Posted: 24/11/2025
As part of the bicentennial celebration of Thomas Cooper’s founding in 1825, Penningtons Manches Cooper is spotlighting a different standout case conducted by the firm across its two centuries of English legal practice for each month of 2025.
In June 2019, Thomas Cooper joined forces with Penningtons Manches in a £90 million ‘Goldilocks merger’, in which Thomas Cooper gained enhanced critical mass in the UK, and Penningtons Manches expanded its international footprint with offices in Madrid, Paris, Piraeus and Singapore.
The relocation of the Thomas Cooper London team to 125 Wood Street from their longstanding premises at Ibex House was completed during the Covid-19 global pandemic, amidst intermittent societal lockdowns and mandated social distancing, while office culture worldwide settled in to a new era of technology-led hybrid working.
This penultimate instalment in the bicentennial series focusses on the judgment delivered during that period by the Court of Appeal in K Line Pte Ltd v Priminds Shipping (HK) Co Ltd, The Eternal Bliss [2021] EWCA Civ 1712, in which Penningtons Manches Cooper acted for the successful charterers.
The word 'demurrage' has been in English usage for almost 400 years. Its modern-day meaning is liquidated damages payable by a charterer for exceeding the laytime under a voyage charter. Legally speaking, if the cargo operations are not completed within the agreed laytime, the charterer is in breach of contract and correspondingly liable to the shipowner in damages for the delay. This liability is quantified by the demurrage clause, which is a liquidated damages clause, meaning the parties have already agreed on the amount of damages, obviating any need to litigate matters of quantum at trial.
Once the vessel is on demurrage, events that would have interrupted the expiration of laytime, such as bad weather or a public holiday, will not interrupt the accrual of demurrage unless the terms of the contract expressly say so. Liability for demurrage is incurred continuously as a matter of causation, since the vessel would never have endured the laytime-interrupting events if the charterer had not breached their contract. Commercial parties often express this concept through the maxim 'once on demurrage, always on demurrage'.
Pursuant to a contract of affreightment dated 30 July 2014, K Line Pte Ltd voyage chartered the bulker Eternal Bliss to Priminds Shipping (HK) Co Ltd on amended Norgrain terms.
The vessel arrived at Longkou, China on 29 July 2015 for the discharge of a cargo of soya beans, but was kept at anchorage for 31 days due to congestion and a lack of storage space ashore. Discharge only commenced on 30 August 2015, and was completed on 11 September 2015. In the course of discharging, it was allegedly discovered that the cargo had undergone significant moulding and caking, which necessitated K-Line eventually compromising their liability to cargo interests at a cost of US$1.1 million.
K-Line said that the cargo deteriorated by reason of the prolonged retention on board, which would not have happened if Priminds had discharged the vessel within the laytime. No breach of contract was alleged against Priminds other than overrunning the laytime.
K-Line commenced arbitration, following which the case was brought before the Commercial Court to determine a preliminary point of law: namely, whether, assuming the facts as alleged by K-Line, they could recover their loss of US$1.1 million in addition to demurrage, all as a result of charterers' sole breach of contract in exceeding the laytime.
With a view to determining '[w]hat does the law take to be covered by a demurrage rate? What does demurrage liquidate?', Mr Justice Andrew Baker conducted an in-depth review of the authorities.
Significant attention was paid to the Court of Appeal's decision in Reidar v Arcos (1926) 25 Ll L Rep 513 in which a vessel was prevented from loading a full summer cargo by reason of the charterer overrunning the laytime. The vessel could only load a reduced winter cargo, otherwise it would have arrived at Manchester for discharge unlawfully overladen. The court in that case was unanimous that owners could recover damages equivalent to deadfreight in addition to demurrage. The judges' analyses, however, differed. Lord Justice Bankes found there to be only one breach of charter, namely exceeding the laytime, whereas Lord Justice Sargant considered there to be two. Lord Justice Atkin's views on the issue were unclear, although in the later decision of The Bonde [1991] 1 Lloyd's Rep 136, it was concluded that he and Lord Justice Sargant had been in agreement. Accordingly, a claim for carrying charges in addition to demurrage failed in The Bonde, as the only breach of charter was that of exceeding the laytime.
After careful consideration, Mr Justice Andrew Baker concluded that even if there were two breaches of contract in Reidar v Arcos, it was still possible to find a common ratio across all three judgments by treating the single breach in exceeding the laytime as sufficient to allow the deadfreight-related losses to be recovered. In other words, any possibility of a second breach could be seen as superfluous. The learned judge accordingly took the view that The Bonde was wrongly decided and declined to follow it.
Having determined that 'agreeing a demurrage rate gives an agreed quantification of the owner’s loss of use of the ship to earn freight by further employment in respect of delay to the ship after the expiry of laytime, nothing more', it followed that K-Line's cargo indemnity claim comprised a different head of loss. The disponent owners, therefore, succeeded in establishing liability in principle for US$1.1million as unliquidated damages in addition to demurrage of US$20,000 per day. The charterers appealed.
The judgment of the Court of Appeal was delivered by Lord Justice Males.
The court acknowledged the effort expended on ascertaining from the dicta in Reidar v Arcos whether Lord Justice Atkin was 'a “one breach” or a “two breach” man'. In truth, they said, it was 'impossible to tell' and 'the ratio of the case on this issue is obscure.'
Respectfully differing from Mr Justice Andrew Baker, the Court of Appeal considered that The Bonde was correctly decided. However, being a first-instance decision only, the case was not binding on the Court of Appeal, and the other authorities on the issue were inconclusive. The court was therefore free to:
'approach the issue as one of principle. Our conclusion is that, in the absence of any contrary indication in a particular charterparty, demurrage liquidates the whole of the damages arising from a charterer’s breach of charter in failing to complete cargo operations within the laytime and not merely some of them.'
Although demurrage is primarily intended to compensate a shipowner for loss of freight, the court held that is not all it is intended to do. While it is possible for parties to agree that a liquidated damages clause should liquidate only some of the losses arising from a breach, that would be an unusual outcome, as it would forfeit the benefits of a liquidated damages clause in providing certainty and limiting the scope of disputes. A finding that demurrage quantified only some of the owners' losses would also inevitably cause disputes as to which losses are within and which are without.
The court noted that the authority of The Bonde had stood for some 30 years, apparently without causing any dissatisfaction in the market, and without another case criticising its reasoning: 'This is itself, in our judgment, a powerful reason not to depart from the decision in The Bonde.'
Although permission to appeal to the Supreme Court was granted, the case settled before the appeal could be heard.
In discussing at length the Court of Appeal's decision in 'the very important case of The Eternal Bliss', the textbook Voyage Charters, 5th Edition concludes: 'The statement that the ratio of Reidar v. Arcos on the issue is obscure and it is better to recognize that fact than to continue to search for a clarity which does not exist is refreshing. The reasoning from first principle is highly persuasive and the result in terms of producing certainty and clarity is to be commended.'
The Eternal Bliss was one of two notable Penningtons Manches Cooper successes of the period in which the Court of Appeal considered a notional means of procuring a cargo indemnity under a voyage charter, and found the claim to be conceptually flawed. In The Tai Prize [2021] EWCA Civ 87, the master’s inspection of a defective cargo was obscured by a dust cloud, prompting the owners to contend that the draft bills of lading, presented by the charterers for signature, misrepresented the ‘apparent good order and condition’ of the goods. However, the court held that, 'as the apparent condition of the cargo refers to the condition as it appears to the master on reasonable examination, it is essentially meaningless to say that a misdescription of the apparent condition cannot reasonably be discovered by the master.'
The niceties of the theoretical arguments advanced, and ultimately rejected, in The Eternal Bliss and The Tai Prize make for fine academic reading, but the decisions also reflect a narrowing of owners' already-slender array of options when contemplating the pursuit of a cargo indemnity under a voyage charter.
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