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Voyage Charterparty Issues:Presentation of a demurrage claimPeter GloverSenior Associate / Master Mariner31 May 2013

FINANCIAL INSTITUTIONSENERGYINFRASTRUCTURE, MINING AND COMMODITIESTRANSPORTTECHNOLOGY AND INNOVATIONPHARMACEUTICALS AND LIFE SCIENCES

Voyage Charterparty Issues:Presentation of a demurrage claim

Outline of Presentation:

• Notice of Readiness• Demurrage – presentation of a claim

... put together by relatively junior business people, without legal training and under pressure of

timing and events, who use loosely relatively complex contract terms.

Transpetrol Maritime Services Limited v SJB (Marine Energy) BC, “Rowan” [2012] EWCA Civ 198

Notice of Readiness

• Notice of Readiness (“NOR”)

• Statement by the owner that the vessel is ready to load (or discharge)

• Statement must be accurate

• Unless otherwise stated, may be oral

• No more unless required by contract

• Vessel will not be ready to load unless port authorities satisfied:

– vessel is free from infectious diseases; and

– crew are free to make contact with the shore

– time honoured phrase “free pratique”

• Absence of “free pratique” will not prevent NOR at common law from being given

• Parties can make other arrangements:

– most charterparties contain an express requirement for NOR

AET Inc Ltd v Arcadia Petroleum Ltd (The Eagle Valencia) [2010] EWCA Civ 713

• Eagle Valencia chartered on “Shellvoy 5” Form with Shell Additional Clauses - Feb 1999 (SAC)

[13.1.a1] Time at each loading or discharging port shall commence to run 6 hours after the vessel is in

all respects ready to load or discharge and written notice thereof has been tendered by the

master or Owners’ agents to Charterers or their agents or the vessel is securely moored at the

specified loading or discharging berth whichever first occurs.

[13.1.a2] However, if the vessel does not proceed immediately to such berth time shall commence to

run 6 hours after (i) the vessel is lying in the area where she was ordered to wait or, in the

absence of any such specific order, in a usual waiting area and (ii) written notice of readiness

has been tendered and (iii) the specified berth is accessible.

[15.3] Owners shall notify Charterers within 60 days after completion of discharge if demurrage has

been incurred and any demurrage claim shall be fully and correctly documented, and received

by Charterers, within 90 days after completion of discharge. If Owners fail to give notice of or

to submit any such claim with documentation, as required herein, within the limits aforesaid,

Charterers’ liability for such demurrage shall be extinguished.

The Eagle Valencia

[SAC] 22. Clearance Clause

[22.1] If Owners fail

(A) to obtain Customs clearance; and/or

(B) free pratique; and/or

(C) to have onboard all papers/certificates required to perform this Charter,

either within the 6 hours after Notice of Readiness originally tendered or when time would

otherwise normally commence under this Charter, then the Original Notice of Readiness shall

not be valid.

[22.2] A Notice of Readiness may only be tendered when Customs clearance and/or free pratique has

been granted and/or all papers/certificates are in order in accordance with relevant authorities

requirements.

[22.5] The presentation of the notice of readiness and the commencement of laytime shall not be

invalid where the authorities do not grant free pratique or customs Clearance at the anchorage

or other place but clear the vessel when she berths.

The Eagle Valencia

• The facts:

– am 15 January Eagle Valencia arrived anchorage and tendered NOR

– berth occupied and vessel required to wait at anchorage

– am 16 January free pratique granted (more than 6 hours after NOR tendered)

– pm 16 January master sent e-mail wp to NOR 15/Jan re. vessel arrived and ready to load

– pm 16 January master e-mail re. free pratique granted am 16 January

– pm 19 January vessel departed anchorage for berth and commenced loading

– pm 21 January loading completed

– demurrage “60,000 USD PDPR”

The Eagle Valencia

• Owners primary argument:

– laytime commenced 6 hours after original NOR tendered on 15 January

– relying on clause 22.5

[22.5] The presentation of the notice of readiness and the commencement of laytime shall not be

invalid where the authorities do not grant free pratique or customs Clearance at the anchorage

or other place but clear the vessel when she berths.

• Held:

– SAC 22 is a different arrangement to Clause 13

– free pratique was granted more than 6 hours after “original” NOR was tendered

– “original” notice was invalid per SAC 22.1

If Owners fail to obtain free pratique ... within 6 hours after NOR originally tendered ... original NOR

shall not be valid.

The Eagle Valencia

• Owners alternative argument:

– e-mail of 16 January (post free pratique) constituted fresh NOR

WITHOUT PREJUDICE TO THE NOTICE OF READINESS TENDERED ON 15-JAN-07 ON ARRIVAL

Please be informed that M.T. “Eagle Valencia” arrived and anchored at Escravos terminal, Nigeria at

11.48 hrs local time on 15-Jan-07 and is ready in all respects to load a parcel of Escravos Crude Oil as

per terms, conditions and exceptions of the relevant Charter party.

Please accept Notice of readiness tendered at 11.48 Hrs local time on 15-Jan-07.

– but owners did not submit in their alternative demurrage claim the fresh NOR e-mail (see SAC 22.2)

The Eagle Valencia

Alternative argument:

– Court ... “more troubling question”:

… if Owners fail to submit any demurrage claim ‘fully and correctly’ documented within 90 days,

Charterers’ liability for any such claim ‘shall be extinguished’.

Zim Israel Navigation Co Ltd v Tradax Export SA (The Timna) [1970] 2 Lloyd’s Rep. 409, 411

It is a good working rule in such situations to give notice of readiness and to go on giving such notices

in order that, when later the lawyers are brought in, no one should be able to say “If only the master

had given notice of readiness, laytime would have begun and the owners would now be able to claim

demurrage”.

The Eagle Valencia

• Held (alternative argument):

– master sending e-mail of pm 16 January reflected reasoning in the The Timna

– not unreasonable to expect an owner claiming demurrage to include alternative NORs with claim

– Babanaft v Avanti (The Oltenia) [1982] 1 Ll Rep 448, 453

The owners would not, as a matter of common sense be debarred from making factual corrections to

claims presented in time … nor from putting a different legal label on a claim previously presented, but

the owners are in my view shut out from enforcing a claim the substance of which and the supporting

documents of which (subject always to de minimis exceptions) have not been presented in time.

– an essential document in support of every demurrage claim is the NOR

– if only NOR submitted is contractually invalid, claim is not “fully and correctly documented”

The Eagle Valencia

• Practical guidance …

– ensure proper understanding of charterparty requirements for tendering NOR

– if in any doubt, always submit a second and subsequent NOR (wp) until accepted

– always submit a contractually valid NOR with claim documents

– alternative laytime statements and invoices should be submitted

– all substantive documents (i.e. time sheets, pumping records, cow records) must be submitted

– be alert to the contractual time periods for submitting a claim

– submit documents within the contractual time period

Demurrage and Documenting the Claim

• Improperly documented claims

• Babanaft v Avanti (The Oltenia) [1982] 1 Ll Rep 448, 453

– Absatankvoy Form

M.2. Charterers shall be discharged and released from all liability in respect of any claims Owners may

have under this charter Party (such as, but not limited to, claims for deadfreight, demurrage, shifting

expenses or port expenses) unless a claim has been presented to Charterers in writing with all

available supporting documents within 90 … days from completion of discharge of the cargo concerned

under this Charter Party.

Babanaft v Avanti (The Oltenia) [1982] 1 Ll Rep 448

• Commercial intent in M.2. is to ensure claims made by Owners within a short period of final discharge

• Enable claims to be investigated while facts are still fresh

• Charterers are to be put in possession of all factual material that they require

The owners would not, as a matter of common sense be debarred from making factual corrections to

claims presented in time … nor from putting a different legal label on a claim previously presented, but

the owners are in my view shut out from enforcing a claim the substance of which and the supporting

documents of which (subject always to de minimis exceptions) have not been presented in time.

• Supporting documents essential to the success of demurrage claim by owners

Waterfront Shipping Co Ltd v Trafigura AF (The Sabrewing) [2007] 2 CLC 763

• The facts:

– Sabrewing chartered on Beepeevoy 3 form

– all contractual laytime used at load port (vessel on demurrage on arrival at discharge port)

– discharge occupied over 24 hours

– owners submitted a composite demurrage claim within 90 days of completion of discharge

– owners submitted pumping logs produced by charterers’ agents in support of their claim

23. Charterers shall be discharged and released from all liability in respect of any claim for demurrage

which Owners may have under this Charter 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 carried hereunder.

• Charterers’ claimed owners were time barred under cl 23 of Beepeevoy 3 for:

– failing to provide supporting documentation within 90 days of discharge

The Sabrewing• Charterers’ claimed owners were time barred under cl 23 of Beepeevoy 3 for:

– failing to supply cl 16 documentation

– failing to supply pumping logs signed by the vessel (or at all)

16. Owners shall undertake that the Vessel shall discharge a full cargo, as defined hereunder, within 24 hours, or pro

rata thereof in respect of a part cargo, from the commencement of pumping or that the Vessel shall maintain an

average discharge pressure of 100 psig at the Vessel's manifold throughout the period of discharge except when

stripping provided that the shore receiving facilities are capable of accepting discharge of the cargo within such time

or at such pressure. ...

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 the following documentation: -

(a) an hourly pumping log, signed by a responsible officer of the Vessel and a terminal or Charterers' representative,

showing the pressure maintained at the manifold throughout discharge and, in the absence of a signature from a

terminal or Charterers‘ representative, a Note of Protest;

(b) copies of all Notes of Protest issued or received by the Vessel in relation to the discharge in question; and

(c) copies of any other documentation generated by the Vessel or by the shore receiving terminal relevant to the

discharge in question.

The Sabrewing

• Held (i):

– demurrage would only accrue for additional time beyond 24 hrs if the required average pressure had

been maintained by the vessel

– charterers under no obligation to consider demurrage claim unless:

– owners provided documentation required by cl 16 (i.e. an hourly pumping log signed by v/l officer)

– non-compliance with the pumping logs is not de minimis

... there is a real commercial purpose and importance in requiring a signed pumping log to support a

claim in these circumstances for additional pumping time in excess of 24 hours, i.e. to prove that they

had maintained the required average pressure throughout the discharge and that the fault lay with the

terminal. The signature of a responsible officer of the Vessel was obviously 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 ...

– absence of a signature on the pumping log was not trifling or insignificant

– de minimis principle should not apply to a document required by the contract and was relevant

The Sabrewing

• Held (ii):

– Trans Oceanic Co Ltd v Newton Shipping Ltd (The Minerva) 17 January 2001 – overturned

While my ruling means that the claim for demurrage at Marsaxlokk is time-barred, it does not follow

that the totality of the demurrage claim is time-barred. I can see no justification for construing cl. L.13

as meaning that an owner can only submit one claim, although the claim may include claims relating

to loading and a range of discharge ports. I accept Mr. Kimmins' submissions that i) provided the

constituent parts of the claim can be broken down (as they can in this case) valid claims can be

identified and quantified …

Note:

– particular wording of cl 23; and

– only one composite claim for demurrage made by owners

23. Charterers shall be discharged and released from all liability in respect of any claim for demurrage

which Owners may have under this Charter 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 carried hereunder.

The Sabrewing

• Held (ii):

Clause 23 required owners to present ‘a claim in writing’ (my emphasis) within 90 days of discharge of

cargo, ‘together with supporting documentation substantiating each and every constituent part of the

claim’ (my emphasis). Unless such a claim, with supporting documentation, is presented within the

relevant time period, charterers are released ‘from all liability in respect of any claim for demurrage’,

i.e. not merely that particular constituent part of the claim that is not supported by relevant

documentation.

– absence of both meant charterers are released “from all liability in respect of any claim for demurrage”

– not just that particular constituent part of the claim that is not supported by relevant documentation

– owners time barred in respect of the entire claim

Petroleum Oil and Gas Corp of South Africa (Pty) Ltd v FR8 Singapore Pte Ltd. [2008] 2 CLC 535

• Eternity chartered on amended “BP Voy 4” form

• Carriage of Gasoil and Mogas from India to South Africa

• Bulk of demurrage incurred whilst vessel detained at Mossel Bay (part disch. Gasoil cargo)

(owners did not serve appropriately signed pumping logs for disch. at Mossel Bay)

• Eternity proceeded to Cape Town

• Following delay, disch. resumed - not to the shore terminal but by STS transfer

• Charterers:

– did not accept owners’ claim for demurrage calculation

– denied liability for demurrage

Petroleum Oil and Gas v FR8 Singapore

BP Voy 4

7.1 LAYTIME/DEMURRAGE

Charterers shall be allowed the number of hours stated in Section 1 of PART 1 [84 hours], together

with any period of additional laytime arising under Clause 7.3.1, as laytime for loading and

discharging and for any other purposes of Charterers in accordance with the provisions of the

Charter.

7.4 Charterers shall pay demurrage at the rate stated in Section J of PART 1 per running day [$28,500],

and pro rata for part of a running day, for all time that loading and discharging and any other time

counting as laytime exceeds laytime under this Clause 7. If, however, demurrage is incurred by

reason of the causes specified in Clause 17, the rate of demurrage shall be reduced to one-half of the

rate stated in Section J of PART 1 per running day, or pro rata for part of a running day, for

demurrage so incurred.

Petroleum Oil and Gas v FR8 Singapore• Owners:

– failed to furnish a pumping log signed by a “Terminal representative”

• Charterers:

– (i) argued that Owners could not claim “additional time” under clause 19.7

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:

19.7.1 the Vessel's Pumping Log signed by a senior officer of the Vessel and a Terminal representative showing at hourly

intervals the pressure maintained at the Vessel's manifold throughout the cargo operations; and …

– (ii) argued entire claim was barred for want of appropriate supporting documentation under clause 20

20. CLAIMS TIME BAR

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 where possible substantiating each and every constituent part of the claim, within ninety

(90) days of the completion of discharge of the cargo hereunder.

Petroleum Oil and Gas v FR8 Singapore• Owners accepted Mossel Bay disch. barred for failing to submit pumping logs

• Owners submitted “additional time” at anchor and at Cape Town was not:

– “cargo operations carried out under this clause 19”; and

– absence of supporting documentation from Mossel Bay did not bar balance of demurrage claim

• Owners further submitted:

– specified documentation (Pumping Log) had no application to STS discharge

– only in the context of discharge to a “terminal” that the warranty cargo “capable of being received within such time or at

such pressure” was provided

• Charterers submitted:

– “additional time” meant any additional time used in cargo operations

• Held (i): (agreeing with owners)

– thrust of clause 19 is directed at operations involving a terminal

– “terminal” meant a shore installation with an associated representative

– wholly inappropriate to describe a STS operation as involving a terminal

Petroleum Oil and Gas v FR8 Singapore

• But … demurrage claim presented in composite form

– did the absence of the signed pumping log for Mossel Bay provide a defence under clause 20?

• Charterers relied on The Sabrewing:

Clause 23 required owners to present “ a claim in writing” (my emphasis) within 90 days of discharge of

cargo, “together with supporting documentation substantiating each and every constituent part of the

claim” (my emphasis). Unless such a claim, with supporting documentation, is presented within the

relevant time period, charterers are released “from all liability in respect of any claim for demurrage”, i.e.

not merely that particular constituent part of the claim that is not supported by relevant documentation.

Petroleum Oil and Gas v FR8 Singapore

• Held (ii): (agreeing with owners)

– not persuaded that that clause 20 required owners to submit only one composite claim

(but which Owners did)

– even if composite claim required:

– (i) need to consider the proper construction and effect of clause 20

20. CLAIMS TIME BAR

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 where possible substantiating each and every constituent part of the claim,

within ninety (90) days of the completion of discharge of the cargo hereunder.

– (ii) the failure to provide all “supporting documentation” (whether needed under clause 19 or

otherwise) for one constituent part of the claim did not discharge liability for the entire demurrage

claim

National Shipping Co of Saudi Arabia v BP Oil Supply Co.(The Abqaiq) [2011] EWCA Civ 1127

• Demurrage dispute

• BPVOY4 Form for carriage of heavy sulphur fuel oil from Freeport to Singapore

• Owners submitted a “supplementary invoice” for time spent having vacated the berth for lack of cargo

• Clause 20.1 provided:

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, with ninety (90) days of the

completion of discharge of the cargo carried hereunder.

• Court:

– basic requirement is that Charterers are to receive both the claim and the supporting documentation

– documents do not necessarily have to be presented at the same time

– “together with” import no requirement other than that both presentations must be achieved within 90

days

The Abqaiq

• In The Sabrewing:

– court rejected Owners production and reliance of pumping logs signed by Charterers’ representative.

• In The Abqaiq court is more pragmatic:

... caution against too mechanistic approach ...

I cannot think that the mere fact that a necessary document has been supplied by a third party who is not

for that purpose an agent of the Owners should of itself and automatically result in the conclusion that

there has been non-compliance with the clause.

• Conclusion:

– the Sabrewing cannot be considered to be safe law

– but not expressly overturned

Glencore Energy (UK) Ltd v Sonol Israel Ltd (The Team Anmaj)[2011] 2 Lloyd’s Rep. 697

• A final note on demurrage time bars:

– claimant sellers entered into a contract to sell Gasoil to the defendant buyers

– claimant purchased the Gasoil on CIF terms from BP

– BP presented demurrage claim to sellers on 27 April 2005

– seller issued a demurrage invoice to buyers on 28 April 2005

– sellers claimed against buyers claiming sums due and owing for demurrage invoice on 19 April 2011

– last day on which demurrage was claimed was 10 January 2005

• Limitation Act 1980

5. Time limit for actions founded on simple contract.

An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

• Held:

… where a sale contract incorporates the terms of a charterparty relating to demurrage in an otherwise

independent sale contract containing, for example, provisions about laytime, the obligation in the sale

contract is generally to be construed as an independent demurrage obligation and not as an indemnity.

– claim was time barred

Demurrage Claims …

• Practical tips:

– ensure proper pumping logs (i.e. hour by hour) are maintained

– ensure the time of stripping of tanks and cow is clearly recorded in the pumping log

– pumping log should match the cargo operations log as regards time entries

– do not falsify pumping logs

– ensure manifolds are fitted with correctly calibrated pressure gauges

– ensure that a senior officer signs the pumping logs (and other relevant logs)

– absent a terminal representative signature in the pumping logs, masters must issue a

note of protest

– if (or when) in doubt, issue a notice of protest

Demurrage Claims …

• Practical tips:

– ensure vessel operation manuals reflect typical cargo orders (to the extent possible)

– ensure details of charterparty are timely communicated to masters (including recap)

– ensure all supporting documents to substantiate a claim are obtained from the ship

– ensure all supporting documents are submitted to charterers strictly within time limits

– not necessary to submit a composite claim – but can do so

– be alert to the six year statutory time bar for simple contract claims

– be aware that operational logs are not subject to legal professional privilege

Voyage Charterparty Issues:Presentation of a demurrage claim

Questions?

Peter GloverTel: 0207 444 2071peter.glover@nortonrose.com

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