474. President of India v Lips Maritime Corporation (the “Lips”) [1987] 2 Lloyds Rep 311

Late payment of demurrage (calculated in US Dollars and paid in British Pounds) causing loss because of weakening of Pound – owners’ only remedy interest on demurrage

The Facts

Di-ammonium phosphate was shipped from Louisiana to India.

Demurrage was incurred and short paid by the charterers.

Pursuant to the terms of the charter, demurrage was to be calculated in US Dollars and paid in Pounds Sterling at the rate of exchange prevailing at the date of the bills of lading. The short payment of demurrage having been determined by an arbitral award, and the British Pound having weakened between the time of initial payment and the time of the award, the Umpire awarded the owners an additional sum of damages to compensate for their loss on the exchange rate.

Findings

Staughton J held that this was impermissible. The Court of Appeal (Neill and Nicholls LJJ and Sir Roualeyn Cumming-Bruce) restored the Umpire.

The House of Lords (Lords Keith, Fraser, Brandon, Griffith and Mackay – speech by Lord Brandon) restored Staughton J.

The reasoning was: in principle, late payment of damages (and demurrage is damages) does not ground a cause of action. The remedy in this case was to award interest on the late payment.

In any event, clause 30 of the charter stipulated the date at which the rate of exchange was to be applied.

Commentary

The House of Lords’ distinction between interest and damages as separate remedies for the late payment of damages is semantic and not based on principle where payment of interest serves the same purpose as damages ie compensation.

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