Article from Andrew Wilding, Managing Director, Asdem Asia Pte. Ltd.
In the "Mercini Lady", reported in Asdem News Update No.41, although the load port inspector found that the "total sediment" of the gas oil was within specification, four days later, following a voyage which was without incident, the cargo failed the sediment test at the discharge port. The Buyers, Bominflot, claimed over US$ 3 million from their Sellers, Petroplus, for the difference in the value of the cargo, freight and other consequential losses. Bominflot succeeded with their claims by persuading the Commercial Court that the contract contained conditions implied by section 14 of the Sale of Goods Act 1979 and at common law that the goods should have been "capable of remaining" within the contract specification and/or of satisfactory quality during the voyage and for a reasonable time thereafter. Further, and whilst there was a standard clause in the contract excluding quality claims, the Commercial Court held that it failed to stop these conditions being implied into the contract and claims being based on them, because the exclusion clause did not expressly exclude these "conditions".
The decision caused considerable controversy because it exposed an FOB seller to the risk of goods deteriorating after loading, even though risk passed on loading, and even though the contract provided that the cargo quality was to be certified at the load port. The effect of the commercial decision was that, contrary to the view of most traders, load port certificates were not final and binding for all purposes.
In a strong decision the Court of Appeal, "Mercini Lady  EWCA 1145”, overturned the Commercial Court's ruling. The Court of Appeal stated that the implied statutory condition of satisfactory quality under Section 14 of the 1979 Act which includes the product's "reasonable" durability to remain on specification for the voyage, applies only at the time of loading. To the extent that the first instance decision created an implied term at common law which could avoid the effect of the standard certificate final on loading clause, the decision was wrong, otherwise: "All certainty in international sale of goods, which such inspection clauses are designed to provide... would be utterly broken".
The Court of Appeal did agree with the Commercial Court that to exclude the effect of any implied statutory terms, the contract must expressly and specifically exclude conditions implied by the Sale of Goods Act in order to be effective. However, in reinforcing the commercial importance of certificate final clauses, the Court of Appeal said that if the contract contains a certificate final clause there might be no basis for alleging breach of the statutory implied term of satisfactory quality under the 1979 Act or any similar term implied at common law. The intention of the certificate was that it was to be final and binding on both parties and extinguish quality claims once the cargo was properly certified as being on specification.
22 London arbitration awards were published by Lloyd's Maritime Law Newsletter in 2010. While this is probably only 5% of all last year's LMAA arbitrations, it is a distinct improvement on 2009 when only one was published. Though most of the awards were not relevant to demurrage or indeed to the oil industry, arbitration no. 19/10 806 LMLN1 3(2) is worthy of note as it relates to the perennial argument as to where the ship should be when tendering its Notice of Readiness. The vessel was chartered on the Vegoil form to load at either Dumai or Lubuk Guang, two ports which are close to each other in Indonesia. The vessel tendered NOR at the Morong pilot station where a "sea" pilot boarded for the river passage to the Dumai port area. Two days later, a "harbour" pilot boarded and took the vessel to the loading berth at Dumai. The charterers claimed that the NOR tendered at the pilot station was invalid as it was not within the official area of the port. The owners, on the other hand, claimed that the pilot station was controlled by the Dumai harbour authority and was where ships would normally wait. The charterers contended that the harbour authority did not have control of the pilot station and any connection was only in an administrative role. It was simply the place where ships would pick up the pilot before being taken up river to either Dumai port (5 hours sailing time) or Lubuk Guang port (8 hours sailing time).
The arbitrators agreed with the charterers that the Morong pilot station did not fall under the jurisdiction of the Dumai harbour authority. The vessel had not completed its sea voyage and would not do so until it had reached one of the inner anchorages listed in the Admiralty Guide to Port Entry. The vessel was not an "arrived ship" as defined by The House of Lords in The Johanna Oldendorff  and the NOR was therefore invalid. As no further NOR had been tendered, laytime would commence in accordance with the terms of the c/p which was when the vessel was all fast at the berth.
The recent judgment of the High Court in the case of National Shipping Company of Saudi Arabia v. BP Oil Supply Company  EWHC 3043 illustrates yet again how important it is for owners to establish their demurrage claim with all the required supporting documentation within the time bar period. This is particularly essential under the BPVOY3/4 charter parties which stipulate that the claim must be presented "together with full supporting documentation substantiating each and every constituent part of the claim". In this case, the owners had initially submitted a demurrage claim for USD 317,635 which the charterers agreed and paid. The owners also issued a separate claim for additional freight under an additional port clause for a delay to a second berthing at the load port for USD 521,150 plus USD 68,768 for additional bunkers consumed while drifting. The charterers considered that this second claim should have been for demurrage. The owners eventually conceded this and changed their claim to one for demurrage for USD 316,823. They did this after the expiry of the time bar for demurrage claims.
The judge considered that the demurrage settlement agreed between the parties was intended to be a settlement of any and all claims for demurrage. Furthermore, the owners were not entitled, after the 90-day time bar had expired, to amend a claim for freight and bunkers to a claim for demurrage which was a claim of a completely different nature. The judge also pointed out that the original freight claim had not included all the necessary supporting documentation to substantiate a demurrage claim. The owners' second claim for demurrage was therefore time barred.
In 2005, Asdem fought an arbitration in London on behalf of a small firm of ship owners. They discovered rather belatedly that they had sent their demurrage claim to the wrong company. However, they still managed to send their claim to the correct charterers' brokers on the 90th day, just within the time bar period. The charterers, however, declined to pay the claim and in the arbitration they offered every possible excuse as to why they considered it was time barred. Fortunately, the single arbitrator dismissed all their arguments and held that: