Demurrage and the Availability of General Damages

• Author: Michael John Wells
• Position: Student, T C Beirne School of Law, University of Queensland. The author wishes to thank Professor Sarah Derrington, T C Beirne School of Law, for her helpful comments on this paper
• Pages: 76-88

(2008) 22 A&NZ Mar LJ 76

DEMURRAGE AND THE AVAILABILITY OF GENERAL DAMAGES

Michael John Wells*

1 Introduction

Demurrage is an amount payable by the charterers to the owners for detention of the vessel beyond the agreed

laytime. Demurrage compensates the owners for the loss of freight. The demurrage provision in the charterparty

quantifies the amount of compensation.

The owners may seek to recover general damages in addition to (or in lieu of) demurrage. The availability of

such damages was first recognised in England in 1926 but has been the subject of controversy ever since. The

matter has not been considered in Australia. The English Court of Appeal recently revisited the availability of

general damages in addition to demurrage in ERG Raffinerie Mediterranee SpA v Chevron USA Inc (The

Luxmar).1

The Luxmar considers the four central matters which determine whether the owners can recover general

damages, which this article will examine:

(1) the nature of demurrage;2

(2) the nature of the breach;3

(3) whether general damages are recoverable;4 and

(4) the circumstances in which the owners may recover general damages.5

It is well established that general damages may be awarded in addition to demurrage. However, the

circumstances in which such damages are recoverable remains contentious. The authorities establish that

damages are available where there is a breach additional to, or separate from, the detention of the vessel. Until

The Luxmar, it was widely considered that general damages were also available where the owners incur an

additional loss. The Luxmar confines an award of general damages to where there is a breach additional to, or

separate from, the failure to load within the lay days and/or at the agreed rate.6

Further, the availability of general damages turns on the circumstances of the case. The construction of the

demurrage provision in the charterparty is significant. The nature of demurrage is also significant. This article

suggests that the court should draw a distinction between demurrage and other damages. To define demurrage as

damages for breach of the laytime/demurrage provision causes confusion as to whether general damages are

available in addition to demurrage. The circumstances in which general damages should be awarded would be

more easily determined were demurrage defined as a payment for the use of the ship beyond the agreed lay days

rather than damages for breach of the laytime/demurrage provision.

2 Scenario

The issue of whether general damages are available in addition to demurrage arises in circumstances where:

(a) the vessel is under a voyage charter;

(b) the charterparty contains a laytime clause;7

* Student, T C Beirne School of Law, University of Queensland. The author wishes to thank Professor Sarah Derrington, T C Beirne School

of Law, for her helpful comments on this paper.

1 [2007] 2 Lloyd’s Rep 542 (CA (Civ Div)), on appeal from ERG Raffinerie Mediterranee SpA v Chevron USA Inc (The Luxmar) [2006] 2

Lloyd’s Rep 543 (QBD (Comm)).

2 See Part 4 below.

3 See Part 5 below.

4 See Part 6 below.

5 See Part 7 below.

6 ERG Raffinerie Mediterranee SpA v Chevron USA Inc (The Luxmar) [2006] 2 Lloyd’s Rep 543, [58], citing Richco International Ltd v

Alfred C Toepfer International GmbH (The Bonde) [1991] 1 Lloyd’s Rep 136, 143 (QBD (Comm)).

7 For standard form laytime clauses see eg:

Shellvoy 5: ‘The laytime for loading, discharging and all other Charterers’ purposes whatsoever shall be the number of running hours

specified in Part I(I). Charterers shall have the right to load and discharge at all times, including night, provided that they shall pay for all

extra expenses incurred ashore.’