Don't be Time Barred - a Trio of Decisions

The decisions in three recent cases act as a reminder that close attention is essential on all clauses in a charterparty that stipulate time bars.  

Lukoil Asia v Ocean Tankers, the “Ocean Neptune”

The “Ocean Neptune” [2018] EWHC 163 (Comm) serves as an important reminder that close attention needs to be paid to demurrage claim presentation time bars. Such time bars also present the risk of an owner being caught out on less conventional claims concerning the delay of the vessel while awaiting a charterer’s orders.

In this case the vessel called at three ports to discharge the cargo. But following a cargo quality dispute arising at the first port of discharge, it was subjected to a stay in excess of 1,000 hours. The charterer had, in accordance with its contractual rights, ordered the vessel to wait off the first port of discharge pending confirmation of further orders.

Unfortunately, the cargo was never accepted by the receiver at the first port of discharge. The cargo was later discharged in a more usual time frame at the second and third ports of discharge, before completing the contractual voyage. The owner then presented its claim within the demurrage claim presentation time bar period.

However, the owner did not comply with some of the documentary presentation requirements for the conventional demurrage claim, for time used during cargo operations in port. The High Court, in agreement with the arbitrators, decided that this demurrage claim failed for want of compliance.

Nevertheless, the arbitrators allowed the delay claim while awaiting the charterer’s orders on the premise that there were no documents identified, or that needed to be presented, by the relevant clauses for that aspect of the claim to succeed. The High Court did not agree, so dismissed the delay claim too.

The High Court decision was made on the basis that the delay awaiting the charterer’s orders was to “count as” time on demurrage. As that was inherently tied up with the demurrage clauses in general, including the time bar, the decision time barred what would otherwise have been a true detention claim.

This case can be contrasted with The “Seagrace” [2018] EWHC 156 (Comm). The charterparty clauses in this case did not give the charterer a right to order the vessel to await orders. The parties agreed a delay awaiting orders would be allowed at the demurrage rate.  However, this did not result in the demurrage claim presentation time bar barring what in this case was a true detention claim.

A key point to take away from these cases is that whether or not a demurrage claim presentation time bar is effective against other claims that are not of a conventional demurrage nature, depends on the careful reading of the charterparty in question. As such, an owner should check all demurrage clauses, including related time bars, carefully in each case.

P v Q; Q v R; R v S, the “Capetan Giorgis”

The “Capetan Giorgis” [2018] EWHC 1399 (Comm) illustrates that close attention needs to be paid to the potentially adverse impact of claims commencement time bars in back to back charterparty chains. Such time bars present the risk of an owner or a charterer being caught out when its contractual counterparty serves an arbitration notice very close to the expiry of the time bar.

Section 12 of the Arbitration Act 1996 provides an ability to apply for an extension of a contractual time bar, but gives only limited aid to a party caught by an arbitration notice served very close to the expiry of a time bar, even if in principle the circumstances fall within the scope of section 12. The High Court in this case decided that a party becoming aware on 18 November 2016 that it had been served with commencement of arbitration, should have then served its own commencement of arbitration on the next party by no later than 22 November 2016.

The key point to take away from this case is that when contractual time bars apply to the commencement of claims, there is a need to consider whether there would be sufficient time to commence against the next party in the charterparty chain should arbitration be commenced close to the time bar. A solution would be to seek advance agreement from the next party in the contractual chain to at least another seven days extension on top of the time bar expiry period that is otherwise applicable.

London Arbitration 19/18

London Arbitration 19/18 is an important reminder of the need to identify if a broker can be treated as the agent of the charterer when serving demurrage claim papers.

In this case, the owner agreed a contract of affreightment with the charterer, wherein the owner was to present demurrage claims within 30 days of voyage completion, failing which claims would be time barred. The brokerage chain was complicated and the owner decided to serve its demurrage claims on a broker named in the contract.

A number of the owner’s demurrage claims were not passed on in time by the broker named in the contract, as a result of which the charterer declined to pay. The owner’s case was that the named broker was the charterer’s agent, which if true would mean that receipt in time by the named broker alone would be binding on the charterer.

Having analysed the brokerage chain, the tribunal concluded that the broker named in the contract was an intermediary, acting for neither the owner nor the charterer, having introduced the owner’s broker and charterer’s broker to fix the contract. The intermediate broker had to be named in the contract to have a right to commission.

As such, the owner had not validly served its demurrage claims in time, giving the charterer a complete defence. The important take away from this case is that an owner should ensure that demurrage claims are served directly on the charterer or its known agent, to avoid the risk of barring due to delayed service.

If Members have any queries relating to clauses in a charterparty that stipulate time bars, we recommend they contact our FD&D team.

Author: Jim Leighton
Senior Solicitor England and Wales (FD&D)