London Arbitration 3/25
Editor’s Note: Please reference London Arbitration 1/25 and London Arbitration 2/25 for the earlier arbitration decisions.
Due to the Charterers’ failure to deliver cargo under an amended Gencon, the Owners commenced arbitration proceedings to determine an award amount based on the “claims and costs” associated with the Charterers’ breach of contract.
Voyage Details
Over the course of the hearing, the Arbitrator noted an error in the Expert’s calculation of total voyage duration. Initially, the total voyage was calculated as 21.85 days. The duration was the basis for the Owners’ claim of US$89,851.72, a significant reduction from the previous claim of US$470,842.89. Ultimately, the total voyage duration was recalculated and reduced from 21.85 days to 14.06 days, reducing the “time charter for hire” costs associated with the voyage.
Claims and Counter Claims
The Owners’ hired an Expert to assess damages and make a claim based on the assessment. The export found the total costs associated with the voyage were roughly US$478.956.47, and undertaking the voyage had resulted in a loss of US$16,098.85. Despite this, the Expert concluded US$470,842.89 for freight expenses, demurrage, and bottom cleaning expenses was still owed to the Owners. The quantum of Expert opinion resulted in a claim of US$470,842.89.
The Charterers rejected the claim, using precedent set in London Arbitration 2/25 to reiterate their right to “set off” demurrage for what they had paid the Owners toward freight that was not earned, and claim US$16,904.18 for non-delivery. Further, the Charterers noted the Expert did not fully support the Owners’ claim due to a lack of “repudiation damages”. Meaning had the cargo been delivered, and the voyage completed, it would have resulted in a net loss for the Owners, regardless.
CHARTERPARTY CLAUSES
The head charter contained an express clause delegating financial responsibility for bottom fouling to the Owners. Initially, their responsibility was disputed due to a lack of proof of payment. Despite this, it was decided that the expense of US$20,000 for bottom fouling would have been incurred regardless, and was; therefore, appropriately delegated to the Owners.
Quantum
To rectify the Expert’s miscalculation, 12 hours of turn were added to both ends of the recorded 8.8 port days. This was another Expert oversight, given that the time added was already included in the calculation of port days, meaning the total voyage duration would have been 12.85 days, with an associated net profit of US$97,009.85 for the Owners.
London Arbitration 2/25 finalized a net demurrage of US$437,155.20, despite this the Expert found a higher figure of US$442,044.65. A missing 2.5% address commission, payable on both freight and demurrage, caused the discrepancy.
Later, it was discovered the address commission was deducted from demurrage AFTER rather than BEFORE crediting a payment of US$57,208.59 already on the account, necessitating further adjustments to the demurrage value. Adjusted, the amount owed was US$505,572.90 – “less address commission and brokerage (US$486,613.92 net) less US$57,208.59 paid on account, leaving a balance of US$429,405.33.”
Further, the court noted the initial Expert report was “clearly misconceived”, allowing for the Owners to recoup 70% of costs for the second and third awards, but only 50% of Expert costs.
Award/Conclusion
The Owners prevailed and were awarded US$92,335.80 on paper. The actual award was limited to US$89,851.72, the sum claimed, plus 4.4% annual interest, and ordered to be paid quarterly 30 days after the charter payment was terminated.
The Charterers were ordered to pay the cost of the second and third awards.