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Failure to produce bills of lading in support of demurrage claim bars entire claim

Insights / / Hong Kong

Tricon Energy Ltd v. MTM Trading LLC (MTM Hong Kong) [2020] EWHC 700 (Comm)

The Commercial Court has held that where a charterparty requires demurrage to be calculated by reference to bill of lading quantities, and incorporates a demurrage time bar which requires provision of all supporting documents, a claim for demurrage will be time-barred if the shipowner fails to provide copies of the bills of lading within the required time.

The background facts

The Vessel was chartered under an amended Asbatankvoy form, with the most relevant clauses being Clauses 10 and 38.

Clause 10 provided as follows:

"Laytime/Demurrage

 … …

(e) If load or discharge is done simultaneously with other parcels then laytime to be applied prorate between the parcels.

(g) In the event of Vessel being delayed in berthing and the Vessel has to load and / or discharge at the port(s) for the account of others, then such delay and/or waiting time and /or demurrage, if incurred, to be prorated according to the Bill of Lading quantities.”

Clause 38 stated as follows:

"Time Bar Clause

Charterer shall be discharged and released from all liability in respect of any claim/invoice the Owner may have/send to Charterer under this Charter Party unless a claim/invoice in writing and all supporting documents have been received by Charterer within [90] days after completion of discharge of the cargo covered by this Charter Party or after other termination of the voyage, whichever occurs first. Any claim/invoice which Owner may have under this Charter Party shall be waived and absolutely barred, if claim/invoice and all supporting documents are not received by Charterer before the time bar."

The Owners brought a claim for demurrage as a result of delays at both the load and discharge ports. A formal demurrage claim, which attached a number of documents, including the demurrage invoice, laytime/demurrage calculations, NOR, vessel timesheet/statement of facts, hourly rate/pressure logs and various letters of protest was submitted within 90 days after completion of discharge. However, the Owners did not provide copies of the two bills of lading for the two parcels of cargo.

The Charterers disputed that the demurrage claimed was due to the Owners, arguing that the claim was time-barred by virtue of Clause 38, as the demurrage claim submitted by the Owners (within the 90 day period), had not attached all the necessary documents, specifically the bills of lading which contained the required information regarding the quantities.

In arbitration, the tribunal held that the Owners' demurrage claim succeeded in full, on the basis that all the Charterers needed was the statement of facts that recorded the bill of lading figure. The Charterers could use that to check that the apportionment of waiting and discharging time had been correctly stated. The tribunal did not think that the Charterers needed to see the bills of lading to satisfy themselves that the cargo quantity figures recorded in the statement of facts had been calculated on the same basis (i.e. measured in air or in a vacuum). Since the statements of facts were prepared by ship’s officers in the knowledge that they would be required to pro-rate discharging time, they would have used the cargo quantity figure recorded by the same method in each bill of lading. The tribunal recorded that in disputes involving the discharge of different parcels of cargo, owners traditionally only ever adduced in evidence statements of facts and never any bills of lading.  

The Charterers appealed. The point of law that the Court was required to consider was as follows: "Where a charterparty requires demurrage to be calculated by reference to bill of lading quantities, and contains a demurrage time bar which requires provision of all supporting documents, will a claim for demurrage be time-barred if the vessel owner fails to provide copies of the bills of lading?"

The Commercial Court decision

The Court held that, on a true interpretation of clause 38, copies of the bills of lading did have to be provided in this case. The Court did not, however, suggest that this was a general requirement.

The charterparty contained an express reference to "Bill of Lading quantities" in clause 10(g), and while clause 10(e) did not make a specific reference to bill of lading quantities, it was clear in 10(g) that "pro rating" was to mean a division according to bill of lading quantities. Therefore, clearly pro-rating for demurrage purposes had to be calculated by reference to the bill of lading quantities. Furthermore the charterparty in the present case referred not simply to "supporting documentation" but to "all" such documentation.

Accordingly, in the Court’s view, it was not possible to treat the bills of lading as outside the requirements of clause 38. In the present case, there was no evidence that the bills were unavailable to the Owners within the time frame. The suggestion was that they were confidential, but if there were sensitive elements to the bill of lading, those could very easily have been redacted and the redaction would not realistically include the quantities. If a bill of lading was not available, then a proper explanation of that fact would need to be provided for the purposes of clause 38 alongside what was available.

Finally, clause 38 referred to a claim/invoice as a single item and did not refer to "constituent part[s]" of a claim for demurrage. Therefore, the Court held that the Owners' failure to produce bills of lading in support of their demurrage claim, barred the entire claim.

Comment

While the Court stated that this dispute was decided on the particular wording and interpretation of the relevant charterparty clauses, it seems that, following the decision in MUR Shipping B.V. v Louis Dreyfus Company Suisse S.A. (Tiger Shanghai) [2019] EWHC 3240 (Comm), a trend may be developing whereby the courts are imposing a strict interpretation on the documents that must be submitted when raising such claims. Parties should be aware that whenever there is a time bar for submission of a claim, particularly demurrage claims, careful attention should be paid to the requirements, specifically in respect of supporting documentation. Parties are advised to err on the side of caution in order to avoid their claim becoming time-barred.

Rania Tadros

Rania Tadros Managing Partner

Paul Katsouris

Paul Katsouris Senior Associate

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