Davies Johnson’s Nico Saunders explores some recent decisions on time bar clauses in a shipping context.
Charterparties frequently contain clauses requiring claims to be presented within a limited period and purporting to bar claims which are not presented in time. For example, it is common for voyage charterparties to provide for demurrage claims to be time barred if the claim and supporting documents are not presented within, say, 90 days.
The purpose of such clauses is to ensure that claims are made within a short period so they can be investigated and, if possible, resolved while the facts are still fresh and/or to enable the parties to have a final accounting as swiftly as possible (per Bingham J in The Captain Gregos  Lloyds Rep 310 and The Oltenia  1 Lloyd’s Rep. 448).
Provided the wording is clear, time bar clauses are strictly enforced by the courts, even though their effect may be draconian. In The Sabrewing  1 Lloyd’s Rep 286 Mrs Justice Gloster remarked that demurrage time bar clauses had to be complied with “carefully and strictly.” She went on to remark that, whilst a time-bar clause shouldn’t be interpreted in such a way as to prevent a legitimate claim from being pursued, clauses have to be given their natural meaning with contra proferentem (i.e. interpreting the clause against the party who drafted it and seeks to rely on it) being a resolution of last resort.
A clause requiring notice of a claim within a certain period will only be effective if it clearly sets out the time for notification and makes it clear what rights would be lost if notice is not given in time (Bremer v Vanden  2 LLR 109, per Lord Salmon at p128 col 1).
A spate of recent cases have examined clauses requiring supporting documents to be presented within a certain time scale.
The “MTM Hong Kong”  EWHC 700 (Comm) – Robin Knowles J
The Vessel was chartered on an amended Asbatankvoy form for a voyage from Antwerp to Houston. Clause 10 of the Charterparty provided that, in the event of simultaneous discharge of parcels of cargo, laytime and demurrage was to be pro-rated between parcels according to bill of lading quantities. Clause 38, entitled “Time Bar Clause”, provided that Charterers would be discharged and released from all liability for any claim unless the claim and “all supporting documents” were submitted within 90 days of completion of discharge.
Owners submitted a demurrage claim in time along with supporting documents, including a statement of facts which recorded the bill of lading quantity (albeit incorrectly for Charterers’ parcel). However, Owners did not provide bills of lading and Charterers argued the claim was time-barred as “all supporting documents” had not been provided in time.
Owners’ demurrage claim succeeded in arbitration. The Tribunal thought it was enough to provide the statement of facts which recorded the bill of lading figure and was therefore sufficient for Charterers to verify the calculation of apportionment of waiting and discharging time. The Tribunal also doubted whether a bill of lading could be provided to a third party without the permission of the holder of the bill.
On appeal by the Charterers, the Court held the claim was time-barred by reason of Owners’ failure to provide bills of lading within 90 days. The Charterparty made clear that pro-rating of laytime and demurrage was to be calculated by reference to the bill of lading quantities. Moreover, clause 38 referred to all supporting documents. The Court dismissed the confidentiality point referred to by the Tribunal; this could easily be overcome by redacting sensitive information.
The ”Tiger Shanghai”  EWHC 3240 (Comm) – Mrs Justice Cockerill
By a time charterparty on amended NYPE form, the Vessel was chartered for two laden legs, the first of which involved loading of cement clinker at the port of Carbenaros, Spain. Clause 46 of the Charterparty provided that Charterers could fit and weld any additional equipment for loading cargo, subject to the Owners’ and Master’s approval, which was not to be unreasonably withheld. Charterers requested permission to cut new feeder holes in the Vessel’s hatch covers to facilitate loading a cement clinker cargo. They obtained a survey report for this purpose (although this was not presented to the Owners at the time). Owners refused to allow the work and Charterers terminated the Charter and claimed for damages, alleging that Owners’ refusal was unreasonable.
Clause 119 required any claim to be notified in detail accompanied by all available supporting documents (whether relating to liability or quantum or both) and an arbitrator appointed within 12 months from completion of charter, failing which the claim would be “totally extinguished” and the other party would be “discharged and released from all liability”.
Charterers commenced arbitration within the 12 months, attaching a Final Hire Statement, which was sufficient to particularise the nature and quantum of the claim. Claim submissions (attaching, indeed relying on, the survey report) were served more than 12 months after termination of the Charterparty.
The arbitrators held by a majority (Ms. Elizabeth Birch and Mr. Robert Gaisford, with Mr. Mark Hamsher dissenting) that the claim was time barred because the survey report was a supporting document that should have been submitted within 12 months. The reason for the split decision was that whereas the majority concluded the report was not privileged, Mr. Hamsher disagreed. The majority’s conclusion on privilege led them, therefore, to conclude that the time bar defeated the claim.
The Charterers appealed. Their primary argument was that the survey report was no more than “contingently relevant”; it might or might not be relevant depending on how the Owners sought to justify their refusal. The Commercial Court dismissed this:
- the scope of the clause was particularly wide, with specific reference to “all relevant supporting documents (whether relating to liability or quantum or both)”, while not confining itself to any particular sort of claim;
- Charterers’ claim depended on their being entitled to terminate, which itself depended on unreasonable refusal on the part of the Owners. The report was therefore within the ambit of the claim that Charterers advanced and supportive of it (and it was telling that Charterers turned to the survey report to support its case as well as anticipating a defence).
The Court also considered Charterers’ argument that if a document is reasonably arguable to be privileged, its disclosure is not required by an “all supporting documents” time bar clause and it does not matter (even if, in the final analysis, it is held not to be privileged). For the purposes of this argument, (i) Owners accepted that the clause did not require provision of a privileged document and (ii) Charterers accepted the survey report was not privileged.
The Court commented that such clauses would rarely be designed to require the provision of the kinds of documents which were or might be privileged. The present case was unusual in that the width of the clause and the nature of the disputes capable of arising meant that this point was at least arguable in this case. However, the Court dismissed the argument as “profoundly uncommercial” which would provide highly fertile ground for protracted disputes.
The judge also touched upon the question as to what is a “document”, drawing on the distinction (raised by Hamblen J in The Adventure  1 Lloyd’s Rep 473) between primary material (i.e. contemporaneous, factual documents) and secondary material (such as witness statements or expert reports, created later and for the purpose of the dispute) which, whilst possibly relevant was not decisive in this instance.
Charterers’ appeal was therefore dismissed and the Tribunal’s majority finding that the claim was time barred was upheld.
The “Amalie Essberger”  EWHC 3402 (Comm) – Peter MacDonald Eggers QC
The Vessel was chartered on amended Asbatankvoy form for a voyage carrying a cargo of Cyclohexane from Rotterdam to Castellon.
Clause 5 provided “Any claim for demurrage… shall be considered waived unless received … with all supporting calculations and documents, within 90 days after completion of discharge of the last parcel of Charterer’s cargo(es). Demurrage, if any, must be submitted in a single claim at that time”. It then listed a number of documents to be submitted, including pumping logs and letters of protest.
Clause 23 provided that certain documents, including pumping logs and letters of protest, had to be provided within 7 banking days after completion of loading or discharge.
After loading, Owners sent the pumping log and a letter of protest within 7 days as required by clause 23. Owners subsequently submitted a demurrage claim, within 90 days as required by clause 5. However, the pumping log and letter of protest was not submitted with the demurrage claim.
Charterers applied for summary judgment to dismiss the claim on the grounds that the demurrage claim was time-barred because it was not submitted in accordance with the requirements of Clause 5 of the Charterparty within the permitted time period of 90 days
The Court refused to grant summary judgment, rejecting Charterers’ submission that the supporting documents must be provided at the same time as the demurrage claim. Owners were not obliged to re-submit the pumping log and letter of protest.
The Court provided the following helpful guidance:
- “supporting documents” means documents on which Owners rely in support of their claim or one that requires the submission of documents which taken at face value establishes the validity of the claim. In the context of a demurrage claim, that would include documents which evidence the time used in berthing, loading, and discharging operations and the interruptions and stoppages in such operations, including the notice of readiness and the statement of facts or time logs.
- The categories of documents listed in clause 5 were required to be provided in support of the demurrage claim, even if they were strictly irrelevant to that claim.
Interestingly, although the issue did not arise because of his decision that the documents had been provided, the Judge said that if a particular document was not submitted in time, the whole demurrage claim would be time-barred (and not only that part of the demurrage claim to which the missing document relates).
The “Ocean Neptune”  EWHC 163 (Comm) – Mr Justice Popplewell
The voyage charter incorporated the ExxonMobil VOY2005 form, and the Lukoil International Trading and Supply Company Exxonvoy 2005 clauses (the LITASCO Clauses), in each case as amended. The Vessel loaded petroleum products at Taiwan for carriage to Australia. She was delayed at the first discharge port, Gladstone, when receivers refused to take delivery of the cargo on the grounds that it was alleged to be contaminated/off specification.
LITASCO Clause 2B specified certain documents which had to accompany demurrage claims, which had to be presented within 90 days of discharge. Charterers argued that the demurrage claim was time-barred because the documents specified in LITASCO Clause 2B had not been provided in time.
In arbitration , the Tribunal determined the time bar defence as a preliminary issue. It held that the Owners failed to provide all the supporting documents required by LITASCO Clause 2B and that the demurrage claims were time-barred for that reason, save in respect of the delays at Gladstone. It treated the delays at Gladstone as falling outside the scope of the time bar defence because although the claim was initially categorised as a claim for demurrage by the Owners, they subsequently re-labelled it as a claim for time lost waiting for orders falling within LITASCO Clause 4. The Tribunal held that the documentary requirements of LITASCO Clause 2B would not apply to the claim so re-labelled. Accordingly, the claim in respect of the delays at Gladstone was not time-barred.
Charterers appealed. They submitted that a claim under LITASCO Clause 4 was a claim for demurrage, and the entire claim was therefore time barred under LITASCO Clause 2B. The Court agreed. The language of the charter provided in clear terms that a LITASCO Clause 4 claim was a demurrage claim.
Owners had argued that if Charterers’ construction was correct the owners would at least in some circumstances be required to submit irrelevant documents. The Court held that was not a sufficient reason for failing to give effect to the clear wording of the contract. The requirement was not onerous: it applied to a very limited class of documents which, if they existed, ought to be readily to hand and capable of submission without undue difficulty or expense.
The appeal was allowed and the Owners’ whole claim was held to be time barred.
The cases discussed above referred to less recent cases including:
The Oltenia  1 Lloyd’s Rep. 448, in which Bingham J commented, in respect of a time bar clause requiring all available supporting documents, that “the object [of the clause] could only be achieved if the Charterers were put in possession of the factual material which they required in order to satisfy themselves whether the claims were well-founded or not … Owners would not … be debarred from making factual corrections to claims presented in time … nor from putting a different legal label on a claim previously presented, but the owners are in my view shut out from enforcing a claim the substance of which and the supporting documents of which (subject always to de minimis exceptions) have not been presented in time…”
In The Abqaiq  1 Lloyd’s Rep 18, Tomlinson LJ said “For my part I am not sure that it is helpful to introduce into the approach to provisions [requiring supporting documents to be provided with a certain time] a notion of strict compliance. Where in a commercial contract one finds a provision to the effect that one party is only to be liable to the other in respect of claims of which he has been given notice within a certain period, it is fair to assume that the parties wish their relationship to be informed rather by certainty than by strictness… Thus the touchstone of the approach ought in my view to be a requirement of clarity sufficient to achieve certainty rather than a requirement of strict compliance which, if applied inflexibly, can lead to uncommercial results.”
In The Adventure  1 Lloyd’s Rep 473 the clause required “all supporting documentation substantiating each and every constituent part of the claim” to be provided within 90 days of completion of discharge. Hamblen J held “Where the Owners have available documentation from the load and discharge ports such as port logs and time sheets those are, as the Tribunal found, ‘relevant’ to the claim made. In the present case that is specifically borne out by the fact that the letters of protest relied upon refer to delays and stoppages recorded in the port log/time sheets. As such they are clearly supporting documentation for the claim made. In any event I consider they are primary documents containing factual material which should be made available to the Charterers so that they may satisfy themselves that the claim is well founded, consistent with the purpose of the clause.”
Contractual time bars are common in charterparties and failure to comply could result in an otherwise strong claim being defeated. Their application will depend upon the wording of the clause, the factual circumstances and the type of claim. It is therefore important that careful consideration is given to complying with their requirements.
The authorities discussed above suggest:
- Where a clause expressly sets out the documents to be provided, those must be submitted, even if irrelevant;
- “supporting documents” means documents on which the claimant relies or which establish the validity of the claim;
- The word “all” before “supporting documents” widens the scope of the documents which should be provided;
- Documents need not be submitted at the same time.
If a clause requires documents to be provided within a certain time, it is important that an available document which supports any claim or a limb of a claim is presented within the time bar. Parties should err on the side of caution in providing all potentially required documents in good time.
If such a clause covers a wide scope of documents and/or claims, this could lead to further complications, for example, a document may be “primary” or “secondary” material and it could be privileged. Parties would be well minded to restrict the clause to the presentation of specified documents or to cover only certain types of dispute if possible.
For further guidance or questions on this topic please contact Nico, Andrew or Charles in the Plymouth office.
Author: Nico Saunders