NEWS & ARTICLES
The Eternal Bliss Case
With a shipping case named “The Eternal Bliss”, which follows the name of the ship involved in the dispute, the expectations out of the reading of this judgment by Mr. Justice Andrew Baker were very high.
These expectations have been matched by a very detailed judgment that addresses a very interesting set of facts where the learned judge carries out a bright review of the case law together with the leading textbooks in a very exhaustive and complete manner.
Putting the matter short, the judge was asked to determine the viability of the claim of a shipowner against his Charterer, arising from the failure of the Charterer to discharge the goods within the agreed laytime that resulted in the deterioration of the cargo on board without fault of the shipowners. The Charterer contended that the shipowner could only get compensation by collecting the agreed demurrage rate under the charter and therefore the claim should fail.
The judge concluded that the shipowner was entitled to compensation for the deterioration of the goods other than the demurrage rate under the charter. To reach this conclusion the judge undertook a fantastic analysis of English law.
We would normally describe the facts of the case but in this judgment, the judge makes an introduction worth its full transcript.
From time to time, a case provides the opportunity to resolve a long-standing uncertainty on a point of law of significance in a particular field of commerce. This is such a case. It concerns the nature of demurrage payable under a voyage charter when the charterer has failed to load or discharge the ship within the laytime allowed. On the facts, the question arises following a failure timely to discharge cargo resulting in delay at the discharge port.
No breach of contract is alleged against the defendant charterer (“Priminds”) other than failure to discharge within the laytime. The claimant owner (“K-Line”) says that by reason of the prolonged retention of the cargo on board due to that breach, it deteriorated without fault on the part of K-Line, and that the cargo would have been in sound condition if timely discharged. K-Line claims that as a result it was confronted with damages claims brought by the cargo owners and their insurers that were reasonably compromised at a total cost of c.US$1.1 million. If all that is proved in arbitration, will K-Line be entitled to an award requiring Priminds to compensate it in respect of that cost, by way of damages or under an implied indemnity, or was the demurrage the charter required Priminds to pay K-Line’s exclusive remedy for the breach (there being no question of such prolonged delay as might have entitled K-Line to say that Priminds had repudiated the charter)? That last qualification should be borne in mind throughout, to save repetition; I am not dealing with repudiatory delay, or loss caused by or arising after a termination for such delay.
Scrutton (with a fascinating history, considered below) sides with K-Line: “Demurrage … is a sum agreed by the charterer to be paid as liquidated damages for delay beyond a stipulated or reasonable time for loading or unloading, generally referred to as the laydays or laytime”; “Where there is no further breach of charter beyond the failure to load or discharge within the laydays, but the charterer’s breach causes the shipowner damage in addition to the detention of the ship, the position is not clear but it is submitted that the better interpretation of Aktieselskabet Reidar v Arcos is that these losses can be recovered in addition to demurrage”, Scrutton on Charterparties, 24th Ed. (2020), at 15-001, 15-006. The case for that answer was also argued in some detail in an article by Robert Gay, then of Hill Taylor Dickinson (as they were then), “Damages in addition to demurrage”,  LMCLQ 72 (“Gay”).
Voyage Charters sides with Priminds: “The varying reasoning of the members of the court in Reidar v Arcos left it in doubt whether, if damages in addition to demurrage are to be recovered, it is necessary to show breach of a separate obligation as well as damage of a different kind from delay in the completion of the loading and discharging operation. In Suisse Atlantique …, both Mocatta J and the Court of Appeal took the view that it is necessary to show a separate breach. The contrary view was taken in The Altus, in which Suisse Atlantique was not referred to, but in The Bonde Potter J, after reviewing all the authorities, preferred the view taken in Suisse Atlantique, which it is submitted is the better view”, Cooke, Young et al., “Voyage Charters”, 4th Ed. (2014), at 16.14.
As those quotations show, and as will be familiar to those practising in this field, the controversy has been seen as one of interpretation of the judgments of the Court of Appeal in Akt. Reidar v Arcos  KB 352, in particular after what was said about them in Suisse Atlantique d’Armement Maritime SA v N.V. Rotterdamsche Kolen Centrale  1 AC 361; so it was nearly 90 years old when the facts of the present case arose.
To my mind the debate over how to read the judgments in Reidar v Arcos, particularly the judgment of Atkin LJ, important though it is in the discussion, has also distracted from the underlying arguments of principle that ought to drive the answer. In the present case, Mr Bird for the claimant and Mr Wright for the defendant gave those arguments their due prominence, and in my view their submissions were the better for that.
The matter comes before the court by agreement between the parties for the determination of a question of law arising in the arbitration. I am satisfied that it substantially affects the rights of the parties, since K-Line’s claim for the compensation it seeks in the arbitration requires the answer it gives to that question to be correct. The parties were also agreed, and again I am satisfied, that I have jurisdiction to entertain and determine the question, under s.45 of the Arbitration Act 1996, and that it is just and convenient as a matter of discretion to do so (subject to a qualification concerning the second part of the question). Indeed, I commend them for invoking s.45 here so that the law may be clarified, although it may take a judgment from the Court of Appeal for the controversy to be settled definitively.
The facts of the case were established in the judgment as follows:
K-Line and Priminds entered into a contract of affreightment dated 30 July 2014 for 9 separate voyages, each to be performed by tonnage to be nominated by K-Line, with one laycan per month from February to October 2015 inclusive and otherwise on materially identical terms. The contract was drawn up on, and was subject to the terms and conditions of, a Norgrain form (the North American Grain Charterparty 1973, Amended 1/7/74), as amended and supplemented by the parties. It included bespoke provisions for the creation and narrowing of the individual voyage laycans, and the nomination of tonnage for each by K-Line. This was therefore a contract pursuant to which 9 individual voyage charters would be created and performed, all going well, each on Norgrain terms as amended and supplemented by the parties. By agreement concluded on 2 July 2015, as reflected in additions within the copy of the updated contract that was in evidence before me, 3 further voyages were added, for laycans to be created and narrowed within November 2015, December 2015 and January 2016.
Additional clause 45 specified that loading for each voyage was to be one safe port one safe berth Santos or Tubarao or Paranagua or Rio Grande or Sao Francisco do Sul, or in Priminds’ option one safe Argentine berth up river not above Timbues of San Lorenzo or Nueva Palmira, or one safe berth port Montevideo, in either case followed by completion cargo at one safe port berth Bahia Blanca or Necochea, or one safe berth port Montevideo. The additional ‘charterer’s option’ loading range was not available if the discharge port was to be in Japan.
Additional clause 47 specified that discharge for each voyage was to be one safe berth, one safe port China, with Priminds guaranteeing a 13.0 metre arrival draft, with an option in Priminds for the 8th and 9th shipments only to declare instead discharge at either one safe port one safe berth Incheon, Korea, one safe port one safe berth Kaohsiung, Taiwan, or one or two safe berth(s) at up to three safe port(s) Kashima to Kagoshima range (both inclusive), including Hakata, Japan. The cargo for each voyage – specified by additional clause 46 – was to be 60,000 m.t., 10% more or less in K-Line’s option, of Heavy Grain, Soya or Sorghum in bulk, with stowage factor about 48/49 without guarantee (i.e. about 48/49 cu.ft./lt, which is about 0.75 m.t. per cubic metre).
Clause 18 of the contract set a contractual discharge rate of 8,000 m.t. per weather working day Saturday, Sunday and Holidays excepted even if used (Friday 1700 hrs to Monday 0800 hrs not to count), and thus determined the laytime allowed and when the chartered ship went on demurrage at the discharge port. The demurrage clause was Norgrain clause 19, in the following terms as amended by the parties:”Demurrage at loading and/or discharging ports, if incurred, to be paid at the rate of declared by Owners upon vessel nomination but maximum USD 20,000 per day or pro rata / despatch half demurrage laytime saved at both ends. per day or for part of a day and shall be paid by Charterers in respect of loading port(s) and by Charterers/Receivers in respect of discharging port(s). Despatch money to be paid by Owners at half the demurrage rate for all laytime saved at loading and/or discharging ports. Any time lost for which Charterers/Receivers are responsible, which is not excepted under this Charter Party, shall count as laytime, until same has been expired, thence time on demurrage.”
The dry bulk carrier Eternal Bliss was nominated by K-Line so as to become the chartered ship for the June 2015 laycan. She loaded 70,133 m.t. of soybeans at Tubarao for discharge in China. Loading was completed and bills of lading were issued on 11 June 2015.
Eternal Bliss arrived at Longkou anchorage and tendered NoR for discharge at 0442 hrs local time on 29 July 2015. She was kept at the anchorage for some 31 days due to port congestion and lack of storage space ashore for the cargo, such that discharge only got underway on 30 August 2015. Upon discharge, the cargo is said to have exhibited significant moulding and caking throughout the stow in most of the cargo holds. Discharge was completed, and the ship sailed away from Longkou, on 11 September 2015, having provided a US$6 million letter of undertaking from China Reinsurance (Group) Corp as guarantors in favour of the cargo receivers, Shandong Xiang Chi Grain and Oil Company Ltd, as security for the receivers’ cargo claim, in return for the receivers refraining from arresting the ship.
As already indicated, K-Line says it later settled the receivers’ and their insurers’ claims at a total cost of c.U$1.1 million. It commenced arbitration seeking damages or an indemnity in respect of that cost, appointing Mr Gault, in January 2019. Written claim, defence and reply submissions were served in the arbitration. Leaving aside what is for present purposes a question-begging allegation of breach by failure to indemnify K-Line, the only allegation of breach made against Priminds is that it failed to discharge the subject cargo at the rate specified by clause 18.
The possibility of taking the question of law now before the court as a preliminary issue was identified, and the parties in due course agreed to bring it straight to the court under s.45 of the 1996 Act. For that purpose, the parties are agreed, and I am content, that the following further facts should be assumed, without pre-judging which of them (if disputed) will be established in the arbitration, namely that:
(i) Eternal Bliss was detained at the discharge port beyond the contractual laytime, due to port congestion and a lack of storage.
(ii) Priminds was therefore in breach of its obligation to complete discharge within the permitted laytime.
(iii) The condition of the cargo deteriorated as a result of the detention beyond the laytime, and not due to any want of care by K-Line.
(iv) K-Line suffered loss and damage and incurred expense as a result of the detention beyond the laytime, including dealing with and settling the cargo claims brought by the cargo interests and insurers.
(v) The loss, damage and expense suffered by K-Line were:
(a) not caused by any separate breach of charter other than Priminds’ obligation to discharge within the contractual laytime;
(b) not caused by any event which broke the chain of causation; and
(c) reasonably incurred.
(vi) The loss, damage and expense suffered by K-Line were consequences of compliance with Priminds’ orders to load, carry and discharge the cargo.
The factual basis for K-Line’s case about that in the arbitration, the judge added for completeness, is that the cargo was shipped with what K-Line will say was a high moisture content for the anticipated voyage length, averaging 12.52%; but it is not said that moisture content involved or resulted from any breach of contract by Priminds.)
After discussing the initial questions of law at the hearing, it was agreed that a neater and better question to state and answer is this:
“If the facts were as presently assumed [paragraph 17 above] in respect of the voyage charter of m.v. ‘Eternal Bliss’ in relation to the June 2015 laycan under the contract of affreightment between the parties dated 20 July 2014, is the charterer liable to compensate or indemnify the owner in respect of the loss, damage and expense referred to therein by way of:
(a) damages for the charterer’s breach of contract in not completing discharge within permitted laytime;
(b) an indemnity in respect of the consequences of complying with the charterer’s orders to load, carry and discharge the cargo?
After a detailed examination of the case the judge gives his final analysis as follows:
(i) The Altus was correctly decided, that is to say the claim for damages for the wrongfully reduced demurrage rate rightly succeeded, but on the simple basis that, whatever be the correct answer to the point about demurrage now before me, on no view did the deadfreight clause in that case have effect to preclude that claim.
(ii) Webster J, with respect, was wrong to conclude that Reidar v Arcos decided (so as to bind him to decide) that unliquidated damages may be recovered, in addition to any demurrage payable under the charter, as damages for a voyage charterer’s failure to load or discharge within the laydays where it causes loss to the owner additional to and different in kind from the loss of the use of the ship as a freight-earning vessel.
However, the fact that Reidar v Arcos is not authority for that proposition does not mean it is authority for the contrary proposition that such damages are not recoverable, but rather damages in respect of the additional loss, different in kind, may only be recovered if there is an additional and different breach, also causative of the additional loss. As I explained in my initial consideration of Reidar v Arcos (see paragraph 37 above), the conclusion of the majority that there was in that case an additional and different breach, also causative, that sufficed for the owner’s deadfreight claim to succeed, was not a conclusion that such a breach is necessary. That question only arose on the minority approach of Bankes LJ that there was no additional and different breach, and he decided it in favour of the owner; the question did not arise for the majority, and they did not decide it or express a view on it obiter, whether agreeing or disagreeing with Bankes LJ.
So The Altus is not satisfactory authority for the proposition that Reidar v Arcos decided that an additional and different breach of contract is not necessary. The judgment in The Altus is therefore not a sound basis for endorsing that proposition. Given the approach he took, it is an unknown how Webster J would have decided the point if he had seen himself as free to decide it for himself.
The Adelfa was a case with factual similarities to the present case but also significant differences. A cargo of maize carried to Tripoli under a voyage charter arrived trivially wet-damaged. With most of the cargo still on board, the receivers arrested the ship and the local authorities banned the cargo from being landed ashore. The receivers’ claims were upheld by the court in Tripoli, imposing liability on the owner to pay US$3.7 million. After negotiations, matters were settled with the receivers for a payment of US$2.5 million, the ship was released, and the cargo was carried to and discharged at Singapore.
The owner claimed in arbitration under the voyage charter damages for or restitution in respect of the losses caused to it by the receivers’ claim. That claim failed, the findings in the arbitration being that the receivers’ claim had been wholly unjustified, the voyage charter was frustrated by the ban on discharge at the latest when judgment was entered locally against the owner, and the losses claimed against the voyage charterer flowed from matters for which they had no responsibility. There had been a prolonged delay awaiting discharge, resulting in a demurrage claim in the arbitration that was settled in the course of the reference, and that caused a certain inevitable wetting and discolouration of top layer bags in each hold, but that was not causative of the owner’s relevant losses.
Evans J dismissed the owner’s appeal, there being no error of law in the award as regards responsibility for the receivers’ actions, or as regards frustration or causation. The discussion of Reidar v Arcos,  2 Lloyd’s Rep 466 at 472 lhc-rhc, was obiter. Evans J noted that where an owner seeks damages in addition to demurrage for loss caused by a failure to load or discharge within the laydays, “There must, of course, be a proved head of loss which is recoverable as damages for that breach and which is distinct from the loss of the use of the vessel, for which on any view of the matter demurrage is the agreed rate of liquidated damages.” Evans J was prepared to assume without deciding that where there is such a distinct head of loss, damages may be recovered in addition to demurrage for the failure to load or discharge within time. But that was not the case because even on that basis, “The plaintiffs must prove that the loss … was caused by the charterers’ failure to discharge … within the laytime and that it is not too remote in consequence of that breach. There is no finding to this effect, and in my judgment no such conclusion can be drawn from the findings which the umpire has made. … Even if the arrest was based on the assumption … that the cargo suffered serious damage during the period of waiting off Tripoli, it is impossible to say, as a matter of law or in fact that the loss was caused by the charterers’ breach, which had occurred … when the laytime expired.”
I do not think it right to treat Evans J’s preparedness to assume the recoverability in principle of damages in addition to demurrage in a ‘one breach’ case as indicating more than that in his view it was arguable, but a matter for another day, that such damages could be recovered. He did though add this, after noting that there was support for the recoverability of damages in such a case in Chandris and The Altus: “Authoritative statements of the law [i.e., I take it, as to the nature of demurrage] are found in Suisse Atlantique …, likewise in the judgments of Mr Justice Mocatta, and the Court of Appeal in that case, but these in my respectful view do not necessarily preclude the submission on behalf of the shipowners that an independent head of damage may be recovered in the circumstances of a particular case.” As will be apparent from my review of Suisse Atlantique, that is also my view. What was said in Suisse Atlantique that might be thought to touch on the issue was not decisive either way and was in any event obiter. Specifically, it did not amount to endorsement, even obiter, of the proposition that an additional and different breach is required before damages for a separate and distinct head of loss may be recovered.
So I return at last to The Bonde, recalling the conclusion I have already reached that it is authority for the proposition that an additional and different breach is necessary, so that to find for K-Line in the present case requires me to conclude that The Bonde was wrongly decided and should not be followed.
The basic argument of Mr Havelock-Allan (as he was then) for the seller, so for my purposes effectively the argument for K-Line, as to what a demurrage rate is and what, therefore, a demurrage clause does not preclude, appears from the judgment,  1 Lloyd’s Rep 136 at 140 lhc. It was that a demurrage clause provides an estimate of the loss of prospective freight likely to be suffered if the ship is kept beyond the laydays, and therefore “demurrage is not and/or should not be the exclusive compensation where failure to load within the contractual laytime has consequences other than the detention of the ship. As agreed compensation for detention of a ship, it does not cover … the separate and independent head of loss represented by the necessity to pay carrying charges for the excess time taken in loading.” In my view, that argument was sound in principle, accorded with the preponderance of views expressed in the authorities as to the nature of a demurrage rate, and was an argument that Potter J was free to adopt so as to decide the case before him in favour of the seller.
From 140 lhc to 142 lhc, Potter J considered the principal prior authorities I have also considered, namely Reidar v Arcos, Chandris, Suisse Atlantique, The Altus and The Adelfa:
(i) As regards Reidar v Arcos, Potter J concluded, and I agree, that Atkin LJ, and therefore the majority, decided that there had been an additional and different breach, viz. a breach of the full load obligation, not only a breach of the loading rate obligation, and dismissed the appeal upon that premise. That was Potter J’s own reading of Atkin LJ’s judgment, fortified by the fact that it was also how that judgment had been understood by the Court of Appeal in Suisse Atlantique. He did not regard Devlin J in Chandris, reading the judgment in that case as a whole, as supporting the view that Atkin LJ was a ‘one breach’ man.
(ii) However, as may now be repetitive, that does not mean, and Reidar v Arcos did not decide, that an additional and different breach was in law required before damages for a separate and different head of loss may be recovered.
(iii) Next, and critically, Potter J read Viscount Dilhorne, Lord Hodson and Lord Upjohn in Suisse Atlantique as saying that the effect of the majority judgments in Reidar v Arcos was “that it was necessary for a party to establish a breach of the charter-party other than by the detention of the vessel if damages are to be obtainable over and above the demurrage payments”. As will be apparent from my discussion of Suisse Atlantique, with respect I disagree. To my mind, that is a plain misreading of the speeches in the House of Lords in Suisse Atlantique, and I agree with Mr Bird that it is explicable only on the basis of faulty reasoning to the effect that if Atkin LJ found there to have been two breaches, so that Bankes LJ was in a minority on that issue, that means or implies a majority ratio to the effect that if there had been only one breach, as Bankes LJ found, the claim should have failed and the appeal in Reidar v Arcos would have been allowed.
(iv) As regards The Altus, Potter J regarded Webster J’s analysis of Reidar v Arcos as unreliable, because it took Atkin LJ as a ‘one breach’ man, and because, so Potter J concluded, Suisse Atlantique had not been drawn to the attention of Webster J. The latter point, if correct (the report of The Altus does not include a list of cases referred to the court but not mentioned in the judgment), does not take matters beyond the issue whether Bankes LJ was in the majority or in the minority in holding that there was only one breach in Reidar v Arcos, unless Suisse Atlantique is decisive or persuasive against the soundness in law of Bankes LJ’s approach for a ‘one breach’ case. So again one finds that the critical element of Potter J’s reasoning is his reading, in my view an incorrect reading, of the speeches in the House of Lords in Suisse Atlantique.
(v) Finally, noting that Evans J had expressed no concluded view in a passage that was obiter, Potter J said that The Adelfa “does not dissuade me from the opinion which I have formed upon analysis of the cases which is that, where a charter-party contains a demurrage clause, then in order to recover damages in addition to demurrage for breach of the charterers’ obligation to complete loading within the lay days, it is a requirement that the plaintiff demonstrate that such additional loss is not only different in character from loss of use but stems from breach of an additional and/or independent obligation.” However, no prior case decided that such a requirement existed; and apart from Potter J’s misreading (as I think it was) of the speeches in the House of Lords in Suisse Atlantique there is no analysis of the prior authorities in The Bonde that could found the opinion that it did. That Potter J expressed himself as he did reinforces, I think with respect, the conclusion that his analysis was premised on the faulty reasoning that if the majority view in Reidar v Arcos was that it was a ‘two breach’ case, it followed that Bankes LJ’s approach was wrong in law for a ‘one breach’ case.
(vi) The conclusion stated by Potter J also, with respect, misstates what would be the law if his premise were correct that the law requires an additional and different breach. Were that the law, it would have to be on the basis that a demurrage rate liquidates the damages recoverable, whatever the nature of the loss suffered, in respect of a breach of the obligation to load or discharge within the laytime. There would never be, as Potter J’s conclusion has it, “damages in addition to demurrage for breach of the charterers’ obligation to complete loading within the lay days” (my emphasis); rather, on Potter J’s premise, the law would be that damages in addition to demurrage:
(a) may never be awarded for a breach of the obligation to load or discharge within the laytime;
(b) may not be awarded for a breach of an obligation other than the obligation to load or discharge within the laytime in respect of the loss of the use of the ship due to detention after the commencement of laytime.
The result is that in my judgment the reasoning in The Bonde is clearly faulty. As I noted, the basic argument for K-Line on the issue before me was put to Potter J by Mr Havelock-Allan (see paragraph 125 above). In The Altus, having concluded that Reidar v Arcos bound him to a certain view, Webster J did not consider for himself the soundness or unsoundness of that argument. In my judgment, Webster J was wrong to think himself bound to a certain view by Reidar v Arcos, but that does not affect the correctness of the decision in The Altus, since that does not depend upon the soundness of the basic argument. In The Bonde, having concluded that Reidar v Arcos, read with dicta in Suisse Atlantique, established a proposition contrary to the conclusion of the basic argument, Potter J likewise did not consider for himself its soundness or unsoundness. In my judgment, Potter J was wrong to conclude that Suisse Atlantique affected, decisively or persuasively, the question whether Reidar v Arcos is authority against the basic argument, and his judgment is explicable only if a non sequitur lies at its heart.
In those circumstances, and other things being equal, I would regard myself as free to conclude, since it is my firm view that K-Line’s basic argument is sound, that The Bonde was wrongly decided and should not be followed. Even if the rule of precedent as stated in Colchester Estates applies (i.e. assuming in Priminds’ favour that I should treat myself as a third judge of first instance, cf paragraph 54 above), I would not follow The Bonde. Looked at from that perspective, this is a case in which Potter J was clearly wrong, in my view, to jump from the valid criticism that Webster J in The Altus had put Bankes LJ in the majority in Reidar v Arcos, which was the substance of Webster J’s reasoning, to a conclusion that Bankes LJ’s approach in Reidar v Arcos was unsound, or had been rejected by Suisse Atlantique, for a ‘one breach’ case, so that damages beyond demurrage could not be recovered in such a case, whatever the loss for which such damages were claimed.
The question arises whether I should not take that course because The Bonde has now stood for nearly 30 years and/or because of the extent to which it has been followed. That brings me, firstly, to The Luxmar, which concerned a contract for the sale of gasoline f.o.b. Priolo. The buyer purported to terminate the contract after its nominated ship had arrived in time for a 29-30 May 2004 laycan but loading had not commenced by 3 June 2004 due to technical problems at the refinery. The seller treated that as a wrongful repudiation by the buyer, contending that the time for delivery was not of the essence, there being only a laycan (LAY –laytime not to commence before, CAN – cancellation right if ship not arrived by). Langley J held for the seller and the Court of Appeal dismissed an appeal.
The contract was priced on market prices across 25 May to 1 June 2004. The market price fell between 31 May and 3 June 2004, so the seller suffered loss on re-selling the quantity it would have been obliged to deliver to the buyer as against the contract price the buyer would have had to pay.
On the premise, held to be correct, that the buyer had wrongfully repudiated the contract, the buyer claimed that the seller was liable in damages for the difference in the market value of the cargo the buyer did not receive between the expiry of the laytime and when loading would in fact have completed if the seller had not terminated the contract (see per Langley J,  2 Lloyd’s Rep 543 at ). This was a counterclaim by the buyer (ibid, at ), and the trial upon which Langley J gave his judgment was limited to “liability issues and the issue of principle whether or not [the buyer] is entitled to set off general damages for late delivery” (ibid, at ).
The counterclaim was plainly a bad claim. The buyer did not suffer from the fall in the value of cargo because it did not buy or take delivery of the cargo; and it did not buy or take delivery of the cargo because it wrongfully repudiated the contract and the seller terminated the contract on that basis. The point I have to determine simply did not arise.
Langley J, however, did not dismiss the counterclaim on that basis, but by reference to The Bonde. His judgment on the point is very brief, there does not appear to have been any argument about the correctness of Potter J’s decision, only a suggestion that Langley J rejected that the demurrage provision in The Luxmar was unusual, and none of the other authorities was considered (save that Langley J referred to Inverkip, ibid at [44(iv)] and -, as part of showing why the buyer’s repudiation was wrongful). The judgment on the counterclaim is this single paragraph, ibid at :
“In the context of my decisions on the terms of the contract, there is no basis on which [the buyer] can claim general damages for delay. The counter claim must be limited to demurrage (which is conceded). In The Bonde …, Potter J held that, in order to advance such a claim for general damages for delay in an FOB contract, there had to be a breach additional to or separate from that of failing to load within the lay days and/or at an agreed rate of loading, so as to establish a separate right not circumscribed by the right to demurrage. Mr Bright [for the buyer] submitted that the demurrage clause in this agreement was unusual or to be construed as addressing only the case where [ship]owners did claim demurrage from [the buyer] and nothing more. I do not agree. The clause is, as it says it is, a “demurrage” clause, and uses the word in its ordinary sense. [The buyer], no doubt, regrets its limitations but that is no reason to give it a meaning it does not have.”
This reliance on The Bonde in a case where, on a true analysis, the point it decided did not arise and where its correctness was not debated, is not in my view reason to follow The Bonde where I have been persuaded that otherwise it is right not to do so. If anything, with respect, the starkness of the result of treating it as correct, as stated by Langley J, only reinforces the view that it is, on reflection, wrongly decided. Where in an f.o.b. contract a delivery date is stated, as such, but time is not of the essence (either on the proper construction of the particular contract or because the buyer does not choose to terminate for late delivery though entitled to do so), and the seller delivers late on a falling market, the buyer will have a claim for damages for late delivery unaffected by any laytime/demurrage clause. There is to my mind no rational basis for saying that the position is different merely because the effectively warranted delivery date is a function of the laytime provisions rather than a delivery date separately stated as such. The idea that by agreeing also a demurrage clause, typically referable to the charterparty demurrage rate, the buyer is agreeing to forgo his normal late delivery claim under s.53 of the Sale of Goods Act 1979 is startling and, in my respectful view, not at all likely to be the intention of traders agreeing f.o.b. sales.
For completeness as to The Luxmar, I note again that what was considered was a counterclaim by the buyer, for damages for the failure to load within the laytime allowed, laytime having expired prior to the buyer’s repudiation of the contract. The correct measure and quantification of the seller’s damages was not part of the trial before Langley J (see again paragraph 132 above). In relation to the seller’s damages, it may be the buyer could have attempted the argument that but for its wrongful repudiation (as it was held to have been) the seller would have been obliged to deliver in circumstances where it would incur by doing so a liability for late delivery. Then, as it seems to me, the point before me would have arisen, and for the reason given in the previous paragraph in my view it ought then to have fallen to be decided in favour of the buyer. That is why I said in paragraph 133 above only that the buyer could not say it had suffered loss, and not that the lower market value when the contract was terminated represented a gain for the buyer because it had been saved from paying a higher contract price for it. The latter would have begged the question whether the seller could maintain in the face of s.53(1)(a) of the 1979 Act that if the buyer had not repudiated, so that the seller would have been obliged to effect a late delivery, the seller would have been entitled to be paid in full the contract price fixed by the higher market prices in the week to 1 June 2004.
In the Court of Appeal, Longmore LJ, with whom Buxton LJ and Sir Martin Nourse agreed, also dealt with the buyer’s counterclaim very briefly,  Lloyd’s Rep 542 at -. The first two sentences of  were sufficient to dispose of the counterclaim, consistently with paragraph 133 above: “… it has never been made clear what loss the buyers have suffered as a result of the delay. There is no claim for loss of market which is unsurprising since the market moved in the buyers’ favour.” Accordingly, whilst Longmore LJ went on to say that Langley J had “rightly held that, where a demurrage figure is contained in a contract it is intended to cover loss for delay and general damages for delay cannot be awarded as well” (later in , and see  for a brief elaboration), it seems to me he had in mind (I think, with respect, correctly) that the buyer had not identified any harmful consequence other than the delay to the ship that it could say it had in fact suffered, for the purpose of what was its counterclaim, and was not dealing with any argument about the seller’s damages.
For these reasons, I do not think The Luxmar is reason to follow The Bonde where I have been persuaded that it was wrongly decided and should not be followed.
As well as relying on The Luxmar, Mr Wright referred me to two arbitration decisions reported in the London Maritime Law Newsletter as London Arbitration 23/07, (2007) 730 LMLN 2 and London Arbitration 1/09, (2009) LMLN. They appear to relate to the same voyage, under which a ship carried on Gencon terms a cargo of sodium sulphate in bags from Zhenjiang, China, to Vitoria, Brazil. I infer that the two arbitration references were under a head voyage charter and sub-charter, and it seems from the reports that they were on materially identical terms. The references do not appear to have been consolidated or dealt with concurrently, but some or all of the arbitrators may have been the same, and it would not be right to treat the two reports as adding separate weight, the one to the other, to any argument that The Bonde has become so accepted that I ought not to depart from it.
The LMLN reports of these arbitration awards indicate that the arbitrators considered The Altus, The Bonde and Suisse Atlantique so as to ascertain the true ratio of Reidar v Arcos, and concluded that “the owners needed to find a separate breach of a further obligation by the charterers to entitle them to recover for the costs of the watchmen and wharfage during the period in question, costs which the owners otherwise accepted were their liability” (quoting from London Arbitration 1/09). On any view, the port costs for which damages were being claimed were within the purview of demurrage. Had the arbitrators disagreed with The Bonde, the result would have been the same; and although it seems that they agreed with it, at the risk of reading too much into briefly reported decisions in arbitration, their approach does not appear to have been that The Bonde settled the matter such that further thought was not required on their part. These two arbitration awards do not give me cause to refuse to depart from The Bonde if otherwise it be right to do so.
Finally on this aspect of what has been made of The Bonde since it was decided, I come back to the textbooks. In the period since The Bonde was decided, practitioners (and their owner, charterer and insurer clients, if they do not rely only on external legal advice) will have turned first to Scrutton and Voyage Charters, also it may be to Schofield. As I found in my review, there they would have found: in Scrutton, support for K-Line’s position that has been present ever since Reidar v Arcos, most explicitly so for the last 25 years; in Voyage Charters, support for Priminds’ position but only since 2014, previously no view having been expressed; in Schofield, a summary of the cases without any view being taken. As I also said in my textbook review, I do not regard McGregor or Chitty as significant for present purposes. Finally, as it seems to me Carver and Baughen are too recent for any claim that they might have generated a settled wisdom. Anyone needing to consider the point would also be expected to be aware of, or to find, Gay, the detailed and careful analysis of the authorities within which would show any serious reader that there was at all events real room for argument whether The Bonde was rightly decided, and that the point was or might well be still contentious.
I expressed surprise that Scrutton expresses a view without referring to The Bonde, and I would not hesitate to differ from that view, if I felt it right to do so, particularly so perhaps given the failure to acknowledge The Bonde. But that is not the position; and for the immediate point the greater significance is that Scrutton has expressed the view it has, favouring K-Line in the argument before me, throughout the relevant period. What I take from the textbook review (pace Carver, see paragraph 106 above), is that it has not become settled wisdom that The Bonde is correct; and that anyone with a need to consider the issue at all seriously should have found or been advised that it remains contentious.
It is a strong thing for a judge of first instance to refuse to follow a prior decision at first instance that has stood without direct criticism in later case-law for a substantial period of time. However, the point raised before me and previously decided by Potter J in The Bonde is a specific, narrow, point, in a specialist field, that does not arise often, on which equally there has not been a fully considered later decision agreeing with Potter J.
In the event, though it is now 30 years since The Bonde and over 90 since Reidar v Arcos, I apprehend this may have been the first occasion on which the arguments of principle have been aired fully and the prior authorities up to and including The Bonde examined in detail so as to expose as flawed (i) the notion that if the majority in Reidar v Arcos held there to have been two breaches, that makes Reider v Arcos authority for the proposition that two breaches are required and that Bankes LJ’s approach is wrong in law for a ‘one breach’ case, rather than merely not authority for the proposition that Bankes LJ’s approach is correct for such a case, and in consequence (ii) the idea that what was said about Reidar v Arcos in Suisse Atlantique could or does amount to persuasive authority for such a proposition. In the intervening years, it cannot be said that the view taken by Potter J in The Bonde, on what I have concluded, with respect, was erroneous reasoning, has become the settled wisdom, or that the point has by reason of The Bonde been treated as no longer controversial.
In those circumstances, since I have come to the firm and clear view that The Bonde was wrongly decided, I have decided the right course is to say so in terms, and not to follow Potter J on the point.
Mr Bird’s first submission on K-Line’s claim for an indemnity in respect of the loss it suffered, on the assumed facts, was that the court cannot decide whether there is any relevant implied indemnity obligation as that is a matter for the arbitration. If by that he meant only that the answer given by the court to the implied indemnity question as put to it on the assumed facts could not create an estoppel per rem judicatam between the parties as to the existence of an implied indemnity on different facts, if different facts were pleaded and proved before the arbitrators, that may be right – it is not necessary to take a view. But if he meant that the court could not decide the question actually put to it, I disagree.
That said, the question of implied indemnity would only matter if K-Line had lost on the question about demurrage. Indeed, on reflection, and bearing in mind that the purpose of coming to court under s.45 was to test the viability in law of K-Line’s claim before the arbitrators, it might have been better to articulate the question as whether on the assumed facts K-Line is entitled to recover the loss in question (a) by way of damages for not loading at the required rate, if not (b) under an implied indemnity. That way, the answer if the court were with K-Line on demurrage would be (a) Yes, (b) N/A.
In the event, I have sided with K-Line on the demurrage issue, so that (subject to any appeal against my decision) K-Line’s claim is viable and will proceed in the arbitration if not now settled. I have not been able to identify how it might affect the outcome in the arbitration whether the claim might also be put as an indemnity claim; it is ultimately a matter for my discretion whether to answer a question of law under s.45; and the strong policy of English law under the 1996 Act that the court should interfere in the arbitral process only where justice truly demands is still in play even though the parties came to court jointly invoking s.45. In those circumstances, seized as I am only of this preliminary legal argument, I decline in my discretion to give a final answer to part (b) of the question, which will therefore be for the arbitrators to consider if somehow it might make a difference (and hence my reference at the outset – paragraph 7 above – to a qualification upon my view that it was appropriate to give a determinative ruling under s.45).
Therefore, the answer I shall give to the question of law put to the court under s.45 is: (a) Yes; (b) Not Answered.
For completeness, though, I should indicate how I would have answered the indemnity question had I been against K-Line on demurrage. On that basis, it would have been necessary to answer part (b), if it could properly be answered as a preliminary point, in order to decide whether K-Line had a viable claim to pursue, and the justice of the court deciding the point upon the parties’ joint request would have been clear. Furthermore, in my judgment, the answer itself would have been clear: (a) No; (b) No.
On the premise of the previous paragraph, the position would have been that the parties by the demurrage clause had agreed to liquidate, whereby to limit K-Line’s recovery for, all the consequences of the pertinent delay at the discharge port. It would be inconsistent with that element of the express bargain to imply an indemnity rendering Priminds responsible for one of those consequences. That would be an implied indemnity inconsistent with what was effectively an express exclusion of Priminds’ liability for the very claim now brought. That was the logic of Mr Wright’s primary argument in response to the indemnity claim, were he right about demurrage. Mr Bird had no answer to it, in my judgment, nor have I identified any.
For the reasons given above, I conclude that:
(i) It is possible, and appropriate as a matter of discretion, to answer part (a) of the question of law put to the court by the parties jointly pursuant to s.45 of the 1996 Act, concerning the demurrage clause; and it is to be answered in the affirmative. In that regard, it is my particular conclusion that The Bonde was wrongly decided, and that it is both open to me and right in the circumstances to depart from it, and so I have not followed it.
(ii) I have not identified how part (b) of the question put to the court, on implied indemnity, will not be academic, and I prefer to leave that, and the question itself, to be considered within the arbitration, if K-Line pursues the implied indemnity claim although it has succeeded as to the scope of the demurrage clause.
(iii) The question of law as put to the court will therefore be answered: (a) Yes; (b) Not Answered.
(iv) For completeness, were I wrong about the demurrage clause, it would have been possible and appropriate to answer both parts of the question of law as put, and I would have answered: (a) No; (b) No.
Arizon Abogados S.L.P