National Shipping Company of Saudi Arabia v BP Oil Supply Company (The “Abqaiq”)
Court of Appeal (Ward and Tomlinson LJJ and Sir Mark Potter) 12 October 2011
The controversial issue of demurrage time bars has been before the Court again with the Court of Appeal reconsidering this matter, following the judgment of Field J of the Commercial Court.
That first instance decision was discussed in part I of this article Beware Demurrage Time Bars and Documentation
The “Abqaiq” was voyage chartered for a voyage from the Bahamas to Singapore on an amended BPVOY4 (1998 Edition) Form. The vessel arrived at the load port of Freeport on 6 February 2008 and completed loading on 18 February. She had loaded at two berths. The vessel arrived at the discharge port of Singapore on 22 March and completed discharge on 30 March.
After the completion of the voyage, owners issued a “time & bunkers invoice” for carrying out the second berthing at Freeport. Subsequently, owners issued another invoice entitled “demurrage invoice”. The demurrage invoice covered laytime running at both the load port and the discharge port and showed that demurrage was payable for the period 25 March to 30 March, whilst at the discharge port. Owners and charterers negotiated the demurrage invoice, following which an agreed demurrage invoice was issued on 4 June bearing the words “Combine All ports”.
Charterers then disputed the time & bunkers invoice, stating that it should have been presented as a demurrage claim. Subsequently, and after the expiration of the 90 day demurrage time bar contained in the BPVOY4 form, owners sought to replace the time & bunkers invoice with a further claim for demurrage. Charterers resisted this claim on the basis that the further demurrage claim was barred by reason of a settlement of any and all demurrage claims under the agreed demurrage invoice or, alternatively, that the new demurrage claim had been presented outside the 90 day time limit.
There were two issues for the Court of Appeal to decide: (i) was the second demurrage claim barred by the settlement of the agreed demurrage invoice? And if not, (ii) was the second demurrage claim presented out of time?
As to the first issue, owners contended that the payment of the agreed demurrage invoice constituted a settlement only of demurrage for the period 25 March to 30 March. It was still open to them to claim for demurrage at Freeport. The Commercial Court had rejected this argument and held that the agreed demurrage invoice covered all demurrage claims. Particular regard was had to the fact that the invoice stated that demurrage was for “all ports”.
The Court of Appeal reversed this decision. They held that, at the relevant time, owners were reasonably under the impression that their claim under the time & bunkers Invoice was being treated by charterers as a demurrage claim. In addition, the time & bunkers invoice was, in fact, being handled by charterers’ demurrage department. For these reasons, the Court of Appeal found that it was impossible to say the parties were proceeding on the basis that no further claim for demurrage was going to be pursued by owners. The settlement of the agreed demurrage invoice was only in respect of time used at Singapore and owners were still entitled to recover demurrage incurred at Freeport. They attached no significance to the phrase “all ports” in the agreed demurrage invoice, considering the phrase simply reflected the fact that the total allowed laytime applied across all the ports on the voyage.
Thus, the second question fell to be decided. This issue depended on whether the further demurrage claim was substantially the same claim as that presented under the time & bunkers invoice, which had been advanced within the 90-day time period.
There is a line of authority that it is permissible to make revisions to a claim after a time limit has expired. At first instance, Field J had found that, in the circumstances of the case, the claim presented under the time & bunkers invoice was not substantially the same as a demurrage claim and so was time-barred. The Court of Appeal similarly overruled this conclusion, deciding that the claim was for demurrage at Freeport and, whilst there were errors in the laytime calculation, those errors could be corrected and the claim re-labelled without changing the substance of the claim.
Charterers’ time bar arguments were not persuasive. They accepted that they had received all the relevant documents within the 90 day window but claimed this was not sufficient unless they were presented with the demurrage invoice. The Court of Appeal held that the relevant question was whether “the Charterers are put in possession of the factual material which they require in order to satisfy themselves a claim is well-founded or not.”
In reaching this conclusion, the appeal judges disagreed with the view of Mrs Justice Gloster in The “Sabrewing”* that the requirements under a demurrage time bar clause must dictate strict compliance. They also disagreed with her assertion that documents must be presented by the owners themselves rather than by other parties.
This decision is to be applauded, especially in its criticism of the “The Sabrewing” decision - the most restrictive of interpretations on demurrage time bars - from which every successive court has sought to distance itself. It is to be hoped this approach is followed. It is of course imperative however, that owners continue, as a matter of best practice, to ensure that they comply with all charterparty requirements concerning the presentation of demurrage claims.
Article by Sian Morris
* See website article of January 2009 which reviews this case and The “Eternity” : Demurrage Timebars - The Tide is Turning on “Sabrewing”
