Demurrage and damages for repudiation of charter.

 

In London Arbitration 26/17  the Tribunal considered how future demurrage should be taken into account when calculating owners’ damages claim following charterers’ repudiation of a voyage charter. Owners claimed: (1) demurrage accrued at the loading port at the date on which owners accepted charterers’ repudiation and; (2) damages from that date based on the difference between the gross profit they would have earned on the cancelled charter and the gross profit they earned for the period of the substitute voyage.

In calculating the second claim, owners argued that the profit on the notional voyage under the cancelled charter should take account of demurrage that would have accrued at the time loading would have commenced, as the vessel was already on demurrage at the time the charter was terminated. The Tribunal disallowed this element. Owners were confusing the notional voyage with the actual part-performance of the charter prior to the repudiation. The charterers were to be credited with the full loading laytime under the calculations for the gross profits under the nominal voyage.

It should be noted that a contrary approach was taken by Teare J in The Bow Cedar [2004] EWHC 2929 (Comm) where he held that a further sum in respect of future demurrage that would have been earned had the charter been performed could be included in owners’ damages claim.

Interest on the claim for loss of profits ran from the date on which owners accepted charterers’ repudiation. Interest on the accrued demurrage claim was subject to the terms of the repudiated charter which had provided for demurrage to be settled “[w]ithin a period of 45 days after completion of discharging in China and submission of claim supported by all relevant documents”. The Tribunal decided that interest should start to run 45 days after the termination of the charter.

 

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