Demurrage claims: withholding supporting documents results in time bar of claim

Eleanor Coates (partner) and Anna Fomina (Senior Associate) at law firm Clyde & Co have written on the case of Tricon Energy Ltd v MTM Trading LLC [2020] EWHC 700 (Comm), which they said underlined the importance of a thorough consideration of all available documentary evidence when presenting a claim which was subject to a time bar clause requiring the presentation of “all supporting documents”.

Failure to provide an available document which supported any aspect of the claim might result in the claim being time barred. What constituted a “supporting document” would be considered in the context of the time bar clause and other clauses of the charterparty.

In the case in question the Charterers chartered the MTM Hong Kong to transport cargo from Antwerp, Belgium to Houston, USA.

The Charterparty, based on the “Asbatankvoy” form, provided at clause 10(g) that:

  • “(g) In the event of Vessel being delayed in berthing and the Vessel has to load and / or discharge at the port(s) for the account of others, then such delay and/or waiting time and /or demurrage, if incurred, to be prorated according to the Bill of Lading quantities”.

The Charterparty also provided at clause 38 that:

  • “Charterer shall be discharged and released from all liability in respect of any claim/invoice the Owner may have/send to Charterer under this Charter Party unless a claim/invoice in writing and all supporting documents have been received by Charterer within [90] days after completion of discharge of the cargo covered by this Charter Party or after other termination of the voyage, whichever occurs first. Any claim/invoice which Owner may have under this Charter Party shall be waived and absolutely barred, if claim/invoice and all supporting documents are not received by Charterer before the time bar”.

Demurrage was incurred at both the load and discharge ports. Since a second parcel of cargo was discharged at the same berth as the Charterers’ cargo in Houston, the demurrage due was pro-rated in accordance with clause 10(e).

Arbitration Proceedings

The Owners commenced arbitration proceedings. They claimed the pro-rated demurrage amount of US$56,049.36. The Owners provided the demurrage invoice, laytime and demurrage calculations, notice of readiness, statement of facts, hourly rate and pressure logs and letters of protest within the 90 day contractual time bar.

The Charterers disputed the claim on the basis that the Owners had not provided the applicable bills of lading (in relation to the Charterers’ parcel and the second parcel) within the 90 day time bar and that the Owners had therefore failed to provide all supporting documentation, thus time-barring the claim.

The arbitral tribunal held that the demurrage claim should succeed. It held that the bills of lading themselves were not necessary in addition to the statement of facts, which had recorded the relevant figures needed for apportionment.

Court proceedings

The Charterers appealed, arguing that the tribunal had incorrectly interpreted clause 38 of the Charterparty by finding that the clause required no more than sufficient information for Charterers to understand the Owners’ claim, to be presented. The Charterers maintained that, without the bills of lading, they could not establish whether the demurrage claim was well founded.

The Commercial Court allowed the appeal.

The Court found that the wording “all available documents” was not limited to the particular documents relied on in support of the Owners’ claim. The Court placed emphasis on the wording of clause 38, which expressly required the provision of “all supporting documents” as opposed to simply “supporting documents”. Where the Charterparty made it clear that pro-rating of demurrage was to be calculated according to bill of lading quantities, the Court held that the bills of lading could not be considered to fall outside the requirement to submit all supporting documents.

In the Court’s view, the suggestion that the bills of lading contained commercially sensitive information was not sufficient reason to withhold them. The Court said that they could have been “very easily” redacted without removing the cargo quantities needed for pro-rating purposes. Whilst it had not been argued in this case that the bills of lading were unavailable, the Court considered that if the bills of lading were unavailable, a proper explanation of that fact would need to be provided with the available documents.

Clyde said that, similar to the case of the Tiger Shanghai covered by Clyde in a previous briefing note, parties were reminded of the risks of withholding or failing to include documentation when presenting a claim. “Parties should be aware that where wording such as “all supporting documents” is used, a wide obligation is imposed”.

The writers conclude therefore that, to avoid claims becoming time barred, parties should carefully consider when preparing to present claims, which documents were specifically required by the wording of the relevant Charterparty or sale contract clauses, and how best to reconcile this requirement with the issues of confidentiality, privilege or availability of documents.

Any other available documents which may support the claim should also be presented within the time limit.

At the drafting stage, parties should consider whether the onerous obligation imposed by wording such as “all supporting documents” is appropriate for their transaction, and, if not, consider alternative terms.