In Asdem Newsletter No. 53 we said that the High Court case of Gard Marine & Energy Ltd. v. China National Chartering Co Ltd (The "Ocean Victory") [2013] EWHC 2199 (Comm) helped to explain what the courts consider to be an unsafe port. However, that proved to be somewhat premature as the High Court judgment has been overturned by the Court of Appeal in Gard Marine & Energy Ltd. v. China National Chartering Co Ltd (The "Ocean Victory") [2015] EWCA Civ 16.
The Court of Appeal held that the critical question as to whether Kashima was a safe port depended on whether the two separate conditions which coincided could be said to have become an unusual occurrence. These were (i) the swell from "long waves" which might force the vessel from the jetty and (ii) northerly gale force winds which could prevent the vessel from leaving the port safely. Neither of these conditions on its own rendered the port unsafe. However, the combination of the two made this an abnormal occurrence.
A charterer did not become liable for unexpected and sudden abnormal events which created unsafe conditions once he had ordered the vessel to the port. The relevant question was whether the combination of conditions occurred frequently enough to make it a normal characteristic of the port. The judge in the High Court had been wrong to consider that each of the two factors was a characteristic of the port. He should have considered whether the combination of the two factors was an unusual event at Kashima that lead to the vessel becoming trapped in the port. The test of mere foreseeability was not sufficient to turn a rare event into a normal characteristic of the port. The judge should have considered the past history of such an event at the port and the probability of it occurring again. The only possible conclusion would then have been that this was indeed an unusual event and therefore there had not been a breach of the safe port warranty by the charterers.
Another case which went to the Court of Appeal was the case of Trafigura Beheer BV v. Navigazione Montanari SPA "The Valle Cordoba" [2014] EWHC 129(Comm) which we reviewed in Asdem Newsletter No. 55. However, in this instance the Court of Appeal confirmed the High Court judgment. The in-transit loss clause applied only to shortage claims arising from a normal voyage. It did not apply to a loss of cargo as a result of action by pirates. The court further held that in any event as the Hague-Visby Rules applied to this charter, owners were except from liability under articles IV rules 2(c), 2(f) or 2(q).
The recent High Court case of Kassiopi Maritime Co. Ltd v Fal Shipping Co. Ltd, "The Adventure" [2015] EWHC 318 (Comm) has potentially significant consequences for owners who charter out their vessels on BPVOY4 terms.
Unfortunately, there does not appear to be an appeal outstanding.
The arbitrators at first instance held that the owners' claim for USD 364,847 demurrage failed because copies of the port log, time sheets and an email from the master confirming the time that free pratique had been given by VHF at Port Sudan had not been provided with their claim within the 90 day time bar period. Clause 21 of BPVOY4, the time bar clause, states that the charterers shall be discharged from all liability "unless a claim in writing has been presented to Charterers, together with all supporting documentation substantiating each and every part of the claim, within ninety (90) days of the completion of discharge of the cargo carried hereunder".
In addition, the arbitrators, referred to clause 19.7, where owners were obliged to provide copies of signed pumping logs, all notes of protest and, in cl.19.7.3, "copies of all other documentation maintained by those on board the Vessel or by the Terminal in connection with the cargo operations".
The arbitrators had concluded that the owners should have provided all the documentation that they would be required to disclose in an arbitration. The owners appealed to the High Court.
In the opinion of the judge, Mr. Justice Hamblen, it was wrong to expect owners to provide as much documentation as might be required in an arbitration. This would place too heavy a burden on owners. However, he considered that cl.19.7.3 of BPVOY4 obliged owners to provide contemporaneous records kept by the vessel relating to the cargo operations.
Although the judge accepted that the information on the port log and time sheet referred to in letters of protest had already been provided by other documents including a statement of facts, he stressed that the owners' obligation was to provide "all" documents. Clause 21 required owners provide all the documents which would objectively substantiate each and every part of the claim so that the charterers could satisfy themselves that the claim was well-founded, consistent with the purpose of the clause.
This case is perhaps more relevant to BP's charter parties as the majority of time bar clauses in other charter parties do not include the words "all supporting documents".
However, the general rule in English law is clear enough. The claimant must provide sufficient documentation to enable the recipient of the claim to verify it.
One question which comes up on a regular basis is, how should laytime be calculated when a charterer has been unable to meet his contractual obligation to load a full cargo? The ship owner is entitled to receive freight payment for the amount of cargo actually loaded and also an amount in lieu of the extra cargo that the vessel could have loaded in compliance with the terms of the charter party. The extra payment for the cargo shortage is called deadfreight.
The ship owner will have received payment for the full freight although only part of the cargo has been loaded. As far as laytime is concerned, the vessel is deemed to have the full cargo on board and therefore the full laytime allowance agreed in the charter party will be applicable. For example, if the minimum cargo agreed in the charter party is 50 kt and the laytime allowance is 72 hours, but only 40 kt is loaded onto the vessel, the charterer will still be entitled to the full 72 hour laytime allowance.
We mentioned in our January newsletter that we looked forward to the publication of BP's new charter party, BPVOY5. We had hoped that BP would be able to present it at our Demurrage Conference but we understand that the trials and testing of the charterparty are still continuing and are unlikely to be completed before the end of June. However, we remain hopeful that as the most up-to-date charter party it will quickly gain favour as the charter of choice for many charterers and owners. It should undoubtedly require fewer amendments than the older charter forms and may even encourage some charterers finally to abandon the ancient Asbatankvoy which, incidentally, was first published by Exxon in 1969.
Article from Andrew Wilding - Managing Director, Asdem Asia Pte. Ltd.
English law has established that a shipowner cannot claim demurrage when the delay is caused by the shipowner himself or by those for whom the shipowner is responsible. This principle applies independently of the terms of the charter and operates as a defence to a claim for demurrage. It is based on the general principle that a party cannot claim damages if the claim is based on his own fault. That fault must occur whilst demurrage is running for the rule to apply. To give a simple example, a poorly maintained winch which breaks down whilst a ship is on demurrage would prevent the ship owner claiming demurrage.
This principle is separate from claims against demurrage that arise from breach of charter, such as a breakdown, which consequentially result in time on demurrage because, for example, the ship loses its turn. The charterer would, in principle, have a claim for damages in the amount of the demurrage claimed and may refuse to pay demurrage by setting off one claim against the other.
This situation places an owner and charterer on the horns of an interesting dilemma. Can a claim for damages be set off against a claim for demurrage? The shipowner's response is likely to be "No". The shipowner will demand his demurrage insisting that damages for breach cannot be set off against demurrage on the basis that demurrage is compensation for loss of freight. As a matter of law there is, essentially, no right whatsoever of set off against freight and it follows that there is no right to set off a damages claim against demurrage because demurrage is in reality in the nature of a payment of freight. Damages should be dealt with separately.
However, there is an argument to the contrary available to charterers. Demurrage is a payment of (liquidated) damages for breach of the obligation to load and discharge the vessel within the agreed laytime. Demurrage is a claim for damages; it is not a claim for freight. The rules against set off against freight are known as "exceptional". In the colourful metaphor of the English House of Lords in Aires Tanker Corp v Total Transport (1977) they stand "uneroded like an outcrop of pre-Cambrian [rock] amid the detritus of sedimentary deposits". The charterers would argue that the rule against set off against freight should not be extended to demurrage, which is a claim for damages. Charterers should therefore be entitled to set off their claim for damages against the shipowner's damages claim.
As far as we are aware there is no court decision to say whether you can or cannot exercise a right of set off in these circumstances. The arguments for and against the right of set off are finely balanced and the lack of High Court authority points to the fact that claims in these circumstances are invariably settled out of court.