In its judgment in The Eternal Bliss, the High Court has finally settled the long-standing question of whether a shipowner can recover damages in addition to demurrage when a charterer’s only breach is the failure to load/discharge the ship within the contractually agreed laytime.
K-Line (Owners) and Priminds (Charterers) entered into a charterparty for the Eternal Bliss for a shipment of soybeans from Brazil to China. Upon arrival at the discharge port, the vessel was kept at anchorage for 31 days due to port congestion and a lack of storage space ashore. During this period of delay, the cargo (which was perishable) deteriorated, as a result of which Owners faced a claim by the cargo owners and their insurers, which they settled for US$ 1.1m. For the purposes of the hearing, the parties agreed that Charterers were in breach of their obligation to discharge the cargo within the permitted laytime, and that there was no other breach by Charterers. Owners sought to recover the US$ 1.1m from Charterers as damages or in the form of an indemnity, in addition to the demurrage due.
The question of law
The issue for the Court to decide was whether Owners could recover damages (for the cargo claim which they settled for US$ 1.1m) in addition to demurrage.
Prior to the Judgment, opinions were divided on the issue. Some took the view that an owner could recover damages as well as demurrage provided it could prove a separate type of harm or loss unrelated to its loss of the use of the vessel. Others considered this to be insufficient and argued that an owner must prove both a separate type of loss and a separate breach of contract (beyond failure to load / discharge within the agreed laytime) in order to recover such losses.
After a thorough review of the authorities, Andrew Baker J concluded that it was unnecessary for an owner to prove a separate breach in order to recover damages in addition to demurrage. Where an owner suffers a different type of loss (i.e. a loss beyond the loss of use of the ship to earn freight by further employment) arising from a failure to load or discharge within the laytime, the owner does not need to demonstrate a separate breach in order to recover damages, such as cargo claim liabilities, in addition to demurrage.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at November 2020.