Demise Charter ' The Demise Of Your Recovery?

• Published date: 15 September 2020
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation, Professional Negligence
• Law Firm: Clyde & Co
• Author: Mr Jai Sharma and Simon Culhane

The recent decision in Fimbank PLC v. KCH Shipping Co. Ltd [2020] EWHC 1765 (Comm) is a stark reminder of the importance in recovery claims of making inquiries as to the existence of a demise (bareboat) charter.

As many readers will know, Owners are not generally liable for cargo damage in cases where a vessel is on bareboat charter. In those cases, the bareboat charterer will be the legally liable party and the correct recovery target. Therefore any time limit will have to be protected against that party. In this case, the Claimant, Fimbank PLC ("Fimbank") commenced arbitration against Owners, but did not protect time to commence an arbitration claim against the bareboat charterer.

Fimbank then applied to the High Court under section 12(3)(a) and (b) of the Arbitration Act 1996 to extend time for commencing arbitration proceedings against the Defendant bareboat charterer, KCH Shipping Co. Ltd ("KCH").

The decision provides helpful guidance as to the circumstances in which the Court will grant an order extending time to commence arbitration, and a reminder that such orders will not be easily granted by the Court.

Background facts

Fimbank wished to make a claim for circa $7.3m against the carrier for the loss of cargo due to misdelivery without production of the bills of lading which were held by Fimbank. The bills of lading incorporated the Hague Rules which provide for a one-year time limit.

Fimbank's lawyer identified the registered owners of the vessel, Mirae Wise SA ("MW") as the carrier for the purposes of its claim.

There was a chain of charterparties for the vessel, which included: the bareboat charterer, KCH, the time charterer, Classic Maritime Inc ("Classic"), and the voyage charterer, Trafigura Maritime Logistics Pte Ltd ("Trafigura").

Fimbank's lawyer reportedly did not make any inquiries as to whether there was a bareboat charterparty in place, and so when the claim letter was sent to MW, it was misdirected, and should have been sent to the bareboat charterer KCH.

Upon receiving the claim letter, the vessel's P&I Club sent it on to Classic, who were aware of the existence of KCH, but not of the specific arrangement between them and MW.

A series of exchanges followed between Fimbank, Classic, KCH (via Classic) and Trafigura, however nothing within the correspondence alerted Fimbank's lawyer to the existence of the bareboat charter.

With the one-year time bar for the claim expiring in April 2019, Fimbank sought an extension via Classic from...