UK: The Court Of Appeal Considers Demurrage Claims And Time Bar Clauses

Last Updated: 6 January 2012
Article by Jonathan Elvey and David Richards

National Shipping Company of Saudi Arabia v. BP Oil Supply Company (The Abqaiq) [2011] EWCA Civ 1127

In the January 2011 edition of our e-brief, we reported on the decision of the Commercial Court in The Abqaiq. There, the court examined (a) when payment of a demurrage claim may amount to a settlement of any and all demurrage disputes and (b) whether a claim put forward on one basis within a stipulated time limit will be time-barred when it is subsequently (out of time) re-presented as a demurrage claim.

The Commercial Court ruled in favour of the charterers. The judge said that the demurrage claim was time-barred.

The case has since reached the Court of Appeal. The Court of Appeal has reversed the first instance decision and ruled that the demurrage claim was NOT time-barred.

The background facts

The Abqaiq was voyage chartered for a voyage from the Bahamas to Singapore on an amended BPVOY4 (1998 Edition) Form. The vessel arrived at the load port of Freeport on 6 February 2008 and completed loading on 18 February. As the vessel was too large for her intended berth, she had to shift to another berth before loading could commence. The vessel arrived at the discharge port of Singapore on 22 March and completed discharge on 30 March.

After the completion of the voyage, the owners issued an invoice for "time consumed" and "bunkers consumed" in carrying out the second berthing at Freeport (referred to in the judgment as the "Time & Bunkers Invoice"). The owners attached to this invoice a statement of facts signed by the master certifying the time and bunkers used for the second berthing and also a bunker invoice evidencing the price of the bunkers supplied prior to the arrival at the load port.

Subsequently, the owners issued another invoice entitled "demurrage invoice". This invoice attached (1) demurrage reports for the load port and the discharge port; (2) notice of readiness, port log, statement of facts, letters of protest for the load port; and, (3) notice of readiness, statement of facts, discharging log, letters of protest and the pumping log for the discharge port. The demurrage invoice covered laytime running at both the load port and the discharge port and showed that demurrage was payable for the period 25 March to 30 March (i.e. only for time at Singapore). The owners and charterers negotiated the demurrage invoice, following which an agreed demurrage invoice was issued on 04 June (the "Agreed Demurrage Invoice"). The Agreed Demurrage Invoice included the words "Combine All ports".

The charterers then disputed the Time & Bunkers Invoice, stating that it should have been presented as a demurrage claim. Subsequently, and after the expiration of the 90 day demurrage time bar contained in the BPVOY4 form, the owners sought to replace the Time & Bunkers Invoice with a claim for demurrage. The charterers resisted this claim on the basis that the new demurrage claim was barred by reason of a settlement of any and all demurrage claims under the Agreed Demurrage Invoice, alternatively that the new demurrage claim had been presented outside of the 90 day time limit.

The Court of Appeal decision

Was the second demurrage claim barred by the settlement of the Agreement Demurrage Invoice?

Answer: By the first court: YES. By the Court of Appeal: NO.

The owners contended that the payment of the Agreed Demurrage Invoice constituted a settlement only of demurrage for the period 25 March to 30 March. It was still open to the owners to claim for demurrage at Freeport.

In the Commercial Court, Mr Justice Field rejected this argument and held that the agreed demurrage invoice covered all demurrage claims. Amongst other reasons, the judge had particular regard to the fact that the invoice stated that demurrage was for "all ports".

In the Court of Appeal, Lord Justice Tomlinson reversed this decision, largely on a factual basis. He decided that, at the relevant time, the owners were reasonably under the impression that their claim under the Time & Bunkers Invoice was being treated by the charterers as a demurrage claim. In addition, The Time & Bunkers Invoice was, in fact, being handled by the charterers' demurrage department. For these reasons, Lord Justice Tomlinson concluded it was impossible to say the parties were proceeding on the basis that no further claim for demurrage was going to be pursued by the owners. The settlement of the Agreed Demurrage Invoice was only in respect of time used at Singapore and the owners were still entitled to recover demurrage incurred at Freeport. Lord Justice Tomlinson attached no significance to the phrase "Combine All ports" in the Agreed Demurrage Invoice, considering the phrase simply reflected the fact that the total allowed laytime applied across all the ports on the voyage.

Was the second demurrage claim presented out of time?

Answer: By the first court: YES. By the Court of Appeal: NO.

Although it was not necessary for the first instance judge to determine whether the claim for demurrage at Freeport was time-barred, he nonetheless expressed a view that it was.

This issue depended first on whether the further demurrage claim was substantially the same claim as that presented under the Time & Bunkers Invoice, which had been advanced within the 90-day time period. Previous cases have established that it is permissible to make revisions to a claim after a time limit has expired. As per Mr Justice Bingham in The Oltenia [1982] 1 Lloyd's Rep. 448, a claimant "...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 [claimants] are in my view shut out from enforcing a claim the substance of which and the supporting documents of which (subject always to de minimis exceptions) have not been presented in time."

Mr Justice Field held that, in the circumstances of the case, the claim presented under the Time & Bunkers Invoice was not substantially the same as a demurrage claim. On appeal, Lord Justice Tomlinson overruled this conclusion, deciding that the claim was for demurrage at Freeport and, whilst there were errors in the laytime calculations, those errors could be corrected and the claim re-labelled without changing the substance of the claim.

Mr Justice Field had also concluded at first instance that, even if the further demurrage claim was the same as the Time & Bunkers claim, it was still time-barred as the claim had not been presented with all the supporting documents. The judge rejected the owners' arguments that it was sufficient that these documents had previously been presented with the first demurrage claim and held that supporting documents had to be provided with each claim.

Lord Justice Tomlinson found the charterers' time bar arguments unattractive. The charterers had accepted that they had received all the relevant documents within the 90 day window, but claimed this was not sufficient unless they were presented with the demurrage invoice. The appeal judge concluded that the relevant question is whether "the Charterers are put in possession of the factual material which they require in order to satisfy themselves a claim is well-founded or not."

In reaching his conclusion, Lord Justice Tomlinson disagreed with the view of Mrs Justice Gloster in The Sabrewing that the requirements under a demurrage time bar clause must require strict compliance. Lord Justice Tomlinson also disagreed with a comment by Mrs Justice Gloster in The Sabrewing that the documents must be presented by the owners themselves rather than by other parties.

Comment

When reporting the decision of the Commercial Court in 2010, we commented that the courts were continuing to adopt a strict approach to demurrage time-bar clauses. The Court of Appeal's decision signals against such an approach.

Nonetheless, it remains to be seen whether this approach is taken onboard by first instance courts and arbitration tribunals in all cases. Facts and circumstances vary from case to case. In the meantime, it is suggested that owners should continue as a matter of best practice to ensure that they adhere to any charterparty requirements concerning the presentation of demurrage claims and, where necessary, submit all supporting documents with each demurrage invoice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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