In Lukoil Asia Pacific Pty Ltd v Ocean Tankers (Pte) Limited (Ocean Neptune) [2018] EWHC 163 (Comm) the Commercial Court overturned an arbitral award concerning a charter incorporating standard terms of the ExxonMobil VOY2005 form and the Lukoil International Trading and Supply Company Exxonvoy 2005 clauses dated 30.05.2006. The Commercial Court decided that a claim by the owner concerning time “waiting on orders” was a claim for “demurrage” and contractually time barred.

Facts

In November 2013, Lukoil Asia Pacific Pty Limited (the “Claimants” or “Charterers”) chartered the Ocean Neptune (“Vessel”) from Ocean Tankers (Pte) Limited (the “Defendant” or “Owners”) for the carriage of petroleum products from one safe port in Taiwan to one to three safe ports in Australia. The voyage charter was contained in a fixture recap email which incorporated the standard terms of the ExxonMobil VOY2005 form and the Lukoil International Trading and Supply Company Exxonvoy 2005 clauses dated 30.05.2006 (the “LITASCO clauses”), as amended in the fixture recap with a laytime for loading and discharging of 84 hours in total at both ends, Saturdays and holidays included.

Clause 13 of the ExxonMobil VOY2005 form stated:

13. LAYTIME/DEMURRAGE ….

(d) PAYMENT. Charterer shall pay demurrage per running day and pro rata for a part thereof for all time by which the allowed laytime specified in Part I (I) is exceeded by the time taken for the loading and discharging and for all other Charterer's purposes and which, under this Charter, counts as laytime or as time on demurrage.”.

Clause 2 of the LITASCO clauses required (with underlining to illustrate where the clauses were amended by the fixture recap):

2. CLAIMS

A. …

UNLESS A CLAIM HAS BEEN PRESENTED IN WRITING TO CHARTERERS WITH SUPPORTING DOCUMENTATION WITHIN NINETY (90) DAYS FOR DEMURRAGE AND 120 DAYS FOR OTHER CLAIMS FROM COMPLETION OF DISCHARGE OF THE CARGO UNDER THIS CHARTERPARTY.

B. FOR DEMURRAGE CLAIMS SUPPORTING DOCUMENTS MUST INCLUDE WHENEVER POSSIBLE -

  1. OWNERS' CALCULATION OF THE DEMURRAGE DUE; AND
  2. THE CERTIFICATE OF NOTICE OF READINESS TENDERED AT EACH PORT OF LOADING AND DISCHARGE; AND
  3. THE STATEMENT OF FACTS FOR EACH LOADING AND DISCHARGE BERTH WHICH MUST BE SIGNED BY THE MASTER OR THE VESSEL'S AGENTS AND, WHEREVER POSSIBLE, THE TERMINAL; AND
  4. THE VESSEL'S PUMPING LOGS FOR EACH DISCHARGE BERTH; AND
  5. ALL LETTERS OF PROTEST ISSUED BY THE VESSEL OR THE TERMINAL. THE NOR [sic]”.

Clause 4 of the LITASCO clauses stated (with underlining to illustrate where the clauses were amended by the fixture recap):

“4. WAITING FOR ORDERS CLAUSE

IF CHARTERERS REQUIRE VESSEL TO INTERRUPT HER VOYAGE AWAITING AT ANCHORAGE FURTHER ORDERS, SUCH DELAY TO BE FOR CHARTERERS’ ACCOUNT AND SHALL COUNT AS LAYTIME OR DEMURRAGE, IF VESSEL ON DEMURRAGE. DRIFTING CLAUSE SHALL APPLY IF THE SHIP DRIFTS”.

Following receivers at one port in Australia (Gladstone) refusing to take delivery of cargo because the cargo was alleged to be off-specification/contaminated (this delay totalling around 1,048.58 hours), the Owners claimed demurrage together with interest and costs. The Charterers denied liability for the claim on the grounds, amongst others, that the claim was time barred because the documents in support of the claim specified in the LITASCO clauses for demurrage were not provided within 90 days of the completion of discharge.

The Owners subsequently argued that time at Gladstone was, in fact, time waiting on orders. Further, such time was not demurrage.

Arbitral tribunal’s decision

The arbitral tribunal agreed with the Owner’s submission in relation to time bar for demurrage costs relating to delays caused at Gladstone. It accepted the Owners claim that time lost waiting for orders fell under Clause 4 of the LITASCO clauses, but that the time limitation for demurrage claims did not apply to time waiting on orders.

The arbitral tribunal’s reasoning for that conclusion was contained in paragraph 20 of its award in the following terms:

It seems to us that the strict application of the requirements of clause 2.B has to cut both ways and they are not applicable to a claim for time lost waiting for orders. Not only does that follow from the proper construction of the rider clauses, but from a practical point of view it would make sense for the documentary requirements for demurrage not to be applicable to claims for time lost waiting for orders. When a vessel has to wait for orders, she will often do so off port limits in order to avoid port charges. As a result, the contact that a vessel will have with the shore representatives of those handing the cargo may well be totally absent. The vessel’s wait for orders may generate no communications at all with anyone at the port.”.

In essence, the arbitral tribunal decided that there was a distinction to be drawn between claims for demurrage in relation to operational delays at the loading and discharge ports, and claims for time lost waiting for orders, which were to be treated differently. The fact that a LITASCO Clause 4 claim was to “count as” demurrage for the purposes of computation did not make it a claim for demurrage for all purposes, and in particular did not do so for the purposes of clauses such as LITASCO Clause 2B.

Decision of the Commercial Court

In overturning the arbitral tribunal’s decision, the Commercial Court applied the usual principles of contractual interpretation and construction. In doing so, it considered the natural and ordinary meaning of the terms of the charter and the commercial consequences of rival constructions.

The starting point for the Commercial Court’s analysis was that LITASCO Clause 2B applies “for demurrage claims”. The question for the Commercial Court was therefore whether a claim under LITASCO Clause 4 is a “demurrage claim”. In this respect, the Commercial Court considered that the ExxonMobil VOY2005 form and the LITASCO Clauses are detailed and carefully drafted terms, and the fixture recap was framed by reference to them. It therefore found it convenient to start its analysis with the language used in the charter as a whole, before moving on to the commercial consequences. The Commercial Court reasoned:

a) The language of the charter provides in clear terms that a LITASCO Clause 4 claim is a demurrage claim;

b) identification of what is meant by a claim for demurrage is to be found in clause 13(d) of the ExxonMobil VOY2005 form. It is there that the obligation to pay demurrage is framed by the use of the words “Charterer shall pay demurrage….”. It provides that demurrage is to be paid for all time by which the allowed laytime “is exceeded by time taken for loading and discharging and for all other Charterer’s purposes and which, under this Charter, counts as laytime or as time on demurrage.”;

c) the language of LITASCO Clause 4 provides that the delay caused by waiting at anchorage shall “count as” used laytime or demurrage;

d) the waiting time under LITASCO Clause 4 is, in the words of clause 13(d), time taken for Charterers’ purposes which under the Charter counts as laytime or demurrage. It therefore falls squarely within clause 13(d), giving rise to a claim for demurrage;

e) it follows that it is not just to be quantified in the same way as a demurrage claim at the demurrage rate. It is a demurrage claim under clause 13(d). The words make it clear that there is no distinction between an “ordinary” demurrage claim, in the sense of a claim where the Charterers have exceeded the allowed laytime by the time taken for loading and discharging, and a claim for delay waiting for orders where such delay is to count as laytime or time on demurrage. There is only one type of claim: a claim for demurrage to account for the time by which Charterers have exceeded the agreed laytime for loading, discharging and for any other of Charterers’ purposes which count as laytime or time on demurrage under the Charterparty – including time spent waiting for orders under LITASCO Clause 4;

f) providing that time is “to count” as laytime or demurrage and be treated as part of a demurrage claim is a common drafting technique in charterparty terms. The formulation is often used to describe periods which would otherwise not form part of the laytime;

g) this construction is reinforced by the fact that a claim for waiting time under LITASCO Clause 4 is not simply or necessarily a claim for all such time. A claim under the clause is not only to be quantified at the demurrage rate, but is also qualified by the laytime otherwise used or not used in the course of performance of other parts of the voyage. If a claim arises under the clause it is to count as laytime: to the extent that laytime has not otherwise been used;

h) this construction was also supported by the contrast between the wording of LITASCO Clause 4 and that of clauses 5 and 7 of the fixture recap. Where the parties wanted to draw a distinction between demurrage claims and other types of delay claim they used clear language to do so. For example, clause 5 provides that any delay caused by breach of the ISPS clause obligations by the Charterers “shall be compensated at the demurrage rate”; and

i) the above construction makes commercial sense as such clauses are intended to enable the parties to have a final accounting as swiftly as possible and, if any factual enquiries have to be made, to ensure that the parties are able to do so whilst recollections are reasonably fresh. This rationale applies as much to a claim for waiting time under LITASCO Clause 4 as to any other aspect of a demurrage claim.

Contractual notice and limitation periods are designed to provide parties with greater certainty as to the financial outcome of their transaction, by ensuring that any claims are speedily notified, substantiated and resolved.

However, it is important that the parties are aware of the existence of such provisions and, where necessary, a party is in a position to comply within the time periods provided. Absence such compliance, English law will usually enforce the intention of the parties, objectively ascertained, by time barring any claim that might have otherwise been valid.

The deployment of multiple model form agreements, along with amendments, within a single contract, or charter, might make identifying the existence or meaning of such provisions more complex. However, the complexity of the exercise will not prevent English law from ascertaining the proper meaning of the contract, or charter, and applying its terms. Upon identifying a notice or limitation provision, if it is not clear whether a notice provision applies, swift legal advice should be sought, and consideration given as to whether a ‘protective’ notice should be issued ‘without prejudice’ to the contention on whether the provision properly applies.

Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (Ocean Neptune) [2018] EWHC 163 (Comm).