Court of Appeal Reverses Judgment on Shipowner’s Entitlement to Damages on Top of Demurrage

In our update of September 2022 on The Eternal Bliss case (below), we reported that permission to appeal to the Supreme Court was granted. The case has now settled and so will not be heard by the Supreme Court. The decision of the Court of Appeal stands, which can be read here.

Update 6 September 2022

In November 2021, the Court of Appeal reversed the decision of the High Court judge that a shipowner is entitled to recover damages in addition to demurrage where a ship exceeds laytime.

The Court of Appeal decided in K Line Pte Ltd  v. Priminds Shipping (HK) Co Ltd [2020] EWHC 2373 (Comm) (The Eternal Bliss) that demurrage liquidates the whole of the damages arising from a charterer’s breach of charter in failing to complete cargo operations within the laytime.

In September 2022, the UK Supreme Court granted permission to appeal.

Read the 2021 Court of Appeal judgment at https://www.bailii.org/ew/cases/EWCA/Civ/2021/1712.html

Update 28 October 2020

The UK Court has decided that a shipowner is entitled to recover damages in addition to demurrage where a ship exceeds laytime.

The facts

The Eternal Bliss loaded soya bean cargo at Tubarao, Brazil and discharged at Longkou, China. It was kept waiting at an anchorage at Longkou for 31 days due to port congestion and lack of storage space.

On discharge in China, the cargo was found to exhibit moulding and caking throughout the stow in most of the cargo holds.  Owners put up security for US$6m and later settled the cargo claim for US$1.1m.  They sought to recover that exposure as damages from voyage charterers.

Judgment

The parties agreed the High Court should answer the following legal question: where a voyage-chartered vessel is detained at a discharge port beyond the laytime, and the delay causes cargo to deteriorate, is the owner entitled to damages in addition to demurrage?  The judge’s answer to that question was ‘yes’.

Many lawyers thought the question had been resolved in 1990 after the High Court in The Bonde decided that a shipowner needed to show a separate breach before recovering damages resulting from delay where the contract contains a demurrage clause.  The judge in The Eternal Bliss thought The Bonde was wrongly decided and came to the opposite conclusion.

Recent cases like The Tai Prize have decided a shipowner cannot usually rely on an implied indemnity under a voyage charter to obtain damages for shipping inherently unstable cargo.  In that case, the shipowner’s alternative argument that the voyage charterer impliedly warranted that the cargo was in apparent good order and condition also failed.

In The Eternal Bliss, owners have finally found one way to get an indemnity from voyage charterers where cargo damage occurs due to a prolonged stay at a port.  The decision is also likely to have a wider impact outside the area of cargo claims.