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Dias Compania Naviera S.A. v. Louis Dreyfus Corporation, [1978] 1 WLR 261

Dias Compania Naviera S.A. v. Louis Dreyfus Corporation, [1978] 1 WLR 261

1 W.L.R.

                            [HOUSE OF LORDS]




1977 Dec. 19;                        Lord Diplock, Viscount Dilhorne,
1978 Jan. 26   Lord Edmund-Davies, Lord Fraser of Tullybelton
                                                                and Lord Scarman



My Lords, the principles that apply to laytime and demurrage under voyage charterparties are clear. What " laytime " and " demurrage " mean was stated succinctly by Lord Guest (with the substitution of " lay days " for " laytime") in Union of India v. Compania Naviera Aeolus S.A. [1964] A.C. 868,899:

"Lay days are the days which parties have stipulated for the loading or discharge of the cargo, and if they are exceeded the charterers are in breach; demurrage is the agreed damages to be paid for delay if the ship is delayed in loading or discharging beyond the agreed period."

For the purposes of the adventure in four stages contemplated by a voyage charterparty, laytime is that period of time, paid for by the charterer in the freight, for which the shipowner agrees to place the ship at Q the disposition of the Charterer for carrying out the loading operation or the discharging operation. Laytime for discharging is generally based upon an estimate of the time which will be needed to carry out the operation with reasonable diligence if everything else goes well. With dry cargoes the actual discharging of the cargo is not an operation that can be carried on continuously for 24 hours in each successive day, but only intermittently, as weather and working days at the port permit. So the length of time for which the vessel will need to be at the disposition of the charterer for this operation in order to enable him to complete it within the stated period by the exercise of reasonable diligence on his part, is not predictable in advance. It can only be a matter of subsequent calculation by the application of an agreed formula to events that have occurred.

The formula states at what point of time laytime will start and what period of time thereafter shall be excluded from the calculation and so prevent its running continuously. These excluded periods are sometimes expressed as exceptions, e.g. "Sundays and holidays excepted," sometimes by some such phrase as that time used for a stated purpose is "not to count as laytime [or discharging time] " or simply "not to count."
Similarly, the formula may state that there shall be included in the calculation periods of time spent by the ship in some way or other, which would otherwise not form part of the laytime because during the period so spent the ship had not yet become an arrived ship at the place for loading or discharge, e.g. a "time lost" clause. The commonest way of expressingthis is to say that time so spent is "to count as laytime" or simply "to count."

As Mocatta J., a judge of great experience in these matters, said in his judgment in the instant case [1976] 2 Lloyd's Rep. 395, 401 ". . . in my experience, so far as it goes, phrases like ' to count or not to count' are generally used in charters with reference to laytime." If laytime ends before the charterer has completed the discharging operation he breaks his contract. The breach is a continuing one; it goes on until discharge is completed and the ship is once more available to the shipowner to use for other voyages. But unless the delay in what is often, though incorrectly, called re-delivery of the ship to the shipowner, is so prolonged as to amount to a frustration of the adventure, the breach by the charterer sounds in damages only. The charterer remains entitled to continue to complete the discharge of the cargo, while remaining liable in damages for the loss sustained by the shipowner during the period for which he is being wrongfully deprived of the opportunity of making profitable use of his ship. It is the almost invariable practice nowadays


for these damages to be fixed by the charterparty at a liquidated sum per day and pro rata for part of a day (demurrage) which accrues throughout the period of time for which the breach continues.
Since demurrage is liquidated damages, fixed by agreement between the parties, it is possible by apt words in the charterparty to provide that, notwithstanding the continuance of the breach, demurrage shall not be payable in respect of the period when some event specified in the charter- party is happening; but the effect of such an agreement is to make an exception to the ordinary consequences that would flow in law from the charterer's continued breach of his contract, viz. his liability in damages.
As was said by Scrutton L.J. in a passage in his work on charterparties, 16th ed. (1955), p. 353 that was cited by Lord Reid in the Union of India case [1964] A.C. 868, 879:

" ' When once a vessel is on demurrage no exceptions will operate to prevent demurrage continuing to be payable unless the exceptions clause is clearly worded so as to have that effect.' "

This is but an example of the general principle stated by Lord Guest in the same case in continuation of the passage that I have already cited (p. 899), " . . . an ambiguous clause is no protection. ' . . . if a party wishes to exclude the ordinary consequences that would flow in law from the contract that he is making he must do so in clear terms.' (Szymonowski & Co. v. Beck & Co. [1923] 1 K.B. 457, 466, Scrutton LJ.)."

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