Outlining a recent court decision which is yet another reminder that time bar clauses in charterparties must be complied with in all details – even where an Owner may rightly consider the clause’s requirement.
Claims involving demurrage may run into considerable amounts of money and, although the preparation and presentation of a demurrage claim may seem to be a fairly routine clerical task, experience shows that time bar clauses continue to cause problems for owners.
Some might argue that a fairly large number of court decisions and arbitration awards have shown that time bar clauses and their requirements are to be strictly complied with, but cases nevertheless continue to appear.
Demurrage time bar clauses appear both in preprinted C/P forms (such as Shellvoy 5 and Beepeevoy 3) and can also be found in specific rider clauses. (Sometimes a time bar clause will even be found “hidden” within the text of a more general time bar clause covering more than just demurrage.)
A recent London court decision concerning the “SABREWING” concerned clause 16 in the Beepeevoy 3 form. This clause requires owners to maintain a certain average discharge pressure and, if the receiving terminal facilities are unable to accept discharge within the agreed time or at the agreed discharge pressure, the vessel must present the receiving terminal with a note of protest etc. The clause specifically stipulates that “charterers will not consider any claim by owners for additional time used in the foregoing circumstances in the absence of the provision by owners” of certain documentation which is listed as hourly pumping log (required to be signed by responsible officer of the vessel and a terminal or charterers’ representative), copies of all Notes of Protest and copies of any other documentation generated by the vessel or by the shore receiving terminal relevant to the discharge.
The Beepeevoy 3 form also includes in its clause 23 a provision that charterers are to be discharged and released from all liability for any demurrage claims, unless a claim in writing has been presented to charterers “together with supporting documentation substantiating each and every constituent part of the claim within 90 days of the completion of discharge of the cargo”.
In this case, the owners presented a claim for approx. USD 115,000 and the claim was accompanied by various supporting documents and was in fact provided within the 90-day period. Supporting documents provided by owners were, however, not described on their face as pumping logs and were not signed. Some documentation had been received by charterers from their own agents and not from owners.
Charterers refused to make payment which resulted in litigation.
The charterers argued that they had not within the 90-day period been provided with signed pumping logs (and at least not signed by a responsible officer of the vessel or by a terminal or charterers’ representative) that no pumping logs signed by a responsible officer had been provided and that notes of protest were not countersigned (as required by clause 16) by a terminal or charterers’ representative.
The owners, on their part, argued that they were not required to produce pumping logs and, alternatively, that there was no requirement that pumping logs should be signed. However, more importantly the owners also made the argument that the lack of signatures by the owners and by charterers’ representatives was irrelevant because the absence of an owner’s signature was de minimis.
The court held that demurrage time bar clauses had to be complied with “carefully and strictly” and also confirmed that requirements for signed documents were important, as the commercial purpose of such clauses and requirements were to achieve finality.
Accordingly, under clauses 16 and 23 of the Beepeevoy 3 form, the owners were obliged to provide signed pumping logs.
The failure to provide signed pumping logs within the 90-day period was not de minimis. On the contrary, there was a real commercial purpose and importance in requiring a signed pumping log, as the signature of a responsible officer of the vessel was important to show that such a person was prepared to put his name to the document to confirm its accuracy, to authenticate it and to prove its provenance. (The same arguments also applied to the required signatures from a charterers’ or terminal representative.)
The absence of the required signatures was not trifling or insignificant and the de minimis principle did not apply to a document that was expressly required to be produced under the contract.
In the circumstances, this result is not surprising and in other previous cases, a similar, parallel importance had been attached to the requirement that a copy of a C/P should be signed (the “OBO VENTURE”) and also to time sheets being signed (the “MINERVA”).
The owners also tried to argue that they should not be compelled to do something which was either useless or unnecessary (the so-called “futility principle”). This was considered relevant in this case where the charterers had in fact received pumping logs signed by their own representatives within the 90-day period. The charterers had not, on the other hand, received this from owners (and also not signed by owners). It is somewhat noteworthy that this argument was also rejected – the court, having already decided that the owners were duty bound to provide pumping logs (signed by owners and countersigned by charterers to confirm that their contemporaneous agreement to the accuracy of the logs) saw no room for the application of the futility principle. The court also commented that the commercial purpose of the demurrage time bar clause was to ensure that charterers were presented “with a package of documents by owners that was sufficient in itself” for charterers to consider (i.e. without any need for any collateral investigation and therefore also without the need to make any check of documents received from other, third parties).
This particular case, therefore, serves as yet another reminder that the C/P should be checked in detail with regard to the time bar for demurrage claims (which may well be hidden away in other “general” clauses) and that all the requirements for presenting a demurrage claim must be complied with “strictly and carefully”.
Even though some of the requirements set out in such a time bar clause may seem superfluous, unnecessarily detailed etc, it is, for all practical purposes, not possible to rely on such matters being de minimis or superfluous – it will be assumed that the requirements are there for a purpose and have been agreed to unreservedly by owners.
It is consequently also important to ensure that all supporting documentation for the claim is presented in time and care must be taken to ensure that charterers do receive the claim with supporting documentation within the agreed time period. Wherever possible, the claim should be sent directly to charterers, but in many cases all communication has been done via brokers and the demurrage claim may therefore also be sent via this channel of communication. At least where the C/P is subject to English law, it will probably be sufficient that the claim is received properly by brokers at least where it is clear that the brokers have been acting as charterers’ brokers and accordingly can be deemed to have authority to receive documents on charterers’ behalf. A more difficult question would be where only one broker has been involved and it is probably not entirely settled whether intermediate brokers acting in a dual capacity for both owners and charterers can be said to have authority to receive a demurrage claim on charterers’ behalf. In at least one London arbitration from 1985 the majority of arbitrators took the view that an intermediate broker could receive the demurrage claim on charterers’ behalf, but the question is probably not finally settled and it is certainly preferable to be able to send the claim directly to charterers.
Whether the claim is sent by surface mail or courier or, as is more the case now, by e-mail, care should also be taken to ensure that a receipt is generated.
This most recent case also illustrates that owners should carefully consider what terms they agree to in terms of the documentation they will have to provide when presenting a demurrage claim – once terms have been agreed it will be too late for owners to argue that the generation of certain documentation will be too costly, difficult or superfluous. This aspect must be decided before C/P terms are finally agreed.
This type of provision is not only used in C/Ps – or even used only with regard to demurrage – but is also found in many other types of maritime contracts such as bunker supply contracts where a very short contractual time bar is often included in suppliers’ terms and conditions. This type of provision has also been held to be valid and serving the purpose of certainty between the parties and therefore cannot be set aside (the “JULIUS HAMMER”).
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Waterfront Shipping Co. Ltd. v Trafigura A.G. (the “SABREWING”) [2008] Vol. 1 286
Mira Oil Resources of Tortola v Bocimar N.v. (the “OBO VENTURE”) [1999] 2 Lloyd’s Rep. 101
Transoceanic Co. Ltd. v Newton Shipping Ltd. (the “MINERVA”) 17 January 2001, unreported
Ocean Chemical Transport Inc. and another v Exhor Craggs Limited (The “JULIUS HAMMER”) [2000] 1. Lloyd’s Rep. 446
LMLN 151 London Arbitration 8/85