|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
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. Regrettably, Raoul Colinaux passed away in 1984 after the 13th 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 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 voyage.
006 The Shipowner and Charterer are quite free to make the contract in any form 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 terms found in them vary according to the type of trade concerned.
007 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 for the transportation of Bulk Cement and for Coal, Polcoalvoy. For carriage of Grain, the Codename is Graincon. 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 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 Mosvolds Rederi A/S v Food Corporation of 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 The shipowner is entitled is sue for damages for detention if-
The laytime has expired and demurrage has not been provided for in the Charterparty;
The time for loading or discharge is not agreed, and a reasonable time for loading as discharge has expired; or
Demurrage is only to be paid for an agreed number of days and a further delay takes place.
013 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
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.
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:
“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 a fundamentally different effect but it has now been held by the Court of Appeal of 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 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. (The Hosanger) 1931 40 LIL Rep 259, 261. 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. The Trevarraek (1934) 49 LIL Rep 86. Illegality is no defence to a claim for failure to load or discharge unless it prohibits the operation. The Maria G (I958) 2QB 196. It has also been held that half-day holidays do not class as “holidays” Love and Stewart v Rowtor Steamship  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 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:
The vessel is an “arrived ship”;
She is ready to load or discharge; and
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.
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 provision to the contrary in the charterparty.
024 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 an “arrived ship” for a port Charterparty go back over one hundred years. It was thought that the decision 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 be considered to have “arrived” if the port authorities ordered is to stay outside this area.
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.
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 the legal, fiscal or administrative limits of the port and relied upon the decision of New York arbitrators in Maritime Bulk Carriers v Garnac Grain Co 1975 AM 1826. 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 anchorage” for vessels awaiting entry to the port of Rotterdam. It was held by a majority that notice of readiness was valid.
029 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, (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 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 superfluous so far as time spent waiting in turn within the limits of the port. This count as laytime anyway; it is laytime. The clauses would however have 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 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. 1 Lloyd’s Rep 395; Tres Flores  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, 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. in “Mexico 1” 1990 1 Lloyd’s Rep. 507 as follows:
“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 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.
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. Viscount Finlay stated the principle in William Alexander v Akt. 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
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. The Forum Craftsman [1991 1 Lloyd’s Rep 81].
050 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.
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.
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. Does this mean time saved to the shipowner or laytime not used? 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 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 held that “every hour saved” meant every hour saved from the permitted laytime and not every hour by which the discharge was completed earlier. Therefore, 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 either :
(i) lay days and time saved by dispatch are dealt with in the same clause and demurrage in another clause;
(ii) lay days saved by dispatch and demurrage are dealt with in the same 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 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.
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.