[2020] EWHC 2373 (Comm)

High Court of England and Wales

Facts: Priminds (charterers) entered into a voyage charter with K-Line (shipowners) on a modified Norgrain 89 form to transport soybeans from Brazil to China. At the port of discharge, the vessel anchored and gave a notice of readiness on 29 July 2015. However, due to the large number of vessels in the port and lack of sufficient storage space on shore, the vessel remained there for 31 days awaiting discharge, which began only on 30 August . During the waiting time at anchor, the laytime agreed in the charter had expired, and the unloading was completed already on demurrage.

Due to the delay, the soybeans got moldy and caked. The owners settled the claim of the consignees and commenced arbitration to recover these losses from the charterers as indemnity, in addition to the claim for demurrage. The charterers objected, stating that their liability to the shipowners for the delay in unloading the vessel was limited to demurrage. The parties referred this preliminary issue to the High Court under Art. 45 of the English Arbitration Act 1996.

High Court of England and Wales: the shipowners' claims allowed in full. Up to now, there has been a split in English law as to whether the charterers’ liability for detaining the ship beyond the agreed laytime is limited by the amount of demurrage.

Demurrage is a fixed agreed sum paid for detention of the vessel beyond laytime. In other words, this is a compensation to the owners for their inability to use the vessel for a certain period of time. However, the owners' claims arose not due to their inability to use the ship because of the delay, but due to cargo damage. The demurrage clause does not apply to such claims, as well as to the owners’ claim for damage to the ship or personal injury to the crew.

In this case, it is enough for the owners to prove that the additional losses (in this case, cargo damage) occurred due to the breach by the charterers of their obligation to discharge the cargo in a timely manner after the notice of readiness was given. To recover these additional damages, the owners do not need to prove that the charterers are in breach of any other obligations under the charter. In other words, if due to a delay in discharge, the owners incur two types of losses (inability to use the vessel and payment to cargo interests for cargo damage), then the owners may recover all these losses from the charterer, proving only the fact of delay in discharge.

Comments: it is noteworthy that the owners in this case voluntarily paid the consignees’ claim, although the month-long delay in the port and the subsequent cargo damage likely occurred without their fault as carriers. Consequently, the owners had a good chance of claiming that Art. 4 (2) (q) of the Hague-Visby Rules applied and excluded their liability.

It should be noted that in Russian law, the issue of whether the charterers’ liability for discharging cargo within a period exceeding the agreed laytime is limited only to the amount of demurrage is resolved differently. According to the commentary to Art. 132 MSC,⁶ “the recovery of the corresponding amount [i.e. demurrage] excludes the possibility of awarding compensation to the carrier for losses caused by the detention of the vessel. Therefore demurrage is an exclusive penalty. When the payment of demurrage and its amount are expressly provided in the contract, it can be classified as exclusive contractual penalties". This approach is generally supported by existing case law.⁷ ■

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