The Meaning of “Port Limits” in a Fixture Recap

The Commercial Court has set out a starting point for construing the meaning of “port limits” in a charterparty. While not offering an exhaustive definition of those words, this decision serves as a useful reminder to parties to ensure that the agreed charter terms reflect their true intention.

The background facts

Navalmar UK Limited v. Kale Maden Hammaddeler Sanayi Ve Ticart AS (MV Arundel Castle) [2017] EWHC 116 (Comm)

The Owners voyage chartered the Vessel to the Charterers on an amended Gencon 94 form.

Clause 15 of the fixture recap stated:

“[Notice of readiness] to be tendered at both ends even by cable/telex/telefax on vessels arrival at load/disch ports within port limits. The [notice of readiness] not to be tendered before commencement of laydays.” 

Clause 6(c) of Gencon 94 provides:

“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 provided that the Master warrants that she is in fact ready in all respects. Time used in moving from the place of waiting to the loading/discharging berth shall not count as laytime. …”

The Vessel proceeded to Krishnapatnam, the loading port and, upon arrival, the Vessel was unable to proceed straight to the berth as the port was congested. She dropped anchor at a place directed by the port authority and the Owners tendered notice of readiness (“NOR”). The Owners subsequently brought a demurrage claim, which went to arbitration.

The arbitration award

The arbitrators held that the wording of the fixture recap prevailed over Clause 6(c) of Gencon 94 and found that the NOR was invalid as it was given when the Vessel was outside of the port limits. The arbitrators held that the port limits were identified by reference to the relevant Admiralty chart, which was the only material provided to the arbitrators. Both parties accepted in the arbitration that the Vessel was anchored outside the “port limits” shown on the chart.

The Owners appealed the arbitration award, arguing that “port limits” should include (a) areas where vessels are customarily requested to wait by the port authorities and over which the port authorities exercise control or authority, or (b) areas where vessels load or discharge cargo as well as places outside the legal fiscal or administrative areas where vessels are asked to wait for their turn, no matter the distance from that area. The latter argument was based on the definition of “port” in the Laytime Definitions for Charterparties 2013 and also in the Baltic Code 2014.

The Commercial Court decision

On the Owners’ appeal, the Court was asked to consider the following question: on the proper construction of the fixture recap, if the Owners had no right to tender NOR outside port limits, what was the meaning of port limits?

The Court dismissed the appeal. It held that the starting point is still the position outlined in the Johanna Oldendorff [1971] 2 Lloyds Rep 96, namely that a vessel will be considered an arrived ship when she is at a place where she is at the immediate and effective disposal of the charterers and that normally includes a place where ships usually wait. The Court also noted that the usual waiting place will not always be within the port in question.

Furthermore, where there is a national or local law which defines the limits of the port in question, then those will be the limits that will apply in that case relating to that particular port. In the absence of such law, a good indication as to the port limits will be provided by the extent of the area where the port authority exercises its powers to regulate the movement and conduct of the ships.

In this case, the parties provided little relevant material or evidence to the arbitrators. There was no suggestion that there was a local or national law defining port limits, nor did the parties address the area where the port authority exercises its power. The arbitrators were left only with the Admiralty chart on which to base their decision. Based on that limited evidence, the Court held that the arbitrators were entitled to conclude that the vessel was not within port limits, or at least that the Owners had failed to prove that she was. However, the Court emphasised that, in another case with more complete or additional material, it might be possible that a different conclusion would be reached, even regarding the port of Krishnapatnam.

In addressing the alternative definition of “port” advanced by the Owners based on the Laytime Definitions, the Court stated that it would cause uncertainty to include in this definition places outside the legal, fiscal or administrative area where vessels are ordered to wait for their turn. This cannot be taken to provide a definition of “port limits” except in cases where the parties expressly agree to this. They did not do so in this case.

Comment

The Court has helpfully confirmed in this case that the starting position for determining the meaning of “port limits” remains the test laid down in the Johanna Oldendorff over 40 years ago. This case also serves as a useful reminder that, if parties have a specific definition of “port limits” in mind, they should expressly provide for this in the contract. The Court also highlighted that, in other cases, there might be additional circumstances and evidence that have to be considered, such as a local law that defines port limits in the port in question, which might lead to a different conclusion.

Source : InceLaw