Case Study : Demurrage time bar: crucial to comply with documentary requirements

20.03.2015 | Maritime

Kassiopi Maritime Co v. Fal Shipping Co Ltd (M/T Adventure) [2015] EWHC 318 (Comm)

In this case, the vessel Owners failed to provide the Charterers with all documents in support of their demurrage claim within the 90-day time period provided under the charterparty. Their claim was dismissed and they were time-barred from recovering demurrage from the Charterers.

The background facts

The vessel was chartered under a voyage charterparty on an amended BPVoy4 form dated 15 June 2011. The Owners brought a substantial claim for demurrage as a result of delays at the load port of Sitra, Bahrain, and the discharge port, Port Sudan. A formal demurrage claim was submitted to the Charterers by email on 5 August 2011. The email attached a number of documents. 

The Charterers disputed that demurrage was due to the Owners on the basis that the demurrage claim had not attached all of the necessary documents and that, because the 90-day period provided under the charterparty within which to submit those documents (and the claim) had elapsed, the Owners’ demurrage claim had become time-barred.

The charterparty provisions

The charterparty contained the following provisions:

19.7 No claim by Owners in respect of additional time used in the cargo operations carried out under this Clause 19 shall be considered by Charterers unless it is accompanied by the following supporting documentation:

...

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.

...

20.1 Charterers shall be discharged and released from all liability in respect of any claim for demurrage, deviation or detention which Owners may have under this Charter unless a claim in writing has been presented to Charterers, 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 carried hereunder.

The arbitration award

The Tribunal ruled that the Owners’ claim was time-barred. The Owners had failed to provide the Charterers with the documents required under clauses 19.7.3 and 20.1. 

In particular, the Tribunal ruled that the port log, time sheets and a manuscript note from the Master showing that he had received free pratique by VHF at Port Sudan should have been provided, being documents that would have been kept on board (per clause 19.7.3). The Tribunal also ruled that the Owners should have disclosed upfront all the documents they would be required to disclose in an arbitration in support of their demurrage claim.

The Commercial Court decision

The Owners’ appeal was dismissed by the Commercial Court. The Judge was slightly more sympathetic to the Owners than the Tribunal had been. He agreed, however, with the Tribunal that the claim was time barred.  

In particular:

1. The Judge disagreed with the Tribunal that the Owners had to disclose upfront all documents that they would be required to disclose in an arbitration or court case. This would impose a far-reaching and potentially unworkable obligation on the Owners. It would require them to undertake a detailed search for documents, in the context of disclosure, which was beyond what was being contemplated by the clause. The scope of disclosable documentation in arbitration or court proceedings is determined by the parties’ pleadings that identify the issues in dispute. Undertaking that type of disclosure before a claim had been formulated and formally commenced would be a heavy burden to impose upon the Owners. 
2. Clause 19.7.3 of the charterparty was limited to contemporaneous records kept by the vessel in connection with cargo operations. In this context, the Judge agreed with the Owners’ submission: the documentation contemplated under the clause involved regularly updated documents, as compared to “one-off” documentation that comes into being solely for the purpose of a demurrage claim, such as a statement of facts. However, the type of documents that had to be submitted at the time of submitting the demurrage claim to the Charterers was a question for the Tribunal.
3. Under clause 20.1, the Owners were to provide “all supporting documentation”, not merely “supporting” or “essential” documentation. What was required was documents which substantiated each and every part of the claim and which provided Charterers with the material required to satisfy themselves that the claim was well-founded. Accordingly, the port logs and timesheets were required to be presented to the Charterers. The email with the Master’s manuscript note regarding the time when free pratique had been granted at Port Sudan was probably a supporting document too, because this information was important to the commencement and proper calculation of the laytime and there was no record of it in the other documentation provided by the Owners. The Owners’ failure to provide these documents to the Charterers within the 90-day time period provided under clause 20.1 meant that the Owners’ demurrage claim was time-barred.

Comment

This case reminds us again of the importance of understanding and fully complying with charterparty terms when presenting a demurrage claim to charterers – or any claim subject to time limits or explicit requirements regarding what needs to be produced and when. The effect of non-compliance may be fatal to owners - who may find themselves unable to recover substantial amounts to which, in all other respects, they have a straightforward entitlement.