The Adventure - Perils of Demurrage Time Bars

March 2015

The Adventure Perils Time Bars iStock CoverHKTankers 6155475

In this recent English High Court decision the Owners of MT Adventure, found their demurrage claim time barred against Charterers. The decision in Kassiopi Maritime Co Ltd v Fal Shipping Co Ltd [2015] EWHC 318 (Comm), is significant for both Owner and Charterer Members of the Club.

The Facts

The relevant provisions of the BPVoy4 charterparty were:

Clause 20.1

Charterers shall be discharged and released from all liability in respect of any claim for demurrage…which Owners may have under this Charter unless a claim in writing has been presented to Charterers, together with all supporting documentation substantiating each and every constituent part of the claim, within ninety (90) days of the completion of discharge of the cargo carried hereunder”.

and clause 19, which so far as relevant  provided that:

19.7:      No claim by Owners in respect of additional time used in the cargo operations … 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 cargo operations; and

19.7.3:   copies of all other documentation maintained by those on board the Vessel or by the Terminal in connection with the cargo operations.

The Owners brought a claim for demurrage in the amount of US$ 364,847.78 as a result of delays at both the load port, Sitra, and the discharge port, Port Sudan. Charterers argued that Owners had breached clauses 19.7 and 20.1 of the Charterparty because they had failed to provide “all supporting documentation” within the 90 day time limit. The matter was then referred to arbitration.

The Arbitration Decision

The tribunal concluded that Owners’ demurrage claim was time barred by virtue of their failures to provide supporting documentation as required under clauses 19.7 and 20.1. Owners therefore appealed the tribunal’s decision.

The High Court Appeal

The most notable elements of the Judgment are as follows:

  • Owners had asked the court to consider whether this Clause 19.7 was significantly broad to require Owners to provide with their demurrage claim copies of all documents which the Owners would be required to disclose in an arbitration reference, such that the disclosure obligation which applies in the normal course of an arbitration reference, in fact arises at the time of submitting the claim within the time required by Clause 20.1.

As to whether full “disclosure” was required, the court concluded that the obligation on Owners was not so broad stating:  “The obligation of disclosure if likely to go far wider than merely “supporting documentation” and require a search which is more rigorous than that contemplated by a clause such as this….”

  • The court was also asked to interpret the obligation to provide that “copies of all other documentation maintained by … the Terminal”. The Tribunal concluded, and the Judge did not disagree, that this would only include those documents within Owners’ possession and control. The Judge commented on the clause 19.7 generally that “in my judgment the clause cannot have been intended to impose such a far reaching and potentially unworkable obligation on the owners”.
  • The meaning of 19.7.3 was therefore not as far reaching as the Tribunal had considered – but it was a sweep up provision focusing on “contemporaneous records kept by the vessel relating to the cargo operation”, which had not already been covered by clauses 19.7.1 and 19.7.2. The Judge considered that “the Pumping Log is the most obvious example of such a document but some vessels may keep similar but different records”.
  • The Judge considered the case The Eagle Valencia [2010] 2 Lloyd’s Rep. 257, in which guidance was given as to the documents which would generally support a demurrage claim: “(1) a summary demurrage report, plus detailed demurrage reports for Freeport and Singapore, (2) notice of readiness, port log, statement of facts, discharging log, timesheet, Master’s letter of protest and pumping log for Singapore”.
  • In the case of the Adventure, Owners had supported their claim for demurrage with the following documents: an invoice for demurrage, a laytime/demurrage calculation for load port and discharge port, Notices of Readiness for load port and discharge port, Statements of Fact for load port and discharge port, Letters of Protests load port and discharge port, pumping records and an empty tank certificate for the discharge port. However, they failed to provide: (1) port logs and timesheets which had been referred to in the Letters of Protest at the load port and (2) an email with a manuscript note from the Master confirming that free pratique had been granted to the vessel over VHF at the discharge port. The latter document was relevant because under the Charterparty the notice of readiness only became effective when free pratique “has been granted or is granted within 6 hours of the Master tendering NOR”.
  • The Judge concluded that clause 20.1 did not only require “essential” supporting documentation to be submitted. The Judge agreed with the Tribunal that the port logs, time sheets and email recording that free pratique had been granted were relevant to the claim and therefore failure to provide these put Owners in breach of the requirement to provide “all” supporting documentation. The Judge commented that he considered these documents to be “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” and cited Tomlinson J in The Abqaiq [2012] 1 Lloyd’s Rep 18: namely “documents which objectively [the charterers] would or could have appreciated substantiated each and every part of the claim”.

On the basis of this, the Judge held the tribunal had reached the correct decision (albeit he disagreed with some of the reasoning) and concluded that Owners’ claim was indeed time barred. Owners’ appeal was therefore dismissed.

Comment

This decision is a stark reminder to Owner Members of the risks of failing to adequately support their demurrage claims within the stipulated time limits. In some recent cases, the court has taken a less strict approach:

  • In The Eternity the court held that if documents were not provided for one part of the claim, this would not necessarily time bar another part of the claim.
  • In The Abqaiq the court held that although the claim and supporting documents must be presented in time, they need not be presented simultaneously. The court also stated that if certain supporting documents come into the charterers’ possession from a source other than Owners, this is probably sufficient.

However, The Adventure follows the stricter approach taken in Eagle Valencia (where Owners failed to produce a second notice of readiness upon which they ultimately relied).

Owner Members should therefore ensure strict compliance with time limit provisions – this case is a clear reminder of the risks of non-compliance. The purpose of these clauses is to enable the parties to finalise accounts swiftly, with any disputes resolved quickly with facts still fresh in the parties’ minds. Charterers need to be put in possession of factual material which they require to establish whether the claim is or is not well founded. Therefore, these clauses have an important commercial purpose and will be enforced strictly by tribunals and the courts, providing they are clear, even if the result appears severe.

In a case such as this, where the clause requires “all supporting documentation” to be provided, this must include documents supporting both the claim and the quantum. Further, where other parts of the contract specify documents to be provided in support of a claim, Owners should ensure that such documents are included. Owners should therefore take a cautious approach to provision of supporting documents, which will include, at the very least: Notices of readiness (and documents referred to within these); Notices/Letters of protest (and documents referred to within these); Time sheets; Statements of fact; Loading/discharging logs; Pumping logs; Port logs; Demurrage reports.

However, the appropriate documents to be submitted will of course depend on the claim being advanced, the relevant contractual provisions, the factual circumstances and the documents in Owners’ possession and control. If there is any doubt, Members should contact the Club to seek guidance on supporting their demurrage claims to ensure that the necessary documentation is submitted before any time bar.

Charterer Members should carefully assess that claims are indeed properly supported in accordance with the contractual requirements.

Article by Beth Larkman, Syndicate Executive