The claimant Chevron was a manufacturer and seller of petroleum products. It entered into a charterparty with the defendant Unical under the Shelltime 4 form. In terms of the charterparty, the claimant agreed to hire the barge for a period of 5 years commencing from the date of delivery of the ship for the purpose of delivering the claimant’s marine products to vessels in the port. The defendant delivered the barge to the claimant on 19 August 2008.

Clause 27(a) of the charterparty excluded the vessel’s masters and owners from liability under various circumstances. However, cl 27(c)(ii) of the charter party stated that:

(c) Clause 27 (a) shall not apply to or affect any liability of Owners or the vessel or any other relevant person in respect of:

(ii) any claim (whether brought by Charterers or any other person) arising out of any loss of or damage to or in connection with cargo. All such claims shall be subject to the Hague-Visby Rules, excluding the provisions of Article 3 Rule 8 thereof, notwithstanding that the parties have agreed that bills of lading will not be issued for the carriage of the cargo.

Clause 5 of Annexure A of the charterparty further provided that any disputes arising out from the agreement shall be referred to arbitration in Cape Town and that the charterparty was governed by South Africa law.

On 3 September 2008 the claimant’s representative discovered a shortage in the MFO and Gasoil which had been delivered to the barge. The claimant billed the defendant for the loss according to the charterparty. The defendant denied the liability and contended that if there was a shortage the company which was responsible for the on-shore storage of the claimant’s marine products should be blamed.

A series of meetings were held between Chevron and Unical to deal with the shortage problem but no agreement was achieved. On 12 December 2009, Chevron forwarded a letter of demand to Unical demanding payment of the marine products losses of the sum of ZAR 24,412,217.96.

Chevron was not aware of the one-year time bar contained in art 3.6 of the Hague-Visby Rules until 1 February 2010. After again falling to reach settlement on 16 March 2010, Chevron commenced arbitration proceedings on 30 March 2010. Chevron delivered a request for arbitration on 18 June 2010. Unical raised the one year time-bar contained in the Hague-Visby Rules as a defence. Chevron sought an extension of the one year time-bar according to s 8 of South Africa Arbitration Act 1965 which authorizes courts to extend the time bar in an arbitration agreement to evade undue hardship.

The issue for determination was whether in terms of the South African Arbitration Act (s 8 of the Arbitration Act 42 of 1965) the time period within which to commence arbitration proceedings should be extended.

Held: The Judge allowed the claimant’s application for extension of time.

The judge closely examined the relevant facts of the case and came to following conclusions:

First, the size of the claimant’s loss was large and the delay of seven months by the claimant was not trivial;

Second, the claimant’s delay was due to its employee’s failure to read properly the charterparty in terms of which he sought to enforce Chevron’s claim against Unical.

Third, Unical did not mislead the claimant into believing that settlement negotiations would bear fruit notwithstanding the point that there was a time-bar provision in the charterparty.

However, prior to his final judgment, the Judge found he was bound to consider the prejudice which Chevron was likely to suffer if extension of time were to be refused and compare it with prejudice which Unical was likely to suffer if extension of time were to be granted.

The Judge found that the nature of prejudice which Unical alleged did not necessarily result from delay. It was merely a risk which any defendant may face in a claim for damages. In contrary, if an extension of time were to be refused Chevron would be more prejudiced as it would be barred from pursuing almost 80% of its ZAR 24 million claim, which in the Judge’s view was a huge amount for a litigant to sacrifice as a result of operation of a time-bar provision in the contract.

The Judge concluded that, even though the claimant was at fault, the consequences of non-extension of time would be out of proportion to its fault. Therefore, the extension of time had been granted in order to prevent undue hardship to the claimant.