“Anchor aweigh”. No retrospective invalidity of NOR.

 

In London Arbitration 16/19 a vessel was chartered on Gencon form which was amended so that notice of readiness (NOR) could be tendered at any time after the ship’s arrival at an anchorage 150 km downriver from the discharge port with passage time from anchorage to discharge port not to count as laytime. The vessel arrived at anchorage and tendered NOR. When the pilot boarded the vessel was found to have only one anchor available which had not been notified in advance to the port authorities. The pilot would only proceed upriver if the owners would hire an escort tug. The owners declined on cost grounds and decided to replace the second anchor instead. The vessel was sent back to the anchorage to do this and then proceeded back to the pilot station with two anchors and from there proceeded to the discharge port and berthed the following day. The owners claimed laytime started with giving of NOR but as a good will gesture discounted the time from when the vessel first weighed anchor to proceed to the pilot station to when the vessel arrived at the discharge port.

The tribunal accepted charterer’s evidence that  two anchors was a normal requirement for river navigation, and that in a case of a missing anchor it was usual and reasonable for a standby tug to be required. However, when the vessel gave NOR, the absence of a second anchor was not an absolute bar, as the possibility existed of proceeding to the discharge port with tug assistance. When the vessel tendered NOR she was not, therefore, in a condition in itself that necessarily precluded her from completing the contractual voyage. It was owners’ later decision not to employ a standby tug that had that effect. Owners’ decision did not retrospectively invalidate the NOR tendered at a time when the vessel was able to proceed to the discharge port, albeit with tug assistance rather than by having two anchors on board.

Owners’ decision not to proceed with an escort tug, on cost grounds, was appropriately addressed by the exclusion of time in the manner adopted in their calculations.

IISTL Member to present paper at ASDEM’s 14th International Oil Industry Laytime and Demurrage Conference on 16/17 May

 

 

IISTL member Professor Simon Baughen will be presenting a paper “LEGAL ISSUES OF DEMURRAGE AND PUMPING WARRANTIES” at Asdem’s 14th International Oil Industry Laytime and Demurrage Conference on 16/17 May at the Le Meridien Piccadilly Hotel in London.

Pumping warranties are the norm in tanker charters and apply a separate laytime and demurrage regime to the period of discharge, and sometimes to the period of loading as well. They have also generated many disputes between owners and charterers as to how this separate regime operates and how it fits in with the demurrage time bar clauses that are invariably found in tanker charters. Professor Baughen will be looking at the pumping clauses found in oil charterparties from the wide range of additional clauses that are necessary for Asbatankvoy to the standard warranties in widely used modern forms and examining the legal issues they give rise to.

The full speaker line-up and topic list for this event, can be found in Asdem’s brochure which you can download by clicking here.

To register immediately on-line, please click here.

 

 

 

 

 

“Government interference” and laytime under the  1999 Sugar Charterparty

In Sucden Middle-East v Yagci Denizcilik Ve Ticaret Ltd Sirketi (The MV Muammer Yagci)[2018] EWHC 3873 (Comm) the Court heard an appeal from an arbitral decision  on the following point of law. “where a cargo is seized by the local customs authorities at the discharge port causing a delay to discharge, is the time so lost caused by ‘government interferences’ within the meaning of clause 28 of the Sugar Charter Party 1999 form?”. The case arose out of a substantial period of delay in the vessel’s discharge at Algiers due to the seizure of cargo by the authorities there following the identification of a discrepancy between the cargo and the relevant documents presented by the receivers. The cargo was eventually sold after a four and a half month delay in discharging the cargo.

Robin Knowles J found that delay fell within the laytime and demurrage exception in cl.28 of the Sugar Charterparty 1999 form as being caused by ‘government interferences’. The question put to the court was solely concerned with a seizure of cargo by local customs authorities at the discharge port. The ordinary meaning of the word “interference” was apt to include an intervention in this specific form, that is, by way of seizure. This action on the part of local customs authorities was, in this context, the action of government through its appropriate arm or agency. Seizure of cargo by the customs authorities was not a thing that could be treated as routine. The seizure caused the delay even if the submission of the false documents caused the seizure. The arbitrators had found that the key point would be that all the steps taken were in fact ordinary but that was incorrect. Seizure, of cargo, which is a significant exercise of executive power, cannot be regarded as “ordinary”.

 

Bill of lading shipper liable for sums due under incorporated head charter.

 

In Singapore Arbitration 1/19 a fraudulent broker purported to charter to shipowners on behalf of X and then sub-chartered to Z. Under the charter to X 100% freight was to be paid within six days of signing and release of bills of lading. The cargo was loaded and a bill of lading was issued to Z as  Z, incorporating all the terms and conditions of the charter and stating ‘freight payable as per charterparty dated 9 November 2010’.  Both charters bore that date. The broker received 95% freight from Z and paid part of that to owners in respect of freight under the X head charter. Owners later claim the unpaid balance of freight, and loading port demurrage, under the X charter from Z as bill of lading shipper. The owners had discharged into a port authority warehouse but had lost their lien when receivers managed to take delivery without payment of sums due under the charter with X. Owners commenced arbitration in Singapore against Z under the bill of lading.

The tribunal held that it did have jurisdiction to determine which of two charters with the same date was incorporated into the bill of lading. Both charters were subject to English law. Applying the San Nicholas it was the head charter that was incorporated.  Notwithstanding the transfer of the bill of lading, the shipper’s liability remained due to section 3(3) COGSA 1992.  Owners did not have to give credit for what Z had paid, but only for what they had received. Owners could not be criticised for having failed to act with due diligence once the balance due under the charter with X came due and had not been received. Owners acted reasonably in discharging into a port authority warehouse. The unfortunate Z was liable for the sums claimed by owners.

When does a shipowner have to start the approach voyage under a voyage charter?

Yesterday the Court of Appeal upheld the first instance decision in CSSA Chartering and Shipping Services SA v Mitsui OSK Lines Ltd (The Pacific Voyager) [2018] EWCA Civ 2413 which we noted in this blog on 24 October 2017. The case involved a voyage charter on Shellvoy 5 form which contained no ‘estimated ready to load’ statement. Instead Part 1(b) contained estimated times of arrival for the itinerary on the previous charter. When did the owner’s absolute obligation to begin the approach voyage to the load port commence? Popplewell J held that the obligation began within a reasonable time of the completion of discharge at the final port in the previous charter as specified in the estimated itinerary for that voyage. The owners were in breach of that obligation and charterers were entitled to substantial damages.

The Court of Appeal have upheld this decision. Longmore LJ stated that this meant that there was no need to deal with charterer’s alternative argument that the cancellation date provided a further indication of the time at which it would be reasonable to say that the obligation of utmost despatch arises.  “If, for any reason, it were impermissible to rely on the expected date of arrival of 25th January at the last discharge port under the previous charter, I would have difficulty in saying that the cancellation date would do instead.  It would be necessary to know why it was that 25th January could not be relied on and, if it were because there was no ETA Rotterdam, that might apply equally to any argument about the cancelling date. If, however, there had been no itinerary given and the only guide was the cancelling date, that might be a different matter.  That can (and should) be left to another day for the (perhaps somewhat surprising) terms of such a charterparty to be considered.”

Force majeure and counterfactuals

A nice force majeure issue — and one of considerable importance — came up before Teare J yesterday in Classic Maritime v Limbungan [2018] EWHC 2389 (Comm), argued by IISTL stalwart Simon Rainey QC. Imagine you conclude a contract (in this case a CoA under which you have to provide a number of iron ore cargoes) which in the event you can’t and don’t perform, and never could have performed. An exemption clause in the contract says that if you could have performed it but a force majeure event X (inundations in Brazilian iron ore mines) then occurs that stops you performing it, you are not liable for breach. Event X occurs. Are you (a) in breach of contract, (b) on the hook for substantial damages?

On (a) the answer is Yes. You promised to perform, you haven’t performed, and because you never could have performed in any case you can’t shelter behind the exemption clause.

But what about (b)? There are two ways to look at this. One is to say: this is a simple case of unexcused non-performance, and hence you must be liable to the shipowner for his lost profits on the carriage, a figure amounting to many millions. The other point of view runs thus. If, counterfactually, you could have performed but for X, the shipowner would in the event have had no claim to performance because of the exemption clause. Hence hence it’s no skin off his nose that you didn’t perform, and damages are nominal only. Teare J plumped for the second: nominals only.

This view is highly plausible and for the moment clearly represents the law. It also dovetails quite nicely with the general rule in cases such as The Golden Victory [2007] UKHL 12, [2007] 2 A.C. 353 and Bunge v Nidera [2015] UKSC 43, [2015] 2 CLC 120, that in assessing damages we take into account later events that would have taken away the right to demand performance.

But this case, or the issue in it, may go further. There is a respectable argument, that certainly can’t be dismissed summarily, which suggests a different answer. In so far as the inability to rely on a force majeure clause is due to a party’s own default, which was the case in Classic Maritime, should it be open to that party to argue that if he had acted differently he would have been able to invoke that very same clause? Suppose a force majeure clause requires notice to be given within 7 days after the force majeure event; a party prevented by force majeure nevertheless fails to give notice for 10 days, and thus loses the protection of the clause. Is it really open to the party then to say that if he had given the proper contractual 7 days notice he would have been protected by the clause, the counterparty would have had no right to demand performance, and hence damages are nominal only? I’m doubtful. And I’m equally not sure that this scenario is that different from what happened in Classic Maritime.  It’s just a thought. Whether it’s a good one, only time will tell.

Charter time bar not read  into charterers’ letter of indemnity.

 

In Navig8 Chemicals Pool Inc v. Glencore Agriculture BV (The Songa Winds) [2018] EWCA Civ 1901, the Court of Appeal had to consider whether a time bar clause in a voyage charter operated to bar claims under a letter of indemnity issued by charterers to owners in respect of delivery of cargo without production of bills of lading. Clause 38  of the charter required the owners to release the cargo  against charterers’ letter of indemnity  (LOI) if bills of lading were not available at the discharge port and the period of validity of any letter of indemnity was to be three months from date of issue. The LOI provided by charterers did not refer to any time bar and provided in clause 5 “. As soon as all original bills of lading for the above cargo shall have come into our possession, to deliver the same to you, or otherwise cause all original bills of lading to be delivered to you, whereupon our liability hereunder shall cease.”

Two points arose. Was the LOI provided by charterers subject to the three month time bar provided in the charterparty? If so, how did that time bar run?  Andrew Baker J, [2018] EWHC 397 (Comm) ,had found that the LOI was not subject to the time bar, and that the effect of the time bar was that the period within which the requested delivery of the cargo must take place was three months from the date of delivery.

The Court of Appeal has upheld the first finding. Charterers had the contractual right to insist that the LOI incorporated the terms set out in cl.38 but they had failed to do so. Clause 5 of the  LOIs was a self-contained provision which confines charterers’ liability, and which containeds no reference to any extraneous term which might impact on the time limit of that liability.Their LOIs were distinct agreements to the voyage charter, setting out self-contained obligations and rights which could be relied on by third parties, such as owners’ agents, as against charterers.

On the second point, however, the Court of Appeal rejected the judge’s construction  of cl. 38 and found that cl.38 meant that there was a time limit of three months for making claims.

Demurrage time bar and submission of documents. Fault of owners and consequential loss of time.

 

When dealing with a demurrage time bar clause in your charter, it pays for owners to know who charterers’ agents are, as shown by London Arbitration 19/18. Owners chartered two vessels under a contract of affreightment for a series of voyages. The charters provided for the demurrage claim and supporting documents for each voyage to be sent by owners to charterers within 30 days starting from next day after discharging at discharging port. Failure to supply the documents within this period would free charterers from any responsibility for demurrage. The charter also provided that owners were to pay commission on F/D/D to a firm of brokers, D.

Charterers declined to pay demurrage accruing on eight voyages as they had not received the documentation within the 30 days. Owners claimed that they had passed the documentation to D within the 30 days and that D were charterers’ agents. The tribunal found that D were an intermediate broker who had no principals and who could look to either charterers or owners for their commission. The charter had included a specific provision to cover their commission, making owners responsible for it. D’s duty was simply to pass messages up and down the chartering chain. There was no evidence that charterers held D out as their broker and they were clearly not charterers’ actual broker. Receipt of documents by D did not amount to receipt by charterers or their agents.

The tribunal rejected owners’ argument that D had ostensible authority to act as charterers’ agents. The fact that the charterers had paid all freight claims and many of the demurrage claims which were sent by the owners to D alone did not amount to a representation on the charterers’ part that D had authority to accept all demurrage claims under the charter on their behalf as their agent. Those claims were paid, not because they were received by D, but because they were passed by D to C and it was receipt by the latter that triggered payment by charterers. Nor was there any estoppel, either by convention or promissory. The parties proceeded on the basis that charterers would pay all demurrage claims received from D within the 30 day period. The fact that charterers had paid a demurrage claim presented out of time on one voyage out of the 87 performed did not amount to a waiver of their right to rely on the time bar clause.

The tribunal also rejected charterers’ claim on another voyage to suspend laytime for consequential delay on arrival at the discharge port because of a delay on completion of loading of nine days due to engine problems. For culpable fault resulting in time not counting, the fault and the delay had to be co-extensive.

Assignee’s right to damages for cargo claim. Title to sue is not the whole story.

 

In making a cargo claim, a party’s title to sue is separate to the question of whether it has suffered loss and is thus entitled to substantial damages. The issue arose in The Fehn Heaven [2018] EWHC 1606 (Comm) where charterers loaded a cargo of organic sunflower seeds and organic wheat, carried under two straight bills of lading which named Justorganic, as consignee. At some stage in the voyage the cargo had to be fumigated and as a consequence it could no longer be sold as organic. Charterers had to discount the price to their two Dutch buyers and sought to recover the amount of the discounts from the shipowner. They claimed in arbitration against the shipowner either as assignees of the consignee’s rights under the bills of lading or in their own right under the charterparty.

The tribunal awarded the charterers damages and found that charterers had title to sue, as assignee of the consignee’s rights under the bill of lading. However, the tribunal  made no express finding that Justorganic, the assignor, had suffered loss. This was a critical absence in the award because of the principle that an assignee could not recover more from the debtor than the assignor could have done had there been no assignment.(Chitty on Contracts (32nd edition at paragraph 19-075). The award could not be upheld on the alternative basis of charterers’ claim, that they had a right to recover their losses under the charterparty, as it was clear that the tribunal had decided that charterers’  title to sue was based on the assignment rather than on the charterparty. Owners’ appeal, therefore, succeeded and the matter was remitted to the tribunal.

Stuck in the middle with you.  Back to back time bar clauses in chain of charters.

 

 

P v Q, Q v R, R v S [2018] EWHC 1399 (Comm) involved three voyage charters in the middle of a lengthy chain, between P and Q, Q and R, and R and S. Each contained the same time bar clause barring all claims if arbitration was not commenced within thirteen months of final discharge. Final discharge was on 16 October 2015 and  in September 2016 cargo claims were made against the owners and duly passed down the chain. On 16 November 2016 after their office had closed, P received notification of the appointment of an arbitrator by their disponent owner, Sinochart. By the time they became aware of this on 17 November, the thirteen month time limit in their charter with Q had expired.  P notified Q and appointed an arbitrator on 30 November. Q then contacted R and appointed  their arbitrator on 17 November, with R doing likewise to S, appointing their arbitrator on 1 December.

The notices of arbitration down the three charter chain from P to S were all out of time. However, P argued there had to be an implicit limitation on the literal meaning of the arbitration clause C so that the time bar would not apply where it was impossible for a claim to be passed on within the stipulated time because the recipient of a notice of claim was unaware of the claim or receipt of a notice thereof, or where, at the expiration of the time limit, no dispute existed that could be made the subject of a commencement of arbitration.  A similar argument had been raised, and rejected, in  The Himmerland [1965] 2 Lloyd’s Rep 353 and in The Stephanos [1989] 1 Lloyd’s Rep 506  in which it had been held that the three month Centrocon arbitration clause should be given a literal construction, so that claims or disputes that had not even arisen within the stipulated period were nonetheless time-barred. Sir Richard Field, acting as a judge of the High Court, did likewise, noting that the words in the arbitration clauses were clear and ambiguous and should be given the same construction as was given in the Centrocon cases.

Time could be extended under s.12 of the Arbitration Act 1996 if it were just, but the applicant would need to have acted expeditiously and in a commercially appropriate fashion to commence proceedings once it became aware that a claim was being made against the applicant under the charterparty above or below in the chain.  Q had done so by appointing their arbitrator on 17 November, and were granted an  extension but this was not the case with P who had appointed  their arbitrator on 25 November, nor with R who had appointed their arbitrator on 1 December.