337. R. Pagnan and Fratelli v Finagrain Compagnie Commerciale Agricole et Financiere S.A (the “Adolf Leonhardt”) [1986] 2 Lloyd’s Rep 395

FOB sale – sellers liable for demurrage as an independent obligation where reference made in contract of sale to the generic terms of the Centrocon charterparty.

The facts

Sellers sold 25 000 tonnes Argentine flint maize FOB.  Two-thirds of the shipment was to be loaded at Rosario and one-third at Buenos Aires.

The contract provided as follows:

“Special conditions : loading rate, M.T. 2000.  Time to count as per Centrocon charterparty, WIBON, WIPON, WIFPON.  Demurrage / dispatch as per C/P.  Dispatch to be paid at half the demurrage rate.

Buyers on sold to Moscow buyers in terms of a contract where they, in turn, undertook to be liable for demurrage to their buyers (the Moscow buyers).

Moscow buyers entered into a voyage charterparty with Moscow charterers / disponent owners.

The vessel tendered notice of readiness at Intersection on the river Plate, 200 miles from Rosario, being a usual waiting place for vessels before travelling up river to that port.

There was delay caused by congestion at Rosario and at Buenos Aires.

The intermediate party, the buyers, claimed demurrage from the sellers under the head contract in a sum different to that paid by them to their buyers, the Moscow buyers. This was because “time to count as per the Centrocon charterparty” yielded a different sum to the régime allowed for in the 2nd contract of sale.

There were three issues: 1) whether the strike clause of the Centrocon charterparty exempted the sellers from liability for demurrage since the cargo could not be loaded by reason of obstructions beyond their control: 2) time did not start to count at Intersection because the vessel had not reached a point where she could give proper notice of readiness and 3) the sellers did not have an independent liability for demurrage to the intermediate party but only an obligation to indemnify them against their liability to the Moscow buyers.

A fixed rate of demurrage was set out in the charterparty between the Moscow buyers and the Moscow charterers/ disponent owners.

Findings

The disputes were referred to GAFTA arbitration. Both tiers found in favour of the buyers.

On a special case stated by the GAFTA Board of Appeal, Staughton J found that the exemption in the centrocon strike clause was determinative and that no demurrage was payable by the sellers.  He relied on N.V Reederij Amsterdam v President of India (1961 CA) where it was held that “obstructions” in the Centrocon strike clause included congestion in a port which prevented a ship from obtaining a berth.

This finding was determinative of the other issues but Staughton J recorded his views on the other two issues in the event that the matter would be taken on appeal.

On the second issue he pointed out the paucity of authority on the meaning of WIPON.  The only case where specific attention was directed to the words was Surrey Shipping Co Ltd v Compagnie Continentale (1978 CA).  There the criterion stated by Sir David Cairns was that the vessel had to be at the usual waiting anchorage at the port, and at the immediate and effective disposition of the charterers.  Staughton J adopted the same test and found that Intersection was such a place vis-à-vis the port of Rosario.

On the third issue he found that the sellers had an independent obligation to pay demurrage.

Staughton J held that reference to the generic Centrocon charterparty was an indication that the parties intended an independent obligation to pay demurrage and not simply an obligation to indemnify.

Commentary

The facts of this case provide a clear illustration of demurrage payable by a party to a contract of sale being an independent obligation.  A further indication in both contracts of sale was that the buyers were to remain ultimately responsible for dispatch.

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