Navalmar UK Ltd v Kale Maden Hammaddeler Sanayi Ve Ticart (as "The MV Arundel Castle")

The owners of the MV Arundel Castle (“the Vessel”) bring an appeal under section 69 of the Arbitration Act 1996 on a point of law in respect of an arbitration award dated 7 January 2016. The arbitrators were Mr Williamson and Mr Schofield.

The question in respect of which permission to appeal was granted is as follows:

“On a proper interpretation of the fixture recap entered into between the parties dated 27 October 2014, if the [owners] had no right to tender notice of readiness outside port limits, what is the meaning of port limits?”

Permission to appeal was granted on the basis that the point at issue raised a question of general public importance. That question of general public importance was identified as the meaning of “port limits” in a charterparty.

As Beatson J noted in TTMI Sarl v Statoil ASA [2011] EWHC 1150 “it is common for charter-parties to be concluded by an exchange of emails or faxes, with the terms being recapitulated in a "fixture recap", and they can be concluded orally and recapitulated”.

Clause 15 of the fixture recap was in these terms:

“[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 35 of the fixture recap provided:

“Otherwise Gencon 94 printed form charter-party with logical amendments on [basis] the terms as per fixture recap.”

Clause 6(c) of Gencon 94 includes the following under the sub-heading “Commencement of laytime (loading and discharging)”:

“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 loading port in question was Krishnapatnam. The port was congested and the Vessel was unable to proceed straight to berth. She anchored at a location directed by the port authority. The owners gave notice of readiness. A demurrage claim followed.

The arbitrators held that notice of readiness given where the Vessel was outside “port limits” was invalid. They identified “port limits” by reference to the relevant Admiralty chart. It was common ground that the Vessel anchored outside the “port limits” shown on that chart.

However “port limits” include, say the owners, any area within which vessels are customarily asked to wait by the port authorities and over which the port authorities exercise authority or control over the movement of shipping.

Alternatively, say owners, “port limits” include any area where vessels load or discharge cargo including 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.

Although Clause 6(c) of Gencon refers to “the Vessel’s arrival at or off the port of loading/discharging”, in the fixture recap the wording is “on vessels arrival at load/disch ports within port limits”. The arbitrators concluded that the latter wording prevailed, and that conclusion is not the subject of appeal.

The test at common law for when a vessel has arrived under a port charterparty was addressed by the House of Lords in The Joanna Oldendorff (Oldendorff (EL) & Co GmbH v Tradax Export SA) [1973] 2 Lloyd’s Rep 285. Lord Reid’s formulation of the test was accepted by Lord Diplock as “a convenient practical test” (at page 307), and Lord Simon of Glaisdale agreed with the speeches of both Lord Reid and Lord Diplock (at page 308).

The formulation of the test for an arrived ship showed it to be concerned not only with the nature or quality of the vessel’s position but also with whether that position is inside port limits rather than outside. At page 291 Lord Reid said:

“… I think it ought to be made clear that the essential factor is that before a ship can be treated as an arrived ship she must be within the port and at the immediate and effective disposition of the charterer and that her geographical position is of secondary importance. But for practical purposes it is so much easier to establish that, if the ship is at a usual waiting place within the port, it can generally be presumed that she is there fully at the charterers’ disposal.

I would therefore state what I would hope to the true legal position in this way. 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. …

If the ship is waiting at some other place in the port then it will be for the owner to prove that she is as fully at the disposition of the charterer as she would have been if in the vicinity of the berth for loading or discharge.”

A usual waiting place will not always be within the port in question. Both Lord Reid and Lord Diplock gave Glasgow and Hull as examples where the usual waiting place was outside port limits.

The House of Lords heard argument that “the limits of many ports are … indefinite” (page 291, and meaning ‘unclear’). Lord Reid responded to this argument as follows:

“… I find it difficult to believe that there would, except perhaps in rare cases, be any real difficulty in deciding whether at any particular port the usual waiting place was or was not within the port. The area within which a port authority exercises its various powers can hardly be difficult to ascertain. Some powers with regard to pilotage and other matters may extend far beyond the limits of the port. But those which regulate the movements and conduct of ships would seem to afford a good indication. And in many cases the limits of the port are defined by law.”

Expressing this as a sequence to be applied, 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. Where there is not such a law then a good indication of what the port limits are is given by the area of exercise by the port authority of its powers to regulate the movements and conduct of ships.

Lord Diplock responded to the argument that port limits might be unclear, in the following way (at pages 306-307), and he was later to say much the same in The Maratha Envoy(Federal Commerce and Navigation Co Ltd v Tradax Export SA) [1977] 2 Lloyd’s Rep 301 at page 306:

“… I do not believe that in practice it is difficult to discover whether a place where ships usually wait their turn for a berth is within the limits of a named port, or outside those limits as is the case with Glasgow and Hull.”

Lord Reid and Lord Diplock did not offer an exhaustive definition, or provide material further definition beyond Lord Reid’s indication, of port limits. It is true there had already been a finding of fact by the umpire in that case that the vessel was “within the legal, administrative and fiscal areas of Liverpool/Birkenhead”, so an exhaustive definition or further definition was not essential to the outcome of the case. But the decision not to attempt an exhaustive definition or material further definition will likely also have been guided by the consideration that in some cases there might be particular features that a definition would not anticipate. Even though Lord Diplock spoke (at page 303) of the desirability of formulating broader principle where that was practicable, he did not do so in this respect.

I accept that 40 years have passed since The Johanna Oldendorff, but in my judgment it remains the better course to leave matters at the stage of description provided in that decision. It is always open to the parties to provide more specifically for what it is they intend.

In the present case, the parties provided little relevant material to the arbitrators. The parties did not suggest there was a law, local or national, that defined the port limits at Krishnapatnam. The parties did not address the area of exercise by the port authority of its powers to regulate the movements and conduct of ships.

The arbitrators were left with the Admiralty chart, and they did their best with that. This showed an area described as “Limit of Port of Krishnapatnam”. It showed anchorages within that area for vessels of up to 180 metres and vessels of over 180 metres. The Vessel anchored outside the area (at a distance of 1250 metres).

This limited material, taken with the absence of further material, tolerably allows an inference that the Vessel was outside the area described by Lord Reid. The arbitrators were entitled to reach a conclusion of fact that the Vessel was not within port limits, or at least that the owners had not proved that she was. This does not mean that in another case, on more complete or additional material, the same conclusion would be reached even as regards the port of Krishnapatnam.

The owners said that the port authority had accepted the Vessel as arrived. Even if that was the case it was not a conclusion reached under the terms of the fixture recap.

The owners’ alternative meaning is based on the definition of “port” in the Laytime Definitions for Charterparties 2013. The Laytime Definitions were not incorporated into the recap, but it is argued that they serve as an extrinsic aid to construction or form part of the factual matrix.

The same definition has been included in The Baltic Code 2014. The definition is in these terms:

“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.”

The reference to “places outside the legal, fiscal or administrative area where vessels are ordered to wait for their turn” in my view could extend to places outside the “port limits” described by Lord Reid. It is hard to see what limits there are if all that is required is a place where vessels are ordered to wait for their turn (to load or discharge) “no matter the distance”. And the point is amplified if the reference to “that area” is to “the legal, fiscal or administrative area” (rather than to the “area where vessels load or discharge cargo”).

As Lord Diplock later recorded in The Maratha Envoy (at page 305), the House of Lords spent some of the 6 days of hearing of The Johanna Oldendorff considering “the position of ports where the usual waiting-place lies outside the limits of the port of discharge”. Lord Reid drew attention to the fact that “there are a great many ports” where “the usual waiting area for a port” “is well outside the port area” (at page 291 in The Johanna Oldendorff). Even though over the years as communication and means of power have developed in shipping (see, for example, per Lord Reid at page 289 and per Lord Diplock at page 307 in The Johanna Oldendorff) the step to include “places outside the legal, fiscal or administrative area where vessels are ordered to wait for their turn” is a large one indeed.

And it is an uncertain step. In The Maratha Envoy Lord Diplock said (at page 304) that the purpose of the House of Lords in The Johanna Oldendorff “was to give legal certainty to the way in which the risk of delay from congestion at the discharging port was allocated between charterer and shipowner under a port charter which contained no special clause expressly dealing with this matter”. He referred, at page 308, to the presence of “legal certainty that neither in port nor berth charter was the voyage stage brought to an end [to be followed, as the case may be, by the loading operation or the discharging operation: see The Johanna Oldendorff at page 304] by the arrival of the ship at any waiting place short of the limits of the named port”. He continued:

“Where charterers and shipowners as part of their bargain have desired to alter the allocation of the risk of delay from congestion at the named port which would otherwise follow from the basic nature of their contract, they have not sought to do so by undermining whatever legal certainty had been attained as to when a voyage stage ends. Instead they have achieved the same result without altering the basic nature of the contract, by inserting additional clauses to provide that time should begin to run for the purposes of laytime or demurrage if, although the voyage stage is not yet ended, the ship is compelled to wait at some place outside the named port of destination until a berth falls vacant in that port. That is why resort is had by shipowners and charterers to the time lost clause and the standard clauses which deal specifically with the individual ports where a usual waiting place for vessels waiting for a berth lies outside the limits of the port.”

In these circumstances I do not consider that the definition of “port” in the Laytime Definitions can be taken to provide a definition of “port limits” save where the parties deliberately choose it as their definition. That the parties did not choose it in the present case is strongly indicated by the fact that the parties did not even leave undisturbed the Gencon 94 reference to “at or off … port” but chose to specify “within port limits”.

I express the views I do with all deference to those who drafted the definition of “port” in the Laytime Definitions 2013. I appreciate that those Definitions have had the benefit of international contribution. But according to the commentary provided by special circular no. 8 of 10 September 2013 published by the Baltic and International Maritime Council the definition of “port” in the 2013 Definitions is intended “to reflect the wider concept of port area explained in The Johanna Oldendorff (1973) with reference now made to places outside the legal, fiscal or administrative area”. I do not, with respect, believe that the definition does reflect what was explained in The Johanna Oldendorff.

The charterers urged that certainty would be promoted if the Court were to hold that “port limits” means “geographical” port limits, as shown by an Admiralty chart.

Having regard to the treatment of the subject matter in the authorities to which I have referred I cannot accept that the words, used alone, have this confined meaning.

The parties would of course be free to provide for that meaning in a particular case. In some cases the result of so providing might be to identify a more limited area than discussed above. At the same time the parties might also keep in mind the point made by Viscount Dilhorne in The Johanna Oldendorff (at page 302) that the “physical limits of a port ... may extend far beyond the limits of what those using it would regard as the port”.

It does not follow from my rejection of this additional argument that the arbitrators were wrong to use the Admiralty chart as they did to reach the conclusion that they did on the limited material put before them in this particular case.

For the reasons given I will dismiss the appeal.