10-04-2017

‘The Arundel Castle’ – High Court clarifies the meaning of ‘port limits’

Standardclub

The High Court has clarified the meaning of “port limits” in voyage charterparties which say that notice of readiness (NOR) can only be tendered within a specified port.

Modern Definition of Port Limits

Laytime can only commence when a vessel has actually arrived at a port and tendered her NOR. The test for an “arrived ship” was set out by the House of Lords in the Johanna Oldendorff [1973] 2 Lloyd’s Rep 285 where Lord Reid said:

“Before a ship can be said to have arrived at a port she must, if she cannot proceed immediately to a berth, have reached a position within the port where she is at the immediate and effective disposition of the charterer. If she is at a place where waiting ships usually lie, she will be in such a position unless in some extraordinary circumstances proof of which would lie in the charterer.” Lord Reid p.291)

The Facts

The vessel was chartered pursuant to a fixture recap, clause 15 of which provided: “NOR TO BE TENDERED…AT LOAD/DISCH PORTS WITHIN PORT LIMITS…”

In addition, clause 6(c) of GENCON 94 form provided: “If the loading/discharging berth is not available on the Vessel’s arrival at or off the port of loading/discharging, the Vessel shall be entitled to give notice of readiness within ordinary office hours on arrival there … Laytime or time on demurrage shall then count as if she were in berth and in all respects ready for loading/discharging…”

The vessel arrived at the port of Krishnapatnam but was unable to proceed straight to berth because of congestion. Instead she anchored at a location as directed by the port authority and tendered NOR but charterers disputed that the NOR was valid.

The arbitrators agreed with the charterers and held that the NOR was invalid because it was not given within the port limits as stipulated by clause 15 of the recap, which took precedence over the standard wording of clause 6(c) of GENCON. They identified “port limits” by reference to the relevant Admiralty chart and there was no question that the vessel was anchored outside of the geographical limits of the port.

However, owners contended that “port limits” could include places within which vessels are customarily asked to wait by the port and/or that are outside the legal, fiscal or administrative area where vessels are ordered to wait for their turn no matter the distance from that area.

The High Court Decision

Mr Justice Knowles dismissed the appeal and said that whist 40 years had passed since the Johanna Oldendorff the test laid down by Lord Reid is still the correct one i.e. the vessel must have reached a place within the port limits to have properly “arrived” and a usual waiting area will not always be within the port in question.

The court went on to clarify that where there is a national or local law that defines the limits of the port in question, those are the limits that will apply in the case of that port. However, where there is no such law, port limits may be defined as the area within which the port authority exercises its powers to regulate the movements and conduct of the ship.

In this case, the arbitrators were entitled to a finding of fact that the vessel was not in port limits when she tendered her NOR and the owners had not proved otherwise.

Comment

The court has helpfully clarified the common law position surrounding “port limits” and serves as a reminder that owners must ensure they tender NOR only when the vessel has properly arrived at the port. Although the decision is clearly in charterers’ favour members should remember that it is always open for the parties to negotiate a specific wording in the charterparty which allows NOR to be tendered outside of port limits. One such wording could be taken from the Laytime Definitions for Charterparties 2013:

“PORT shall mean any area where vessels load or discharge cargo and shall include, but not be limited to, berths, wharves, anchorages, buoys and offshore facilities as well as places outside the legal, fiscal or administrative area where vessels are ordered to wait for their turn no matter the distance from that area.”

This article intends to provide general guidance on the issues arising as a matter of English law. It is not intended to provide legal advice in relation to any specific query. Members requiring further information on this topic should direct their enquiries to either their usual contact at the club, or to the authors of this article.

Defence cover is, by its very nature, discretionary in that the club must be satisfied as to the merits and quantum of the claim in question and the likelihood of achieving a successful outcome, if it is to lend support.

Source: Standard Club

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