Nature of demurrage: liquidated damages for delay – where delay results in damage of a type different from loss of use of vessel, general damages not available – question of law determined under s45 of the Arbitration Act 1996
Voyage charterparty. Norgrain form. Heavy grain, Soya or Sorghum in dry bulk carrier.
Discharge completed 42 days after becoming an arrived ship.
Moulding and caking assumed to be caused by delay.
Assumed that damage not owners’ fault.
Owners provided USD6m LOU to cargo receivers – claim settled at USD1.1m
Owners claimed damages on top of demurrage, alternatively, indemnity from charterers.
Andrew Baker J held, in favour of the owners, that such damages were competent. He based his finding on an exhaustive analysis of the case law and text books.
The Court of Appeal (Sir Geoffrey Vos MR, Newey, Males LJJ – judgment, Males LJ) disagreed that the authorities favoured the interpretation of the judge. The authorities were inconclusive and if anything, the scales tipped in the opposite direction. In particular, the CA disagreed that the Bonde was wrongly decided.
The shipowner would be insured against cargo damage whereas the charterer would not. The outcome of the Commercial Court therefore disturbed the natural risk allocation and was uncommercial.
Interesting tension between the CA’s stated intention of solving the problem on first principles and the archaeological exercise of Andrew Baker J. Another example of the courts imputing contractual intention via precedent.
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