Glencore Energy UK Ltd v OMV Supply & Trading Ltd

This claim arises out of a contract for the sale of oil on CFR terms between the claimant seller, Glencore Energy UK Ltd (“Glencore Energy”) and the defendant buyer, OMV Supply & Trading Ltd (“OMV”). Because of congestion at the discharge port, OMV requested, and Glencore Energy agreed, that the vessel carrying the oil should wait offshore until a berth was available. It is common ground that ordinarily OMV would make payment in respect of the period the vessel spent waiting. Glencore Energy makes the claim in implied contract, the amount calculable at the demurrage rate, with an additional payment for bunkers consumed while the vessel was at the waiting area. OMV contends that in the circumstances Glencore’s claim is for demurrage and that it is time barred because it was not made within the contractual period for demurrage claims.

At the hearing there was oral evidence on behalf of Glencore Energy from Mr Thomas Large and Mr Richard Prince. Mr Large is a risk manager on Glencore Energy’s fuel oil desk, but at the relevant time was involved in cargo operations on its crude oil desk. Mr Prince is a senior freight trader at ST Shipping and Transport Pte Ltd (“ST Shipping”). ST Shipping acts as Glencore Energy’s in-house shipping department, with its primary role being to provide shipping services to companies within the Glencore group which trade oil products and require tonnage to fulfil their trading obligations. No one from OMV gave evidence.

On 30 October 2015 Glencore Energy and OMV reached heads of agreement for the sale by Glencore to OMV of 80,000 mt of Siberian light crude oil to be loaded from Novorossiysk, Russia. Glencore sent a draft sale contract to OMV on 2 November, and OMV sent non-controversial revisions to various clauses on 4 November. Under clause 5 of the agreement, delivery was to be “CFR basis one safe berth / port basis Augusta, Italy with scheduled loading dates 10^th-14th November 2015, weather and safe navigation permitting, on board vessel ‘TBN’/sub to be acceptable to Buyer...”

Laytime was provided for in clause 9 of the contract, demurrage in clause 10:

“9.

Laytime

Laytime allowed at disport shall be 36 hours, commencing 6 hours after tendering of notice of readiness or upon commencement of discharge, whichever first occurs. Laytime computation shall be as per the general terms and conditions.

10.

Demurrage

Except as herein provided, for all time exceeding the allowed laytime, Buyer shall pay demurrage to Seller in accordance with the actual charterparty rate. Any claim for demurrage to be received latest 90 days from completion of discharge otherwise it will be deemed to have been waived, and any such claim not to exceed the amount properly due by seller to the shipowner. Seller will supply Buyer copy of owner’s claim prior to payment.”

Clause 24 of the contract stated that where not specifically covered by the “above terms”, the agreement was to be governed by BP 2007 General Terms and Conditions for CFR deliveries. That was a reference to the 2007 edition of BP Oil International Limited’s General Terms and Conditions for Sales and Purchases of Crude Oil (“the BP Terms”).

The BP terms, section 13, was headed “Time allowed, delays and demurrage”. Clause 13.1 covered time allowed for discharge, 36 hours. Running hours were dealt with in clause 13.1, which provided, in part:

“13.2.1

Running hours shall commence Berth or no Berth 6 hours after NOR is tendered or on commencement of discharge, whichever is the earlier. For the purposes of calculating running hours, discharge shall be deemed to be completed upon disconnection of discharging hoses.”

Clause 13.2.2 set out certain exemptions when delay was not to be counted, including at clause 13.2.2(b) “inward passage until the Vessel is securely moored at the Berth…” There was a time bar for demurrage claims in clause 13.2.4. Demurrage claims were addressed in clause 13.3.

Clause 24.1 contained definitions: “discharge port” was the berth at which the oil to be delivered under the terms was to be discharged; “laytime” was the time allowed to the seller for loading under the terms, or the time allowed to the buyer for discharge under them; and “NOR” meant:

“the valid notice of readiness to load or discharge, as the case may be, as given by the master of the Vessel...to the Seller...at the Loading Terminal or to the Buyer…at the Discharge Port respectively.”

Along with negotiations for the sale of the oil, there had been negotiations over the chartering of a vessel to deliver it. On 30th October 2015 Mr Large of Glencore had referred the details of two vessels to perform the contract to OMV, one being the MT Seagrace. OMV had referred these to its vetting department, and on 2nd November 2015 OMV accepted the MT Seagrace (“the vessel”) on terms set out in its email. Mr Large notified ST Shipping.

Mr Prince of ST Shipping then concluded a charter for that vessel through the brokers, Clarksons, acting for the owners. It was between ST Shipping as charterers on the one hand and the owners, Cooper Navigation Ltd (“the Owners”) on the other. In the recap which Clarksons sent, laytime was specified as 84 hours, Sundays and holidays included. Demurrage was at a rate of $US 32000 per day pro rata. Address commission was set at 1.25% on freight, deadfreight and demurrage.

The charterparty was based on the BPVoy 4 form as modified. Clause 20 of that form contained a time bar for demurrage claims: these needed to be made within 90 days from the time of discharge of the cargo, and had to have documentary support. Clause 22 was headed Revised Charterers’ Voyage Orders for Loading or Discharge Ports and provided, in its relevant parts:

“22.1

If at any time after the date of this Charter, Charterers, notwithstanding that they may have nominated a loading or discharge port, wish to issue revised Charterers’ Voyage Orders and instruct Owners to stop and/or divert the Vessel to an alternative port within any Ranges stated in Section E or F of Part 1, or cause her to await orders at one or more locations, Owners shall issue such revised instructions to the Master as are necessary to give effect to such revised Charterers’ Voyage Orders and the Master shall comply with such revised instructions as soon as the Vessel is free of any previous charter commitments.

22.2

If…

22.2.3

the Vessel is, after loading, instructed by Owners to stop and await orders at Charterers’ request then all time spent by the Vessel awaiting orders shall count as laytime or, if the Vessel is on demurrage, as demurrage.”

After Mr Prince of ST Shipping had concluded the charterparty with the owners on 2 November 2015, he sent the same day to Glencore Energy, including Mr Large, a fixture recap recording the position as between the owners and ST Shipping. This was topped and tailed from the recap Clarksons had sent him. However, there was no mention of Glencore Energy, the parties remaining ST Shipping and the Owners, and the recap referred to commission payable to Clarksons. In his evidence Mr Prince accepted that the owner-ST Shipping charterparty would not necessarily be back to back in all cases with the ST Shipping- Glencore Energy arrangements, as where the former was a time charter and the latter (as in this case) a voyage charter.

The background to what Mr Prince had done was that under a Frame Agreement between Glencore Energy and ST Shipping, Glencore Energy informs ST Shipping that it requires a vessel for a particular trade. ST Shipping then seeks to provide vessels from ST Shipping’s own fleet or by chartering them, although failure to locate a vessel is not a breach of contract. Pricing is a market related price plus a service fee. Each transaction is to be summarised in a fixture recap. Under the Frame Agreement, ST Shipping is not to represent itself as an agent of Glencore Energy, not to commit Glencore Energy without prior approval, and not to bind Glencore Energy in any way. Glencore Energy must settle its obligations to ST Shipping within 30 days of receipt of an invoice. Schedule A of the Frame Agreement provides that freight and demurrage is to be paid as per fixture recap/charterparty.

The same day Mr Large received the ST Shipping-Owners recap from Mr Prince, 2 November 2015, he had sent it, not the ST Shipping- Glencore Energy recap, to OMV. From this point ST Shipping and Mr Prince dropped out of the picture and Glencore Energy took over the handling of day to day operations and the provision of instructions to the vessel.

On 3 November 2015 OMV confirmed that the discharge port was Trieste and provided documentary/discharge instructions. The oil was destined for the SIOT (Società Italiana per l'Oleodotto Transalpino SpA) terminal there and the transalpine pipeline. On 6 November 2015 Glencore Energy provided the vessel with discharge orders. On 9 November her master issued an NOR; the vessel had arrived at Novorossiysk and it was ready to load. The NOR stated that laytime was to commence in accordance with the terms of the charterparty of 2 November. Loading commenced on 9 November and was completed the next day. The vessel left Novorossiysk.

Meanwhile, the previous day, 9 November 2015, OMV sent an email to Glencore Energy in the following terms:

“As there are no berthing prospects currently for the Seagrace at Trieste. Can you please ask the Master to remain off Trieste Gulf until further instructions are issued.

Please ask the Master to tender the NOR according to the natural ETA.

The Master could possibly wait in the area located about 20 miles off Chioggia (Italy) Venice (Italy) or Dugi Otok Island (Croatia).

The Master is to tender NOR upon arrival at the waiting area to all parties as per voyage orders. The NOR is to include bunkers rob upon anchoring and estimated sailing time to Trieste.

Master will be instructed when to move into Trieste. Upon sailing from the waiting area Master is to advise time of sailing and bunkers rob. Master is to tender a new NOR (without prejudice to the previous one) upon arrival Trieste including bunkers rob upon anchoring/berthing. Please confirm Master instructed accordingly.”

The same day OMV sent Glencore Energy a further email which stated:

“Further to the below, our scheduling department would like the Master to give ETA Trieste 15/12/15 when sending ETA messages to the terminal. Master is to tender NOR according to natural ETA to OMV. Please confirm the Master has been instructed accordingly.”

That same day, 9 November, Mr Large of Glencore amalgamated OMV’s requests into one and forwarded them to the Owners. The Owners inquired why OMV wanted information on the bunkers remaining on board at the anchoring point. Mr Large replied that he had no idea. In his evidence he said that in fact he did know – because of a potential claim for waiting – but that his reply was to deal with the matter quickly, not least when it should be of no interest to the Owners. That evidence I accept.

The following day, 10 November, the master emailed Mr Large, OMV and Clarksons, giving an estimated time of arrival at the waiting area as 19 November.

On 13 November 2015 OMV requested details of the demurrage rate from Glencore Energy, which duly provided them.

A few days later, 16 November 2015, OMV emailed Mr Large of Glencore Energy as follows:

“Further to the below, can you please ask the Master to find a safe waiting area just north of Corfu. The Master is to continue to give ETA Trieste 15/12/15 when sending messages to the terminal. Master is to tender NOR according to natural ETA Trieste to OMV.”

Mr Large forwarded this request to the Owners, who replied that “chrts are kindly advised that all time spent by the vessel awaiting for orders will be for chrts account. Furthermore, bunkers consumed over and above idle during waiting to be for chrts acct”. In his daily update on 16 November, the master indicated that he estimated he would arrive at the waiting area the next day.

The vessel arrived at a location north of Corfu as requested and dropped anchor on 17 November 2015. At 11.48 that day the master emailed Mr Large of Glencore Energy, OMV and Clarksons with the subject-heading “Seagrace/ST Shipping – CP dated 2.11.2015 - NOR waiting area” stating:

The following day Clarksons for the Owners sent Mr Large another email, not copied to OMV, which stated:

The vessel remained at the waiting position until 10th December 2015. The Owners sent revised ETAs Trieste during this period, including one with a reminder to Glencore Energy that they needed 3 days’ notice of the intended arrival at Trieste to give them time to comply with the port’s pre-arrival requirements.

On 9 December 2015, Glencore Energy inquired of OMV when the vessel might sail for Trieste. The reply on 10 December 2015 was that the vessel could proceed to Trieste and was to tender an NOR there at 00.01 hours on 13 December 2015. This was passed to the vessel. She left the waiting position at 11.00 hours on 11 December 2015. The Master sent a departure notice to Mr Large and OMV confirming the time of departure and the bunkers on board at that point.

The vessel arrived at Trieste late on 12 December 2015 and tendered two notices of readiness at exactly the same time. The first was sent to the parties, including the terminal, but the second did not include the terminal as a recipient. The first stated "NOR - Tendered on 13.12.2015 at 00:01 hours LT - Dear Sirs, I hereby tender you the M/T SEAGRACE as being ready in all respects to commence discharging of the cargo of SILCO - 80090.000 MT in VAC. Laytime shall commence in accordance with the relevant terms and conditions of the charter party dated 02.11.2015."

The second NOR stated "NOR without prejudice to previous - Tendered on 13.12.2015 at 00:01 hours LT (dropped anchor) - Dear Sirs, Without prejudice to the Notice of Readiness tendered on 17.11.2015 at 1148 hours LT hereby tender you the M/T SEAGRACE as being ready in all respects to commence discharging of the cargo of SILCO - 80090.000 MT in VAC. Laytime shall commence in accordance with the relevant terms and conditions of the charter party dated 02.11.2015".

The oil was discharged at Trieste on the 13/14 December 2015.

The Owners had sent an invoice for freight of $US 950,342.57, dated 11 November 2015, addressed to ST Shipping but sent to Mr Large of Glencore Energy. Mr Large’s evidence was that ST Shipping never sent invoices to Glencore Energy for freight, demurrage or bunkers in relation to the charter of the vessel to it.

On 30 November Clarksons emailed Mr Large and Mr David Carr, who dealt with demurrage claims at Glencore Energy, that there appeared to be no “on account” provisions in the charterparty for demurrage payments. However, the Owners had requested a payment given the vessel had been waiting at Trieste roads since 17 November, having tendered an NOR, and was not expected to berth prior to mid-December. The Owner’s invoice to this effect claimed for 12 days at the demurrage rate, minus address commission. In early December the Owners were paid the invoice amount of $US 379,200 in what Mr Carr in his email described “as demurrage on account”.

On 22 December 2015 Clarksons forwarded the Owner’s invoice for the “Balance Demurrage”, $US379,200 having already been paid on account. Attached to the invoice were “Laytime Calculations”, stating that the NOR was given at 11.48 on 17 November 2015, laytime had begun at 17.48 that day (six hours later), the vessel was on demurrage from 13.30 on 20 November 2015, and laytime had ended at 17.48 on 14 December (the time the hoses had been disconnected). On 29 February 2016, Mr Carr sent a revised offer for “demurrage”, since the Owners had not given credit for the passage time to Trieste from the waiting area. The Owners accepted that there had been an oversight, sent a revised invoice for demurrage, minus address commission, and in early March Mr Carr notified Clarksons that the revised figure of $US 331,909.71 had been paid to the Owners “in settlement of their demurrage claim”.

In the following months, Glencore Energy made no claim against OMV for the waiting time. I accept Mr Large’s evidence that the matter was in the hands of someone in Glencore Energy who is on the crude oil desk. She deals with general claims separately from Mr Carr and those in Glencore Energy who deal with demurrage. At some point Mr Large could not remember, OMV informed Glencore Energy that the time bar for demurrage claims meant that no claim could be made against them.

There followed an Owners’ “without prejudice” invoice sent to Glencore Energy for the account of ST Shipping, dated 19 September 2016, claiming as “Detention” the time spent at the waiting position at the contractual demurrage rate ($US 766,133.34), and also for the cost of the bunkers consumed during that period ($US 48,900).

Glencore Energy then sent OMV an invoice dated the same date, 19 September 2016. I accept Mr Large’s evidence that it was issued by the person on the crude oil desk who deals with general claims. The invoice claimed for detention and bunkers in the same amounts as the Owner’s invoice. Attached as back up documentation was the Owners-Glencore Energy invoice and a statement by the master of the vessel of the bunkers consumed between 11.48 on 17 November, when it anchored at the waiting area, and 10.24 on 11 December 2015 when it left that point. OMV was not informed about the earlier settlement by Glencore Energy of the Owner’s claim.

Having heard Mr Large’s evidence, my conclusion is that the timing and phraseology of the Owners-Glencore Energy invoice, and of the Glencore Energy-OMV invoice, were prompted by OMV informing Glencore Energy that the time bar for demurrage claims had expired. The characterization of the claim in both as for detention was unsurprising given OMV’s approach. Mr Large’s evidence was that after the invoice Glencore Energy paid the Owners for the bunkers as claimed.

OMV rejected the claim on 20 September 2016 on the basis that it was a demurrage claim, rather than a detention claim, and was accordingly time-barred. Glencore Energy responded stating that no discharging operations were performed at the waiting position and their claim was therefore for detention and not demurrage.

In outline, Glencore Energy’s case was that an implied contract came into being as a result of Glencore Energy acceding to OMV’s request in the emails of 9 and 16 November 2015, that the vessel wait in the Mediterranean for a berth at Trieste. Further, it was a term of that contract that Glencore Energy was entitled to be remunerated for the time the vessel spent at the waiting area by reference to the demurrage rate, as well as for the cost of any bunkers consumed whilst the vessel was there. Its case was that its claim for the time the vessel spent at the waiting area was one for detention, pure and simple. It cited, inter alia, Moore-Bick J’s judgment in The Mass Glory [2002] 2 Lloyd’s Rep. 244 at [8]-[10]) as to the distinction between demurrage and detention claims. Use of the demurrage rate for a detention claim was supported by reference for example to Laytime and Demurrage, 7 th ed, 2016, [8.2]. On its case OMV’s request that the vessel record its use of bunkers at the waiting area confirmed that it should pay for the bunkers consumed there as well.

OMV’s case was that the time the vessel spent at the waiting area fell to be treated as part of a laytime and demurrage calculation, either under the terms of the contract (its primary case), or as a result of a variation to that contract through Glencore Energy agreeing to its requests in the emails of 9 and 16 November 2015 (its secondary case). Since a claim for demurrage was not made within 90 days after discharge provided for in the contract, it was time barred. The purpose of time bars in this area is, as Bingham J had put it in Babanaft International Co SA v Avant Petroleum Inc (The “Oltenia”) [1982] 1 Lloyd’s Rep 448, 453, that claims can be investigated and, if possible, resolved while the facts are still fresh. There was nothing unfair about OMV invoking the time bar. Glencore Energy should bear the loss of its mistake in not issuing its claim in time.

As to OMV’s primary case, this was that the time spent at the waiting area fell directly under clause 10 of the sale contract. The master of the vessel issued a notice of readiness on 17 November, and by clause 9 of the sale contract, supplemented by clause 13.2.1 of the BP Terms, laytime commenced 6 hours later. Then 36 hours after that demurrage began automatically, in accordance with clause 10. That demurrage continued to accrue until the discharging hoses were disconnected at Trieste, subject to the other terms of the laytime and demurrage regime (BP Terms, clause 13.2.1). The other terms included clause 13.2.2(b) of the BP Terms, that delay regarding inward passage was not to be counted until the vessel was securely moored at the berth. Consequently, the demurrage calculation would not have included the time of the inward passage from the waiting area to Trieste. The second notice of readiness was for the terminal at Trieste, not for the parties themselves.

OMV’s secondary case was that the parties agreed to a variation of the contract, whereby laytime was begun at the waiting point by issue of a notice of readiness, with demurrage mechanically following. Parties can agree that laytime is advanced (citing J. Cooke, A. Taylor, J. Kimball, D. Martowski, L. Lambert, Voyage Charters 4th ed, 2014, [15.48]), which is what in OMV’s submission happened here. Even if the notice of readiness did not comply strictly with clause 9, the argument continued, the parties’ conduct caused laytime to commence (citing Mustill LJ in Transgrain Shipping BV v Global Transporte Oceanico SA (The “Mexico 1”) [1990] 1 Lloyd’s 507, 514). On OMV’s case the emails of 9 and 16 November amounted to a representation or offer that a notice of readiness tendered on the vessel’s arrival at the waiting area would be effective to commence the running of laytime, and Glencore Energy acted on that representation or accepted that offer. Further, OMV told Glencore Energy that the master should tender a new NOR without prejudice to the previous one upon arrival at Trieste. Glencore Energy also accepted that, so again the contract was varied so that the second notice of readiness on arrival at Trieste constituted a notice of readiness within the terms of the contract.

OMV rejected Glencore Energy’s implied contract case. Courts only imply a contract when it is necessary to do so (Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274; [2002] 1 All ER (Comm) 737, para [17]-[21]), and will not find one to remunerate a party if the situation is already covered by an express contract (Steven v Bromley [1919] 2 KB 722, 727). Here it was not necessary to imply a contract since Glencore Energy could be remunerated for the waiting period through the demurrage provisions in the contract.

Despite Mr Byam-Cook’s ingenious arguments, I cannot accept the primary case he advanced, that the sales contract covered this situation in that laytime was brought forward by the serving of the NOR on arrival at the waiting area, the demurrage provisions following mechanically. The only provision expressly addressing waiting time he could point to, clause 22 of the BPVOY4 form, was not part of the sales contract. In any event, that clause makes no reference to serving an NOR, or to the Owners being entitled to claim the cost of bunkers consumed while waiting. I will return to the issue of bunkers shortly, but their cost while the vessel was waiting would have been a concern to anyone in Glencore Energy’s position, not least because the Owners in their reply to Mr Large’s email of 16 November indicated that someone in the Glencore group, the charterers ST Shipping, would have to account for bunkers in excess of idle.

What happened does not fit within the terms of the sales contract. Clause 9 refers to laytime at disport, and the definition of laytime in the BP Terms, which were incorporated in the sales contract, is of the time allowed for loading and unloading. Thus the terms of the sales contract do not contemplate that laytime could run in the middle of the carrying voyage. This is consistent with authority that ordinarily laytime and a claim for demurrage cannot by definition arise midway through the carrying stage of the voyage: The Mass Glory [2002] 2 Lloyd’s Rep. 244 at [8]-[10]), per Moore-Bick J.

As to the argument that the notice of readiness on 17 November 2015 meant that after laytime the demurrage provisions of clause 10 had come into effect, that does not accord with the terms of the contract. The definition of notice of readiness in the BP Terms, incorporated in the sales contract, was of a notice to load or to discharge given by the master of the vessel to the seller at the loading terminal, or to the buyer at the discharge port. That does not apply to a waiting period as here when there is neither loading nor unloading. Moreover, under section 13.2.1 of those terms, the running hours of 36 hours for the discharge of the oil began 6 hours after a notice of readiness was tendered, or on commencement of discharge, whichever was the earlier. In other words, if the notice issued by the master on 17 November was a notice of readiness under the contract, the time for discharge, and the consequences for failing to comply with it, had been triggered. That again was not the case.

Another difficulty is that OMV could not explain how under the contract time running was stopped after the vessel left the waiting area and was triggered again at Trieste, or indeed how a new notice of readiness could be issued at all, when the vessel was to discharge there. When read in the context of clause 13 in the BP Terms as a whole, the inward passage clause, 13.2.2(b), providing the time does not run, is concerned with inward passage within the port, not as in this case passage from the waiting area to the port: see also Laytime and Demurrage, 7th ed, 2016, paras. 4.469-4.470. There is no provision in the sales contract for a second notice of readiness. Mustill LJ’s dictum in The Mexico I arose in a different context. Overall, this is not a case where the sales contract could be applied to the circumstances of this case.

That leads to Mr Byam-Cook’s secondary case, that as a result of OMV’s requests of 9 and 16 November 2015, and Glencore’s acceptance, the sales contract was varied. How would the contract have been varied? Clause 9 would need to be rewritten so as to apply to the waiting area and to provide for the tender of a second NOR at Trieste. There would also have to be amendments to clause 10 of the sales contract and to clause 13 of the BP Terms so that the demurrage rate applied as well to delays mid-voyage. The definitions of laytime would need to be reworded to apply to time spent waiting during the voyage. Amendments to clause 9 might be necessary as well regarding the six hour period before laytime commenced, so that it applied at both the waiting area and Trieste. It would need to be made clear as well whether the exceptions to laytime applied as regards the waiting area.

In my view OMV’s variation case does not bear close examination. The amendments necessary to the sales contract and the BP terms (incorporated into it) would be substantial and not necessary to give business reality to what Glencore Energy and OMV had agreed to by 17 November 2015. Moreover, it is unlikely that someone in Glencore Energy’s position would have agreed to some of the variations consequent on OMV’s analysis. To take one example: if clause 9 was not varied, so that the six hour period applied at both the waiting area and at Trieste, it would mean that Glencore Energy was agreeing to assume an extra liability. That would not have been an additional potential cost that Glencore Energy would have had to agree to when it was already complying with OMV’s request for the vessel to wait, a request it was entitled to refuse.

To my mind the correct legal analysis of what happened in this case was straightforward. It is what in Laytime and Demurrage, 7th ed, 2016, is characterized as “delay by agreement”: [8.7], [8.76-8.85]. Although not exactly on point, Saville J’s decision in The Saronikos [1986] 2 Lloyd’s Rep 277 supports this conclusion. There the owners agreed to the charterers’ request that the vessel wait off the port. The charterers accepted that the owners were entitled to reasonable remuneration for waiting and the issue was over the calculation of the amount. In the course of his judgment, Saville J said that the position was that the charterers had requested that the owners perform services outside the terms of the charterparty, services which they were not obliged to perform, the owners had agreed, and there was an implied contract that they should pay remuneration for those services. Saville J held that it was unrealistic to treat this as a breach of contract, and in the absence of agreement between the parties “wrong to regard the extra contractual services as though they had been performed to any extent under the contract, for the simple reason they were not”: at 279.

In this case in their emails of 9 and 16 November 2015 OMV requested Glencore Energy that the vessel wait in the Mediterranean because of congestion at Trieste. Although not obliged to do so, Mr Large emailed the Owners, and the following day (the day loading at Novorossiysk was completed) the master sent an email indicating that the vessel would proceed as requested. On 16 November OMV made an additional request, that the vessel wait at a particular area off Corfu. Again Mr Large contacted the Owners, and the master emailed that he was proceeding to that area. The vessel reached it the following day. At that point Glencore Energy had accepted OMV’s request through the conduct of Mr Large and the master acting as he did. There was an implied contract for “delay by agreement”.

It was necessary for an implied contract to this effect “to give business reality to a transaction to create enforceable obligations between parties who are dealing with one another in circumstances in which one would expect that business reality and those enforceable obligations to exist”: The Aramis [1989] 1 Lloyd’s Rep 213, 224 per Bingham LJ approving May LJ in The Elli 2 [1985] 1 Lloyd’s Rep 107, 115. Without an implied contract Glencore Energy would not be paid for its services since, for the reasons I have explained, the express provisions in the contract for remuneration by way of demurrage did not apply, nor was there any agreement to vary the contract’s terms. The principle in Steven v Bromley [1919] 2 KB 722 is no obstacle to an implied contract in this case, because otherwise Glencore Energy would not be remunerated.

To my mind the necessary terms of the implied contract which came into effect on 17 November were straightforward: the vessel would wait in the specified waiting area until further orders, and Glencore Energy would be remunerated for that service. By accepting by conduct the request in OMV’s emails of 9 and 16 November for the vessel to wait, Glencore Energy was not binding itself to everything contained in them. In my view it was not binding itself to that part of the requests about the vessel issuing a notice of readiness at the waiting area. Compliance with that part of the requests was not necessary to give business reality to the transaction; all that was necessary was that Glencore Energy agree that the vessel should wait and that, in return, it be paid.

Moreover, none of what happened after the implied contract came into effect on 17 November has any bearing on its terms or their interpretation, in particular what at any point Glencore Energy might have termed the compensatory payment for the service it provided. In fact, I note in passing that it was the Owners who first characterised the payment as demurrage, possibly because of clause 22.2.3 of the BPVoy 4 form, which was part of their charterparty with ST Shipping. In its communications with OMV, Glencore Energy never used the term demurrage to describe the payment; of course it never claimed payment until the invoice of 19 September 2016, when it described it as a payment for detention.

The issue becomes what was impliedly agreed as to how Glencore Energy was to be compensated. Payments for detention have long been calculated at the demurrage rate: e.g., The Varing [1931] P 79, at 89, 93. Use of the demurrage rate does not, of course, constitute a payment as demurrage: see Lukoil Asia Pacific PTE Limited v Ocean Tankers (PTE) Limited [2018] EWHC 163 (Comm), per Popplewell J.In The Saronikos [1986] 2 Lloyd’s Rep 277. Saville J held that the owners should receive a fair commercial rate for the use of their vessel outside the terms of the charterparty, as well as the bunkers consumed and other additional running costs. In establishing the terms of a contract accepted by conduct, the courts sometimes use the standard of reasonableness to resolve uncertainty as to their nature: Chitty on Contracts, 32^nd ed, [2-030].

In this case part of the factual matrix was that, after its initial request of 9 November that the vessel wait, and before the implied contract came into effect, OMV inquired on 13 November 2015 about the demurrage rate. Glencore Energy provided it to them. In light of that it seems to me that the demurrage rate became the implied contractual benchmark for quantification of Glencore Energy’s claim for providing the services of the vessel in the waiting area. It was the fair commercial rate and met the standard of reasonableness for the service Glencore Energy provided.

There is one caveat to that. The request in OMV’s email of 9 November 2015 about bunkers - that the master record them on arriving and leaving the waiting area - persuades me there was an additional implied term that OMV would pay for the bunkers consumed as a result of the vessel having to wait at the waiting area. Why else should OMV request that bunker records be kept, except that a reasonable person knowledgeable about this trade would expect that a claim for bunkers would follow the request for the vessel to wait? OMV gave no explanation at the hearing for its request to record bunkers. It did underline that what it requested in its email was a record of the bunkers at Trieste as well. Since any liability for bunkers would cease when the vessel left the waiting area, not at Trieste, it submitted that there must have been another explanation for the request to record bunkers. In the absence of any explanation from OMV itself about its request for the recording of bunkers at Trieste, that submission can be ignored.

What the Owners claimed, were paid, or purported to claim by their invoice of 19 September 2016, has no relevance to the implied contract between Glencore Energy and OMV and its terms. The Owners were not a party to the implied contract, and there was never at any time a suggestion that OMV would indemnify Glencore Energy for what it had to pay the Owners for the vessel waiting. For this reason as well, the contractual arrangements between Glencore Energy and ST Shipping have no bearing on the terms of the implied contract. OMV made the request to Glencore Energy that the vessel wait, and Glencore Energy procured that result from the Owners in ways that are irrelevant to the implied contract between Glencore Energy and OMV.

For the reasons given, Glencore Energy is entitled to compensation for the service it provided to OMV at the demurrage rate for the days the vessel spent at the waiting area, and for the bunkers consumed during that period. I anticipate that the parties will agree the figures.