K-Line Pte Ltd v Priminds Shipping (HK) Co Ltd (The “Eternal Bliss”) – Court of Appeal, 18 November 2021
NORGRAIN – DEMURRAGE – DAMAGES – LIQUIDATED DAMAGES- APPEAL – IMPLIED INDEMNITY – LAYTIME
Procedural History
The vessel Eternal Bliss was chartered by K-Line to Priminds. When Priminds did not discharge the vessel within the allowed laytime, breach of contract was alleged, for had the cargo been discharged on time, it would have been in sound condition. K-Line said it had to meet claims made by cargo owners and their insurers for a total cost of US$ 1.1 million.
K-line started arbitration against Priminds, claiming compensation of the claims under an implied indemnity. Priminds countered that payment for demurrage included K-Line’s payment for the breach. The legal question at the core of this case was whether shipowners must prove a breach of a specific charterparty obligation to obtain damages in addition to demurrage.
Priminds used “THE BONDE” as precedent, claiming the buyer could not recover damages beyond demurrage because the only breach by the seller had been the failure to load at the contractual rate. (“THE BONDE” [1991] 1 Lloyd’s Rep 136) However, the Court agreed with K-Line’s argument, and accepted that the damage to the cargo was quite distinct in nature from, and was additional to, the detention of the ship, as a type of loss. The court also asserted that “THE BONDE” ruling had been wrongly decided.
Court of Appeal Decision
The Court of Appeal declared on 18 November 2021 that if a shipowner wants to recover damages in addition to demurrage resulting from delay, it must prove a breach of a separate obligation other than failing to load/unload within the charterparty’s authorized laytime. The Court acknowledged that the legal authorities and textbooks do not provide a clear answer to the subject; So, the Court viewed it as a matter of principle.
The Court ruled . . . demurrage liquidated all damages originating from a charterer’s failure to complete cargo operations within the laytime.
The Court ruled that in general, and absent any contrary indication in a particular charterparty, demurrage liquidated all damages originating from a charterer’s failure to complete cargo operations within the laytime. A shipowner seeking damages beyond demurrage must prove a specific responsibility. Finally, the Court concluded that the ruling in “THE BONDE,” which had stood for 30 years, had been appropriately decided.
The Court of Appeal ruled that Priminds was not liable to pay damages in addition to demurrage for its breach of contract in not completing discharge within the permitted laytime.