327. Babanaft International Co. SA v Avant Petroleum Inc. (the “Oltenia”) [1982] 1 Lloyd’s rep 448

Asbatankvoy time-bar clause-not to be applied with “pedantic literalness”

 The facts

The vessel was chartered to carry gasoil from one safe port on the Black Sea to one or two safe ports in the European Mediterranean. Clause M.2. read: “Charterers shall be discharged and released from all liability in respect of any claims owners may have under this Charter Party (such as, but not limited to, claims for deadfreight, demurrage, shifting expenses or port expenses) unless a claim has been presented to charterers in writing with all available supporting documents within 90 days from completion of discharge of a cargo concerned under this charter party.”

The vessel loaded at Tuapse. The vessel was initially ordered to Genoa but en route charterers requested the vessel to proceed to Augusta where she lay at anchor at the outer roads.  No order to discharge was given by charterers.

Owners protested that this delay might cause the vessel to miss the cancelling date for the next fixture. Owners reserved their right to claim damages for detention at Augusta.

Charterers then ordered the vessel to Algeciras to discharge.

Owners submitted a claim for demurrage with full supporting documentation. They also submitted a further claim for detention at Augusta which included a detailed calculation of how the claim was made up.

The owners’ claim was calculated by working out the daily profit which they would have made if the voyage from Tuapse to Algeciras (including loading and unloading), had taken the correct time. They applied that daily profit to the period during which the vessel was delayed at Augusta. The cost of bunkers consumed during the idle period was added.

Daily profit was calculated by deducting the charter hire payable by the owners under their charter and the cost of bunkers which would in any event have been consumed during a voyage of proper length and the disbursements which would in any event have been made at the ports of loading and discharge. A copy of the owners’ charter was attached.

No supporting documentation for disbursements at ports of loading and discharge was supplied. Owners did, however, supply additional supporting material including a statement of bunkers consumed during the idle period and an extract from the vessel’s log to verify the period of idleness.

After the 90 day period mentioned in clause M2 had elapsed, owners submitted a third claim for special damages arising out of the delay. They alleged that they had undertaken to an associated company that the vessel would be ready to take on a ship-to-ship transfer from another vessel by a certain date. Because of the delay owners became liable for the demurrage liability incurred by the other vessel. This claim was submitted with little or no supporting documentation.

Charterers raised the points that on the second claim the owners had failed to provide supporting documentation in respect of the port disbursements.  In respect of the third claim charterers took the point that the claim itself was late and that in any event no supporting documentation had been supplied.

Findings

The charterers’ points were submitted for determination as preliminary points of law in a pending arbitration under the Arbitration Act, 1979.

Bingham J held that the commercial intention of clause M2 was to ensure that claims were made within a short period of discharge so that they could be investigated while the facts were fresh.  The clause was, however, not to be applied with “pedantic literalness”.

He allowed owners the opportunity of showing that there were in fact no documents in existence to support the port disbursements claim.  If it turned out that there were such documents, he held that the failure to produce them would have the effect of extinguishing the claim under clause M2.

He held further that section 27 of the Arbitration Act, 1979 giving a court the discretion to condone a late referral to arbitration, did not apply to clause M2 which had the effect of finally extinguishing the claim.

He went on to hold that, if he did have a discretion, he would have condoned the failure by owners to provide the documentation supporting port expenses in claim 2.  The owners’ default on claim 3 was more serious and he would not, had he had discretion, condoned their failure to submit their claim timeously and properly supported by relevant documentation.

Commentary

The judgment is finely weighted and fair.  To use a different analogy, it steers between the Scylla of strict enforcement and the Charybdis of unprincipled laxity.

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