339. Gill and Duffus S.A v Rionda Futures Ltd (the “Opal Islands”) [1994] 2 Lloyd’s Rep 67

Demurrage – CIF sale – buyers found liable for demurrage even though charterparty signed after contract of sale – notice of readiness held valid despite instruction from buyers not to discharge

The facts

Buyers purchased 11 400 tonnes of Cuban sugar CIF free out Mogadishu with the buyers’ option to declare Benghazi (subsequently altered to Tripoli) as discharge port.

Relevant terms of the contract were as follows:  “Discharge:  750 metric tons basis 5 hatches per weather working day of 24 consecutive hours… time to count 24 hours after tender of notice of readiness whether vessel in port or not, at berth or not, whether granted in free pratique or not, whether customs cleared or not.

Master allowed to tender his notice by radio.  All other terms and conditions as per sugar charterparty 1969 (revised 1977).  Dispatch and demurrage at discharge to be for buyers’ account.  Demurrage as per C/P half dispatch.”

The sellers were themselves buyers under an earlier contract of sale from Cuban shippers who entered into a voyage charter with Cuban owners.  The charterparty was signed after the main contract of sale.

Buyers under the main contract of sale on-sold the sugar to sub-buyers.

The charterparty was on the standard “Cubasugar” form.  It provided for demurrage at $5 000  per day for Libyan ports.

En route the vessel broke down and general average was declared.

A further complication was that the sub-buyers delayed in furnishing an acceptable letter of credit to the buyers who instructed the Master not to discharge.  Another reason for the delay in discharge, despite notice of readiness having been given, was that the owners would not discharge until they received general average security.

Buyers took the point that as there was no charterparty in existence at the time when the contract of sale was signed no demurrage was payable.  A further point taken by them was that no valid notice of readiness was served because discharge was halted by both the owners and the buyers for the reasons given above.

Findings

In a trial before Clarke J in the Commercial Court, he found that buyers’ undertaking to pay demurrage was binding despite the fact that the charterparty was signed after the contract of sale.  He found also that the obligation to pay demurrage was an independent one and not an indemnity.

He held further that the instructions from the owners and the buyers not to discharge did not affect the validity of the notice of readiness and laytime began to run in terms of the contract of sale i.e. 24 hours after the giving of their notice of readiness.

Commentary

The judge relied on the Boral Gas (1988 Comm Ct), where the exercise of a lien by ship owners did not interrupt the running of laytime.

A number of other points were decided in this turgid judgment, probably made so by the complexity of the facts.

Young and Males appeared

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