DGM Commodities Corporation v Sea Metropolitan SA

DGM Commodities Corporation v Sea Metropolitan SA [2012] EWHC 1984 (Comm)

[2012] 2 Lloyd’s Rep. 587; [2012] All ER (D) 204 (Jul)

CONTRACT, FRUSTRATION, CHARTERPARTY, SALE OF GOODS, FRUSTRATING EVENT, FAILURE TO DISCHARGE, DEMURRAGE, UNLOADING, DELAY, DAMAGED CARGO, RECEIVER’S CONDUCT

PREVENTING RELIANCE ON FRUSTRATION

Facts

In October 2007, the defendants (the owners of a vessel) chartered a vessel to the claimants (the charterers) for the carriage of frozen chicken leg quarters from the US to St Petersburg. In April 2008, some of the cargo was found to have been contaminated with gasoil as a result of a leak from an adjacent deep bunker tank. The leak was caused by the unseaworthiness of the vessel. The receivers of the cargo demanded a cash settlement for the damaged cargo and did not take any further steps to discharge the remaining cargo. In October 2008, the defendants and the receivers reached an agreement for the cargo to be re-exported for a cash settlement. In November 2008, the Russian veterinary service granted a permission for the re-export. An arbitration tribunal found that the owners breached the charterparty by providing an unseaworthy vessel. Up to May 2008, it was reasonably foreseeable that the owner’s breach of the charterparty would cause a delay in the veterinary service resolving the case. However, this was not the case after May 2008. The tribunal awarded the owners a particular sum as demurrage in respect of the period May – November 2008. The charterers appealed this decision.

Issues

(1) Did the receivers’ conduct cause the delay?

(2) Did the receivers’ conduct prevent the charterers from relying on frustration of the charterparty?

Decision/Outcome

The appeal was dismissed.

(1) The receivers’ conduct was ultimately the real reason why the cargo was not discharged as it was the reason why the Russian authorities put in place an order prohibiting the re-export of the cargo.

(2) The charterers were liable in damages or demurrage as they failed to discharge the cargo within the laytime.

(3) Unlike in Adelfamer SA v Silos E Mangimi Martini SpA (The Adelfa) [1988] 2 Lloyd’s Rep 466, in the instant case the frustrating event did not prevent the sailing away of the vessel, but was a failure to discharge the cargo within the laytime. Therefore, the receivers’ conduct prevented the charters from relying on what would otherwise be a frustrating event, relieving them from the obligation to pay demurrage.