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Courts Take Hard Line Over Demurrage Time Bars
Neil Henderson
This article by Neil Henderson first appeared in Lloyd's List on 12 January 2011.
The relatively recent Court of Appeal case, The Eagle Valencia [2010] 2 Lloyd’s Rep. 257, has highlighted once again the procedural problems and risks owners can face in trying to recover demurrage from charterers. The case is another reminder that where a charterparty makes express provision for exactly when and how claims for demurrage should be submitted, it is vital that these requirements are exactly complied with.
A clause specifying that claims must be brought within a certain time-limit, failing which the defaulting party will be released from all liability, is an exclusion clause. It entitles the defaulting party to escape liability for damages it would otherwise be obliged to pay.
Exclusion clauses must be expressed clearly and without ambiguity, otherwise they will be ineffective. If the clause is clear then the severe consequences of the clause are no justification for putting a constrained or artificial meaning on the language to avoid or restrict the exclusion of liability. The general approach of the Courts has been to construe exclusion clauses strictly against a wrongdoing party seeking to rely upon such a clause: namely the wrongdoer bears the burden of proof and any doubt or ambiguity will be resolved in the innocent party’s favour. However, in relation to time-bars for demurrage the Courts have taken a seemingly tough line in upholding the defaulting charterers’ right to rely upon the exclusions available to them.
In the 1982 case of The Oltenia [1982] 1 Lloyd’s Rep. 448, the owners sought to recover against charterers for demurrage incurred on another vessel which was due to tranship a cargo of gasoil into the Oltenia after completion of discharge of the subject cargo, and damages for detention of the Oltenia. The Asbatankvoy form charterparty contained the following clause: “M.2. Charterers shall be discharged and released from all liability in respect of any claims Owners may have under this Charter Party (such as, but not limited to, claims for deadfreight, demurrage, shifting expenses or port expenses) unless a claim has been presented to Charterers in writing with all available supporting documents within 90 . . . days from completion of discharge of the cargo concerned under this Charter Party.”
Bingham J held that the commercial intention underlying the exclusion clause was to ensure that claims were made by the owners within a short period of final discharge so that the claims could be investigated and if possible resolved while the facts were still fresh. This object could only be achieved if the charterers were put in possession of the factual material which they required in order to satisfy themselves whether the claims were well-founded or not. The expression "all available supporting documents" was held to be in no way ambiguous.
The general principle to be applied by the Court as to whether the claims were time-barred was held by Bingham J to be as follows: “The owners would not, as a matter of common sense be debarred from making factual corrections to claims presented in time… nor from putting a different legal label on a claim previously presented, but the owners are in my view shut out from enforcing a claim the substance of which and the supporting documents of which (subject to the de minimis exceptions) have not been presented in time.”
In The Sabrewing [2008] 1 Lloyd’s Rep. 286, the BPvoy 3 form charterparty contained a clause which required the pumping logs and note of protest to be provided by the Owners in the event of a claim for demurrage. The Owners had failed to provide these when claiming. Gloster J held that the claim was time barred because the documents had not been provided within the time limit of 90 days from discharge.
In The Eagle Valencia the claimant shipowners had sought to advance an alternative case shortly before the oral hearing based on a later-tendered NOR. Although the primary case had been properly notified to the charterers, complete with all supporting documentation well within the 60-day limit, the alternative lesser-value demurrage claim (which was dependent upon the later-tendered NOR) had not been properly notified or documented.
The Court of Appeal upheld the first instance decision that this alternative claim for demurrage had not been properly notified to the Charterers within the 60-day period because the NOR had not been included in the documentation: “In the present case it might well be fair to say that the substance of the owners’ claim was presented in time inasmuch as it was always clear that they were claiming that a particular number of days and hours had been spent at Escravos when no berth had been accessible for the vessel. But an essential document in support of every demurrage claim is the notice of readiness and, if the only notice of readiness submitted is a contractually invalid notice, the claim cannot be said to be “fully and correctly documented” within the wording of clause 15(3)”.
So what should the prudent shipowner submit to ensure that an alternative case is not struck-down by a time-bar? A suggested answer to the problem is found in The Eagle Valencia where Longmore LJ said: “That is not necessarily to say that alternative laytime statements and invoices would always have to be submitted to avoid the extinction of an alternative claim but merely to say that the documents to be submitted pursuant to the clause must include a valid notice of readiness. It is not unreasonable for charterers to require such a notice nor is it unreasonable to expect owners to supply it.” In the same way that in the event of uncertainty it is advisable for the Master to continue tendering NORs without prejudice to the validity of those previously tendered, so a prudent shipowner should be prepared to provide all NORs tendered plus other alternative-case paperwork as part of the demurrage claim to ensure it is fully-documented.
What then of other claims such as for deviation or detention which might be subject to a time-bar? A number of standard form voyage charters, including Shellvoy 6 and BPvoy4 provide that the strict requirements for notification of demurrage claims apply similarly to detention and other types of claim. Shellvoy 6 clause 6(3) provides that the claims must “have been received by Charterer in writing, fully and correctly documented…”
Whereas with a claim for demurrage it is relatively straightforward to identify what documents are relevant (NOR, SOF, any NOPs and laytime calculations), the necessary paperwork for a claim for deviation or detention is more amorphous. In these circumstances it is suggested that the shipowner should err on the side of caution and provide any document that might be relevant, bearing in mind that there may be alternative periods of time claimed for which require different documentation. Prudence would suggest that a separate calculation of the period of time claimed for under each claim (demurrage, deviation or detention) should be provided rather than a single one-size-fits-all calculation. The claims might be similar, but it is unlikely that they will exactly mirror each other.
The consequences of the time-bar provisions may appear somewhat harsh, but the lesson to be learned from these cases is that the exacting requirements of the charterparty must be complied with and owners should be alive to the adverse consequences of not doing so.