Completion of discharge - but at what time (zone)

Voyage charterparties will often contain a time limit within which vessel owners must notify their voyage charterers of any demurrage that they wish to claim, which must usually be accompanied by supporting documents. Previously, the English courts have had to address what supporting documents are required in order to meet these provisions, however in the recent case of the MT Maria, the English High Court had a different problem to grapple with: which time zone is relevant for the purposes of determining when discharge was completed, to identify when the time limit would expire?

Background

In this case, the charter provided for what is a fairly common 30 days from completion of discharge limit that the owners had in which to serve a notice of their demurrage claim on the charterers. Failure to do so would extinguish their claim for demurrage.

Discharge had taken place in Long Beach, California, completing on 24 December 2019 at 21:54 local time. In Europe it was of course already 25 December - specifically eight hours ahead in the UK (05:54 on 25 December GMT) which was arguably applicable by reference to the charter being subject to English law, and nine hours ahead (06:54 on 25 December Central European Time) which is where both the owners and the charterers were based. The owners’ notice of their demurrage claim was sent on 24 January 2020 (timed at 12:42 CET).

Charterers’ position was that this was out of time – discharge had completed on 24 December 2019 (based on local time) and so ‘day 30’ was therefore 23 January 2020 (‘day 1’ being 25 December 2019). Owners disagreed. They argued that discharge in fact completed on 25 December 2019 (based on GMT, the time of the law of the contract, or CET where the parties were based), such that the last day to notify the charterers of the claim fell on 24 December 2019.

High Court’s decision

Where there is a commercial contract, the court’s job is to “ascertain the objective meaning of the language which the parties have chosen to express their agreement”, whilst considering the contract as a whole. Moreover in the case of demurrage time bar clauses, previous judgments confirm that demurrage time bar clauses must be clear and unambiguous, especially given that they have the potential to bar otherwise valid claims.

The High Court was firmly of the view that the date of an event should be determined using the local time at the place where the event happened. Previous cases had held that “Time is a local phenomenon” and, specifically in the case of charterparties, in the absence of anything to the contrary, the textbooks favour a local time approach in relation to events such as delivery of the vessel. The owners’ attempts to depart from this were unsuccessful.

The High Court’s finding therefore was that local time should be applied, with the consequence that the owners’ demurrage claim was time barred. In particular, the court favoured this for the following reasons:

• Discharge of cargo is a tangible physical event which occurs at a specific location and in a particular time zone.
• The time and date of discharge, by reference to the local time, is relevant for other matters such as the end of the running of laytime or demurrage or the time limit pursuant to the Hague-Visby Rules for cargo claims. The owners’ case could mean a different date for the same event for different purposes.
• With the above in mind, the use of local time gives rise to a “single, clear and easily ascertainable date and time of completion of discharge.”

Comment

As with all time dependant clauses, this case is another example of why parties are strongly encouraged not to leave notification of a claim or commencement of proceedings until the eleventh hour. Small margins, such as those debated in this case, can result in significant financial losses.

Related item: US Commission issues interpretive rule on demurrage and detention charges – possible relief for shippers