View source for Carboex SA v Louis Dreyfus Commodities

DMC/SandT/12/26

'''England'''

'''Carboex SA v Louis Dreyfus Commodities Suisse SA'''
 
'''English Court of Appeal: Lord Neuberger MR, Moore-Bick and Toulson LJJ: [2012] EWCA Civ 838: 19 June 2011'''

Miss Siobán Healy Q.C. and Miss Jessica Sutherland, instructed by Reed Smith, for the defendant/appellant Shipowners, Louis Dreyfus Commodities Suisse SA 

Mr Charles Kimmins Q.C. and Mr Socrates Papadopoulos, instructed by Thomas Cooper, for the claimant/respondent Charterers, Carboex SA

'''DEMURRAGE: CALCULATION OF LAYTIME: STRIKE EXCEPTION: STRIKE CAUSING CONGESTION AT PORT AND CHARTERED VESSELS DELAYED FROM BERTHING AS A RESULT: PERIOD OF DELAY TO BE DISCOUNTED FROM CALCULATION OF LAYTIME SO LONG AS STRIKE WAS THE EFFECTIVE CAUSE OF DELAY'''

'''Summary'''

A clause in the American Welsh Coal Charter form (1979 amendment) provided that “... [i]n case of strikes,… or any other causes included but not limited to breakdown of shore equipment or accidents beyond the control of the Charterers which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage.” The English Court of Appeal affirmed the decision of Field J and held that so long as the strike was the effective cause of the delay, the period of delay in cargo operations directly caused by strike was to be discounted from the calculation of laytime and further, the charterers were also protected from the effects of strikes which prevented or delayed the vessel from entering berth in order to discharge.

This note has been contributed by Ken T.C. Lee, LLB(Hons), PCLL (University of Hong Kong), BCL(Oxon) and barrister-at-law in Hong Kong.

'''Background'''

In March 2008, Louis Dreyfus Commodities Suisse SA (“the Shipowners”) chartered four of its vessels (“the Vessels”) to Carboex SA (“the Charterers”) for the carriage of coal from Indonesia to Ferrol, Spain on the American Welsh Coal Charter form (1979 amendment). 

Clause 4 governed the laytime at the loading port and provided that:

“Any time lost through riots, strikes,… or any cause whatsoever beyond the control of the Charterer affecting mining, transportation, delivery and/or loading of the coal, not to be computed as part of the loading time (unless any cargo be actually loaded during such time).”

Clause 9 provided that:

“... In case of strikes,… or any other causes included but not limited to breakdown of shore equipment or accidents beyond the control of the Charterers which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage.”

Clause 40 provided that:

“At port of discharge, time to commence twelve (12) hours after the vessel’s arrival at berth, vessel is ready to unload and Notice of Readiness received and accepted, unless sooner commenced in which case time actually used to count. If the berth is not available when vessel tenders Notice of Readiness, but provided vessel/Owners not at fault in relation thereto, then laytime shall commence twelve (12) hours after first permissible tide, Notice of Readiness received and accepted, whether in berth or not…”

In June 2008, there was a nationwide haulage strike in Spain. Two of the chartered Vessels arrived at Ferrol before strike at the port ended, and the two other Vessels arrived at Ferrol after strike had ended. When each of the Vessels arrived at Ferrol and gave notice of readiness, there were vessels ahead of it. As a result, there was delay in berthing and discharging the cargo. 

The Charterers argued that as the delay was caused by the strike, it should not be excluded from the calculation of laytime pursuant to Clause 9. The Shipowners argued the contrary. 

The dispute was referred to arbitration. Upon the request of the parties, the arbitral tribunal was asked to determine the following preliminary issues:

(i)	Whether Clause 9 applied in the case of a vessel which was delayed by the after-effects of a strike which had ended; and

(ii)	Whether Clause 9 applied in the case of a vessel which had arrived after the strike had ended.

Question (i) was directed at the situation of the two Vessels which arrived before the end of the strike, and Question (ii) the Vessels which arrived after the strike had ended. 

In June 2010, the tribunal published a declaratory award in which they answered each of the questions in the negative. Relying on the decision of the House of Lords in Central Argentine Railway Ltd v Marwood [1915] AC 981 which dealt with a provision materially the same as Clause 9, the tribunal held that Clause 9 did not apply to a vessel which was prevented from berthing because the berths were occupied by other vessels, even where the reason for the congestion at the discharging port was a strike. 

The Charterers appealed against the decision of the tribunal. At the appeal before Field J, [insert huyperlink] the parties invited the court to consider a third issue which it was said would decide the issues of construction common to those raised by questions (i) and (ii) above, namely whether the strike exception in Clause 9 applied to a vessel which was unable to berth due to berth congestion caused by a strike. 

Field J ([2011] EWHC 1165 (Comm), [2011] 2 All ER (Comm) 365) [[http://www.onlinedmc.co.uk/index.php/Carboex_v_Louis_Dreyfus_Commodities]] held that, following Leonis Steamship v Joseph Rank Ltd (No 2) (1908) 13 Com Cas 295, the ordinary meaning of Clause 9 was that it covered not only delay in discharging caused by congestion due to a strike  but  also delay in discharging caused by congestion due to the after-effects of a strike which had ended. This was so whether the vessel arrived at the discharging port before or after the strike had ended. Statements by various members of the House of Lords in the Marwood case were obiter and were not binding on the Court. Field J thus allowed the appeal and set aside the award.

The Shipowners appealed against the judgment of Field J.

'''Judgment'''
 
The Court of Appeal dismissed the Shipowners’ appeal. The leading judgment was given by Moore-Bick LJ.

The Court first noted that, by agreeing that the Vessels could give notice of readiness “whether in berth or not” under Clause 40, the parties had agreed that the laytime clock would start to run after giving notice of readiness before the vessel reached the berth. This also had the effect of transferring the general risk of congestion at the discharging port from the Shipowners to the Charterers. However, it created no presumption that the parties did not intend to transfer the risk of delay from specific causes back to the Shipowners. The Court rejected the Shipowners’ argument that Clause 9 was confined to protecting the Charterers against strikes which directly interfered with cargo handling operations. 

The language of Clause 9 showed that the parties also intended the Charterers to be protected from the effects of strikes which prevented or delayed the vessel from entering berth in order to discharge. There was nothing in Clause 9 which indicated an intention on the part of the parties to restrict its operation to the period during which the Vessels were alongside the quay ready to work. The court in Leonis Steamship Co Ltd v Joseph Rank Ltd (No 2) (1908) 13 Com Cas 295 adopted the same approach to a differently worded strike clause. It held that although the vessel was delayed in loading cargo due to congestion at the load port caused by a military revolt and a strike on the railways, this period was discounted from laytime pursuant to the strike clause. 

This conclusion was not affected by the apparent difference in wordings between Clause 4 and Clause 9. Clause 4 only made clear that a wide variety of different events well beyond the confines of the port may affect the Charterers’ ability to have the cargo ready for loading, and that express provision was necessary in order for the Charterers to be protected from such events.

Moore-Bick LJ was further of the view that despite statements by Viscount Simon, Lord Parmoor and Lord Wrenbury in Central Argentine Railway Ltd v Marwood [1915] AC 981 to the effect that the clause did not extend to strikes which only prevented the chartered vessel from getting to a berth because the strike prevented other vessels from getting out of the berth, they were only dicta and did not assist the Shipowners here. The shipowners in the case of Marwood conceded that laytime did not run during the period between the vessel’s arrival at berth and the partial resumption of work at port. It would be surprising if the House had intended to rule to the contrary without hearing argument in this respect. The case was only authority for the proposition that “such time” in Clause 9 meant time lost to the vessel in completing discharging by reason of one of the excepted causes, and that the excepted cause had to be the effective cause of delay to the vessel. Thus, when there was a partial resumption of work during a strike, the equivalent number of days for which work was done should be counted towards laytime. 

Moore-Bick LJ was of the view that whether the strike was the effective cause of delay was a question of fact (Reardon Smith Line Ltd v Ministry of Agriculture Fisheries and Food [1962] 1 QB 42). The closer the vessel was to the head of the queue when the strike broke out, the easier it was likely to be to establish the causal link. One could not exclude the possibility that causal link existed even for vessels arriving after the strike had ended. 

Thus, each of the preliminary questions would be answered, “Yes, provided the strike is the effective cause of the delay”, and the appeal would be dismissed.