UK: Liability For Demurrage Under A "Liner Out" Voyage Charter: Construing The Provisions Of A Voyage Charterparty

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

London Arbitration 1/12, LMLN 3 August 2012

This arbitration concerned owners' claim for loss of time due to delay in obtaining a berth at the port of discharge.

The background facts

The parties had entered into a voyage charter for the carriage of steel bars from Poland to Luanda in Angola. En route, the vessel also picked up a part cargo in Scotland. When the vessel dropped anchor in Luanda, a notice of readiness (NOR) was tendered. Shortly thereafter, the Scottish cargo was discharged at a private jetty. The vessel then had to wait some 11 days before a suitable berth became available, so that the cargo carried under the present charter could be discharged. Once at the berth, discharging was also delayed for a total of 10 hours waiting for trucks for the cargo. The owners claimed that the time spent waiting for the berth after completion of discharge of the Scottish cargo, together with the time lost waiting for the trucks during discharging, was for the charterers' account.

The charterparty was contained in a recap and the charterers' executed Gencon 94 pro forma. The dispute hinged on the fact that the terms of the recap were apparently at odds with the terms of the pro forma. The recap contained the provision "Freight eur 72,50 - pmt free in lsd/liner out under hook" (our emphasis). "Liner out" generally means that the freight rate includes the cost of discharging at the port of discharge. "Under hook", in the context of discharging, means that the owners/shipper will arrange for discharge over the ship's side.

The tribunal's decision

The tribunal found that there was a "fundamental conflict" between the provisions of the recap and the charterers' executed Gencon pro forma. On the one hand, the recap contained provisions for the counting of laytime and demurrage at the loading port, but no such provisions for the discharge port. That position, in addition to the "liner out" provision, clearly indicated that the owners should undertake responsibility for discharging, including time involved in waiting for berth, although not during the discharging operation. On the other hand, the Gencon pro forma indicated there should be a NOR and laytime at the discharging port, thereby imposing obligations on the charterers in those respects and giving rise to a liability for damages (i.e. demurrage) if they were breached.

The tribunal could see no way of reconciling the conflicting provisions. They found that the only sensible way to interpret the contract was on the basis that the recap recorded the parties' most specific intentions, and accordingly that this should take precedence over the recap in case of conflict between the two. This was consistent with the term of the recap stating "Rest of terms as per chrts exec gcn 94 c/p, logically amended as per main terms [i.e. the recap]...". On this basis, the owners' claim for the time spent waiting for the berth failed.

The owners' claim did succeed, however, in respect of the time lost during discharging because of the unavailability of the trucks. The tribunal determined that the inclusion of the words "under hook" in the recap provision meant that the owners' responsibility ceased once the cargo was placed on the pier apron or, in the context of the present case, on to the trucks. From that point on, it was the charterers' responsibility to remove the cargo, from which it followed that any delay in providing trucks to take the cargo away was also their responsibility. The charterparty did not contain any agreed demurrage rate for discharging, so damages were to be quantified on the basis of the vessel's daily market rate at the time. On the basis, however, of the parties' agreement as to loading demurrage (set out in the recap) and the evidence adduced by the owners as to the losses they claimed to have suffered, the tribunal ultimately awarded damages at the loading demurrage rate of EUR 10,000 per day.

In case it was wrong on the conflict between the recap and pro forma, the tribunal went on to find that the NOR given on dropping anchor at Luanda was defective. The ship was not ready at the time the NOR was tendered, because the Scottish cargo had not yet been discharged. A fresh NOR was required, but none was given. On that alternative basis, therefore, the owners could not have succeeded in their claim for loss of time spent waiting for the berth.

The tribunal further held that congestion or occupation of a berth was not covered by the exceptions in the following charterparty clause:

"Time lost by reason of all or any of the following clauses [sic] shall not be computed in the loading or discharging time viz: War, Rebellion, Tumult, Civil Commotions, Political Disturbances, Riots, Strikes, Stoppage of lighterman, tugboatmen or other hands essential to the working, carriage, delivery, shipment or discharge of the said cargo whether partial or general, bad weather, intervention of customs and/or constituted Authorities or partial or total stoppage on railways, or any other causes beyond the control of Charterers."

The closing words "or any other causes beyond the control of the Charterers" had to be interpreted in the context of what preceded them and the occupation of a berth or congestion could not be considered as being similar to the matters enumerated earlier in the provision. Therefore, the time lost would not have been excluded by that clause.

Comment

This case is a stark example of the application of the principle that, where a contract is entered into on the basis of specific negotiated terms which incorporate by reference some form of standard terms, in case of conflict between the two the specific terms will generally take precedence. In this case, the inclusion of just two words, "liner out", in the recap were, in conjunction with the other terms of the recap, a crucial factor in essentially negating some substantial obligations of the Gencon pro forma.

The tribunal's findings in respect of the NOR given at the anchorage in Luanda, although not ultimately decisive of the award, follow established judicial precedent, in particular the Court of Appeal decision in The Happy Day [2002] 2 LLR 487, and underline the importance of tendering a fresh NOR if the first one is defective.

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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