Voyage charters often include additional rider
clauses requiring an owner to submit any claim they may have for demurrage
within a prescribed period following completion of loading/discharge
operations. This article explains why, where a charterparty makes clear
provision as to how demurrage claims are to be submitted by an owner, it is
essential that such provisions are strictly complied with.
Introduction
It is common to find additional rider clauses
in voyage charters requiring an owner to submit any claim they may have for
demurrage within a prescribed period following completion of loading/discharge
operations, often within 90 days, failing which the claim is ‘deemed to have
been waived and forever time barred’.
The prescribed time bars for the submission of
demurrage claims are usually the most onerous and time-sensitive an owner will
have to comply with, when compared with the time bars otherwise applicable for
contractual claims under voyage charters – the default position is six years
under English Law.
The reason behind these clauses is that there
are often similar provisions in the underlying contract(s) of sale for the
cargo, requiring the charterer to submit their own claim(s) for demurrage
within similar, prescribed, tight time frames. Generally, the English courts
and arbitration tribunals will uphold these time bar provisions, so long as the
wording of the clause is clear and unambiguous. However, the approach has
shifted over the years as discussed later in this article.
Earlier case law Strict compliance with the
clause
One of the earliest cases on the subject of
demurrage time bars is The Oltenia3. The relevant rider clause required
the demurrage claim to be submitted in writing with ‘all available supporting
documents. The judge held: ‘I cannot regard the expression “all available
supporting documents” as in any way ambiguous…the owners are in my view shut
out from enforcing a claim the substance of which and the supporting documents
of which (subject always to de minimis exceptions) have not been presented in
time.’
In The Sabrewing4 the owner had failed
to produce copies of signed pumping logs within the prescribed 90 days and this
was held by the English court to be fatal to the whole of their claim, not just
to the parts of their demurrage claim to which the logs related. Here, the
judge concluded:
‘Clause 23 required owners to present “a claim
in writing” within 90 days of discharge of cargo, “together with supporting documentation
substantiating each and every constituent part of the claim”.
Unless such a claim, with supporting documentation,
is presented within the relevant time period, charterers are released “from all
liability in respect of any claim for demurrage”, i.e. not merely that constituent
part of the claim that is not supported by relevant documentation.
Accordingly, if, as here, only one composite
claim for demurrage was made, owners are time-barred in respect of the entirety
of the claim, notwithstanding that the absence of documents only relates to one
constituent part of the claim.’
Some have criticized the trend of the above
cases, where the courts seem to have taken an overly literal interpretation of
the subject time bar clause, without true regard to issues such as materiality.
Conversely, it is difficult for a judge or arbitrator
to find to the contrary where the wording of a time bar clause is clear and
unambiguous and, after all, has been entered into between two commercial parties.
A more flexible approach
An example of the English courts taking a more
flexible (and, thus, a more ‘owner friendly’ approach) can be found in The
Eternity, where the judge held:
‘I confess that I find the proposition that a
claim put in on time but in respect of part of which the accompanying documents
are non-contractual gives rise to a bar to the entire claim is a commercially
surprising construction.
I am not persuaded that on its proper construction
the effect of clause 20 was such that the failure to provide “all supporting
documentation” (whether needed by reason of the requirements of clause 19 or
otherwise) for one constituent part of the claim discharged liability for the
entire demurrage claim.’
In The Abqaiq, the owner submitted a
demurrage invoice, together with ‘all supporting documents’ within the 90 days
prescribed in the charter.
However, a dispute arose in relation to an
earlier invoice submitted by the owner for bunkers and time consumed at the
load port. The charterer argued that the first invoice had to be brought as a
clearly stated demurrage claim and that the owner had failed to do so within
the 90-day limit. Although the charterer succeeded at first instance, the Court
of Appeal overturned the decision on the grounds that the charterer had been
put in possession (within the 90-day time frame) of all the factual material
which they required in order to satisfy themselves that each and every part of
the claim was well founded. They were able to satisfy themselves as to the extent
of their liability without the need for the invoice to be marked expressly as a
‘demurrage invoice’.
In reaching this conclusion in The Abqaiq,
the Court of Appeal disagreed with the court in The Sabrewing that the requirements
under a demurrage time bar clause dictate strict, and absolute, compliance.
Recent case law
The most recent case on demurrage time bars is
Kassiopi Maritime Co v Fal Shipping Co Ltd (M/T Adventure). In this
case, the ship was chartered on an amended BPVOY4 form. The relevant
charterparty provisions read as follows (our emphasis):
‘19.7 No claim by owners in respect of
additional time used in the cargo operations carried out
under this clause 19 shall be considered by
charterers unless it is accompanied by the following
supporting documentation:
19.7.1 the vessel’s pumping log signed by a
senior officer of the vessel and a terminal representative showing at hourly
intervals the pressure maintained at the vessel’s manifold throughout the cargo
operations; and
19.7.2 copies of all NOPs issued, or received,
by the Master in connection with the cargo operation; and
19.7.3 copies of all other documentation maintained
by those onboard the vessel or by the terminal in connection with the cargo operations.
20.1 Charterers shall be discharged and
released from all liability in respect of any claim for demurrage, deviation or
detention which owners may have under this charter unless a claim in writing
has been presented to charterers, together with all supporting documentation
supporting each and every constituent part of the claim, within 90 days of
the completion of discharge of the cargo carried hereunder.’
The owner submitted a formal demurrage claim
and provided the following documentation in support of the same: a demurrage
invoice; a laytime/demurrage calculation for both the load and discharge ports;
a Notice of Readiness, a statement of facts and four letters of protest issued
at the load port; and a Notice of Readiness, a pumping record, a statement of
facts, four letters of protest and an empty tank certificate issued at the
discharge port.
However, the arbitration tribunal found in
favour of the charterer, holding that the owner’s claim was time-barred as they
had failed to provide the following documents:
(a) the port log and time sheets referred to
in the letters of protest; and
(b) a manuscript note from the master, indicating
that he had received ‘free pratique’ at the discharge port.
The owner appealed to the English High Court,
on the basis that the proper construction of clause 20.1 required the owner to
provide only ‘essential’ supporting documentation and not ‘all’ relevant
supporting documentation.
The court dismissed the appeal and agreed with
the charterer that the claim was time-barred. In particular, the judge ruled
that clause 19.7.3 did not require the owner to disclose all relevant
documents upfront, as this would place a too
far-reaching and commercially impracticable obligation upon the owner. The purpose
behind this clause was to focus on ‘contemporaneous records kept by vessel
relating to the cargo operation’, which had not been otherwise covered by
clauses 19.7.1 and 19.7.2.
The judge indicated that the case of The
Abqaiq provided clear guidance as to which documents
should be presented in support of a demurrage
claim. The judge referred to ‘documents which objectively the charterers
would or could have appreciated substantiated each and every part of the claim’
and by which they ‘were thereby put in possession of the factual
material which they
required in order to satisfy themselves that
the claim was well-founded’.
However, clause 20.1 laid an obligation upon
the owner to provide ‘all supporting documents’
in their possession. In this case, the port
logs and time sheets were considered ‘primary documents containing factual
material which should be made available to the charterers so that they may
satisfy themselves that the claim is well founded, consistent with the purpose of
the clause’.
Conclusion
While some English High Court cases have
indicated a shift towards a more relaxed judicial approach, when it comes to
compliance with demurrage time bar provisions, perhaps also more
in line with commercial practice, the most
recent case of The Adventure serves as a timely reminder that where a
charterparty makes clear provision as to how demurrage claims are to be submitted
by an owner, it is essential that such provisions be strictly complied with.
Failure to do so could be fatal to the claim. It further underlines the importance
of carefully considering and submitting all available documentary material that
could be considered evidence, supporting various aspects of a demurrage claim.
Overall, when it comes to submitting demurrage claims, the general rule of
thumb for an owner should be ‘the more documentation
you serve in support, the better’.
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