Lukoil Asia Pacific Pte Limited v. Ocean Tankers (Pte) Limited (Ocean Neptune)  EWHC 163 (Comm)
Does a claim for “waiting for charterers’ orders” fall within a 90 day demurrage time bar? On the wording of this particular charter, the Court said that it did. As a result, the Shipowners were unable to recover any damages in respect of seven weeks spent awaiting Charterers’ orders. Shipowners beware!
The background facts
This is one of those cases where, at first glance, many of our readers will have some sympathy for the Shipowners and this may explain why they won in London arbitration before a panel of experienced maritime arbitrators. However, unless the contract or the arbitration rules say there is no right of appeal, London arbitration awards may be appealed to the Commercial Court on points of law, and this is what happened in this case.
The Shipowners had voyage chartered their vessel to the Charterers on the ExxonMobil VOY 2005 form with Litasco rider clauses. The relevant clauses for the purposes of this dispute were as follows:
Rider Clause 2: “….Charterers shall be discharged and released in respect of any claims owners may have….such as but not limited to …claims for demurrage….unless a claim has been presented…with supporting documents…within 90 days…….For demurrage claims supporting documents must include whenever possible……the statement of facts for each loading and discharging berth which must be signed by the Master or the vessel’s agents and whenever possible, the terminal….”
Rider Clause 3: “….statement of facts must be signed by…..the receivers, if possible. If not possible then Master to issue a letter of protest…submitted together with Owners demurrage claim.”
Rider Clause 4: “if Charterers require vessel to interrupt her voyage waiting 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”.
ExxonMobil VOY 2005 - Clause 13(d): “Charterers shall pay demurrage …. 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” (our emphasis added).
The vessel loaded (uneventfully) in Taiwan and sailed for discharge at 1-3 ports, Australia. On arrival at the first Australian port, after two days at the berth, the cargo receivers rejected the cargo and the vessel shifted back to the anchorage. There she waited for about seven weeks, until ordered by the Charterers to proceed to two further Australian ports. The Charterers alleged that the Shipowners were responsible for the cargo contamination, but the merits of that claim are not relevant to this decision.
The Shipowners lodged their demurrage claim on time, but the supporting documents that they provided were incomplete. Therefore, the Tribunal held that the claim for demurrage in respect of the load port and the second and third Australian discharge ports failed. However, in relation to the first Australian port, which accounted for the bulk of the Shipowners’ claim for over US$700,000, and which they had subsequently re-labelled as a claim for time lost waiting for orders, the Tribunal found in favour of the Shipowners. The Tribunal classified the delays incurred waiting for the Charterers’ orders as falling outside the scope of the Charterers’ time bar defence. Their basis for doing so was that a claim for time lost waiting for orders was covered by Clause 4 of Litasco’s terms, which did not constitute a demurrage claim and, therefore, the documentary requirements of the time bar clause did not apply.
The Charterers appealed against the Tribunal’s decision, highlighting that no sound commercial reasons existed for failing to give the language of the clauses their clear and plain meaning. The Owners submitted that there was an obvious distinction to be drawn between claims for demurrage in relation to operational delays incurred at the loading and/or discharge port, and claims for time lost waiting for orders.
The Commercial Court decision
The Charterers’ appeal was allowed. The Court stated that the time bar in Clause 2 applied to “demurrage claims”. So the question was whether a claim by the Shipowners under Clause 4 was “a demurrage claim.” The answer to that, in the Court’s view, was clearly yes, because of Clause 13. This clause defined demurrage as being: (i) time spent in excess of laytime; and (ii) time lost for charterers’ purposes and which was said to count as laytime or time on demurrage. This was exactly what the Shipowners’ claim under Clause 4 was. In contrast to certain other clauses in the charter, which simply referred to delay being quantified at the “demurrage rate”, Clause 4 was a demurrage claim as defined by Clause 13.
The Court also noted that, in order to assess the waiting time under Clause 4, the Shipowners could not simply claim all the time because the clause only applied to claims in excess of laytime. The parties still had to calculate the amount of laytime used, so a claim under Clause 4 was part and parcel of a Clause 13 demurrage claim.
Whilst there might be some circumstances where a claim for waiting for charterers’ orders did not involve providing any of the documents needed for a normal demurrage claim, this was not a reason for failing to give effect to the clear words of the contract.
This case is a good reminder of the care that is needed in order to comply with these time limit clauses. It is not entirely clear from the judgment which documents were missing, but it seems that a statement of facts from the load port was not countersigned by the terminal or, failing that, accompanied by a Letter of Protest from the Master. At this stage, the troubles to come later on in the voyage were not even known about, and this just goes to show how important it is for masters to ensure that the ship complies to the letter with the terms of the charter/voyage orders when it comes to issuing notes of protest.
Providing that time is to count as laytime or demurrage is a common drafting technique in charters. Whilst the result in this case turned on the definition of “demurrage” in the incorporated Exxonvoy charter, we think that many other standard charters would adopt the same approach. As such, whenever parties have claims for delay under voyage charters (or sale contracts) which, on the face of them, fall outside the usual loading/discharging regime, the cautious starting point is always to assume that the demurrage time limit will apply.