Demurrage, yes - but damages as well?

Demurrage, yes - but damages as well?


A recent case involving Hong Kong-based Charterers may mean that in future more Owners can recover damages as well as demurrage.




An enduring question in the UK was whether, as well as demurrage, Owners could recover damages (or indemnity) for loss (or liability) due to Charterers' failure to load or discharge within the agreed laytime.


The answer was yes, but only if they could show some other breach by Charterers i.e. besides failure to perform within the laytime.




The UK High Court decision in K Line Pte v Priminds Shipping (HK) Co [2020] EWHC 2373 (Comm) (the "ETERNAL BLISS") changes that, ruling that an Owner who has suffered some other loss due to Charterers’ failure to load or discharge within laytime (here, liability to cargo interests) can recover damages, as well as the demurrage. There is no need to establish a separate breach.


The Court considered demurrage as fixing Charterers' liability, but only for tying up the vessel beyond the agreed measure. It does not bar other claims.


Facts and terms


Under a 30 July 2014 contract of affreightment on the Norgrain 1973 form for nine (and later three more) voyages, the dry bulk carrier “ETERNAL BLISS” loaded 70,133 tonnes of soybeans at Tubarao for carriage to China. She tendered NOR at Longkou anchorage at 04:42 hrs local time on 29 July 2015, but was held there for 31 days due to congestion and lack of storage space. On discharge, the cargo was found damaged, with significant moulding and caking throughout the stow.


Having provided security of USD 6 million, Owners later settled cargo interests’ claims at USD 1.1 million. They sought to recover that in arbitration, but Charterers countered that, as their only breach was failure to discharge within laytime, Owners could only recover demurrage, under the Norgrain clause 19, which said:


“Demurrage ... to be declared by Owners upon vessel nomination but maximum USD 20,000 per day or pro rata / despatch half demurrage laytime saved at both ends for part of a day … . Despatch ... to be paid by Owners at half the demurrage rate for all laytime saved ... Any time lost for which Charterers … are responsible, which is not excepted under this Charter Party, shall count as laytime, until same has been expired, thence time on demurrage.”




The parties had paused the arbitration in order to ask the Court to give a ruling on the law. The facts would be determined later by the Tribunal, but for now it was assumed that:


1.  Charterers had breached, and had breached only, their obligation to discharge within the laytime;

2.  the cargo had been damaged because of that, and not due to Owners’ fault;and

3.  as a result, Owners had suffered otherwise recoverable loss




Charterers said simply that demurrage was Owners’ sole remedy, as liquidated damages, for their breach. No other fault was even alleged, so any other claim was invalid.




The Judge disagreed.


He first considered what the law took to be covered by a demurrage rate, i.e. what did demurrage actually liquidate? The answer was : loss of vessel earnings due to delay through failure to complete loading or discharging within laytime. Unless the fixture said otherwise, demurrage was simply an agreed measure of the value of the time lost to the vessel.


The parties could agree something different, but this Norgrain demurrage provision was entirely typical, in that it did not say that Charterers would just pay liquidated damages no matter what the consequences of failure to load or discharge in time. 


Commercial parties would not understand that a demurrage rate also fettered, for example, claims for physical damage to the cargo, or even the vessel, if such arose due to failure to discharge within the laytime.


Demurrage is an agreed quantification of Owners’ loss of use of the vessel, and nothing more. It does not measure or limit any claim for a different kind of loss arising from delay beyond laytime, whatever the basis of the claim.




This ruling means that, currently, if Owners incur additional loss or liability due to Charterers’ failure to load or (perhaps more likely) discharge within the laytime, they can in principle recover damages, or get an indemnity. Whether they do so will depend on the facts, and here these were just assumed. As regards the law, as the Judge observed, it may take a ruling from the Court of Appeal to decide this issue finally, and we will of course circulate an update if there is any further decision.


If you would like to discuss anything raised in this article please contact Chris Potts on +(852) 9461 4377 or at or Peter Lau on +(852) 9683 7439 or at