UNDERSTANDING THE CONCEPTS OF LAYTIME AND
DEMURRAGE IN THE CARRRIAGE OF
GOODS BY SEA
A PAPER PRESENTED AT THE 7TH MARITIME LAW SEMINAR FOR SUPERIOR
COURT JUDGES OF GHANA HELD AT THE COCONUT GROVE REGENCY
HOTEL, ACCRA, OCTOBER 6 - 7, 201
PRESENTED BY
A. G. BUABENG
UNDERSTANDING THE CONCEPTS OF LAYTIME AND DEMURRAGE IN THE
CARRIAGE OF GOODS BY SEA
A PAPER BY A. G. BUABENG AT THE SEVENTH SEMINAR FOR JUDGES OF
THE SUPERIOR COURTS OF GHANA ON 6TH AND 7TH OCTOBER 2011 AT THE
COCONUT GROVE HOTEL, ACCRA
001
My Lords, it gives me unmitigated pleasure to be with you once again this year
on the invitation of Ghana Shippers’ Authority to deliver a Paper on the
“Understanding the Concepts of Laytime and Demurrage in Carriage of Goods
by Sea”.
002
My Lords, when I was a student at the London School of Economics in the
1971-72 academic year, my bible on the law of Carriage of Goods by Sea was
Carver’s “Carriage by Sea” under the distinguished editorship of Raoul Colinaux
of 4 Essex Court, Temple, London.
in 1984 after the 13
th
Regrettably, Raoul Colinaux passed away
Edition of the Book.
In the first edition of the Book in 1885, T. G Carver, the Author observed in his
First Preface as follows: and I quote “hope that the book may be found to be
in some degree of service, both to those who are practically conversant with
commercial affairs, and to those who are engaged in studying and practising in
the law by which those affairs are regulated”.
003
Mutatis mutandis, my Lords, in all humility, I hope this Paper will assist My
Lords in appreciating the intricacies of the Concepts of Laytime and Demurrage
in Carriage of Goods by Sea.
004
My Lords, since the inception of these Maritime Law Seminars by the Ghana
Shippers’ Council (as it then was) in 2004 quite a number of topics in areas of
Maritime Law have been covered by various distinguished Resource Persons at
various times . The general principles on Bare boat Charterparties, Time
Charterparties and Voyage Charterparties have been expounded by various
Resource Persons.
Today, however, I intend within the compass of this Paper
2
to cover Laytime and Demurrage which are peculiar only to only Voyage
Charterparties.
005
My Lords, a Voyage Charterparty is where a vessel is chartered for a certain
006
The Shipowner and Charterer are quite free to make the contract in any form
voyage.
they choose,
but they invariably use Charterparty in a standard form eg. one
of many which are approved by the Documentary Committee of the Chamber of
Shipping of the United Kingdom.
the type of trade concerned.
007
The terms found in them vary according to
BIMCO (Baltic and International Maritime Council) which was founded in 1905
as the Baltic & White Sea Conference,
also publishes a number of Standard
Voyage Charterparties covering a wide variety of commodities and situations.
Some
of
these
Charterparties
are
code
named
Cementvoy
transportation of Bulk Cement and for Coal, Polcoalvoy.
the Codename is Graincon.
for
the
For carriage of Grain,
BIMCO is now the world’s largest private shipping
organization with 2,650 members worldwide.
008
Invariably, in all various forms of Voyage Charterparties, there will be clauses
and Laytime or Demurrage. It must be observed that fundamental to the
economic consequences of entering into voyage Charterparty is the manner in
which the Charterparty allocates risks of delay.
Among the most prevalent of
such risks is congestion at a loading or a discharging port causing the vessel
to wait until a berth falls vacant at which her cargo can be loaded or
discharged.
It was observed in Steamship Rutherglen Co v. Howard Houlder
and Partners, 2003 F 848-851 (2nd Cir 1913) that there is a “wilderness of law
upon the subject of demurrage.”
009
Gilmore and Black, The Law of Admiralty 2nd Edition, The Fondation Press, New
York 1975 p 213 observes as follows:
“Since the demurrage case almost invariably involves the question whether the
stipulations and the charter have been transgressed, and since the bewildering
variety of phraseology in many charter forms now or formerly in use brings it
3
about no two cases are rarely exactly alike, it is quite impossible to systematize
the holdings”.
010
As Lord Denning said in the case of
Corporation of
Mosvolds Rederi A/S v Food
India (The “Kind Theras”) 1984 1 Lloyd’s Rep. “Life would be
much easier if shipowners and charterers would (a) refrain from making
sophisticated bargains
about demurrage (b) express their bargains more clearly.
Before I Proceed with demurrage permit me my Lords to deal with laytime first.
011
WHAT THEN IS LAYTIME OR LAYDAYS?
Laytime or laydays is the time allocated to the charterer for the purpose of
loading and discharging cargo without additional payment. Where the charterer
takes longer than the laytime allowed for loading or discharging, he may be
liable, under the charter party to pay demurrage which in Ghanaian and English
Laws are liquidated damages for the delay beyond laytime.
If, on the other
hand, the charterer completes loading and discharging in less than the permitted
laytime he will normally be entitled, if the charterparty so provides to receive
dispatch money.
012
013
The shipowner is entitled is sue for damages for detention if(i)
The laytime has expired and demurrage has not been provided for in the
(ii)
The time for loading or discharge is not agreed, and a reasonable time
(iii)
Demurrage is only to be paid for an agreed number of days and a
Charterparty;
for loading as discharge has expired; or
further delay takes place.
In the case of a claim for damages for detention, the damages are unliquidated
i.e. it is for the Court to assess what loss has been suffered by the shipowner
by his vessel being detained in port.
THE NUMBER OF LAY DAYS OR LAYTIME
4
014
Where the Charterparty names a number of “days” or “running days” these
mean consecutive days including Sundays and holidays Nielsen v. Wait (1885)
16 Q B D 67 at 72 per Lord Esher MR.
The word
“day “ usually means a calendar day and not a period of 24 hours
calculated from the
moment of the vessel’s arrival. The Katy (1895) P 56 CA.
If the term “working day” is used, this means the days on which work is
normally done in the port.
Reardon Smith Line Ltd v Ministry of Agriculture
Fisheries and Food 1963 AC 691 and “weather working days” are working
days on which the weather allows work to be done.
In Compania Naviera Azuero SA v. British and Cake Mills Ltd (1957) 2 QB
293, a Charterparty provided that a certain number of “weather working days”
should be allowed for discharge.
There were several periods during which rain
was heavy enough to stop or prevent discharge. In fact, however, no unloading
was prevented for the charterer had not planned to unload during these periods
even if the weather had been fine.
Held, that in calculating the lay time, deductions should be made in respect of
the periods in which rain fell, for a weather working day was to be determined
solely by the state of the weather on that day, although no plans had been
made for working at the relevant time.
“WEATHER PERMITTING”
015
Just as the term “weather working day “is part of the definition of laytime, so
also is the term “weather permitting”.
Both phrases are descriptive of how laytime is calculated.
This means that one
considers the type of weather to see if it is such as to prohibit work; it is not
essential that the bad weather cause delay in loading or discharging of the
chartered vessel.
In Reardon Smith Line v Ministry of Agriculture, Fisheries & Food Lord Delvin
said:
5
“It is well established that whether a day is a weather working day or not
depends on the character of the day and not on whether work was actually
interfered with………..”
It
was
once
thought
that
the
term
“weather
permitting
“
produced
fundamentally different effect but it has now been held by the Court
of
a
of Appeal
England that both phrases are part of the definition of laytime, not an
exception from it.
016
The “Vorras” 1983 I Lloyd’s Rep 579 was chartered on the Beepeevoy 2 to lift
a cargo at Skikda.
The laytime was “72 running hours weather permitting” The
vessel arrived at Skikda and tendered notice of readiness, but the berth was
occupied and the port closed due to bad weather.
When the weather eased,
the berthed vessel departed and another vessel berthed.
Bad weather again
set in and two days after the departure of the second vessel the “Vorras”,
finally berthed, but her loading was continually dogged by further bad weather
and was considerably delayed.
The shipowners claimed demurrage on the
basis that the term “weather permitting” operated to extend laytime only if it was
such as to prevent the loading of the “Vorras”.
017
The Court of Appeal held the term “weather permitting” was descriptive of, and
not an exception to laytime.It should be construed as meaning that the allowed
laytime was 72 running hours unless the weather conditions prohibit loading of
vessels of the same type as the chartered vessel, or put the other way round
the weather conditions must be such that loading or discharging is possible
irrespective of the vessel’s identity.
Sir John Donaldson MR. applied the views
of Lord Delvin in connection with the term “weather working day” and concluded
on the facts of the case that if “the weather prohibited any vessel of this
general type from loading and it is nothing to the point that owing to the
presence of another vessel in the berth, the prohibition was not the operative
cause which prevented the vessel from loading.
018
The only significant difference now between the two phrases is that “weather
working day “ produces extended laytime by apportionment for bad weather
according to length of the working day but “weather permitting” extends laytime
6
only by the amount of the time during which bad weather is such as to prohibit
loading or discharging.
“SUNDAYS AND HOLIDAYS EXCEPTED”
019
Sundays are simple to identify; “holidays” are not.
Whether a day is or is not
a holiday is a question of fact to be decided according to the regulations,
practice, custom or law applicable at the port in question. It need not be a
general or national holiday in the country where that port is situated.
Hosanger) 1931 40 LIL Rep 259, 261.
(The
It is sufficient that a competent local
authority decrees that a day is a holiday for the port or area in question and it
is irrelevant that work is in fact done.
The Mosfield 1968 2 Lloyd’s Rep 173.
The fact that work is done on the payment of overtime is likewise irrelevant
Carrado Societa Anonima di Navigazione v. “Exporthleb (1932) 43 LI.L Rep
509.
If the custom or practice of the port or locality is that a particular day is
a holiday, then the absence of any local law or decree is irrelevant (the
Honsanger) above.
If the local law forbids work on a particular day without making it a holiday, the
fact that it is illegal to work does not in itself turn that day into holiday.
Trevarraek (1934) 49 LIL Rep 86.
Illegality is no defence to a claim for failure
to load or discharge unless it prohibits the operation.
196.
The
The Maria G (I958) 2QB
It has also been held that half-day holidays do not class as “holidays”
Love and Stewart v Rowtor Steamship [1916] 2 A.C. 527.
THE COMMENCEMENT OF LAYTIME
020
My Lords, before I proceed to deal with the Commencement Laytime, I will
respectfully crave my Lords’ indulgence to quote from a dictum
by Scrutton L-
J in Van Nievet Gourdriaan and Co’s Stoomvart Maatschappij v Forslind and
Son 1908 1 K B 499 at pp 517 – 518.
“On the other hand the charterer has said “How ridiculous it is that
my time
for loading and discharging should begin before I have got a berth where I can
load or discharge and until the ship gets into the place where I can load or
discharge. On the other hand, the shipowner has said, “You have got the cargo
at the port, you have got to make arrangements for a berth and if cannot get a
7
berth, why should my ship be waiting around at my expense when it is due to
the fault of your arrangements that you cannot get there”.
021
As My Lords will therefore appreciate, the issue of commencement of laytime is
economic. Usually laytime commences when:
1) The vessel is an “arrived ship”;
2) She is ready to load or discharge; and
3) The shipowner has given notice of readiness to load.
022
In English Law, no notice of readiness to discharge is necessary unless there is
an express provision to the contrary in the charterparty.
“ARRIVED SHIP”
023
My Lords, the question as to whether or not a ship is an “arrived ship” depends
on whether a voyage Charterparty is a berth, or a dock charter (that is a
charter which has a berth or dock as destination; or a berth or dock is be
specified later by the Charterer
or a port charter (that is a charter which
requires the vessel to proceed to a named port, or a port is be named by the
charterer a later stage).
In a berth or dock Charterparty a ship does not
become an “arrived ship” unless she is at the particular berth or dock, and
therefore laytime begins to run once she is ready to load and a valid notice of
readiness is given to the charterer according to the provisions and the
charterparty.
Thus under a berth or dock charterparty
any time lost before the
vessel can get to the berth or dock where loading or discharging can be done
falls upon the owners unless there is an express
the charterparty.
024
provision to the contrary in
More difficulties arise, however in formulating the test for an “arrived ship in the
case of a port charterparty.
This is partly due to the larger area involved and
partly to the variety of definitions of a port, dependent on
whether it is
regarded from a geographical, administrative or commercial standpoint. The
earliest
English
cases
of
the
question of
Charterparty go back over one hundred years.
an
“arrived
ship”
for
a
port
It was thought that the decision
8
in Leonis Steampship Co Ltd.
Rank Limited 1908 1 KB 499 had provided an
authoritative answer but changes in commercial practice not matched by
changes in standard form of voyage charterparties produced a spate of
decisions on the subject in the years between 1957 and 1977 including three
cases which reached the then House of Lords - Sociedad Financiera de
Bienes Raices SA v Agrimpex Hungarian Trading Co (The Aello) 1961 AC
135, EL Oldend orff v. Tradax Export SA (The Johanna Oldendorff) 1974 AC
479 and Federal Commerce and Navigation Co Ltd v Tradax Export SA (The
Maratha Envoy) 1978 AC 1.
The case of Leonis and Rank Ltd established that where the agreed
destination was a port only without further limitation the ship is an “arrived ship”
when she is within the commercial area of the port, and at the disposition of
the charterers even though she may not be in the position to load or discharge
cargo at the place she has reached.
In the case of the Aello, on the other
hand, the House of Lords construed the “commercial area” of a port as “the
area in which the actual loading spot is to be found and to which vessels
seeking to load cargo of the relevant description usually go, and in which the
business of loading such cargo is usually carried out”.
025
The Aello was overruled by the House of Lords in Johanna Oldendorff.
Here
the charterer under a port charter had nominated the port of Liverpool /
Birkenhead.
At the time the vessel reached the port no berths were available
and it was ordered to anchor at the Mersey Bar, a point some 17 miles from
the dock area but within the administrative limits of the port. The point of issue
was whether the Johanna Oldendorff was an “arrived ship” at the Mersey Bar
or whether laytime only began to run 16 days later when she was eventually
admitted to a berth.
In reviewing the cases, the House of Lords criticized the
test based on arrived with the “commercial area” of a port advanced in the
Aello and overruled it on the grounds that such an area was difficult to define
and caused unnecessary uncertainty in the Law with no regard for practical
commercial implications.
Their Lordship were in favour of a more practical test
based on the following proposition.
026.
1.
The vessel must be within the geographical and legal area of the port in the
sense commonly understood by it users.
Consequently a vessel could never
9
be considered to have “arrived” if the port authorities ordered is to stay
outside this area.
2. The decisive test is whether the vessel at this point is immediately and
effectively at the disposal of the charterer in the sense that it can reach the
berth quickly when informed that one is vacant.
In view of improved radio
communication and the increased speed of modern ships, a vessel could
satisfy this test even if anchored at some distance from the specified berth,
since it would usually be given advance warning of the time at which the
berth was likely to become available.
3. The vessel is presumed to be effectively at the disposal of the charterer
when anchored at the place where ships usually lie when waiting for berth
at that port, proof of the contrary resting with the charterer.
Even if the
vessel is anchored elsewhere, the shipowner is allowed to prove that it is
equally at the effective disposal of the charterer, though in this case the
burden of proof rests with him.
027
As the Mersey Bar was within the administrative limits of the port of
Liverpool/Birkenhead and as it was normal anchorage for vessels waiting for
berth at that port the Johanna Oldendorff was held to be an arrived ship.
028
However difficulties arise when, as is frequently, the case where the vessel
has to wait at the customary anchorage which is not within the legal, fiscal
and administrative area of a port.
This question arose in the case of
Maratha Envoy (1977) 2 ALL ER 849.
Where the charterer had nominated
Brake, a river port on the Weser as the port of loading but as no berths
were available there, the vessel had been instructed not to proceed
upstream but to wait at the Weser light.
The lightship was stationed in the Weser estuary at the point 25 miles
downstream from Brake, and was the normal waiting place at that port for
vessels the Maratha Envoy since there were no suitable anchorages on the
river within the port itself at which vessels could lie while waiting for a
vacant berth.
In reviewing the criteria for an “arrived ship”,
the Court of
Appeal held that it was not necessary for the vessel to have arrived within
10
the legal, fiscal or administrative limits of the port and relied upon the
decision of New York arbitrators
Co 1975 AM 1826.
in Maritime Bulk Carriers v Garnac Grain
In the New York case a ship with cargo for discharge
at Rotterdam had anchored and given notice of readiness when she was
within
an
area
designated
as
“Recommended
awaiting entry to the port of Rotterdam.
notice of readiness was valid.
029
anchorage”
for
vessels
It was held by a majority that
Lord Denning in the English Court of Appeal, in following the New York
decision, said: “The merchants and shipping men on both sides of the Atlantic
used the same standard forms of contract, and the same words or phrases.
These should be interpreted in the same way in whichever place they come up
for decision. No matter whether in London or New York, the result should be
the same.
“However, the House of Lords in the “Maratha Envoy” reversed the
decision of the Court of Appeal relying on the previous decision of the House
of Lords in the Johanna Oldendorff case.
The Maratha Envoy was not an
“arrived ship” while anchored at the Weser Light, since she was not within the
limits of the port of Blake.
030
So the attempt to bring consistency to English and American Law on this point
failed. As stated by Benedict on Admiralty 3rd Edition at p. 231.
“American authorities have generally adopted a test of commercial good sense
regarding the vessel’s anchorage location; geographical considerations are only
of minimal importance, and a vessel can be considered an “arrived” ship while
sitting at a customary anchorage site outside the geographical and physical
limits of a port, especially if the vessel’s movements are still subject to some
control by the local authorities as, e.g. through the assignment of berth rotation.
Recent
English
authority,
however,
more
deferential
to
precedent
than
practicality, insists that a vessel is not arrived if it drops anchor of the
designated ports legal, fiscal and administrative limits”.
031
Some modern Charterparty forms contain provisions to avoid the effects of the
“Maratha Envoy” in English Law by providing that a notice of readiness can be
given once the vessel has arrived at the customary anchorage if she cannot
berth immediately. Tanker charterparties usually contain such a provision,
11
(Tankervoy 87 clause 8) with the result that expensive disputes as to whether
or not the vessel was an arrived ship seldom arrives in the tanker industry.
My Lords, sometimes Charterparty provisions do shift risk of delay. “Time to
count whether in berth or not”.
032
For instance a berth charterparty may sometimes state that time is to count
whether in berth or not.
The phrase “whether in berth or not” takes effect only
when a berth is not available.
It does not apply where a berth is available but
is unreachable because of bad whether.
033
Thus, in Sea Crystal Shipping Ltd v Bulk Group Shipping Co Ltd, the Kyzikos
1989 1 Loyd’s Rep I HL.
A berth charterparty stated that discharging time was to commence at 1400
hours if notice was given before noon and that time was to count “whether in
berth or not “.
The vessel arrived in the discharging port at 0645 hours on 17 December 1984.
Notice of readiness, was given before noon.
The berth was available but she
could not proceed there until 1450 hours on 20 December because of fog. The
shipowners contended that time commenced at 1400 hours on 17 December.
Held, by the House of Lords, that this contention failed and that time did not
count during the period for which the vessel was prevented from proceeding to
the berth by reason of fog.
Notice of readiness could not be effectively given
on 17 December at the time stated above, for the phrase “whether in berth or
not “ did not apply where the berth was available but
unreachable.
TIME LOST WAITING FOR A BERTH CLAUSE
034
My Lords, another of these clauses designed to shift the risk of delay in the
Gencon clause which provides that “Time lost in waiting for berth to count as
loading (or discharging time”). The object of this clause is to shift the risk
before the vessel becomes an arrived ship.
That is from the time when it
could have entered a berth had one been available.
Thus in the case of a
berth charter it will cover the period while the vessel is waiting in port until a
12
berth is available.
Alternatively, in the case of a port charter it will cover the
period while the vessel is waiting outside the port and even while it is waiting
inside the port in circumstances where according to the Johanna Oldendorff
criteria, it is not “immediately and effectively” at the disposal of the charterer.
The crucial question in each case is whether the basic reason for delay is the
unavailability of a berth. The clause in its origin was essentially a berth charter
clause which because of its popularity and effectiveness, was later included in
port charters.
035
In fact this extension of use led to confusion since in the case of port charters
there was a possibility of overlap between waiting time and laytime provision in
that the vessel could become an arrived ship and still be waiting for a berth.
There were many decisions on the point interpreting provisions of various
voyage charterparties.
The House Lords in the Darrah 1977 AC 157 overruled
previous decisions on this point.
Whether the clause provides that all time lost
waiting for a berth is to count in as loading time or “laytime” the result is the
same.
All such time lost is to be treated as laytime in the same way as if the
vessel had become an arrived ship.
Lord Diplock said at page 166 in the Darrah. “In a berth charter the effect of
the clauses is to put the shipowner in the same position financially as he would
have been if, instead of been compelled to wait his vessels had been able to
go straight to her berth and the obligations of the charterer to carry out the
loading or discharging had started then.
In port charter the clauses are
This count as laytime anyway; it is laytime.
The clauses would however have
superfluous so far as time spent waiting in turn within the limits of the port.
the same effect as in berth charter in respect of ports like Hall or Glasgow
where. The usual waiting place is outside the limit of the port.
READINESS TO LOAD OR DISCHARGE
036
Before laytime will begin to run, not only must be the vessel become an
“arrived ship” at its designated port of loading but two further requirements as
already alluded to must be satisfied.
First the shipowner must have given the
prescribed notice of readiness to load and second, the vessel must in fact be
ready to load. In the absence of special agreement in the Charterparty, English
13
law does not require the master to give notice of readiness to unload to the
consignee at the port of discharge.
NOTICE OF READINESS TO LOAD
037
The purpose of such notice is to inform the charterer that loading may
commence and to provide a starting point for the calculation of laytime Vide
Moore- Brick J in the Mass Glory [2002 2 Lloyds Rep 244 at p 250.
At
common law notice can be in any form provided that it is communicated but if
a particular form is prescribed in the charter such notice in writing in the form
must be adopted.
038
From the standpoint of business convenience, advance notice of expected
readiness would be particularly helpful to the charterer and many standard
forms require the giving of such notice at a specified time before arrival.
For
example, clause 2 of the Polcoalvoy charter requires at least 10 running day’s
written notice of the approximate date of readiness to load.
On the other hand
many charter forms prefer certainty and the requirement at common law is for a
simple notice of actual readiness to load.
Such notice is however only effective
in respect of an “arrival ship” which is actually ready to load at the time notice
is given Christensen v Hindustan Steel Ltd.[1971] 1 Lloyd’s Rep 395; Tres
Flores [1973] 2 Lloyd’s Rep 247 at p249.
In this respect English law takes a strict view that notice of anticipated
readiness is ineffective even though the vessel was in fact ready to load at the
time notice was given see Christenson v. Hindustan Steel Ltd supra.
“ACCEPTANCE
BY
THE
CHARTERER
OF
AN
INVALID
NOTICE
OF
READINESS, AS WAIVER OF NOTICE
039
Where a charterer or his agent “accepts” notice of readiness, which is in fact
invalid but his acceptance is unqualified the charterer may thereafter lose the
right to assert that invalidity.
The master of Helle Sekou 1976 2Llyod’s Rep
205 tendered notice of readiness to load a cargo skimmed milk.
He did so
honestly although in fact her holds were tainted by the smell of a previous
cargo of fishmeal. The charterers formally accepted the notice of readiness, but
they did not check the vessel and immediately started loading.
After sometime,
14
loading stopped and they discharged what they had loaded for further cleaning
of the holds.
The shipowner admitted that they were liable in damages, but
denied that the charterers were entitled to treat the notice of readiness as
invalid by reason of that acceptance.
040
Donaldson J held that the charterer’s acceptance precluded them from asserting
the invalidity of the notice of readiness.
He did not finally determine what was
the precise principle saying merely that it could be “labelled as waiver or
estoppel or something else”.
He said that the charterers could not resile from
the acceptance save upon the grounds of fraud.
041
However, in the Shackleford 1978 2 Lloyd’s R. 154 where notice of readiness
was premature but accepted nonetheless; the case was treated as one of
estoppel.
042
My Lords there may be other ways in which the conduct of the charterer will
cause laytime to commence despite the absence of a valid (or any) notice of
readiness.
They were described in general terms by Mustill L.J.
1990 1 Lloyd’s Rep. 507 as follows:
in “Mexico 1”
“For my part I am skeptical about the deployment of the elusive concept of
“waiver” and would prefer to look for conduct from which one could infer either
a bilateral agreement to vary the charter, or the existence of what
has come
to be called “estoppel by convention, “namely, a situation in which the parties,
having conducted themselves on the mutual assumption that their legal relations
take a certain shape, cannot afterwards be heard to assert the contrary, I do
not doubt that such a state of affairs, if proved to exist could justify the
conclusion that laytime began after the giving of an invalid notice but before the
moment of actual discharge.”
ACTUAL READINESS TO LOAD
043
Whether or not a vessel is in fact ready to load depends on a variety of factors
including the position of the vessel, whether it s physically capable of receiving
15
the cargo and whether it has complied with all the port health and documentary
requirements. The position of the vessel has already been touched upon.
044
From the physical standpoint, a vessel is not ready to load unless she is
discharged and ready in all her holds so as to give the charterer complete
control of every portion of the ship available for cargo except so much as is
reasonably required for ballast to keep her upright.
Vide the Tres Flores 1973 2 Lloyd’s Rep 247 and [Nikmary I 200] I Lloyd’s
Rep 55 where tanks needed cleaning before fit to receive gasoil. The charterer
is entitled to immediate access to all the cargo space and consequently the
vessel is not ready to load so long as even the smallest proportion of the
previous cargo remain to be discharged or ready to unload.
If overstored cargo
has to be removed before access can be gained to the charterer’s cargo.
A
further fact of the physical readiness is the requirement that the vessel must be
cargo worthy in the sense that it must be fit to receive the agreed cargo. Thus
the holds must be clear and free from contamination, the required loading gear
must be fixed and any special equipment required for particular cargoes must
be available and in position. For example shift boards for grain cargo.
The final aspects of readiness requires that the vessel has compiled with port
regulations by satisfying the health requirements and obtaining the necessary
documentation.
Here again, several of these requirements have been regarded
as mere formalities and shipowners have been allowed to give notice of
readiness even though they have not received free pratique.
Presumably such notice would be ineffective if the master did not obtain the
required documentation by the time or shortly after the vessel berthed.
045
My Lords this disposes of my observation on Laytime and may I respectfully
proceed to deal with Demurrage. I have already alluded to Demurrage and
Damages for detention in the course of this Paper and consequently my
treatment of Demurrage will be quite brief.
DEMURRAGE
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046
If the vessel is detained in loading or discharging beyond the agreed laytime,
the charterer is in breach of charter and the suggestion to the contrary implicit
in the word “allowed” does not alter the analysis. The charterer’s liability may
sound in damages at large or where demurrage rate is agreed in demurrage,
which is liquidated damages for that breach.
principle in William Alexander v Akt.
Viscount Finlay stated the
Hansa 1920 AC 88 at P 94. “If the
charterer has agreed to load or unload within a fixed period of time…. he is
answerable for the non-performance of that engagement, whatever the nature of
the impediments, unless they are covered by exceptions in the charterparty or
arise through the fault of the shipowner or those for when he is responsible”.
The liability is absolute, subject to the two matters mentioned by Lord Finlay
and not dependent upon the fault on the part of the charterer.
047
Exceptions clauses – “once on demurrage always on demurrage”.
Exception
clauses must be clearly worded to lessen or exclude a liability for demurrage
once there has been a failure to load or discharge, as appropriate within the
allowed laytime. Lord Reid treated as correct the proposition that when once a
vessel is on demurrage no exceptions or interruptions will operate to prevent
demurrage continuing to be payable unless the clauses is clearly worded to
have that effect.
This is often abbreviated to the phrase “once on demurrage,
always on demurrage”.
The rule probably owes its origin at any rate in part, to
the consideration that, if the charterer had performed his undertaking to load or
discharge in the lay days, the vessel would not have been affected by
occurrences causing delay during the demurrage period.
048
As Lord Reid put it in The Spalmafori 1964 AC at P882 “ I do not think it is
an arbitrary rule for this reason if a strike occurs before the end of laytime
neither party can be blamed in any way.
But if it occurs after demurrage has
begun to accrue, the owner might well say: though your breach of contract in
detaining my ship after the end of the laytime did not cause the strike, but if
you had fulfilled your contract the strike would have caused no loss because
my ship would have been on the high seas before it began, so it is more
reasonable that you should bear the loss than I should”.
DELAY CAUSED BY THE FAULT OF THE SHIPOWNER
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049
One exception which does not apply equally to laytime or to time on demurrage
is the implied exception of delay caused by the fault of the shipowner or those
for whom he is responsible.
Where the shipowner’s fault delays or impedes
cargo operations but does not deprive the charterer of access to the vessel or
cargo it is clear that the onus lies on the charterer to prove how much delay
was actually caused by the fault.
81].
050
The Forum Craftsman [1991 1 Lloyd’s Rep
The question which has arisen is whether the rule that “once on demurrage
always on demurrage” also applies in cases where the vessel, at the port of
loading having used all laytime allowed for loading and discharging is on
demurrage when she arrives at the port to discharge.
And whether in such a
case the charterer is entitled to the benefit of the charterparty notice period
before demurrage recommences.
051
This situation arose in “The Tskuba
Maru 1979 1 Lolyd’s Rep 459 and the
Court applied the rule as there was nothing in the charterparty (The Exxonvoy
69) to indicate that laytime exception applied once the vessel was on
demurrage. While dry cargo standard forms do not contain express provisions
on the issue, some tanker voyage Charters expressly state that demurrage shall
not run during the notice period.
052
The Exxonvoy 84 for example in clause 13 (a) provides that “Laytime or time
on demurrage, as hereinafter provided shall commence upon expiration of six
hours after receipt by charterer or its representative of notice of readiness”.
RATE OF DEMURRAGE
053
The rate of demurrage is expressly stated in the charterparty eg.
“Ten running days on demurrage at the rate of £2000 per day or pro rata for
any part of a day payable by day is to be allowed. Merchants altogether at the
ports of loading and discharge” See Gencon form clause 7.
In certain circumstances only half demurrage may be payable depending upon
express provision in the charterparty.
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BY WHOM DEMURRAGE IS PAYABLE
054
Usually it will be the charterer who will be liable for the payment of demurrage.
The charterparty often contains a “cesser clause” which purports to relieve the
charterer from paying demurrage, but in each case, it is a question of
construction whether it does relieve him in fact, Vide Fidelitas Shipping Co Ltd
v Exportchleb V/0 1963 2 Llyods Report 113.
DISPATCH MONEY
055
Dispatch money is payable by the owners to the charterer if the charterers
complete loading or discharging before the laytime has expired so that the
vessel is available to the owners earlier than if the charterer’s full laytime
entitlement had been used.
A saving of laytime does not entitle the charterer
to claim dispatch money unless there is a special clause in the charterparty to
this effect.
A clause providing for payment of dispatch money is often found in
dry cargo voyage charterers.
056
The interpretation of dispatch clauses have given rise to disputes.
As Carver
put it “Great difficulty has been encountered in construing provisions for the
payment of dispatch money on time “saved” in loading or discharging.
this mean time saved to the shipowner or laytime not used?
Does
If laytime does
not include Sundays, are Sundays to be taken into account in calculating time
“saved” In the English case to Re Royal Mall Co and River Plate SS. Co
1910 1KB 800 the clause in the charterparty provided that “20 running days……
excepted ……… The owners of the ship to pay £10 per day dispatch money for
each running day saved”.
057
The Court held that the word “saved” must be construed as meaning time
saved to the Shipowners and therefore dispatch money was payable for the
whole time saved without any deductions for holidays and weekends during that
period.
058
A similar conclusion was reached in Laing v. Hollway 1878 3 Q B P 437
where the words of the clause were “dispatch money 10s per hour on any time
saved in loading and/or discharging”
But the case of Glendoven 1893 P 269
was differently decided where the charterparty provided that the vessel was “to
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be discharged at the rate of 200 tons per day weather permitting (Sundays and
fete days excepted )” and if sooner discharged, to pay at the rate to 8s 4d per
hour for every hour saved”.
The dispute arose as to whether Sunday and a
fete day, occurring between the end of discharging and the end of laytime
should be counted in the dispatch calculation of “every hour saved”.
The Court
and not every hour by which the discharge was completed earlier.
Therefore,
held that “every hour saved” meant every hour saved from the permitted laytime
the two days had to be excluded from dispatch calculation.
The decision in the
Glendevon was followed in Nelson v. Nelson Line (1907) 2 KB 705.
059
In the case of Mawson SS. Co. v Beyer 1914 1 KB 304-312.
Bailhache J
summarised the conclusion which he drew from those decisions as follows:
1.
Prima facie, the presumption is that the object and intention of these
dispatch clauses is that shipowners shall pay to the charterers for all
time saved to the ship, calculated in the way in which, in the converse
case, demurrage would be calculated. That is taking note of any lay day
exception…………
2.
This prima facie presumption may be displaced, and is displaced where
(i)
lay days and time saved by dispatch are dealt with in the same clause
(ii)
lay days saved by dispatch and demurrage are dealt with in the same
either :
and demurrage in another clause;
clause, but upon the constructions of that clause the Court is of opinion,
from the collection of the words or other reason, that the days saved are
referable to and used in the same sense as the lay days are described
on the clause, and are not used in the same sense as days lost by
demurrage”.
060
The dispatch rate is usually stipulated at half of the demurrage rate:
“Since
the shipowners may have difficulty in obtaining another engagement at short
notice or in advancing a date of the ship’s next voyage, he stands to gain less
by unexpected expedition in loading and discharging than he stands to lose by
delay.
Accordingly dispatch is usually payable at half the rate of demurrage
20
rate” Per Donaldson J in Navico A. G. v Vrontados Nafiki Etairia PE (1968)
1Lloyd’s Rep 379 at p 383.
061
My Lords, this concludes my treatment of Understanding the Concept of
Laytime and Demurrage. I hope, I have been able to give you a bird’s eye view
of this rather important area of the Carriage of Goods by Sea.
Thank you.
BIBLIOGRAPHY
Voyage Charterparties 3rd Edition-Julian Cooke et Al;
Report on Second Regional Seminar on Maritime Legislation Bangkok 1990 UN
Publication;
Payne and Ivamy – Carriage of Goods by Sea 13th Edition;
Carriage of Goods by Sea 7th Edition John F Wilson;
Carver - Carriage by Sea 13th Edition Raoul Colinaux;
Scrutton on Charterparties & Bills of Lading 21st Edition Boyd, Eder, Burrows;
Gilmore and Black on the Law of Admiralty; and
Benedict on Admiralty.
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