Odfjell Seachem v. Continentale

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Odfjell Seachem A/S v Continentale des Petroles et D'Investissements and Others
English High Court, Commercial Division: Nigel Teare QC: 15 December 2004

Christopher Smith, instructed by Stephenson Harwood, for the Claimant shipowners
Stewart Buckingham, instructed by Ince & Co, for the Defendant charterers

Where time under a limitation clause runs from completion of discharge of the cargo, but there was no cargo to discharge, the judge held that the limitation clause does not apply. He refused to imply additional words into the clause that would have allowed time to run from when the cargo should have been discharged since, if the parties had wanted to provide for such a circumstance, they could easily have done so. The judge also held that, in addition to damages for repudiation, the shipowners could claim demurrage that had accrued before the charterparty was repudiated

DMC Category Rating: Confirmed

This case note is based on an Article in the January 2005 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA Piper Rudnick Gray Cary, which is an International Contributor to this website

In August 2002, the Bow Cedar was chartered to the defendants for the carriage of a cargo of jet fuel, gasoline and gas oil from Bahrain to Cotonou, Benin. The voyage charterparty was on the terms of an amended BPVOY4 form. On 27 August, the vessel tendered notice of readiness. Laytime expired on 30 August, after which the vessel incurred demurrage at the agreed rate. On 2 September, the charterers emailed the owners to say they were still having problems purchasing a cargo and so were cancelling the charterparty and releasing the vessel. The owners accepted the email as repudiation of the charterparty on 3 September and claimed a "cancelling fee", which represented lost freight and demurrage, less saved port costs and bunkers, details of which were provided in October 2002.

On 5th September 2002, however, the owners mitigated their loss by chartering the vessel. But they did not amend their claim or provide documents relating to the mitigation voyage until July 2003. In October 2003, they issued these proceedings and applied for summary judgment.

The charterers argued that the owners were out of time in bringing their claim. Clause 20 of the charterparty provided that charterers would be discharged from all liability in respect of (amongst other things) any claim for demurrage which the owners might have under the charter unless a claim in writing with all supporting documentation was presented to charterers within 90 days "of the completion of discharge of the cargo carried hereunder". Under 20.2, any claim against charterers "for any and all other amounts which are alleged to be for charterers' account under this charter" would be extinguished unless the claim was presented with full supporting documentation within 180 days "of the completion of discharge of the cargo carried hereunder". The charterers argued that the claim against them fell within clause 20.2 and that, where no cargo was discharged, a term could be implied to the effect that time ran from completion of discharge of the cargo or the date "on which the cargo should have been delivered".

The owners denied that the claim was one that fell within the clause and that, in any event, they had complied with the requirements.

There was a further dispute about whether owners were entitled to claim for demurrage incurred before termination. The charterers relied on statements made in The Noel Bay[1989] 1 Lloyd's Rep 361, to the effect that damages for repudiatory breach should be assessed assuming the charterer had performed all his obligations, i.e. that no demurrage had been incurred.

Clause 20
The judge was satisfied that clause 20.2 encompassed claims for sums which, under the terms of the charterparty, were expressly for the account of the charterers, but it did not clearly include claims against charterers for damages for breach of their obligations under the charter. Time bar clauses have to be construed strictly, and so the judge concluded that, viewed objectively, the clause did not include claims for damages.

In any event, time under clause 20 ran from discharge of the cargo. No reference was made to the situation where no cargo had been discharged. This suggested the clause was intended to have a limited application. Had the parties wanted to provide for circumstances where there was no cargo, they could have done so. In relation to claims against owners, for instance, Article III rule 6 of the Hague-Visby Rules (which were incorporated into this charterparty) provided for claims to be brought within one year of delivery of the goods "or of the date when they should have been delivered".

Had the claim fallen within clause 20, the judge would nevertheless have found that the owners had not complied with the requirement to provide full documentation. The documents provided in October 2002 made no reference to the credit to be given against the claim for the mitigating voyage. It is well settled that the normal measure of the owners' loss is the difference between net income they would have earned under the charter and the net income in fact earned under the substitute charter. Documentation about the mitigating voyage was part and parcel of the claim and had to be given within the time limit.

Demurrage claim
The judge disagreed with the charterers’ contentions. Demurrage is a liability in damages incurred when the charterer detains the ship beyond stipulated laydays. The basis of the claim is breach of contract. The demurrage clause simply liquidates the damages for such a breach. Repudiation, when it is accepted by the innocent party, brings any unperformed, primary obligations of the parties under the contract to an end, but it does not affect rights that had accrued before then.

The judge distinguished this situation from that in the NoelBay case, in which a breach of contract (a failure to nominate a loading port) ultimately led to the termination of the charterparty and the court held that the owners could not claim an additional sum for delay. In this case, the breach that led to termination was the failure to provide cargo, but there had already been a failure to load within the laydays for which demurrage at the agreed rate had already accrued. Demurrage that had accrued before termination could berecovered in addition to damages for loss of profit consequent on the termination.

In the circumstances, the judge was satisfied that the charterers had no real prospect of successfully defending the claim and entered summary judgment against them.

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