5 March, 2020
Welcome to this month's edition of our shipping case digest, providing you with concise and useful summaries of recent legal decisions in the shipping market.
The "AMALIE ESSBERGER": demurrage time bar provision
The court had to consider whether the owners’ demurrage claim was time-barred because insufficient documentation had been provided.
Factual background
The claimant (the owners) chartered the vessel “M/T AMALIE ESSBERGER” (the vessel) to the defendant (the charterers) for a voyage from Rotterdam, the Netherlands, to Castellon, Spain, under a voyage charterparty dated 18 November 2017 (the charterparty).
The Charterparty was on an amended ASBATANKVOY form and rider clause 5 provided:
"5) TIME BAR
Any claim for demurrage, deadfreight, shall be considered waived unless received by the Charterer or Charterer's broker in writing with all supporting calculations and documents, within 90 days after completion of discharge of the last parcel of Charterer's cargo (es). Demurrage, if any, must be submitted in a single claim at that time, and the claim must be supported by the following documents:
A. Vessel and/or terminal time logs;
B. Notices of Readiness;
C. Pumping Logs; and
D. Letters of Protest’
On 22 December 2017, the owners submitted their claim for demurrage to the charterers. This claim was submitted within the 90-day period.
When the demurrage claim was submitted, the owners provided the charterers with the vessel and terminal's time logs, the notices of readiness and the vessel's pumping logs for the discharge ports.
The following documents did not accompany the demurrage claim on 22 December 2017: (a) the vessel's pumping log at Rotterdam and (b) a master’s letter of protest issued by the master of the vessel, dated 30 November 2017, (the disputed documents). However, both documents had been provided by the owners to the charterers earlier, on 1 December 2017.
The charterers' defences were twofold; first, that the delay suffered by the vessel was the result of cargo contamination due to owners' fault; second, the demurrage claim was time-barred for noncompliance with rider clause 5. The charterers applied for summary judgment relying on the time-bar defence.
Issue 1: Did the owners' obligation to provide supporting documents under rider clause 5 extend only to documents relevant to the demurrage claim that was being made?
There were in fact two separate questions. First, what did the phrase ‘all supporting … documents’ mean in the first sentence of rider clause 5? Second, what was the effect of the second sentence which listed four specified categories of documents, including the disputed documents?
Clause 5 required the submission of ‘all’ supporting documents. This would almost invariably include documents that evidenced the time used by the vessel in berthing, loading, and discharging operations and the interruptions and stoppages in such operations. This construction accorded with the requirement of certainty and would not impose a burdensome obligation on the owners. The owners would readily, and easily, be able to identify and provide the documents on which they relied, or which objectively established the validity of their claim.
The critical issue, however, was the second question concerning the meaning of ‘the claim must be supported by the following documents’ and then proceeded to list four categories of documents. It was clear from the mandatory language of the second sentence that the four listed categories of documents had to be provided in support of the demurrage claim, even if they were strictly irrelevant to the demurrage claim. This was because there was no reason why the documents should be listed if they were not required to be provided. Further, these documents were very often relied on in support of a demurrage claim and were readily identifiable.
Therefore, the disputed documents were required to be submitted in support of the demurrage claim within the 90-day time period referred to in rider clause 5.
Issue 2: Did the supporting documents have to be provided at the same time as the demurrage claim or was it sufficient that the documents were provided at some point before the expiry of the relevant 90-day period?
There was no express requirement in the language of rider clause 5 that the supporting documents had to be provided at one time and at the same time as the demurrage claim for the following reasons:
(1) The word ‘demurrage’ at the beginning of the second sentence was to be construed as a reference to the demurrage claimed only. If it had been intended that the supporting documents had to be provided ‘in a single claim at that time’, the clause should have so provided.
(2) The requirement that the demurrage claim ‘with’ all supporting documentation had to be received by the charterers within 90 days meant no more than that the claim and supporting documents had to be received before the expiry of that period.
(3) The reference to a ‘single claim’ meant that only one claim may be submitted. In other words, separate demurrage claims, for example at loadport or at each discharge port, were not permitted.
(4) The commercial purpose of the clause did not require the simultaneous submission of the demurrage claim and the supporting documents.
The only temporal requirement affecting the supporting documents was that they were provided within 90 days of the completion of discharge. This temporal requirement identified only the end-point of the relevant time period and not the starting point. The reference to the completion of discharge was to enable the calculation of the expiry date of the time period for the submission of the demurrage claim. If supporting documents were provided before the completion of discharge, any demurrage claim supported by these documents would not necessarily be time-barred.
Issue 3: Did the owners' obligation to provide supporting documents require them to provide documents already in the charterers' possession?
The question was whether the disputed documents, which were provided to the charterers on 1 December 2017, were readily understood by the charterers as being ‘supporting documents’ within the meaning of rider clause 5.
The disputed documents were identified in the clause as documents deemed to be ‘supporting … documents’ and therefore documents which had to be provided. These were also documents that were to be provided in accordance with rider clause 23 within seven days of the completion of loading. Accordingly, when the disputed documents were provided on 1 December 2017, before the submission of the demurrage claim, it should have been obvious to them that the disputed documents were already in their possession and deemed to be supporting documents within the meaning of rider clause 5.
Therefore, the fact that the email submitting the owners' demurrage claim did not refer to the disputed documents did not detract from the fact that the owners had provided the documents which they were required to be provide under rider clause 5. If the parties had intended a stricter requirement for the presentation of a demurrage claim, that intention would have had to be more clearly expressed.
Issue 4: In the event that the owners failed to provide a particular supporting document in accordance with rider clause 5, is the owners' entire claim for demurrage, or only that part of the claim to which the particular document related, time-barred?
In light of the decision on issues 2 and 3, the issue did not arise.
In any event, rider clause 5 provided plainly that ‘any claim for demurrage … shall be considered waived unless received by the Charterer … in writing with all supporting calculations and documents, 90 days after completion of discharge’. It did not provide that only a part of the demurrage claim would be waived if anything less than ‘all supporting … documents’ were provided. Further, the clause contemplated only a ‘single claim’ and most importantly, identified four specified categories of documents which had to be provided in support of a demurrage claim; it did not state that these documents were relevant only to one or another part of a demurrage claim; they were to be treated as supporting the entire claim. Accordingly, if there had been a failure to provide the disputed documents, the whole demurrage claim would have been time-barred.
In the circumstances, the charterers' application for summary judgment was dismissed.
Comment
The court provided a useful reminder of the importance of strict compliance with a contractual time bar provision.
First, the commercial purpose of a demurrage time-bar provision within a relatively short period of time is to allow the charterers to investigate and verify or dispute the claim soon after the events giving rise to the claim.
Secondly, with demurrage time-bar provisions there is a balance to be found between clarity and strict compliance. The touchstone of the approach is a requirement of clarity sufficient to achieve certainty rather than a requirement of strict compliance which, if applied inflexibly, can lead to uncommercial results.
Thirdly, given that the demurrage time-bar provision may bar an otherwise valid claim, both the time bar and the conditions for the application of the time bar must be clearly stated. It follows that if there is any genuine ambiguity in the meaning of the provision, it should be construed restrictively against the charterers and in favour of the owners. However, this principle of construction should be applied as a last resort, meaning that there must be a real ambiguity that remains after the analysis of the language, the commercial purpose and factual background, and should be applied less rigorously than a full exemption clause.
These guiding principles should be kept in mind both by owners and charterers given that disputes arising from the wording of the demurrage time bar provision are frequent.
Ocean Prefect -v- Norden: use of MAIB report in arbitration
In this case the court had to consider whether the court’s permission was required for the MAIB report of a grounding to be used in arbitration.
Factual background
In June 2017 the vessel “OCEAN PREFECT” twice ran aground in the course of entering the port of Umm Al Quwain in the UAE. The grounding of this British registered vessel caused the Marine Accident Investigation Branch (MAIB), an independent inspectorate within the Department of Transport, to investigate the circumstances of the grounding to see what lessons could be learnt with regard to improving the safety of shipping. The owners alleged that the grounding was caused by a breach of the safe port warranty by the charterers. The owners pursued their claim in arbitration.
The owners wished to refer to the MAIB report in the arbitration. The charterers and the MAIB said that should not happen, arguing that before the MAIB report was admitted into the arbitration, the court had to give permission pursuant to regulation 14(14) of the Merchant Shipping (Accident Reporting and Investigation) Regulations 2012 (the Regulations) and that permission should be refused. The owners said that the court's permission was not required and that any decision as to admissibility of the MAIB report was a matter for the arbitral tribunal. If the court's permission was required then the court should grant permission in the interests of justice.
Legal background
Section 259 of the Merchant Shipping Act 1995 empowers an inspector to require any person who is able to give information relevant to an investigation to answer such questions and to sign a declaration of the truth. Further, no answer is admissible in evidence against that person in any proceedings except proceedings for making a false statement.
Regulation 5 provides that the sole objective of a safety investigation into an accident under the Regulations is the prevention of future accidents through the ascertainment of its causes and circumstances and not to determine liability nor, except so far as is necessary to achieve its objective, to apportion blame.
Regulation 14(14) states that if any part of any document produced as a result of a safety investigation is based on information obtained in accordance with an inspector's powers as above, that part is inadmissible in any judicial proceedings whose purpose is to attribute or apportion liability, unless a court determines otherwise.
Was the arbitration within the definition of 'judicial proceedings'?
If the arbitration proceedings were judicial proceedings within the meaning of the Regulations then the MAIB report could not be admitted into the arbitration unless the court so ordered.
The definition of judicial proceedings in regulation 14(17) was not exclusive. Judicial proceedings were said to ‘include’ any civil or criminal proceedings before any court or person having by law the power to hear, receive and examine evidence on oath.
The context in which the phrase ‘judicial proceedings’ was used was that provided by regulation 14(14), namely, that those parts of the MAIB report that were based upon information obtained in accordance with the inspector's powers were inadmissible in any judicial proceedings whose purpose was to attribute blame, unless a court decided otherwise. If such parts of the report were admissible, then in the future those asked to provide information to the MAIB as to a maritime casualty might be unwilling to do so. That was the reason for the general inadmissibility of the relevant parts of an MAIB report, which applied whether the civil dispute about liability was determined in court or in arbitration. There appeared no sensible reason why the parties should have to seek the permission of the court to refer to the MAIB report if the unsafe port case was heard in court, but not if it was heard in arbitration.
Further, the proceedings before the arbitral tribunal were judicial in character. The arbitral tribunal had a duty to conduct the arbitral proceedings fairly and impartially as between the parties, giving each party a reasonable opportunity of putting its case and dealing with that of its opponent. That duty was characteristic of the judicial function. The judge accepted that the arbitral proceedings were private and consensual proceedings but they remained "judicial" in any event. The arbitrators' powers under the Arbitration Act 1996 could not entitle them to ignore regulation 14(14).
Should the court exercise its discretion in admitting the report?
The question was whether the court was satisfied that the interests of justice in admitting the MAIB report in the arbitration outweighed any prejudice or likely prejudice to any future accident safety investigation or relations between the UK and another state or international organisation. Regulation 13(5) required the court to have regard to the views of the chief inspector. That was probably intended by regulation 14(14) also.
According to the chief inspector, the admission of the MAIB report would be likely to prejudice future accident safety investigations, since it would diminish the MAIB's ability to have candid and detailed conversations with witnesses and to have ready and unqualified access to accident sites. It would diminish the MAIB's ability to fulfil its statutory function and enhance the safety of all those at sea.
Arbitration proceedings were private and confidential. However, a decision of the court admitting the MAIB report would be in the public domain. Possible witnesses to future marine casualties might know of it or be told about it. The chief inspector said that the MAIB went to great lengths to reassure witnesses that their testimony was protected. The MAIB would have to add that the report might be admitted into private arbitrations where fault was at issue. The judge was unable to accept that the private and confidential nature of arbitrations was a complete answer to the chief inspector’s concerns.
As to testing the factual and expert evidence in the arbitration, the court considered the following. Regarding the latter, the experts could be satisfactorily cross-examined were the MAIB report not to be admitted. Counsel would have the opinions and reasoning of their own expert with which to cross-examine the opposing expert. Counsel would not need the MAIB report in order to do so. Therefore, the interests of justice in testing the evidence of the experts did not outweigh the likely prejudice to future accident investigations and the UK's relations with another state or international body.
As to factual evidence, again the interests of justice, in particular, the ability of counsel to cross-examine by reference to the MAIB report, did not outweigh the likely prejudice to future accident investigations and the UK's relations with another state or international body. The court gave two reasons.
First, the likely prejudice was a matter of great public interest. It concerned the safety of life at sea. By comparison, the concern of the owners was restricted to their commercial interests and their ability to recover a loss from the charterers. Their right to damages was significant and the interests of justice required that right to be vindicated, but that private right did not outweigh the likely prejudice to future accident investigations. Second, in this case, it was not as if the owners were unable to challenge the factual evidence in question, if counsel could not refer to the MAIB report.
In the circumstances, the court refused permission to admit the MAIB report into the arbitration proceedings.
Comments
It is interesting to note that this was the first occasion on which the use of MAIB reports in a private and confidential arbitration had arisen for decision by the courts, though the final result is probably unsurprising. The court also emphasised the importance of an application for an order under regulation 14(14) being made long before the hearing, as to avoid the parties having to excise any references to the MAIB report in the factual and expert evidence and to not affect the court’s schedule with last minute urgent applications, as it happened in this case.
For further information, please contact:
Damien Laracy, Partner, Hill Dickinson Hong Kong
damien.laracy@hilldickinson.com
