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.

 

 

Demurrage or detention? Agreement for vessel to wait mid-voyage.

 

What is the nature of a claim for compensation when the parties to a sale contract agree that the vessel shall wait for orders mid voyage? Demurrage, or detention? This was the question that came before the court in Glencore Energy UK Ltd v OMV Supply & Trading Ltd [2018] EWHC 895 (Comm).

Glencore Energy sold oil on cfr terms to OMV Supply & Trading. There was congestion at the discharge port of Trieste and OMV asked Glencore that the carrying vessel should wait offshore until a berth was available, to which Glencore agreed.  On arrival at the waiting area the vessel’s master served NOR. The sale contract provided for 36 hours laytime at disport, commencing 6 hours after tendering of NOR or on commencement of discharge, and provided for demurrage to be paid in accordance with the  actual charterparty rate. The clause also required any claim for demurrage to be received latest 90 days from completion of discharge otherwise it would be deemed to have been waived. The contract also incorporated the BP 2007 General Terms and Conditions for CFR deliveries.

Glencore claimed compensation for the period waiting offshore at OMV’s request by reference to the demurrage rate, as well as for the cost of bunkers consumed there. This was a detention claim on the basis of an implied contract. The claim was submitted outside the 90 day period for submission of demurrage claims and OMV rejected it, arguing that the claim was a claim for demurrage, in that laytime was advanced when the master served NOR on arrival at the waiting area, with the demurrage provisions following mechanically.

Sir Ross Cranston held that the waiting period did not fall within the laytime and demurrage provisions in the sale contract or the incorporated BP terms. The former referred to laytime at disport and the latter defined laytime as time allowed for loading and unloading. The NOR given by the master could not start laytime for a waiting period during which there was neither loading or unloading. Glencore were entitled to compensation for the waiting time at the demurrage rate, together with the cost of bunkers consumed during the waiting time. Their acceptance of OMV’s request gave rise to an implied contract for “delay by agreement” under which the vessel would wait until further orders and Glencore would be remunerated for that service. The claim was one for detention, not demurrage, and accordingly was not within the time bar provisions for demurrage claims.

“Always Accessible” covers your going out as well as your coming in.

 

The term ‘always accessible’ in a voyage charter has been treated as synonymous with ‘reachable on arrival’ in the light of the decision in London Arbitration 11/97. Consequently the warranty has been thought to apply only to arrival at a berth and not to cover departure.  In Seatrade Group N.V v Hakan Agro D.M.C.C. (“The Aconcagua Bay”) [2018] EWHC 654 (Comm), 26 March 2018, the High Court has now held that the warranty covers both arrival and departure from a berth and has overturned the decision of the umpire applying the received wisdom that the warranty did not apply to departure.

Robin Knowles J, C.B.E stated: “Did the parties intend to provide for departure in the wording they used? Where commercial parties have addressed the question of the accessibility of a berth, I can see no basis for a conclusion that they should be taken to have addressed entry alone. Importantly in my view the Umpire did not provide an answer to this. The submission by Mr Nevil Phillips and Mr Ben Gardner for the Owners that the reasonable commercial party looking at the subject of berthing would bear all aspects in mind and not confine itself to getting into the berth, is to my mind decisive….The term “reachable on arrival” is to be found in some charterparties (particularly tanker charters according to London Arbitration 5/12 in LMLN 1 Oct 2012). The Owners submit that this self-evidently applies to arrival only. I am left with the perspective that there is a useful vocabulary from which parties can choose, if “always accessible” applies to departure as well as entry and if “reachable on arrival” applies to entry alone.”

Hague rules. No limitation for bulk cargo.

 

On Wednesday in The Aqasia [2018] EWCA Civ 276 the Court of Appeal upheld the decision of Sir Jeremy Cooke [2016] EWHC 2514 (Comm) that “unit” in Article IV rule 5 of the Hague Rules means a physical item of cargo and not a unit of measurement. The case involved a cargo claim against owners under a voyage charter for the carriage of bulk fishoil, which provided that “The Owners in all matters arising under this Contract shall also be entitled to the like privileges and rights and immunities as are contained in Sections 2 and 5 of the Carriage of Goods by Sea Act 1924 and in Article IV of the Schedule thereto …”

 

Flaux LJ reasoned that the word “package” clearly referred to a physical item and the use of the words “package” and “unit” together and in the same context pointed strongly to both words being concerned with physical items rather than units of measurement. “Unit” refers to a physical item which is not a “package”, because, for example, it is incapable of being packaged or is not in fact packaged. This was the construction accepted by courts in other common law jurisdictions and favoured by the majority of academic commentators and textbooks.

 

It was also clearly confirmed by the travaux préparatoires for the Hague Rules. There was no suggestion in the travaux préparatoires that “unit” had been introduced to cater for bulk cargoes.  Any limitation by reference to weight or volume was abandoned by the end of the session on 31 August 1921, as was any limitation by reference to a multiplier of freight by the end of the session on 1 September 1921. The word “unit” had been introduced to cater for items of cargo which are carried without packaging, such as cars or boilers.

 

Accordingly, there is no limitation available under the Hague Rules in respect of loss or damage to bulk or liquid cargo. The Court of Appeal also rejected owners’ argument that the words of Article IV were written into the charterparty so that every provision in the Article must be given meaning and effect in the context of the carriage of the bulk cargo contemplated by the charterparty. On the correct construction of the charterparty, owners were entitled to rely upon no more than what Article IV provides.

 

Is  a ‘Waiting for orders’ claim a demurrage claim?

 

 

The answer to this question matters because of the documents required under a time bar clause for “demurrage claims”.

In The Ocean Neptune [2018] EWHC 163 (Comm) the vessel was chartered for a voyage from Taiwan to three Australian discharge ports on ExxonMobil VOY2005 form, and the Lukoil International Trading and Supply Company Exxonvoy 2005 clauses dated 30.05.2006 (“the LITASCO Clauses”). Clause 2 of the Litasco clauses provided a requirement for demurrage claims to be provided with supporting documentation within 90 days of completion of final discharge, with a similar provision for other claims but with a time limit of 120 days. In addition cl. 2(b) specified the types of documentation that had to be required for a demurrage claim.  Clause 4 of the Litasco clauses was a ‘waiting for orders’ clause which provided “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.”

At Gladstone, the first discharge port, the vessel berthed but then shifted back to the anchorage, remaining there for more than a month until charterers ordered the vessel to sail to Botany Bay.  The reason for the delay at Gladstone was that the receivers, Caltex, refused to take delivery of the cargo on the grounds that it was alleged to be contaminated/off specification. Owners initially presented this delay claim as a demurrage claim, but then reformulated it as a claim under cl. 4. The Tribunal held the Owners’ demurrage claims were barred because they failed to include a statement of facts for the loading port and the discharging ports, countersigned by the terminal, or if it was impossible to obtain such a countersignature, a letter of protest from the Master, as required by cl. 2(b). However, the Tribunal found that cl.2(b) did not apply to the claim for delay under cl.4. Charterers appealed against the finding.

Popplewell J allowed the appeal. The claim under clause 4 was a demurrage claim. Demurrage was defined by clause 13(d) of the ExxonMobil VOY2005 form which provided that demurrage was 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.”  Clause 4 provided that the delay caused by waiting at anchorage shall “count as” used laytime or demurrage. Demurrage was not limited to a claim where charterers had exceeded the allowed laytime by the time taken for loading and discharging. The waiting time was, therefore, time taken for Charterers’ purposes which under the charter counted as laytime or demurrage.  This was to be contrasted with other clauses in the charter which provided merely that compensation for delay caused by breach would be at the demurrage rate.

 

Repudiation claims and voyage charter timebar clause

 

Demurrage time bar clauses are a commonplace in tanker charters. They require owners to submit their claim with supporting documentation within a specified period of time after completion of discharge, failing which the claim is extinguished. Some clauses extend this regime to all claims by owners against charterers. However, what happens to the time bar when the cargo is never discharged, because charterers have repudiated the charter and have never loaded a cargo? The Tribunal in London Arbitration 3/18 has found that the clause which discharged the charterer from all liability if appropriate documentation is not provided “within 90 days after completion of discharge at last discharging port” did not affect owners’ load port demurrage claim, nor their  cancellation claim. The clause could not operate effectively in circumstances where the contemplated voyage was not performed at all. If charterers had wanted the clause to operate in these circumstances, they needed to provide clearly for this eventuality, as is the case with the Hague/Hague-Visby Rules which discharge an owner from liability if suit was not brought within one year of the delivery of the goods or of the “date when they should have been delivered”. A similar finding was made by Nigel Teare QC, as he then was, in The Bow Cedar,[2005] 1 Lloyd’s Rep 275.

Demurrage claim against seller. Don’t blame your buyer if you don’t pay freight due under your charter.

 

London Arbitration 2/18 give us an interesting issue on causation arising out of two related contracts, a cfr sale contract, and the charterparty made by the seller. The cfr sale contract required buyers to pay charterparty freight to sellers as soon as possible after signing bills of lading; which they failed to do. The shipowners refused to release the ‘freight prepaid’ bill of lading until freight had been paid. The consequent delay resulted in the seller incurring a liability for demurrage at the discharge port under their charterparty. The tribunal held that the sellers were not entitled to an indemnity from the buyers in respect of their demurrage liability. Despite the provisions of the sale contract, the primary obligation to pay to the owners the charterparty freight remained with the sellers, as charterers of the vessel.  The sellers decided not to pay themselves the freight due to the owners and this broke any chain of causation there might have been between the buyers’ breach and the demurrage incurred by sellers under the charter. Alternatively, the sellers had failed to mitigate the damages to which the buyers’ breach exposed them and thereby incurred a liability for demurrage that could have been otherwise avoided.

Owners obligation to start the approach voyage under a voyage charter.

 The Pacific Voyager [2017] EWHC 2579 (Comm) concerns the shipowner’s obligations under a voyage charter in commencing the approach voyage to the port of loading. In the present case, the vessel struck a submerged object in the Suez Canal while engaged in the final leg of her previous charter. All her cargo was discharged there and the vessel had to be drydocked for repairs before performing any further laden voyages. The cancelling date was 2359 on 4 February 2015 and owners notified charterers that the vessel was shortly due to drydock where repairs would take “months”. Charterers cancelled on 6 February 2015 and claimed substantial damages.

In Monroe Brothers Limited v Ryan [1935] 2 KB 28 the Court of Appeal held  that where the charter contains an expected readiness to load date (‘ertl’) the owner is under an absolute obligation to start the approach voyage by a date when it is reasonably certain that the vessel will arrive at the loading port on or around the expected readiness to load date. The exceptions in the charter will apply once the approach voyage starts but do not apply to the period before hand. The same applies where the charter provides an an estimated time of arrival (‘eta’) at the load port (The Myrtos [1984] 2 Lloyd’s Rep. 449).

The present case raised the novel issue of how the Monroe obligation operated in a charter which did not contain an ‘ertl’ or an ‘eta’ provision. Instead the charter contained a series of ETAs in respect of the anticipated timetable for completion of the voyage then being undertaken under the previous charter. Charterers argued that the cancelling date provided the date by reference to which there was an absolute obligation on the Owners to commence the approach voyage. Owners argued that the only relevant obligation on the Owners was an implied term that they would exercise due diligence to get the Vessel to the loading port by the cancelling date.

Popplewell J found that there was an absolute duty on the Owners to commence the approach voyage, at a particular point of time. That time is to be a reasonable time, to be identified in the light of the other charterparty terms. In this charter the relevant terms were to be found in the provisions regarding ETAs for the completion of the previous charter, which were equivalent to an ETA of arrival at the load port. The ETAs concluded with the vessel arriving at Antifer on 25 January 2015 for final discharge of her previous cargo. Owners were under an absolute obligation to commence the approach voyage at the end of a reasonable discharging period, were the vessel to arrive at Antifer on 25 January 2015. Had there been no ETAs for the vessel’s previous employment, there would have been an absolute obligation to commence the approach voyage by a date when it was reasonably certain that the Vessel would arrive at the loading port by the cancelling date.