Lukoil Asia Pacific v Ocean Tankers - The Ocean Neptune

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DMC/SandT/18/03

England

Lukoil Asia Pacific Pte Ltd v Ocean Tankers Pte Ltd (The “Ocean Neptune”)

English Commercial Court: Popplewell J: [2018] EWHC 163 (Comm): 2 February 2018

Natalie Moore (instructed by Clyde & Co LLP) for Lukoil

Richard Lord QC (instructed by Thomas Cooper LLP) for Ocean Tankers

VOYAGE CHARTER: EXXONMOBILVOY 2005 FORM: LITASCO CLAUSES: DEMURRAGE CLAIM PRESENTATION
TIME-BAR REQUIRING DOCUMENTS IN SUPPORT OF CLAIM TO BE PRESENTED TO CHARTERERS WITHIN 90
DAYS OF COMPLETION OF CARGO DISCHARGE: WHETHER CLAIM FOR TIME LOST WAITING FOR ORDERS
TIME-BARRED DUE TO NON-COMPLIANCE WITH DOCUMENT PRESENTATION REQUIREMENT: APPEAL FROM
PARTIAL FINAL AWARD UNDER SECTION 69 OF THE ARBITRATION ACT 1996

Summary

On appeal from a Partial Final Award, the High Court determined, in allowing the appeal, that the true meaning of the
LITASCO Clauses as incorporated into the EXXONMOBILVOY 2005 form of charterparty is that a claim for time spent in
awaiting charterers’ orders at anchorage is a claim within the laytime and demurrage scheme of the charterparty when
taken as a whole, such that the claim for time lost in awaiting orders in this case failed for want of compliance with the
demurrage claims presentation time-bar within the charterparty for the four port calls in question.

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor of England & Wales, LMAA
Supporting Member and International Contributor to DMC’s Case Notes

Background

Charterers, Lukoil, voyage chartered the tanker “Ocean Neptune” from Owners, Ocean Tankers, on an amended
EXXONMOBILVOY 2005 form dated 8 November 2013, which incorporated the LITASCO Clauses, for the carriage of a
minimum of 35,000 metric tons of clean petroleum products, from one safe port Taiwan (in the event Mailiao) to one to
three safe ports Australia (in the event Gladstone, Botany Bay and Port Alma) with 84 hours in total laytime at both ends.

Following completion of the voyage, Owners claimed demurrage in the total sum of US772,327.87, most of which related to
a prolonged stay of some 1,048 hours at anchorage off Gladstone awaiting Charterers’ orders, together with interest and
costs. Charterers denied liability on the grounds, amongst others, that the claim was time-barred because the documents
in support of the claim specified in LITASCO Clause 2B were not provided within 90 days of the completion of discharge,
as required by that clause.
In making a Partial Final Award on the preliminary issue of whether or not Owners’ claim was time-barred, the Tribunal
decided that the claim was time-barred under Clause 2B for want of presentation of statements of fact supported by letters
of protest if not countersigned by the terminal at the four ports of call. However, the Tribunal allowed the claim for the
prolonged stay at anchorage off Gladstone awaiting Charterers’ orders, on the basis that Owners re-labelled that claim (as
they were entitled to do) as one under LITASCO Clause 4 to which, in the Tribunal’s view, Clause 2B did not apply,
because the documents listed by Clause 2B would not ordinarily be ones that would be generated while awaiting orders off
the port.

The LITASCO clauses in question read:

“2. CLAIMS

A…... CHARTERERS SHALL BE DISCHARGED AND RELEASED FROM LIABILITY IN RESPECT OF ANY CLAIMS
OWNERS MAY HAVE UNDER THIS CHARTERPARTY (SUCH AS, BUT NOT LIMITED TO, CLAIMS FOR
DEADFREIGHT, DEMURRAGE, SHIFTING OR PORT EXPENSES) UNLESS A CLAIM HAS BEEN PRESENTED IN
WRITING TO CHARTERERS WITH SUPPORTING DOCUMENTATION WITHIN NINETY (90) DAYS FOR DEMURRAGE
AND 120 DAYS FOR OTHER CLAIMS FROM COMPLETION OF DISCHARGE OF THE CARGO UNDER THIS
CHARTERPARTY.

B. FOR DEMURRAGE CLAIMS SUPPORTING DOCUMENTS MUST INCLUDE WHENEVER POSSIBLE -

1. OWNERS' CALCULATION OF THE DEMURRAGE DUE; AND

2. THE CERTIFICATE OF NOTICE OF READINESS TENDERED AT PORT OF LOADING AND DISCHARGE; AND

3. THE STATEMENT OF FACTS FOR EACH LOADING AND DISCHARGE BERTH WHICH MUST BE SIGNED BY THE
MASTER OR THE VESSEL'S AGENTS AND, WHEREVER POSSIBLE, THE TERMINAL; AND

4. THE VESSEL'S PUMPING LOGS FOR EACH DISCHARGE BERTH; AND

5. ALL LETTERS OF PROTEST ISSUED BY THE VESSEL OR THE TERMINAL. THE NOR [sic].

3. STATEMENT OF FACTS CLAUSE

IN ORDER TO BE CONSIDERED AN AUTHORIZED DOCUMENT, STATEMENTS OF FACTS MUST BE SIGNED BY

THE MASTER OF VESSEL, VESSEL'S AGENTS, SUPPLIERS OR RECEIVERS, IF POSSIBLE. IF NOT POSSIBLE,
THEN MASTER TO ISSUE A LETTER OF PROTEST TO THE DISSENTING PARTY, SUBMITTED TOGETHER WITH
OWNERS' DEMURRAGE CLAIM.

4. WAITING FOR ORDERS CLAUSE

IF CHARTERERS REQUIRE VESSEL TO INTERRUPT HER VOYAGE AWAITING AT ANCHORAGE FURTHER

ORDERS, SUCH DELAY TO BE FOR CHARTERERS' ACCOUNT AND SHALL COUNT AS LAYTIME OR DEMURRAGE,
IF VESSEL ON DEMURRAGE. DRIFTING CLAUSE SHALL APPLY IF THE SHIP DRIFTS.”
Charterers appealed the Partial Final Award on the basis that: a claim under LITASCO Clause 4 was a claim for
demurrage; LITASCO Clause 2B applied in terms to claims for demurrage; there were no commercial reasons for failing to
give the language of the LITASCO Clauses their clear and plain meaning; and, on the contrary, commercial considerations
reinforced that plain meaning.

Owners opposed the appeal on the basis that: there is a distinction between claims for demurrage for operational delays at
loading and discharge ports, and claims for time lost awaiting orders, which were to be treated differently; the fact a
LITASCO Clause 4 claim was to "count as" demurrage for computation purposes did not make that a claim for demurrage
for all purposes, and in particular did not do so for the purposes of LITASCO Clause 2B; there was no reason to suppose
that any of the categories of documents listed in LITASCO Clause 2B was likely to be relevant or necessary for assessing
a claim for time lost awaiting orders; and the Tribunal's reasoning, as a matter of commercial sense, reinforced that
construction of the language of the relevant clauses.

Judgment

Having noted the modern leading authorities on the principles applicable to the construction of commercial documents
(fn.1), the Judge identified that the task of the court is to ascertain the objective meaning of the language which the parties
have chosen in which to express their agreement, and to prefer, if there are two possible constructions, the construction
which is consistent with business common sense and to reject the other. In the Judge’s view, as LITASCO Clause 2B
applies "for demurrage claims", the question was whether a claim under LITASCO Clause 4 is a "demurrage claim". The
Judge noted the EXXONMOBILVOY 2005 form and the LITASCO Clauses are detailed and carefully drafted, and the
Fixture Recap was framed by reference to them, such that convenience lay in starting with the language used in the
charterparty as a whole. In the Judge’s determination, the language of the charterparty provided in clear terms that a
LITASCO Clause 4 claim is a demurrage claim. By clause 13(d) of the EXXONMOBILVOY 2005 form, the obligation to pay
demurrage was framed by the use of the words "Charterer shall pay demurrage…." and provides that demurrage is to be
paid for all time by which the allowed laytime "is exceeded by time taken for loading and discharging and for all other
Charterer’s purposes and which, under this Charter, counts as laytime or as time on demurrage."

As the language of LITASCO Clause 4 provided that the delay caused by waiting at anchorage shall "count as" used
laytime or demurrage, the italicised words made clear that there was no distinction between an "ordinary" demurrage claim,
in the sense of the allowed laytime being exceeded by the time taken for loading and discharging, and a claim for delay
awaiting orders where such delay is to count as laytime or time on demurrage. As such, there was only one type of claim: a
claim for demurrage to account for the time by which Charterers had exceeded the agreed laytime for loading, discharging
and for any other of Charterers' purposes – including time spent awaiting orders.

The Judge next turned to consider whether there were any commercial considerations or consequences which point to a
LITASCO Clause 4 claim not being a "demurrage claim" for the purposes of engaging LITASCO Clause 2B. Clause 2B
identifies documents which must accompany a demurrage claim, which by Clause 2A must be made within 90 days of final
discharge of the cargo. The Judge noted that the Tribunal focussed on the fact that documents of the kind enumerated in
Clause 2B might not exist in relation to the waiting place of the vessel, and in particular on the fact that if the vessel was
awaiting orders off port limits there would be no communications with anyone at the port. The Judge did not consider that it
was helpful to look to the application of the clause in circumstances where there would be no documents of the type
enumerated, because the clause was qualified by the words "whenever possible". Where one could not send documents
which never existed, the requirements of the clause would not be engaged.

The Judge noted that the Tribunal did not say there would never be circumstances in which such documents came into
existence, and there clearly could be (as the facts of this dispute illustrated). What was of more significance, in the Judge’s
view, was that when such documents do exist in relation to a LITASCO Clause 4 claim, they would often be relevant and
necessary to fulfil the function which LITASCO Clause 2 is designed to serve. Whenever the waiting at anchorage takes
place after arrival at the relevant port, there would be an NOR and likely be a statement of facts which could be required to
be signed by the terminal or non-signature protested by the Master in relation to that port. That would, in the Judge’s view,
likely assist in the swift resolution or further investigation of events which gave rise to a Clause 4 claim. As such, Clause 2B
fulfilled its primary function when such documents do exist, and was not engaged when they do not.

Accordingly, despite the deference which he paid to this experienced maritime tribunal, the Judge found himself unable to
agree with their conclusion for the reasons explained, and so allowed Charterers’ appeal.

Comment

While the judgment is no doubt a clever forensic analysis of the material provisions of the charterparty taken as a whole,
which cannot be faulted in that regard, the true meaning and effect of a contract also requires consideration of all the
material facts of the case before drawing a conclusion as to whether or not a claim fails.

Appeals from arbitration awards under section 69 of the Arbitration Act 1996 are supposed to be on questions of law alone,
whereas the key material consideration in this case was really factual: were there any documents to be presented under
LITASCO Clause 2B given that the claim was under Clause 4?

The Tribunal had made tolerably clear that they considered, as a matter of fact, there were no documents to be presented
under LITASCO Clause 2B, because a claim under Clause 4, awaiting orders, was such that none of the documents listed
in Clause 2B would normally be expected to be generated for such a claim.

Accordingly, to the extent the Tribunal had, in the Judge’s view, made insufficient factual findings for the awaiting orders
event, the more appropriate course, instead of simply allowing the appeal, would have been to remit the matter back to the
Tribunal for further consideration of the facts, given his decision on the true meaning of the provisions of the charterparty
as a whole.

However, had documents for a LITASCO Clause 4 claim been required, explicit provision could and would no doubt have
been made within the Clauses themselves, given the detail within the LITASCO Clauses. As there was no such provision,
this necessarily and implicitly meant no documents were required, as to present copies of the email exchanges between
the vessel and Charterers regarding the timings of the waiting period would be an exercise in futility, since these were
documents that Charterers already had.
Given that the other claims for delayed cargo operations in the four ports of call had been dismissed by the Tribunal for
want of presentation of statements of fact supported by letters of protest where they were not countersigned by the
terminal, there was a further legal question that was legitimately open to consideration in light of the Judge’s construction
of the charterparty – namely, whether failing to present adequate documents under LITASCO Clause 2B for those time-
barred claims meant a claim under Clause 4 alone was unsustainable.

English courts have given different views on that legal question (fn.2), although the preponderance of views favours a more
pragmatic approach. As such, courts and tribunals should be slow to deny on a mere technicality a legitimate claim where
a number of related claims are time-barred, if the documentary failings for the time-barred claims themselves are not such
as to make the task of assessing the legitimate claim impossible.

Consequently, there are sound grounds to argue that, even though a LITASCO Clause 4 claim had to be applied within the
scope of and on the basis of time counting within the overall laytime and demurrage scheme agreed, nothing stopped the
awaiting orders claim in this case from being assessed alone. The reason for that being so in this instance is that the total
time awaiting orders exceeded the total amount of laytime allowed.

In other words, proving demurrage had accrued for the awaiting orders claim in this case was not dependent on first
establishing if any laytime had expired under the time-barred claims. Accordingly, in this case, laytime would commence
and run from the time of anchoring through to the expiry of the total laytime allowed followed thereafter by time on
demurrage accruing for the remainder of the time awaiting orders until anchor aweigh. On that basis, with laytime of 84
hours in total at both ends allowed and with time awaiting orders of some 1,048 hours, there could be no doubt that
demurrage accrued for some 964 hours, and making that assessment is in no way dependent on first having to prove any
laytime had expired under any of the time-barred claims.

Footnote 1: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, Chartbrook Ltd v
Persimmon Homes Ltd [2009] 1 AC 1101, Re Sigma Finance Corp [2010] 1 All ER 571, Rainy Sky SA v Kookmin Bank
[2011] 1 WLR 2900, Arnold v Britton [2015] AC 1619, Wood v Capita Insurance Services Ltd [2017] AC 1173

Footnote 2: The “Sabrewing” [2008] 1 Lloyd’s Rep 286 (Gloster J against), The “Eternity” [2009] 1 Lloyd’s Rep 107 (David
Steel J for), The “Abqaiq” [2012] 1 Lloyd’s Rep 18 (Tomlinson LJ for), The “Adventure” [2015] 1 Lloyd’s Rep 473 (Hamblen
J for).