UK: Clyde & Co Shipping Newsletter - April 2015

Last Updated: 28 April 2015
Article by Clyde & Co LLP

Written by legal experts, the Clyde & Co Shipping Newsletter regularly reports on recent legal developments within the marine sector.

The "ADVENTURE" – The Court rules on the documents required in support of a claim for demurrage under BPVoy4

By Marcia Perucca

Following the High Court decision in Kassiopi Maritime Co Ltd v Fal Shipping Co. Ltd [2015] EWHC 318, a demurrage claim may be time barred if all relevant documentation in support of such a claim is not submitted on time.

Arbitration Tribunal

An arbitral tribunal (the Tribunal) had held that Kassiopi Maritime's (the Owners) demurrage claim failed because they had failed to provide all the relevant documents required under a demurrage claims clause within 90 days of completion of discharge of cargo.

The claim had been submitted by email attaching: a) invoice; b) laytime and demurrage calculations for both load and discharge ports; c) NOR for load port; d) SOF for load port; e) four Letters of Protest for load port; f) NOR for discharge port; g) pumping record for discharge port; h) SOF for discharge port; i) four Letters of Protest for discharge port; and j) empty tank certificate for discharge port.

However, the Tribunal found that a number of the Letters of Protest at load port referred to delays or stoppages recorded in the vessel's port log/time sheets and, in relation to free pratique, that the grant of free pratique was recorded in the SOF for the load port but not for the discharge port.

As a result, the claim failed because the Owners had not provided, within the 90 days' time frame, the port log and time sheets kept, as referred to in the Letters of Protest and a manuscript note on an email that the Master had received free pratique at the discharge port (the free pratique email).

High Court

The Owners appealed on points of law pursuant to Section 69 of the Arbitration Act 1996. The following clauses were relevant to the appeal:

Clause 19.7 No claim by Owners in respect of additional time used in the cargo operations....shall be considered by Charterers unless it is accompanied by the following supporting documentation:

19.7.1 the Vessel's Pumping Log....

19.7.2 copies of all NOPs issued, or received, by the Master in connection with the cargo operations; and

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

Clause 20 Claims Time Bar

20.1 Charterers shall be discharged and released from all liability in respect of any claim for demurrage...unless a claim in writing has been presented...together with all supporting documentation substantiating each and every constituent part of the claim, within ninety (90) days of the completion of discharge of the cargo...

The Court considered a number of questions:

  1. Does clause 19.7.3 require owners to provide with their demurrage claim copies of all documents which the owners would be required to disclose in arbitration?

    The Court said that the obligation of disclosure is likely to go far wider than merely "supporting documentation" and require a search which is considerably more rigorous than that contemplated by the clause. In addition, what disclosure requires may vary as between different arbitration rules, as between arbitration and court, and it may also vary between different arbitration proceedings under the same rules. The Court concluded that the clause "cannot have been intended to impose such a far reaching and potentially unworkable obligation on the owners".
  2. On a proper construction of clause 19.7.3, are "one-off" documents, which are generated by the vessel in connection with the cargo operations, within the scope of "documentation maintained by those on board the Vessel...in connection with the cargo operations..."?

    The Court considered that contemporaneous records kept by the vessel relating to the cargo operation will often be kept on an ongoing basis (as opposed to "one-off"), but that this was not necessarily so. Whether the port logs and time sheets, in this case, were such records, would be a matter for the Tribunal. However, because the Court found against the Owners in the next question, and the issue would not be remitted to the Tribunal, then the question was not answered in terms.
  3. On a proper construction of clause 20.1, does "all supporting documentation substantiating each and every constituent part of the claim" require owners to provide all relevant supporting documentation, or only "essential" supporting documentation?

    The Owners submitted that the clause only required presentation of "essential" supporting documentation, which, they argued, generally means the NOR and SOF. However, the Court said that the most helpful guidance comes from The "ABQAIQ" where it is said that the documents required are "documents which objectively [the charterers] would or could have appreciated substantiated each and every part of the claim" and which meant that they "were thereby put in possession of the factual material which they required in order to satisfy themselves that the claim was well-founded".

Which documents will meet those requirements will depend on the factual position of each case. The Court concluded that, in the present case, the port logs and timesheets were primary documents containing factual material which should be made available to the charterers so that they may satisfy themselves that the claim is well founded.

As for the free pratique email, the Court said that in most cases secondary documentation of this kind would not be required. However, in this case, because there was no record in the documentation provided as to when free pratique had been provided at the discharge port, then it was probably to be regarded as a supporting document.

Comment

The decision may have far-reaching implications, as Hamblen J appears to have expressed the view that port logs and timesheets are primary documents which will always need to be provided by owners to charterers in support of a demurrage claim (see paragraph 41 of the judgment)1.

In any event, what follows from the decision in The "ADVENTURE" is that where a demurrage claim is made under a clause requiring "all supporting documentation" to be provided, owners should carefully consider which documents are relevant to substantiate their claim and should not assume that the provision of "essential" documents (such as NOR, SOF and laytime and demurrage calculations) will suffice.

Where a claim has already been submitted, but the timeframe has not yet expired, the documentation already sent to charterers should be reviewed and any additional relevant documents provided, as failure to do so may result in the claim being time barred.

Footnote

1 http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/ Comm/2015/318.html&query=kassiopi&method=Boolean

The "VALLE DI CORDOBA" – The Court of Appeal confirms that shipowners are not liable for loss of cargo stolen by pirates

By Tom Gorrard-Smith and Sam Sidkin

In rejecting charterers' appeal against the Commercial Court's earlier ruling, the Court of Appeal (CA)1 clarified what constitutes an "in-transit loss" for the purposes of a voyage charterparty. The in-transit loss clause (ITL clause) in question covered "loss of a kind encountered on a normal voyage". The CA confirmed that it did not, therefore, allow a charterer who had suffered a loss by piracy to recover from the shipowner.

Charterparty

The terms of the charterparty between Trafigura, (charterers), and Navigazione Montanari SpA (shipowner), contained the following ITL clause:

"Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.5% .... In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port".

The Hague-Visby Rules (the Rules) were incorporated into the charterparty. Article IV of the Rules lists the exceptions to the carrier's liability for loss of, or damage to the cargo, which include loss resulting from piracy.

Facts

On Christmas Eve 2010, pirates boarded the "VALLE DI CORDOBA" off the coast of West Africa. They transferred 5,291 metric tonnes of oil, out of a total of 33,460 metric tonnes, to an unknown lightering vessel and made off with the stolen cargo. The charterers claimed against the shipowner for the loss of the oil.

Commercial Court

In order to succeed with their claim, charterers needed to persuade the Commercial Court of two things. Firstly, that the loss of oil constituted in-transit loss for the purposes of the ITL clause; and secondly, that the ITL clause imposed strict liability on the shipowner, such that it could not avail itself of the exceptions contained in the Rules.

Mr Justice Smith held that:

  1. On a true construction of the ITL clause, the lost cargo was not in-transit loss
  2. In any event, the Rules exempted the shipowner from liability

Court of Appeal

The appeal failed at the first hurdle, the majority of the Court agreeing with Mr Justice Smith. For commercial reasons, parties include ITL clauses in charterparties to define the point at which a charterer will be entitled to claim against a shipowner for an unexplained difference in volume, as measured on loading and unloading (in this case, over 0.5%).

In view of this, the CA, following the lead of the Commercial Court, held that in-transit loss connotes loss of a kind encountered on a normal voyage. Clearly this did not include loss by piracy. It rejected the charterers' contention that an in-transit loss encompassed all loss in transit, however such loss occurs. The CA ruled that such an interpretation had three obvious flaws:

  1. A shipowner who had agreed to an ITL clause of this type would be liable to a greater extent than a common carrier (who at common law is excused for loss caused by piracy)
  2. A shipowner would be liable for all loss however it occurs, but not for any damage or contamination however it occurs
  3. The ITL clause in question would effectively make a shipowner an insurer of the cargo

Contrary to the majority's view, Briggs LJ declared that the ITL clause appeared to impose liability for in-transit loss regardless of the cause of that loss (provided it exceeded 0.5%). Nevertheless, all three members of the CA agreed that even if the loss by piracy constituted in-transit loss for the purposes of the ITL clause, the Rules excused the shipowner from liability.

The CA had been referred to the decision in Lakeport Navigation Company Panama S.A. v Anonima Petroli Italiana S.p.A (The " OLYMPIC BRILLIANCE") [1982] 2 Lloyd's Rep 205. The ITL clause in that case provided that where there was a shortage of oil exceeding 0.5%, the charterers could make a deduction from freight. It was held that this was a permanent deduction, and it was therefore irrelevant whether or not the shipowner was liable under the charterparty. However, it did not follow, as a result, that this case supported Trafigura's argument that the Rules did not apply to their claim for loss of cargo. It was, clear from the judgement in The "OLYMPIC BRILLIANCE" that had the ITL clause referred to a claim for loss - as opposed to a deduction from freight - the shipowner would not have been liable where the loss fell within the exceptions.

In the CA's view, the ITL clause and Clause 46 (incorporating the exceptions) were compatible – neither made the other otiose. Losses of a kind encountered on a normal voyage were covered by the ITL clause but a shipowner would not be liable for other kinds of loss provided they fell within the exceptions.

Comment

The CA's decision reflects the commercial reality underpinning ITL clauses. If the parties' intention is, in fact, to make a shipowner the insurer of any short delivered cargo whatever the circumstances of the loss, such a clause needs to be clearly drafted to that effect.

Footnote

1 Trafigura Beheer BV v Navigazione Montanari SpA [2015] EWCA Civ 91

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