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Whether claim for time spent waiting off port limits was for demurrage or detention

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Glencore Energy UK Ltd v. OMV Supply and Trading Ltd (MT Seagrace) [2018] EWHC 895 (Comm) 

The issue in this case was whether the time spent waiting off the port limits, pursuant to the Charterers’ orders, was subject to the contractual demurrage regime or whether it was a valid claim for “detention by agreement”. The Court concluded that the contractual time-bar provision for demurrage claims did not apply as the time spent waiting was to be properly classed as detention. As a result, a recovery could be made for the time spent and bunkers consumed at the waiting area.

The background facts

In October/November 2015, Glencore agreed to sell 80,000 MT of Siberian light crude oil on CFR terms to OMV. The contract of sale contained laytime and demurrage provisions for the port of discharge which, among other things, provided for any demurrage claims to be received within 90 days from the date of discharge.

In addition, clause 24 of the contract stated that any matters not covered by the contract of sale were to be governed by the BP General Terms and Conditions 2007. The BP terms incorporated into the contract of sale contained the following definitions:

““Discharge Port” means the Berth at which the crude oil to be delivered hereunder is to be discharged;

“Laytime” means the time allowed to the Seller for loading…or the time allowed to the Buyer for discharge…as the case may be;

“NOR” means the valid notice of readiness to load or discharge, as the case may be, as given by the master of the Vessel…to the Seller…at the Loading Terminal or to the Buyer… at the Discharge Port respectively;”

On 2 November 2015, Glencore’s shipping arm, ST Shipping, chartered in the MT Seagrace to carry the cargo sold to OMV from Novorossiysk, Russia to Trieste, Italy. The charterparty was on an amended BPVoy 4 form and included the following clause governing revised orders:

“22.2 If...

22.2.3 the Vessel is, after loading, instructed by Owners to stop and await orders at Charterers' request then all time spent by the Vessel awaiting orders shall count as laytime or, if the Vessel is on demurrage, as demurrage.”

The fixture recap as concluded between ST Shipping and the Owners of the vessel, not ST Shipping and Glencore, was passed by Glencore onto OMV.

The loading completed and the vessel departed Novorossiysk on 10 November 2015. However, the day before, OMV had sent an email to Glencore, stating that there were no berthing prospects at Trieste. In the same email, OMV requested that the vessel stay off Trieste Gulf until further instructions and that:

(i)   NOR was to be tendered upon arrival at the waiting area, including ROB (remaining on board) figures for bunkers;

(ii)  ROB figures were to be sent by the Master when leaving the waiting area pursuant to OMV’s orders; and

(iii) NOR, along with ROB figures, was to be re-tendered on a without prejudice basis upon arrival at Trieste.

On 13 November 2015, OMV asked Glencore for the details of the demurrage rate and, having been provided with these by Glencore, on 16 November 2015, OMV specified the waiting area as an area “just north of Corfu”. The vessel arrived at the waiting area on 17 November 2015, tendering her NOR, and remained there for around 24 days, unable to berth due to congestion.

She re-tendered two NORs at Trieste on 13 December 2015, with the discharge completing the following day.

The dispute

On 19 September 2016, Glencore were presented with a “without prejudice” invoice from the Owners “for the account of ST Shipping” in the sum of US$ 766,133.34 for the time spent (calculated at the contractually agreed demurrage rate) and US$ 48,900 on account of bunkers consumed at the waiting area. Glencore passed the invoice onto OMV on the same day.

OMV refused the claim on the basis that it was a claim for demurrage which was by now time-barred. Glencore contended that OMV’s requests made on 9 and 16 November 2015, asking for the vessel to await further instructions at the waiting area, created an implied contract under which Glencore were entitled to be remunerated for the time spent at the waiting area by reference to the demurrage rate and the cost of bunkers consumed.

The Commercial Court decision

The Court found in favour of Glencore on the basis that the contract of sale did not by default cover the waiting time. The only clause directly on point was clause 22 of the BPVoy 4 charter between ST Shipping and Owners and that clause did not form part of the contract of sale.

Further, the BP definitions incorporated into the contract of sale stated that laytime was afforded for loading/discharge operations. Equally, the NOR was defined as a notice to load/discharge. The provisions could not, therefore, extend to the waiting period as there were no cargo operations performed during that time.

The Court decided that the time spent at the waiting area was to be properly categorised as “delay by agreement”. The emails of 9 and 16 November 2015 requested that Glencore performed services that they were not obliged to perform and Glencore’s acceptance of that request necessarily carried with it an implied term that they would be paid for the additional service provided.

Furthermore, the fact that OMV had asked for the demurrage rate indicated that the remuneration for the delay was to be calculated with reference to the agreed rate of demurrage. Similarly, OMV’s instructions to send ROB figures served to prove that there was an additional implied term that OMV would pay for the bunkers consumed at the waiting area.

To the extent that OMV asserted that the contract of sale was varied by the emails of 9 and 16 November 2015, the Court found that “[t]he amendments necessary to the sales contract and the BP terms (incorporated into it) would be substantial and not necessary to give business reality to what Glencore Energy and OMV had agreed to by 17 November 2015”. The Court further remarked that “it [was] unlikely that someone in Glencore Energy’s position would have agreed to some of the variations consequent on OMV’s analysis.”

Comment

Whilst the case is fact specific, the judgment provides a useful guidance on proper categorisation of delay claims and the minimum standard that needs to be met to successfully argue variation.

Laytime and demurrage claims have become so common and standardised that owners and charterers frequently overlook the fact that not all delays will fall within the contractual laytime and demurrage clauses. Where a vessel is delayed due to the charterers’ fault or pursuant to the charterers’ instructions, the owners may have an alternative or standalone action for detention. This action stems from common law and is different in nature to a claim for demurrage. Therefore, unless specific contractual terms exist to limit its scope, the claim for detention will not be affected by demurrage time bar provisions.

Further, unlike in the case of laytime and demurrage, a claim for detention can be made in respect of delays suffered on the approach/carrying voyage and/or after the completion of cargo operations.

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