Demurrage time bar. Do documents and claim have to come together?

 

Following a recent decision on a time charter time bar clause, we now have another time bar decision, this time by Peter MacDonald Eggers QC, in The Amelie Essberger [2019] EWHC 3402 (Comm). The vessel was chartered on amended Asbatankvoy form for a voyage from Rotterdam to Castellon in Spain. At Castellon the receiver refused to accept delivery of part of the cargo carried in one of the vessel’s tanks (tank 5S), because that cargo was contaminated with mono ethylene glycol. After discharge of the remainder of the cargo at Castellon the vessel then shifted to an anchorage off Castellon, remaining there for nine days before sailing to Valencia for discharge of the cargo in tank 5S.

The charter contained a demurrage time bar clause in the rider.

5) TIME BAR

Any claim for demurrage, deadfreight, shifting expenses or other charges or invoices shall be considered waived unless received by the Charterer or Charterer’s broker in writing with all supporting calculations and documents, within sixty (60) 90 days after completion of discharge of the last parcel of Charterer’s cargo (es). Demurrage, if any, must be submitted in a single claim at that time, and the claim must be supported by the following documents:

  1. Vessel and/or terminal time logs; B. Notices of Readiness; C. Pumping Logs; and D. Letters of Protest …

The Charterers applied for summary judgment pursuant to CPR rule 24.2 on the ground that the Owners had no real prospect of succeeding in their claim for demurrage because of the time bar defence. The demurrage claim was submitted in time but did not include two of the specified documents – (a) the Vessel’s pumping log at Rotterdam and (b) a letter of protest issued by the Master of the Vessel dated 30th November 2017, noting that the Charterers’ and the shippers’ surveyor had not supplied the Vessel with sealed samples of the cargo upon completion of loading. Owners had already provided the charterers with these documents before submitting their demurrage claim.

The Judge was inclined to adopt either a construction of the time-bar clause that requires the Owners to submit documents on which they relied in support of their demurrage claim or one that required the submission of documents which taken at face value established the validity of the demurrage claim. The clause required the submission of “all” such supporting documents. Furthermore, the four listed documents had to be supplied whether or not the listed documents might be said to be “supporting documents”  as this was clear from the mandatory language of the second sentence (“must be supported”).

However, there was no express requirement that the supporting documents must be provided at one time and at the same time as the demurrage claim. The word “Demurrage” at the beginning of the second sentence was to be construed as a reference to the demurrage claimed and not as a reference to the demurrage claim and supporting documents The requirement that the demurrage claim “with” all supporting documentation must be received by the Charterers within 90 days after the completion of discharge meant no more than that the claim and supporting documents must be received before the expiry of the 90 day period. The reference to a “single claim” means that only one claim may be submitted. In other words, separate demurrage claims, for example at loadport or at each discharge port, were not permitted.  The commercial purpose of Clause 5 did not require the simultaneous submission of the demurrage claim and the supporting documents, but merely the submission of the claim and the supporting documents before the end of the 90 day period.

Accordingly, the claim was not time barred. Had supporting documents not been supplied to charterers within 90 days, the entire demurrage claim would have been barred and not just that part to which those documents related. The clause did not provide that only a part of the demurrage claim will be waived if anything less than “all supporting … documents” are provided and contemplated only a “single claim”. However, the Judge could see the sense of “an approach that if there are two parts of the demurrage claim which are unrelated and if a supporting document is relevant for one part of the demurrage claim, but not the other, there is no pressing reason why the unaffected part of the claim should be time-barred [62].”

 

 

New year, new sulphur cap.

The Sulphur cap is here. If you’re a shipowner still running on High Sulphur Fuel Oil (HSFO) you need to trust to your Fuel Oil Non-Availability Report (FONAR), unless you are fitted with scrubbers. If you’re running on Low Sulphur Fuel Oil (LSFO) now you still need to get any HSFO off your vessel by 1 March 2020 due to the Carriage Ban. Apart from increasing the cost of running a vessel, the IMO’s two regulation are likely to see various additional costs being incurred by shipowners: costs of disposal of remaining onboard HSFO including costs of tank and line cleaning to avoid residual HSFO mingling with LSFO and pushing the Sulphur level over 0.5%; time lost in performing such operations; effect of LSFO on owners’ performance warranties under time charters; fines and detention due to inability to get remaining HSFO off the vessel by 1.3.2020 (there is no equivalent of a FONAR to cover this eventuality). A report from S&P Global Platts last week reveals that a lot of debunkering is going to have take place between now and 1.3.2020. https://www.spglobal.com/platts/en/market-insights/latest-news/shipping/122719-shipowners-rush-to-de-bunker-hsfo-as-imo-2020-looms

Added to that there is the greater risk of engine damage due to use of LSFO. Today Reuters carries a report that testing companies examining newer, low-sulphur marine blends acquired in Antwerp, Belgium, Houston and Singapore have found sediment at levels that could damage the engines of ocean-going vessels. Depressing news with which to welcome in the new year. https://uk.reuters.com/article/uk-shipping-imo-fueloil/tests-raise-alarms-over-fuel-blends-coming-for-ocean-going-vessels-idUKKBN1YZ1ED

It is likely that the new decade will see a spate of claims arising out of the sulphur cap and the carriage ban, particularly under time charters, with renewed interest by owners in the indemnity as a means of clawing back costs from time charterers.

“All supporting documents” in time charter time bar clause means what it says.

 

Mur Shipping BV v Louis Dreyfus Company Suisse SA [2019] EWHC 3240 (The Tiger Shanghai) concerned the construction of the following time bar in additional clause 119 of a time charter on NYPE form.

“[Owners] shall be discharged and released from all liability in respect of any claim or claims which [Charterers] may have under Charter Party and such claims shall be totally extinguished unless such claims have been notified in detail to [Owners] in writing accompanied by all available supporting documents (whether relating to liability or quantum or both) and arbitrator appointed within 12 months from completion of charter”.”

The charter was terminated due to a problem with the feeder holes in the hatch covers which were positioned so that the loading crane at the loading port, Carbenaros, was not quite long enough to reach those on the starboard side of the Vessels. To solve this problem the Charterers wanted to cut new cement feeder holes into the hatch covers. Disponent owners refused permission for the work to be done. Shortly after the vessel arrived at the load port, a survey was conducted at charterer’s request by CSS on the cutting of new cement holes in the hatch covers. The following day disponent owners stated that their refusal was final and non-negotiable and  charterers terminated the charter.

The express basis for that termination was that the cutting of additional feeder holes fell within the ambit of Clause 46 which provided “The Charterers, subject to the Owners’ and Master’s approval which is not to be unreasonably withheld, shall be at liberty to fit/weld any additional equipment and fittings for loading … cargo. Such work shall be done at the Charterer’s expense and time, and the Charterers shall remove such equipment and fittings at their expense and time prior to redelivery, if so required by the Owners …” Charterers argued that Owners’ refusal for permission to cut such holes had been unreasonably withheld, so that Owners were in repudiatory breach and Charterers were entitled to terminate.

Charterers appointed their arbitrator within 12 months of the termination of the charter and claimed in respect of “all disputes connected with the Charterparty” which was stated to include claims for:

  1. i) The return of hire and value of delivery bunkers paid in advance,
  2. ii) costs incurred on the Owners’ behalf;

iii) damages in respect of claim from the sub Charters for the termination of the Charter; and

  1. iv) the Owners’ failure to obey instructions/ breach of Clause 46 of the Charter.

Nearly a year later charterers served claim submissions to which was attached the CSS Report dealing with the feasibility of drilling cement holes in the hatch covers, and relied on it to allege that disponent owners had unreasonably withheld consent to the works

The submission of the CSS report led disponent owners to take the timebar point, arguing that it went to the heart of the issue of liability and that had it been presented it was likely that the parties could have resolved the dispute without the need for arbitration. Charterers argued that the CSS Report was a document compiled for the purposes of the arbitration in the light of the dispute and that expert reports and other arbitration documents fell outside the category of “supporting documents” that are to be provided and Clause 119

The majority of the Tribunal found that this document was a “supporting document”, that it was not privileged; and that the claim was consequently time barred. On appeal two issues arose.

i) Is a document which would otherwise be a supporting document one which should not be counted as such if it was arguably privileged?

This point concerned arguably privileged documents as opposed to actually privileged documents. This was because: (i) Charterers accepted that the document was not privileged and (ii) Owners are prepared to proceed on the assumption that the clause does not require provision of a privileged document. Charterers submitted that if a document is reasonably arguable to be privileged, then its disclosure is not required by an “all supporting documents” time bar clause and it does not matter even if, in the final analysis, it is held not to be privileged. Cockerill J rejected this submission as the argument was “profoundly uncommercial”. Such an approach would sit very ill with the requirements of certainty which underpin clauses of this sort

ii) Is a document which is not at least at the time of commencement of the arbitration of relevance to either the identification of or support for a relevant claim as referred to arbitration, a “supporting document”.

Cockerill J held that the CSS report was a supporting document and it could not be the case that simply because a document emerges later it cannot give rise to a time bar argument. An “all documents” clause is naturally geared to the provision of more than the bare essentials; and even in the simpler cases it may be the case that the party receiving the documents may not know the full extent of the documentation available.

The question of “supporting documents” had to look to the claim being advanced. If for some reason the claim somehow changed in essence at a later stage, for example, if a timing point not previously apprehended was made, or a correction needed to be made, this should not mean that documents later relied on became retrospectively relevant at the point of the time bar. However, here, there was no change in the case or correction. Charterers’ claim was predicated on the refusal by disponent owners having been wrongful, because unreasonable. Without that, the termination was not valid. The material in the CSS Report went to this question of reasonableness.

If the reasonableness of the refusal was in play at the time when the claim was made, this document was relevant and supportive. It was significant that the clause combined both specific reference to “all” and specific reference to “liability and quantum”, while not confining itself to any particular sort of claim. The parties intended the clause to cover all disputes under the Charterparty, including inferentially claims arising out of wrongful termination. While the case had not refined itself so far as it had done at the time of the hearing, the claim (at least as to quantum) in fact depended on the date of termination and the date of termination depended on being entitled to terminate, which itself depended on unreasonable refusal on the part of the Owners. Therefore, the report was on its face within the ambit of the claim that charterers advanced and supportive of it.

The appeal against the Award was therefore dismissed.

A tale of targets. Dutch Supreme Court decides on climate change and State’s duty to protect its citizens.

 

 

A new feature of the legal landscape is climate change litigation – be it tort claims against carbon majors in the US, investor fraud allegations in the US, and public law challenges in Europe. The last of these yielded an interesting decision just before Christmas when the Dutch Supreme Court gave its decision in the Urgenda case, reported in this blog on 25 October 2018, upholding the judgments of the lower courts that the Dutch State must reduce GHG emissions by 25% over 1990 levels by the end of 2020.

 

The Dutch Supreme Court has summarised its decision as follows (an English translation of its judgment is not yet available).

 

  • The Supreme Court based its judgment on the UN Climate Convention and on the Dutch State’s legal duties to protect the life and well-being of citizens in the Netherlands, which obligations are laid down in the European Convention for the Protection of Human Rights and Fundamental Freedoms (the ECHR).
  • There is a large degree of consensus in the scientific and international community on the urgent need for developed countries to reduce greenhouse gas emissions by at least 25% by the end of 2020. The Dutch State has not explained why a lower reduction would be justified and could still lead, on time, to the final target accepted by the Dutch State.
  • The Dutch State has argued that it is up to politicians to decide on the reduction of greenhouse gas emissions. According to the Supreme Court, however, the Dutch Constitution requires the Dutch courts to apply the provisions of the ECHR. This role of the courts to offer legal protection is an essential element of a democracy under the rule of law. The courts are responsible for guarding the limits of the law. That is what the Court of Appeal has done in this case, according to the Supreme Court.
  • Therefore, the Supreme Court ruled that the Court of Appeal was allowed and could decide that the Dutch State is obliged to achieve the 25% reduction by the end of 2020, on account of the risk of dangerous climate change that could also have a serious impact on the rights to life and well-being of residents of the Netherlands.

The decision is the first successful climate change challenge to a government’s targets for reducing GHG emissions. In May 2019 a challenge to the EU’s targets of a 40% reduction by 2030 over 1990 levels in Carvalho v European Parliament and Council of EU, Case T-330/18 failed, and a similar challenge to the UK’s targets under the Climate Change Act 2008 in the Plan B case, reported here on 3 September 2018, also failed.

 

Shipowner organisations urge bunker levy to fund R&D into green fuels for shipping.

 

International shipping contributes about 3% of total global CO2 emissions, about the same as that of Germany. In 2018 the IMO set out its ambitions for eliminating CO2 emissions. Since then concrete proposals have been thin on the ground. Mandatory slow steaming seems dead in the water, with concerns that it would delay introduction of carbon neutral tonnage. To facilitate this a new proposal has been put to the IMO just before Christmas by various international shipowner associations, such as BIMOC and the International Chamber of Shipping. The proposal is to introduce a mandatory levy of US$2 per tonne on bunker fuel purchases to fund a US$5 billion ten year programme to accelerate the R&D effort required to decarbonise the shipping sector and to catalyse the deployment of commercially viable zero-carbon ships by the early 2030s.  The programme could be put in place by 2023 via amendments to the existing IMO Convention for the Prevention of Pollution from Ships (MARPOL).

In the meantime CO2 emissions from international shipping are likely to increase. The 2018 report of the Intergovernmental Panel on Climate Change (IPCC) gives a remaining global carbon budget of 420 gigatons of CO2 for there to be a 67% chance of stabilising the global temperature at 1.5 degrees Celsius over pre industrial levels (p 108 of chapter 2 of SR15). The current rate of CO2 emissions is 40 gigatons per annum. The maths is not hard to do.

Weight of undamaged pallets and Montreal Convention package limitation.

 

On 11 October 2018 (I ZR 18/18) the German Federal Court of Justice (BGH) ruled on the calculation of the Montreal Convention package limitation of 19 SDRs per kilo under art. 22(3). Article 22(4)(1) stipulates that compensation may not exceed the amount payable in the event of loss of the devalued part of a consignment. The claim was in respect of a consignment consisted of 1,000kg of goods and 250kg of pallets. The BGH ruled that in considering the weight relevant to the package limitation no account should be taken of the weight of the pallets which were undamaged. Only the net weight of the damaged goods was to be taken into account and so the claimant’s maximum damages claim would be 19,000 SDRs (1,000kg by 19 SDRs) and not 23,750 SDRs as claimed.

BIMCO withdrawal clause. No withdrawal for underpayment of previous hire instalment.  

 

Quiana Navigation SA v Pacific Gulf Shipping (Singapore) PTE Ltd “Caravos Liberty” [2019] EWHC 3171 (Comm) involved  a time charter under which the charterers made an underpayment of the fourth instalment of hire but owners did not exercise their right to withdraw under the BIMCO withdrawal clause incorporated into the time charter. However, the shortfall remained and at the time of the sixth instalment, which was paid in full, the owners decided to withdraw the vessel on account of the remaining shortfall in hire under the fourth instalment. The key words in the BIMCO Clause are “If the hire is not received by the Owners by midnight on the due date, the Owners may immediately following such non-payment suspend the performance of any or all of their obligations under this Charter Party (and if they so suspend, inform the Charterers accordingly) until such time as the payment due is received by the Owners.” In the context of the right to withdraw, what constitutes ‘the hire’? The tribunal found that it referred to the hire for that particular instalment and did not encompass previous underpayments. Cockerill J upheld that decision. The question “What is the hire?” question could only sensibly be answered and one single date produced if the charterers’ approach were preferred.  Cockerill J stated [42]:

“[i]t is artificial to ignore the temporal dimension inherent in the reference to a “due date” in (a); and equally artificial to say that the sum outstanding from the fourth instalment was due “on” 10 August. Owners’ argument also, either (as Charterers would put it) impermissibly elides the very real distinction between the continuing entitlement to recover hire as a debt and on the other the independent contractual entitlement to withdraw or at least attempts to draw focus from the existence of other remedies.”

Accordingly, owners’ withdrawal was unjustified and amounted to a repudiation of the charter.

Demurrage due to delays in discharge due to damaged condition of cargo.

Alianca Navegacao E Logistica LTDA v Ameropa SA (The Santa Isabella) [2019] EWHC 3152 (Comm)

A vessel carried a cargo of white corn/maize from Mexico to South African Ports under a Synacomex form charter incorporating the Hague Rules.  On arrival the cargo was found to have suffered extensive damage and that led to a delay in discharge resulting in demurrage becoming due. Voyage charterers claimed that they were not liable for demurrage due to delays resulting from fault of the disponent owners. They alleged that the damage to the Cargo, and the delays at Durban and Richards Bay, were caused by (a) the Vessel taking the Cape Horn route rather than the Panama Canal route from Topolobampo to Durban, (b) failure by the Vessel to ventilate the Cargo in accordance with a sound system, (c) failure by the Vessel to disinfest areas of the Vessel outside of the cargo holds following loading at Topolobampo and/or (d) the Vessel proceeding to Durban at less than her warranted speed.

Andrew Henshaw QC (sitting as a Judge of the High Court) found that the owners’ obligation was to proceed on the usual and reasonable route to the discharge port and that where there were more than one such routes they were entitled to choose one rather than the other and that choice did not require owners to calculate the effect of taking that route on the cargo being carried. Both the Cape Horn route and the Panama Canal routes were usual routes to Durban and the owners committed no deviation, nor breach of art. III(2) of the Hague Rules, in taking the former. In determining which route to take the judge stated[91]:

“cargo considerations may be relevant in the elementary sense that a much longer voyage is likely to be detrimental to a perishable cargo. However, the case law does not in my view require shipowners to undertake the far more refined analysis urged by Ameropa, which would involve (in the present case) considering in detail how predictable climactic conditions on the Cape Horn and Panama Canal routes would impact on the need to ventilate the cargo and the vessel’s ability to do so.

However, the owners were found to have been in breach of art III(2) of the Hague Rules in failing properly to ventilate the cargo on the voyage and this had resulted in the delays experienced at Durban and Richards Bay. It was common ground that as owners were not bailees the legal burden of proof in showing breach of art III(2) fell on charterers. Charterers argued that the arrival of the cargo in a damaged condition  gave rise to an inference of breach. The judge rejected this, stating [52]:

“As a matter of common sense, the arrival in a seriously damaged condition of a cargo loaded in apparent good order and condition calls for an explanation, and a want of care on the part of the shipowner is a possible inference. In the present case, Alianca’s explanation is that the length and/or route of the Voyage made damage inevitable. On that basis, I am inclined to the view that it is for Ameropa to show, on the balance of probabilities, that the damage suffered in fact arose from a breach of contract by Alianca.”

Ameropa succeeded in showing that the damage did arise from a breach of contract by disponent owners.

The owners were also in breach of their obligation to proceed at the warranted speed but it was not possible to identify any particular element of damage or loss caused by that breach.

FAL Convention. Electronic documentation for ports replacing paper.

On 1 January 2017 the Facilitation Convention was amended to provide for exchange of FAL data electronically from 8 April 2019. The amendments provide for a transition period of 12 months during which paper and electronic documentation co-exist for FAL documents.

The amendments provide that consideration should also be given to such a Single Window serving as the mechanism through which the public authorities communicate decisions and other information covered by this Convention in connection with the arrival, stay and departure of ships, persons and cargo.

The documents in question are:

General Declaration

Cargo Declaration

Ship’s Stores Declaration

Crew’s Effects Declaration

Crew List

Passenger List

Dangerous Goods Manifest

The document required under the Universal Postal Convention for mail

Maritime Declaration of Health

Security-related information as required under SOLAS regulation XI-2/9.2.2

Advance electronic cargo information for customs risk assessment purposes

Advanced Notification Form for Waste Delivery to Port Reception Facilities, when

communicated to the Organization.

 

The amendments only affect FAL documents and not the certificates of liability insurance under the CLC, the Nairobi Wreck Removal Convention, the Bunker Oil Pollution Convention. These must be carried on board vessels as paper certificates.

 

‘Properly due’ in General Average Guarantee. Guarantor’s reliance on Rule D of YAR 1974.

 

 

The BSLE Sunrise [2019] EWHC 2860 (Comm) involved a preliminary  issue as to whether the issuer of the GA guarantee can raise a defence under Rule D of YAR 1974 as to their liability under the GA guarantee.

Following a grounding off Valencia in 2012, owners incurred expenses in attempting to refloat vessel and in conducting temporary repairs. General Average Bonds and General Average Guarantees were issued. Each GA bond provided

“In consideration of the delivery to us or our order, on payment of the freight due, of the goods noted above we agree to pay the proper proportion of any … general average

… which may hereafter be ascertained to be properly and legally due from the goods or the shippers or owners thereof …”

Each of the GA guarantees, in the wording approved by the Association of Average Adjusters and the Institute of London Underwriters, provided:

“In consideration of the delivery in due course of the goods specified below to the consignees thereof without collection of a deposit, we the undersigned insurers, hereby undertake to pay to the ship owners … on behalf of the various parties to the adventure as their interest may appear any contributions to General Average … which may hereafter be ascertained to be properly due in respect of the said goods.

Cargo interests maintained that the grounding was due to owners’ breach of their obligation of seaworthiness under art III.1 of the Hague/Hague-Visby Rules which were incorporated into each of the bills of lading, and accordingly under Rule D of YAR 1974 which was incorporated into those contracts, no general average was due from them.

Judge Pelling QC held that this defence also applied in respect of the general average guarantees. The wording in the bonds and the guarantees should be construed in the same word and that the word “due” when applied to a monetary obligation meant that it is legally owing or payable. No sum becomes legally due or payable “ … on behalf of the various parties to the adventure as their interest may appear …” by way of contribution to general average unless and until it has been decided whether the Rule D defence  succeeds or fails. The inclusion of the word “properly” served to put the point beyond doubt.

The Maersk Neuchâtel, [2014] EWHC1643 (Comm); [2014] 2 Lloyds Rep 377 on which owners relied contained different wording whereby the undertaking was to pay “ … on behalf of the various parties to the adventure as their interest may appear …” the GA “… which may hereafter be ascertained to be properly due in respect of the said goods”. This was construed as requiring the charterer to pay the sum ascertained to be due in the adjustment, with the omission of the words in the standard bond such as ‘is payable’ and ‘properly due’, making the contract akin to an on-demand guarantee, payment being due upon here certification.

Accordingly the Preliminary Issue was resolved in favour of the guarantors. Nothing was payable under the GA guarantees issued by them if the loss was caused by the owner’s actionable default or until that issue has been resolved.