Not all reported legal cases make new law. Two recent cases have considered whether the Charterers should pay demurrage for the delay to chartered ships. Each was largely dependent on the precise facts. Despite this, the cases offer guidance to decision makers as to how to react in similar circumstances.
The cases also illustrate the problems faced by those who have to take the instant decisions when a problem occurs. If courts looking in hindsight have a difficult job in deciding what actually happened and consequently who should bear the cost of delay, pity the poor shipping man who faces the problem initially - and in real time. The cases are also a useful reminder of the number of interests involved when a vessel goes to a port - Owners, Charterers, cargo sellers, cargo receivers, agents, port authorities, terminal operators, veterinary authorities, local politicians. The list is almost endless.
In Great Elephant Corporation v Trafigura Beheer BV and others (June 2012), the Charterers had to pay demurrage, albeit at a reduced rate. A tanker (M/T “Crudesky”) loaded oil at a floating terminal off Port Harcourt, Nigeria. An initial verbal authorisation to load from the Nigerian Department of Petroleum Resources, confirmed in writing, was subsequently revoked on the same day. As a result, the necessary cargo documents could not be completed and the vessel could not leave Nigeria. Matters were further complicated when the Minister of Petroleum Resources required the payment of a “fine” of $12 million before the vessel could sail. Teare J found that the Owner was entitled to demurrage because the vessel was “waiting cargo documentation” which was at Charterer’s risk. Charterers could not pass on their liability to their sellers and up the sale chain. However, the demurrage rate should be halved because the “fine” was an abuse or arbitrary exercise of power by the Minister and constituted an “arrest or restraint of princes” which, under the Beepeevoy 3 charterparty form, reduced the demurrage rate payable.
The second case in July 2012 concerned a shipment of frozen chicken from the US to St Petersburg on an amended Gencon charterparty (DGM Commodities Corp v Sea Metropolitan SA (MV “Andra”)). There were three possible causes of the 6 month delay. Gasoil (which leaked because the vessel was unseaworthy) was found to have damaged part of the cargo. Secondly, the local Russian veterinary authorities imposed a suspension on movement of the remaining cargo. Thirdly, the receivers, to whom the Charterers had delegated their obligation to discharge the cargo, refused a P & I Club letter of undertaking and demanded $2 million cash to settle the cargo damage claim. Popplewell J determined that neither the unseaworthiness of the vessel or the acts of the veterinary authorities were causative of the delay or the frustration of the charterparty. The cause of the delay was the actions of the Receivers. The Charterers were liable as between themselves and the Owners for the actions of the Receivers. Consequently demurrage was payable.
For more information please contact Duncan Quinan or your usual Lewis Silkin contact.