UK: Arbitration Tribunal Decides Deadfreight And Despatch Claims

Last Updated: 4 October 2012
Article by Daniel Jones and Peter Hazell

London Arbitration 2/12, LMLN 3 August 2012

The disputes in this arbitration related to claims for deadfreight and despatch under a voyage charterparty for the carriage of iron ore.

The background facts and the tribunal's decision

Owners' claim for deadfreight

The cargo was defined in the charterparty as "46,000MT MOLOO [More or Less at Owners' Option] 10% IRON ORE IN BULK". It was further provided that "Chartrs confirm min draught of 11.4m SWAD plus tide in the loading port".

An owner is entitled to deadfreight if the charterer fails to load the full amount of cargo which he has agreed to supply under the terms of the charterparty. Here, the deadfreight claim arose from the fact that when the vessel arrived, the maximum allowable draught at the berth was 11.19 metres: less than the minimum draught warranted by the charterers. Therefore, the vessel could only load 46,000.787mt of iron ore. As the charterers had agreed under the charterparty to load up to 50,600mt, the owners claimed freight on the full cargo which could have been loaded at the warranted minimum draught, which they said was 47,265mt.

The charterers claimed that the port authority reduced the draught following a recent earthquake. They refuted liability on the grounds that: (i) the owners had removed the charterers' agent at the loadport (in breach of the agency provisions of the charterparty), meaning that they were in the dark during the loading operations and denied the opportunity to negotiate with the port authority to procure the loading of more cargo; and (ii) the warranty as to minimum draught was given in good faith after exercising due diligence to ascertain the position - the actual draught was only lower because of circumstances beyond their control.

The tribunal rejected the charterers' arguments. With respect to (1) above, the evidence showed that the charterers were aware of maximum draught limitation before and during the loading operation. Even if the owners were technically in breach of the agency provisions of the charterparty, this had not caused the charterers any loss. In relation to (2), as there was no force majeure or other clause excluding losses caused by the aftermath of the earthquake, the charterers were bound by their warranty as to the minimum draught at the loadport. The charterers had assumed the risk of any reduction in available draught and were liable for the deadfreight claimed.

Charterers' claim for despatch

Where it is expressly provided for in a voyage charterparty, despatch is payable to the charterer if loading or discharging is completed in less than the allowed laytime. Such was the case here, with despatch payable at half of the demurrage rate. The laydays were 1 to 10 April, and it was stipulated that "laytime at the Port of Loading shall not count before 1st April". The vessel arrived at the loadport, tendered notice of readiness and completed loading by 29 March. It was common ground that, as no new laydays had been agreed, laytime had not commenced at the loadport. However, the charterers argued that they should be entitled to despatch for the full time allowed for loading, whereas the owners argued that as laytime never began, no laytime was saved during loading and no despatch was due.

The tribunal dismissed the owners' argument, which was not supported by any authority, as illogical. There was no reason why a charterer should be deprived of a right to despatch where the loading operations were completed before laytime began to count. The nature of the benefit to the owners in having such operations completed early - reflected by despatch paid to the charterers - was just the same whether or not laytime began to count. The charterers were, therefore, awarded despatch for the full time allowed for loading.

Comment

This decision adds some helpful context to two types of voyage charterparty claim. The arbitrators' comments relating to the charterers' minimum draught warranty serve as a reminder that parties will be held responsible for a breach of their contractual warranty as to a particular state of affairs, even if the cause of that breach is outside of their control, unless the circumstances are covered by a suitably drafted exclusion clause.

The decision that despatch should be payable even where laytime has not commenced also provides some useful guidance on a novel issue, although being an arbitration decision it does not create any binding precedent in English law.

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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