Commencement of Laytime - Davies

July 21, 2017 | Author: Marcos Viniegra | Category: Arbitration, Judgment (Law), Industries, Logistics, Water Transport
Share Embed Donate


Short Description

Voyage Charter Party book...

Description

C O M M E N C E M E N T O F L AY T I M E F O U RT H E D I T I O N

E S S E N T I A L M A R I T I M E A N D T R A N S P O RT L AW S E R I E S

Bills of Lading: Law and Contracts by Nicholas Gaskell and Regina Asariotis, Yvonne Baatz (2000) Modern Law of Maritime Insurance, Volume 2 Edited by Professor D. Rhidian Thomas (2002) Maritime Fraud by Paul Todd (2003) Port State Control Second edition ¨ by Dr Z. Oya Ozçayir (2004) War, Terror and Carriage by Sea by Keith Michel (2004) Freight Forwarding and Multimodal Transport Contracts by David A. Glass (2004) Contracts of Carriage by Land and Air by Malcolm Clarke and David Yates (2004) Marine Insurance: Law and Practice by F. D. Rose (2004) General Average: Law and Practice Second edition by F. D. Rose (2005) Marine Insurance Clauses Fourth edition by N. Geoffrey Hudson and Tim Madge (2005)

COMMENCEMENT O F L AY T I M E BY

D O N A L D DAV I E S , R . D. , R . N. R . of Gray’s Inn, Barrister, Master Mariner Fellow of the Institute of Chartered Shipbrokers, the Chartered Institute of Arbitrators, and the Nautical Institute

F O U RT H E D I T I O N

LONDON

2006

Informa Law Mortimer House 37–41 Mortimer Street London W1T 3JH [email protected] an Informa business First published 1987 Second edition 1992 Third edition 1998 Fourth edition 2006 © Donald Davies 1987, 1992, 1998, 2006 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 1–84311–530–1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Informa Law. Whilst every effort has been made to ensure that the information contained in this book is correct, neither the editors and contributors nor Informa Law can accept any responsibility for any errors or omissions or for any consequences resulting therefrom.

Text set in 10/12pt Plantin by Interactive Sciences Ltd, Gloucester Printed in Great Britain by MPG Books, Bodmin, Cornwall

To Mia for her continuing patience and understanding

This page intentionally left blank

PREFACE TO THE FOURTH EDITION

The object of this book is to research the English common law in relation to the subject of the commencement of laytime, to consider criticisms of that law, and to look at various remedies which may be open to the parties to a charterparty contract to vary the common law position. For example, many types of clauses have been introduced into charterparties over the years which compensate shipowners for time spent by their vessels waiting at or off a port when laytime, under the common law, would not have commenced. Consideration is also given to breaches of contract which, by allowing shipowners a remedy in damages, provide compensation for the time that a vessel is waiting off a port when laytime would not otherwise have commenced. Commencement of laytime (laytime being the amount of time allowed for loading/discharging vessels over and above which the shipowner is invariably paid demurrage) is a subject of extreme importance since it applies to every voyage charterparty and involves large sums of money in the aggregate. In practice, it is invariably the most important factor in laytime/demurrage disputes. The subject has led to a great many court cases as well as scores of arbitrations—in fact, arbitrations on the subject continue to take place in London every year and it seems that the subject is incapable of exhaustion. In 1924 Lord Justice Scrutton said that for as long as he could remember there had been controversy between shipowner and charterer as to who is to bear the risk of waiting at or off a port. Not only does the controversy remain with us but it would appear, because of the large number of arbitrations on the subject, that the controversy shows no sign of any significant abatement. Commencement of laytime must surely be one of the most fertile areas for arbitrators and lawyers within the wider ambit of carriage of goods by sea. The fact that, under English law, there is complete freedom of contract regarding laytime (no statutory provisions whatsoever) leads to new clauses being drawn up to modify the position in respect of the commencement of laytime; such clauses are not always clear and/or they conflict with other charterparty clauses with the result that arbitrators have a staple diet of arbitrations concerning the commencement of laytime. The courts are also involved on frequent occasions. Only English common law is considered (apart from a few U.S.A. arbitrations/ proceedings and an Indian case) even though arbitrations and court proceedings take place in many other maritime nations. While there may be some differences between the approach of the English judges/arbitrators and those of other maritime vii

P R E FAC E TO T H E F O U RT H E D I T I O N

countries it is thought that, in the main, such differences are few; it seems that English common law has been followed to a great extent by judges and arbitrators in other maritime nations. The work makes reference to a large number of English judgments (most of which commenced as arbitrations and proceeded to the courts by way of the special case procedure or, in more recent times, by way of a reasoned award) as well as by countless reported London arbitrations which have been reported in Lloyd’s Maritime Law Newsletter. This edition brings the book up to date, the last edition being in 1998. All chapters of the book have needed revising in view of the many important Court of Appeal and High Court judgments in addition to the very large number of London maritime arbitrations which have been reported over the past eight years and which affect, and illustrate, the legal aspects of commencement of laytime. Important judgments, such as The ‘‘Happy Day’’ (commencement of loading and discharging re waiver and estoppel), The ‘‘Mass Glory’’ (assessment of damages re arrival of vessel and setting off the laytime), The ‘‘Stolt Spur’’ (owners using their vessel for their own purposes while it waits for a berth), The ‘‘Nikmary’’ (readiness and absolute obligation of charterer to provide cargo), The ‘‘Solon’’ (exceptions), are considered in depth along with how those judgments have affected and clarified the law. The ‘‘Happy Day’’ is very detailed because of its importance regarding a notice of readiness; the Court of Appeal judgment has dealt with an area which required clarification to ensure certainty in respect of a topic which can affect all voyage charterparties and international contracts for the sale of goods. The much-debated area of the effect of the Conoco Weather Clause in an Asbatankvoy charterparty is dealt with fully, as is the aftermath of The ‘‘Linardos’’/‘‘Jay Ganesh’’ judgments (as illustrated by way of the reported arbitrations of London arbitrators). New sections have been added to the book to cover important matters which affect, and are interrelated to, the commencement of laytime, such as the 2004 ISPS Code and different type clauses to deal with its effects, failures by owners or charterers regarding the non-production of bills of lading, and the position of owners if using their vessels for their own purposes when a vessel waits for a berth. An important new section is devoted to international sale contracts and includes full consideration of the recent Court of Appeal decisions in Fal Oil v. Petronas and Kronos v. Sempra. I repeat my previous plea for many more awards of London maritime arbitrators to be publicised (by way of disguise as in the Lloyd’s Maritime Law Newsletter and perhaps a stated minimum period after an award has been published). The fact is that very few cases are getting through to the courts and, because of the way in which the right of appeal has been radically diminished by the Arbitration Acts 1979 and 1996 it is imperative that if the maritime world is to get to know what London maritime arbitrators are deciding there should be a big increase in the publicising of awards. It is difficult to understand any legitimate grievance, by the users of London maritime arbitration, to the publicising of awards by way of disguise and a stated minimum period after an award has been published. After all, most maritime viii

P R E FAC E TO T H E F O U RT H E D I T I O N

arbitration centres around the world publicise their awards (without disguise) and it would seem that London would not lose by taking a similar approach, particularly with the safeguards mentioned above. I thank many of my colleague arbitrators for their help and advice as I do also Roger Sepkes of ASDEM, Mike Cohen of New York, and Angelos Pantazatos of Athens. It is hoped that the wide-ranging and in-depth examination of the all important financial aspect of laytime is in a style which is readable by shipowners, charterers, ship operators, shipbrokers, traders and other lay persons in addition to lawyers and arbitrators. The law is stated as it was thought to be as at 1 February 2006. D O N A L D DAV I E S

ix

This page intentionally left blank

CONTENTS

Preface Table of Cases Decisions in LMLN Reports Bibliography

vii xiii xix xxi

I N T RO D U C T I O N —G E N E R A L R E QU I R E M E N T S O F E N G L I S H L AW

1

C H A P T E R 1 — A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N Port charterparty, geographical—the Oldendorff test Difficulties in the application of the ‘‘within the port’’ Oldendorff test At the immediate and effective disposition of the charterer Sale contract Berth charterparty Dock charterparty Tanker charterparties

3 22 38 45 47 53 54

C H A P T E R 2 — S P E C I A L C L AU S E S R E L E VA N T TO A R R I V I N G AT T H E D E S T I N AT I O N General Advancing laytime including ‘‘whether in berth or not’’ and ‘‘whether in port or not’’ Specific sums for waiting time Time lost waiting for a berth including the Darrah decision Other special clauses

57 57 74 76 93

C H A P T E R 3 — B R E AC H E S O F C O N T R AC T / DA M AG E S R E L E VA N T TO A R R I V I N G AT T H E D E S T I N AT I O N : I M P L I E D TERMS Reachable on arrival/always accessible including the Laura Prima decision Damages—implied terms Assessment of damages

xi

99 121 135

CONTENTS CHAPTER 4—READINESS General Cargo spaces including the Tres Flores decision Equipment Documentation—legal readiness—including the Delian Spirit decision Draught (Draft)/Lightening Tankers—Ballasting/deballasting

145 145 172 183 192 196

C H A P T E R 5 — S P E C I A L C L AU S E S / B R E AC H E S O F C O N T R AC T / DA M AG E S R E L E VA N T TO R E A D I N E S S ( I N C L U D I N G D R AU G H T A N D B I L L S O F L A D I N G A N D FAU LT O F OW N E R S ) Special clauses Breach of contract/damages (including draught and bills of lading and fault of owners)

201 224

C H A P T E R 6 — N OT I C E O F R E A D I N E S S I N C L U D I N G R E L E VA N T S P E C I A L C L AU S E S A N D AC C E P TA N C E O F N OT I C E O F R E A D I N E S S Notice of readiness—common law Notice of readiness—express clauses Correctness of notice Acceptance of notice of readiness including waiver/estoppel etc. Elapsed time Notice of readiness tendered prior to the laydays

237 244 252 268 287 290

C H A P T E R 7 — M I S C E L L A N E O U S M AT T E R S General Readiness and cancellation Work before the commencement of laytime Overchartering and obstacles created by chartering Exceptions Estimated time of arrival Sale contracts Multiple charters

293 293 296 301 304 312 319 328

Index

331

xii

TABLE OF CASES All references are to paragraph number

Para. A/B Nordiska Lloyd v. J. Brownlie (1925) 22 Ll L Rep 79; 30 Com Cas 307; 41 TLR 503; 69 SJ 661 (CA) ......................................................................................................................... 100, 123 A/S Uglands Rederi v. The President of India. See Danita, The Achillet, The, 1985 Arbitration, LMLN 180—25 September 1986 ............................................. 115 Adolf Leonhardt, The, Pagnan (R) & Fratelli v. Finagrain Compagnie Commerciale Agricole et Financi`ere SA [1986] 2 Lloyd’s Rep 395 .................................. 17, 18, 29, 62, 127, 128, 134–137 Aello, The, Sociedad Financiera de Bienes Raices SA v. Agrimpex Hungarian Trading Co for Agricultural Products; sub nom. Agrimpex Hungarian Trading Co for Agricultural Products v. Sociedad Financiera de Bienes Raices SA [1960] 1 Lloyd’s Rep 623; [1961] AC 135; [1960] 3 WLR 145; [1960] 2 All ER 578; 104 SJ 543 (HL) ....................................... 2, 4–8, 11, 54, 62, 64 Agamemnon, The, 1974 Arbitration ........................................................................................10, 14 Agamemnon, The, TA Shipping Ltd v. Comet Shipping Ltd [1998] 1 Lloyd’s Rep 675 ........17, 21, 109, 111 Agios Stylianos, The, Agios Stylianos Compania Naviera SA v. Maritime Associates International Ltd Lagos [1975] 1 Lloyd’s Rep 426 ......................................................................... 40, 139, 140 Agrimpex Hungarian Trading Co for Agricultural Products v. Sociedad Financiera de Bienes Raices SA. See Aello, The Aktieselskabet Inglewood v. Millar’s Karri (1903) 8 Com Cas 196 ............................................. 125 Alaska, The, New York Arbitration, LMLN 452—1 March 1997 ............................................... 53 Albion, The, President of India v. Davenport Marine Panama SA [1987] 2 Lloyd’s Rep 365; [1987] 2 FTLR 240 .......................................................................................................................... 86 Aldebaran Compania Maritima SA v. Aussenhandel AG. See Darrah, The Allied Marine Transport Ltd v. Vale Do Rio Doce Navega¸cao SA. See Leonidas D, The Amalgamated Investment and Property Co Ltd v. Texas Commerce International Bank Ltd [1982] 1 Lloyd’s Rep 27 (CA) .......................................................................................................... 116 Amstelmolen, The, NV Reederij Amsterdam v. President of India [1961] 2 Lloyd’s Rep 1 (CA) ........................................................................................................... 26, 29, 127, 128, 130 Anco Elias, The, 1977 Arbitration ........................................................................................... 14–16 Anders Utkilens Rederi A/S v. Compagnie Tunisienne de Navigation of Tunis. See Golfstraum, The Angelos Lusis, The [1964] 2 Lloyd’s Rep 29 ..................................................................... 27, 45, 46 Antclizo, The, Antclizo Shipping Corp v. Food Corporation of India [1992] 1 Lloyd’s Rep 558 (CA); affirming [1991] 2 Lloyd’s Rep 485 ...........................................................................79, 86 Apollo, The, Sidermar SpA v. Apollo Corporation [1978] 1 Lloyd’s Rep 200 ............................. 78 Apollon, The, NZ Michalos v. The Food Corporation of India [1983] 1 Lloyd’s Rep 409 .......... 80, 86 Armement Adolf Deppe v. John Robinson [1917] 2 KB 204 .................................. 64, 72, 74, 75, 78 Atlantic Sunbeam, The, Sunbeam Shipping Co Ltd v. President of India [1973] 1 Lloyd’s Rep 482 .......................................................................................................... 56, 57, 62, 98, 118, 126 Austin Friars, The (1894) 71 LT 27 .......................................................................................... 78 Azur Gaz, The, SHV Gas Supply & Trading SAS v. Naftomar Shipping & Trading Co Ltd Inc, LMLN 680—9 December 2005 ............................................................................................. 132 Barque Quilpue v. Brown (1903) 9 Com Cas 13 ....................................................................... 125

xiii

TA B L E O F C A S E S Para. Barrett Bros (Taxis) Ltd v. Davies [1966] 2 Lloyd’s Rep 1; [1966] 1 WLR 1334; [1966] 2 All ER 972; 110 SJ 600 (CA) ............................................................................................................ 100 Blue Anchor Line Ltd v. Alfred C Toepfer International GmbH. See Union Amsterdam, The Boral Gas, The [1988] 1 Lloyd’s Rep 342; [1988] FTLR 201 .................................................90, 91 Borg (Owners of SS) v. Darwen Paper Co (1921) 8 Ll L Rep 49; [1921] WN 192 .................... 120 Brereton v. Chapman (1831) 7 Bing 559 ................................................................................... 42 Brown v. Johnson (1842) 10 M & W 331 .................................................................................. 42 Budgett & Co v. Binnington & Co [1891] 1 QB 35 (CA); affirming (1890) LR 25 QBD 320 .... 97 Cape of Good Hope Motor Ship Company Ltd v. Ministry of Agriculture, Fisheries and Food. See Reardon Smith Line v. Same Carga Del Sur Compania Naviera SA v. Ross T Smyth & Co Ltd. See Seafort, The Carlton Steamship Company Ltd and Cambay Steamship Company Ltd v. Ministry of Agriculture, Fisheries and Food. See Reardon Smith Line v. Same Cero Navigation Corp v. Jean Lion & Cie. See Solon, The Cheikh Boutros Selim El–khoury and Others v. Ceylon Shipping Lines Ltd. See Madeleine, The Christensen v. Hindustan Steel Ltd. See Maria LF, The Ciampa v. British India Steam Navigation Co Ltd [1915] 2 KB 774 .......................................... 128 Clerco Compania Naviera SA v. The Food Corporation of India. See Savvas, The Compania Argentina de Navegacion de Ultramar v. Tradax Export SA. See Puerto Rocca, The Compania de Naviera Nedelka SA v. Tradax International SA. See Tres Flores, The Conoco Weather Clause, 2005 Arbitration ................................................................................. 53 Cosmar Compania Naviera SA v. Total Transport Corporation. See Isabelle, The Damodar General TJ Park, The, Mosvolds Rederi A/S v. The Food Corporation of India (The King Theras) [1986] 2 Lloyd’s Rep 68 ........................................................................................... 12 Danita, The, A/S Uglands Rederi v. The President of India [1976] 2 Lloyd’s Rep 377 ............... 105 Darrah, The, Aldebaran Compania Maritima SA v. Aussenhandel AG [1976] 2 Lloyd’s Rep 359; [1977] AC 157; [1976] 3 WLR 320; [1976] 3 All ER 129; 120 SJ 553 (HL) ............... 35–41, 140 Delian Leto, The, Food Corporation of India v. Carras Shipping Co Ltd [1983] 2 Lloyd’s Rep 496 ........................................................................................................................................ 86 Delian Spirit, The, Shipping Developments Corporation SA v. V/O Sojuzneftexport [1971] 1 Lloyd’s Rep 506; [1972] 1 QB 103; [1971] 2 WLR 1434; [1971] 2 All ER 1067 (CA); reversing [1971] 1 Lloyd’s Rep 64 .....................................2, 6, 7, 15, 48, 57, 61, 64, 71, 74, 78, 79, 83–85 Democritos, The, Marbienes Compania Naviera SA v. Ferrostaal AG [1976] 2 Lloyd’s Rep 149 (CA) ...................................................................................................................................... 67 Demosthenes V, The, (No 1), Gerani Compania Naviera SA v. General Organisation for Supply Goods and Alfred C. Toepfer [1982] 1 Lloyd’s Rep 275 ........................................ 72, 74, 75, 108 Deppe. See Armement Adolf Deppe v. Robinson Despina, The, 1980 Arbitration ................................................................................................. 69 Dubhe, The, 1981 Arbitration .................................................................................................68, 82 EL Oldendorff & Co GmbH v. Tradax Export SA. See Johanna Oldendorff, The Epaphus, The, Eurico SpA v. Philipp Brothers [1987] 2 Lloyd’s Rep 215; [1987] 2 FTLR 213 (CA); affirming [1986] 2 Lloyd’s Rep 387 .............................................................................. 64 Etablissements Soules et Cie v. Intertradex SA. See Handy Mariner, The Eurico SpA v. Philipp Brothers. See Epaphus, The Eurobreeze, The, 1984 Arbitration ............................................................................................ 103 Eurus, The, LMLN 473—20 December 1997 (CA); [1996] 2 Lloyd’s Rep 408 .......................42, 62 Evera SA Commercial v. North Shipping Co Ltd [1956] 2 Lloyd’s Rep 367 .............................. 131 Fal Oil Co Ltd v. Petronas Trading Corpn (The Devon) [2004] 2 Lloyd’s Rep 282 (CA) ... 135, 136, 137 Federal Commerce and Navigation Co Ltd v. Tradax Export SA. See Maratha Envoy, The Finix, The, Neu Tyhi Maritime Co Ltd of Piraeus v. Compagnie Grainiere SA of Zurich [1975] 2 Lloyd’s Rep 415 ..................................................................................................................... 21 Fjordass, The [1988] 1 Lloyd’s Rep 336; [1988] 2 All ER 714 ................................................ 50–53 Fontevivo, The, Gem Shipping Co of Monrovia v. Babanaft (Lebanon) Sarl [1975] 1 Lloyd’s Rep 339 ........................................................................................................................................ 97 Food Corporation of India v. Carras Shipping Co Ltd. See Delian Leto, The Fornyade Rederiaktiebolaget Commercial v. Blake & Co and Others (1931) 39 Ll L Rep 205 (CA) ...................................................................................................................................... 126

xiv

TA B L E O F C A S E S Para. Franco-British Steamship v. Watson and Youell (1921) 9 Ll L Rep 282 ..................................... 100 Freijo, The, Logs & Timber Products (Singapore) Pte Ltd v. Keeley Granite (Pty) Ltd [1978] 2 Lloyd’s Rep 1 (CA) ............................................................................................................... 30 Front Commander, The, Tidebrook Maritime Corporation v. Vitol SA, LMLN 682—11 January 2006 ...................................................................................................................................... 125 Frota Oceanica v. Continental Ore Corporation [1973] AMC 2315, New York .......................... 121 Garibaldi Societa Co–operativa di Navigazione ARL v. President of India. See Reardon Smith Line v. Ministry of Agriculture, Fisheries and Food Gem Shipping Co of Monrovia v. Babanaft (Lebanon) Sarl. See Fontevivo, The Gerani Compania Naviera SA v. General Organisation for Supply and Alfred C. Toepfer. See Demosthenes V, The, (No 1) Gill & Dufus SA v. Rionda Futures Ltd [1994] 2 Lloyd’s Rep 67 ...................................90, 134–137 Glencore Grain Ltd v. Flacker Shipping Ltd. See Happy Day, The Glencore Grain Ltd v. Goldbeam Shipping Inc; Goldbeam Shipping Inc v. Navios International Inc. See Mass Glory, The Golfstraum, The, Anders Utkilens Rederi A/S v. Compagnie Tunisienne de Navigation of Tunis [1976] 2 Lloyd’s Rep 97 ........................................................................................................ 12 Government of Ceylon v. Societe Franco-Tunisienne d’Armement–Tunis. See Massalia, The (No 2) Graigwen (Owners) v. Anglo–Canadian Shipping Company Ltd [1955] 2 Lloyd’s Rep 260 ........ 107 Grampian Steamship Co Ltd v. Carver and Co (1893) 9 TLR 210 ............................................ 76 Gundulic, The, 1980 Arbitration ............................................................................................... 15 Handy Mariner, The, Etablissements Soules et Cie v. Intertradex SA [1991] 1 Lloyd’s Rep 378; Financial Times, 14 November 1990 (CA) ...................................................................19, 134–136 Happy Day, The, Glencore Grain Ltd v. Flacker Shipping Ltd [2002] 1 Lloyd’s Rep 487 (CA) ... 17, 21, 100, 101, 108, 111, 116–119 Helle Skou, The, Sofial SA v. Ove Skou Rederi [1976] 2 Lloyd’s Rep 205 ...108, 112, 114, 115, 117 Horsley Line Ltd v. Roechling Bros, 1908 SC 866 ..................................................................... 33 Ian Stach Ltd v. Baker Bosley Ltd [1958] 2 QB 130; [1958] 1 Lloyd’s Rep 127 ........................ 138 Inca Compania Naviera SA and Commercial and Maritime Enterprises Evanghelos P Nomikos SA v. Mofinol Inc. See President Brand, The Ingram v. Little [1962] 1 QB 31; [1960] 3 WLR 504; [1960] 3 All ER 332; 104 SJ 704 (CA) ........ 64, 75 Ino, The, 1979 Arbitration ........................................................................................................ 57 Investors Compensation Scheme Ltd v. West Bromwich Building Society, The Times, 24 June 1997 ...................................................................................................................................... 62 Ionian Navigation Company Inc v. Atlantic Shipping Company SA. See Loucas N, The Irinikos, The, 1977 Arbitration .................................................................................................. 69 Isabelle, The, Cosmar Compania Naviera SA v. Total Transport Corporation [1984] 1 Lloyd’s Rep 366 (CA); affirming [1982] 2 Lloyd’s Rep 81; [1982] Com LR 90 .......................................21, 99 Jag Leela, The, LMLN 242—11 February 1989 ........................................................................ 86 James Nelson v. Nelson Lines. See Nelson (James) v. Nelson Lines Jay Ganesh, The [1994] 2 Lloyd’s Rep 358; Lloyd’s List, 8 July 1994 ..................................... 71, 130 Johanna Oldendorff, The, EL Oldendorff & Co GmbH v. Tradax Export SA [1973] 2 Lloyd’s Rep 285; [1974] AC 479; [1973] 2 WLR 382; [1973] 3 All ER 148; 117 SJ 760 (HL); reversing [1972] 2 Lloyd’s Rep 292; [1972] 3 WLR 623; [1973] 3 All ER 420; 116 SJ 616 (CA); affirming [1971] 2 Lloyd’s Rep 96 ...................................................................... 2, 8–11, 13–18, 20, 22, 23, 26–29, 32, 37, 38, 42, 45, 50 Johs Stove, The, Sametiet M/T Johs Stove v. Istanbul Petrol Rafinerisi A/S [1984] 1 Lloyd’s Rep 38 ..................................................................................................................................... 52, 130 Kell v. Anderson (1842) 10 M & W 498 .................................................................................... 18 King Theras, The. See Damodar General TJ Park, The Kronos Worldwide Ltd v. Sempra Oil Trading SARL [2004] 1 Lloyd’s Rep 260 ......................8, 138 Kyzikos, The, Seacrystal Shipping Ltd v. Bulk Transport Group Shipping Co Ltd [1989] 1 Lloyd’s Rep 1; [1989] AC 1264; [1988] 3 WLR 858; [1988] 3 All ER 745; 132 SJ 1526 (HL); reversing [1987] 2 Lloyd’s Rep 122; [1987] 1 WLR 1565; [1987] 3 All ER 222; [1987] FTLR 171; 131 SJ 1550 (CA); reversing [1987] 1 Lloyd’s Rep 48 ...............................................................18, 21, 26, 28, 29, 39, 53

xv

TA B L E O F C A S E S Para. Laura Prima, The, Nereide SpA de Navigazione v. Bulk Oil International Ltd [1982] 1 Lloyd’s Rep 1; [1981] 3 All ER 737 (HL) ............................................................................17, 47–53, 80, 129 Lee Frances, The, LMLN 253—15 July 1989 ............................................................................ 44 Lefthero, The [1992] 2 Lloyd’s Rep 109 (CA) ...................................................................... 97, 130 Leonidas D, The, Allied Marine Transport Ltd v. Vale Do Rio Doce Navega¸cao SA [1985] 2 Lloyd’s Rep 18; [1985] 1 WLR 925; [1985] 2 All ER 796; 129 SJ 431; 82 L S Gaz 2160 (CA) ...................................................................................................................................... 118 Leonis Steamship Co Ltd v. Rank Ltd [1908] 1 KB 499 ........................................... 2–4, 8, 15, 123 Linardos, The [1994] 1 Lloyd’s Rep 28 ........................................................................... 71, 75, 130 Logs & Timber Products (Singapore) Pte Ltd v. Keeley Granite (Pty) Ltd. See Freijo, The Loucas N, The, Ionian Navigation Company Inc v. Atlantic Shipping Company SA [1971] 1 Lloyd’s Rep 215 (CA); affirming [1970] 2 Lloyd’s Rep 482 ................................... 35–38, 41, 128 Mackay v. Dick (1881) 6 App Cas 251 ...................................................................................... 56 Madeleine, The, Cheikh Boutros Selim El–khoury and Others v. Ceylon Shipping Lines Ltd [1967] 2 Lloyd’s Rep 224 ............................................................................................................. 79, 123 Maratha Envoy, The, Federal Commerce and Navigation Co Ltd v. Tradax Export SA [1977] 2 Lloyd’s Rep 301; [1978] AC 1; [1977] 3 WLR 126; [1977] 2 All ER 849; 121 SJ 459 (HL); reversing [1977] 1 Lloyd’s Rep 217; [1977] QB 324; [1977] 2 WLR 122; [1977] 2 All ER 41; 120 SJ 834 (CA) ......................................................................2, 8, 10–14, 17, 23, 26, 28, 29, 39 Marbienes Compania Naviera SA v. Ferrostaal AG. See Democritos, The Maria LF, The, Christensen v. Hindustan Steel Ltd [1971] 1 Lloyd’s Rep 395; [1971] 1 WLR 1369; [1971] 2 All ER 811 ..................................................................................................... 108 Mass Glory, The, Glencore Grain Ltd v. Goldbeam Shipping Inc; Goldbeam Shipping Inc v. Navios International Inc [2002] 2 Lloyd’s Rep 244 .................................................... 61, 111, 117 Massalia, The, (No 2), Government of Ceylon v. Societe Franco-Tunisienne d’Armement– Tunis [1960] 2 Lloyd’s Rep 352; [1962] 2 QB 416; [1961] 2 WLR 161; [1960] 3 All ER 797; 105 SJ 129 .........................................................................................75, 108, 109, 115, 120, 139 Mediolanum, The [1984] 1 Lloyd’s Rep 36 ............................................................................... 99 Metalimex v. Eugenie Maritime Company Ltd [1962] 1 Lloyd’s Rep 378 .................................. 119 Metals & Ropes Company Ltd v. Filia Compania Limitada. See Vastric, The Mexico 1, The, Transgrain Shipping BV v. Global Transporte Oceanico SA [1990] 1 Lloyd’s Rep 507; Financial Times, 7 February 1990 (CA); reversing [1988] 2 Lloyd’s Rep 149 .................. 21, 67, 70, 71, 74, 75, 80, 100, 101, 106, 108–112, 115–118, 139 Michalos (NZ) v. The Food Corporation of India. See Apollon, The Miramar Cia Nav SA v. Government of The Union of South Africa. See Reardon Smith Line v. Ministry of Agriculture, Fisheries and Food Mitsui OSK Lines v. Garnac Grain Co Inc. See Myrtos, The Monroe Brothers Ltd v. Ryan, 51 Ll L Rep 179; [1935] 2 KB 28; [1935] WN 59; 153 LT 31; 40 Com Cas 193; 51 TLR 361; 104 LJ (KB) 150 (CA) .............................................................. 131 Moorcock, The (1884) 14 PD 64 .............................................................................................. 54 Mosvolds Rederi A/S v. The Food Corporation of India. See Damodar General TJ Park, The Mozart, The [1985] 1 Lloyd’s Rep 239 ..................................................................................... 100 Myrtos, The, Mitsui OSK Lines v. Garnac Grain Co Inc [1984] 2 Lloyd’s Rep 449 ............ 131, 132 N.V. Reederij Amsterdam v. President of India. See Amstelmolen, The Navrom v. Callitsis Ship Management SA. See Radauti, The Nea Tyhi Maritime Co Ltd of Piraeus v. Compagnie Grainiere SA of Zurich. See Finix, The Nelson (James) v. Nelson Line [1908] AC 108 .......................................................................... 124 Nereide SpA de Navigazione v. Bulk Oil International Ltd. See Laura Prima, The Nessfield, The [1912] 1 KB 434 ................................................................................................ 26 Nestor, The [1987] 2 Lloyd’s Rep 649 ...................................................................................... 86 Nikmary, The, Triton Navigation Ltd v. Vitol SA [2004] 1 Lloyd’s Rep 55 (CA) ....................58, 65 Noemijulia Steamship Company Ltd v. Minister of Food (1950) 84 Ll L Rep 354; [1951] 1 KB 223; 66 TLR (Pt 2) 342; [1950] 2 All ER 699; 94 SJ 534 (CA); affirming (1949–50) 83 Ll L Rep 500; 66 TLR (Pt 1) 819 .................................................................................. 64, 72, 73, 75, 123 North King, The, Pacific Carriers Corporation v. Tradax Export SA [1971] 2 Lloyd’s Rep 460 .................................................................................................................................. 112, 113 Notos, The, Soci´et´e Anonyme Marocaine de L’Industrie du Raffinage v. Notos Maritime Corporation [1987] 1 Lloyd’s Rep 503; [1987] 1 FTLR 519; 84 LS Gaz 1141 (HL) .......................... 129

xvi

TA B L E O F C A S E S Para. OK Petroleum AB v. Vitol Energy SA (The Chemical Venture and The Jade) [1995] 2 Lloyd’s Rep 160 ........................................................................................................................................ 136 Odfjfell Seachem v. Continentale des Petroles et D’Investissements [2005] 1 Lloyd’s Rep 275 ... 83 Ogmore v. Borner (1901) 6 Com Cas 104 ................................................................................. 125 Oldendorff (EL) & Co GmbH v. Tradax Export SA. See Johanna Oldendorff, The Orion Insurance Co Plc v. Sphere Drake Insurance Plc [1990] 1 Lloyd’s Rep 465; The Independent, 1 February 1990; affirmed [1992] 1 Lloyd’s Rep 239 (CA) .................................................... 116 Pacific Carriers Corporation v. Tradax Export SA. See North King, The Pagnan (R) & Fratelli v. Finagrain Compagnie Commerciale Agricole et Financi`ere SA. See Adolf Leonhardt, The Pan Journey, The, 1986 Arbitration ........................................................................................... 93 Panaghis Vergottis, The (Owners) v. Cory & Son (1926) 25 Ll L Rep 64; [1926] 2 KB 344; [1926] WN 151; 135 LT 254; 31 Com Cas 262; 95 LJKB 1002 ....................................................... 126 Panchaud Fr`eres SA v. Etablissements General Grain Co [1970] 1 Lloyd’s Rep 53 (CA) ........... 112, 114, 116, 134 Pegasus, The, 1975 Arbitration .................................................................................................. 83 Pericles Halcoussis, The, 1985 Arbitration ................................................................................. 58 Petr Schmidt, The [1998] 2 Lloyd’s Rep 1 (CA); affirming [1997] 1 Lloyd’s Rep 284 .... 71, 80, 83, 106, 109, 111 Petros Hadjikyriakos, The [1988] 2 Lloyd’s Rep 56 ................................................................... 80 Plakoura, The [1987] 2 Lloyd’s Rep 258 ................................................................................... 23 Polyfreedom, The, 1974 New York Arbitration .................................................................. 10, 11, 13 President Brand, The, Inca Compania Naviera SA and Commercial and Maritime Enterprises Evanghelos P Nomikos SA v. Mofinol Inc [1967] 2 Lloyd’s Rep 338; 117 New LJ 1192 .............................................................................................................................. 46–48, 80 President of India v. Davenport Marine Panama SA. See Albion, The Pteroti Compania Naviera SA v. National Coal Board [1958] 1 Lloyd’s Rep 245; [1958] 1 QB 469; [1958] 2 WLR 505; [1958] 1 All ER 603; 102 SJ 216 ...................................................... 117, 124 Puerto Rocca, The, Compania Argentina de Navegacion de Ultramar v. Tradax Export SA [1978] 1 Lloyd’s Rep 252 ...............................................................................................................20, 21 Radauti, The, Navrom v. Callitsis Ship Management SA [1988] 2 Lloyd’s Rep 416 (CA); affirming [1987] 2 Lloyd’s Rep 276 ................................................................................................ 127, 128 Radnor, The, North River Freighters Ltd v. President of India [1955] 2 Lloyd’s Rep 668 .......... 20, 21, 35, 38 Reardon Smith Line v. Ministry of Agriculture, Fisheries and Food; Garibaldi Societa Co– operativa di Navigazione ARL v. President of India; Carlton Steamship Company Ltd and Cambay Steamship Company Ltd v. Ministry of Agriculture, Fisheries and Food; Cape of Good Hope Motor Ship Company Ltd v. Ministry of Agriculture, Fisheries and Food; Miramar Cia Nav SA v. Government of The Union of South Africa (The Vancouver Strike Cases) [1963] 1 Lloyd’s Rep 12; [1963] AC 691; [1963] 2 WLR 439; [1963] 1 All ER 545; 107 SJ 133 (HL); reversing in part [1961] 1 Lloyd’s Rep 385; [1962] 1 QB 42; [1961] 3 WLR 110; [1961] 2 All ER 577; 105 SJ 567 (CA); affirming [1959] 2 Lloyd’s Rep 229; [1960] 1 QB 439; [1959] 3 WLR 665; [1959] 3 All ER 434; 103 SJ 920 ................................................................................... 128 Republic of India v. India Steamship Co Ltd (The Indian Endurance and The Indian Grace) (No. 2) [1998] AC 878; [1998] 1 Lloyd’s Rep 1 (HL); affirming [1996] 2 Lloyd’s Rep 12 (CA) .... 117 Ropner Shipping Co Ltd v. Cleeves Western Valley Anthracite Collieries Ltd (1927) 27 Ll L Rep 317; [1927] 1 KB 879; [1927] WN 91; 43 TLR 384; 96 LJKB 654; 137 LT 221; 32 Com Cas 259; 17 Asp 245 (CA) ........................................................................................... 39, 75, 97, 140 Sametiet M/T Johs Stove v. Istanbul Petrol Rafinerisi A/S. See Johs Stove, The San Carlos, The, 2001 Arbitration ............................................................................................. Santa Clara Valley, The, Reardon Smith Line Ltd v. East Asiatic Company (1938) 62 Ll L Rep 23 .......................................................................................................................................... Sati Rani, The, 1977 Arbitration ................................................................................................ Saturnia, The, Superfos Chartering A/S v. NBR (London) Ltd [1987] 2 Lloyd’s Rep 43 ........... Savvas, The, Clerco Compania Naviera SA v. The Food Corporation of India [1982] 1 Lloyd’s Rep 22 (CA) ................................................................................................................................. Scapdale, The, 1980 Arbitration ................................................................................................

xvii

53 26 84 53 80 21

TA B L E O F C A S E S Para. Sea Queen, The [1988] 1 Lloyd’s Rep 500 .............................................................................. 50–53 Seacrystal Shipping Ltd v. Bulk Transport Group Shipping Co Ltd. See Kyzikos, The Seafort, The, Carga Del Sur Compania Naviera SA v. Ross T Smyth & Co Ltd [1962] 2 Lloyd’s Rep 147; 106 SJ 651 ............................................................................................... 26, 27, 29, 34 Seamaster, The, 1988 Arbitration .............................................................................................. 18 Shackleford, The, Surrey Shipping Co Ltd v. Compagnie Continentale (France) SA [1978] 2 Lloyd’s Rep 154; [1978] 1 WLR 1080; 122 SJ 555 (CA); affirming [1978] 1 Lloyd’s Rep 191 ...........................................................................................................29, 33, 82, 87, 112–116 Shipping Developments Corporation SA v. V/O Sojuzneftexport. See Delian Spirit, The SHV Gas Supply & Trading SAS v. Naftomar Shipping & Trading Co Ltd Inc. See Azur Gaz, The ....................................................................................................................................... 132 Sidermar SpA v. Apollo Corporation. See Apollo, The Sociedad Financiera de Bienes Raices SA v. Agrimpex Hungarian Trading Co for Agricultural Products. See Aello, The Soci´et´e Anonyme Marocaine de L’Industrie du Raffinage v. Notos Maritime Corporation. See Notos, The Sofial SA v. Ove Skou Rederi. See Helle Skou, The Solon, The, Cero Navigation Corp v. Jean Lion & Cie [2000] 1 Lloyd’s Rep 292 ...................... 130 Spalmatori, The, Union of India v. Compania Naviera Aeolus SA; sub nom. Compania Naviera Aeolus SA v. Union of India [1964] AC 868; [1962] 2 Lloyd’s Rep 175 (HL) ........................ 53 Stanton v. Austin (1872) LR 7 CP 651 ...................................................................................... 100 Steamship Garston Co v. Hickie & Co (1885) 15 QBD 580 ...................................................... 8 Stolt Spur, The, Stolt Tankers Inc v. Landmark Chemicals SA [2002] 1 Lloyd’s Rep 786 .......... 97 Sun Shipping v. Watson and Youell (1926) 24 Ll L Rep 28; 42 TLR 240 ................................72, 75 Sunbeam Shipping Co Ltd v. President of India. See Atlantic Sunbeam, The Superfos Chartering A/S v. NBR (London) Ltd. See Saturnia, The Surrey Shipping Co Ltd v. Compagnie Continentale (France) SA. See Shackleford, The TA Shipping Ltd v. Comet Shipping Ltd. See Agamemnon The Themistocles, The (1949) 82 Ll L Rep 232 ............................................................................... 43 Tidebrook Maritime Corporation v. Vitol SA. See Front Commander, The ................................ 125 Tielrode, The, 1973 Arbitration ..............................................................................................83, 87 Timna, The, Zim Israel Navigation Company Ltd v. Tradax Export SA [1971] 2 Lloyd’s Rep 91 (CA); affirming [1970] 2 Lloyd’s Rep 409 ............................................60, 61, 100, 109, 111, 116 Torm Estrid, The, 1978 Arbitration ......................................................................................... 14–16 Transgrain Shipping BV v. Global Transporte Oceanico SA. See Mexico 1, The Tres Flores, The, Compania de Naviera Nedelka SA v. Tradax International SA [1973] 2 Lloyd’s Rep 247; [1974] QB 264; [1973] 3 WLR 545; [1973] 3 All ER 967 (CA); affirming [1972] 2 Lloyd’s Rep 384 ....................................................................................39, 57, 64, 65, 68–75, 78, 79, 81, 82, 86, 92, 107, 108 Triton Navigation Ltd v. Vitol SA. See Vikmary, The Union Amsterdam, The, Blue Anchor Line Ltd v. Alfred C Toepfer International GmbH [1982] 2 Lloyd’s Rep 432 ..................................................................................................................... Union of India v. Compania Naviera Aeolus SA; sub nom. Compania Naviera Aeolus SA v. Union of India. See Spalmatori, The Universal Cargo Carriers Corp v. Citati (No. 1) [1957] 1 Lloyd’s Rep 174 ................................

97 58

Valla Giovani & C SpA v. Gebr Van Weelde Scheepvaartkantoor BV. See Chanda, The Vancouver Strike Cases. See Reardon Smith Line v. Ministry of Agriculture, Fisheries and Food Vastric, The, Metals & Ropes Company Ltd v. Filia Compania Limitada [1966] 2 Lloyd’s Rep 219 ................................................................................................................................ 35, 36, 38 Venore, The, Venore Transportation Co v. President of India [1973] 1 Lloyd’s Rep 494 (US Ct) .... 125 Vikmary, The, Triton Navigation Ltd v. Vitol SA [2004] 1 Lloyd’s Rep 55 ................................ 58 Virginia M, The [1989] 1 Lloyd’s Rep 603 ......................................................... 51, 64, 72, 75, 107 Vyse v. Wakefield (1840) 6 M & W 442 .................................................................................... 99 Werrastein, The, Roland-Linie Schiffahrt GmbH v. Spillers Ltd and Others [1956] 2 Lloyd’s Rep 210 ........................................................................................................................................ Winston, The, 1985 Arbitration .................................................................................................

xviii

34 92

TA B L E O F C A S E S Para. Woodhouse AC Israel Cocoa SA v. Nigerian Produce Marketing Co Ltd [1972] 1 Lloyd’s Rep 439; [1972] AC 741; [1972] 2 WLR 1090; [1972] 2 All ER 271; 116 SJ 329 (HL) ........................ 114 World Navigator, The [1991] 2 Lloyd’s Rep 23 (CA) .......................................... 56, 59, 61, 62, 134 Zim Israel Navigation Company Ltd v. Tradax Export SA. See Timna, The

DECISIONS IN LMLN REPORTS LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN

Para. 15—29 May 1980 ......................................................................................................... 105 18—10 July 1980 .......................................................................................................... 18 35—5 March 1981 ......................................................................................................78, 84 44—9 July 1981 ............................................................................................................ 105 62—18 March 1982 ...................................................................................................... 67 71—22 July 1982 .............................................................................................. 39, 139, 140 72—5 August 1982 ....................................................................................................... 81 90—14 April 1983 ........................................................................................................ 86 103—13 October 1983 .................................................................................................. 121 114—15 March 1984 .................................................................................................... 41 117—26 April 1984 ....................................................................................................... 51 143— 25 April 1985 ...................................................................................................16, 29 151—15 August 1985 .................................................................................................... 103 155—10 October 1985 .................................................................................................. 16 179—11 September 1986 .............................................................................................. 83 180—25 September 1986. See Achillet, The 205—12 September 1987 .............................................................................................. 99 206—26 September 1987 .............................................................................................. 115 230—27 August 1988 .................................................................................................... 41 239—31 December 1988 ............................................................................................... 67 242—11 February 1989. See Jag Leela, The .................................................................. 86 248—6 May 1989 ......................................................................................................... 58 253—15 July 1989. See Lee Frances, The ...................................................................... 44 262—18 November 1989 .............................................................................................. 115 266—13 January 1990 ........................................................................................ 82, 87, 115 267—27 January 1990 ................................................................................................52, 53 274—5 May 1990 ............................................................................................... 16, 84, 118 285—6 October 1990 ............................................................................................... 65, 121 299—20 April 1991 .............................................................................................. 31, 65, 81 303—15 June 1991 ....................................................................................................... 52 304—29 June 1991 ....................................................................................................... 81 305—13 July 1991 ........................................................................................................ 132 307—10 August 1991 .................................................................................................... 121 328—30 May 1992 ............................................................................................. 57, 82, 118 329—13 June 1992 ....................................................................................................... 61 332—25 July 1992 ......................................................................................................57, 67 337—3 October 1992 .................................................................................................65, 81 338—17 October 1992 .............................................................................................. 57, 118 351—17 April 1993 ........................................................................ 39, 40, 51, 75, 139, 140 356—26 June 1993 ....................................................................................................... 39 383—9 July 1994 .......................................................................................................... 132 387—3 September 1994 ................................................................................................ 110 401—18 March 1995 .................................................................................................... 42 408—24 June 1995 ....................................................................................................... 104 409—8 July 1995 ........................................................................................................16, 18 411—5 August 1995 ..................................................................................................... 83 416—14 October 1995 .................................................................................................. 78 417—28 October 1995 .................................................................................................. 83 421––23 December 1995 ............................................................................................... 78 434—22 June 1996 ............................................................................................. 30, 57, 118

xix

TA B L E O F C A S E S LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN LMLN

Para. 445—23 November 1996 .......................................................................................... 67, 123 446—7 December 1996 ................................................................................................ 82 450—1 February 1997 .................................................................................................. 124 452—1 March 1997. See Alaska, The ............................................................................ 53 459—7 June 1997 ..................................................................................................... 57, 118 463—2 August 1997 ..................................................................................................... 53 471—22 November 1997 .......................................................................................... 18, 139 473—20 December 1997. See Agamemnon, The ........................................................... 132 473—20 December 1997. See Eurus, The ...................................................................42, 62 488—21 July 1998 ......................................................................................................80, 83 489—4 August 1998 ..................................................................................................... 52 493—29 September 1998 .............................................................................................. 99 510—27 May 1999 ....................................................................................................... 94 511—10 June 1999 ....................................................................................................... 70 538—22 June 2000 ....................................................................................................... 83 545—28 September 2000 ............................................................................................71, 78 559—12 April 2001 ....................................................................................................... 18 562—24 May 2001 ....................................................................................................... 120 566—19 July 2001 ......................................................................................................21, 99 587—16 May 2002 ....................................................................................................... 95 594—22 August 2002 .................................................................................................... 105 615—12 June 2003 ............................................................................................... 17, 29, 38 619—7 August 2003 ..................................................................................................... 95 628—12 December 2003 ............................................................................................... 96 636—31 March 2004 .......................................................................................... 17, 71, 130 647—1 September 2004 ..............................................................................................17, 80 648—15 September 2004 .............................................................................................. 87 651—27 October 2004 .................................................................................................. 124 669—6 July 2005 .......................................................................................................... 75 672—17 August 2005 ......................................................................................... 17, 61, 118 676—12 October 2005 .................................................................................................. 65 680—9 December 2005 ................................................................................................ 132 682—11 January 2006 ................................................................................................... 125

xx

BIBLIOGRAPHY

Schofield on Laytime and Demurrage (Informa Professional 5th ed. 2005) Scrutton on Charterparties and Bills of Lading (20th ed. 1996) Summerskill on Laytime (4th edition, Sweet & Maxwell/Stevens, 1989)

xxi

This page intentionally left blank

INTRODUCTION

GENERAL REQUIREMENTS OF ENGLISH LAW

English law is clear and simple when looked at in general terms regarding the commencement of laytime. It is the application of the general principles to detailed commercial events, circumstances and activities which results in complications and difficulties. In general, there are three requirements which have to be satisfied for laytime to commence under English common law, as follows: 1. The vessel has arrived at the agreed destination. The destination may be a port, dock, mooring, berth, etc., or an area coupled with the provision that the vessel then proceeds to a part of the area nominated by the charterers. 2. The vessel is ready to load or discharge the cargo. 3. Notice of readiness is tendered to the charterers or their agents. Such a notice is only required at the first loading port under English common law; it is not required for discharging ports unless there is a custom to such effect; in practice, it is usual for a charterparty to contain an express clause requiring the tendering of notice of readiness at both loading and discharging ports and perhaps also at subsequent loading/ discharging ports. When the three requirements above are satisfied the vessel is considered to be an arrived ship and, under English law, laytime then commences. In practice charterparties usually provide that laytime is not to commence until a stipulated time (e.g. 8 a.m. next working day), alternatively, after a prescribed time (e.g. 24 hours) after the tendering of a notice of readiness and, naturally, such an express provision governs the precise moment that the laytime clock is triggered off. A good example of a much-used notice of readiness provision is that in the Asbatankvoy charterparty form, which reads: ‘‘Upon arrival at customary anchorage at each port of loading or discharge, the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the Vessel is ready to load or discharge cargo berth or no berth, and laytime, as hereinafter provided, shall commence upon the expiration of six (6) hours after receipt of such notice, or upon the Vessel’s arrival in berth (i.e., finished mooring when at a sealoading or discharging terminal and all fast when loading or discharge alongside a wharf), whichever first occurs.’’

1

G E N E R A L R E QU I R E M E N T S O F E N G L I S H L AW

However, there are still some charterparties which do not have such an express provision, in which case the common law position applies so that laytime commences at the very moment that the notice of readiness is tendered to the charterers or their agents. The words ‘‘arrived ship’’, emphasised above, are somewhat confusing since they sometimes lead persons to think that they refer to one requirement only, that is, the vessel arriving at the agreed destination. While many people talk about the arrival of vessels, and charterparty clauses often refer to vessels having arrived, the position is that, under English law, the words ‘‘arrived ship’’ only come into effect when all three requirements have been satisfied. The fact that a vessel has arrived at the agreed destination does not determine that the vessel is an ‘‘arrived ship’’ within the context of the commencement of laytime; the other two requirements also have to be satisfied. Despite what has just been stated, many persons use the words ‘‘arrived ship’’ when speaking of the first requirement only; it is commonly used in this way even by judges and arbitrators so that, when reading judgments and awards, allowance has to be made for the licence existing therein. Such licence may also be used in this book when considering the first requirement of reaching the agreed destination.

2

CHAPTER ONE

ARRIVING AT THE AGREED DESTINATION

1. The agreed destination may be a port, dock, mooring, berth, etc., or an area coupled with the provision that the vessel then proceeds to a part of the area nominated by the charterers. The destination which has caused the most litigation/ arbitration is that of the ‘‘port’’, and it is this destination which will form the major part of this chapter. In practice, a vast number of port charterparties are made every year; their importance cannot be under-estimated particularly in the light of the large number of arbitrations, in addition to court cases, which have taken place over the years. The majority of port charterparties name a specific port as the destination, alternatively the charterparty makes the destination a port to be nominated by the charterers.

PORT CHARTERPARTY, GEOGRAPHICAL—THE OLDENDORFF TEST 2. Until The ‘‘Maratha Envoy’’1 the highest and most recent authority regarding a port charterparty was The ‘‘Johanna Oldendorff’’2 in which the House of Lords gave full consideration to the ‘‘arrived ship’’ concept. As will be seen, the Oldendorff decision has been left untouched. However, before considering these judgments it is helpful to look at the earlier cases of Leonis v. Rank,3 The ‘‘Aello’’4 and The ‘‘Delian Spirit’’5 in order to see how the law has developed since the turn of the century in respect of a port charterparty. 3. In Leonis v. Rank3 the vessel arrived in the port of Bahia Blanca and lay in the river outside the pier where the charterers required her to load; the place in which she lay was the usual place for vessels to be while awaiting a pier berth; there was evidence that she could have been loaded there. The Court of Appeal decided that the vessel was an ‘‘arrived ship’’ because she was within the commercial area of the

1. [1977] 2. [1973] 3. [1908] 4. [1960] 5. [1971]

1 2 1 1 1

Lloyd’s Rep. Lloyd’s Rep. K.B. 499. Lloyd’s Rep. Lloyd’s Rep.

217. 285. 623. 506.

3

Para. 3

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

port and at the disposition of the charterers. The leading judgment of Lord Justice Kennedy has been much quoted and reads (inter alia) as follows: ‘‘It is when the stipulated point of destination is a port only without further limitation, as in the present case, that a question as to the fact of the ship’s arrival at her destination is likely to arise. The limits of a port established by law or ancient custom may be very wide; or, again, in the case of a newly established place of shipping traffic, the limits may be uncertain because they are not yet defined by any competent authority . . . In the case of a port, and nothing more, being designated in a charterparty as the point of destination our Courts have acted in accordance with those dictates of reason and practical expediency which ought to be paramount especially in the region of mercantile business. Just as a port may have one set of limits, if viewed geographically, and another for fiscal or for pilotage purposes, so when it is named in a commercial document, and for commercial purposes, the term is to be construed in a commercial sense in relation to the objects of the particular transaction . . . But then comes the question what does the expression the ‘port’ viewed commercially, or the ‘commercial area’ in this connection mean? Certainly it does not mean the loading berth, that is to say, the actual spot at which the work of loading or unloading the ship is performed . . . The commercial area of a port, arrival within which makes the ship an arrived ship and, as such, entitled to give notice of readiness to load, and at the expiration of the notice to begin to count lay days, ought, I think to be that area of the named port of destination on arrival within which the master can effectively place his ship at the disposal of the charterer, the vessel herself being then, so far as she is concerned, ready to load, and as near as circumstances permit to the actual loading ‘spot’ . . . be it quay or wharf, or pier, or mooring, and in a place where ships waiting for access to that spot usually lie, or, if there be more such loading spots than one, as near as circumstances permit to that one of such spots which the charterer prefers.’’

Before leaving this case it is emphasised that the courts disregarded the geographical, fiscal and pilotage limits of the port; they focused on the commercial area, bearing in mind that they had a commercial contract to construe and that commercial matters were to the fore. As will be see, the ‘‘commercial area’’ remained the test under English law for a considerable time vis-`a-vis the ‘‘arrived ship’’ concept. With the advance of time and the growth/expansion of ports it became more difficult to delineate the ‘‘commercial area’’ of a port, particularly so after the Second World War. Even so, it could be said that a vessel had to get fairly close to the loading spot for a vessel to come within the ‘‘commercial area’’ of a port, as defined in Leonis v. Rank.3 The result caused economic hardship to owners but it did lead to a considerable amount of certainty. It is doubtful whether the original draftsmen of ‘‘proceed to . . . or so near thereto as she may safely get’’ would have approved of the narrow interpretation by the courts vis-`a-vis ‘‘commercial area’’, even though the Court of Appeal judges in Leonis v. Rank3 thought they were being quite bold in widening the area for a vessel to be an ‘‘arrived ship’’. After all, they did reverse the High Court judge who had held that the vessel was not an arrived ship when she anchored in the river within the port. 4. The case of The ‘‘Aello’’6 was an application of the Leonis v. Rank7 decision to the port of Buenos Aires. Although the House of Lords had the opportunity to change the ‘‘commercial area’’ test they did not do so. However, the case is interesting because of the application of the ‘‘commercial area’’ test to a large port in 1961, 6. [1960] 1 Lloyd’s Rep. 623.

4

THE OLDENDORFF TEST

Para. 4

some 52 years after the Leonis v. Rank7 decision. It will be seen that the nature of the cargo played an important part in the decision. The facts were that the vessel was chartered to load a cargo of maize at the port of Buenos Aires; she anchored at the intersection (22 miles distant from the dock area of the port but within the legal and administrative limits of the port) on 12 October and could not enter the inner harbour of the port until 29 October because of the non-availability of a berth. The House of Lords held, by a majority of three to two, that she was not an ‘‘arrived ship’’ until 29 October since the intersection (the Roads) could not be considered the ‘‘commercial area’’ of the port. In applying Leonis v. Rank7 Lord Jenkins stated (inter alia): ‘‘ . . . the ‘commercial area’ of the port, that is to say, the area in which the actual loading spot is to be found and to which vessels seeking to load cargo of the relevant description usually go, and in which the business of loading such cargo is usually carried out. The area presumed to be intended by the hypothetical owner and charterer is further particularised in point of proximity to the actual loading spot as being the area on arrival within which the master can effectively place the ship at the disposal of the charterer, and the position of the ship in which is to be as near as circumstances permit to the actual loading spot and in a place where ships waiting for access to that spot usually lie. The judgments, as I think, clearly postulate as the ‘commercial area’ a physical area capable (though, no doubt, only within broad limits) of identification on a map. When the given ship enters that area and positions herself within it in accordance with the requirements just stated, she is (in point of geographical position) an arrived ship; until she does so, she is not an arrived ship, and lay days and demurrage are to be calculated accordingly.’’

The judgment of Lord Morris also put emphasis on the cargo which was to be loaded/discharged; he said (inter alia): ‘‘The phraseology used in Leonis Steamship Co. Ltd. v. Rank Ltd. and other cases shows that it is no easy matter to employ the appropriate words to describe an area of water which is itself within a larger area, but Lord Justice Kennedy conveys the conception when he speaks of the commercial area within the port which is usually occupied by vessels whose obligation and purpose is to receive a cargo. A vessel may be within that area but may not be actually loading: she may be waiting to be loaded—or waiting to move to a berth at which she can be loaded. But if it can reasonably be said that a ship which is required to go to a port in order there to load has reached the commercial area of the port within which are the loading spots for her specified cargo, so that she next awaits details as to her particular loading spots and directions as to proceeding to them, then it can also fairly be said that she has arrived at her destination.’’

Lord Keith (the other majority law lord) saw no reason why the question could not be answered satisfactorily by an application of the principles elaborated in Leonis v. Rank and tabulated eight reasons for his decision that the Aello was not an arrived ship when she reached the intersection, the most relevant appearing to be: ‘‘The free anchorage was not an area within the port in which grain ships usually lay when waiting to load . . . the vessel lay some 22 miles from the dock area and had still to finish her voyage to Buenos Aires in the sense that she had to be piloted and be assisted with tugs along a 22 mile channel in order to reach the usual ‘place’ for loading as distinguished from the actual loading ‘spot’ . . . no loading or unloading of grain ships ever took place at the anchorage in the roads . . . a point ‘as near as circumstances permit to the actual loading spot’ must be within the port in its commercial sense . . . the fact that oil vessels or other types of 7. [1908] 1 K.B. 499.

5

Para. 4

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

vessel might load or discharge in the roads is nothing to the point. There may be different commercial areas in a port for different types of vessel and cargo, or a vessel may have to load or discharge outside a port . . . ’’

The dissenting judgments of Lord Radcliffe and Lord Cohen were perhaps more in tune with a simplistic approach which would satisfy commercial instincts. The former stated (inter alia): ‘‘My Lords, applying the principle of the Leonis case as I have tried to explain it, I am of the opinion that the Aello arrived in the port of Buenos Aires on 12 October. My reason for thinking so is based on the combination of the following facts. She was under the control of the port authority at Buenos Aires in the anchorage. She was lying in what was, by the prevailing regime of the port, the proper waiting place for vessels under orders to load maize. She could go no farther into the port without the giro which would allocate her a berth. She was at the disposition of the charterers, ready to take up the berth selected by them, as soon as they provided the cargo which would make the berth available. The free anchorage was an ‘extension of the port of Buenos Aires’ which at the relevant date was in a commercial sense ‘the port’ for the purposes of the chartered voyage. I am bound to say that I regard this conclusion as more satisfactory than the suggested alternative. It seems to me that, if we are looking for a general test of an ‘arrived ship’ applicable to all ports with their great varieties of structure, formation and local condition, it is unwise to identify the ‘commercial area’ too closely with the idea of a fixed geographical limit.’’

While Lord Cohen, agreeing with the reasoning and conclusions of Lord Radcliffe, added; ‘‘As I read the judgment of Lord Justice Kennedy in Leonis Steamship Co. Ltd. v. Rank Ltd., he was saying that in the case of a charterparty naming a port and nothing more as the point of destination, the test of whether a ship had become an arrived ship was whether the ship had reached the commercial area of the port; he regarded, I think, the question what was the commercial area in any particular case as one to be decided on the facts of the case. To put the matter in other words, he was saying that the test to be applied was what would a man of business, a marine officious bystander, to adapt Lord Justice Mackinnon’s well-known phrase, looking at all the facts of the case, including any relevant port regulations, regard as the commercial area of the port.’’

In the event, it was to be over a decade before an approach, more simplistic than that of the majority in The ‘‘Aello’’, prevailed. 5. Although The ‘‘Aello’’ did not change the law regarding the principle to be applied vis-`a-vis an ‘‘arrived ship’’, it did clarify the application of the ‘‘commercial area’’ principle in that it militated for a broader area which could constitute the commercial area than what many had thought to be possible, particularly in the case of large ports. Much emphasis was put on the nature of the cargo to be loaded/discharged so as to lead to the result that parts of a port would not constitute the commercial area for a particular vessel unless that vessel was within the area of the port which handled the goods to be loaded/discharged. This led to certainty in many cases so that shipowners, charterers, arbitrators, maritime lawyers and others were able to see, at a glance, if the vessel was an arrived ship simply by looking at the nature of the cargo to be loaded/discharged and the sections of the port which handled cargoes of such a nature. 6

THE OLDENDORFF TEST

Para. 6

The application of the test could, and did, lead to findings that the commercial area might be well away from the heart of the port and, in some instances, even outside the administrative limits of the port. For example, tankers often load/ discharge many miles from a port nucleus and it is obvious that they must be arrived ships when anchoring very close to the loading/discharging berth. What is not so obvious is how close such vessels had to get to the berth in order to have reached the commercial area and to be designated ‘‘arrived ships’’. Even though the ‘‘commercial area’’ test had some flexibility it could lead to economic unjust results as far as owners were concerned; further, the fact that the test had flexibility caused some uncertainty when considering some ports and cargoes. Before leaving The ‘‘Aello’’8 it is worth mentioning that, even though the owners were denied the commencement of laytime at the intersection anchorage, the House of Lords allowed them damages for delay because the non-availability of a berth was due to the failure of the charterers to supply a cargo; this aspect will be considered later under remedies available to owner (see later paragraph 55). 6. The increase in size of ship led to greater difficulty in applying the ‘‘commercial area’’ concept. It also led to commercially unrealistic results in that a vessel reached a position as close as she could get to the loading port (and could go no further because of the lack of a berth and/or port authority restrictions) and was still not considered an ‘‘arrived ship’’ because her anchorage (invariably the usual waiting place) was outside the ‘‘commercial area’’ of the port. The result was often economic hardship to the owner since his money-making chattel was getting no compensation for time during which the vessel was lying doing nothing even though she had completed the sea passage and was as near to the loading/discharging spot as she could get. Of course, many persons asserted that it was up to an owner to get a ‘‘time lost waiting for berth’’ provision, or some other suitable clause, in the charterparty to take care of a situation, but this may be easier said than done. This approach complicated an area of shipping law which should be simple, bearing in mind the large sums of money which can turn on whether or not time is to score up while a vessel is waiting at an anchorage after her completing her sea passage; further, the charterparty contract spells out the laytime for loading and discharging and it would appear to be commercially just that an owner should get compensation for the time that his vessel is at or off a loading/discharging port and this exceeds the contractual period laid down for the loading and discharging of cargo. Because of the general feeling of sympathy for owners, some judges and arbitrators tended to strain the limits of the ‘‘commercial area’’ test to decide that a vessel was an ‘‘arrived ship’’ when, strictly speaking, she was not. Nowhere was this more evident than in The ‘‘Delian Spirit’’,9 a case which went to the Court of Appeal in 1971.

8. [1960] 1 Lloyd’s Rep. 623. 9. [1971] 1 Lloyd’s Rep. 506.

7

Para. 7

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

7. In The ‘‘Delian Spirit’’9 the vessel was chartered to load a cargo of crude oil at one or two Black Sea ports. The charterers ordered the vessel to Tuapse, a port of modest size with a breakwater within which was a jetty with berths for four tankers. When the vessel presented herself, the berths were occupied, so she anchored in the roads some one and a quarter miles from the jetty at the anchorage appointed for ships proceeding to the oil berth within the harbour. The learned umpire (Mr Michael Mustill QC as he then was, later Lord Mustill) found that the waiting area was within the legal, fiscal and administrative area of the port but that is was not a usual place for the loading of oil and felt constrained to hold that the ship was not arrived although, in every practical sense, she had completed her voyage when she came to rest at the anchorage. Both the High Court and the Court of Appeal reached an opposite conclusion to the umpire. Although the decision of the courts was in accordance with commonsense it appeared to be wrong under the application of the ‘‘commercial area’’ test, the principle which had been adopted by the House of Lords in The ‘‘Aello’’.8 The Delian Spirit9 judgment caused much uncertainty in the shipping sphere and it was obvious that the concept of the ‘‘arrived ship’’ required re-canvassing before the highest of English tribunals. The wish of many persons was soon fulfilled since The ‘‘Johanna Oldendorff’’10 went to the House of Lords within two years of the Court of Appeal’s decision in The ‘‘Delian Spirit’’.9 The latter case also involved ‘‘reachable on arrival’’; see later Chapter 3. 8. In The ‘‘Johanna Oldendorff’’10 the vessel was voyage chartered to carry bulk grain from the U.S.A. to Liverpool/Birkenhead, the charterparty stipulating: ‘‘Time to count from the first working period on the next day following receipt during office hours of written notice of readiness to discharge whether in berth or not’’. The charterers were informed that the vessel was due at Mersey Bar anchorage at 17.00 hours on 2 January 1968, but no berth was nominated by them. When she arrived she anchored there. The next day she proceeded to Princes Pier landing stage, Liverpool, and cleared with the customs. She was then ordered by the port authority to leave and proceed to anchor at the Bar light-vessel. She did so arriving at that anchorage at 14.40. Meanwhile the owners gave to the charterers notice of readiness. This was received at 14.30 on 3 January. The vessel lay at anchor at the Bar from 3 to 20 January ready, so far as she was concerned, to discharge. Evidence was given that the Bar anchorage, which was 17 miles from the nearest discharging berth, was the usual place where grain ships lay awaiting such a berth. A dispute arose as to when the vessel had become an ‘‘arrived ship’’, and was referred to arbitration. The umpire stated a special case, the question for the court being: Whether laytime for discharge started (i) at 08.00 hours on 4 January 1968; or (ii) at 08.00 hours on Monday, 22 January; or (iii) at 08.00 hours on 23 January. Subject to the decision of the court the umpire held that the laytime started at 08.00 hours on 4 January. It was decided by Mr Justice Donaldson (as he then was) that (1) on the evidence, the vessel was not an ‘‘arrived ship’’ when she reached the 10. [1973] 2 Lloyd’s Rep. 285.

8

THE OLDENDORFF TEST

Para. 8

Bar anchorage; (2) nor was she an ‘‘arrived ship’’ when she reached the Prince’s landing stage because (a) it was not a usual waiting place for grain ships seeking a discharge place, and (b) she was no longer there when the notice of readiness was served; (3) the laytime began to count at 08.00 hours on 22 January or at 08.00 hours on 23 January but, as the matter was of academic interest only, no view as which of these two dates should be preferred need be expressed; (4) that the answer to the question in the special case was either (ii) or (iii) and that the alternative award in favour of the charterers was upheld. On appeal by the shipowners, it was contended that (1) the vessel was an ‘‘arrived ship’’; and (2) the words ‘‘whether in berth or not’’ had the effect of casting the risk of delay upon the charterers, it was held by the Court of Appeal (Lord Justices Buckley and Roskill; Lord Denning, M.R., dissenting) that (1) the vessel was not an ‘‘arrived ship’’, for (a) she had not reached the commercial area of the port; (b) the relevant waiting area must be in the commercial area; and (c) that commercial area must be that part of the port where she could be discharged (or loaded) when a berth was available; (2) the application of the words ‘‘whether in berth or not’’ was limited to a case where a vessel was already an ‘‘arrived ship’’; their use did not dispense with the necessity for her being an arrived ship before notice of readiness could be given and the laytime start to count; and only when she had arrived did the clause operate to make laytime commence even though she was not in berth. The appeal was dismissed. Both the High Court and the Court of Appeal had held, on the strength of The ‘‘Aello’’,11 that the vessel was not an arrived ship. However, the House of Lords, after canvassing the topic, produced a unanimous decision that the Johanna Oldendorff10 was an arrived ship when she anchored off the Bar light-vessel. In doing so they reversed the Court of Appeal and overruled The ‘‘Aello’’. The all-important ratio decidendi of the Oldendorff case10 (now known as the Reid test) is that a vessel can be said to have arrived at a port if she has reached a position within the port where she is at the immediate and effective disposition of the charterers, her geographical position being of secondary importance; she will be at the immediate and effective disposition of the charterer if she is at a place within the port where waiting ships usually lie unless the charterer can show circumstances to the contrary; if the vessel is waiting at some other place in the port then it is up to the owner to prove that the vessel is as fully at the disposition of the charterer as she would have been if in the vicinity of the berth for loading or discharging. The precise words of Lord Reid were: ‘‘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 lie, she will be in such a position unless in some extraordinary circumstances proof of which would lie on 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.’’

11. [1960] 1 Lloyd’s Rep. 623.

9

Para. 8

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

Apart from Lord Reid’s speech other speeches which are of help in understanding the House of Lords’ decision are those of Viscount Dilhorne and Lord Diplock. The former summarised his conclusions, as follows: ‘‘(1) That under a port charterparty to be an arrived ship, that is to say a ship at a place where a valid notice of readiness to load or discharge can be given, she must have ended her voyage at the port named. (2) The port named in the charterparty must be given the meaning which those persons using it as a port, shippers of goods, charterers of vessels and shipowners, would give to it. (3) The physical limits of a port afford no reliable guide, for the physical limits as indeed the pilotage limits, may extend far beyond the limits of what those using it would regard as the port. (4) The area of some ports may be defined by law. (5) A vessel has not reached her port of destination until it has ended its voyage within the port, either in its legal, or if it differs, in its commercial sense. If it is refused permission and ordered to wait outside the port by the port authority it is not an ‘arrived’ ship. (6) If it is within the port in its legal sense it does not follow that it is within the port in its commercial sense. (7) Brett, M.R.’s definition in Steamship ‘Garston’ Co. v. Hickie & Co. and his reference to port discipline may be useful in determining what are the limits of the port in its legal sense but port discipline may be exercised and submitted to over a wider area than the port in its commercial sense. (8) Under a port charterparty a vessel has arrived when (i) if it can proceed directly to a berth or dock, it has arrived there and (ii) if it cannot do so, it has reached that part of the port in which vessels waiting to load or discharge cargo usually lie before moving directly to a dock or berth. At that part of the port she can be effectively placed at the charterers’ disposal for loading or unloading and that part of the port is to be regarded as part of the port in its commercial sense. (9) If within the port though not for some reason at the usual waiting place, a ship may still be an ‘arrived ship’ if, at the place where she is, she can be effectively placed at the disposal of the charterers. (10) The ‘usual place’ may be changed by a port authority or by a regulation. If for some reason due to the conditions of the port and not of the ship, a vessel wishing to wait at the usual waiting place is ordered to lie elsewhere by the port authority, I think, though the question does not arise for decision in this case, that she ought to be regarded as an arrived ship.’’

Lord Diplock analysed the characteristics of a voyage charterparty in four successive stages as follows: ‘‘(1) The loading or approach voyage, viz. the voyage of the vessel from wherever she is at the date of the charterparty or the conclusion of her previous fixture, if that is later, to the place specified as the place of loading. (2) The loading operation, viz. the delivery of the cargo to the vessel at the place of loading and its stowage on board. (3) The carrying or loaded voyage, viz. the voyage of the vessel from the place of loading to the place specified in the charter as the place of delivery. (4) The discharging operation, viz. the delivery of the cargo from the vessel at the place of delivery and its receipt there by the charterer or other consignee.’’

This analysis has been well recognised over the years and has been referred to again by the Court of Appeal in a fairly recent decision in Kronos Worldwide Ltd. v. Sempra 10

THE OLDENDORFF TEST

Para. 8

Oil Trading S.A.R.L.,12 see Lord Justice Mance at page 264. This case concerned a sale contract and is detailed under Sale Contracts in Chapter 7, paragraph 138. Lord Diplock also had this to say: ‘‘A dock encloses a comparatively small area entered through a gate. There is no difficulty in saying whether a vessel has arrived in it. As soon as a berth is vacant in the dock a vessel already moored inside the dock can get there within an interval so short that for the practical business purpose of loading or discharging cargo it can be ignored. For such purposes she is as much at the disposal of the charterer when at her mooring as she would be if she were already at the actual berth at which the charterer will later make or accept delivery of the cargo, but is unable for the time being to do so. The area of a port, however, may be much larger. It may sometimes be less easily determinable, because of absence of definition of its legal limits or variations between these and the limits within which the port authority in actual practice exercises control of the movement of shipping; but 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 is outside those limits as is the case with Glasgow and with Hull. In the days of sailing ships, whose movements were dependent on favourable wind and weather, and even in the days of steamships before there was regular radio communication between ship and shore, a ship prevented by congestion in the port from reaching a berth on her arrival there might be compelled to moor at some place which, although it was within the limits of the port, was nevertheless one at which she could not fairly be regarded for business purposes as being already at the disposition of the charterer, because the interval which would elapse between the time when a berth did become actually available and the time when the vessel would be able to reach it in response to directions given by the charterer, might be so long that it would be of practical business significance. ... My Lords, the application of the principle that under a port charter the vessel must be put at the disposal of the charterer before laytime for loading or discharge can start, calls for consideration of the particular circumstances of the adventure contemplated by the charterparty, and must take into account changes in the kinds of ships used in maritime commerce, in means of communication and in port facilities and the management of ports. If a port is congested so that on arrival within its limits the chartered vessel cannot proceed immediately to a berth to load or to discharge, it is of no business importance to the charterer where she waits within those limits, so long as it is a place (1) where she counts for turn if the port is one where vacant berths are allotted to waiting vessels in order of arrival; (2) where the charterer can communicate with her as soon as he knows when a berth will become available for the cargo to be loaded or discharged, and (3) from which the vessel can proceed to the available berth when she receives the charterer’s communication, so as to arrive there as soon as the berth has become vacant or so shortly thereafter as not to be significant for practical purposes. The waiting places within the limits of an extensive port which have these characteristics alter as ships become more manoeuverable, faster or larger, and communications between ship and shore improve. It was an area of the port which embraced but did not extend beyond these places that Lord Justice Kennedy in Leonis v. Rank called ‘the commercial area of the port’ which the parties to a port charter must be taken to have meant as the area in which the vessel must have arrived and come to stop in order to complete its loading or carrying voyage. Whether these waiting places were also places at which other ships could be actually loaded or discharged, or usually were at other times, was irrelevant to the business purposes of the parties to the particular adventure if the chartered vessel itself could not. Since it is to the interest of all concerned, of port authorities as well as charterers and shippers, that time should not be wasted by leaving berths vacant when they are available for 12. [2004] 1 Lloyd’s Rep. 260.

11

Para. 8

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

loading or discharging cargo, the usual places for ships to wait their turn for a vacant berth are those which do possess the three characteristics that I have mentioned, if there are any such places within the limits of the port. In days of sailing ships close proximity to berths likely to become vacant may have been necessary in order that a place should possess those characteristics, but distance from the actual berth becomes of less importance as steam and diesel power replaces sail and instantaneous radio communication is available between ship and shore. In modern conditions it is possible for port authorities and charterers to know at least some hours in advance, when a berth presently occupied by a loading or discharging vessel will become vacant and available for use by the chartered vessel. Notice of similar length can be given by the charterer to the waiting vessel so as to enable her to reach the berth as soon as it becomes vacant, if she can make the journey from her waiting place to the berth within that time. And if she can she is as effectively at the disposal of the charterer for loading or discharging while at that waiting place as she would have been if waiting in the immediate vicinity of the berth. My Lords, this no doubt is why the Bar anchorage, which is within the legal limits of the port of Liverpool and included in the area in which the port authority is entitled to control the movement of shipping, has become the usual place to which vessels are directed by the port authority to wait their turn for a berth. And the same must generally be true of usual waiting places within the limits of other ports where congestion is liable to occur, I would therefore accept as a convenient practical test as to whether a vessel has completed her loading voyage or her carrying voyage under a port charter so as to cast upon the charterer the responsibility for subsequent delay in finding a vacant berth at which her cargo can be loaded or discharged, the test as it is formulated by my noble and learned friend, Lord Reid, at the conclusion of his speech.’’

While there is considerable virtue in what was stated by Viscount Dilhorne and Lord Diplock, both of them held to that part of the so-called Reid test ‘‘within the port’’ notwithstanding that they placed reliance upon the control of the movement of shipping as a guideline for determining the limits of a port. Neither of them postulated a situation where the usual waiting place was close to but outside the legal limits of a port where the port authority had no direct but only inferential influence in respect of the particular vessel; for example, the port authority only being able to say to the vessel ‘‘come in’’ at an appropriate time. It seems that those law lords, along with Lord Reid, thought that they were taking a relatively bold step (which perhaps in the strict legal sense they were) by way of their disapproval of the ‘‘commercial area’’ test and the introduction of the ‘‘Reid’’ test. The references to sailing ships speak volumes in indicating a conservative approach and it is worth noting that Lord Diplock took the lead in the later 1977 Maratha Envoy decision, another House of Lords case of some importance and which is considered later in paragraph 11. The decision widened the area within which a vessel can be considered an ‘‘arrived ship’’ and this was generally welcomed; however, it is submitted that the decision did not go far enough and this is be to regretted in view of the House of Lords having had a golden opportunity to simplify an area of law which had become unnecessarily complicated over the years. 9. The disappointment in the Johanna Oldendorff decision10 is that part of the ratio decidendi which stipulates that the vessel must be within the port in order to be an ‘‘arrived ship’’. This can lead to illogicalities (illustrated later), also to difficulties because of many ports not having well defined legal limits. Since the Oldendorff 12

THE OLDENDORFF TEST

Para. 10

decision10 arbitrators have been faced with problems regarding whether or not a usual waiting place is, or is not, within the port, and this runs counter to the words of Lord Reid (leading judgment in the case) which read (inter alia): ‘‘But 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 [emphasis supplied]; and in many cases the limits of the port are defined by law.’’

There have been arbitrations since the Oldendorff decision10 where there has been doubt not only concerning the exact legal limits of the port but also as to the extent and degree of regulation of ships by port authorities. Notable examples have been some of the Mediterranean ports although other areas of the world have also produced problems in this respect. Although a move in the right direction the Oldendorff decision10 did not go sufficiently far in order to simplify, and remove uncertainty from, the application of the ‘‘arrived ship’’ concept. Although it may be illogical to say that a ship has arrived at a port when she is not within the port, does it really matter whether or not a vessel has reached certain limits (which can be difficult to ascertain) so long as she has completed her sea passage and is lying where vessels usually wait for a berth, adjacent to the port? 10. The commercial illogicality which can result from the Oldendorff10 decision is well illustrated by two 1974 arbitrations which occurred soon after the Oldendorff decision, one in London and the other in New York, both of which concerned grain laden vessels which waited at the usual waiting anchorage off the Hook of Holland before proceedings to their discharging berths at Rotterdam. In the London arbitration The ‘‘Agamemnon’’,13 the charterparty stipulated: ‘‘Notification of vessel’s readiness to discharge must be delivered to the office of the charterers or their agents, at or before 4 p.m. (or at or before 12 noon if on a Saturday) and the laydays will then commence at 7 a.m. on the next business day, whether in berth or not.’’

The charterers nominated Rotterdam as the port of discharge and the vessel, carrying a cargo of grain, arrived at the recommended anchorage off the Hook of Holland at 01.00 on 18 August 1973 which anchorage was partly outside of Netherlands Territorial Waters; the Agamemnon anchored in that particular part of the anchorage. While lying at the anchorage the vessel was about 20 miles from the indicated discharging berth which, at the time, was occupied by another vessel. The owners made attempts to secure a waiting berth within the port of Rotterdam but were unsuccessful. It was usual for vessels to lie at the recommended anchorage if no discharging or waiting berth was available and when the Agamemnon reached the recommended anchorage she had reached as practically close as circumstances permitted to the berth nominated by the charterers. The recommended anchorage was outside of the legal and fiscal limits of the port of Rotterdam and the Port of 13. 1974.

13

Para. 10

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

Rotterdam authorities did not have any control over the vessels at the recommended anchorage save for that of forbidding them to move into the port although for the purpose of assisting vessels, Netherlands state authorities exercised duties in relation to pilotage, dredging, buoyage, beaconage and lighting, in areas including and well to the seaward side of the recommended anchorage. Pilotage was not compulsory insofar as the area traversed by the Agamemnon was concerned, prior to anchoring. Notice of readiness was given on behalf of the vessel at 09.00 on 18 August 1973; this notice was not accepted by the charterers. A further notice of readiness was tendered at 06.00 on 28 August 1973 and this notice was accepted at 09.00 on 28 August 1973 by which time the vessel had arrived at her discharging berth. The question which the umpire had to decide was whether or not the vessel had reached the agreed destination of Rotterdam, within the rule laid down in the Oldendorff at the time that the 18 August notice of readiness was tendered. He decided the special case in favour of the charterers, holding reluctantly that the vessel had not reached the port of Rotterdam, under the Reid test, when she anchored off the Hook of Holland on 18 August. Part of his reasoning was: ‘‘It appears to me that there is virtually no difference between a vessel waiting at the recommended anchorage off the Hook of Holland in relation to the port of Rotterdam, and a vessel waiting at anchor off the Bar light-vessel in relation to the port of Liverpool, when considering the ‘arrived ship’ concept, except that the former anchorage is outside the legal limits of the port, whereas the latter anchorage is inside the legal limits of the port. It seems strange that, in one case, the vessel should be an ‘arrived ship’, whereas, in the other case, the vessel should not be so considered, but, in view of the Oldendorff decision (which, as I see it, specifies that a vessel must be within the port in order to be an ‘arrived ship’) one appears to be left with this illogicality, simply because of where the legal limits of a port are drawn. With respect, it seems a pity to myself, and to many persons in the City of London and other shipping centres around the world, that the Oldendorff decision did not go a little further so as to embrace places where vessels usually wait off the port when they are prevented from proceeding further because of no berth being available to them. Such an extension of the ‘arrived ship’ concept would have avoided some of the problems now coming before arbitrators as to whether a usual waiting place is, or is not, within the port; there are a good many ports in the world which make it difficult (because of, for example, no defined legal limits) for arbitrators to decide whether or not the usual waiting place is within the port. Lord Reid’s test, in the Oldendorff decision does not appear to be of easy application to many ports and, in addition, can often lead to considerable time consuming and costly research in attempting the establishment of the limits of the various powers exercised by port authorities. The views expressed above are prompted simply by a desire to see the ‘arrived ship’ concept made easier and more certain of application, also in the hope that, one day, the English law will be in step with so many other maritime nations.’’

The case was never set down in the courts by the owners because they were advised that there was no likelihood that the House of Lords would depart from one of its previous decisions so soon after the Oldendorff. In New York the arbitrators in The ‘‘Polyfreedom’’,14 on virtually identical facts, took a different approach and decided in favour of the shipowners in that the vessel was an ‘‘arrived ship’’ when she reached the anchorage off the Hook of Holland. 14. 1974.

14

THE OLDENDORFF TEST

Para. 11

The arbitration panel, agreeing that the ship was outside the legal, fiscal and geographical limits, posed the question, ‘‘does this geographical imaginary line drawn up by the Dutch government authorities for totally different purposes, mean that under the terms of this particular charterparty, the Polyfreedom had not arrived at Rotterdam?’’ The majority answered the question in the negative, in favour of the owners stating (inter alia): ‘‘Under a port charterparty containing a ‘whether in berth or not’ provision, if a vessel has reached a point as close as she may reasonably arrive to the designated discharging berth, and can prove that it was not possible or practical to get nearer, then the physical and geographical location of the waiting point (provided it is within the usual waiting area) is of no importance. The owner of the vessel has at that point in time executed the requirement of the contract to the extent required to place the ship and cargo at charterers’ disposal. Clearly this requires that the vessel be able, immediately she is required to do so, to proceed on charterers’ instructions to the discharging berth, without causing any delay to charterers at that time.’’

While the New York arbitrators had the Oldendorff decision put to them it only had persuasive authority albeit by the highest English tribunal and the majority, quite rightly, it is submitted, rejected it. The above quotation surely reflects what the law should be in respect of reaching the agreed destination regarding a port charterparty. Interestingly, the New York Polyfreedom arbitration was referred to a few years later, by the English Court of Appeal, in The ‘‘Maratha Envoy’’15; see later paragraph 11 for discussion of this case. 11. The ‘‘Maratha Envoy’’16 was perhaps a bad case on its facts to take to the House of Lords so relatively soon after the Oldendorff decision, particularly since three of the five law lords in the Oldendorff sat in the Maratha Envoy case; the leading and only judgment was given by Lord Diplock (the other four law lords simply concurring) who had delivered a lengthy speech and analysis of the Oldendorff decision (see above, paragraph 8). It appeared that the chance of the House of Lords departing from one of its previous decisions, within four to five years, was indeed very slight even though the Court of Appeal was unanimous in deciding that the vessel had arrived at Brake when she anchored at the Weser light-ship to wait for a berth, the anchorage being outside the legal, fiscal and administrative limits of Brake and about 25 miles from her intended berth. The facts were that the vessel anchored at the Weser light-vessel at 22.10 on 7 December and on the same day the charterers directed that the vessel should proceed to Bremen after lightening at Brake. At 03.00 on 8 December, the vessel sailed for the River Weser. The vessel was taken up river to Brake on the flood tide, turned in the river off the port of Brake and went back to the light-vessel. There was no berth available for her, there were no waiting places in the port of Brake and anchoring in the river in or near the area of the port was forbidden. The vessel did not obtain clearance from either the health or customs’ authorities. The vessel turned in the river at about 07.20 and notice of readiness was tendered at 09.00, when the vessel was back at Bremerhaven. That notice was rejected. 15. [1977] 1 Lloyd’s Rep. 217. 16. [1977] 2 Lloyd’s Rep. 301.

15

Para. 11

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

On 10 December the charterers nominated the port of Brake as the discharging port. At 07.30 on 12 December the vessel made a second excursion up the River Weser. Again there was no available berth but the vessel obtained special health clearance. No customs’ clearance was obtained. The vessel turned in the river off the port at 11.45 and notice of readiness was given but this too was rejected. On 30 December at 04.00 hours the vessel finally berthed in the port of Brake. The owners contended (i) that Maratha Envoy became an arrived ship at Brake on 8 or 12 December 1970; and (ii) the cost of waiting at the light-vessel was recoverable as damages for failure to give discharging port orders timeously. The charterers replied that the vessel did not become an arrived ship before 30 December 1970, and, although the discharging port orders were given late, the owners suffered no damage. It was held by Mr Justice Donaldson (as he then was) that (i) although in a commercial and legal sense vessels were within the port of Brake when they were off the quay, the Maratha Envoy had not ‘‘arrived’’ on 8 or 12 December because the voyage had not ended and the vessel was not waiting; her trips to the port of Brake and back to the light-vessel did not constitute arrival in a commercial or in a legal sense; (ii) therefore, the failure to nominate a discharging port in time caused no loss to the owners. On appeal by the shipowners it was held by the Court of Appeal (Lord Denning, M.R., Lord Justices Stephenson and Shaw), that (1) when the vessel dropped anchor at the Weser light-ship and was waiting for a berth she was an arrived ship; and there were no authorities binding the court to hold that a vessel could not be an arrived ship until she got within the limits of the port; (2) (Lord Justice Stephenson, dissenting): it was implied by the terms of the charterparty operating in conjunction with the nomination of a Weser port (Brake) that arrival at the Weser light-ship should take effect as if it were arrival in the port of Brake. Lord Denning took the approach of the New York arbitrators in The ‘‘Polyfreedom’’ and said (inter alia): ‘‘I think that, at the present day, a vessel should be held to be an arrived ship when she has reached the usual waiting place for the port, even though it may be a few miles outside the limits of the port itself. The reason being that she has completed her carrying voyage and is at the disposition of the charterers as effectively as if she was inside the port itself in the vicinity of a berth.’’

On the implied term aspect Lord Denning had this to say: ‘‘If the vessel is ordered to a port—and goes there—within which there is no available berth and no available waiting area (such as the port of Brake), what is the shipowner to do? Is he to sail away with the cargo to a distant port? Obviously not. He must go to the appointed area for waiting outside the port. That must be implied. But who then is to bear the cost and expense of waiting? Obviously the charterer, because it is his responsibility to provide a berth, and he has not done so. It must necessarily be implied that the vessel becomes an arrived ship when she arrives at the usual waiting place, even though it is outside the port. . . . None of the authorities hitherto has discussed these implied terms. So there is nothing to prevent our introducing them. And, if they are necessary to do justice, I think we should introduce them. It is a legitimate way of getting round the bad interpretation of the past.’’

16

THE OLDENDORFF TEST

Para. 12

The decisions of the Court of Appeal received short shrift in the House of Lords where it was held that in a port charterparty the vessel could not be an ‘‘arrived ship’’ at any waiting place short of the limits of the named port and, further, there was no ground for implying a term into the charterparty as proposed by the majority in the Court of Appeal. Lord Diplock emphasised that the Oldendorff stipulated ‘‘within the port’’ by stating: ‘‘My noble and learned friend Viscount Dilhorne stated specifically that for it to have ‘arrived’ the place where the vessel is waiting must be within the port. A vessel ordered to wait outside the port is not an arrived ship. In the course of my own speech I spoke throughout of a waiting place within the port and this qualification was a necessary consequence of the analysis of the four stages of the adventure contemplated by a charterparty which led to my acceptance of the Reid test as correct.’’

He then went on to say ‘‘it would be doing a grave disservice to the shipping community if this House were to allow the legal certainty introduced by the Reid test to be undermined’’. Lord Diplock dealt very cursorily with the implied term aspect, as follows: ‘‘Lord Denning M.R. and Lord Justice Shaw were also prepared to imply a term in the charterparty to the same effect as the express Weser Lightship clause. Charterparties entered into upon printed forms and adapted to the particular adventure contemplated by the parties often contain surplus phrases or clauses; but there is no ground for implying terms which are not necessary to give business efficiency to the contract and which if incorporated in the contract would alter the allocation of a misfortune risk in a way for which the parties themselves had not provided when negotiating rates of freight and provisions for demurrage. I agree with Lord Justice Stephenson that in the instant case there is no ground for any such implication.’’

It is submitted that the implied term aspect was worthy of greater consideration there being much sense in equating the charterers’ obligation to provide a berth with that of supplying a cargo. After all, the charterer has an absolute obligation to provide a cargo; see The ‘‘Aello’’ (see earlier paragraphs 4 and 5 and later paragraphs 54 and 55) where the owners obtained damages for the vessel’s detention at the Intersection because the charterers breached their absolute obligation to supply a cargo and this resulted in the vessel having to wait at the Intersection (where she was not an ‘‘arrived ship’’ until the cargo had been supplied and the vessel was granted permission to move into a berth). The charterer also has to provide a berth for the cargo to be loaded/discharged; why should the obligation not be of identical nature under the law in view of one obligation being so closely bound up with the other? What could have more business efficacy than having parallel legal obligations where they are so closely juxtaposed? 12. Although an implied term is strictly within the field of damages (see later Chapter 3) it has a bearing on the ‘‘arrived ship’’ concept because of what has been stated earlier in paragraph 11. It is of more than passing interest that shortly before The ‘‘Maratha Envoy’’ went to the House of Lords it had been decided in the High Court that in the case of delivery under a time charterparty there was an implied term that a berth should be available on the vessel’s arrival. In The ‘‘Golfstraum’’17 17. [1976] 2 Lloyd’s Rep. 97.

17

Para. 12

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

the time charterparty stipulated (clause 1) that the vessel was to be delivered and placed at the disposal of the charterers at Sfax ‘‘in such available berth where she can safely lie always afloat’’. The Golfstraum arrived at Sfax Roads on 8 March and at 08.00 hours, the master informed the charterers’ agents at Sfax by radio that the vessel was ready to be delivered. Owing to harbour congestion, non-availability of berth and the nature of the commercial operations the Golfstraum was engaged in, no berth was available until 12 March when she was allowed to enter the port and the charterers took delivery of her. In the arbitration the umpire decided, by way of a special case, that the charterers were under an obligation to direct the vessel on her arrival to an available berth and there take delivery of her, they were in breach of this obligation and could not rely for relief from such breach on the fact that they had no control over the port authority, and that the owners were entitled to damages, based upon the daily amount of hire, for the 8–12 March period. The umpire’s award was upheld in the High Court by Mr Justice Mocatta who stated: ‘‘Clause 1 of the charter does not expressly provide for the time when the charterers must give directions for the available and safe berth to which the vessel is to go to make her delivery, but I think the necessary inference is that the directions must be given either on arrival at Sfax or before arrival. I do not think the clause can be read as imposing no obligation to give the necessary directions until a berth shall become available.’’

The ‘‘Golfstraum’’ was not cited in The ‘‘Maratha Envoy’’ but it is unlikely that it would have swayed the conservative-minded Lord Diplock who contended for a stringent test regarding an implied term in respect of demurrage obligations under a charterparty. The stringency of the test came up in the later case of The ‘‘Damodar General Park and King Theras’’18 where Mr Justice Steyn (as he then was) decided to imply a provision into a Sandheads clause which allowed a notice of readiness to be tendered at a place some 40 miles closer to Calcutta than Sandheads. It was found necessary to discharge the cargo into lightening vessels and, under the terms and conditions of the charterparty, time used for discharging from the ‘‘mother vessel’’ was to be disregarded, and laytime had to be calculated with reference to the lightening operation. Clause 38 of the charterparty (the ‘‘Sandheads Clause’’) provided inter alia that, ‘‘if vessel is unable to give notice of readiness by reason of congestion at Calcutta, time shall commence to count at 8 a.m. on the next business day after notice of vessel’s arrival off Sandheads has been given’’. The lightening vessels could not proceed straight up to Calcutta, and there give notice of readiness in the usual way, because of the congestion at that port. Eight of the nine lightening vessels never reported their readiness on arrival off Sandheads. Each was loaded from the mother vessel after she had shifted from Sandheads to Saugor. Then only did they purport to give notice. Sandheads was some 40 miles off the mouth of the River Hooghli and was the area where vessels would normally wait if they were unable to proceed directly to Calcutta. Saugor was much closer to Calcutta and was at the mouth of the river some 40 miles north of Sandheads. The charterers contend that notices given on completion of loading at Saugor could not constitute valid notices under clause 38 because what that clause called 18. [1986] 2 Lloyd’s Rep. 68.

18

THE OLDENDORFF TEST

Para. 12

for was notice of the vessel’s arrival off Sandheads. It was therefore argued that the Sandheads Clause had no application, and laytime for eight of the nine vessels only started to run as and when each vessel, having reached Calcutta and obtained customs entry and free pratique, gave notice of readiness. The owners of the vessel made a contrary submission. The arbitrator decided in favour of the owners of the vessel. In so awarding, the arbitrator was constrained to comment on the absurdity of a lightening vessel, loaded at Saugor, having to waste time and money proceeding out to Sandheads in order to comply with the strict letter of the clause. He then said that there could be no real doubt as to the basic intention of the shipowners and charterers, namely that, given a congestion situation, the waiting time should count as laytime as from the day following upon receipt of advice that the vessel was ready to proceed up to Calcutta. Also that, in selecting arrival off Sandheads as the turn-key for the purpose of clause 38, the draftsman plainly overlooked the possibility of transhipment being effected, in the words of clause 35 ‘‘closer to Calcutta’’—language which was wide enough to embrace transhipment being carried out, as it was here, at Saugor. When the dispute came before the Commercial Court it was held that on no view could the phrase ‘‘off Sandheads’’ in clause 38 be given a meaning so extensive as to cover the vicinity of Saugor, and that the owners’ position could not therefore be sustained by any process of construction, the only question being whether it could be supported on the basis of implying a term in the contract. In deciding the case of favour of the owners and upholding the arbitrator Mr Justice Steyn had this to say: ‘‘Keeping in mind the stringency of the test applicable to the type of implied term under consideration, and the approach enunciated by Lord Diplock in The ‘Maratha Envoy’, I now turn to the question whether an appropriate term can be implied in clause 38. I do not accept that demurrage provisions under a charterparty are entirely immune from the application of general principles of contract law regarding the implication of terms, I do, however, accept that the stringent test applicable to the implication of such terms will rarely result in a term being implied in commercial contracts, and particularly in the field of demurrage obligations under a charterparty. The question whether a term as set out in Mr Eckersley’s award or in substantially similar terms ought to be implied is not susceptible of detailed analysis. It is a matter of first impression. In my judgment, Mr Eckersley’s description of the basic purpose of the relevant contractual provision is manifestly sound. The senselessness and wastefulness of requiring the vessels to return to Sandheads after completion of loading at Saugor in order to give notice at a place substantially further away from the discharging port is obvious. In my view, reasonable men versed in the shipping business, and faced in the real commercial world with the question posed in the two arbitrations, would undoubtedly have said: ‘Yes, of course, the vessels need not undertake an 80 or 100 miles deviation in order to give notice of readiness; they may give notice of completion of loading if the transhipment is effected at a place closer to Calcutta.’ The term implied by Mr Eckersley is in my judgment so obvious that reasonable men, circumstanced as the parties were, would without doubt have assented to the overlooked and unexpressed term set out in Mr Eckersley’s award.’’

The business efficacy approach of the arbitrator and judge was sensible; it may be that a similar approach (also the approach taken by the umpire and judge in The ‘‘Golfstraum’’) will lead eventually to the implication of a term in respect of the 19

Para. 12

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

provision of a berth by the charterer in a port charterparty, when a vessel gets as close to the port as she can. 13. It may appear surprising that the courts have been so sluggish and slow regarding developments in the ‘‘arrived ship’’ concept as applied to a port charterparty. The words of Lord Justice Shaw in the Court of Appeal Maratha Envoy19 judgment reflect the thoughts of many commercial persons: ‘‘An intelligent layman who had occasion to study the long and tortuous history of judicial wrestling with the legal concept of ‘an arrived ship’ might be forgiven if he expressed some wonderment as to what it was that had caused so much difficulty and disputation. If he ventured to seek an explanation he might come to the conclusion that in applying its principles to the complexities of maritime commerce the law has been slow to adapt itself to practical advances in maritime traffic. Thus in times past a trading vessel could offer no assurance that she would be able to discharge her cargo at a particular port until she had reached a safe harbourage within the confines of that port. It was reasonable that she should not be regarded as an arrived ship while substantial hazards still stood between her and the berth where her cargo was to be discharged. In the present day shipping is not dependent on fair weather and favourable winds. The master of a vessel can now be confident of making port at a prescribed time when he is still far from it. The law does not at once react to or reflect such vital changes. The time lag is no doubt inevitable. It may even be salutary if not too long extended, for changes in legal principles in their application to practical affairs are likely to result in confusion and doubt as to the rights and liabilities of those concerned in those affairs. A cautious advance is calculated to preserve commercial equilibrium, but advance there must be if the law is to operate in conformity with contemporary conditions. Inevitably there does come a time when the gap must be closed if incongruities and artificialities are not to develop and persist so as to give rise to absurdities and injustices. The courts must then re-examine the concept and formulae which have become entrenched in a mercantile law. This may reveal that while established principles are properly maintained, their application and operation must be given a different impact from that which has hitherto prevailed.’’

The application of the above surely leads to a conclusion that a vessel becomes an arrived ship in the case of a port charterparty when she has completed the sea passage, is at or off the port and at the immediate and effective disposition of the charterer, it being irrelevant as to whether or not she is in or outside certain geographical, administrative, legal or fiscal limits of the port. Such a test is the simplest and easiest to apply when considering if a vessel has arrived. While Lord Diplock made much about the essential characteristics of a voyage charterparty in the Oldendorff, and divided the adventure into four successive stages (pure pedantry, by the way, to a commercial shipping person), the essence surely has to be the carrying voyage, viz, the voyage of the vessel to the place specified in the charterparty. A coach and four can be driven through Lord Diplock’s assertion that the carrying voyage only terminates ‘‘in the port’’; the carrying voyage surely terminates when the vessel anchors at the usual waiting place when she can go no further through no failure on her part, it being irrelevant whether some commercially artificial line (fiscal, legal or administrative port limit) lies a few miles on one side or the other of the usual waiting place for the port in question. 19. [1977] 2 Lloyd’s Rep. 301.

20

THE OLDENDORFF TEST

Para. 13

In The ‘‘Maratha Envoy’’ the reasons given by Lord Diplock for the rejection of the Oldendorff test were: (a) (b) (c) (d)

The provision of legal certainty. Freight rates are, or can be, adjusted to reflect the risk of congestion. The Johanna Oldendorff test has not proved difficult of application. The risk of waiting due to congestion can be taken care of by an appropriate type-added clause, many of such now being standard form.

Dealing first with the certainty aspect, there is no doubt that commercial men wish for this and do not want the law changed that frequently. However, when the law changed from the commercial area to the Oldendorff test the change tended to lead to some uncertainty in deciding whether or not ships had arrived, simply because the Oldendorff decision did not go far enough. Lord Diplock puts it too high when he states that the commercial area test had turned out to be obscure and difficult to apply: it may have been commercially unjust but it was sometimes easier to apply than the test established in the Oldendorff. It is ironic that his lordship stated that the purpose of the Oldendorff was to replace the commercial area test to provide greater legal certainty but then baulked at going on to adjust the Oldendorff test to produce even greater certainty. Even though only a few years separated the Oldendorff and Maratha Envoy decisions, it is a pity that the House of Lords did not have the vision to follow through and to make the ‘‘arrived ship’’ test as simple and certain as reasonably possible. Regarding the inter-relationship between freight rates and demurrage, his lordship surely took an unrealistic approach. The fact is that both freight and demurrage rates tend to move together according to the state of the market and cannot be used in the bargaining manner postulated by Lord Diplock (freight rate up to cover sufficiently the expense of waiting at the owner’s risk, and down if the charterer takes the waiting risk). Owners do not calculate their freight rate on the supposition that laytime will not count at the loading/discharging ports. Further, as opposed to liner terms where the owner has to find a berth, a voyage charterparty makes it incumbent on the charterer to provide a berth and to take the risk of obtaining such. Before the law lords speculate upon commercial matters as they stand it might be better if they took stock of the current realities of commercial life. The reason regarding the Oldendorff test not having proved difficult of application has not been supported in practice; see paragraph 14 below, et seq. on this aspect. Arbitrators have had problems put to them in this respect and, in many of those disputes, considerable time and expense was expended in searching for and providing evidence in order to attempt to show that the vessel was in or outside of the port. In respect of the contention that the risk of congestion be transferred to the charterer by way of a time lost waiting for berth, or other provision, the answer must be that, on a principle which applies to every port voyage charterparty, the law should be simple, certain and commercially just, so as not to necessitate the formulation of special clauses to compensate an owner for the time that his vessel exceeds the contractual periods laid down for the loading and discharging of cargo. It is because the law has not been commercially just in respect of the ‘‘arrived ship’’ 21

Para. 13

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

concept that owners have been forced into seeking special provisions to compensate them for the time that their money-making chattels are lying idle at anchorages because charterers are not able to provide loading/discharging berths. It is surely better that the law should be simple and commercially just, leaving the parties to contract out if they so desire, rather than the law be commercially unjust with the parties having to negotiate a clause (sometimes in difficult economic circumstances) in order to achieve commercial justice. It is mentioned that the law of some other maritime nations favours the simple approach. For example in New York The ‘‘Polyfreedom’’ has won the day (see paragraph 10 above) and in Hamburg (now expanding in the maritime arbitration field) arbitrators have decided that if a vessel has to wait for a loading/discharging berth it does not matter at all whether she anchors outside or within the limits of a port, the real importance of which often cannot be realised, provided that the vessel is able to proceed as quickly as possible to the nominated loading/discharging berth; see Lloyd’s Maritime and Commercial Law Quarterly, May 1986, page 251, ‘‘Laytime problems and comparison of law’’ by Dr Johannes Trappe. Perhaps, in due course the House of Lords will get an opportunity to reconsider the matter and, hopefully, it will adopt the simple approach of the Court of Appeal in The ‘‘Maratha Envoy’’ and that of arbitrators in Hamburg and New York.

DIFFICULTIES IN THE APPLICATION OF THE ‘‘ WITHIN THE PORT’’ OLDENDORFF TEST 14. In The ‘‘Maratha Envoy’’18 the House of Lords considered that the Oldendorff 10 test had not proved difficult of application. In practice matters have worked the other way in that there have been a good many arbitrations where the Oldendorff 10 test, apart from resulting in illogicalities (see above, paragraph 10) has posed difficulties. The ‘‘Agamemnon’’ arbitration, (see paragraph 10 above),20 although not a commercially sound decision, was not difficult of resolution because of the legal limits of the port being capable of definition. However, in the later Anco Elias arbitration21 the matter was not so simple, the port in question being Alexandria. The facts were as follows: (a) The vessel arrived at the outer anchorage off Alexandria on 30 December; she anchored there (about two miles north of Great Pass Beacon) because of severe congestion arising from limited discharging facilities. This was the usual waiting place for vessels awaiting discharging berth when such berths were unavailable by reason of congestion. (b) The outer anchorage was outside the limits of the port, as described in The ‘‘Mediterranean Pilot’’. In the Pilot these limits are defined as administrative limits. (c) There were no bye-laws or statutes defining the legal administrative or fiscal limits of the port of Alexandria. 20. 1974. 21. 1977.

22

D I F F I C U LT I E S O F ‘‘ W I T H I N T H E P O RT ’’

Para. 14

(d) The harbour master did not regard the statement in the Pilot as accurate; he considered his administrative control extended beyond those limits. (e) The port authorities exercised de facto administrative control over the area within which the Anco Elias was anchored. Further, there was no rigid outer limit to this area of control within which vessels could be ordered to anchor; it varied with the number of vessels waiting for berths. (f) There were statutory provisions which controlled the movement of vessels after their arrival. By ministerial decree all ships coming within the 12-mile territorial limit of Egypt, bound for Alexandria, were subject to control and inspection by the Alexandria Port Authorities when they came within 10 miles of Great Pass Beacon. The arbitrator decided that the vessel had arrived at Alexandria when she reached the outer anchorage, albeit that she was outside the administrative limits as defined in The ‘‘Mediterranean Pilot’’. He relied upon the words of Lord Reid (see paragraph 9, earlier) regarding the area within which a port authority exercises its powers in coming to his decision that the vessel had reached the agreed destination of Alexandria. The decision was commercially sound and one that the arbitrator was able to make because of the uncertainty regarding the legal limits of the port of Alexandria. In such cases, where there is uncertainty regarding the legal limits of a port, commercial arbitrators tend to take a broad view and to decide that the vessel has arrived at the port so long as she is waiting off the port at the place where vessels usually wait for a berth and can proceed no further because of the lack of a berth. If it can be shown that the port authority exercises administrative control over the area in which the vessel lies (as in The ‘‘Anco Elias’’ arbitration21), then an arbitrator is fully justified in concluding that the vessel has reached the agreed destination. Of course, there can be argument as to what is meant by administrative control as exercised by a port authority, bearing in mind factors such as pilotage, anchorages, advice and/or orders to vessels from the port authority, etc. The words of Lord Reid, that these powers which regulate the movement and conduct of ships afford a good indication of when the port authority exercises its various powers, for the purpose of deciding whether or not a vessel is within the port, are not always as clear and unambiguous as he imagined. It would have been so much simpler if the Oldendorff22 ratio had not been restricted to the vessel having to be within the port. The ‘‘Torm Estrid’’ arbitration23 followed soon after The ‘‘Anco Elias’’ arbitration21 and was, again, concerned with a large port—this time, Leningrad. The charterers contended that, since the vessel was anchored off the pilot station and/or so-called ‘‘receiving buoy’’ some 24 miles off the inner port and well outside the commercial limits of the port, the vessel had not reached the port of Leningrad. However, the evidence showed that the port authority (Port Control Service) exercised control and jurisdiction over the area within which the vessel lay to regulate and order the movements of ships and their conduct, and the arbitrator accepted this as satisfying 22. [1973] 2 Lloyd’s Rep. 285. 23. 1978.

23

Para. 14

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

the Oldendorff22 test so as to hold that the vessel had reached the agreed destination. The arbitrator summed it up by stating: ‘‘There can be no doubt that on any objective test any area over which the Port Authority exercises control in such direct manner must be deemed to be an area within port limits, especially so in the case of the Soviet Union where public authorities exercise quasi-governmental powers.’’

Here again, the arbitrator was able to use the extent of the port authority’s control to circumvent the argument that the vessel had not arrived because either she was outside certain limits or the limits were vague and uncertain. Because The ‘‘Anco Elias’’21 and ‘‘Torm Estrid’’23 arbitrations appeared to be decided correctly many persons might think that the Oldendorff22 test is satisfactory. However, even though the arbitrations were probably decided correctly it has to be remembered that it is costly and time consuming to get the requisite evidence and to fight arbitrations. Neither of those arbitrations would have been necessary if the House of Lords had plumped for the simple test advocated by the vast majority of shipping commercial persons, namely, completion of the sea passage and at the immediate and effective disposition of the charterers. Many other arbitrations have been fought on the same point over the years, some of them going in favour of the charterers because the vessel was not within the legal limits of the port; there have been a good many arbitrations which have required considerable research in order to establish whether or not the vessel was within the port. 15. The ‘‘Gundulic’’24 is an interesting arbitration regarding the Oldendorff22 test; it concerned the South American port of Necochea. The legal arbitrator (not the author) was faced with the problem of the vessel being anchored in the place where vessels normally wait for a berth but there being conflicting evidence regarding port limits, controls, etc. The relevant factors in favour of the vessel having arrived were: (a) There was a defined area, within a radius of 1.5 miles from the southern breakwater of the harbour entrance, which was recognised by the port authorities as ‘‘Necochea Roads’’, within which pilots embarked and disembarked and from which pilotage into the protected harbour was compulsory. (b) When vessels arrived in Necochea Roads they were considered by the port authorities as ‘‘on turn’’ for the granting of a berth. (c) Contrary to what was stated to be the practice in the Centrade Navegacion Transatlantico (CNT) Year Book for 1973, free pratique was granted to the vessel by wireless upon her arrival at the anchorage. (d) Frequent references in the contemporaneous documents to ‘‘Necochea Roads’’ or ‘‘the roads of the port’’ (as being a recognised geographical area).

24. 1980.

24

D I F F I C U LT I E S O F ‘‘ W I T H I N T H E P O RT ’’

Para. 15

(e) According to the owners’ local Argentine agents, ‘‘ . . . the anchorage zone at Necochea Roads was definitely considered by the Port Authorities within the legal, fiscal and commercial limits of the Port . . . ’’ On the other side of the coin the relevant factors were: (a) There was no physical geographic feature which defined the extent of Necochea Roads and the only geographical enclosure was the harbour within the twin breakwaters. (b) The local chart did not define or even mention ‘‘Necochea Roads’’, but referred only to the area within the breakwaters as the ‘‘Puerto’’ and ‘‘Antepuerto’’. (c) The local South American Pilot (10th edn, 1959) referred to the port of Necochea as being protected by two breakwaters, and referred to the fact that in certain weather conditions it was ‘‘ . . . difficult and sometimes impossible to enter the port’’. (d) No charges were levied by the port authorities on vessels lying at anchor in the roads, and ‘‘port services’’ were only available to vessels within the enclosed harbour. (e) The CNT Year Book for 1973 described the port as being protected by the twin breakwaters, and stated (inaccurately as at March 1977) that although free pratique could be given in the roads it is ‘‘now given only when alongside or in the pool’’, and finally stated that ‘‘ . . . shippers consider the Outer Roads as open sea and will not accept Notice of Readiness until the vessel enters the port’’. The arbitrator said that he did not find it easy to decide whether or not the anchorage in Necochea Roads was within the port of Necochea. With some hesitation he concluded that the anchorage was within the port for the purpose of determining whether the vessel was an arrived ship. He gave little weight to the expressions of opinion by interested parties or to references to the ‘‘port’’ in documents where the word may have been used as synonymous with ‘‘harbour’’ or ‘‘docks’’ without the present problem being in mind. He considered the most important fact to be that there was the required defined area, referred to as ‘‘Necochea Roads’’ and within which the port authorities exercised a degree of control, on arrival within which vessels were allocated their berthing turn, where ‘‘free pratique’’ may be granted, and within which the port pilots will embark for the purposes of compulsory pilotage into the protected harbour. It seemed to him that in so deciding the case he was following the approach of Lord Reid in The ‘‘Johanna Oldendorff ’’25 where his lordship considered that the exercise by the port authority of powers to regulate the movement and conduct of ships afforded a good indication of the limits of port. The arbitrator drew some support for his decision from the previous cases of Leonis Steamship Company Ltd. v. Rank Ltd.26 (the vessel was held to be within the commercial area of the port of Bahia Blanca while at anchor in the River Parana in 25. [1973] 2 Lloyd’s Rep. 285. 26. [1908] 1 K.B. 499.

25

Para. 15

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

the usual place where vessels lay while awaiting a berth at the loading pier) and The ‘‘Delian Spirit’’27 (the vessel was within the Black Sea port of Tuapse when anchored in the roads in a place about one and a quarter miles from the loading berth which was one of four within a harbour protected by breakwaters). It is interesting that the legal arbitrator decided as he did since it is thought that some other legal arbitrators might have decided the case differently. It is submitted that the arbitrator was correct in deciding that the anchorage was within the port even though the case could be described as marginal. The fact that the port was small made it easier for the arbitrator to arrive at his decision and, like the arbitrators in The ‘‘Anco Elias’’28 and ‘‘Torm Estrid’’,29 he was able to pray in aid the words, ‘‘powers which regulate the movement and conduct of ships’’ from The ‘‘Johanna Oldendorff ’’25 in support of his decision. 16. Two arbitrations reported in 1985 were concerned with the problem of the geographical arrival of a vessel in circumstances where the waiting places were many hundreds of miles from the actual loading ports. Both related to the Arabian Gulf. In the first arbitration30 the vessel loaded a cargo at a European port for discharge in Iran; the charterparty called for discharge at Bandar Abbas or Bushire and the latter became the nominated port when the vessel passed Suez. The charterparty included a Wipon (whether in port or not) provision so that it was not, strictly speaking, a port charterparty; however the arbitration is of interest, in a port charterparty context because of the approach of the arbitrators to ‘‘Wipon’’ and ‘‘the usual waiting place’’ as per The ‘‘Johanna Oldendorff’’. It also has relevance to later paragraph 29 which considers ‘‘Wipon’’. The vessel arrived at Bandar Abbas in September 1981, anchored there, and the master cabled an intended notice of readiness. Eventually, the vessel joined a convoy for Bushire late in November 1981 and she reached Bushire Roads in early December, berthing a few days later and completing discharge towards the end of December. The owners brought a claim for demurrage and argued that the vessel was an ‘‘arrived ship’’ when she had reached Bandar Abbas even though the contractual discharge port of Bushire was almost 400 miles distant. The owners submitted that, although the vessel was not then at the nominated discharge port, she was ready to discharge and fully at the disposal of the charterers; therefore, two out of three tests derived from The ‘‘Johanna Oldendorff’’25 were satisfied. The third test (the physical arrival at the contractual port of discharge) was, according to the owners, displaced by the operation of clause 22 of the charterparty which stipulated that a notice of readiness could be tendered ‘‘whether in port or not’’ (‘‘Wipon’’). The owners argued that the Wipon stipulation operated in the very special circumstances extant at Iranian ports at that time to make valid a cabled notice of readiness tendered by the master in September. They further contended that those same circumstances made Bandar Abbas the ‘‘usual waiting place’’ for vessels going 27. [1971] 1 Lloyd’s Rep. 506. 28. 1977. 29. 1978. 30. LMLN 143—25 April 1985.

26

D I F F I C U LT I E S O F ‘‘ W I T H I N T H E P O RT ’’

Para. 16

to Bushire. The owners also argued that there was no evidence put forward by the charterers to show that the vessel was waiting for a convoy. It was plain, said the owners, that the vessel was not waiting for any purpose of theirs. It was decided by the tribunal that, by agreeing to go to Bushire (which was not described as a safe port in the charterparty) the owners held out that they had made all proper enquiries on their own initiative as to the navigational and like problems which would attend the voyage from Europe to Bushire, and that they accepted for their own account the risks, particularly of delays, arising from such a voyage—save where protected by exception clauses or if there were a relevant default by the charterers. The general situation in Iran at that time was well known and the owners ought to have been aware that some sort of convoy system was in operation. On proper enquiry, they would or at least should have discovered the edict of the Iranian Ports and Shipping Organisation which provided: ‘‘We hereby nominate Bandar Abbas as ‘Mother Port’ and it is required that all ships carrying cargoes for Iranian Ports, on passing Ras al Kuh, contact Bandar Abbas in order that they may be allocated an anchorage position within Bandar Abbas port limits. The diversion thereafter of any vessel to Bushire . . . will take place according to Ports and Shipping Organisation planning and programme schedules.’’

The arbitrators decided that the wait at Bandar Abbas could only be regarded as an interruption to the voyage on which the vessel was engaged, a voyage which was only completed when the vessel arrived at Bushire Roads. A place which was almost 400 miles distant from the port of destination could not possibly be held to be within the ambit of Wipon. If it were to be the place at which a valid notice could be given, that could only be achieved by very clear and special wording in the charterparty. The main reason for rejecting the owners’ case turned on the arbitrators’ analysis of why the ship waited at Bandar Abbas. The owners’ statement that the wait was not for their purpose could not be accepted. The vessel was plainly waiting to join a convoy to go to Bushire. That was the very convoy system which the owners ought to have known about, and in all probability did know about. The vessel could not complete her voyage until she was permitted to join a convoy. That was as much a hazard of the voyage falling to the owners’ account as any other awkward navigational impediment which could arise, such as a mishap blocking the Suez Canal shortly before the vessel intended to transit it. Clause 22, and in particular the Wipon aspect, related only to the port of Bushire and to the normal waiting place before entering that port which was Bushire Roads. In addition, the arbitrators considered that Bandar Abbas, despite the Port and Shipping Organisation’s edict, could not be viewed as the ‘‘usual waiting place’’ for Bushire in the sense acquired by that particular phrase in The ‘‘Johanna Oldendorff’’.31 In colloquial language it would have been natural to have referred to Bandar Abbas Roads as the required waiting place for a vessel wishing to go to Bushire when discussing how the Iranian naval convoy system operated. But that did not elevate the status of Bandar Abbas Roads to being the ‘‘usual waiting place’’ for Bushire in the legal sense which attached to the phrase for notice of readiness 31. [1973] 2 Lloyd’s Rep. 285.

27

Para. 16

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

purposes. Accordingly the owners’ claim failed. It is submitted that a different tribunal might well have taken a different approach when analysing the combination of ‘‘usual waiting place’’, ‘‘Wipon’’, and the then edict of the Iranian Ports and Shipping Organisation. In the second reported 1985 arbitration32 the vessel was chartered on the Asbatankvoy form in 1982 for the carriage of crude oil from Kharg Island to India. She tendered a notice of readiness at Sirri Island (some hundreds of miles from Kharg) where she anchored for four days before proceeding to the loading terminal at Kharg Island. The owners contended that the time spent at anchor at Sirri should count as laytime on the basis that the anchorage at Sirri Island was a customary anchorage for the loading port in accordance with clause 6 of the charterparty which read: ‘‘Upon arrival at customary anchorage at each port of loading . . . the Master . . . shall give the Charterer . . . notice by . . . and laytime . . . shall commence upon the expiration of six hours after receipt of such notice . . . ’’ It was decided by the tribunal that under the terms of the charterparty the actual steaming time between Sirri and Kharg could not count as laytime but that there was no doubt that the regulations of the Iranian authorities governing the movement of vessels through the Arabian Gulf to the terminal at Kharg Island rendered the anchorage at Sirri Island a ‘‘customary anchorage’’ for Kharg Island so that the owners were entitled to count the time spent at Sirri Island as laytime after the six hours’ notice time had run out. It would appear that the arbitration turned very much on its own very special facts (Iraq/Iran war and Iranian regulations) since, otherwise, it is difficult to see how an anchorage at Sirri Island could be a customary anchorage for another loading port several hundred miles away. In a much later reported arbitration, LMLN 274—5 May 1990, the vessel was chartered on the Ferticon form to carry a cargo of bulk supplies to ‘‘1/2 safe ports/ safe anchorages East Court India . . . in charterers’ option’’. The charterers nominated Haldia. The vessel arrived at Sandheads and gave notice of readiness. One of the issues in the arbitration was whether Sandheads was a place where the vessel could give notice of readiness. It was held that Haldia was a comparatively new port which was developed during the 1970s on the banks of the Hooghli and Haldia Rivers. It was some 120 km from Calcutta by road. Calcutta and Haldia were treated as two separate ports notwithstanding the fact that following a Government of India Notification dated 26 February 1977 the operation of Haldia came under the management of Calcutta Port Trust (‘‘CPT’’). The chart indicated a point outside the Haldia lock as Haldia anchorage. The charterers contended that the Haldia anchorage was that point just outside the lock gates and that as Sandheads was outside the limit of the jurisdiction of CPT, a vessel could only be considered to be at the Haldia anchorage when outside the lock gates. However, the evidence showed that the anchorage was only used for temporary purposes, such as waiting to enter the locks, or in cases of emergency such as for bunkers or supplies or medical assistance. Vessels did not customarily wait there to enter the port in the event of congestion. 32. LMLN 155—10 October 1985.

28

D I F F I C U LT I E S O F ‘‘ W I T H I N T H E P O RT ’’

Para. 16

The evidence showed that on arrival at Sandheads vessels gave notice of readiness and immediately came under the control of the port authority (CPT), which either arranged for a pilot to bring the vessel into dock or gave orders regarding anchoring. It was not disputed that vessels did customarily wait at Sandheads, but the charterers had contended that at some ports of the world it was not sufficient for a vessel to reach the place where vessels customarily waited outside the port limit. The charterers had contended that Haldia was one such port, and that as Sandheads was outside the port limits, the vessel was not an ‘‘arrived ship’’. The evidence showed that CPT, as far back as 1977, did not consider the Haldia anchorage to be the point just outside the locks. It took about two hours to reach the port from the anchorage. Accordingly the anchorage had to be where Sandheads was shown on the chart. All the evidence indicated that the commercial practice that had developed was for vessels to arrive at Sandheads and there give notice of readiness. Accordingly, the vessel was an ‘‘arrived ship’’ when she gave notice of readiness at Sandheads. In LMLN 409—8 July 1995 (a 1993 arbitration) the vessel was chartered on the Euromed form as amended. Notice of readiness was tendered at the first loading port, Rosario, as soon as the vessel reached the Zona Comun anchorage in the lower reaches of the river at 14.40 hours on 30 May. The owners submitted that laytime began to run from 06.00 hours on 3 June. The Zona Comun was the anchorage where vessels were customarily held awaiting berths when there was congestion at the up-river loading ports of San Lorenzo and Rosario. The charterers contended that the NOR as tendered by the vessel whilst in the Zona Comun was invalid, and that no valid NOR had been tendered at the loading ports. They argued that at the time NOR was tendered the vessel was outside the limits of the nominated loading port and thus failed to meet a fundamental requirement of the ‘‘arrived ship’’ criterion. They also argued that at the time the NOR was tendered certain essential requirements were absent. It was held that so far as the charterers’ first contention was concerned, the fact that Zona Comun was outside the Rosario port limits was clear on the evidence. What was really in contention was the effect that that factor might have upon the ‘‘arrived ship’’ doctrine (i.e. the Johanna Oldendorff test). Although the general rule was that, for a vessel to be treated as having arrived at her destination she had to be within the port limits, that had to be understood as being subject to an exception where the Port Authorities had designated another area within their administration where vessels had to wait before proceeding to a berth. Such interpretation of the law as it stood on that point had been widely accepted in commercial arbitrations and made good commercial sense where, as in the present case, the vessel became effectively an ‘‘arrived ship’’ when waiting off the port at a place where it was customary for vessels to be held pending the availability of a berth, and when it had been shown that the designated loading port exercised administrative control over the waiting area. This arbitration has relevance to earlier paragraph 9 (Lord Reid—‘‘Some powers with regard to pilotage and other matters may extend far beyond the limits of the 29

Para. 16

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

port. But those that regulate the movements and conduct of ships would seem to afford a good indication’’) and also earlier paragraphs 14 (The ‘‘Anco Elias’’ and ‘‘Torm Estrid’’ arbitrations) and 15 (The ‘‘Gundulic’’ arbitration) and also to later, paragraph 18, where an arbitrator in an earlier 1988 arbitration took the view that a vessel at the Zona Comun anchorage was not an arrived ship in respect of Rosario: however, it may well be that the administrative limits of Rosario altered between 1988 and 1993. The arbitrations referred to above, also those referred to earlier in paragraphs 14 and 15 above, more than suggest that arbitrators continued to have problems put to them regarding the geographical arrival of vessels under port charterparties, thus defying the forecasts of the law lords, in the Johanna Oldendorff and the Maratha Envoy cases that there should be no real difficulty in deciding whether a usual waiting place was or was not within the port. 17. In more recent times there has been a reduction in the number of disputes coming before arbitrators in respect of a port charterparty and reaching the agreed destination. That results from the clarification of legal limits of ports by local legislation and/or port authority directions and/or arbitrators’ decisions and also by parties to voyage charterparty contracts agreeing to clauses which allow a notice of readiness to be given irrespective of whether or not the vessel has reached a position ‘‘within the port’’ as per the Johanna Oldendorff/Maratha Envoy decisions. Examples of notice of readiness clauses which allow notices to be given as soon as a vessel completes her sea passage and has to wait at a place where vessels usually wait before proceeding inwards to the loading/discharging berth are: ‘‘Notice of readiness to be given . . . whether in port or not . . . whether in free pratique or not . . . ’’

see later in Chapter 2 for detailed consideration of whether in port or not (Wipon). Having said the above it is worth considering the arbitrations in LMLN 636—31 March 2004, LMLN 647—1 September 2004 and LMLN 672—17 August 2005, all of which were concerned with arrival in the geographical sense in respect of a port charterparty. In the first arbitration the vessel was chartered on a Voyage Scrap Form for a voyage with scrap to Masan, Korea. One of the disputes concerned the notice of readiness at the discharge port of Masan. Clause 20 of the charterparty read: ‘‘At each port, time to count from 8:00 am on the first working day after due notice given. Notice of Readiness to be given in writing within office hours from 09.00–17.00 Monday through Friday . . . If because of congestion vessel unable to enter port or designated berth the Notice of Readiness to be tendered by cable from customary waiting anchorage . . . ’’

The owners said that notice was given at 08.47 local time on 17 May. The charterers said, first, that at that time the ship was not at a place where notice could properly be given. She was then at an anchorage area near the pilot station outside the port, whereas, according to the Guide to Port Entry, a ship was only considered as ‘‘arrived’’ when at the quarantine anchorage. The charterers’ second argument was that notice of readiness was not, in any event, actually given. The alleged notice was purportedly tendered before 09.00 and was thus invalid under clause 20. Moreover, 30

D I F F I C U LT I E S O F ‘‘ W I T H I N T H E P O RT ’’

Para. 17

a valid notice could only be given by cable, and the document in question was plainly not that. It was held that, as to the charterers’ first point, clause 20 only required that a notice be given from the customary anchorage in the case of congestion. It was plain, long before the vessel’s arrival, that she would have to wait some days due to congestion, and there was clear evidence that the ship was actually ordered to wait at the anchorage by the port authority due to congestion. In the tribunal’s view that anchorage was to be taken as ‘‘customary’’ for the purposes of clause 20, and the fact that it might be outside the port was irrelevant. As to the charterers’ second point, it overlooked the fact that at almost 09.20 local time the master had sent, via Inmarsat, a notice of readiness to all concerned. As previously indicated, an Inmarsat electronic communication satisfied the ‘‘by cable’’ requirement in clause 20. Thus notice was given within office hours and in accordance with clause 20 of the charter. The point is not really relevant to this chapter; it is more concerned with Chapter 6 and will be referred to again in that chapter. The second arbitration in LMLN 647—1 September 2004 is particularly interesting, not least for the unusual contention of the owners that laytime had not commenced. The vessel was charterered on an amended Sugar Charterparty 1969 for a voyage from Santos or Paranagua to Banjul and Nigeria with a cargo of bagged sugar. There were two issues relating to the commencement of laytime, one at the first discharge port of Banjul and the other concerned the second discharge port of Lagos. The port charterparty provided for notice of readiness to be given ‘‘from the customary waiting place in ordinary office hours’’. In the first issue the owners’ case was that a valid notice had been given at 03.50 on 5 September after the vessel had anchored at a position fairly close to the fairway buoy marking the approach to Banjul. The charterers said that the vessel did not complete her approach voyage until she arrived in the roads at 12.30 on 5 September and then proceeded to the customary anchorage at the port which appeared to be close to the cargo berths, at one of which the vessel eventually discharged. They said that a notice of readiness could not have validly been given before 12.30 on 5 September. The owners gave no explanation as to why the vessel might have anchored in the vicinity of the fairway buoy for several hours but produced a copy of the relevant port guide which appeared to suggest that the vessel would have been able to take a pilot from the point where she first anchored at 03.50 and on that basis they said that the vessel was an arrived ship. The charterers produced a statement from the agents at the port which said that the point at which the vessel purported to tender notice of readiness was 27 nautical miles from the discharging berths. They also referred to the statement of facts signed by the master which recorded the time of the vessel’s arrival at the roads but did not mention the vessel anchoring at any earlier point. It was held that the notice of readiness was good at 12.30 on 5 September, which was the time the vessel arrived at the roads. Even if she did anchor at 03.50 it was not at the anchorages for Banjul described in the port guide and the agents had said in a fax addressed to the charterers that the vicinity of the fairway buoy was not the waiting place for Banjul. Accordingly, if the vessel did anchor for the first time at 03.50, she was not then at the customary place for ships waiting for a berth at 31

Para. 17

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

Banjul, which was the requirement of the charter. The tribunal also pointed out that, as had been said in a number of cases, before presenting a notice of readiness, the ship had to proceed as close to her berth as possible, from which point her proceeding further would serve no useful commercial purpose. In the present case there was nothing to suggest that the vessel was in any way prevented from proceeding direct to the customary waiting place, whether because of a restriction on night movements or because of orders from the port authority. In other words, owners cannot advance the position of arrival artificially by anchoring at any place within the port limits; the vessel must be at the customary waiting place or as close to the berth as practically possible, see also later LMLN 615—12 June 2003 in Chapter 2, paragraph 29, regarding this aspect. The second issue was whether the owners had a claim for detention for the period the vessel was waiting off Lagos or whether a notice of readiness that was given was effective and therefore laytime and thereafter demurrage ran during the period of delay. Clause 22 of the charterparty provided: ‘‘ . . . master had the right to tender notice of readiness from the customary waiting place in ordinary office hours, notice of readiness to be tendered to agents . . . whether in berth or not. ... At discharging port(s) in the event of congestion master has the right to tender his notice of readiness by cable/telex in ordinary office hours to agents, whether in berth or not, whether in port or not, whether in free pratique or not, whether customs cleared or not . . . ’’

Clause 24 provided: ‘‘In the event that charterers require the vessel to wait at any time prior to arrival at destination, owners agree to instruct the master to anchor at any safe place on passage in international waters or in charterers’ option at waiting place at discharge port. In respect of such charterers are to pay owners US$5,500 gross of commission per day or pro rata excluding bunkers but less commission. However, if the vessel waits at a place where the vessel is able to tender her notice of readiness, then charterers may elect to commence laytime as per charterparty.’’

The figure of US$5,500 payable under clause 24 was considerably higher than the charterparty demurrage rate. The question was whether the owners were entitled to rely on clause 24 in order to claim damages for detention. On arrival off Lagos on 23 September the master had given notice of readiness. However, the owners now said that the notice was ‘‘nothing more than a knee-jerk reaction’’ by the master and was ineffective to trigger the running of laytime because the vessel was not at the time in a position where a valid notice could be given. The charterers said that it was a valid notice which triggered the commencement of laytime. After arrival off Lagos the vessel was instructed by port control to drift at a distance of 10/15 nautical miles offshore pending further instructions. The master advised that the port of Lagos was very congested, with about 50 vessels waiting outside the port. That message was passed on to the charterers by the owners who said that they guessed that the detention rate in the charter should apply for the delay in berthing. That brought a response from the charterers on 24 September 32

D I F F I C U LT I E S O F ‘‘ W I T H I N T H E P O RT ’’

Para. 17

saying that they had asked that the vessel tender notice of readiness and that time would count as laytime. By 25 October the owners were pointing out that the vessel had been waiting to berth for more than 30 days which they said could not be considered normal waiting time, especially as they said the delay did not seem to originate from the port being congested but from problems on the trading side. The charterers continued to say that they hoped the vessel would soon berth, but throughout the long delay did not at the time give any real explanation as to whether the delay was purely due to congestion or whether there were other factors involved. However, by the end of the hearing it appeared that the problem lay simply with the port being congested. The vessel berthed at 15.15 on 7 November, discharge commenced at 08.00 on 11 November and was completed at 13.30 on 21 November. The further delay between berthing and commencing discharge resulted from a combination of a strike by truck drivers and no work on a Saturday. It was held that where the vessel waited was not in international waters and the charterers gave no specific instruction for the vessel not to proceed to berth. However, clause 24 could be triggered by implicit instructions by which the tribunal meant that the charterers either did something or failed to do something which would have enabled the vessel to proceed to berth. But, even if there were implicit instructions, the final sentence of clause 24 allowed the charterers to commence laytime if the vessel was waiting at a place where she was able to tender notice of readiness. On 24 September the charterers had pointed out to the owners that they had asked for notice of readiness to be tendered. Also, the vessel was waiting at a place where she was able to tender notice of readiness. Clause 22 did not require the vessel to be at the customary anchorage, but at the customary waiting place, which was a rather wider term. According to the Africa Pilot, in addition to the two anchorages also referred to in the Pilot, there was even in 1982 a practice for vessels to be anchoring over 20 miles off-shore to avoid the attention of well-organised gangs of pirates. The tribunal was aware from its own experience that there still remained a serious threat of piracy to vessels waiting off Lagos and that it was common for vessels not to anchor, which would make them sitting targets, but to drift off-shore with their engines ready should any threat of attack materialise. In the present case, the vessel had been ordered to drift 10–15 nautical miles off-shore by Lagos port control. Although that was outside port limits as marked on the chart it was nevertheless an area where the port control still exercised authority. Accordingly, when notice of readiness was tendered, the vessel was within an area which could be called ‘‘the customary waiting place’’. The vessel had also reached a point where her proceeding further would serve no useful commercial purpose. It followed that even if clause 24 could be invoked by the owners, nevertheless by virtue of the final sentence, the charterers were entitled to, and did, elect to have laytime count in respect of the delay and pay demurrage thereafter. There was nothing uncommercial or nonsensical about that, and it is what the parties clearly agreed. The third arbitration, LMLN 672—17 August 2005 (also referred to later in Chapter 6, paragraph 118 regarding estoppel), concerned a number of issues, one of which was whether notice of readiness was tendered at the discharge port of 33

Para. 17

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

Fujairah where the charterparty described the place of discharge as ‘‘one safe anchorage Fujairah’’. The vessel was chartered on a Asbatankvoy form from Ras Tanura to Fujairah with a cargo of butane and involved discharge of the cargo into another vessel by ship to ship transfer. Apart from the standard clauses 6 and 9 of the Asbatankvoy the charterparty stipulated, by way of Clause M10 (headed ‘‘Lighterage Clause’’) that notice of readiness was to be tendered during daylight hours. The owners submitted that, as far as commencement of laytime at the discharge port was concerned, the normal laytime regime set out in clause 6 of the charter did not apply to ship to ship transfers, which they described as lighterage operations. Instead, they argued that such operations were governed by clause 9 and additional clause M10. The vessel had waited for the mother vessel into which she was to discharge her cargo, at anchorage D, the dedicated LPG/LNG anchorage at Fujairah. There was no evidence as to where the actual transfer took place, but it was probably at the same anchorage, which was dedicated to LPG/LNG vessels, with the chartered vessel, the smaller vessel, coming alongside the larger vessel. The tribunal did not believe that the parties intended a separate regime for ship to ship transfers. The charter described the place at which discharge was to take place as ‘‘One safe anchorage Fujairah’’. The tribunal would accept the charterers’ submission that commencement of laytime for ship to ship transfers was governed by clauses 6 and 9 of Part II of the charter in the same way as would apply if the vessel had discharged alongside. The distinction, which was not applicable in the present case, was that in respect of ship to ship transfers, notice of readiness could only be tendered during daylight hours. Accordingly, the owners’ argument that the tendering of a notice of readiness and the notice time required by clause 6 was not required for lighterage or ship to ship transfers would be rejected. The owners said that NOR was tendered at 10.45 on 1 June. The charterers denied that NOR was tendered, and said that even if it had been it would have been premature and thus invalid, since the vessel did not arrive at anchorage D until 12.00 on 1 June. It was held that although the tribunal had been given a copy of a printed form dated 1 June, where the blanks had been completed which stated that the vessel was ready to load/discharge her cargo of butane as from 10.45 on that date, it was signed as being received at 07.40 on 3 June. The statement of facts for Fujairah recorded that NOR was tendered at 10.45 and received at 07.40 on 3 June. It was common ground that at 10.45 on 1 June the chartered vessel was not at any position where the printed form of notice could be handed over and thus tendered. Nor had the tribunal been given a copy of any electronically transmitted document, which announced the arrival of the vessel at 10.45 on 1 June and her readiness to discharge. Nor was there a statement from the master or other evidence from the vessel that that information was passed orally to the charterers or to anyone, such as the master of the mother vessel, who might be considered as their agents for the purpose of receiving notice of readiness. The charterers might have been in contact with the port authorities at Fujairah about her arrival, but the port authorities were not the charterers’ agents for the purpose of receiving such a notice. 34

D I F F I C U LT I E S O F ‘‘ W I T H I N T H E P O RT ’’

Para. 17

Clause 6 of the charter required notice of readiness to be given when it was received or at least offered. All the tribunal had was the printed form of notice which although dated 1 June recorded that it was received on 3 June. Accordingly, the tribunal found that the owners had failed to prove that a NOR was tendered at 10.45 on 1 June. Even if NOR had been tendered at 10.45 on 1 June it would not have been valid. At that time the vessel had noted ‘‘EOSP’’ (end of sea passage). The charterers had submitted (relying on The ‘‘Johanna Oldendorff’’33 and The ‘‘Agamemnon’’34) that the carrying voyage did not come to an end until the vessel had finished her voyage and reached a point as close as possible to where cargo operations were to be carried out. In the tribunal’s experience, the phrase ‘‘end or commencement of sea passage’’ as used in a vessel’s records meant the point in time when the vessel changed her manning state to or from sea watches to one for entering or leaving harbour. The phrase ‘‘full away’’ was sometimes used to indicate when the sea passage had commenced. In other words it was more to do with who was on the bridge and who was in the engine room than whether the vessel had reached a particular geographical point. There was nothing in the present case to suggest that the transition from sea watches was linked to arrival at any particular geographical point. The documents showed that there was a considerable length of time between the end or commencement of the sea passage and the arrival/departure from the berth/anchorage of the vessel. Anchorage D at Fujairah was a relatively small geographical area with only sufficient space for six vessels. The tribunal therefore did not accept that the end of the sea passage was coterminous with arrival at anchorage D. In an arbitration award relied on by the owners, it was crucial to the arbitrator’s reasoning that he had found that the end of the sea passage coincided with the vessel’s arrival at the entry buoy to the port in question, which was Ras Tanura. In the present case, there was no suggestion that the vessel had reached any such defined point one and a quarter hours before she anchored (at 12.00 on 1 June). Accordingly, no valid NOR was tendered. However, on the authority of The ‘‘Happy Day’’,35 laytime commenced when discharge began at 08.05 on 3 June and ended with completion of discharge of the cargo of butane at 10.25 on 4 June. In the event, no demurrage was due to the owners. The owners also argued that if they were not entitled to demurrage, they were entitled to claim damages for detention in a similar sum for a failure by the charterers to procure a berth ‘‘reachable upon arrival’’, as required by clause 9. It was also held that since the mother vessel was not at Fujairah when the chartered vessel arrived, there was clearly a breach by the charterers of their obligation under clause 9. The relationship between the ‘‘reachable on arrival’’ provision in clause 9 and the commencement of laytime provisions in clause 6 had of course been settled law since The ‘‘Laura Prima’’.36 What the law, as it now stood, said was that if the

33. [1973] 34. [1998] 35. [2002] 36. [1982]

2 1 2 1

Lloyd’s Lloyd’s Lloyd’s Lloyd’s

Rep. Rep. Rep. Rep.

285. 675. 487. 1.

35

Para. 17

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

ship in question could not give a valid NOR because she could not proceed to her specified destination, her owners could claim damages. However, if she had arrived at a place from which NOR could be given, the owners’ remedy was to give notice and use their laytime. In those circumstances, the owners did not have the option of claiming damages instead, but had to give notice. In the present case, the owners could have given NOR on arrival at anchorage D at Fujairah, and it was not therefore open to them to claim damages. This issue is also relevant to Chapter 3 (‘‘reachable on arrival’’/damages) and to Chapter 6 (estoppel). It is mentioned that Charterparty Laytime Definitions 1980, Voylayrules 1993 and the Baltic Code 2003 (applicable if incorporated expressly into a charterparty contract) appear to allow the tendering of a notice of readiness in a port charterparty even though the vessel is not ‘‘within the port’’ as per the Johanna Oldendorff/ Maratha Envoy decisions, but the matter is not free from doubt. The definitions read, ‘‘port’’ means an area within which ships are loaded with and/or discharged of cargo and includes the usual places where ships wait for their turn or are ordered or obliged to wait for their turn no matter the distance from that area. If the word ‘‘port’’ is not used, but the port is (or is to be) identified by its name, this definition shall still apply. The rules read, ‘‘port’’ shall mean an area, within which vessels load or discharge cargo whether at berths, anchorages, buoys or the like, and shall also include the usual places where vessels wait for their turn or are ordered or obliged to wait for their turn no matter the distance from that area. If the word ‘‘port’’ is not used, but the port is (or is to be) identified by its name, this definition shall still apply; the Baltic Code has similar wording. While it is thought that virtually all maritime arbitrators would decide that any place where vessels usually wait for a loading/discharging berth would fall within the above definition/rule irrespective of whether it was not ‘‘within the port’’ as per the Oldendorff/Maratha Envoy decisions the matter is not completely free from doubt so that parties who do incorporate the definitions/rules into their contracts might well make it clear, by appropriate wording, that it is in order to tender a notice of readiness from any usual waiting place irrespective of it not being ‘‘within the port’’ as per the Oldendorff/Maratha Envoy decisions. Perhaps a future edition of Voylayrules could ensure that the matter is absolutely free from doubt. A clause which is crystal clear regarding the tendering of a notice of readiness outside of port limits is clause 17(b) of the Norgrain 89 form which reads: ‘‘(b) Waiting for Berth Outside Port Limits If the vessel is prevented from entering the limits of the loading/discharging port(s) because the first or sole loading/discharging berth or a lay berth or anchorage is not available within the port limits, or on the order of the Charterers/Receivers or any competent official body or authority, and the Master warrants that the vessel is physically ready in all respects to load or discharge, the Master may tender vessel’s notice of readiness, by radio if desired, from the usual anchorage outside the limits of the port, whether in free pratique or not, whether customs cleared or not. If after entering the limits . . . ’’

This 1989 version of the North America Grain charterparty is an improvement on the 1973 version of the same form (which reads ‘‘commercial limits’’ rather than 36

D I F F I C U LT I E S O F ‘‘ W I T H I N T H E P O RT ’’

Para. 17

‘‘port limits’’), see later paragraph 31 for more detailed consideration of the two forms. It makes sense for parties to agree the kind of clause set out in clause 17(b) of the Norgrain 89 form or to agree a Wipon provision in order to obviate disputes in relation to whether a vessel is ‘‘within the port’’ as per the Johanna Oldendorff/ Maratha Envoy decisions. Clause 17(b) of the Norgrain 89 form is to be preferred to the Wipon provision since apart from its cogency and clarity it may avoid the kind of argument displayed in The ‘‘Adolf Leonhardt’’ and an unreported arbitration (both discussed later in paragraph 18) on account of its wording, ‘‘usual anchorage outside the limits of the port’’. This wording would surely take care of any contention (as made in The ‘‘Adolf Leonhardt’’ and the unreported arbitration) that the vessel was not ‘‘at the immediate and effective disposition of the charterer’’. Yet another kind of clause seen in some dry cargo voyage charterparties is: ‘‘If berth is not available, notice of readiness to be given when the ship is anchored at waiting berth/place within port limits, or so near thereunto as she may be permitted to approach at or off the port, whether customs cleared or not, whether in free pratique of not . . . ’’

which clause is favourable to owners of vessels. The Australian Wheat Charter 1990 (‘‘Austwheat 1990’’) is also favourable to owners of vessels, part of which reads: ‘‘If the loading berth is congested on Vessel’s arrival at or off the first or sole port of loading or so near as she may be permitted to approach, the Vessel shall be entitled to give Notice of Readiness during ordinary office hours on arrival there, with the effect that laytime counts as if she were in berth and in all respects ready for loading provided that the Master warrants that she is in fact ready in all respects. Actual time occupied in moving from place of waiting to loading berth not to count as laytime. If after berthing the Vessel is found not to be ready in all respects to load, the actual time lost between the time of this discovery to the time that she is in fact ready to load shall not count as laytime.’’

In addition to being favourable to owners regarding reaching the agreed destination in respect of a port charterparty the above wording of the Austwheat 1990 is also favourable to owners in circumstances where the vessel is later not found ready when she berths (so that the original notice of readiness is, strictly speaking, invalid). Time will count save for the time lost between the discovery of the unreadiness and when that is remedied. This appears to be a commercially fair approach in respect of time which a vessel uses waiting for a loading/discharging berth. The point just made is, of course, also relevant to Chapter 4 where readiness is covered in detail. Charterers in the tanker trade do not appear to take fine points in respect of ‘‘within the port’’. Many of the voyage charterparties state (inter alia) that a notice of readiness shall be given at a ‘‘customary anchorage or waiting place’’ or the ‘‘customary waiting place’’ or ‘‘the vessel is lying in the area where she was ordered to wait or, in the absence of any such specific order, in a usual waiting area’’. Although some of these places may turn out to be outside of the legal limits of a port so long as the vessel is at a customary anchorage or waiting place the master is entitled to send a notice of readiness. This is practical and sensible. See also later paragraph 23, in this chapter, regarding tanker charterparties. 37

Para. 18

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

AT THE IMMEDIATE AND EFFECTIVE DISPOSITION OF THE CHARTERER 18. As illustrated in previous paragraphs the main problems arising from the Oldendorff test have been in connection with that part of the test relating to ‘‘within the port’’. Not a great deal has arisen in respect of the other limb of the test, ‘‘at the immediate and effective disposition of the charterer’’; one reported arbitration, obiter dicta in a High Court decision, an unreported arbitration, and the Kyzikos case which went to the Court of Appeal. These are set out below as in the previous edition of this book. Two more recent arbitrations have been reported and are included at the end of and as part of this paragraph 18. In both the reported arbitration and the Kyzikos case the question was raised as to whether or not a vessel was at the immediate and effective disposition of the charterer when, although she was within the port, tidal factors/weather prevented her from proceeding to a loading/discharging berth. In the arbitration37 the contractual discharge destination was Brest. The vessel arrived off the port and anchored in the roads, not being able to proceed to her discharge berth because of lack of water. As a result of neap tides she had to wait a week until she was able to proceed to a discharge berth. The arbitrators decided that the vessel was within the port of Brest when she anchored in the roads (within the fiscal limits of the port as defined by the authorities) so that she satisfied part of the Oldendorff 31 test; however, they then went on to decide the case against the owners on the basis that the vessel was not at the immediate and effective disposition of the charterers while she was lying neaped in the roads. They had this to say regarding the second limb of the Oldendorff 31 test: ‘‘No detailed guidance was given by Lord Reid, or the other Lords, regarding the full meaning of ‘at the immediate and effective disposition of the charterer’; however, it is not difficult to establish what they intended so to mean, by way of considering their remarks in the Oldendorff case31; these remarks showed that if a vessel had to proceed 17 miles from the anchorage to the berth such was of no account within the context of ‘immediate and effective disposition’, particularly in this day and age when ships can be contacted on VHF and weigh anchor rapidly; they remarked that, in such conditions, there was nothing to prevent the vessel weighing anchor and being in a loading/discharging berth within a few hours; the implication must be that the vessel is capable of moving soon after being ordered so to do. Further, the fact that the vessel was waiting at the usual waiting place indicated that she was fully at the charterers’ disposal. What one gleans from the remarks of the Law Lords is that a vessel would be at the immediate and effective disposition of the charterer when she is waiting at the usual waiting place and can move to a loading/discharging berth as soon as she is called to do so by the charterer. This, in no way, equates with the facts of the instant case where the vessel could not move for several days because of the combination of draught and tide; the vessel could not move to the discharging berth and, therefore, could not have been, by any stretch of the imagination, at the immediate and effective disposition of the charterers.’’

The arbitrators went on to say, by way of emphasis, that it was trite law, in the case of voyage charterparties, for owners to bear the risk of an delays which occurred because of low tides preventing the ship from reaching the loading/discharging place 37. LMLN 18—10 July 1980.

38

I M M E D I AT E A N D E F F E C T I V E D I S P O S I T I O N

Para. 18

absent, of course, any breach of contract by the charterers or any express wording in the charterparty to the contrary. It may well be that the arbitrators were wrong in their conclusions since some other arbitrators have been of the view that, once having reached the geographical destination, the risks of weather, tides and other navigational factors pass to the charterers; in fact, the Court of Appeal took the opposite approach to that of the arbitrators in the 1980 reported arbitration; see The ‘‘Kyzikos’’, below. The Kyzikos decision of Mr Justice Webster38 is of some importance on other matters such as ‘‘whether in berth or not’’ and ‘‘always accessible’’ which are considered later in Chapters 3 and 4. Suffice it to say that, regarding the present subject, Mr Justice Webster delivered some obiter dicta in respect of ‘‘at the immediate and effective disposition of the charterer’’ in circumstances where a vessel, after arriving within the port limits anchored because she could not move into her available discharging berth for several days because of fog. He concluded that even if he was wrong in his decision regarding ‘‘whether in berth or not’’ so that he was dealing with a port charterparty, the vessel was not an arrived ship at the port, within the meaning of Lord Reid’s test in the Oldendorff,31 until she left her anchorage because she was not, until that time, at the immediate and effective disposition of the charterer even though, as the arbitrator had found, the vessel was not being used for the owners’ purposes while being at anchor because of the fog conditions. In a later part of his judgment, when considering ‘‘always accessible’’, he drew attention to there being no reported case in which charterers had been held liable for bad weather in the context of bad weather before laytime began (see below on this particular aspect, paragraph 53). In the Court of Appeal39 it was decided that Mr Justice Webster was wrong; it was held that once the ship was in the appropriate geographical area and ready in herself she was entitled to give a notice of readiness even if she was unable to proceed to a berth by reason of bad weather. The leading judgment was delivered by Lord Justice Lloyd who stated (inter alia): ‘‘I now turn to the second question. Was the vessel at the immediate and effective disposition of the charterers when she gave her notice of readiness? If not, then the notice would be invalid and time would not begin to run. This question seems to have occupied more time in the court below than it did before us in some ways, however, it is the more important of the two questions. Mr Eder argues that the vessel could not, as a matter of common sense be said to be at the immediate and effective disposition of the charterers if she was unable to proceed by reason of fog. The arbitrator had found that the pilot station had closed down. Without a pilot the vessel was as much disabled as if her steering gear had broken down or her master and crew were on strike. Even in a port charter, navigational delays are at the risk of the owners. So even if, in a port charter, the vessel would otherwise have arrived, nevertheless if at the moment of arrival she is unable to proceed to her berth by reason of bad weather she is not entitled to give notice of readiness. In support of his argument Mr Eder relied on Kell v. Anderson (1842) 10 M. & W. 498, which though an old authority, is, he submits, the only authority directly in point. I cannot accept Mr Eder’s argument. The conditions which must be fulfilled before a vessel is entitled to give notice of readiness in a port charter are now well-established. First, she

38. [1987] 1 Lloyd’s Rep. 48. 39. [1987] 2 Lloyd’s Rep. 122.

39

Para. 18

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

must have arrived at the place within the port where she is at the immediate and effective disposition of the charterers. Secondly, she must be ready, so far as she is concerned, to load or discharge her cargo. She need not be absolutely ready, for example, by having all her cargo gear fixed up and in position. But she must be capable of being made ready, in ordinary course, by the time her cargo gear is needed. If therefore her steering gear were broken down, so that she was unable to get to her berth, or if her cargo gear were broken down, so that she was incapable of loading or discharging, the second condition would not be fulfilled, and a purported notice of readiness would be invalid. However it is not suggested in the present case that the second condition was not fulfilled or that the vessel was not ready in herself. The suggestion is that the first condition was not fulfilled. ... On the whole matter I think that 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 charterer’s disposal. I would therefore state what I would hope to be 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 are, she will be in such a position unless in some extraordinary circumstances proof of which would lie in the charterer. ... Mr Eder however submits that the Reid test, in addition to extending the distance from the actual loading or discharging spot at which the vessel might be said to have arrived, introduced a wholly new factor. If his submission is correct, it is now necessary to consider not just the place where the vessel is anchored, waiting to get into berth, but also the circumstances prevailing at the moment of her arrival. If the weather is good when she arrives at the ordinary place of waiting, so that she could proceed direct to her berth if a berth were available, she can give a valid notice of readiness. But if the weather is bad, and the pilot station has closed down, she cannot give a valid notice of readiness until the weather improved even though she is anchored in precisely the same place. I do not believe that the Reid test was intended to introduce a new factor into the equation. It is true that Lord Reid speaks of a vessel’s geographical position being of secondary importance. But it is still a position which he has in mind. If she is in the place where waiting ships usually lie, then she will normally be in that position. In exceptional or extraordinary cases, the proof of which would lie on the charterers, she may be required to be at some other place. But nothing in Lord Reid’s speech suggests that if she is where waiting ships usually lie she may nevertheless not be at the immediate and effective disposition of the charterers because of the weather. It was conceded by Mr Eder that a vessel could be at the immediate and effective disposition of the charterers despite a temporary obstruction in the fairway preventing her getting to her berth when vacant. I can see no difference in principle between a temporary obstruction of the fairway and the temporary closing down of the pilot station by reason of fog or by reason of a strike or for any other reason. Nor does Lord Diplock’s speech in The ‘‘Johanna Oldendorff ’’ suggest that he had anything in mind other than arrival at a place as determining whether a vessel has ‘arrived’ or not. The Reid test is, as Lord Diplock says, a convenient and practical test for ascertaining where that place is. It would be much less convenient and practical if, in addition to ascertaining where that place is, one had also to enquire as to the circumstances prevailing at the moment when the vessel arrived at that place. At present there are only two questions to be answered: ‘Where does the vessel have to be?’; and ‘Is she ready in herself?’ The Reid test provides the answer to the first of those questions. I see nothing in favour of having to ask a third question, to which the answer would vary according to the circumstances.’’

40

I M M E D I AT E A N D E F F E C T I V E D I S P O S I T I O N

Para. 18

Lord Justice Glidewell did not express any view on the subject (deciding in favour of the owners on the other point in the case) while Lord Justice Megaw only had a few words to say: ‘‘The issue of substance, as it appears to me, on this appeal is whether, in the now accepted formula, ‘the position within the port where she is at the immediate and effective disposal of the charterers’, the last nine words are simply part of the definition of the place where the vessel must be. The answer to that question in my opinion is ‘yes’.’’

The case went to the House of Lords but the law lords did not consider ‘‘at the immediate and effective disposition of the charterer’’ since it decided the case in favour of the charterers on the basis of the application/construction of ‘‘whether in berth or not’’ (see below, paragraph 26 et seq.); therefore, the Court of Appeal’s decision in The ‘‘Kyzikos’’ stands in respect of ‘‘at the immediate and effective disposition of the charterers’’, although, strictly speaking, it is obiter dicta only. It is submitted that the Court of Appeal’s decision is disappointing since it results in charterers having to bear risks which traditionally had been borne by the owners of vessels. Further, it is difficult to see the reasoning about it being much less convenient and practical to enquire as to circumstances prevailing when a vessel arrives at or off a port, bearing in mind that twentieth-century refinements should obviate problems in establishing the circumstances which prevail when a vessel arrives off a port, since it is not that difficult to ascertain whether a vessel is waiting for a berth or waiting because of weather or because of tides or for some other reason. It seems that the Court of Appeal laboured the inconvenient/impractical aspects unduly and unnecessarily and moved perfunctorily to a decision which merged the two limbs of the Oldendorff test in such a manner that, in reality, the readiness of the vessel (which is a completely separate element to the commencement of laytime from reaching the agreed destination) was transposed for ‘‘at the immediate and effective disposition of the charterers’’; this surely runs counter to what was said by the law lords in the Oldendorff case. Unfortunately, the House of Lords did not give its views on the subject in The ‘‘Kyzikos’’ because of its decision in respect of ‘‘whether in berth or not’’. It may be many years before the House of Lords gets another opportunity to consider ‘‘at the immediate and effective disposition of the charterer’’ and, in the meantime, charterers will have to live with the Court of Appeal’s decision albeit that, strictly speaking, it is obiter dicta; they may circumvent it, of course, by getting owners to agree a particular clause in the charterparty whereby laytime does not commence or run in circumstances where a vessel arrives and anchors at the usual waiting place when a berth is available for her but is unable to proceed to her berth because of fog and/or some other weather/navigational factor. In obiter dicta from a High Court case and an unreported arbitration the judge and the arbitrator were concerned with the vessel being at one of the usual waiting places for the loading port Rosario but this place was about 200 miles from the port and it was the vessel’s distance/steaming time from the port which was for their consideration; there were no weather factors preventing the vessels moving to their loading ports, it being a matter of berth congestion per se. In The ‘‘Adolf Leonhardt’’40 the vessel’s destination was Rosario, she anchored at Intersection (some 200 miles 40. [1986] 2 Lloyd’s Rep. 395.

41

Para. 18

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

from Rosario) and the master gave a notice of readiness from the anchorage. The charterparty stipulated (inter alia) that laytime could commence whether the vessel was in port or not. Mr Justice Staughton (as he then was) said, by way of obiter, that he considered it a difficult point whether or not the vessel was ‘‘at the immediate and effective disposition of the charterer’’ in the circumstances in question but he did go on to say that it seemed to him that a vessel was as effectively at the disposition of the charterer at Intersection as modern conditions demanded given that she was not required to be in the port of Rosario by reason of the words ‘‘whether in port or not’’ (the latter words are considered later in Chapter 2). It would appear that the inclusion of the Wipon phrase had some bearing on his lordship’s obiter. In the unreported arbitration, The ‘‘Seamaster’’,41 the arbitrator, on virtually identical facts to The ‘‘Adolf Leonhardt’’ save that there was not a Wipon provision in the charterparty, also did not have to decide whether or not the vessel was at the immediate and effective disposition of the charterer because of his decision that the first limb of the Oldendorff test was not satisfied, i.e. the vessel was not within the port of Rosario while lying at the Zona Comun anchorage (very close to Intersection) because the anchorage was not within the legal, fiscal or administrative limits of Rosario and the Rosario port authorities had no control over the vessel. However, he did have something to say regarding ‘‘at the immediate and effective disposition of the charterer’’, as follows: ‘‘The fact that Zona Comun is so far from Rosario (about 200 miles) involving at least 17/18 hours of steaming militates against the vessel being at the immediate and effective disposition of the charterer while lying at anchor at Zona Comun. It is a far cry from being one or two hours away from a berth while at anchor (such as was the Johanna Oldendorff regarding Liverpool) to the facts of the instant case where the Seamaster was lying so far from Rosario Roads to which roads the vessel had to get before being allocated a berth in circumstances of congestion at the roads. It seems to me that in order to be at the immediate and effective disposition of the charterer a vessel must be a relatively short distance from the loading berth so that she can reach it reasonably rapidly when called upon so to do; I am thinking in terms of a few hours at most rather than at least 17/18 hours steaming during which time a vessel may encounter difficulties during an upriver passage. For example, fog is encountered at times in the River Parana particularly during the time of the year in question; in fact, the Seamaster was herself delayed by fog on her outward passage; further, the Zarate bridge apparently cannot be navigated during the hours of darkness so that a passage from Zona Comun to Rosario can take up to 29/30 hours depending upon what time the vessel leaves Zona Comun which time, of course, will be dependent upon the party calling on the vessel to move up river.’’

He considered what Mr Justice Staughton had said in The ‘‘Adolf Leonhardt’’ by way of obiter but felt that he could not follow it particularly since the obiter appeared to be based on meagre evidence and the Wipon provision in that particular contract. See also earlier on this aspect paragraph 16 and LMLN 409—8 July 1995 where the arbitrators appeared to accept that the vessel was ‘‘at the immediate and effective disposition of the charterers’’ in a Rosario Zono Comun context. The two further reported arbitrations mentioned at the beginning of this paragraph are those in LMLN 471—22 November 1997 and in LMLN 559—12 April 2001. In the former arbitration the vessel was chartered on an amended Synacomex 41. 1988.

42

I M M E D I AT E A N D E F F E C T I V E D I S P O S I T I O N

Para. 18

form for the carriage of a part cargo of wheat in bulk to ‘‘1 Safe Berth’’ [named port], at a berth equipped with grabs suitable for discharge bulk wheat and there discharge cargo’’. The vessel ran on a liner service, and she carried a number of parcels of cargo for different shippers/charterers. She arrived at the named discharge port on 30 November, berthing at berth 11 at 08.30 hours and giving notice of readiness at 09.00 hours. Some work then took place, though not to the wheat cargo with which the tribunal was concerned. The following morning, 1 December, between 06.30 hours and 07.40 hours, the ship shifted to berth 22 for further discharging. The wheat cargo was only discharged at that berth. The owners claimed demurrage. Clause 6 of the charterparty provided: ‘‘Laytime . . . shall commence, whether vessel be in berth or not, in port or not, at 2 pm, if written notice of readiness . . . is given during usual local office hours before noon, and at 8 am on next working day if written notice of readiness is given during usual office hours after noon . . . ’’

Clause 30 provided: ‘‘Shifting from anchorage or lay-by berth to loading/discharging berth not to count as laytime even if the vessel is already on demurrage.’’

The charterers submitted that the shift between berths had been arranged by or on behalf of the owners to suit the convenience of other cargo on board, in particular steel consignments, and contended that until the ship arrived at berth 22 she was not effectively at their disposal, and that time should not count until she arrived there, i.e. from 07.40 hours on 1 December. Consequently, they said, the owners’ demurrage claim had to fail. The owners contended that berth 11 was equipped with grabs suitable for discharging wheat cargo and that, this being a berth charter, once the ship had arrived at that berth she had completed her voyage, the notice of readiness given was valid, and laytime ran until completion of the discharging of the wheat cargo. It was held, that the tribunal had some sympathy with the charterers’ position. In liner operations, in practice, they were likely to have very little control over where and when their cargo was discharged. No doubt it was for that reason that the parties had included the typewritten requirement that the berth to which the ship was to be sent be equipped with grabs suitable for discharging bulk wheat. It would be a strange situation if the charterers agreed to have time counting against them whilst other cargo was being discharged. Certainly very clear words would be required to achieve that result. The problem for the charterers was that the first berth to which the ship went (berth 11) was equipped with grabs suitable for wheat. What was beyond question was that movements of that kind usually arose because of the nature of the owners’ service, in that their ship was carrying a number of different parcels of cargo. There was the consideration that notice of readiness could plainly be tendered before the vessel reached the discharging berth, viz the ‘‘whether in berth or not’’ and related provisions, and also clause 30. On a proper analysis there was nothing in the berthing of the vessel on 30 November at berth 11 to invalidate the notice of readiness tendered that day. Berth 11 was a contractual berth for the purpose of the counting of time, and the 43

Para. 18

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

charterers had acknowledged that the cargo could and would have been discharged there if the vessel had remained at that berth. In such circumstances time counted from 14.00 hours on 30 November until completion of discharge. In the later LMLN 559 arbitration the vessel was chartered on the Baltimore Berth Grain Charter Party form for the carriage of 16,000 tonnes of peas in bulk from Canada to Mumbai, India. The vessel arrived at the discharge port of Mumbai on 3 December, tendering notice of readiness at 10.00 hours that day. However, she did not berth until 17.00 hours on 19 December. The owners said that laytime commenced at 08.00 hours on 4 December. The charterers contended that laytime did not begin to count until the vessel berthed on 19 December. The charterers said that the delay in berthing was attributable to the fact that the owners did not remit funds to cover port expenses to the agents at Mumbai until 11 December, with the result that funds were not received by the Bombay Port Trust (‘‘BPT’’) until 16 December. It was only then, they said, that the vessel was considered ready to discharge by the BPT and a berth allocated to her. The charterers referred to clause 9 of the charterparty, which provided that ‘‘customary port charges including all dockage to be for Owners’ account’’, as placing the responsibility for the prompt remittance of port expenses upon the owners. The charterers also relied on a BPT Notice to Shipowners, which stated that owners of vessels who applied for a berth would have to pay, in advance, a deposit equivalent to the charges calculated on the basis of the expected stay of the vessel at the berth plus 15% of the amount so calculated before allotment of the berth. The charterers said that because the port expenses had not been paid the vessel was not in position to proceed to a berth and consequently had not reached a position within the port where she was at their immediate and effective disposition. Thus she was not an arrived ship within the test laid down in The ‘‘Johanna Oldendorff’’.42 As the notice of readiness tendered on 3 December was thus invalid, and as there was no evidence that a second notice of readiness had been tendered by the owners, the charterers calculated that laytime commenced when discharge started. The owners responded that laytime was to be calculated by reference to clause 12 of the charterparty which specified the time permitted for discharge but contained no exception for any failure to pay port dues. Nor did the notice of readiness provisions in the charterparty contain any requirement that port dues be paid before any valid notice could be tendered, consequently, the notice of readiness tendered on 3 December was valid. They said that the only other course open to the charterers was to claim damages for breach of contract under clause 9 of the charterparty. The owners did not deny their obligation to pay such dues, or that they had only effectively been paid to the BPT on 16 December. However, they said that in making such payment they had complied fully with their obligations under clause 9 of the charterparty. It was held that, on the evidence, the BPT would not allocate a berth to the vessel until port dues had been paid, something which the owners had admitted to be their obligation under clause 9, and which they had also admitted had not been done 42. [1973] 2 Lloyd’s Rep. 285.

44

I M M E D I AT E A N D E F F E C T I V E D I S P O S I T I O N

Para. 19

until 16 December. Whether or not there was any formal requirement of the BPT, the agents at Mumbai had made it very clear to the owners from the beginning that they would not be able or prepared to give any undertakings to the BPT so that a berth could be allotted unless and until the owners put them in funds. In those circumstances, the tribunal concluded that the owners had been obligated to place the agents in funds in sufficient time as to ensure that a berth could be allotted to the vessel on, or shortly after, her arrival at Mumbai. However, the receipt of funds by the agents was not a pre-condition for the tender of a valid notice of readiness, and nothing in the charterparty suggested that any connection between the two was intended. Rather, the tribunal considered that the owners’ failure to place the agents in funds entitled the charterers to any damages sustained as a result of the breach of clause 9. To the extent, therefore, that the berthing of the vessel was delayed after the tender of notice of readiness, such time should not count against the charterers as laytime or time on demurrage (or was recoverable as damages if it otherwise did so). Sale contract 19. In the last edition of this book there was a relatively short section on sale contracts. Since then there have been some important Court of Appeal decisions in respect of basic principles attaching to laytime and demurrage in the context of sale of goods contracts and the subject will be considered in more depth in Chapter 7. At this stage there will be some introductory remarks regarding sale contracts plus reference to a Court of Appeal decision (referred to in the previous edition) concerned with the commencement of laytime (in the context of arriving at the agreed destination) as between sellers and buyers when the c.i.f. contract stipulated, ‘‘free out Lorient’’; did it have the effect of being a port charterparty or a berth charterparty? Although this book is concerned with ‘‘commencement of laytime’’ in the context of voyage charterparties such charterparties invariably form part of the transactions between sellers and buyers of goods (the cargo) so that the subject has relevance to contracts for the sale of goods which incorporate laytime/demurrage provisions. In those circumstances the laytime/demurrage provisions may well be back to back with the charterparty provisions so that where, for example, a seller of goods under a c.i.f. contract becomes liable for demurrage to the shipowner under a voyage charterparty, that seller will be able to claim against the buyer of the goods for the demurrage he pays the shipowner because under the laytime/demurrage provisions of the sale contract, the buyer stands in the equivalent position of the seller/charterer in the charterparty. The commencement of laytime can be all-important and happily it will coincide for both sale contract and charterparty contract: however, this may not always be so even if one of the parties to the sale contract thinks this has been achieved by way of the terms in the sale contract. The Court of Appeal decision in The ‘‘Handy Mariner’’43 evidenced how sellers of goods came unstuck in respect of their claim for demurrage against buyers under a c.i.f. contract stipulating 43. [1991] 1 Lloyd’s Rep. 378.

45

Para. 19

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

‘‘free out Lorient’’. The Court of Appeal, in dismissing an appeal from the High Court, decided that discharging time under a c.i.f. contract began to run when the vessel berthed, in the absence of clear words to the contrary, if the contract provided for discharge at a named port at specified rates for discharge, demurrage, and dispatch, but included a GAFTA 100 term that discharge shall be as fast as the vessel can deliver in accordance with port custom. The facts were that by a contract for sale dated 25 June 1987, Intertradax as sellers and Etablissements Soules as buyers, agreed the sale of a cargo of sweet potatoes ‘‘c.i.f. free out Lorient—discharge 400 metric tonnes per hold/whether working day . . . demurrage $3,500 per day pro rata with half dispatch’’. The contract provided that other terms should be in accordance with Form 100 of the Grain and Feed Trade Association (GAFTA). Clause 16 of GAFTA form 100 provided ‘‘discharge shall be as fast as the vessel can deliver in accordance with the custom of the port’’. The Handy Mariner arrived with the cargo at Lorient on 30 September 1987. Owing to congestion in port she had to wait for a berth until 13 October before the cargo could be discharged. The sellers claimed for demurrage against the buyers and their case was that time started to count when the vessel arrived in port, or at latest, when notice of readiness was tendered on 1 October. The buyers contended that time could not start to run until the vessel berthed on 13 October. GAFTA arbitrators decided in the sellers’ favour. Their award was upheld by the GAFTA Board of Appeal. On appeal to the High Court, Mr Justice Hobhouse (as he then was) upheld the buyers’ contention that time could not start to run until the vessel reached a berth. He substituted an award in the buyers’ favour. The sellers appealed. The leading judgment was given by Lord Justice Staughton. In deciding against the sellers in dismissing their appeal he had this to say: ‘‘If the contract to be construed had been a charterparty, there could be no doubt of the answer. A contract to proceed to Lorient has the effect that the carrying stage of the voyage ends when the vessel reaches the port. It is for the charterer then to discharge her, and delay in obtaining a berth counts against his discharging time. The question, as I have said, is whether the parties to this sale contract must be taken to have used the words (‘‘c.i.f. free out Lorient’’) (or rather their French equivalent) in the charterparty sense. But before one comes to that question there is a point which might have been, but in the event was not, of some importance. That is whether by the terms of the contract notes the buyers assumed any obligation at all to the sellers to discharge the cargo in a given time, or of pay demurrage if they did not do so. . . . Like the judge, I think it right to start by considering the printed form of GAFTA 100. Clause 3, labelled ‘price’, has space for a figure followed by the words ‘gross weight, cost, insurance and freight to . . . ’. When the parties insert a destination—or more probably agree on one in a contract note—they generally name only a port or ports, without any reference to berths . . . where only a port is named in or pursuant to clause 3, I do not consider that the parties intend the result which would ensue with a charterparty if only a port is named as the destination—that time starts to count when the vessel reaches the port. Assuming that clause 16 has been left unamended, they have agreed that: ‘ . . . discharge shall be as fast as the vessel can deliver in accordance with the custom of the port’. It is difficult to suppose that this covers a period when the vessel cannot deliver because she is at anchor in the roads, at all events unless it is the custom of the port to discharge into lighters, which is not shown to be the case here.

46

B E RT H C H A RT E R PA RT Y

Para. 20

If that be the construction of form 100 when only a port is named in clause 3 and clause 16 is not amended, what is the right interpretation of the contract in this case? Once again only a port is named; but the parties have amended clause 16, by providing a fixed rate of discharge, a fixed rate of demurrage for failing to discharge at that rate, and a fixed sum for dispatch if the date is exceeded. I find this is a very difficult problem, principally because both trade tribunals have found in favour of the sellers. They must therefore have considered that the parties to this contract did indeed intend, when they named the port of Lorient as the destination, that the consequence would be the same as if Lorient had been named as the destination in a charterparty. Although the question is one of law for the court, one should always give weight to the opinion of trade arbitrators; and this seems to me particularly important when one is considering whether traders are likely to have used words in a particular technical sense. Nevertheless, like the judge, I conclude, in the end, that the parties did not intend to alter what I consider to be the effect of naming a port as the destination in form 100, without amending clause 16. To undertake a liability for demurrage while the vessel is in port but waiting for a berth would be an open-ended commitment in a contract for the purchase of what must probably be a part cargo. It would also be open-ended for a full cargo, since the receiver cannot normally control congestion in the port; yet many traders do assume such a commitment. In the case of a part cargo the problem is worse and the result may be capricious; the buyer does not know when he makes the contract how much other cargo will be carried on the vessel and so share his liability pro rata—unless some or all of it has been discharged at a previous port. I would require rather clearer words before holding that the buyers had assumed such a liability in this case.’’

The other two Lord Justices took a similar approach so that the Court of Appeal were unanimous in their decision against the sellers of the goods. The decision which evidences the different approach taken at times as between commercial arbitrators and judges, illustrates the care required on occasions to ensure that sale contracts and charterparties are essentially back to back in respect of laytime/ demurrage provisions, taking the English common law into account. But more about this in Chapter 7. BERTH CHARTERPARTY 20. There are still many berth charterparties, albeit that special clauses may, for commencement of laytime and practical purposes, turn a large number of them into port charterparties or effectively so. If there is a named berth in the charterparty then the position is quite clear in that the vessel has to get into that berth before she reaches her destination and is in a position to give a notice of readiness. The point was put very clearly by Lord Justice Jenkins in The ‘‘Radnor’’44 when he stated: ‘‘ . . . whereas in the case of a berth charter (that is to say, a charter which requires the vessel to proceed for loading to a particular berth either specified in the charter or by the express terms of the charter to be specified by the charterer) lay days do not begin to run until the vessel has arrived at the particular berth, is ready to load, and has given notice to the charterer in manner prescribed by the charter of her readiness to load.’’

In the later ‘‘Johanna Oldendorff ’’ case the words of Lord Diplock were to the same effect: 44. [1955] 2 Lloyd’s Rep. 668.

47

Para. 20

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

‘‘Where a single berth was specified in the charterparty as being the place of loading or of discharge, the loading voyage or the carrying voyage did not end until the vessel was at that very berth. Until then no obligation could lie upon the charterer to load the cargo, or to receive it, as the case might be. If the specified berth were occupied by other shipping, the vessel was still at the voyage stage while waiting in the vicinity of the berth until it became available, and time so spent was at the shipowner’s expense.’’

One point in favour of a berth charterparty is certainty since there can be little or no argument as to when a vessel arrives at a particular berth, the obvious test being that of the vessel being securely moored alongside the berth in question so that cargo can be loaded or discharged. This means that the owner has to bear the risk of any factor which prevents the vessel getting into her berth and because of this unsatisfactory position for owners it is now common for a berth charterparty to contain special wording whereby a notice of readiness can be given before the vessel gets into her berth in order to start the laytime earlier than would otherwise be the position. Some special wording in use, regarding this aspect, such as ‘‘whether in berth or not’’, will be considered later in Chapter 2. The word ‘‘berth’’ means the loading or the discharging berth and not a lay-by berth. The point came up in The ‘‘Puerto Rocca’’45 where the vessel was chartered to carry bulk grain to ‘‘one safe berth Seaforth Liverpool’’. The charter provided: ‘‘47. Time to count at discharge port from the first working period on the next business day following vessels customs clearance and receipt of written notice of readiness during ordinary office hours by Charterers agents from 09.00 hours to 17.00 hours from Monday to Friday, unless a holiday whether in berth or not. 50. In the event that vessel is unable to berth immediately upon arrival, on account of congestion, vessel is to present notice of readiness in accordance with clause No. 47 from arrival at Mersey Bar and time is to count accordingly but time from berth becoming available within the port until vessels arrival in the berth is not to count.’’

The vessel arrived at the Mersey Bar anchorage at 16.45 on Thursday, 4 November and at 16.50 gave notice of readiness to the charterers. The charterers rejected the notice on the ground that the vessel was not customs cleared in accordance with clause 47. The owners, maintaining the validity of the first notice, ordered the vessel to proceed to a lay-by berth in Seaforth Dock, obtained customs clearance and served a second notice of readiness on 8 November, at 12.00. The charterers accepted the notice and time began to run at 08.00 on 9 November. The dispute between the parties, as to whether the first notice of readiness was valid or only the second, was referred to arbitration and the arbitrator stated his award in the form of a special case the question of law for decision of the court being: whether on the facts found and on the true construction of the charterparty laytime commenced at 08.00 hours on Friday, 5 or 08.00 hours on Tuesday, 9 November 1976. It was held by Mr Justice Mocatta that clause 50 had to be read in relation to this particular charter which provided that the vessel was to discharge a cargo of grain in bulk at ‘‘one safe berth Seaforth’’; and on the natural construction of the clause in its context in the charter, the words ‘‘to berth’’, ‘‘from berth’’ and ‘‘arrival in 45. [1978] 1 Lloyd’s Rep. 252.

48

B E RT H C H A RT E R PA RT Y

Para. 20

berth’’ meant discharging berth; this was a berth charterparty in that the destination of the vessel was ‘‘one safe berth Seaforth’’; and to require a vessel to go to a lay-by berth and only then give notice of readiness seemed unreasonable and uncommercial; as this was a berth charter and the discharging berth was unavailable owing to congestion at the time that the vessel reached Mersey Bar, clause 50 came into operation and the notice of readiness given on 4 November was valid; the question of law would be answered to the effect that laytime commenced at 08.00 on Friday, 5 November. The decision makes sense in that a berth referred to in a charterparty means the loading or discharging berth; this is consistent with Charterparty Laytime Definitions 1980 (applicable only if incorporated expressly into a contract) which defines ‘‘berth’’ as the specific place where the ship is to load and/or discharge. Voylayrules 1993 have added the words ‘‘within a port’’ so that ‘‘berth’’ shall mean the specific place within a port where the vessel is to load or discharge. If the word ‘‘berth’’ is not used, but the specific place is (or is to be) identified by its name, this definition shall still apply. The Puerto Rocca case also has relevance to later Chapter 2 (special clauses relevant to arriving at the destination) and would lie comfortably in paragraph 30. Occasionally disputes arise between owners and charterers regarding the exact time that a vessel reaches the agreed berth destination and is in a position to tender a notice of readiness; the differences between the parties tend to be minimal and not usually worth taking to arbitration although a five or 10-minute difference in the commencement of laytime may have a knock-on effect whereby the exhausting of laytime stretches over a holiday and/or other excepted periods because of the laytime having commenced, say, 10 minutes later than it would otherwise have done. The knock-on effect may be several days demurrage in certain circumstances, e.g. Indian ports with a combination of weekend excepted period, legal holidays, and bad weather periods. As stated earlier the obvious test surely has to be that of the vessel being securely moored in her berth so that cargo can be loaded or discharged; the exact time that the vessel is securely moored is invariably cited in the statement of facts and in the majority of circumstances this time will be taken by owners and charterers as the trigger time. A charterparty may spell out the obligation of the vessel; e.g. some tanker charterparties stipulate ‘‘the vessel is securely moored at the specified loading or discharging berth’’, thus leaving no doubt whatsoever as to the position between the parties. Queries have been raised about the positioning of access to a vessel, e.g. a gangway. Many statements of facts now cite the time that access to the vessel is available and this will usually be a later time than the time the vessel is securely moored in her berth; charterers sometimes assert that the later time, when access becomes available to the vessel, is that which should be taken for reaching the agreed destination, in a berth charterparty, and when the notice of readiness becomes effective. It is submitted that the better view is that the vessel reaches the agreed berth destination when she is securely moored in that berth, leaving it for the charterers to contend, if the facts be apposite, that the vessel was not ready to load or discharge her cargo because there was no access to the vessel and access was 49

Para. 20

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

required in order to start the loading/discharging operation; if there is a deficiency in respect of access it seems that this would have relevance to the readiness of the vessel to load/discharge cargo, which essential is covered later in Chapter 4. Further, and in any event, there may then be an issue regarding whose obligation it is to provide access (it may be the charterers in some circumstances) and the loss of time flowing from a breach of this obligation (more pertinent to a damages situation, see later Chapter 5). Of course, the matter may be governed by an express clause in the charterparty such as Exxonvoy 90 which states in clause 1(d) ‘‘Arrival in berth’’ shall mean the vessel being all fast with gangway down and secure when loading or discharging alongside a wharf/berth. As mentioned earlier in paragraph 19 the Court of Appeal decided that a c.i.f. sale contract providing free out Lorient with a discharging rate should be construed as a berth charterparty despite that, had the contract been construed as a charter, it would have been a port charterparty. 21. It is not necessary for a berth to be named in a charterparty for it to be a berth charterparty. It is sufficient if there is an express right to nominate a berth by the charterer—the charter is a berth charterparty. It is also now settled that where the destination is an area of wider extent, and there is an implied right in the charterer to nominate the berth or other discharging spot, the ship is ‘‘arrived’’ when she reaches the appropriate part of the wider area and not when she later reaches the discharging berth or spot. There was some uncertainty at one time regarding the position where the charterparty provided that discharge should take place at, for example, ‘‘one safe berth, London’’ or ‘‘London, one safe berth’’. The test is one of construction of the charterparty; is the destination London or the berth? In The ‘‘Finix’’46 Mr Justice Donaldson (as he then was) stated, as obiter, that the first illustration would be a berth charterparty and the second one a port charterparty. He took some support in deciding in this manner by views expressed by two Lords Justices of Appeal in The ‘‘Radnor’’.47 His words were: ‘‘But there is a realm of uncertainty where the charterparty provides that discharge shall take place at, for example, (a) ‘One safe berth, London’ or (b) ‘London, one safe berth’. The test is undoubtedly whether on the true construction of the charterparty, the destination is London or the berth. My own view is that in case (a) it is the berth and in case (b) it is London. This point arose in The ‘Radnor’ and Lords Justices Singleton and Parker seem to have inclined to this view. The matter is further complicated where, as here, the reference to the berth takes the form of ‘one or two safe berths, one safe port’, since it may be said—and it is said in this case—that this has nothing to do with the destination, but means only that the vessel can be asked to discharge at more than one berth. Again my present view is that ‘one or two safe berths, London’ would make the first berth the destination, whereas ‘London, one or two safe berths’ would make London the destination.’’

Although Lords Justices Singleton and Porter inclined to the view that ‘‘one safe berth Dairen’’ indicated that the agreed destination was a berth they did not labour 46. [1975] 2 Lloyd’s Rep. 415. 47. [1955] 2 Lloyd’s Rep. 668.

50

B E RT H C H A RT E R PA RT Y

Para. 21

the point and their views were obiter. Likewise, Mr Justice Donaldson (as he then was) did not elaborate on the point and his brief view was also obiter. In a later case, The ‘‘Puerto Rocca’’, see paragraph 20, above, Mr Justice Mocatta was of the firm view that ‘‘one safe berth Seaforth Liverpool’’ was a berth charterparty but no argument was put to him that it was a port charterparty. It appears that there has been no further court case which has considered the matter fully (although there has been at least one arbitration, see below) and this is perhaps unfortunate since it would be more satisfactory if there had been a definitive ruling in the courts that the law was as indicated as above, alternatively that the obiter of the above judges need not be adopted and that ‘‘one safe berth, London’’ meant the same as ‘‘London, one safe berth’’, both being adjudged as port charterparties. Many persons find the above distinction illogical and consider that a berth charterparty should only be one where the berth is actually named in the charterparty itself. After all, a vessel always has to go to a berth of some kind to load/ discharge so that it seems sensible that the destination, for the commencement of laytime, should only be a berth where a named berth is expressly contained in the charterparty. The matter of the distinction between ‘‘one safe berth London’’ and ‘‘London one safe berth’’ came up for adjudication in The ‘‘Scapdale’’48 arbitration. An award was made in the form of a special case and it was hoped that the matter would get to the courts in order to get a definitive ruling vis-`a-vis the obiter of Mr Justice Donaldson and the two earlier Lord Justices. The charterparty stipulated that the vessel was to proceed to ‘‘one or two safe berths Tampa Range, Florida, including Boca Grande—port at Charterers’ option’’. The vessel was ordered to the port of Tampa and arrived at the Seabuoy on the morning of 4 August 1978. The master gave a written notice of readiness to the charterers’ agents at 05.30 on that day and the vessel remained at an anchorage until she berthed at 18.00 on 26 August, the delay in berthing being due to berth congestion. One of the questions for the umpire in the arbitration was whether the charterparty was a port or a berth charterparty. While feeling sympathetic to the owners in their contention that there should be no distinction between ‘‘one safe berth London’’ and ‘‘London one safe berth’’ so that both charterparties should be considered as port charterparties, the umpire still felt constrained to decide against the owners and to follow Mr Justice Donaldson because of the identical wording in the two cases. However he did have this to say in his special case award: ‘‘With respect to Mr Justice Donaldson I find it difficult to follow the distinction between ‘one safe berth London’ and ‘London one safe berth’. I feel that this is too artificial a distinction and it is a distinction that would be missed by most brokers when fixing a vessel. There is little doubt that the commercial community would like a simple test laid down for guidance in the future so that the legal niceties which have occurred in this case do not occur again. A few suggestions have been put forward; the first is that if the word ‘berth’ is mentioned then the charterparty is automatically a berth charterparty, although this position is often made more complicated by the insertion of the phrase ‘whether in berth or not’ later, which affectively deprives the charterer of any benefit of having a berth charterparty. Another 48. 1980.

51

Para. 21

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

commercial suggestion has been to say that no charterparty can be a berth charterparty unless it specifically names a berth in a given port.’’

Unfortunately, the case never reached the courts so that the position remains in that there is persuasive obiter dicta that the use of the word ‘‘berth’’ preceding the name of the port, then describing the destination, makes it a berth charterparty so that, absent any special provisions appertaining to the advancement of laytime, the vessel has to get into her loading/discharging berth before a notice of readiness can be given. The matter was touched upon in The ‘‘Isabelle’’49 where Mr Justice Goff (as he then was) stated, where the wording was, ‘‘proceed to a berth . . . as ordered by charterers in one safe port Algeria’’, that it was plain that this was a berth charter; again this was obiter but it fell into line with the earlier cases. In many berth charterparties the position may be academic in respect of ‘‘commencement of laytime’’ because of the propensity of the parties to agree a special provision in the charterparty whereby a notice of readiness can be given at an earlier time than when the vessel berths, e.g. Wibon, but even then there may be a factor which prevents the notice of readiness being effective; see below, paragraph 26 et seq., The ‘‘Kyzikos’’. In LMLN 566—19 July 2001 the tribunal had to decide whether it was a port or a berth charterparty where a rider clause 43 provided: ‘‘One safe and suitable ice-free port Black Sea out of Odessa, Novorossisk, Tuapse, Constanza, Bourgas, Varna East and /or Varna West . . . one or two safe berths at discharging port.’’

The charterers had contended that the vessel had ‘‘arrived’’ at Novorossisk on 21 March because the charterparty was a ‘‘berth charter’’—because rider clause 43 provided that the vessel was to discharge at ‘‘one or two safe berths at discharging port’’. Although the vessel did not berth on her arrival because of congestion, clause 22 of the charterparty provided that in the event of congestion the master had liberty to tender notice of readiness ‘‘whether in port or not, whether in berth or not . . . ’’ The submission that the vessel had ‘‘arrived’’ at Novorossisk on 21 March would be accepted, but not for the reasons put forward by the charterers. The charterparty was not a ‘‘berth charter’’. Rider clause 43 called for the vessel to discharge at ‘‘One safe and suitable ice-free port’’; the reference to ‘‘port’’ coming before the reference to ‘‘one or two safe berths of discharging port’’ in the final sentence of that clause. Thus, the charter was a ‘‘port charter’’ and the vessel had ‘‘arrived’’ at the port upon her arrival at Novorossisk Pilot Station at 17.30 hours on Sunday 21 March, irrespective of her subsequent delay in berthing. The Commercial Court emphasised the importance of a master not giving a notice of readiness until his vessel had reached the agreed destination (as stipulated in the charterparty). In The ‘‘Agamemnon’’,50 the parties agreed that the vessel was chartered for a voyage from one good and safe berth Baton Rouge with the following relevant words: ‘‘If the loading . . . berth is not available on vessel’s arrival at or off the port of loading . . . or so near thereto as she may be permitted to approach, the vessel should be entitled to give notice of readiness on arrival there as if she were in berth . . . ’’. 49. [1982] 2 Lloyd’s Rep. 81. 50. [1998] 1 Lloyd’s Rep. 675.

52

D O C K C H A RT E R PA RT Y

Para. 22

The vessel arrived at the South West Pass at 23.00 hours on 5 October 1995 and gave notice of readiness. The South West Pass was a customary waiting area for vessels wishing to enter the Mississippi river and to proceed to one of the ports in the river. It was about 170 miles from Baton Rouge and was not part of the port of Baton Rouge. The vessel arrived at the Baton Rouge general anchorage at 10.25 hours on 7 October. No further notice of readiness was given then. The vessel eventually berthed at 20.30 hours on Sunday 8 October and commenced loading at 10.15 hours on 9 October. The arbitrators held that the Master, having tendered notice of readiness at the South West Pass, had effectively fulfilled the purpose of tendering notice of readiness by informing the charterers/shippers of the vessel’s readiness to load the required cargo. The charterers’ agents were thereafter in regular contact with the Master during the up river transit and it followed that they therefore must have been fully aware of the vessel’s arrival at the Baton Rouge anchorage. As the Baton Rouge anchorage was the nearest that the vessel was permitted to approach the berth, the notice of readiness should have been accepted by the charterers on her arrival there at 10.25 hours on 7 October 1995. Although the South West Pass was 170 miles from the anchorage at Baton Rouge, the vessel was from that time onwards under the effective control of the charterers’ agents as regards the organisation of pilots for the transit of the Mississippi and the charterers’ agents were, or ought to have been, fully aware of the vessel’s time of arrival at the Baton Rouge anchorage. The charterers appealed to the High Court, contending that the notice of readiness had been given prematurely and before the vessel’s arrival at a point as near to Baton Rouge as she could approach, and that as no notice had been given when she arrived at that point on 7 October, laytime could not commence before the vessel started to load at 10.15 hours on Monday 9 October. It was held that the charterers were correct in their contention and that since the Court of Appeal decision in The ‘‘Mexico 1’’51 had ruled out the inchoate theory the notice of readiness given by the master on October 5 was a nullity. This case will be considered in more detail later in Chapter 6 which deals in depth with the validity or otherwise of a notice of readiness and the Court of Appeal decision in The ‘‘Mexico 1’’ and The ‘‘Happy Day’’.52

DOCK CHARTERPARTY 22. Little will be said about this type of charterparty for the simple reason that it has now gone out of fashion. Dock charterparties came to the fore in the latter part of the nineteenth century with the big upsurge of dock systems but they are almost unknown in modern-day circumstances. The position, if there is a dock charterparty, is virtually identical to that of a port charterparty. There is no point in repeating what has been said earlier except to say that it must obviously be the case, 51. [1990] 1 Lloyd’s Rep. 507. 52. [2002] 2 Lloyd’s Rep. 487.

53

Para. 22

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

in a dock charterparty, that the vessel has to get into the dock in order to be an arrived ship. Admittance to the dock is all that is required, it being unnecessary for the vessel to get into the loading/discharging berth. Although there are no modern/recent cases directly on the point Lord Diplock did have the following to say in the Oldendorff case: ‘‘A dock encloses a comparatively small area entered through a gate. There is no difficulty in saying whether a vessel has arrived in it. As soon as a berth is vacant in the dock a vessel already moored inside the dock can get there within an interval so short for the practical business purpose of loading or discharging cargo it can be ignored.’’

He thus endorsed earlier held views that entering the dock and mooring was all that was required to reach the agreed destination in a dock charterparty, there being no need to be moored at the actual loading/discharging berth.

TANKER CHARTERPARTIES 23. Because of the nature of their work tanker vessels which are voyage chartered in the bulk oil trade frequently have special clauses regarding the agreed destination and the time that a notice of readiness can be given. Some of them will be covered in more detail in later chapters; suffice it to say for the moment that the clauses regarding the agreed destination are usually more detailed than those seen in dry cargo bulk voyage charterparties where there is often simply a bald reference to a particular port or to one safe berth at a particular port. Many standard tanker voyage charterparties are port charterparties; e.g. the Asbatankvoy and the ASBA II charterparties state: ‘‘Upon arrival at customary anchorages at each port of loading or discharge the master shall give the charterer notice . . . ’’ and the Tankervoy 87 states: ‘‘When the vessel has arrived at a customary anchorage or waiting place for each loading and discharging port or place . . . notice of readiness . . . shall be given to charterers . . . ’’. The Beepeevoy charterparties are also port charterparties but the Shellvoy charterparties are prima facie berth charterparties (vessel securely moored at the specified loading or discharging berth) although they allow a master to give a notice of readiness at an earlier time in certain circumstances. The ‘‘Plakoura’’53 was concerned with the Shellvoy 4 form and whether or not the vessel had reached the agreed destination. The charterparty stipulated: ‘‘3 . . . In this chapter ‘place’ shall include any berth . . . anchorage . . . or any other place whatsoever to which charterers are entitled to order the vessel . . . 13(1)(a) . . . laytime at each loading and discharging place shall commence when the vessel is in all respects ready to load and written notice thereof has been received . . . and the vessel is securely moored at the loading place. Whether or not the nominated loading or discharging place is available and accessible, if the vessel is . . . ordered . . . to wait before proceeding thereto laytime shall commence . . . when written notice of readiness has been received and the vessel is lying at the place where the charterers have ordered her to wait or . . . at a usual waiting place.’’

53. [1987] 2 Lloyd’s Rep. 258.

54

TA N K E R C H A RT E R PA RT I E S

Para. 23

The vessel arrived off the loading port on 7 February but it was closed owing to bad weather; she was ordered by the port authorities to anchor and await berthing instructions. The vessel anchored in the recommended anchorage area and tendered a notice of readiness which was received by the charterers in the early hours of 8 February. The port reopened on 13 February and the vessel was all fast at her sea berth mooring at 10.24. The owners contended that the vessel had reached the agreed destination on 8 February because (inter alia) of the vessel being ordered to a loading port in accordance with the loading port range clause in the charterparty. They relied upon that part of the ‘‘Reid’’ test, ‘‘if she is at a place where waiting ships usually lie’’. According to them the main issue was whether the charterparty was to be regarded as a port or berth charter and, if it was the former, whether the vessel had reached the agreed destination when she had anchored within port limits. The charterers submitted that the question was not to be decided on the historic distinction between a port and a berth charter but on the wording of the particular charterparty which called for the vessel ‘‘to be securely moored at the loading place’’. Further, they asserted that ‘‘securely moored’’ meant ‘‘tied to a berth, jetty or buoys or, in the technical sense, anchored with both anchors down’’; by implication that excluded riding to one anchor only (which was how the vessel was moored) so that the vessel could not be securely moored until she was tied to the berth or buoy where loading was to take place. Mr Justice Leggatt (as he then was) did not accept the submissions of the charterers regarding the ‘‘securely moored’’ aspect per se but still decided the case in their favour on the construction of clauses 3 and 13(1)(a) so that the vessel had not reached the agreed destination until she was moored at the actual loading place, this being the sea berth mooring. He said: ‘‘I accept that the expression ‘available and accessible’ is more apt to refer to the actual point at which loading or discharging is to occur than to the port as a whole. It seems to me that in the phrase ‘securely moored at the loading or discharging place’, the words ‘loading or discharging’ describe and identify the actual spot when the loading or discharging is to occur. In my judgment, construing clause 13(1)(a) in the light of the charterparty as a whole, the phrase ‘securely moored at the loading or discharging place’ means ‘all fast at the spot where the actual process of loading or discharging is to occur’. It bears the connotation that the vessel should be so secured at a particular place in the port so as to enable loading or discharging to occur at that place.’’

In the Shellvoy 5 charter (which replaced the Shellvoy 4) ‘‘place’’ has been taken out of clauses 3 and 13(1)(a) leaving the emphasis very much on ‘‘berth’’. The same holds for the Shellvoy 6 (issued March 2005) where the all important and very detailed notice of readiness clause 13(1)(a) reads: ‘‘Time at each loading or discharging port shall commence to run 6 hours after the vessel is in all respects ready to load or discharge and written notice thereof has been tendered by the master or Owners’ agents to Charterers or their agents and the vessel is securely moored at the specified loading or discharging berth. However, if the vessel does not proceed immediately to such berth time shall commence to run 6 hours after (i) the vessel is lying in the area where she was ordered to wait or, in the absence of any such specific order, in a usual waiting area and (ii) written notice of readiness has been tendered and (iii) the specified berth is accessible. A loading or discharging berth shall be deemed inaccessible only for so long as the vessel is or would be prevented from proceeding to it by bad weather, tidal conditions, ice,

55

Para. 23

A R R I V I N G AT T H E AG R E E D D E S T I N AT I O N

awaiting daylight, pilot or tugs, or port traffic control requirements (except those requirements resulting from the unavailability of such berth or of the cargo).’’

The clause is even more complicated than that in Shellvoy 5 since it also specifies that unless the owners now obtain customs clearance or free pratique within 6 hours of the original notice of readiness (or when time would otherwise commence under the charterparty), the notice of readiness will not be valid and a new one will have to be tendered when customs clearance or free pratique has been given. There is a proviso ‘‘unless this is not customary prior to berthing’’ which applies to free pratique but not to customs clearance. This proviso may well give owners problems. Regarding port charterparties in the bulk oil trade charterers do not appear to take fine points in respect of ‘‘within the port’’ as per the Oldendorff/Maratha Envoy decisions test and a vessel being outside port limits. The usual wording is the ‘‘customary anchorage’’ or the ‘‘customary waiting place’’ at or for the port in question and those in the trade appear to accept that these places may be outside the strict legal limits of a port on occasions but take no point on it so long as the vessel is at the anchorage/place where vessels usually wait for a loading/discharging berth, see also earlier paragraph 17. Many tanker charterparties contain transhipment clauses but such do not usually give rise to any problems regarding the commencement of laytime. They usually specify that laytime commences from the arrival of the vessel at the transhipment area or from the commencement of the laydays, whichever is the later. But more on this later. In recent times, an increasing number of charterers have decided to stop using the Asbatankvoy form and have switched to other forms such as the ExxonMobil Voy 2000 charterparty (which is a port charter). See, for example, ASDEM News Update No. 28 of May 2005. As far as notice of readiness is concerned the ExxonMobil Voy 2000 form is simple in that it specifies: ‘‘Upon arrival at customary anchorage or waiting place at each loading and discharging port or place, Master or Vessel’s agent shall give Charterer or its representative notice by letter, electronic mail, telex, facsimile, radio or telephone (if radio or telephone, subsequently confirmed promptly in writing) that Vessel is in all respects ready to load or discharge cargo . . . Laytime or time on demurrage, as herein provided, shall commence or resume upon the expiration of six (6) hours after receipt by Charterer or its representative of Notice of Readiness or upon Vessel’s Arrival in Berth, whichever occurs first. Laytime shall not commence before 06.00 hours local time on the Commencing Date specified in Part 1(B) unless Charterer shall otherwise agree, in which case laytime shall commence upon commencement of loading.’’

Therefore, as far as notice of readiness is concerned the ExxonMobil Voy 2000 and the Asbatankvoy charterparties appear to be very similar save that the former extends the methods of communication for tendering a notice of readiness, e.g. electronic mail, facsimile etc.

56

CHAPTER TWO

SPECIAL CLAUSES RELEVANT TO ARRIVING AT THE DESTINATION

GENERAL 24. An owner may avoid the financial rigours which can arise from the application of the English common law to a vessel waiting at or off a port either by way of special clauses in the charterparty contract or because the charterer breaches an express or implied term of the contract which results in the owner obtaining compensation, by way of damages, for the period which his vessel waits at or off a loading or discharging port. Breach of contract and damages are dealt with in Chapter 3. The express clauses and terms which are in common use can be categorised as follows: (a) Clauses which advance the time when laytime commences. (b) Clauses which provide for the payment of specific sums when a vessel waits at or off a port. (c) Clauses which cater specifically for the time lost by a vessel waiting for a berth. A usual and important clause in the past, and also today, in the tanker trade has been that which obliges a charterer to provide a berth reachable on the vessel’s arrival but this clause, strictly speaking, comes under breach of contract/damages and will be considered later in Chapter 3. ADVANCING LAYTIME INCLUDING ‘‘ WHETHER IN BERTH OR NOT’’ AND ‘‘WHETHER IN PORT OR NOT’’ 25. Clauses which advance the commencement of laytime in respect of arriving at a destination can be divided into those which do this directly and those which achieve the same or a similar result indirectly. An example of the former is ‘‘laytime to commence when the vessel anchors off the Hook of Holland’’ in a voyage charterparty involving the port of Rotterdam while an example of the latter is ‘‘whether in berth or not’’. There is bound to be some overlap between clauses falling into the category of those advancing laytime and those which cater specifically for time lost waiting for a berth (see below, paragraph 35 et seq.) but there is some sense in separating out the clauses, particularly because of the practical importance of a time lost waiting for a berth clause. Those clauses which directly advance the commencement of laytime such as ‘‘laytime to commence when the vessel anchors off the Hook of Holland’’ are, 57

Para. 25

S P E C I A L C L AU S E S R E A R R I V I N G

generally speaking, simple of application and do not usually lead to problems. If it were not for such a clause laytime might not commence under English law until the vessel moved into the port of Rotterdam, see earlier, paragraph 10. With such a clause, laytime commences as soon as the vessel anchors on completion of her sea passage. In practice, adjustments are often made to such clauses whereby laytime commences at a specific time (say 12 or 24 hours) after the vessel anchors at the stipulated place but these do not significantly affect their benefit to owners of vessels. One tends to see this type of clause in charterparties where vessels are trading to large and complex ports a considerable distance from the open sea such as Rotterdam, Hamburg, Antwerp, Glasgow and Calcutta; their virtue is their simplicity and, to owners of vessels, the compensation received for time which would not otherwise under English law score up for laytime purposes. Examples of such clauses are: ‘‘Should the vessel be ordered to discharge at Avonmouth or Glasgow or Hull and be unable to berth immediately upon arrival on account of congestion vessel shall be permitted to present notice of readiness at the anchorage at Walton Bay or Tail-of-Bank or Spurnhead respectively, and laytime to count accordingly, but time from berth becoming available in Avonmouth or Glasgow or Hull until vessel’s arrival at the berth in Avonmouth or Glasgow or Hull is not to count as laytime.’’

This clause allows the vessel to tender a notice of readiness outside the port limits so that the part of the ‘‘Reid’’ test, ‘‘within the port’’, does not militate against the owners of the vessel. A similar clause for vessels discharging at ports like Bremen or Bremerhaven is the Weser Lightship clause which states: ‘‘If vessel is ordered to anchor at Weser Lightship by Port Authorities, since a vacant berth is not available, she may tender notice of readiness upon arriving at anchorage near Weser Lightship, as if she would have arrived at her final loading/discharging port. Steaming time for shifting from Weser Lightship to final discharging port, however, not to count.’’

Yet another is the so-called Sandheads Clause, already adverted to earlier in paragraph 12, which reads: ‘‘At Calcutta if vessel is unable to give notice of readiness by reason of congestion at Calcutta, time shall commence to count at 8 a.m. on the next business day after notice of vessel’s arrival off Sandheads has been given by radio to Charterers or their agents and received during ordinary office hours. Whilst waiting off Sandheads (or such other place of transhipment) Sundays and holidays and Saturday after 12.00 noon till 8 a.m. Monday not to count unless vessel is already on demurrage. Time proceeding from Sandheads (or such other place of transhipment) is not to count.’’

The above clauses are, in general, fair to owners of vessels; they compensate an owner for the time that his vessel is waiting because of the non-availability of a loading/discharging berth but they do not bite in respect of delays occasioned by navigational/weather factors, which factors have in the past been considered owners’ risks. 26. The use of the words ‘‘whether in berth or not’’ (‘‘Wibon’’) can have the effect of advancing the commencement of laytime in a berth charterparty. The words are in the printed form of many charterparties, alternatively they are incorporated very frequently by type-added words and are of considerable importance. Until recently 58

A DVA N C I N G L AY T I M E

Para. 26

there was doubt whether the words had the effect of converting a berth charterparty into a port charterparty; however, the matter came up for adjudication as a main point (ultimately the main point) in The ‘‘Kyzikos’’1 along with ‘‘at the immediate and effective disposition of the charterer’’; see earlier, paragraph 18 (vessel arrived within the port limits but could not move to her available discharge berth because of fog). Mr Justice Webster (later reversed in the Court of Appeal) decided (inter alia) that the provision did not have the effect of changing the primary obligation of the owners from being one to carry the cargo to a berth to being one to carry the cargo to the named port; nor could the provision have the effect of converting what would otherwise not be an arrived ship, in certain circumstances, into such a vessel, if by an arrived ship is meant a ship which had reached the agreed destination, was ready to discharge and had given a notice of readiness to the charterers. The judge reversed an arbitrator who had decided ‘‘on well established authority that the words had the effect of making the charter into a port charter’’. Although reversed by the Court of Appeal,2 Mr Justice Webster gave a full and well reasoned judgment and it is worth considering before looking at the Court of Appeal decision, which decision was itself later reversed by the House of Lords. He held that there was no decision of any court which was binding on the point and in so concluding he considered six authorities (ranging from the High Court to the House of Lords) in addition to Laytime by Summerskill and Laytime and Demurrage by Schofield. The brief facts (some of which have already been mentioned earlier) were that the vessel arrived within the discharge port of Houston at 06.45 on 17 December; at the time when the notice of readiness was tendered, and at all material times thereafter, the berth to which the vessel was destined and at which she ultimately discharged was available, but she could not proceed to it because of fog until 20 December. Mr Justice Webster said (inter alia): ‘‘None of those six authorities are binding on me. In each of them the vessel was unable to come alongside a berth because none was available; and only two of them related to berth charterparties, The ‘Nessfield’3 and The ‘Amstelmolen’.4 But I have cited them at some length in order, primarily, to try to discover whether (as the arbitrator concluded), they support the proposition that the ‘Wibon’ provision has the effect of converting a berth charter into a port charter and, if I conclude that they do not support that proposition, to try and identify some other proposition which they do support. I recognise that, when a vessel is unable to come alongside because no berth is available, the ‘Wibon’ provision in the ordinary case has, in practice, that effect; but in my view it cannot be said without doubt that the authorities which I have considered, read as a whole, support the proposition that it has that effect in law, still less that it actually converts a berth charter into a port charter. Undoubtedly, Lord Justice Roskill, in the passage which I have emphasised in The ‘Johanna Oldendorff ’,5 said expressly that the provision was designed to convert a berth charterparty into a port charterparty; and the dicta of Lord Justices Ormrod and Upjohn, which I have emphasised (particularly the former) can be said to support the proposition inferentially. 1. [1987] 2. [1987] 3. [1912] 4. [1961] 5. [1972]

1 2 1 2 2

Lloyd’s Rep. Lloyd’s Rep. K.B. 434. Lloyd’s Rep. Lloyd’s Rep.

48. 122. 1. 292.

59

Para. 26

S P E C I A L C L AU S E S R E A R R I V I N G

But the dicta of Mr Justice Branson in The ‘Santa Clara Valley’,6 of Mr Justice McNair in The ‘Seafort’,7 and of Lord Justice Buckley in The ‘Johanna Oldendorff ’,5 support the more restricted proposition that the ‘Wibon’ provision does not override the primary obligation created by the charterparty, or those obligations as modified by the express exception, and that it does not affect, in principle as distinct from detail, the question of where the risk is to fall in the event of delay affecting the vessel. If this more restricted proposition is the right one to derive from the authorities, and if it is to be applied to the facts of the present case, it would seem that the arbitrator’s conclusion was wrong. The passages which I have emphasised from the dicta of Lord Justice Farwell in The ‘Nessfield’,3 and of Lord Diplock in The ‘Maratha Envoy’,8 justify an even more restricted and more specific proposition, namely that the effect of the ‘Wibon’ provision is that, under it, time starts to run when the vessel is waiting in the named port for a berth there to become available, ready so far as she is concerned to unload. If that proposition is the correct one, then there is no question but that the arbitrator’s conclusion in the present case is wrong. For the purpose of the present case, to which that proposition can be directly applied, I prefer, with great respect, that last proposition to that of Lord Justice Roskill and conclude that in the present case time did not begin to run until the vessel was berthed because it was not, before that time, waiting for a berth to become available, ready (so far as it was concerned) to unload. It seems possible to me to reach the same conclusion in reliance upon the dictum of Lord Justice Upjohn in The ‘Amstelmolen’9 that ‘liability for demurrage caused by delay in coming alongside the berth caused by congestion or other reason is thrown upon the charterer’ if, as in my view it can be, a distinction is to be drawn between the impossibility of coming alongside a berth on the one hand, and the impossibility of leaving an anchorage to shift to a berth on the other. The application of that dictum, with that distinction, to the facts of the present case, would also lead to the result that the arbitrator’s conclusion was wrong because there was no reason to prevent the vessel coming alongside; it was being prevented from leaving its anchorage.’’

In the first edition of this book it was submitted that the judgment of Mr Justice Webster made sense to many in the overall context of ship operating and chartering in that charterers bear the risk of congestion and owners bear the risk of bad weather with a ‘‘Wibon’’ provision. The words would still afford relief to owners of vessels in the case of berth congestion which has been traditionally at the risk of charterers but charterers would not be liable for delay preventing the vessel from getting into a berth over which they have no control, and in circumstances where a berth is freely available for the vessel. However, the Court of Appeal thought differently and decided that a ship’s right under a berth charterparty to give notice of readiness to load ‘‘whether in berth or not’’, arises as soon as she arrives in port and is ready to load, in the same way as under a port charterparty, and the ship has ‘‘arrived’’ if she has reached a place within the port where she is at the immediate and effective disposition of the charterers irrespective of whether she is unable to reach an available berth due to fog or other bad weather. In practical terms, the effect of ‘‘whether in berth or not’’ was to turn a berth charterparty into a port charterparty. In deciding in favour of the owners Lord Justice Lloyd (as he then was), in delivering the leading judgment, supported the Court of Appeal’s decision by reference to three main matters: 6. (1938) 7. [1962] 8. [1977] 9. [1961]

62 Ll.L.Rep. 23. 2 Lloyd’s Rep. 147. 1 Lloyd’s Rep. 217. 2 Lloyd’s Rep. 1.

60

A DVA N C I N G L AY T I M E

Para. 26

1. The absence of any words of qualification in the phrase ‘‘whether in berth or not’’. 2. The traditional view of the effect of the phrase. 3. The importance of certainty in relation to a commercial contract of the kind here concerned. Apart from detailing more the above points Lord Justice Lloyd also mentioned the definition of ‘‘whether in berth or not’’ contained in the Charterparty Laytime Definitions 1980 (applicable only if incorporated expressly into a contract) issued jointly by CMI, GCBS, BIMCO and FONASBA as follows: ‘‘ ‘whether in berth or not’ . . . means that if the location named for loading/discharging is a berth and if the berth is not immediately accessible to the ship a notice of readiness can be given when the ship has arrived at the port in which the berth is situated’’. He went on to say: ‘‘It will be noticed that the above definition is not limited to cases where the berth is unavailable. ‘Immediately accessible’ is wider than ‘immediately available’ and would appear to cover a case where the berth is inaccessible through bad weather as well as cases where it is inaccessible through congestion. The definition is therefore consistent with the view which I have formed.’’

In the House of Lords10 the only speech was given by Lord Brandon, the other four law lords simply concurring with him. Lord Brandon dealt with the above three points of Lord Justice Lloyd, as follows: ‘‘First, as to the absence of any words of qualification. I accept, of course, that the phrase ‘in berth or not’ does not of itself indicate that being in berth or not is related to the availability of a berth. I do not, however, think it possible, when interpreting a phrase which has been regularly included in berth charterparties over a long period, to disregard long-established authority as to the purpose intended to be served by it. The authorities to which I referred earlier show that, since 1912 at least, it has been recognised that the purpose of the phrase was to deal with the problem of a ship chartered under a berth charterparty arriving at her port of destination and finding no berth available to her. There is further no reported case prior to this one in which it has ever been suggested that the phrase was intended to deal with the problem of a ship chartered under a berth charterparty arriving at a port where a berth is available for her but being prevented by bad weather from proceeding to it. As I indicated earlier, the phrase has been treated as shorthand for what, if set out in longhand, would be ‘whether in berth (a berth being available) or not in berth (a berth not being available)’. The phrase has been interpreted and applied in that way for so long that I think that it should continue to be so interpreted and applied. Secondly, the traditional view of the effect of the phrase. Lord Justice Lloyd said that this view had always been that the phrase became operative so to enable a valid notice of readiness to be given as soon as the vessel has arrived in the port provided that the other conditions of a valid notice are satisfied. I cannot accept this generalisation as correct. So far as cases where no berth is available when the ship arrives are concerned, that has certainly been the traditional view. But, so far as cases where a berth is available for the ship on arrival but unreachable by reason of bad weather are concerned, no traditional view has ever been established, for the simple reason that the question of the effect of the phrase in that situation has never previously arisen from decision by any court. Thirdly, the need for certainty. I accept that certainty of interpretation is a most desirable characteristic of any contract, especially a commercial contract containing expressions commonly in use. I cannot see, however, that a decision that the phrase ‘whether in berth or not’ 10. [1989] 1 Lloyd’s Rep. 1.

61

Para. 26

S P E C I A L C L AU S E S R E A R R I V I N G

only takes effect when a berth is not available provides any less certainty than a decision that it also takes effect when a berth is available but is unreachable by reason of bad weather. With great respect to Lord Justice Lloyd and the other members of the Court of Appeal who agreed with him, I do not consider, in the light of the examination which I have made of the three main matters relied on by Lord Justice Lloyd, that they provide the support for his conclusion which he regarded them as providing. On the contrary, I am of opinion, having regard to the authorities to which I referred earlier and the context in which the acronym ‘Wibon’ is to be found in the charterparty here concerned, that the phrase ‘whether in berth or not’ should be interpreted as applying only to cases where a berth is not available and not also to cases where a berth is available but is unreachable by reason of bad weather.’’

The short result of the House of Lords’ decision is that the ‘‘Wibon’’ clause only applies to cases where a berth is not available and does not apply to cases where a berth is available for the vessel but unreachable because of weather/navigational factors. The decision/result was well received by many in the shipping commercial community albeit that the vast majority of commercial counsel were convinced that ‘‘Wibon’’ converted a berth charterparty into a port charterparty in all circumstances absent a breach of contract by the owners. 27. Before leaving the ‘‘Wibon’’ provision it is emphasised that, even if the provision bites so as to advance the commencement of laytime the vessel still has to satisfy the Oldendorff test vis-`a-vis the ingredients regarding a port charterparty. That is, she has to be within the port and at the immediate and effective disposition of the charterers. That point was brought out in The ‘‘Seafort’’.11 The vessel was chartered for the carriage of grain from Vancouver to London and Hull and the charterparty provided (inter alia): ‘‘ . . . Time at second port to count from arrival of the vessel at second port, whether in berth or not.’’ The second port was Hull and the vessel anchored at Spurn Head anchorage (the usual place for vessels of this size to wait for a berth in respect of Hull) but did not berth until 9 February. The anchorage was 22 miles from Hull but was not within the legal, administrative or fiscal limits of Hull. It was decided by Mr Justice McNair that, by using the words ‘‘arrival at second port’’ the parties must be presumed to have intended the normal conditions determining whether a vessel was an arrived ship should apply and that the words ‘‘whether in berth or not’’ merely emphasised the continuity of laytime and secured that time should count whether the vessel was in berth or not provided she had arrived at the port. On arrival at Spurn Head, the vessel had not reached the legal, administrative or fiscal limits of Hull and the words ‘‘whether in berth or not’’ did not extend the meaning of ‘‘arrival at the second port’’ to include a place not within the limits of the port so that the owners’ claim failed. The point appeared arguable because of the use of the word ‘‘arrival’’ (see later, for a wider interpretation of ‘‘arrival’’ in 1964 in The ‘‘Angelos Lusis’’12 in respect of ‘‘reachable on arrival’’) but the Seafort decision remains valid. The perhaps uncommercial interpretation of the Seafort decision may be circumvented by the parties using the acronym Wipon (whether in port or not) instead of or in addition to

11. [1962] 2 Lloyd’s Rep. 147. 12. [1964] 2 Lloyd’s Rep. 29.

62

A DVA N C I N G L AY T I M E

Para. 29

Wibon (whether in berth or not); see below, paragraph 29, for consideration of the former phrase. 28. In paragraph 26 mention was made of Charterparty Laytime Definitions 1980 (referred to by Lord Justice Lloyd in The ‘‘Kyzikos’’) and the acronym Wibon. In Voylayrules 1993 the wording has been altered in that ‘Whether in berth or not’’ (Wibon) shall mean that if no loading or discharging berth is available on her arrival the vessel, on reaching any usual waiting-place at or off the port, shall be entitled to tender notice of readiness from it and laytime shall commence in accordance with the charterparty. Laytime or time on demurrage shall cease to count once the berth becomes available and shall resume when the vessel is ready to load or discharge at the berth. There are several differences between the wording of Voylayrules and Definitions, namely: (1) Voylayrules refers to the berth being available as compared to the berth being accessible in the Definitions and reflects the House of Lords decision in The ‘‘Kyzikos’’. (2) ‘‘On reaching any usual waiting-place at or off the port’’ as compared to ‘‘when the ship has arrived at the port in which the berth is situated’’ as in the Definitions. The obvious intention of the differing words is to allow a notice of readiness, under Voylayrules, to be given outside of the port limits (not allowed under the common law, see earlier paragraph 27) so long as the vessel is at the usual waiting place whereas under the Definitions the vessel has to arrive ‘‘within the port’’ as per the ‘‘Oldendorff/ Maratha Envoy’’ decisions. (3) The last sentence of Voylayrules (not in the Definitions) states that laytime shall cease to count once a berth becomes available and shall resume when the vessel is ready to load or discharge at the berth. It appears that this sentence bites even though the berth may not have become accessible and therefore it is perhaps unfair to an owner of a vessel because other circumstances may have arisen after laytime has commenced which later prevent the vessel moving to a berth even though the berth has become available. Baltic Code 2003 has a similar definition to Charterparty Laytime Definitions 1980 since it reads, ‘‘if the designated loading or discharging berth is not available on her arrival, the vessel on reaching any usual waiting place within the port, shall be entitled to tender notice of readiness from it and laytime shall commence as provided under the charterparty’’. It is emphasised, as mentioned earlier, that Charterparty Laytime Definitions 1980, Voylayrules 1993 and Baltic Code 2003 only apply if they are expressly incorporated into a charterparty contract. It may be better to remain with the common law rather than incorporating the Definitions/Voylayrules into charterparties. 29. ‘‘Whether in port or not’’ is now seen commonly in voyage charterparties and the phrase should circumvent the effect of the Seafort decision where the parties use the words ‘‘time to count from arrival . . . ’’ in a port charterparty. As yet there are 63

Para. 29

S P E C I A L C L AU S E S R E A R R I V I N G

no legal authorities regarding the ambit of ‘‘whether in port or not’’ when considering whether a vessel has reached the agreed destination in order to give notice of readiness but commercial commonsense dictates that the words should bite in circumstances where the vessel has not got within the port according to the Oldendorff13 test but has reached the usual waiting place for the port in question and can go no further because of the non-availability of a berth. If the vessel cannot move to a berth because of weather/navigational factors (such as the Kyzikos14 circumstances) the position may be different since presumably what Lord Brandon had to say in The ‘‘Kyzikos’’ would be germane. In other words, Wipon would allow a notice of readiness to be tendered at the usual waiting place, even if the vessel was outside the port limits, so long as the reason for the vessel not moving into the port was the non-availability of a berth but, where weather/navigational factors prevented the vessel moving into the port the phrase would not bite and the vessel would have to get within the port in order to tender a notice of readiness. No doubt the courts will eventually deliver a binding precedent but in the meantime it will remain speculative as to the full effect of Wipon. What has been said above regarding the restrictions on Wipon may conflict with the Court of Appeal’s decision in The ‘‘Kyzikos’’ regarding ‘‘at the immediate and effective disposition of the charterers’’ (weather conditions preventing the vessel from moving to an available berth but not affecting the vessel being at the immediate and effective disposition of the charterer). It is a pity that the House of Lords did not give consideration to ‘‘at the immediate and effective disposition of the charterer’’ when it had the opportunity in The ‘‘Kyzikos’’ but declined to do so because of its decision regarding Wibon. If it had given full consideration to the subject it might have reversed the Court of Appeal and decided that a vessel could not be at the immediate and effective disposition of the charterer when she arrived geographically so as to tender a notice of readiness but could not move further because of a weather/navigational factor. Such a decision would have parallelled the ultimate decision in respect of Wibon and provided consistency so that a notice of readiness could be tendered at the usual waiting place within the port if a berth was not available but not if a berth was available for the vessel but unreachable because of weather/navigational factors. The same reasoning should, it is submitted, be applicable to Wipon. Although there are no binding authorities regarding ‘‘whether in port or not’’ the phrase was the subject of some obiter in The ‘‘Shackleford’’15 and even more obiter in The ‘‘Adolf Leonhardt’’.16 In the former case Mr Justice Donaldson (as he then was) stated: ‘‘The words ‘whether in port or not’ cover the possibility, if such there was, that a bunkering or other berth might be ‘at’ but not ‘in’ the port of Constanza, and also the possibility of any change in the regulations allowing customs entry in the roads.’’

13. [1973] 14. [1989] 15. [1978] 16. [1986]

2 1 1 2

Lloyd’s Lloyd’s Lloyd’s Lloyd’s

Rep. Rep. Rep. Rep.

285. 1. 191. 395.

64

A DVA N C I N G L AY T I M E

Para. 29

The vessel was in Constanza Roads when notice of readiness was given and it appeared that the learned judge considered her to be at, but not in, the port. The case went to the Court of Appeal but no further guidance to this problem materialised in that court. In the later Adolf Leonhardt (see also earlier paragraph 18, above) case Mr Justice Staughton (as he then was) had to decide whether the sellers or the buyers of grain were liable for delay (no berth available) at the Intersection anchorage regarding a vessel bound for Rosario, a port some 200 miles up river from the Intersection; the Intersection was recognised as a waiting area for Rosario as it was also for other ports in the rivers Plate and Parana; the master gave a notice of readiness after he anchored at the Intersection. The sale contract incorporated the Centrocon charterparty terms and in respect of laytime, read: ‘‘time to count . . . WIBON, WIPON, WIFPON [whether in free pratique or not] . . . ’’. Mr Justice Staughton decided that the sellers (standing in the shoes of charterers) had no liability in respect of the delay at the Intersection on the basis that the Centrocon strike clause operated in favour of the sellers as per the binding Court of Appeal decision in The ‘‘Amstelmolen’’17; the cargo could not be loaded by reason of obstructions beyond the sellers/charterers control. Therefore, there was no need for him to make a decision regarding Wipon but he considered this point by way of obiter, as follows: ‘‘The contract in this case does have the words ‘whether in port or not’. Manifestly the effect is to avoid in part the rule that a vessel must have arrived at the port before laytime can commence. But how near to the port must the vessel be, and what hazards can remain to be overcome, when notice of readiness is given? If I had to decide the issue, it would be on the basis that the appropriate waiting places for Rosario are first the roads there, or if they are congested Intersection, or if Intersection is congested, Recalada; and that a vessel obtains no priority until she reaches Rosario Roads. But I have doubts as to the last point. There is scarcely any authority on the words ‘whether in port or not’. With great respect to Mr Justice Donaldson if he intended to deal with the problems, his distinction between being at or in a port is of no assistance to shipowners when there is no waiting area which is even at the port, as for example in the River Weser. Perhaps the phrase ‘whether in port or not’ was not intended to help shipowners in such cases. But the contracts in the present case were concluded a few months after the decision of the House of Lords in The ‘Maratha Envoy’. . . . It appears to me not unlikely that the use of the words ‘whether in port or not’ by these parties, or at least the more general use of those words amongst others followed by these parties, may have been directed at ports with no waiting area within their limits. In point of geographical proximity I therefore prefer Mr. Hallgarten’s solution, which is that the vessel must reach a usual waiting area for the port in question.’’

His inclination to decide that Wipon included the Intersection anchorage (a usual waiting area for Rosario although not the only area, and some 200 miles from the port) ran parallel with his other inclination that the vessel was ‘‘at the immediate and effective disposition of the charterer’’ when she was lying at the Intersection anchorage waiting for a berth. There is no doubt that his lordship took a broad, robust and commercially practical approach to ‘‘whether in port or not’’ and ‘‘at the immediate and effective disposition of the charterer’’ in a berth congestion circumstance; it will be interesting to see what binding precedent eventually emanates from the courts 17. [1961] 2 Lloyd’s Rep. 1.

65

Para. 29

S P E C I A L C L AU S E S R E A R R I V I N G

regarding circumstances like those just described so that the commercial community will know, with more certainty than at present, the full ambit of Wipon in circumstances where a waiting area (not necessarily the waiting area) is some hundreds of miles from the loading/discharging port. For example, in recent times, Nigerian port authorities have insisted that ships anchor at least 160 miles out to sea in order that they be out of the range of pirate boats. Would Wipon bite in those circumstances? The only guidance available from any reported arbitration regarding similar circumstances is that referred to earlier in paragraph 16 (LMLN 143—25 April 1985) where the arbitrators decided that a waiting place some 400 miles distant from the port of destination could not possibly be held to be within the ambit of Wipon. In any event, can it really be said that a vessel is at the immediate and effective disposition of the charterers if it is some hundreds of miles from the loading/discharging area? A relatively recent reported arbitration regarding Wipon is that in LMLN 615—12 June 2003 where the vessel was chartered on an amended Africanphos 1950 form for the carriage of a cargo of phosphate in bulk from ‘‘one good and safe berth always afloat Sfax’’ to ‘‘one good and safe berth always afloat Setubal’’. At 11.50 on Wednesday 5 December, at the end of the vessel’s sea passage to Setubal, the master tendered notice of readiness. The vessel waited outside Setubal Port until 13.20 for a pilot to come on board, and then shifted inwards to Setubal Roads, where she anchored at 15.15 and free pratique was granted 15 minutes later. The vessel then waited until 09.30 on Saturday 8 December for a second pilot to come on board to bring the vessel in to her berth, where she arrived alongside at 11.00, commenced discharge at 08.00 on Monday 10 December and completed at 14.45 the following day. The owners acknowledged that the charter was a berth charter, but they relied (1) on clause 21, which provided that notice of readiness might be tendered whether in port or not (‘‘Wipon’’) and whether in berth or not (‘‘Wibon’’), and (2) on clause 45, which stated that ‘‘time lost in waiting for berth to count as laytime provided that all excepted periods for loading/discharging itself would also apply’’. As to clause 21, the owners said that the effect of that provision was that the vessel might tender notice of readiness even though not actually in the port of Setubal itself at the time. That was because the parties had agreed to shift, and allocate to the charterers, the risk of delay from congestion which would otherwise be for the owners’ account under the berth terms of the charterparty. On completion of the sea voyage and arrival at Setubal, the vessel had been unable to proceed immediately to berth due to port traffic/congestion and, thus, notice of readiness might be tendered when the vessel got as near as she could proceed to the berth. The owners said that when the notice of readiness was tendered the vessel was in all respects at the immediate and effective disposition of the charterers in that she could have proceeded to berth without any significant delay if the charterers had called upon her to do so. That was the case even if the vessel had not then reached what could be defined as the usual waiting place for vessels waiting to berth at Setubal. The charterers contended that the notice of readiness was invalid. They said that notice could only be given upon arrival at the usual waiting place at which the vessel 66

A DVA N C I N G L AY T I M E

Para. 30

could be described as an ‘‘arrived ship’’. The designated waiting place at Setubal, they said, was the inner roads at which the vessel anchored at 15.15 on 5 December. It was held that, by comparison to the expression Wibon there were surprisingly few cases that had considered the meaning of the term Wipon. Parties had a tendency to attempt to construe the expression too broadly. Whilst it might extend the range of places at which notice of readiness might be tendered, it did not do so at the expense of the paramount requirement that the owners should have done as much as possible to place the vessel at the disposal of the charterers. In the case of a berth charter, that at very least required that the vessel should have completed the sea leg of the voyage and reached a point as near as possible to the loading or discharge berth. At ports where that point was outside port limits, the Wipon provision would assist the owner by allowing the vessel to tender notice of readiness there. Where, however, as at Setubal, the vessel merely paused on its passage in to the port or berth, for example, to pick up a pilot, the requirements of the provision would not be satisfied. Although no evidence on the point had been put before the tribunal, the indications were that the requirements of the Wipon provision were not satisfied. It seemed clear that the master had tendered notice of readiness as soon as the vessel reached the pilot station outside the port of Setubal. The vessel had only waited there for 1 hour 30 minutes before a pilot had come out to take the vessel to the inner anchorage inside the port. That indicated persuasively that the pilot station was merely a transit point on the voyage and did not properly represent the point at which the carrying leg of the voyage came to an end and the vessel was as near as possible to the berth and at the immediate and effective disposition of the charterers. That point was the inner anchorage where the vessel had arrived at 15.15 on 5 December. That was the usual waiting place for a berth at Setubal. Accordingly, notwithstanding the Wipon provision, the master was only entitled to tender notice of readiness on arrival at the inner roads and no earlier. Thus, the notice of readiness tendered by the master was invalid and ineffective to start laytime counting. However, the owners had not relied merely on clause 21. They had also relied on the time lost waiting for berth provision of clause 45, which was a rider clause, and in which they were successful, see later paragraph 38. 30. Sometimes owners try to advance the commencement of laytime by more complicated clauses than those referred to in paragraphs 25–29, above. For example, in The ‘‘Freijo’’18 the charterparty contained (inter alia) the following clauses: ‘‘6. Time to count from after the ship has reported as ready and in free pratique whether in berth or not . . . 26. If through congestion at the port of discharge and loading steamer is kept waiting off the port lay days are to commence to count as per Clause 6 but not until 36 hours from arrival . . . ’’

18. [1978] 2 Lloyd’s Rep. 1.

67

Para. 30

S P E C I A L C L AU S E S R E A R R I V I N G

The vessel anchored at the discharge port pilot station but could not move into a berth because of congestion. Free pratique could not be granted until the vessel moved into the inner anchorage. The charterers contended that when clauses 6 and 26 were taken together it was a condition precedent that, before laytime commenced, the ship had to be reported and to have obtained free pratique. In the High Court Mr Justice Donaldson (as he than was) held that: (1) under clause 6, time would only run if (a) the vessel was within the port, (b) she had reported, (c) she was in every respect ready to load and (d) she was in free pratique; and in this case when the vessel lay at the pilot station anchorage she was not within the port nor was she in free pratique and time therefore could not begin to run under clause 6; (2) clause 26 provided alternative criteria which if met caused laytime to commence, i.e. the vessel had arrived off the port of Louren¸co Marques and she was kept waiting there by congestion at the port; and laytime began to count 36 hours from arrival if those criteria were met; (3) the phrase ‘‘clause 6’’ in clause 26 governed the word ‘‘count’’ and not the words ‘‘commence to’’; and viewed as a commercial point, the parties had contemplated two possibilities (a) that the vessel might sail straight into port and thus comply with clause 6 and time would begin to count at most 24 hours later; (b) that the vessel might be kept waiting outside the port due to congestion and the first 36 hours of delay but no more was to be to the owners’ account; (4) it was the obligation of the shipowner to have the vessel ready to load cargo including having the vessel in free pratique as soon as the charterer was ready to load and if he was in breach of this obligation the charterer would have a cross-claim which would extend the laytime or extinguish the demurrage for the period of delay. Judgment was given for the owners. The charterers appealed and, in dismissing the appeal, the Court of Appeal held that: (1) on the construction of clauses 6 and 26, the arbitrator and the learned judge were right in the conclusion which they reached that reporting as being ready and obtaining free pratique was not a condition precedent to the operation of clause 26 so as to make laytime count long before the vessel got to the inner anchorage and could give the relevant notice under clause 6; (2) it was plain that the burden of waiting time through congestion, as a result of which the ship could not get to the inner anchorage to commence loading was by clause 6 cast upon the charterers; (3) the parties had chosen to advance the time for the commencement of laytime and therefore laytime commenced to count notwithstanding that the ship had neither reported nor was ready nor had received free pratique under clause 6. The Freijo case18 is a good illustration of how a departure from simple straightforward wording can lead to complications with attendant high level costs—the 68

A DVA N C I N G L AY T I M E

Para. 30

dispute resulted in an arbitration, a High Court action and a hearing in the Court of Appeal. Another example of special wording, intended to deal with berth congestion, and which finished up in the courts, is that found in The ‘‘Puerto Rocca’’ (see paragraph 20 above for the facts and decision); it started as an arbitration but finished up in the High Court. In a much later reported London Arbitration LMLN 434—22 June 1996 the vessel was chartered on the C (Ore) 7 Mediterranean Iron form for a voyage to carry some 25,000 metric tons of bulk sulphur from Aqaba to Constanza. Disputes arose between the parties regarding the calculation of laytime and demurrage at both loading and discharging ports. The dispute in respect of the loading port is not relevant to the present text although it is relevant to the aspect of an implied term of reasonable despatch, see later paragraph 56 et seq. The charterparty provided: Clause 6 ‘‘Time for loading to count 24 hours after the ship is reported ready, and in free pratique and notice accepted (whether in berth or not), Fridays, Holidays excepted and for discharging 24 hours after ship is reported and in every respect ready, and in free pratique, and notice accepted whether in berth or not Sundays, Holidays excepted. Steamer to be reported during official hours only . . . ’’ Clause 25 ‘‘Waiting time for berth to count as loading/discharging time subject to all exceptions agreed for laytime under this CP.’’ Clause 26 ‘‘If through congestion at the port of discharge steamer is kept waiting on the roads laytime to commence to count as per clause 6, but not until 36 hours from arrival (Sundays and Holidays excepted).’’

[Typewritten amendments shown in italics.] At the discharge port, notice of readiness was given on 31 July. Due to congestion the ship did not berth until 14 August. The notice was not accepted until 15 August. The charterers accordingly argued that time did not start counting until 08.00 hours on 16 August, whereas the owners said that it started on 1 August. It was held that the position at the discharge port was not entirely the same as it was at the loading port, in particular because it was not until the ship berthed (at 21.15 hours on 14 August) that she could obtain customs clearance and free pratique, which she did at 22.35 hours that day. It was not, accordingly, until that time that the requirements of clause 6 (that she be ‘‘reported and ready, and in free pratique’’) could be said to have been satisfied. In that context, though, clauses 25 and 26 of the charter were relevant. The problem that arose when, as so often was the case, a ship could not comply with clause 6 requirements until she was berthed, had been ventilated in arbitrations on many occasions over the years. It should have been put to rest, as the point had been clearly decided by the Court of Appeal in The ‘‘Freijo’’,18 a decision on the form of charter in issue in the present case. The Court of Appeal held that reporting and being ready and obtaining free pratique was not a condition precedent to the operation of clause 26, so that laytime could count before the ship got to the inner anchorage and gave the relevant notice under clause 6. If there was any room left for doubt, it was removed by clause 25 of the present charter. 69

Para. 30

S P E C I A L C L AU S E S R E A R R I V I N G

The above-mentioned cases and arbitration illustrate the problems which may evolve where parties depart from a simple approach for advancing the commencement of laytime (by incorporating more complicated clauses) in circumstances where vessels have to wait off a port for reasons such as congestion. 31. The North American Grain charterparty came into existence in 1973 and has been widely used in the grain trade since that time; it was amended in 1989 particularly in relation to the commencement of laytime/waiting for a berth. In the 1973 edition of the port charterparty the clause (17b) which may practically advance the commencement of laytime if the vessel cannot enter the port because of berth non-availability reads, as follows: ‘‘(b) Waiting for Berth If the vessel is prevented from entering the commercial limits of the loading/discharging port(s) because the first or sole loading/discharging berth or a lay berth or anchorage is not available, or on the order of the Charterers/Receivers or any competent official body or authority, and the Master warrants that the vessel is physically ready in all respects to load or discharge, the time spent waiting at a usual waiting place outside the commercial limits of the port or off the port shall count against laytime. Such laytime shall count from vessel’s arrival at such usual waiting place and will continue to run. . . . If after entering the commercial limits of the loading port, vessel fails to pass inspections . . . and requires more than four hours SHINC to pass such inspections from the time of initial failure to pass the time spent waiting outside the commercial limits of the port as per lines shall not count . . . but if said vessel passes inspections within said four hours any delay in commencing loading directly attributable to its failure to pass initial inspections shall not count as laytime or time on demurrage.’’

The above clause has been the subject of arbitrations in London, one of which was of interest in respect of the application of the clause in circumstances where the four-hour period came into play; that arbitration also has relevance to Chapter 4 (readiness). The events took place in 1983, the arbitration occurred in 1985 and it was reported in LMLN 299—20 April 1991. The vessel, an OBO, was chartered on 26 April for the carriage of a cargo of grain from a Mississippi port. She had previously been carrying a cargo of oil and had to clean and ballast three holds in order to reach the load port. On 3 May the charterers informed the owners that there was an anticipated berthing delay of three to four days. On 5 May, the vessel having completed cleaning of the holds, the master advised the charterers that the vessel was ready to load. The vessel anchored at an anchorage which (as the arbitrators found) was a usual waiting place for vessels loading at the load port although it was about 42 miles down-river of the loading port, Ama. As at 5 May the earliest berthing date was put at 11 May. On 6 May, six holds were passed for loading, at the anchorage, by NCB and USDA inspectors. Holds 3, 5 and 7 were in ballast. The holds passed by the inspectors could have lifted the intended cargo, but shortly after the inspection, officials at the elevator refused to accept a notice of readiness stating that No. 5 hold was scheduled for loading and had not been inspected and passed. The vessel deballasted No. 5 hold, and that hold was inspected and passed by NCB and USDA inspectors on 7 May. The deballasting had taken longer than four hours. A notice 70

A DVA N C I N G L AY T I M E

Para. 31

of readiness was accepted by the charterers on 7 May. The vessel had to reballast No. 5 hold to pass under a bridge for her eventual passage up-river to the load port on 14 May. The vessel was at the anchorage for the whole of the period from 5 May to 14 May. During that time no loading berth was available for the vessel at the load port. The laytime allowed under the charterparty for the loading of cargo was five weather working days of 24 consecutive hours, Sundays and holidays excepted. The owners claimed that the whole of the time waiting for berth counted as laytime. They relied on the above clause. The charterers submitted that the master’s warranty required to be given under clause 17(b) went to the readiness of the vessel to load, and that the validity of the warranty was dependent upon whether more than four hours was taken at a later stage to obtain the NCB and USDA certificates. Furthermore, time at the anchorage had to be spent waiting for berth. That was not so if time was utilised obtaining NCB/USDA certificates and ballasting cargo spaces prior to the inspection of such. The owners contended that the scheme of clause 17 was to allow time waiting for a berth to score as laytime and that, since the vessel was always outside the commercial limits of the load port during relevant times, the third sentence of clause 17(b) had no applicability. The vessel passed all inspections before entering the commercial limits so that, in the present case the inspections had no relevance to waiting time and the counting of such against laytime. It was held that the evidence showed that the vessel was prevented from entering the commercial limits of the load port because the up-river anchorages were congested. The anchorage where the vessel waited was widely known as one of the usual waiting places for vessels loading grain at the load port. Clause 17(b) did not state the usual waiting place, but a usual waiting place. There was no failure by the master when he made his warranty regarding the readiness of the vessel on 5 May. At that time there was sufficient space available on the vessel, in the required condition (as proved by the inspections on 6 May), for the intended cargo. It was sensible and safe for the master to retain ballast in No. 5 hold. Spaces used for necessary ballasting should not come into the reckoning regarding the master’s warranty under clause 17(b). There were circumstances where vessels like OBO’s had to retain ballast in cargo spaces at anchorages for safety reasons, and clause 17(b) could become unworkable if the master’s obligation was to have such cargo spaces pumped out and passed within four hours of an inspection by NCB/ USDA officials. It made sense that the warranty was satisfied even if some cargo spaces were ballasted. When the charterers gave instructions that No. 5 hold should be inspected and passed there were no problems in that respect. All that was required was to deballast the hold and allow the officials to reboard the vessel and inspect a hold which had been properly cleaned. If the charterers had made their position clear regarding No. 5 hold at an earlier time the master might have been able to have arranged matters so that that hold would have been available for inspection on the morning of 6 May, along with other cargo spaces. 71

Para. 31

S P E C I A L C L AU S E S R E A R R I V I N G

Accordingly, the master’s warranty on 5 May was valid for the purpose of clause 17(b). Had the warranty not been valid, the charterers might have had a remedy in damages for any loss or damage flowing from the breach of warranty. The whole of the time at the anchorage was time spent waiting for a berth and should count against laytime. During part of that time inspections and deballasting of cargo spaces were taking place, but that did not make any difference. The essence of the matter was that the vessel was waiting for a berth and clause 17(b) operated in favour of the owners. The clause was designed to put the risk of waiting time on the charterers, but the charterers did have safeguards if a vessel’s cargo spaces were not physically ready when inspected inside the commercial limits of the loading port. In fact, clause 17(b) could operate in a draconian manner against owners as, for example, they could lose the whole benefit of time waiting for a berth (which could be several weeks) if remedial measures, after an inspection, took longer than four hours. In the present case any remedial measures were completed before the vessel entered the commercial limits of the load port so that they became irrelevant in the light of the third sentence of clause 17(b). Although the arbitration was decided in favour of the owners, on its particular facts, it emphasised the dangers to owners of the relatively short time (four hours) for passing inspection which, as is well known, can be very rigorous in many loading ports. The draconian aspect of this part of the clause was specifically mentioned by the arbitrators. The clause is also unsatisfactory in that it refers to the ‘‘commercial limits’’ of the port, a phrase which, it was thought, went out of vogue with the Oldendorff decision. While the Norgrain 1973 may still be used by some organisations it has been replaced by the Norgrain 89 charterparty which radically alters clause 17(b) regarding the commencement of laytime in the context of waiting for a berth. The new clause (already referred to earlier in paragraph 17), identified as 18(b) rather than 17(b), reads: ‘‘(b) Waiting for Berth Outside Port Limits If the vessel is prevented from entering the limits of the loading/discharging port(s) because the first or sole loading/discharging berth or a lay berth or anchorage is not available within the port limits, or on the order of the Charterers/Receivers or any competent official body or authority, and the Master warrants that the vessel is physically ready in all respects to load or discharge, the Master may tender vessel’s notice of readiness, by radio if desired, from the usual anchorage outside the limits of the port, whether in free pratique or not, whether customs cleared or not. If after entering the limits of the loading port, vessel fails to pass inspections as per Clause 18(e) any time so lost shall not count as laytime or time on demurrage from the time vessel fails inspections until she is passed, but if this delay in obtaining said passes exceeds 24 running hours shex all time spent waiting outside the limits of the port shall not count.’’

The 1989 version is a vast improvement on the 1973 version since it has replaced ‘‘commercial limits’’ by ‘‘port limits’’, thus avoiding disputes as to the meaning of ‘‘commercial limits’’, and it has increased the four-hour period for passing inspections to 24 running hours Sundays and holidays excepted: however, if the 24-hour period is exceeded then none of the waiting time outside the port limits will count so that some harshness remains. The rationale for the four hours harshness in the 1973 charterparty was that if more than that time was required for passing inspections the master’s unverified representation that the vessel was ready to load or 72

A DVA N C I N G L AY T I M E

Para. 33

discharge might prove inaccurate; the four hours part of the clause was intended to be a deterrent to the making of such misrepresentations and thus be a safeguard to charterers. In practice it was found that the four hours time limit was too short because surveyors/inspectors might not be readily available at all times; thus, while the rationale still remains, its harshness has been ameliorated by the 24-hours period and is much more reasonable for owners of vessels. 32. There are a good variety of clauses in existence in the dry bulk cargo world which are tailor made for advancing the commencement of laytime in circumstances of berth congestion and a vessel having to wait outside port limits apart from those already referred to. A good clause for owners which is relatively simple is the Baltic Conference General Waiting for Berth Clause, 1968 (‘‘Genwait’’), which reads: ‘‘(a) If the loading berth is not available on Vessel’s arrival at or off the port of loading or so near thereunto as she may be permitted to approach, the vessel shall be entitled to give notice of readiness on arrival there with the effect that laytime counts as if she were in berth and in all respects ready for loading provided that the Master warrants that she is in fact ready in all respects. Actual time occupied in moving from place of waiting to loading berth not to count as laytime. If after berthing the Vessel is found not to be ready in all respects to load, the actual time lost from the discovery thereof until she is in fact ready to load shall not count as laytime. (b) If the discharging berth is not available on Vessel’s arrival at or off the port of discharge or so near thereunto as she may be permitted to approach, the Vessel shall be entitled to give notice of readiness on arrival there with the effect that laytime counts as if she were in berth and in all respects ready for discharging provided that the Master warrants that she is in fact ready in all respects. Actual time occupied in moving from place of waiting to discharging berth not to count as laytime. If after berthing the Vessel is found not to be ready in all respects to discharge, the actual time lost from the discovery thereof until she is in fact ready to discharge shall not count as laytime.’’

The clause allows laytime to commence outside of port limits in a port charterparty because of the wording ‘‘at or off the port or so near thereunto as she may be permitted to approach’’; thus it would appear to cover circumstances of berth congestion and a vessel waiting for a berth up to hundreds of miles from her berth because she is not permitted to proceed further, such as are encountered in respect of ports in the rivers Plate and Parana and waiting places at the Intersection/Zona Comun. The clause is also advantageous to an owner in that it does not allow a charterer to contend that laytime does not commence because the vessel was not ready to load/discharge cargo when she arrived of the port and the notice of readiness was tendered (which argument may be available to a charterer in a ‘‘time lost waiting for a berth to count as laytime’’ clause; see paragraph 39, below on this aspect); the clause is quite specific in that only the actual time lost because of the vessel not being ready is not to count as laytime. 33. There are other clauses in use which may have the effect of advancing the commencement of laytime but they may also have the effect of delaying it; for example ‘‘time to commence on being reported at Custom House’’ may allow laytime to begin, in the case of a port charterparty, when a vessel waits outside the 73

Para. 33

S P E C I A L C L AU S E S R E A R R I V I N G

port but can be reported at the Custom House while at that waiting place. In the Scottish case Horsley Line Ltd. v. Roechling Bros19 a charterparty for the carriage of pig-iron from Middlesbrough provided that the ship should ‘‘proceed to Savona or Genoa, as ordered . . . and there deliver the same . . . Time for discharging to commence on being reported at the custom house.’’ The ship anchored in the Savona Roads and was reported to the Custom House on the same day. The roads were the usual place for ships to lie while the harbour was full. The parties agreed that the roads were outside both the geographical limits of the port and what was known commercially as the port. It was not the custom to discharge in the roads. There was a delay before the ship could get into the harbour, and a further delay before she could berth there. The shipowners claimed demurrage, contending that by the custom of the port ships were allotted berths according to the order of reporting on arrival in the roads. The charterers said that until the ship got within port limits she was not an arrived ship. The Court of Session held that time began when the ship was reported, it being put by Lord Ardwall: ‘‘ . . . although when there is no express stipulation on the subject in the contract, lay-days will not be held to commence to run till the ship becomes what has been called an ‘arrived ship’, yet the parties may contract otherwise, and as in this case fix the date of arrival in the Harbour roads as the commencement of the lay-days, thus throwing on the charterers the risk of the vessel failing to get a harbour berth for some time after arrival in the roadstead off the port.’’

Conversely, a ‘‘time to commence on being reported at Custom House’’ clause will delay the commencement of laytime in the case of a port charterparty where the vessel gets within the port but cannot report at the Custom House until she berths, as has been and still is the circumstance at some ports; see The ‘‘Shackleford’’20 where the clause was similar in that, ‘‘notice of readiness must be delivered . . . vessel also having been entered at the Custom House . . . ’’. The vessel reached the discharge port destination in the port charterparty, anchoring at the usual waiting place within the port limits, but she could not be entered at the Custom House until she berthed, this being a requirement of the port. It was held that the vessel had to be entered in the Custom House before a notice of readiness could be given. For completeness it is mentioned that the case was decided in favour of the owners on other grounds, see later Chapter 6.

SPECIFIC SUMS FOR WAITING TIME 34. With one exception (see below in this paragraph) intrinsic problems do not appear to have arisen regarding clauses which spell out that specific payments have to be made to an owner for the time when his vessel waits off a port. In practice, such clauses are not used that frequently but, when they are, are usually worded, ‘‘all waiting time to be paid for at $——per day’’ or ‘‘all waiting time to be paid for at the demurrage rate’’. The Austral and Austwheat charterparties are examples of 19. 1908 S.C. 866. 20. [1978] 1 Lloyd’s Rep. 191.

74

S P E C I F I C S U M S F O R WA I T I N G T I M E

Para. 34

this approach, the wording in such being: ‘‘Provided always that if such discharging place is not immediately available, demurrage in respect of all time waiting thereafter shall be paid at the rate——.’’ The case which provided the exception referred to above was The ‘‘Werrastein’’.21 The vessel was chartered for a voyage from Sydney, Australia, to Hull on terms (inter alia) for discharge at any customary dock, wharf or pier, as ordered by the charterers, plus the proviso cited above. The vessel was intended for the King George Dock at Hull and had to anchor off Spurn Head which was outside the geographical, legal and physical fiscal limits of the port of Hull, which was a customary anchorage for vessels awaiting entry to the docks. The vessel had to wait for just over seven days before moving into a dock and the owners claimed for demurrage in respect of this period: however, the charterers contended that the proviso of the charterparty had no application until the vessel was ‘‘an arrived ship’’, that is when she got within the port limits. It was held by Mr Justice Sellers (as he then was) that the proviso dealt with waiting time due to the discharging place being unavailable before laytime began to run and provided for just such an occasion as had arisen in the circumstances where the vessel had reached a recognised waiting place for the port and could do no more than be ready and available to discharge. He had this to say: ‘‘The vessel had reached the appropriate waiting place for the port. She was ready to discharge. She had to wait there because no berth was available. She had, therefore, in the course of her voyage to Hull reached the place where she had to stop until a berth was available. The considerations which apply to a vessel which has to wait are obviously different from those which apply to a vessel which has to load or discharge or may often be so. A vessel cannot load or discharge until she is in the position properly designated for the purpose. ... In my view, the proviso deals with waiting time (due to the discharging place being unavailable) before lay-days commence to run, and provides for just such an occasion as has arisen here. The loss due to waiting for discharge has to fall on one of the parties to the adventure and, of course, depends on the terms of their bargain; but provided the vessel has reached the recognised waiting place for the port, she can do no more than be ready and available to discharge. The cargo-owner has the selection (within the terms of the contract) of the place of discharge. It does not seem wholly inappropriate that if loss by waiting for a berth is incurred it should fall on the charterers or consignees. The ship has to face the hazards of the voyage whereby she may be delayed by storm, fog, tides and many other events. But for Clause 2, the waiting at the anchorage would likewise have fallen on the ship, for it would seem that the earliest time, on any view, that she could have become an arrived ship so that time for discharge would run against the charterers or their agents would be when she entered the King George Dock, and she could not have done that before she in fact did enter.’’

This decision made sense and the judge in question was surely right to take a fairly broad approach to the matter. It seems that a similar approach could have been taken in The ‘‘Seafort’’22 although it is conceded that the word ‘‘arrival’’ in the latter case allowed a more restricted approach than that in The ‘‘Werrastein’’.21 One of the advantages of this type of clause (which strictly speaking does not directly concern the commencement of laytime) is that the whole of the waiting time scores up, at the demurrage or other specified rate, for the benefit of the owner 21. [1956] 2 Lloyd’s Rep. 210. 22. [1962] 2 Lloyd’s Rep. 147. See para 27, above.

75

Para. 34

S P E C I A L C L AU S E S R E A R R I V I N G

whereas, if the parties have agreed the kind of waiting clause which triggers the laytime clock, the laytime exceptions will be applicable to the waiting time.

TIME LOST WAITING FOR A BERTH INCLUDING THE DARRAH DECISION 35. The much-used Gencon charterparty contains the following printed words: ‘‘time lost waiting for berth to count as loading/discharging time’’. Some other printed forms have similar words and the words are frequently incorporated into charterparties by way of type-added clauses. Important judgments concerning these words took place between 1955 and 1976. The fortunes of owners and charterers ebbed and flowed through these judgments, charterers for some years suffering considerable financial hardship because of the manner in which the waiting time was counted. The House of Lords canvassed the subject words in The ‘‘Darrah’’23 and, to commercially minded persons, remedied what was an unjust position. Without going into too much detail, it is worth looking at the judgments in three previous cases in order to see how the judges had taken the wrong road prior to the Darrah decision.23 In The ‘‘Radnor’’24 the vessel was chartered to carry soya beans from ‘‘one safe berth Dairen (Manchuria)’’ to Madras and Calcutta. The charterparty provided, by clause 17, that lay days should begin 24 hours after notice of readiness to load had been given. Clause 5 stated: ‘‘Time lost in waiting for berth to count as loading time’’. When the ship anchored in the quarantine anchorage at Dairen customs and port officials sealed the radio, took away a number of ship’s documents, and banned communication with the shore. Seven days later the ship was taken to a berth (though not loaded there) and on the following day the master was able to give notice of readiness. The Court of Appeal held that the shipowners were entitled to count the eight days although notice had not then been given. Mr Justice Singleton said: ‘‘The clause as to time wasted is independent of clause 17. It is inserted to avoid questions which have arisen in many cases which have been before the courts. The risk of time wasted in waiting for a berth is put upon the charterers whose agents are, or ought to be, familiar with local conditions. The clause might have provided simply that time lost in waiting for a berth should be paid for at the rate of £600 a day. As drawn, it gives the charterers an advantage, for they may save on loading time some, or all, of the time lost in waiting for a berth. The time lost is to count as, or to be added to, loading time in order to ascertain the position between the parties. . . . Upon the terms of this contract it is clear, I think, that the risk of time lost through waiting for a berth is undertaken by the charterers, and there is nothing which deprives the owners of the right which, on the face of the document, is given to them. Again, it appears to me that the master could not give the notice envisaged in clause 17 of the charterparty until the vessel

23. [1976] 2 Lloyd’s Rep. 359. 24. [1955] 2 Lloyd’s Rep. 668.

76

T I M E L O S T WA I T I N G F O R A B E RT H

Para. 35

arrived at the nominated berth. Upon the charterparty, she had to proceed to ‘one-safe berth Dairen’. . . . In my opinion, the provision as to notice in clause 17 does not affect the question arising under clause 5 of the charterparty, and the lack of a notice under that clause does not avoid the owners’ rights in regard to time lost through waiting for a berth. The notice is something which has to be given for the purpose of calculating lay-days. That calculation is independent of the provision in clause 5, though the one has to be added to the other to reach the true position under the contract. There was certainly no obligation on the master to give a notice under clause 17 when the vessel arrived at—or perhaps I should say reached—the port of Dairen. The charterers knew of her arrival and the next step was for them to nominate the berth to which they wished her to go. If they failed to do so within a reasonable time, and without any adequate explanation, time was lost by the ship in waiting for a berth. It was to meet such a case that the words in clause 5 were inserted in the charterparty.’’

Therefore it was decided that where the laytime provisions are in a separate clause to the time lost waiting for berth provisions, the time lost provisions are independent of the laytime provisions and are, therefore, not to affect the independent time lost code. The Gencon draftsman must have turned in his grave at this adumbration since, in commercial reality, the two clauses are not really independent. Simply for convenience and to incorporate longer and more complicated laytime provisions into the contract the provisions are not inserted in the printed clauses 5 and 6 of the Gencon charterparty but are type-added with a reference in clauses 5 and 6 as to where they can be found in the type-added clauses of the charterparty. It is strange that a minor technicality such as this should have persuaded the Court of Appeal in The ‘‘Radnor’’24 to conclude that the time lost waiting for berth provisions in the charterparty were independent from the laytime provisions; it is likely that bona fide motivation of the Court of Appeal led it to the above conclusion so that compensation could be given to owners for the waiting time of their vessels when compensation could not be given because of the strict interpretation of an arrived ship vis-`a-vis the commercial area of a port and the tendering of notice of readiness of the vessel. It is also strange that the court should think that the words loading and discharging time meant something different to laytime; to commercial men the terms are synonymous. Whatever the motivation, the result was to allow owners to score up all the time the vessel was waiting for a berth if the vessel was not an arrived ship. The laytime exceptions were not applied and this resulted in owners being better off than if the vessel had been an arrived ship. This led to owners striving to get time lost waiting for berth provisions into charterparties other than the Gencon (where they are in the printed form). It is ironic that while the courts took a realistic view of the ‘‘arrived ship’’ concept they took an over-liberal approach when considering the ‘‘time lost waiting for berth’’ provisions in a charterparty. The injustice of the application of The ‘‘Radnor’’24 was emphasised in the case of The ‘‘Vastric’’.25 The vessel arrived off the port on a Saturday afternoon and did not berth until Monday morning; the whole of the weekend scored up as time lost waiting for a berth even though the period was excepted under the laytime provisions. In so deciding Mr Justice McNair expressed his reservations regarding the 25. [1966] 2 Lloyd’s Rep. 219.

77

Para. 35

S P E C I A L C L AU S E S R E A R R I V I N G

effects of the Court of Appeal’s decision in The ‘‘Radnor’’ but felt that he had to apply it because it was binding on him. The illogicality of the decision can be seen when it paid owners for their vessels to arrive off a port on a weekend, rather than during a working period when the vessel might well berth immediately. The result was that owners often got compensated for time which, otherwise, would not be paid for by the charterers. A mitigating factor, as far as charterers were concerned, was that in The ‘‘Vastric’’25 the time lost waiting for a berth was added at the end of the laytime calculation. At least this had the effect, in many cases, of not allowing the time lost waiting for a berth to exhaust the laytime and put the vessel on demurrage before the vessel berthed. However, as far as charterers were concerned, the situation was to deteriorate further with the decision in The ‘‘Loucas N’’.26 36. In The ‘‘Loucas N’’ it was decided by the High Court that time had been lost at both loading and discharging ports in waiting for a berth and the time lost provisions in clauses 5 and 6 of the charterparty (time lost in waiting for berth to count as loading/discharging time respectively) were independent of the strike clause in the charterparty (which would otherwise have been effective at the discharging port to stop laytime commencing). In respect of how to apply the waiting time in the compilation of time sheets the following questions were posed: (i) before the commencement of loading or discharge . . . at the port for a berth in which the vessel was waiting; (ii) after the conclusion of loading or discharge at that port; (iii) after the conclusion of loading at the last loading port (where the time is lost waiting for a berth at a loading port) and at the conclusion of discharge at the last discharging port (where the time is lost waiting for a berth at a discharging port); (iv) after the conclusion of discharge at the last discharging port; (v) in some other, and if so what, manner. Mr Justice Donaldson (as he then was) decided, regarding the above, that time lost waiting for a berth should be applied moment to moment as it occurred and it has been the practice to follow this approach. This exacerbated the position for charterers as compared with the Vastric decision25 since it could lead to a situation where the time lost waiting for a berth exceeded the laytime thus putting the vessel on demurrage before she berthed, and this by applying all of the time lost waiting for a berth to the actual laytime. Thus, seven days of straight time waiting for a berth put the vessel on demurrage for one day if the laytime allowed was six weather working days, holidays and Sundays excepted; the obvious advantage of the decision to owners can be seen at a glance. To add insult to injury, vis-`a-vis charterers, the High Court judge went on to state by way of obiter: ‘‘The fact that a ship is or is not an arrived ship is totally irrelevant to the question of whether time lost waiting for berth is to count . . . I have already pointed out that a situation can arise 26. [1970] 2 Lloyd’s Rep. 482.

78

T I M E L O S T WA I T I N G F O R A B E RT H

Para. 37

in which both the laytime and the time lost provisions are operative. This occurs if a ship is employed under a port charterparty and lies within the commercial area of the port whilst waiting for berth. In such a case the laytime provisions can be ignored so long as the ship is waiting for a berth, for the same moment of time cannot count twice. Once the waiting time is over it is necessary to look again at the laytime provisions, if the ship is not already on demurrage, in order to see whether, although time is no longer counting by virtue of being lost in waiting for a berth, it is then counting as loading or discharging time properly so called.’’

This obiter was, inferentially, approved by the Court of Appeal,27 and applied in the shipping world until the 1976 decision in The ‘‘Darrah’’.28 The effect was that (inter alia) if the vessel waited for a berth, in a position where she was an ‘‘arrived ship’’, the notice time was used up so that when the vessel moved to a berth the time after the completion of shifting to a berth scored up immediately, and without reference to the notice time in the charterparty, assuming, of course, that the notice of readiness which was given originally was good in all respects. To put it in another way, the vessel arrives in the port and waits for a berth so that the time lost waiting for a berth provision operates; the laytime provision also operates so as to commence laytime but laytime does not run (in view of the time lost provision taking priority), but simply remains inchoate until the vessel completes shifting to a berth whereupon the laytime clock is triggered off so as to score against the laytime remaining after the deduction from the laytime allowed of the time lost waiting for a berth. The injustice to charterers is easily manifested. The result of the Loucas N decision29 was that owners won hands down in cases where there was time lost waiting for berth provisions in the charterparty. If the vessel had not become an ‘‘arrived ship’’ when waiting for a berth all the time scored up without exceptions, as it did also even in cases where the vessel became an ‘‘arrived ship’’. In both kinds of situation the owners were compensated for time which they would not normally be compensated for (Sundays, holidays, etc.) without a time lost waiting for berth provision. To this extent, at least, the Loucas N decision29 was unfair as well as commercially unrealistic. In the latter type situation (vessel arrived and waiting for berth) the result could be grossly unfair in circumstances when the laytime was swallowed up by the time lost waiting for a berth thus denying the charterers any benefit whatsoever regarding the notice time. 37. It is ironic that the extension of the ‘‘arrived ship’’ concept by the Johanna Oldendorff decision30 (an improvement to owners) did not benefit charterers in cases where the charterparties contained ‘‘time lost waiting for berth’’ provisions. It appeared just that laytime exceptions should be applied to the time lost waiting for berth provisions but, unfortunately, the Johanna Oldendorff case30 was only concerned with the arrived ship concept and gave no thought whatsoever to the law in respect of time lost waiting for a berth.

27. [1971] 28. [1976] 29. [1970] 30. [1973]

1 2 2 2

Lloyd’s Lloyd’s Lloyd’s Lloyd’s

Rep. Rep. Rep. Rep.

215. 359. 482. 285.

79

Para. 37

S P E C I A L C L AU S E S R E A R R I V I N G

Of course, a court will only answer the question put to it and unless many parties join together and put general principles to the courts on a consolidated basis, the law tends to develop piecemeal. This is unfortunate since it can lead to unsatisfactory law if problems, which are intrinsically interrelated, are taken in isolation. There was a strong argument that, when The ‘‘Johanna Oldendorff’’30 went to the House of Lords, the highest court in the land should also have considered the time lost waiting for a berth aspect but it did not do so. Luckily, only a few years passed between the Oldendorff decision30 and that of the House of Lords in The ‘‘Darrah’’.31 Before passing to the Darrah decision,31 it is worth mentioning that, during the period from 1970 to 1976 (from the Loucas N29 to the Darrah decisions), charterers must have paid out many millions of dollars demurrage over and above that which would have been paid if the charterparty exceptions had been applied to the time lost waiting for a berth when a vessel arrived at or off the port. 38. Turning to the Darrah case itself, the vessel was chartered on the Gencon form for a voyage to Tripoli, Libya. The printed clause had been amended so that it read ‘‘time lost waiting for berth to count as laytime’’ instead of the printed ‘‘time lost waiting for berth to count as discharging time’’. The vessel anchored in Tripoli Roads, where she was within the port and thus an arrived ship on 2 January, and gave a notice of readiness. She did not berth until 9 January because of berth congestion. The owners contended that the whole of the waiting time should score up with the effect that they should be entitled to 14 days demurrage; the charterers argued for the laytime exceptions to be applied to the waiting time with the result that the owners were entitled to demurrage for only just under four days. The leading maritime arbitrator of the day, Cedric Barclay, took a bold and perhaps heretical approach in deciding the matter in favour of the charterers whereby the exceptions applied to the waiting time. Like most other maritime arbitrators of the time he felt that the Loucas N decision was unfair and commercially wrong and took the bull by the horns in not following it. His award was in the form of a special case and it was set down in the courts. In the High Court32 Mr Justice Ackner (as he then was) reversed the arbitrator’s decision, deciding that where time was lost waiting for a berth all the time so lost was to count whenever and wherever the waiting place and the laytime exceptions only operated once the discharging berth was ready for the vessel. In other words, he applied the decisions set out earlier in paragraphs 35 and 36. His decision was in turn reversed by the Court of Appeal33 where it was held, unanimously, that where a ship was an ‘‘arrived ship’’, as in the case in question, and she was waiting for a berth the laytime provisions applied so that laytime exceptions applied to the time lost waiting for a berth. The case then went to the House of Lords34 where the Court of Appeal’s decision was upheld, on different reasoning, to the effect that:

31. [1976] 32. [1974] 33. [1976] 34. [1976]

2 2 1 2

Lloyd’s Lloyd’s Lloyd’s Lloyd’s

Rep. Rep. Rep. Rep.

359. 435. 285. 359.

80

T I M E L O S T WA I T I N G F O R A B E RT H

Para. 38

(a) In the computation of time lost in waiting for a berth the excepted periods had to be applied just as if the vessel had actually been in berth and laytime was running. (b) There was no conflict between the laytime provisions and the time lost waiting for berth provisions in the case of an arrived ship under a port charterparty. (c) The fact that there was an overlap of the time lost waiting for berth provisions and the laytime provisions did not matter since the time was counted in the same way and the owner did not gain a greater advantage from his ship being kept waiting for a berth than he would get from her being kept at the loading/discharging berth. In the leading judgment Lord Diplock had this to say: ‘‘In recommending your lordships to overrule the construction of a standard clause in a much-used form of charterparty which has no doubt been accepted as correct by shipowners, charterers and maritime arbitrators for the last 10 years since the decision of Mr Justice McNair in The ‘Vastric’, I am not unaware of the importance of not disturbing an accepted meaning of a clause commonly used in commercial contracts upon which the parties to such contracts have relied in regulating their business affairs. But this is a consideration which in my view carries little weight in the case of the ‘time lost’ clauses in the Gencon form of voyage charters. In the first place, the results of ascribing to the clauses the meaning accepted since 1966 do not make commercial sense; it gives to the shipowner the chance of receiving a bonus dependent upon whether (a) his ship is lucky enough to be kept waiting for a berth and (b) is so kept waiting during a period which includes time which would not have counted against permitted laytime if the ship had been in berth. In the second place, I do not think that the chance of obtaining such a bonus is likely to have influenced the freight or demurrage rates charged. In the third place, the effect of using the variant ‘counted as laytime’ in place of ‘counted as loading time’ and ‘counted as discharging time’, as has been done in the instant case, has never previously been the subject of judicial decision. Shipowners and charterers would not go to the trouble of altering the printed words in the standard form of ‘time lost’ clause, unless they wished the clause to bear some other and more commercially sensible meaning than that which has been ascribed by judicial decision to the clause in its printed form. For my own part, as I have already said, I do not think that the alteration makes any difference to the meaning of the clauses, but I have little doubt that if you gave to the clause in the version which appears in the charter the effect which I have ascribed to it and to the printed clauses alike your lordships would be carrying out the intentions of the parties when they entered into the charter. For these reasons I would dismiss the appeal.’’

Apart from the effect of the House of Lords decision as in (a), (b) and (c) above it was also made clear (as from Lord Diplock above) that there was no difference between time lost waiting for a berth to count as laytime and time lost waiting for a berth to count as loading/discharging time; they mean the same. There was a point that The ‘‘Darrah’’31 did not expressly consider, with a ‘‘time lost waiting for a berth’’ clause: the application of the notice time in the case of a berth charterparty. However, it must surely be that the approach to take is that of running the vessel hypothetically into the loading/discharging berth on her arrival at the port and taking the berthing time as that for a notional tender of the notice of readiness. This approach should compensate the owner properly on the basis that this is what would/should have happened if a berth had been available when the vessel arrived off the port and it appears correct in the light of what Lord Diplock 81

Para. 38

S P E C I A L C L AU S E S R E A R R I V I N G

had to say in The ‘‘Darrah’’ (see later paragraph 39) regarding what would have been the position if the vessel had not been prevented from berthing because of congestion. In the case of a port charterparty the notice of readiness will usually be effective as from the time the vessel arrives off the port and a notice is given to the charterers. In taking their decision the House of Lords overruled The ‘‘Vastric’’35 and The ‘‘Loucas N’’.36 Regarding the Radnor decision,37 the court took the view that it had been misinterpreted over the years and that all that The ‘‘Radnor’’37 decided was that time lost waiting for a berth could start before notice of readiness was given. With due respect to their lordships this cannot be right as the Court of Appeal, in The ‘‘Radnor’’,37 certainly drew the distinction between the independence of the two codes. However, it does not really matter, from the overall point of view, as to whether or not The ‘‘Radnor’’37 was misinterpreted because of the decisions in The ‘‘Darrah’’,38 as stated in (a), (b) and (c) above. All one can say is that if The ‘‘Radnor’’ had been misinterpreted up until 1976, it cost charterers around the world some very large sums of money. The fact that the House of Lords have now got the time lost waiting for berth aspect correct is perhaps small consolation to those whose pocket was badly hit over the years. The Darrah decision38 by the House of Lords is obviously right since it defeats the startling position which had arisen whereby an owner was enriched simply because the absence of a berth prevented the charterer from using some of the exceptions that would have otherwise been available to him. The improved position is that one makes a calculation as if the vessel had not been prevented from berthing because of congestion at the port and had moved into a loading or discharging berth immediately. Unlike its approach in The ‘‘Johanna Oldendorff’’39 the House of Lords, in The ‘‘Darrah’’,38 went the whole hog and abrogated the commercial injustice which had arisen from the earlier decisions; its decision surely reflected the intention of the original draftsman of the Gencon charterparty. Since the House of Lords decision in The ‘‘Darrah’’ there have not been that many reported arbitrations regarding ‘‘time lost waiting for a berth’’ although a few are detailed later in paragraphs 39, 40 and 41 in relation to the application of the words in particular circumstances. In a general sense, the fairly recent reported arbitration LMLN 615—12 June 2003 (detailed earlier in paragraph 29 regarding Wipon) concerns circumstances where the owners could not take advantage of Wipon because the vessel tendered an invalid notice of readiness when she merely paused on passage into the port to pick up a pilot. A Rider clause provided:— ‘‘At both ends, time lost in waiting for berth to count as laytime provided that all excepted periods for loading/discharging itself will also apply.’’

It was decided that the usual effect of such provisions was that where the main reason why a notice of readiness could not be given (for example, in the case of a 35. [1966] 36. [1970] 37. [1955] 38. [1976] 39. [1973]

2 2 2 2 2

Lloyd’s Lloyd’s Lloyd’s Lloyd’s Lloyd’s

Rep. Rep. Rep. Rep. Rep.

219. 482. 668. 359. 285.

82

T I M E L O S T WA I T I N G F O R A B E RT H

Para. 39

berth charter) was that there was no loading or discharging berth available, laytime would commence to run when the ship started to wait for berth and continued to run until the ship stopped waiting. When the waiting time ended, time ceased to count, unless exhausted, and restarted when the vessel reached the loading/discharge berth, tendered notice of readiness and any notice time provided in the charterparty expired. The provision was independent of the laytime provisions of a charter, although time counted subject to the same exceptions as laytime. In the present case, after the vessel reached the inner roads at Setubal at 15.15 on 5 December she anchored and waited there for a berth until a pilot came on board to take her into berth at 09.30 on 8 December. The vessel therefore waited for a berth for 66 hours 15 minutes, which exceeded the allowable laytime of 46 hours 52 minutes. Not all of that time, however, was necessarily to count as laytime, and in particular time from 17.00 on Fridays until 08.00 on Mondays was excepted by clause 21. However, since time began to count when the vessel started to wait at 15.15 on Wednesday 5 December the allowable laytime would have been exhausted by 17.00 on Friday 7 December and the vessel would already have been on demurrage, so that time would run for demurrage, without interruption, during that otherwise excepted period. The tribunal was mindful of the fact that laytime did not begin to count whilst the vessel was waiting for a berth because the master had tendered an invalid notice of readiness at the pilot station. The tribunal considered whether that should preclude the owners from seeking the benefit of the time lost waiting for berth provisions of clause 45. The decided cases were clear, however, that the two provisions were independent of each other, even though on many occasions where laytime was running the time lost provision might add nothing to the position. In the present case, however, it did so, and the tribunal therefore concluded that time waiting began to count as laytime at 15.15 on 5 December (as per rider clause 45) with the result that the owners were entitled to demurrage for the period of 4 days 38 minutes (being time from 14.07 on 7 December until 14.45 on 11 December). While there is no doubt that a time lost waiting for a berth clause can be invaluable to owners in circumstances such as congestion, because of its independent nature, it has to be remembered that the vessel in question still has to reach the usual waiting place or to get as close as practically possible to the loading/discharging berth which may be or may not be within port limit. 39. Although there have been no further court decisions in respect of time lost waiting for a berth (understandably in view of the House of Lords decision in The ‘‘Darrah’’) one point worthy of consideration is that regarding a ‘‘time lost waiting for a berth to count as laytime’’ clause in a charterparty in circumstances where a vessel waits for a berth because of berth congestion but is subsequently found not to be ready to load/discharge and this can be related back to the time when the vessel arrived at or off the port and a notice of readiness was given, e.g. a few weevils in one of the holds. One argument is that since the vessel was waiting for a berth the time lost in that respect should score up as laytime even though the original notice of readiness was later found to be invalid; the competing contention is that time lost is directly related to laytime and since the original notice of readiness was invalid, 83

Para. 39

S P E C I A L C L AU S E S R E A R R I V I N G

because the vessel was not ready to load/discharge, laytime cannot commence so that no time scores up in respect of the time that the vessel was waiting for a berth. While one would like to think that a purposive approach would be taken by the courts to this set of circumstances (which are more common than is thought) there is no guarantee of this, particularly, since there appears to have been some narrowing of approach by some commercial judges whereby there is a more literal interpretation of the words used by the parties. There is some support for the purposive approach from The ‘‘Darrah’’, in particular the words of Lord Diplock: ‘‘ ‘Time lost in waiting for berth’ in the context of the adventure contemplated by a voyage charter, as it seems to me, must mean the period during which the vessel would have been in berth and at the disposition of the charterer for carrying out the loading or discharging operation, if she had not been prevented by congestion at the port from reaching a berth at which the operation could be carried out. The clauses go on to say that that period is to count as loading time or as discharging time, as the case may be. That means that for the purposes of those provisions of the charterparty which deal with the time allowed to load or to discharge the vessel and how it is to be paid for (i.e. laytime and demurrage) the vessel is to be treated as if during that period she were in fact in berth and at the disposition of the charterer for carrying out the loading or discharging operation. So whatever portions of the waiting period would have been taken into account in calculating the permitted laytime used up if the vessel had in fact then been in berth and at the disposition of the charterer (e.g. weather working days) are to be treated as if they had been available for loading or discharging cargo, and whatever portions of the waiting period would not have been taken into account in the calculation (e.g. Sundays or Fridays and legal holidays and days on which working was prevented by inclement weather) are not to be treated as if they had been available for loading or discharging cargo.’’ [author’s emphasis]

There is also some support for the approach from what Lord Justice Roskill (as he then was) had to say in The ‘‘Tres Flores’’,40 see paragraph 64, below. It is submitted that the time lost waiting for a berth should score up as laytime, even if the vessel is later found not to have been ready when she tendered a notice of readiness, subject to an allowance of some kind to the charterer in respect to any time utilised to make the vessel ready for loading/discharging. A calculation can be made as to when the vessel would have been ready if she had in fact moved to a berth at the time of her arrival at or off the port; alternatively there can be a later deduction from the laytime or demurrage time regarding the time lost in remedying the unreadiness of the vessel. The former approach is perhaps more reconciled to the above words of Lord Diplock regarding ‘‘the period during which the vessel would have been in berth if she had not been prevented by congestion from reaching a berth’’ and the now accepted approach of applying time lost waiting for a berth moment to moment as it occurs; the difference in the two approaches can, naturally, lead to different endresults particularly when the expiry of laytime is close to an excepted period such as a weekend. Support for the submission, apart from the above words of Lord Diplock, comes also from what his lordship had to say in the slightly later Maratha Envoy House of Lords decision: ‘‘In the case of both port and berth charters, however, it is the common practice, by the use of standard clauses, which too have been the subject of judicial exegesis, to provide expressly for the way in which the risk of delay by congestion at the loading or discharging port is to 40. [1973] 2 Lloyd’s Rep. 247.

84

T I M E L O S T WA I T I N G F O R A B E RT H

Para. 39

be allocated. These standard clauses generally provide for transferring from the shipowner to the charterer the whole or part of this risk which would otherwise fall upon the shipowner under the kind of charter used. A clause in common use which has the effect of imposing upon the charterer the whole of the risk of delay due to congestion at the port is ‘Time lost waiting for a berth to count as laytime’ or as ‘loading time’ or ‘discharging time’. The time lost clause applies whether the usual waiting place lies within or outside the limits of the port.’’

If the pure literal approach is taken to ‘‘laytime’’ (that is, it cannot commence if the original notice is found to be invalid) so as to prevent time lost waiting for a berth to count as laytime when the vessel is waiting for a berth because of congestion, such surely nullifies the intention of the parties, which is to compensate owners for time spent waiting for a berth. Even further support for the purposive approach comes from the Charterparty Laytime Definitions 1980 (applicable only if expressly incorporated into a contract) which provide: ‘‘ ‘TIME LOST WAITING FOR BERTH TO COUNT AS LOADING/DISCHARGING TIME OR AS LAYTIME’ means that if the main reason why a notice of readiness cannot be given is that there is no loading/discharging berth available to the ship the laytime will commence to run when the ship starts to wait for a berth and will continue to run unless previously exhausted, until the ship stops waiting. The laytime exceptions apply to the waiting time as if the ship was at the loading/discharging berth provided the ship is not already on demurrage. When the waiting time ends time ceases to count and restarts when the ship reaches the loading/discharging berth subject to the giving of a notice of readiness if one is required by the charterparty and to any notice time if provided for in the charterparty unless the ship is by then on demurrage.’’

This definition must surely have been drafted with the 1976 Darrah38 decision in mind and appears supportive of the purposive approach. Voylayrules 1993 and Baltic Code 2003 similarly provide: ‘‘TIME

LOST WAITING FOR BERTH TO COUNT AS LOADING OR DISCHARGING TIME’’

or ‘‘AS shall mean that if no loading or discharging berth is available and the vessel is unable to tender notice of readiness at the waiting-place then any time lost to the vessel shall count as if laytime were running, or as time on demurrage if laytime has expired. Such time shall cease to count once the berth becomes available. When the vessel reaches a place where she is able to tender notice of readiness, laytime or time on demurrage shall resume after such tender and in respect of laytime, on expiry of any notice time provided in the charterparty.

LAYTIME’’

It is surprising that no case has been to the courts regarding the subject although there have been two reported arbitrations on the topic (see below). No doubt there will eventually be a judicial ruling on the matter. In the meantime it would appear that if owners of vessels wish to avoid the possibility of a dispute when their vessels wait for a berth in circumstances of berth congestion, they should strive for a clause that is sufficiently clear to ensure that time waiting for a berth scores up for their benefit irrespective of whether the vessel is later found not to be ready for loading/ discharging at the time that the original notice of readiness was given; see earlier paragraphs 31, 32 and 34. The first reported arbitration is LMLN 71—22 July 1982 which concerned part cargoes and a time lost waiting for berth clause. The charter was on an amended Gencon form. Charterers were to load a part cargo of fertiliser. Clause 4 provided that time lost in waiting for berth was to count as laytime. Clause 11 provided that 85

Para. 39

S P E C I A L C L AU S E S R E A R R I V I N G

charterers were liable for demurrage at the discharge port. The charterparty also contained the Centrocon Completion Clause, which provided: ‘‘Owners have the liberty to complete with other . . . merchandise from port or ports to port or ports en route for owners’ risk and benefit, but . . . same not to hinder the . . . discharge of this cargo.’’ The vessel arrived off the discharge port on 26 January 1978 and cabled notice of readiness to the receivers of the fertiliser. At about the same time, she tendered notice of readiness to the receivers of the other part cargoes. There were a large number of ships waiting to discharge fertiliser—the average waiting time before berthing was 40 days. On 1 February 1978 the vessel shifted to the inner harbour and on the following day a written notice of readiness to discharge the fertiliser cargo was given by the vessel and received by the agents of the fertiliser receivers. However, because of overstowage of other cargoes, the vessel was not in fact ready to discharge fertiliser until 12 February. The other part cargoes were discharged between 2 February and 4 March when discharge was interrupted. On 7 March, for the first time, a fertiliser berth became available to this ship and discharge of fertiliser commenced, being completed on 17 March. Discharge of the remaining part cargo resumed on 13 March and was completed on 17 March. The vessel sailed the next day. The owners claimed demurrage. Although they could not maintain that a valid notice of readiness could be given before 12 February, the owners submitted that all the time from the ship’s arrival on 26 January until 7 March when a fertiliser berth became available, was ‘‘time lost in waiting for berth’’ and should count as laytime under clause 4 of the charter. The charterers contended that in a ‘‘port’’ charter, a ‘‘time lost’’ clause effectively added nothing, and did not allow the counting of time which could not be counted as laytime ordinarily because a ship was unfit for discharge. They contended that until 2 February, the ship was waiting for a berth at which she could first discharge the overstowed cargoes, and from 2 February to 7 March she was discharging cargo other than fertiliser at berths where she was put for that purpose. Therefore she was not waiting for a fertiliser berth, but was discharging. Also, while the ship was profitably employed in performing other contracts, it could not be said that she was ‘‘losing’’ time. The charterers also relied on the Centrocon Completion Clause, contending that the other cargo here hindered discharge of the fertiliser, and that without it the ship would have gone straight to a fertiliser berth. To the extent that the ship might have earned demurrage, that was as a consequence of a breach of this clause and the charterers were entitled to be indemnified for it and for dispatch which they would have earned but for the breach. It was held that the owners were entitled to succeed. If the ship had had the same cargoes on board on arrival at the discharge port, but none of them had obstructed access to the fertiliser, the first notice of readiness would have been valid and laytime would have started at 08.00 on 28 January. Assuming events had thereafter followed as they did, laytime would have continued to count notwithstanding the ship’s other activities, for it would seem that Ropner v. Cleeves41 would have been decided in 41. (1927) 27 Ll.L.Rep. 317.

86

T I M E L O S T WA I T I N G F O R A B E RT H

Para. 39

favour of the owners if it had been shown that the charterers there were unable to work the ship during her period of unavailability, as was the case here. If that were right, and if it were also correct (a) that ‘‘time lost’’ provisions might operate even when a ship could not give a valid notice of readiness, and (b) that ‘‘time lost’’ was to be counted as if it were laytime counting under ordinary laytime provisions, it followed that all the time should count in this case. This also seemed a commercially just result since the ship would have waited for a fertiliser berth as long as she did in any event, and the charterers lost nothing by her other activities. What the owners might have earned under their other fixtures appeared irrelevant, for the charterers knew they were only getting part of the ship, and they gave express permission for completion cargoes to be loaded. If the charterers had thought that the Centrocon Completion Clause gave them inadequate protection they should have sought other remedies at the time of fixing, e.g. a demurrage rate not reflecting the full value of the ship. The second reported arbitration is LMLN 351—17 April 1993 which referred (inter alia) to LMLN 71. The vessel was chartered on the Gencon form for the carriage of a part-cargo of bagged fishmeal. The fishmeal was loaded in the bottoms of each of the ship’s five holds. It was then over-stowed by another similar cargo which was carried under an entirely separate charter for different charterers. Both lots had to be discharged at the same berth. On the evidence, the charterers had and would have had no possibility of discharging the cargo at any other berth even if it had not been over-stowed. When the ship arrived at the discharging port on 10 October at 10.00 hours, no berth was available for her and she had to wait until 16.04 hours on 22 October, when a pilot boarded and took her into her berth, where she arrived at 18.40 hours. Discharging then commenced at 01.35 hours the following morning, 23 October. Meanwhile, discharging of the cargo under the present charter had started at 17.40 hours that day. If the cargo under the present charter had not been over-stowed, the ship would still have had to wait as long for the berth as she in fact did. The charterers submitted that no valid notice of readiness could be given under their charter until the cargo covered by it was accessible. They accepted that once their cargo was available to them, laytime started. The owners did not dispute that proposition. However, they said that they were entitled to rely on clause 6 of the charter, which read: ‘‘Time lost in waiting for berth to count as . . . discharging time . . . ’’

It was held that the owners’ submission was correct. The tribunal had been referred to pages 143/4 of Summerskill on Laytime, pages 278/286 of Schofield on Laytime and Demurrage, and to the arbitration award reported in Lloyd’s Maritime Law Newsletter (LMLN 71—22 July 1982). Those texts supported the owners’ position in the present case. What emerged from them were certain principles. First, the time which it was sought to count must have been lost in waiting for the berth for the cargo in question, not for some other cargo. That requirement was satisfied in the present case. Second, another charter covering the same voyage was not to be taken into account unless it was apparent on a reading of the charters in question that they did overlap or were intended to impinge on one another. That 87

Para. 39

S P E C I A L C L AU S E S R E A R R I V I N G

was particularly important in relation to arguments that owners might be earning ‘‘double demurrage’’. There was nothing in the present case to suggest that the two charters should in any way affect one another. Third, the owners’ contentions led to a just result in that even if the cargo had not been overstowed, as much time would have counted against it because there was no berth available for it. The arbitrators obviously took a purposive approach to the time lost waiting for a berth clause but there is no guarantee that the courts will do likewise if and when an identical matter comes before them. The tribunal also took a purposive approval in the arbitration cited in LMLN 356—26 June 1993. The vessel was chartered on the Gencon form. The vessel was to ‘‘proceed to one safe berth . . . always afloat/always accessible . . . to load bulk cement clinker’’. Clause 5 provided: ‘‘Time to commence at 2.30 pm if notice of readiness to load is given in writing/by cable upon vessel’s arrival at pilot station before noon and at 8 am next working day if notice given during office hours after noon. ... Time lost in waiting for berth or cargo to count as loading time. Time actually used before commencement of laytime shall count. Should the vessel not be berthed on arrival, Master right to tender NOR WIPON, WIBON; however, vessel to be customs cleared and in free pratique prior tendering NOR at both ends.’’ (Bold characters indicate typewritten amendments or insertions to the printed form.)

The ship arrived at the loading port anchorage at 05.25 on 2 September. The anchorage was within the port limits. At 05.30 the ship purported to give notice of readiness. There was then no berth available for her, and she waited at the anchorage until the early hours of 10 September. She berthed at 07.50 that day. Free pratique was granted at 08.35 and customs clearance at 09.30. Loading only started at 14.00, at which time the charterers purported to accept the notice of readiness. The owners claimed demurrage. It was held that the charterers had denied liability on various grounds. First, they said that the ‘‘time lost’’ provision could not apply because the ship was ‘‘arrived’’ in the technical sense at the anchorage, and could thus tender notice of readiness and start ‘‘ordinary’’ laytime counting provided she could comply with the requirements as to free pratique and clearance. If she could not, that was the owners’ problem, but they could not rely in default on the ‘‘time lost’’ provision. The fundamental flaw in that argument was quite simply that the charter was plainly a ‘‘berth’’ charter, and therefore arrival in the port was irrelevant for laytime purposes unless the master exercised his right (not an obligation) to tender notice at anchorage. On the evidence, it was not in fact possible for the master to tender notice whilst at the anchorage, for free pratique and customs clearance could only be obtained in cases of urgency, and the present case was not one such. Contrary to the charterers’ submission, the decision in The ‘‘Kyzikos’’42 did not mean that ‘‘Wibon’’

42. [1989] 1 Lloyd’s Rep. 1.

88

T I M E L O S T WA I T I N G F O R A B E RT H

Para. 39

converted a berth charter into a port charter. That case decided just the opposite. In the present case there was a clear provision that time lost in waiting for a berth or for cargo (the latter by specific amendment) was to count, and effect ought to be given to that in the circumstances prevailing, i.e. the ship actually having to wait for a berth. Had she not been able to enter the port but for reasons other than those of awaiting a berth or cargo, then the master would have had the right to avail himself of the special notice inserted into clause 5 if he had been able to get pratique and clearance at the anchorage. Failing that, the risk of the waiting time would have fallen upon owners. That was a perfectly understandable bargain for the parties to have made, since it meant that delay caused by the charterers’ failure to perform their part of the bargain—getting cargo and a berth for the ship ready for her arrival—fell on them, whereas other delays, for example, those caused by weather, tug strikes and similar matters, fell on the owners. That also disposed of the charterers’ other argument, that the ‘‘time lost’’ provisions were in some way to be overridden by the other typed insertions in clause 5. It is mentioned that the incorporation of Definitions/Voylayrules/Baltic Code into a charterparty may lead to a different conclusion to the common law regarding the laytime/demurrage computation because of the last sentence under each of them in that any notice time is not brought into the computation until the vessel reaches the place where she can tender a notice of readiness. Usually there will be no problem in respect of a port charterparty but in a berth charterparty there is a different approach to the calculation of laytime/demurrage as between the Definitions/ Voylayrules/Baltic Code and what the author considers to be the common law in respect of this matter. Under the Definitions/Voylayrules/Baltic Code the notice time is applied when the vessel gets into the berth whereas under the common law (at least in the author’s opinion) the notice time should be applied at the moment when the vessel would have arrived in her berth if the berth had been available, see earlier paragraph 39 as to what Lord Diplock had to say in The ‘‘Darrah’’. The difference in approach can lead to a materially different end result. For example, on the basis that there is a six hours’ notice time clause (very usual), an excepted laytime period of 17.00 Friday/08.00 Monday, laytime is exhausted at 13.00 on Friday under the Definitions/Voylayrules/Baltic Code, the berth becomes available at 07.00 on a Monday and the vessel berths and tenders a notice of readiness at 08.00 on the Monday. By the application of the notice time when the vessel should have berthed (under the common law) laytime is exhausted at 10.00 on the Monday (two hours after the excepted period of 17.00 Friday—08.00 Monday since 4 hours of the 6 hours notice time would have been available to the charterers prior to the weekend excepted period) and the vessel comes on demurrage at that time whereas under the Definitions/Voylayrules/Baltic Code (mentioned already) the vessel would have been on demurrage from 13.00 on the Friday right through the weekend period with demurrage simply ceasing for the period from 08.00 until 14.00 on the Monday. Therefore, a very clear advantage to the shipowner and a good example of the Definitions/Voylayrules/Baltic Code being less advantageous to the charterers than the common law in certain circumstances. 89

Para. 40

S P E C I A L C L AU S E S R E A R R I V I N G

40. A time lost waiting for berth clause and overstowed cargo arose for adjudication in The ‘‘Agios Stylianos’’43 (that is before the Darrah decision) where the owners of the vessel entered into two separate charterparties for carriage of cargoes from Constanza to Lagos. One was in respect of 450 tons of vehicles and the other in respect of 8,800 metric tons of cement which was wholly overstowed by the vehicles. The charterparties were in Gencon form and provided for demurrage at the rate of $1,500 per day with ‘‘time lost in waiting for berth’’ to count as discharging time. The vessel arrived at Lagos at 12.20 hours on 15 May 1971, and waited for a berth until 20.00 hours on 29 May 1971. Discharge of the vehicles was completed on 1 June 1971, at 13.00 hours and discharge of cement began immediately thereafter. The owners were awarded demurrage from the vehicle charterers at the agreed rate for the period spent in waiting for a berth between 15 and 29 May. In arbitration proceedings the owners sought to recover a similar amount from the cement charterers. The arbitrators dismissed their claim and stated their award in the form of a special case, the question of law for decision of the court being: ‘‘Whether on the facts found and the true construction of the charter time for the purpose of laytime and demurrage calculations should start running from 12.20 on 15 May, when the vessel arrived off Lagos and waited for a berth or from 08.00 on 2 June, when the vessel was able to discharge the cargo of cement.’’

It was held by Mr Justice Donaldson (as he then was) that: (i) the words ‘‘time lost waiting for a berth’’ in the cement charterparty meant time lost waiting for the cement berth; (ii) none of the time lost or wasted before the vehicles had been discharged was spent lost or wasted waiting for the cement berth and that once the vehicles had been discharged the cement charterers had the right and duty to nominate a berth and this did not arise at any earlier point of time; (iii) the question of law would be answered by holding that for the purposes of laytime and demurrage calculation time started to run from 08.00 hours on 2 June 1971, and the award would be upheld. See also LMLN 351—17 April 1993 detailed earlier in paragraph 39 for a similar approach by arbitrators where there were two part cargoes, one overstowing the other. 41. An issue arose in arbitration LMLN 114—15 March 1984 regarding whether the charterparty laytime exceptions should be applied to the time spent waiting for a berth where the printed words ‘‘discharging time’’ had been replaced by ‘‘count in full’’. The relevant charterparty clauses stipulated: ‘‘4. Time to commence at 2 p.m. if NOR to discharge is given before noon and 8 a.m. next working day if notice given during office hours after noon unless commenced earlier . . . Any time lost in waiting for berth whether in free pratique or not to count in full.’’ 43. [1975] 1 Lloyd’s Rep. 426.

90

T I M E L O S T WA I T I N G F O R A B E RT H

Para. 41

(The last two words had been inserted in place of the printed words ‘‘as discharging time’’, which had been deleted.) ‘‘29. . . . Cargo to be discharged at the rate of . . . weather permitting, and time from Saturday noon to 8 a.m. on Monday and holidays excluded, even if used, unless vessel already on demurrage. Laytime reversible at loading/discharging port.’’

The owners argued that the words ‘‘time lost in waiting for berth whether in free pratique or not to count in full’’ had the effect of ensuring that all time spent by the vessel in waiting for a berth at the discharge port should count without the application of any charterparty exceptions. They place heavy reliance on the words ‘‘in full’’. The charterers contended that ‘‘time’’ meant laytime. Therefore, clause 4 had to be construed as meaning that any laytime lost in waiting for berth was to count in full. Charterers also argued that the exceptions should apply to the time lost waiting for a berth unless it was abundantly clear that the position should be otherwise. It was held that the charterers’ construction was correct. The first two words of the sentence ‘‘Any time lost in waiting for a berth . . . to count in full’’ were most important in giving meaning to the later words in the same sentence. There was no doubt that the words ‘‘any time lost’’ meant any laytime lost.44 The parties had therefore intended, by way of the first words in that sentence, that laytime was the all-important aspect. There was an onus on the owners to show why the words ‘‘to count in full’’ should derogate from laytime so that every minute of time that the vessel was waiting for a berth should score in full for the owners’ benefit. The owners had not satisfied that burden. If the owners’ intention had been to derogate from the opening words of the sentence so as to strike at the core of established laytime computations, they should have ensured that sufficiently cogent language was used in the all-important sentence so that it was clear that all time waiting for a berth should score up without the application of the laytime exceptions. (For example, wording such as: ‘‘Any time lost in waiting for berth to count in full, with all exceptions excluded.’’) The owners’ claim for balance of demurrage therefore failed. References have been made earlier to the counting of laytime with a ‘‘time lost waiting for a berth’’ provision and to the favoured view that the time should be applied moment to moment as it occurs. There is some judicial support for this, see The ‘‘Loucas N’’ (already referred to earlier in paragraph 35 on the principal argument) where Mr Justice Donaldson (as he then was) decided that the time lost should be brought into the account as and when the delay occurs and this view appears to be adopted by London arbitrators. Of course, the position may be different if the parties have expressly agreed as to how the time lost waiting is to count, as in the North American Grain Charterparty 1989 (referred to earlier in paragraph 31) where clause 17(b) of the form provides for time waiting for a berth to be added to laytime or time on demurrage. An issue came up in LMLN 230—27 August 1988 where clause 17(b) of the Norgrain form read:—

44. The ‘‘Darrah’’ [1976] 2 Lloyd’s Rep. 359.

91

Para. 41

S P E C I A L C L AU S E S R E A R R I V I N G

‘‘If the vessel is prevented from entering the commercial limits of the . . . port . . . on the order of the charterers . . . and the Master warrants that the vessel is physically ready in all respects to . . . discharge, the time spent waiting at a usual waiting place outside the commercial limits of the port or off the port shall count from vessel’s arrival at such waiting place and will continue to run as per clause 18 until . . . Time so used is to be added to laytime (or time on demurrage) used for . . . discharging the entire cargo if clause 18(b) and 18(c) apply . . . [Lines 149/150] . . . ’’

The vessel was chartered for a voyage from Holland to Saudi Arabian Red Sea. Because of problems they had with their receivers the charterers did not want the ship to enter Saudi territorial waters immediately, and accordingly they gave orders that the ship was to wait outside until they said otherwise. The ship anchored off Jeddah on 26 April and gave notice of arrival. She moved into port, pursuant to the charterers’ instructions, on 7 May when she anchored in the roads. She berthed on 13 May and commenced discharging on 14 May. It was held, that clause 17(b) applied to the facts of the present case. Accordingly, under the first sentence of clause 17(b), the time spent waiting outside the port’s commercial limits was to ‘‘count against laytime’’. If the clause stopped there, one would readily be tempted to the conclusion that, as in the case of a ‘‘time lost waiting for berth’’ provision, the waiting time in the present case should be counted against the available laytime as and when it occurred. That view might seem to be reinforced by the reference in the following sentence of clause 17(b) to the time continuing ‘‘to run as per clause 18’’, i.e. subject to the exceptions relating to weather, Fridays and holidays. That initial impression was, however, disturbed by the provisions of lines 149/152. There, the Norgrain form provided that time ‘‘so used’’ (in this case waiting off Jeddah pursuant to the charterers’ orders) was ‘‘to be added to laytime (or time on demurrage) used for . . . discharging the entire cargo’’. If time was to be added it could not already have been counted against laytime as and when it occurred, and more so since it was to be added to laytime which had been used, thus suggesting that it was brought in at the end of the calculation. The conclusion that, under lines 149/150 waiting time was to be brought into account after ‘‘ordinary’’ laytime, was reinforced by the reference to ‘‘time on demurrage’’ and ‘‘the entire cargo’’. The latter certainly suggested an ‘‘end of the day’’ calculation, but the former made anything else inconceivable. By definition, where there was separate laytime for loading and discharging operations (as in the present case) a ship that was prevented from entering her discharging port could not arrive on demurrage, and so waiting time could not be added to demurrage time unless it was treated separately and account of it was only taken at the end of the ordinary laytime/demurrage calculation. The proper way to read lines 142/3 was as though they only provided for waiting time to be calculated as if it were laytime. So, once the ship entered the port and gave notice of readiness, ‘‘ordinary’’ laytime started to count and run until its expiry, whatever might have happened earlier. A laytime/demurrage statement was then prepared starting with the calculation of time used within the port, and there was added to that the out-of-port waiting time. 92

OT H E R S P E C I A L C L AU S E S

Para. 42

The calculation of that waiting time was a simple matter. It started from the arrival at the usual waiting place (line 143) and then counted subject to laytime exceptions (‘‘as per clause 18’’—line 143). If whatever laytime was permitted by clause 18 was consumed in the process, thereafter the exceptions did not apply. That would give a period of time which would then be brought into account at the end of the ‘‘ordinary’’ laytime/demurrage calculation. If that calculation had resulted in some of the available laytime being left unused, then the waiting time would simply be applied against that amount of unused time. If the waiting time exceeded that time, demurrage would be due for the difference. If the unused laytime exceeded the waiting time, dispatch would be due for the difference, and if the two were the same neither dispatch nor demurrage would be due.

OTHER SPECIAL CLAUSES 42. In the first edition of this book no consideration was given to clauses such as ‘‘To be loaded as per colliery guarantee’’, ‘‘In regular turn’’, ‘‘Custom of the port’’, because it appeared that they had no modern practical application whatsoever. However, it seems that ‘‘custom of the port’’ (‘‘COP’’) has been making something of a comeback in certain trades and should be considered. If the parties have agreed a ‘‘custom of the port’’ clause evidence will be admissible to show that there is a recognised and established custom of the port which has a bearing upon when a vessel becomes an ‘‘arrived ship’’. By custom it may be necessary for a vessel to reach a particular part of the port or to be in some particular place before she can be an ‘‘arrived ship’’. The English cases which have relevance to the subject have considerable vintage but are none the worse for that; they simply became irrelevant because ‘‘custom of the port’’ became obsolescent. In Brereton v. Chapman45 the port of discharge was Wells, a port formed by an inlet of the sea the entrance to which was very distant from the quay where ships were unloaded. It was proved that, by a custom of the port, laytime for discharging did not commence until the vessel was at the unloading quay and that this would be applicable to the charterparty in question. Brown v. Johnson46 concerned the port of Hull where the vessel was ordered to discharge. She arrived and was reported on 1 February, entered the discharging dock on 2 February and moved into the discharging berth on 4 February. By custom the usual place of discharge was the dock and laytime therefore commenced on 2 February and not at the earlier date when the vessel arrived at the port. Custom of the port seems to have resurfaced in some of the far eastern trades and, as stated already, its effect may be detrimental to owners of vessels regarding a ship reaching the agreed destination. In some ports in the Far East it may well be that a vessel will not have reached the agreed destination in a port charterparty, with a ‘‘custom of the port’’ stipulation, because of a custom that a vessel is not considered to be at the immediate and effective disposition of the charterer until she reaches an 45. (1831) 7 Bing. 559. 46. (1842) 10 M. & W. 331.

93

Para. 42

S P E C I A L C L AU S E S R E A R R I V I N G

inner anchorage where inspections take place, rather than anchoring at an outer anchorage within the port where she would otherwise satisfy the Oldendorff test and be an ‘‘arrived ship’’. It has to be emphasised that a party who attempts to show a binding custom has a heavy duty to discharge, the more so in the modern context of substantially extended and diverse commercial activity. The difficulty is all the more apparent when it is sought to show that words, which are fairly capable of having a perfectly comprehensible meaning on an ordinary reading, have a particular meaning by virtue of some custom. It was normal to prove a custom by adducing expert evidence and frequently by collecting statements from a large number of people in the relevant industry as to an alleged custom. To succeed on a ‘‘custom’’ argument a party has to show that there is a custom which is notorious, certain and reasonable and while a party might be able to satisfy the last two ingredients fairly easily there are obvious problems in showing that there is a custom which is notorious. See for example LMLN 401—18 March 1995 which concerned the quality of low pour fuel oil from Nigeria. In that arbitration the respondent buyers argued that in a contract for the sale of inter alia a cargo of low pour fuel oil from Nigeria, the phrase ‘‘ . . . grade . . . as per usual Nigerian export quality’’ meant, in particular, that the cargo had to have a sulphur content of not greater than 0.37% by weight. The claimant sellers contended that the phrase had to be given its ordinary, everyday meaning, i.e. ‘‘the quality of oil usually lifted out of Nigeria’’, and that said—which was hardly disputed—that the sulphur content of such oil varied between 0.30 and 0.40%. It was held, that a party who attempted to show a binding custom had a heavy duty to discharge, the more so in these days of substantially extended and diverse commercial activity. This difficulty was all the more apparent when it was sought to show that words, which were fairly capable of having a perfectly comprehensible meaning on an ordinary reading, had a particular meaning by virtue of some custom. It might not be without significance that of the half dozen cases which postdate 1952 listed under the heading ‘‘Custom’’ in Lloyd’s Law Reports Subject Index for 1919–1986, a custom was only successfully shown in one, and that was in relation to a custom of a port. It was normal to prove a custom by adducing expert evidence and frequently by collecting statements from a large number of people in the relevant industry as to the alleged custom. To succeed on the ‘‘custom’’ argument, the buyers had to show that there was a custom which was notorious, certain and reasonable. There could be no argument about the certainty and reasonableness of the custom they sought to set up, but they first had to show that there was a notorious custom. The buyers relied on the evidence of the President of their company. He had said that for the past 212 years or so he had been involved in purchasing about 80% of all Nigerian fuel oil cargos, always from intermediate buyers. He had said that it was standard practice when traders of Nigerian fuel oil talked to refer to ‘‘usual’’ or ‘‘standard’’ specifications or guarantees for Nigerian fuel oil as a shorthand for a particular specification provided by Nigerian exporters which included a maximum of 0.37% sulphur content. The buyers had also relied on some contract documentation, but this was certainly not complete, and there was no documentation relating 94

OT H E R S P E C I A L C L AU S E S

Para. 43

to any transaction at around the time of the contract in the present case. Moreover, whilst such documentation as had been produced invariably referred to a 0.37% sulphur content, in one instance the contract contained price adjustment provisions to cover the eventuality that the content might be higher. In another, that was also true, and there were provisions for the content to be determined on the basis of a sample at the loading port as well as a special condition to cover the repeatability/ reproduceability difficulties of testing; and in a third instance (where the price provisions were not included in the papers) a particular testing method was actually spelt out. Moreover, although the buyers said that they purchased some 80% or so of Nigerian fuel oil cargoes, that still left 20% unaccounted for. It would have been helpful to have had evidence from some at least of the buyers of those cargoes. Similarly, evidence would have been desirable from those involved in selling such cargoes to the buyers. It was also curious that there should be a custom as to a specific sulphur content when the Nigerian sellers themselves sold on the basis of a specified content, but with a price adjustment provision to cover the eventuality that the sulphur content was higher, and when as a matter of fact the range of sulphur contents of Nigerian fuel oil varied between 0.30 and 0.40%, with a not insubstantial proportion exceeding 0.37 as the evidence clearly showed. It could not be safely concluded that there was a custom as the buyers had alleged. On the contrary, the words ‘‘usual Nigerian export quality’’ had to be given their ordinary meaning and be read as covering the normal range or specified elements. In the present case, that meant that the cargo complied with the terms of the contract. However, in The ‘‘Eurus’’47 there was a finding by the arbitrators that the 8 o’clock rule (any oil shipment in Nigeria which was completed before 0800 on the first day of any month was treated as though it had been completed on the last day of the proceeding month) was a custom of the Nigerian oil export trade. See later paragraph 62 for details of the case under the assessment of damages. 43. While ‘‘In regular turn’’ does not appear to have resurfaced in recent times the use of a specified turn time is seen in some voyage charterparties. In some trades a voyage charterparty allows a charterer say ‘‘12 hours turn time’’. The expression ‘‘turn’’ speaks for itself in that it relates to the sequence in which ships are taken for loading or discharging and this is usually governed by port authorities. In practice ‘‘12 hours turn time’’ means that time will not count for 12 hours during the period from the vessel’s arrival until she is brought forward to a loading or discharging berth. It therefore has the effect of delaying the running of laytime for 12 hours in circumstances where a vessel waits in turn for a berth. With a ‘‘12 hours turn time’’ some charterers take the view that they are entitled to this period of time come what may in that it should always bite after the vessel reaches her destination. This would appear to be a fallacy since turn time should only be applicable if a vessel waits to be called in to her loading or discharging berth; otherwise it should not be applicable. For example, if a vessel reaches her destination in a port charterparty and proceeds straight to her berth then turn time is irrelevant and the charterers are not 47. [1996] 2 Lloyd’s Rep. 408.

95

Para. 43

S P E C I A L C L AU S E S R E A R R I V I N G

entitled to a delay in the running of laytime because of this factor. The same should apply in the case of a berth charterparty where the vessel moves straight to a berth without any wait. In The ‘‘Themistocles’’48 clause 6 of the charterparty stipulated that ‘‘the vessel be loaded at Sfax and Casablanca in the customary manner alongside the wharf reserved to shippers, at the berth they indicate and according to their orders, in turn not exceeding 48 hours . . . ’’. The ship berthed at Sfax and loading commenced at 1 p.m. on Friday, 24 October (the day before a local holiday) no time being lost in awaiting turn. The charterers contended that they were entitled to the full period allowed for turn even if the vessel in fact berthed before the expiration of that period. Mr Justice Morris (as he then was) decided the matter against the charterers, and had this to say: ‘‘In my judgment, the contentions of the charterers lead to an unnatural result and give no sufficient or reasonable meaning to the words employed. If the charterers are correct, there would seem to be no reason for the employment of the word ‘turn’. The period might be continuing to run when the vessel was in no sense being keep waiting. Nor would any meaning be derived from the words ‘not exceeding 48 running hours’ . . . . In my judgment, the words of clause 6 of the charter mean and provide that the vessel must not be kept waiting for more than 48 hours for her turn to be at the particular loading berth indicated to the vessel by the shippers. Such period of 48 hours may, however, be extended on account of holidays or Sundays. When the vessel has in fact occupied the loading berth indicated by the shippers, and, being in free pratique, is ready in all respects to load, and with her loading gear free for loading, then the lay days begin to count.’’

The decision cannot be faulted in logic and makes sense in every way. 44. The case of The ‘‘Lee Frances’’ LMLN 253—15 July 1989 is reported as an arbitration and a Commercial Court decision but it does not appear to have entered the Law Reports. However, it does have some interest and it also has some relevance because of its construction of a charterparty guarantee clause in the context of a berth charterparty and the time when the vessel was considered to have arrived in order to activate the guarantee clause in the charterparty. The charterparty was on the Gencon form. It provided that the discharging port or place was to be one good safe berth Cork. Box 21 read: ‘‘Provided the vessel is ready for discharge in all respects by latest 08.00 hours 22.12.86, charterers guarantee completion of discharge by latest 24.12.86, weather permitting and subject to mechanical breakdowns.’’

The vessel arrived at Cork on 22 December 1986. Notice of readiness was tendered and accepted at 06.25 that same day. The vessel only received orders to proceed to berth on 29 December. Discharge commenced on 30 December and was completed at 20.30 that day. The owners commenced arbitration proceedings claiming damages in respect of the delay at Cork. The issues were (1) whether the vessel arrived at Cork in time to trigger the ‘‘Guarantee Clause’’ in the charterparty; (2) if it did, whether ‘‘demurrage’’ was payable or whether ‘‘damages at large’’ were recoverable; and (3) if ‘‘demurrage’’ was payable, what was the amount. 48. (1949) 82 Ll.L.Rep. 232.

96

OT H E R S P E C I A L C L AU S E S

Para. 44

The arbitrators held that the vessel did arrive in time to trigger the ‘‘Guarantee Clause’’ and that the owners were entitled to recover ‘‘damages at large’’. The arbitrators found that the vessel, having arrived at the anchorage at 06.25, was ready in all respects to discharge her cargo by the deadline of 08.00 hours on 22 December; that the vessel could have reached the berth before the deadline; and that no orders to proceed to a berth were given by the charterers on 22 December, which was why the vessel did not arrive at the berth by the deadline. So far as clause 21 was concerned, the arbitrators said: ‘‘In order to trigger the guarantee provision the vessel had to be ready in all respects to discharge her cargo by the deadline. The Guarantee provision does not require the vessel to be at the discharging berth by that time; the requirement is only that she should at that time be an ‘arrived ship’ in the accepted charterparty sense, and be operationally ready to discharge her cargo.’’

The arbitrators found that those requirements had been satisfied. The charterers appealed to the High Court. They argued that the charterparty was a berth charterparty since it provided in effect for carriage to a berth to be nominated by the charterers. The vessel could therefore only become an ‘‘arrived ship’’ when she reached the berth. The owners contended that this was a port charter, and that the vessel was an arrived ship by 06.25 on 22 December. Alternatively, even if the charterparty was a berth charter, the owners argued that on a proper construction of the guarantee clause or by necessary implication, the guarantee clause was activated when the vessel arrived at the anchorage at 06.25 hours on 22 December. It was held that the laytime/demurrage provisions were standard provisions in a voyage charterparty. The rationale was that for a shipowner time was money. He wanted a quick turn-round. Conventionally, therefore, he stipulated for laytime and demurrage and dispatch provisions. They afforded him protection in the event of delay, albeit that the demurrage rate set a ceiling on his recovery. The correlative was that the charterers were entitled to keep the vessel substantially beyond the lay days at the expense of paying demurrage, provided that the delay did not frustrate the commercial object of the adventure. In the present case the shipowners wanted far greater protection. Plainly, the owners’ concern was the usual delays experienced in ports, the main one being port congestion. That seemed to be the contextual scene against which the guarantee had to be viewed. The owners had sought and obtained rights under the guarantee provision which were intended to be separate and more extensive than those conferred by the laytime and demurrage code. The first question was whether the vessel arrived in Cork in time to trigger the guarantee. In the Court’s view, the guarantee was intended to be a separate and absolute undertaking by the charterers. It ought to be interpreted in a purposive way. The concept of an ‘‘arrived ship’’, and the distinction between berth and port charterparties, was a recondite [abstruse] part of English law. It abounded with artificial distinctions and qualifications. That body of law had developed in the context of laytime and demurrage provisions. There was no reason whatever why 97

Para. 44

S P E C I A L C L AU S E S R E A R R I V I N G

that approach should be extended to the interpretation of an entirely separate clause such as the guarantee in the present case. On the contrary, and bearing in mind the commercial purpose of the guarantee, it was wrong to introduce into the guarantee the concept of an ‘‘arrived ship’’ as understood in a conventional laytime and demurrage code. It was sufficient that the arbitrators had found that the vessel arrived at the anchorage of the port; that it was at the effective disposition of the charterers; and that it probably would have reached the berth before 08.00 hours on 22 December if the charterers had given such orders. The vessel was, therefore, ‘‘ready for discharge in all respects’’ in every relevant sense of the word. Accordingly, the arbitrators rightly concluded that the guarantee had been triggered, and it was unnecessary to express any view on the question whether this was a port or berth charter. As to the second question, namely, whether the owners’ remedy for breach of the guarantee was confined to the recovery of demurrage, the broad purpose of the guarantee was plainly to confer on the owners rights in respect of delay over and above the rights contained in the conventional laytime and demurrage code. There was no hint in the language of the guarantee or elsewhere in the charterparty, that the remedy for breach of the guarantee would be the recovery of demurrage. The appeal would be dismissed. As mentioned at the beginning of this chapter, at the end of paragraph 24, the important clause relating to the charterer providing a berth ‘‘reachable on arrival’’ is considered next in Chapter 3.

98

CHAPTER THREE

BREACHES OF CONTRACT/DAMAGES RELEVANT TO ARRIVING AT THE DESTINATION: IMPLIED TERMS

REACHABLE ON ARRIVAL/ALWAYS ACCESSIBLE INCLUDING THE LAURA PRIMA DECISION 45. The potential in a ‘‘reachable on arrival’’ provision in a voyage charterparty (which is more germane to tanker charterparties than to dry cargo charterparties) was not fully realised until the 1960s. An ‘‘always accessible’’ provision (seen more in bulk dry cargo charterparties) is considered to have the same meaning as ‘‘reachable on arrival’’: see later paragraph 53. The modern interpretation of the words by the courts has been very favourable to owners whereby they receive compensation (damages), usually based upon the demurrage rate but not necessarily so, in respect of delays in berthing because of charterers not providing a berth which is reachable at the time of the vessel’s arrival at or off the port. The first important case before the courts concerned port congestion. It started as an arbitration and then went to the High Court as a special case—The ‘‘Angelos Lusis’’.1 The charterparty stipulated (inter alia) that: ‘‘ . . . a voyage from Constanza to . . . . The vessel shall load and discharge at a place or at a dock or alongside lighters reachable on her arrival which shall be indicated by Charterers . . . ’’. The vessel anchored in the roads off the loading port of Constanza p.m. on 28 January 1962. She was not permitted by the port authorities to enter the port until a berth was available and this occurred on 2 February. Cargo was ready at all times for loading but loading by lighters was impracticable in the surrounding weather conditions. The owners claimed against the charterers for damages in respect of the time that the vessel was delayed in the roads waiting for a berth. They alleged that there was an absolute obligation on the charterers to have a place for loading reachable on the arrival of the vessel at Constanza; further, even though the vessel might not have been an ‘‘arrived vessel’’ for laytime purposes she had arrived within the meaning of the above-mentioned clause. The charterers contended that the charterparty was a port charter and the risk of any loss of time, before the vessel became an ‘‘arrived vessel’’, was on the owners unless either (a) there was a clear provision in the charterparty to the contrary or (b) the vessel’s inability to enter the port and become an ‘‘arrived vessel’’ was caused by the charterers’ breach of contract. ‘‘Reachable on arrival’’ meant arrival in the port and the charterers were not obliged to nominate a loading berth until the vessel 1. [1964] 2 Lloyd’s Rep. 29.

99

Para. 45

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

entered the commercial area of the port on 2 February (at this time the Oldendorff case had not even commenced its voyage through the courts). In the arbitration, the umpire decided the case in favour of the owners subject to the opinion of the court on a question of law as to whether the charterers were in breach of contract in failing to provide a reachable berth for the vessel when she arrived off Constanza on 28 January. It was held by Mr Justice Megaw (as he then was) that the charterparty provisions referred to above were intended to impose on the charterers a contractual obligation of value to the owners; that the charterers’ obligation was to nominate a reachable place where she could load (i.e. a berth which the vessel, proceeding normally, would be able to reach and occupy), at the point, whether within or outside the fiscal or commercial limits of the port, where in the absence of such nomination she would be held up; that it was the charterers’ responsibility to ensure that there was at that point of time a berth which the vessel, proceeding normally, would be able to reach and occupy; that the charterers were in breach of contract in failing to provide a reachable berth for the vessel (occasioned by port congestion) when she required such on her arrival. In deciding as above, the judge emphasised: (a) The roads were the normal and proper place for a vessel to lie while awaiting permission to enter the port and that the words in the charterparty ‘‘on her arrival’’ did not have the technical meaning of ‘‘arrival’’ in respect of an ‘‘arrived vessel’’ in a port charterparty. The words denoted the physical arrival of the vessel at a point, wherever it might be, whether within or outside the fiscal or commercial limits of the port, where the indication or nomination of a particular loading place became relevant if the vessel were to be able to proceed without being held up. (b) When the vessel had arrived as in (a) above, the charterers had to nominate a reachable place, which meant that it was the charterers’ responsibility to ensure that there was, at that point of time, a berth which the vessel, proceeding normally, would be able to reach and occupy. (c) The time of the vessel’s arrival, within the above-mentioned charterparty words, had come when the vessel had gone as far as she could go, whether to the verge of or within the port, in the absence of a nomination by the charterers of a place, which she could not reach without being held up, where she could load. The decision went in favour of the owners in circumstances of port congestion and the ‘‘reachable on arrival’’ provision of the charterparty. It appeared to be a sensible decision bearing in mind that it was port congestion which prevented the vessel from moving into a berth when she arrived off the port; historically, port congestion had been, in respect of port charterparties, at the risk of charterers. In many port charterparties, charterers may be able to show that the vessel has not become an ‘‘arrived ship’’ when she arrives off the port so that laytime cannot commence; however, with the inclusion of the important words ‘‘reachable on arrival’’, owners may be compensated on the basis of damages for breach of contract, it being irrelevant that the vessel has not arrived within the port, the word ‘‘arrival’’ being given, correctly it is submitted, a broad interpretation. In other 100

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 46

words, so long as the vessel has got as far as she can get, without the nomination of a reachable berth, she has satisfied the word ‘‘arrival’’ when lying off the port. 46. A few years later a further case came before the courts regarding the words ‘‘reachable on her arrival’’: The ‘‘President Brand’’.2 The case went straight to the High Court on an agreed statement of facts which stated (inter alia) that: (a) The vessel was voyage chartered to proceed from one safe port Persian Gulf to one or two safe ports on the Mombasa/Capetown range. (b) Clause 6 of the charterparty stipulated that the vessel shall load and discharge at a place or at a dock or alongside lighters reachable on her arrival which shall be indicated by the charterers. (c) Under the charterparty the owners guaranteed that the vessel would arrive at Louren¸co Marques with a maximum draught of 32′ 5″ with no deadweight for the charterers’ account. (d) After loading a cargo of crude oil the vessel was ordered by the charterers to discharge at Louren¸co Marques. (e) At Louren¸co Marques there were only two berths suitable for the discharge of oil cargoes from vessels of the size of the President Brand; the vessel on her arrival draught of 32′ 3″ could have lain safely afloat at all states of the tide at either of these berths but was not able to cross the bar and proceed up the estuary to these berths because of a shortage of water. The owners adopted the same arguments which had been used in The ‘‘Angelos Lusis’’.3 According to them, there should be the same result albeit that the Angelos Lusis case3 involved port congestion whereas the circumstances in The ‘‘President Brand’’2 concerned a vessel which was prevented from crossing the bar at the entrance to the port of discharge because of lack of water. In deciding the case in favour of the owners Mr Justice Roskill (as he then was) agreed with the decision of Mr Justice Megaw regarding the meaning of ‘‘arrival’’, in the context of ‘‘reachable on arrival’’; further, on the words ‘‘reachable on arrival’’ he concluded that they applied to the circumstances in question so that, although the berth was not reachable because of a shortage of water at the bar, the charterers were in breach of their obligation to nominate a berth which the vessel could reach on her arrival. He said (inter alia): ‘‘ ‘Reachable’ as a matter of grammar means ‘able to be reached’. There may be many reasons why a particular berth or discharging place cannot be reached. It may be because another ship is occupying it; it may be because there is an obstruction between where the ship is and where she wishes to go; it may be because there is not a sufficiency of water to enable her to get there. The existence of any of those obstacles can prevent a particular berth or dock being reachable and in my judgment a particular berth or dock is just as much not reachable if there is not enough water to enable the vessel to traverse the distance from where she is to that place as if there were a ship occupying that place at the material time. Accordingly, in my judgment, the charterers’ obligation was to nominate a berth which the vessel could reach on arrival and they were in breach of that obligation if they are unable so to do.’’

2. [1967] 2 Lloyd’s Rep. 338. 3. [1964] 2 Lloyd’s Rep. 29.

101

Para. 46

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

The charterers sought to distinguish the facts in this case from The ‘‘Angelos Lusis’’3 (shortage of water on the bar as opposed to port congestion) so as to assert that there was no causation factor regarding ‘‘reachable on arrival’’ since the vessel would have ground to a halt in any event, not because of the want of a berth but because of insufficiency of water. On this aspect the judge went on to say that it was true, as a matter of causation, that the reason why the vessel could not cross the bar was a shortage of water but that was not the crucial consideration; the crucial consideration was that, because of a shortage of water, there was not a place or a dock reachable on the vessel’s arrival at Louren¸co Marques and therefore the resulting loss of time had to be borne by the charterers. Some exception was taken to this decision because tide/shortage of water had been, generally speaking, so much at the risk of owners in the past and the fact that, although the charterparty stipulated for one or two ports of discharge from a Mombasa/Capetown range, the discharge port to which the vessel was eventually ordered was named in the charterparty (clause 25—Owners undertake the vessel will arrive at Louren¸co Marques with a maximum draught of 32′ 5″ with no deadweight for charterers’ account). Therefore, it appeared that the owners took the risk of their vessel, with maximum cargo, being delayed because of known tidal problems. Like The ‘‘Angelos Lusis’’,4 The ‘‘President Brand’’5 was not concerned with the counting of laytime but with damages for breach of contract: however, unlike The ‘‘Angelos Lusis’’,4 there was emphasis on ‘‘reachable’’ as well as ‘‘arrival’’ although there appeared to be no departure from the ratio of The ‘‘Angelos Lusis’’4 regarding the words emphasised earlier in paragraph 45, at that point of time a berth which the vessel, proceeding normally, would be able to reach and occupy. 47. The application of the President Brand decision5 is that owners get compensated for loss of time because of a ‘‘reachable on arrival’’ provision in a charterparty in circumstances when otherwise they might not be so fortunate. Further, they can get the benefit of time lost in respect of delay factors which, traditionally, have been at the risk of owners; for example, insufficiency of water. It logically follows that if a vessel cannot get into a berth because of bad weather (traditionally at the risk of owners) owners get the benefit of the clause since, according to the reasoning of the judge in the President Brand case,5 the crucial consideration would be that, because of the bad weather, there was not a place or a berth reachable on the vessel’s arrival. Although there were no reported English cases regarding the application of the words ‘‘reachable on arrival’’ to a bad weather situation until 1988 (see paragraph 50, below) there were arbitrations where, it was understood, some arbitrators allowed the words to bite in favour of the owners when bad weather prevented the vessel, after her arrival at the port, from proceeding into a berth. Other arbitrators found it objectionable that owners should get the benefit of time lost waiting to enter a port when a vessel was delayed because of factors which, in the past, had been traditionally at the risk of owners; they thought that the words should only bite 4. [1964] 2 Lloyd’s Rep. 29. 5. [1967] 2 Lloyd’s Rep. 338.

102

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 48

in favour of owners in respect of those factors (preventing a vessel reaching a berth) which had been traditionally at the risk of charterers, such as port congestion; delays which, in the past, had been traditionally borne by owners should not be switched to the risk of charterers simply by way of a ‘‘reachable on arrival’’ clause. While The ‘‘Laura Prima’’6 did not resolve the conflict between London maritime arbitrators in respect of the application of The ‘‘President Brand’’ to bad weather circumstances when a vessel arrived at or off a loading/discharging port, it resulted (inter alia) in parties and arbitrators focusing upon the application of ‘‘reachable on arrival’’ to bad weather arrival circumstances in the context of clauses 6 and 9 of the then much used Asbatankvoy charterparty; further, the House of Lords decision ultimately led to a resolution of the divergent approach taken by different arbitrators to the same facts and problems. 48. The words ‘‘reachable on arrival’’ were not considered by the courts between 1967 and late 1979 when The ‘‘Laura Prima’’ was heard in the High Court save for The ‘‘Delian Spirit’’7 which case, in any event, was more concerned with the assessment of laytime/damages in the context of a breach, by the charterers of their obligation (see later in this chapter, paragraph 61). The ‘‘Laura Prima’’ concerned port congestion and important standard clauses in tanker charterparties vis-`a-vis the counting of laytime. The standard clauses 6 and 9 of the Asbatankvoy charterparty were as follows: ‘‘6. NOTICE OF READINESS. Upon arrival at customary anchorage at each port of loading or discharge the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the Vessel is ready to load or discharge cargo, berth or no berth, and laytime, as hereinafter provided, shall commence upon the expiration of six (6) hours after receipt of such notice, or upon the Vessel’s arrival in berth (i.e. finished mooring when at a sealoading or discharging terminal and all fast when loading or discharging alongside a wharf), whichever first occurs. However, where delay is caused to Vessel getting into berth after giving notice of readiness for any reason over which Charterer has no control, such delay shall not count as used laytime . . . 9. SAFE BERTHING—SHIFTING. The Vessel shall load and discharge at any safe place or wharf, or alongside vessels or lighters reachable on her arrival, which shall be designated and procured by the Charterer, provided the Vessel can proceed thereto, lie at, and depart therefrom always safely afloat, any lighterage being at the expense, risk and peril of the Charterer . . . ’’

It was decided by the House of Lords that: (1) clauses in charterparties as in other contracts had to be construed as a whole and it was impossible to ignore the opening words of clause 9 in construing the penultimate line of clause 6 and the reference in clause 7 to loading and discharging berth meant ‘‘designated and procured berth’’ for it was to that berth the vessel would be moving, the time occupied by such movement being excluded from the laytime calculation; (2) ‘‘reachable on arrival’’ was a well-known phrase and meant precisely what it said; if a berth could not be reached on arrival the warranty was broken 6. [1982] 1 Lloyd’s Rep. 1. 7. [1971] 1 Lloyd’s Rep. 64 and 506.

103

Para. 48

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

unless there was some relevant protecting exception and the berth was required to have two characteristics: it had to be safe and it also had to be reachable on arrival; (3) although the finding by the umpire that the sole cause of the delay to the vessel getting into berth was the unavailability of a berth due to the presence of other vessels over which the charterers had no control was unequivocal, this fact did not avail the charterers unless the berth which the vessel was prevented from reaching by reasons over which they had no control was one which had already been designated and procured by the charterers in accordance with clause 9; (4) clauses 6 and 9 were not in conflict with each other; (5) in the circumstances, the owners’ claim for demurrage succeeded. The decision by the House of Lords was welcomed by many in the shipping commercial world, not necessarily because of the reasoning set out in the speech of Lord Roskill vis-`a-vis ‘‘reachable on arrival’’ (he adopted what he had said in The ‘‘President Brand’’; see above at paragraph 46), but, primarily, because berth congestion had been traditionally at the risk of charterers and there was no case to displace this risk by the words of the second sentence of clause 6 of the charterparty. That is, the words should not bite in favour of the charterers in respect of port congestion but would be free to do so regarding bad weather or some other cause of delay outside the control of the charterers, this view turned out to be wrong, see below at paragraph 50. However, the House of Lords decision in The ‘‘Laura Prima’’8 threw considerable doubt on whether or not charterers could take any benefit from the last sentence of clause 6 in such circumstances; many lawyers were of the view that the decision of the House of Lords prevented charterers from taking any intrinsic benefit from the last sentence of clause 6. 49. For some years maritime arbitrators differed as between themselves regarding the application of ‘‘reachable on arrival’’ to bad weather circumstances preventing a vessel berthing vis-`a-vis an Asbatankvoy charterparty. The result of an arbitration could depend on which arbitrators were deciding whether or not the last sentence of clause 6 applied to bad weather situations; a very unsatisfactory state of affairs. The previous edition of this book details this aspect in more detail (in its paragraphs 48 and 49) but such is now a matter of history in view of the courts’ decisions in 1988, see paragraph 50 below. 50. The divergency between London maritime arbitrators continued throughout 1986 and 1987. In the latter year two arbitration awards were made regarding the effect of the Laura Prima decision in circumstances of bad weather, prohibition of night navigation, and the unavailability of tugs when a vessel arrived at or off the loading/discharging ports; both awards (The ‘‘Sea Queen’’ and The ‘‘Fjordass’’) became the subject of appeals.

8. [1982] 1 Lloyd’s Rep. 1.

104

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 50

In The ‘‘Sea Queen’’ the vessel was chartered on the Asbatankvoy form. She arrived off the loading port at 06.55 on 1 January 1985 and tendered notice of readiness. There were two berths capable of accommodating the vessel and both were unoccupied at 06.55 on 1 January when the charterers designated one of those berths for the vessel. The vessel could not, however, be berthed without the assistance of tugs. Between 06.55 and 14.00 on 1 January, the only two tugs available at the port were occupied in berthing two other ships and were unavailable to assist the vessel. The tugs in question were owned by companies separate from the charterers and the charterers had no control over them and had no control over the day to day running of the port installation. From 14.00 on 1 January until 22.15 on 3 January the berthing of the vessel was delayed by bad weather (strong winds and swell). Throughout that period, however, the berth which had been designated by the charterers for the vessel remained vacant. The vessel finally berthed at 00.36 on 4 January. The owners claimed demurrage, contending that laytime commenced at 12.55 on 1 January and continued to run while the vessel was delayed. The charterers argued that the period of delay in berthing should not count as laytime. In the arbitration it was held (by a majority) that the application of clauses 6 and 9 of the Asbatankvoy charterparty to circumstances where the non-availability of tugs and/or wind/swell (referred to as ‘‘bad weather’’) prevented a vessel getting into a loading/discharging berth when she arrived off a loading/discharging port, prior to the commencement of laytime, had not been considered by the courts. They thought that the circumstances of no tugs being available to berth the vessel was even more compelling than bad weather particularly when the responsibility for obtaining tugs was on the owners of the vessel. In the High Court Mr Justice Saville (as he then was) had few doubts whatsoever in reversing the majority arbitrators in The ‘‘Sea Queen’’.9 He held that it was clear from The ‘‘Laura Prima’’8 that clauses 6 and 9 of the charter had to be read together, and that the word ‘‘berth’’ in the last sentence of clause 6 meant a berth for the vessel reachable on her arrival designated or procured by the charterers in accordance with clause 9. The majority of the arbitrators in the present case had taken the view that a distinction should be drawn between reasons for delay in berthing traditionally regarded as being at owners’ risk, such as non-availability of tugs or bad weather, and ‘‘charterers’ risk’’ factors, such as congestion. They had expressed the view that if every reason for delay were to be at charterers’ risk, the result would be ‘‘very unreasonable’’. They accordingly concluded that the charterers were protected by the last sentence of clause 6. The approach adopted by the majority of the arbitrators could not be sustained. First, what might or might not be regarded as ‘‘the traditional position’’, or as being reasonable or unreasonable, could not be the starting point for construing a contract of the present kind. The starting point had to be the phrases the parties had

9. [1988] 1 Lloyd’s Rep. 500.

105

Para. 50

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

chosen to use. It was not a permissible method of construction to propound a generally accepted principle for sharing the risk of delay between owners and charterers or seeking in the abstract to determine a reasonable allocation of risk of delay and then to seek to force the provisions of the charter into the straitjacket of that principle or into that concept of reasonableness. To do so would be to rewrite the bargain that the parties must be taken to have made by the words that they had chosen to use. Secondly, there were in any event great difficulties in trying to propound some general principle which divided delaying events into owners’ risk and charterers’ risk factors. The arbitrators regarded bad weather as a case in the former category, but, for example, how would the principle operate on congestion caused by bad weather? Thirdly, there was nothing in the case which qualified the ambit of the obligation imposed upon the charterers to designate and procure a berth which the vessel was able to reach upon her arrival. Clearly, if there had been some relevant protecting exemption the charterers could take advantage of it. Equally, if the reason the berth could not be reached was some breach of charter by the owners, then the charterers would also be protected—either on the basis that their obligation only extended to finding a berth for a vessel conforming to the charter, or on the basis that any claim by the owners with regard to the delay would be defeated by a cross-claim based on the owners’ breach. Short of such cases, however, or where the contract could be said to be frustrated, the charterers had warranted in clear and simple words that there would be a berth which the vessel would be able to reach on her arrival. It was clear that the arbitrators did not regard with satisfaction the fact that the House of Lords had held that the word ‘‘berth’’ in clause 6 meant a berth duly nominated in accordance with clause 9. However, the Laura Prima decision was binding on the court and there were no grounds for distinguishing between the various causes which might make a berth unreachable for the vessel, unless the particular cause was specifically exempted elsewhere in the charter or was a consequence of the owners’ breach of the charter or was such as to frustrate the adventure as a whole. Accordingly, the appeal would be allowed. The charterers were not protected by clause 6. He also had this to say regarding ‘‘proceeding normally’’: ‘‘Finally, it was argued that, since the requirement on the charterers was to nominate a berth which the vessel, proceeding normally, would be able to reach, there was no breach in the present case, for the vessel would not normally proceed to berth in this port without tugs or in the weather conditions that prevailed. To my mind this argument too is unsustainable. The phrase ‘proceeding normally’ is taken from the judgment of Mr Justice Megaw in The ‘Angelos Lusis’. To my mind the phrase in context simply means that the berth nominated must be one which the vessel can reach by proceeding without waiting [to go] into the port in the ordinary way. Were this not so, then in no case would the charterers be in breach of clause 9, for in the sense for which they contend no vessel would proceed normally if the berth was not reachable for any reason, including congestion.’’

(The words in square brackets are inserted by the author as the words are missing in the law report.) 106

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 50

At about the same time The ‘‘Fjordass’’ arbitration reached the High Court.10 The same charter terms were applicable (Asbatankvoy clauses 6 and 9) in circumstances where at the discharge port, Mohammedia, the vessel’s size made it impossible for her to berth and discharge anywhere but at Sealine No. 3. The vessel tendered notice of readiness at 00.45 on 8 April 1985 but was unable to proceed immediately to her designated berth due to combination of a prohibition of night navigation coupled with a requirement of compulsory pilotage. Pilotage was not available until 9 a.m. At 10.55 on 8 April a pilot came on board. Until 14.02 attempts were made to bring the vessel to the discharging line but eventually the attempts were abandoned due to bad weather. Until 16 April bad weather continued to prevent the vessel from berthing. Thereafter, on 16 and 17 April a strike by tug officers operated to prevent berthing. At 14.45 on 18 April the vessel eventually berthed. The principal issue before the arbitrators related to the ‘‘reachable on arrival’’ clause (clause 9) of the charterparty. The majority of the arbitrators held that the decision in The ‘‘Laura Prima’’11 only applied in cases where the berth was congested. The present case was distinguishable because the primary cause of delay had been the combination of the prohibition of night navigation coupled with compulsory pilotage. Both those restrictions had been imposed by the local port authority. The berth designated by the receiving installation had been available on the vessel’s arrival at the discharging port. Accordingly, the charterers were entitled to take advantage of the exception in the last part of clause 6. The owners appealed. It was held by Mr Justice Steyn (as he then was) that the approach of the majority was wrong. They had failed to give the words ‘‘reachable on arrival’’ their ordinary meaning. Instead, they had started from the premise that in relation to voyage charterparties responsibility for navigational matters rested on the shoulders of owners and not charterers. That was referred to as the owners’ traditional responsibility. No doubt the arbitrators had in mind the observations of Lord Diplock in The ‘‘Johanna Oldendorff’’,12 where he referred to the importance of the four stages into which the adventure was divided. However, Lord Diplock’s general observations were never intended to lay down a special rule of construction, or to require that one should approach a special clause such as a ‘‘reachable on arrival’’ provision with a predisposition in favour of the ‘‘traditional’’ allocation of risk. On the contrary, Lord Roskill made clear in his opening observations in The ‘‘Laura Prima’’ that such an approach would be wrong. Adopting the reasoning of the dissenting arbitrator, most charterparty disputes and particularly laytime/demurrage disputes did not involve fault in a moral sense. One was merely considering the allocation of risk provided for in the charterparty. In the present case, the events at Mohammedia could in no way be described as

10. [1988] 1 Lloyd’s Rep. 336. 11. [1982] 1 Lloyd’s Rep. 1. 12. [1973] 2 Lloyd’s Rep. 285.

107

Para. 50

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

being the fault of the owners or the charterers. However, the terms of the charterparty specified that the charterers should bear the risk of the delays that actually occurred. The charterers had argued that the Laura Prima decision covered only physical causes of obstruction which rendered the place in question not reachable, and therefore did not apply in the present case. However, it would be wrong to approach the ‘‘reachable on arrival’’ clause with a predisposition in favour of a restrictive interpretation. The charterers’ argument involved interpreting the relevant words as ‘‘reachable on arrival without delay due to physical causes’’. That ignored the fact that Mr Justice Mocatta and the House of Lords contemplated that a non-physical cause such as an embargo could put charterers in breach of a ‘‘reachable on arrival’’ clause. In any event, the distinction sought to be drawn by the charterers was in conflict with the interpretation of the ‘‘reachable on arrival’’ clause in The ‘‘President Brand’’.13 The report of The ‘‘Laura Prima’’ did not mention that The ‘‘President Brand’’ had been cited in argument, but counsel had informed the court that it had been cited. The distinction between physical causes of obstruction and non-physical causes rendering a designated place unreachable was not supported by the language of the contract or by common sense. It was in conflict with the reasoning in The ‘‘Laura Prima’’ and was unsupportable on the interpretation given to that provision in The ‘‘President Brand’’. Quite independently of authority, the court believed it to be wrong. The interpretation which found favour with the dissenting arbitrator had moreover the merit of avoiding disputes as to different causes of delay in reaching a designated berth. The appeal would be allowed. The charterers had not designated a berth which was reachable on arrival and could therefore not take advantage of the clause 6 exception. Regarding ‘‘proceeding normally’’ Mr Justice Steyn had this to say: ‘‘But counsel for the charterers sought to support the arbitrators’ decision on another basis. He submitted that charterers are only required to designate or procure a berth which the vessel, proceeding normally, would be able to reach and occupy. Consequently, in the present case, it is submitted that until the impediment of a prohibition on night navigation, absence of tugs, and bad weather, disappeared, the charterers were under no obligation to designate a berth. The phrase ‘proceeding normally’ comes from the judgment of Mr Justice Megaw in The ‘Angelos Lusis’,14 at p. 34 (col. 1). It was in my view not used, or intended, as a general guide as to which causes may or may not rank for consideration under the ‘reachable on arrival’ provision. Reachability of a berth may involve practical considerations as to what can fairly be expected of a vessel. In that sense the idea of a vessel ‘proceeding normally’ is relevant. But, if I have correctly interpreted the ‘reachable on arrival’ provision, there is no merit in this alternative argument.’’

Although Mr Justice Steyn and Mr Justice Saville differed in their reasoning regarding ‘‘proceeding normally’’ the end results were the same. If charterers wish to avoid the rigours of a reachable on arrival provision in a charterparty, as now interpreted and well enshrined in the English common law, 13. [1967] 2 Lloyd’s Rep. 338. 14. [1964] 2 Lloyd’s Rep. 28.

108

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 51

they should use a different charterparty to the Asbatankvoy such as the ExxonMobil Voy 2000 (no reachable on arrival provision) alternatively to ensure appropriate wording in a charterparty so that risks of circumstances such as bad weather are transferred to the owners or, alternatively, they are shared. See for example the Conoco Weather Clause which reads: ‘‘Delays in berthing for loading or discharging and any delays after berthing which are due to weather conditions shall count as one-half laytime, or, if on demurrage, at one-half demurrage rate.’’

That clause, often type-added in standard form charterparties, should have the effect of sharing the bad weather risks which may affect the berthing of a vessel so that if the charterers are in breach of a reachable arrivable provision due to bad weather the laytime will commence but it will only run on a half-time basis. There has been some deabte on this subject which is considered later in paragraphs 52 and 53. 51. There are circumstances other than those considered in earlier paragraphs which may be affected by a ‘‘reachable on arrival’’ provision and where that provision affords an advantage to owners when laytime would not otherwise commence. For example, in LMLN 117—26 April 1984 the relevant charterparty clauses provided: ‘‘4. Notice of readiness and commencement of laytime . . . Laytime shall commence . . . at the expiration of 6 running hours after tender of notice of readiness . . . except that any delay to the vessel in reaching her berth caused by the fault of the vessel or owner shall not count as used laytime . . . 6. Safe berth. Shifting . . . the vessel shall . . . discharge at any safe place or wharf, or alongside vessels or lighters, reachable on her arrival, which shall be designated and procured by the charterer . . . Additional clause 1 . . . At . . . discharging port before tendering notice of readiness the vessel to comply with all port formalities including Gas Free Certificate . . . .’’

The vessel arrived off the floating light at the discharge port at 04.30 on 31 July. Notice of readiness was tendered at that time, but because the inspector could not get out to the anchorage due to bad weather, the Gas Free Certificate was not obtained until 15.00 on 3 August. Furthermore, because of congestion, the vessel did not actually berth until 13 August. The owners contended that laytime commenced at 10.30 on 31 July. The charterers argued that the obtaining of the Gas Free Certificate was a condition precedent regarding the commencement of laytime and that therefore laytime did not commence until 21.00 on 3 August. It was held that because the Gas Free Certificate was not obtained until 15.00 on 3 August, the notice of readiness did not become good until that time, and accordingly laytime commenced at 21.00 on 3 August. However, the charterers were in breach of charter because they had failed to designate a berth reachable on arrival when the vessel arrived off the discharge port (The ‘‘Laura Prima’’11). It followed that the owners were entitled to be put in the same position as if the contract had 109

Para. 51

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

been performed by the charterers; that was on the basis of a berth being available for the vessel when she arrived off the discharge port. If a berth had been available for the vessel on her arrival on 31 July then the arbitrators assumed she would have berthed by about 08.00 on that day. The evidence did not point to the vessel not being able to berth on 31 July, because of bad weather, or any physical reason. It was simply a matter of a berth not being available. The weather, although preventing small boats coming out to the anchorage at the discharge port, did not close the port for larger vessels. On the basis that the Gas Free Certificate would have been given by 10.00 on 31 July, laytime would have commenced at 16.00 on that date. The result was that the owners’ timesheet was incorrect to the extent of 5 hours 30 minutes only. In view of the fact that the charterers were in breach of contract they could not really complain that they should compensate owners on the basis as if the contract had been performed. It was a fundamental principle that parties should carry out their obligations under the contract; that overrode the other factors such as the terms regarding commencement of laytime. The charterers were, however, entitled to set off the amount of laytime against the delay arising from the breach of contract. Accordingly, the charterers were liable to pay demurrage for the period from 16.00 on 31 July to 21.00 on 3 August. Yet another example of a ‘‘reachable on arrival’’ provision affording an advantage to owners in circumstances where there was a breakdown of a vessel’s windlass which delayed the berthing of the vessel is the arbitration reported in LMLN 351—17 April 1993 (cited in paragraphs 39 and 40 regarding other matters and also later in paragraph 75). The vessel was chartered on the Asbatankvoy form. When the ship arrived at the discharge port (when she was already on demurrage) she was not able to reach a berth because of weather conditions. She accordingly gave notice of readiness and anchored at that time. But for the weather conditions she would have been able to go straight into port and anchor at the multi-buoy mooring to which she was destined to go. It had been indicated to the ship that she might move from anchorage to that berth early in the morning of 18 July, but when attempts were made to raise her port anchor, the motor of the port windlass, which had just been tested in both directions, broke down. It was subsequently discovered that that breakdown was due to the defective manufacture of certain steel parts of the motor. That amounted to a latent defect not discoverable by the exercise of due diligence. The receivers of the cargo refused to accept a proposal by the owners that the ship should moor without her port anchor, being held in place by a tug. There was no positive evidence to indicate that a tug would have been available, and such evidence as there was led the tribunal to conclude that one would not have been available in any event. In the event, the ship was unable to berth until a new windlass motor had been obtained and fitted in the evening of 24 July. The motor was fully operational at 20.20 hours that day, and the ship berthed at 15.50 hours the following day, completing at 19.10 hours on 26 July. 110

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 51

On the evidence, it was plain that if there had been a berth reachable on arrival, the ship would have been able to go straight to it without having to stop at the anchorage, and she would have been able to moor at it, using two anchors without any difficulty, just as in the event she moored safely at the anchorage on 17 July. No doubt the port windlass motor would have given up the ghost when attempts were made to raise the anchor after the completion of discharging, but that would have led to other problems which were not of present concern. The owners contended that time ran from 17.12 hours on 17 July, i.e. six hours after giving notice of readiness. The charterers’ principal submission was that time did not start until 15.50 hours on 25 July. They said that the ship was not in fact ready to discharge when the notice of readiness was given, the notice was therefore invalid and time could not start counting until she berthed. However, the ship was ready in the sense that she could have gone to her berth, moored safely and discharged without difficulties at the relevant time. Indeed, she could then have left the berth, though that would have involved slipping the port anchor and having it raised by a special operation. The charterers argued, second, that the delay in berthing which apparently resulted from the problem with the windlass motor was not caused by any breach of the laytime provisions or of the obligation upon them to provide a berth reachable on arrival. There was, they said, a break in the chain of causation, or the consequence was too remote in the sense of not being foreseeable as a result of the laytime or ‘‘reachable on arrival’’ breaches. Third, the charterers contended that the owners were in breach of Special Provision (i) in Part I, M of the charter, which read: ‘‘Further vessel’s characteristics: ... Vessel . . . is in compliance with usual discharge ports mooring requirements/restrictions for discharge fuel oil . . . ’’

It was held that the ship was ready when she gave notice of readiness, and that notice was valid. The fact that she became unready subsequently (as a result only of having to anchor because of the charterers’ breach) did not affect that position. The case was quite different from that of The ‘‘Virginia M’’ (see later paragraphs 64 and 75) in that there, at the time notice was given, the facts were such that the ship was not able to complete her discharging operation. Here, the contrary was the case. The vessel only became unable to discharge because the charterers’ breach led to the last straw being placed on the camel’s back significantly earlier than it would have been but for that breach. There was no doubt that there was such a breach, for under clause 9 of the charter the charterers were bound to designate and procure a berth reachable on the ship’s arrival (in the sense which had been given to that word in cases such as The ‘‘Laura Prima’’15). Whilst that breach in effect allowed a valid notice to be given and demurrage time to count six hours later in accordance with clause 6 (as amended), it remained a breach and the charterers were responsible for damages flowing from it, subject to the ordinary rules on causation and remoteness. 15. [1982] 1 Lloyd’s Rep. 1.

111

Para. 51

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

It was totally foreseeable that if a charterer failed to provide a reachable berth in circumstances such as the present, other matters might later intervene and cause delay to the ship beyond that which was created by the simple unavailability of the berth in question. It might be, for example, that a berth was occupied but that when it became free the weather was such as to prevent berthing, or there was a strike of relevant operatives which had the same effect, or any one of a number of other possibilities might manifest. The charterers therefore remained responsible for all the time following their original breach subject to any relevant charterparty exceptions (of which there were none in the present case) or a relevant breach or fault on the part of the owners, for all such time flowed sufficiently directly from that breach by charterers. There was no breach or fault on the part of the owners in the present case. The provision as to ‘‘compliance with usual discharge ports mooring requirements’’ was a warranty as to the ship’s description which applied either at the date of the charter or at the start of the voyage, but was not a continuing warranty any more than any of the other provisions appearing in Part I, A (‘‘Description and Position of Vessel’’) and M, Special Provision (i). But even if that was wrong, the owners were protected by the General Exceptions Clause, clause 19 of Part II, in the particular circumstances of this case. Accordingly, the owners were entitled to demurrage as claimed. 52. Problems may still arise with a ‘‘reachable on arrival’’ clause in a voyage charterparty if there are other clauses in the charterparty which bear on the commencement of laytime in a breach/damages situation and there is no wording like that in the last sentence of the Asbatankvoy clause 6. In a 1991 reported arbitration, LMLN 303—15 June 1991, the vessel was delayed by bad weather after arrival at the loading port. Clause 6 of the Tanker Motor Vessel Voyage form charter provided that the ship was to ‘‘load . . . at a place or at a dock or alongside lighters reachable on her arrival, which shall be indicated by charterers . . . ’’ and by clause 7 the laytime was to ‘‘commence from the time the vessel is ready to receive . . . her cargo, the Captain giving six hours’ notice to the charterers’ agents, berth or no berth’’. Typewritten clause 28 read: ‘‘Any time used in waiting for daylight, normal tide conditions, bad weather or port services such as pilotage and towage shall not count as laytime at ports of loading and discharging.’’

Typewritten clause 46 incorporated an addition to printed clause 9 reading: ‘‘Neither owners nor charterers shall be responsible if, in the event of strikes of workmen, lock-outs, riots or floods or any accident or cause beyond the control of either party, loading or unloading of the vessel is delayed, prevented or interrupted. In such circumstances, laytime will not commence, or if commenced, will not continue until the cause of the interruption or delay is removed.’’

The shipowners contended that the charterers were in breach of their obligation under clause 6 and were accordingly not entitled to rely on either clause 28 or clause 46. The charterers said that the present case was not like The ‘‘Laura Prima’’,16 16. [1982] 1 Lloyd’s Rep. 1.

112

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 52

which was concerned with the effect, if any, to be given to the exception in the last sentence of clause 6 in the charter there under consideration, an exception which did not appear in the present case. It was held that the charterers’ argument was correct. The charterers were entitled to the benefit of the bad weather exception in clause 28 (or, if necessary, the general exceptions in clause 46) and were accordingly entitled to succeed on that issue. A later arbitration, LMLN 489—4 August 1998, involved consideration of an Asbatankvoy charterparty with standard clauses 6 and 9 ‘‘(reachable on arrival)’’ but with an additional clause 13 which provided: ‘‘Suspension of Running Time Clause: Time shall not count as laytime, or if on demurrage as demurrage, when spent or lost: (a) for and on an inward passage moving from anchorage to first berth, including awaiting tugs, pilot . . . until the vessel is securely moored at the berth . . . ’’

The vessel arrived at the discharge port at 13.45 on 31 December. At the time of her arrival the berth to which she was destined to go was empty. However, the charterers had also chartered another ship (‘‘the other vessel’’) which had arrived at the same discharge port the previous day, and they wanted to berth her first. Unfortunately, the other vessel could not berth on 31 December because of bad weather during the first part of the day and because, from 17.00 onwards until 08.00 on 2 January tugs were not available due to holidays. The other vessel berthed in the morning of 2 January and sailed on 3 January, thereafter the subject vessel berthed and discharged. The owners contended that time counted from 19.45 on 31 December (6 hours after notice of readiness) while the charterers said that time did not start counting until 08.00 on 2 January. The charterers said that they were protected because there was a berth available when the subject vessel arrived. In any event, they said, The ‘‘Laura Prima’’16 only applied to cases where there was congestion, i.e. not the present case. Thus, if the ship was not able to proceed because of weather or other risks traditionally borne by owners, then laytime could not count. In addition, they relied on clause 13 and said that plainly time was here spent or lost awaiting tugs. Therefore, the proximate cause preventing berthing was not congestion, but was adverse weather and the unavailability of tugs, and time could only start counting once those impediments had ceased. It was held that the charterers were wrong. The position in English law was perfectly clear. The ‘‘Laura Prima’’ did not simply apply to congestion as had been made more than clear in the subsequent decisions of The ‘‘Sea Queen’’17 and The ‘‘Fjordass’’.18 The only question was whether clause 13 affected the position in any way. In the view of the majority of the tribunal it did not. The time that the subject vessel spent waiting was not spent ‘‘awaiting tugs’’. (Indeed, for the first few hours even that could not be argued since it was heavy weather which originally prevented the other 17. [1988] 1 Lloyd’s Rep. 500. 18. [1988] 1 Lloyd’s Rep. 336.

113

Para. 52

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

vessel from berthing.) The simple fact was that the charterers had failed to designate and procure a berth that was reachable upon the vessel’s arrival, and all the time she spent until she did berth was time spent in waiting for a reachable berth to be procured. Even if there had been no bad weather and no tug strike there would have been no reachable berth for the vessel because the other vessel would have occupied it. The fact that the other vessel was delayed (inter alia) by the tug’s holiday did not enable the charterers to rely upon clause 13 because it was the other vessel that was awaiting tugs and not the subject vessel. The exception to laytime in clause 13 had to be read strictly against the charterers and could not be held to apply to the vessel, particularly given that the charterers were in breach of their fundamental obligation to designate and procure a berth reachable on that ship’s arrival. Accordingly, the majority of the tribunal concluded that the owners’ claim succeeded in full. Although not directly on the point of ‘‘commencement of laytime’’, but more to do with the commencement of demurrage, a 1990 reported arbitration, LMLN 267—27 January 1990, is of interest for its consideration of ‘‘reachable on arrival’’ and the Laura Prima decision. A vessel chartered on the Asbatankvoy form was ordered to discharge at a port where, at the time of her arrival, a tug strike was in progress. A discharging berth was available but the vessel was unable to be berthed due to the tug strike. The arbitrator held that the laytime remaining available for discharge started to count on expiry of the six hours ‘‘grace’’ period allowed by clause 6. That, he held, necessarily followed from the fact that the charterers were in breach of their obligation under clause 9 to provide a berth ‘‘reachable on arrival’’: The ‘‘Laura Prima’’. On the following day the laytime expired, so that in the ordinary course the vessel would have gone onto demurrage. But the tug strike was still going on and, as the arbitrator found, prevented the berthing of the vessel for a further five days. Were the charterers liable for demurrage for those five days or did the last sentence of the demurrage clause excuse them from liability until the vessel was able to berth and commence discharge? The demurrage clause (clause 8) provided as follows: ‘‘The Charterer shall not be liable for any demurrage for delay caused by strike, lockout, stoppage or restraint of labour for [sic] Master, officers and crew of the Vessel or tugboat or pilots.’’ Was this exception available to the charterers notwithstanding that they were in continuing breach of their obligation under clause 9 to provide a berth ‘‘reachable on arrival’’? It was a different problem from that posed in The ‘‘Laura Prima’’, where the only question was whether breach of the clause 9 obligation operated to prevent reliance upon the last sentence of clause 6 (‘‘ . . . where delay is caused to vessel getting into berth after giving notice of readiness for any reason over which Charterer has no control, such delay shall not count as used laytime’’). The arbitrator found nothing in the speech of Lord Roskill in The ‘‘Laura Prima’’ to indicate that breach of the ‘‘reachable on arrival’’ obligation would have the same impact upon the demurrage exception in clause 8 as it was held to have upon the laytime exception in clause 6. He decided that the charterers were excused from liability for demurrage. 114

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 53

The arbitrator observed that a not dissimilar argument had been raised in The ‘‘Johs Stove’’19 in relation to the half-demurrage provision contained in the second sentence of clause 8. Although the argument failed because the arbitrator in that case had found as a fact that the relevant delay had been caused by congestion and not (as the charterers had sought to argue) by the shore labour dispute, there was no suggestion that the argument would have been rejected if, on the facts, the charterers could have brought themselves within clause 8. Although the present arbitration decision turned upon somewhat unusual facts, it appeared to raise a question which could be of wider significance, namely whether breach of the ‘‘reachable on arrival’’ obligation was of any materiality where a vessel was already on demurrage on her arrival at the discharge port and there existed a situation falling within either the second or third sentences of clause 8. Both of the above arbitrations, LMLN 303 and LMLN 267, support the premise that a ‘‘reachable on arrival’’ provision in a charterparty may not be as favourable to shipowners as owners imagine and where an exceptions clause is sufficiently clear arbitrators may apply it so as to suspend the running of laytime or the time on demurrage in circumstances where the berth is not reachable on the vessel’s arrival. For arbitrations regarding ‘‘reachable on arrival’’ and the Conoco Weather Clause (same principle in issue) see later, paragraph 53. 53. The meaning of ‘‘reachable on arrival’’ and ‘‘always accessible’’ appear to be synonymous. That was the view of Mr Justice Webster in The ‘‘Kyzikos’’.20 Charterparty Laytime Definitions 1980 is to the same effect and stipulates: ‘‘6 ‘REACHABLE ON ARRIVAL’ or ‘ALWAYS ACCESSIBLE’ (applicable only if incorporated into a contract) —means that the charterer undertakes that when the ship arrives at the port there will be a loading discharging berth for her to which she can proceed without delay’’ as is also Voylayrules 1993 which reads ‘‘ ‘REACHABLE ON HER ARRIVAL’ or ‘ALWAYS ACCESSIBLE’ shall mean that the charterer undertakes that an available loading or discharging berth be provided to the vessel on her arrival at the port which she can reach safely without delay in the absence of normal occurrence’’. ‘‘However, Baltic Code 2003 reads, ‘REACHABLE ON HER ARRIVAL OR ALWAYS ACCESSIBLE’—means that the charterer undertakes that an available and accessible loading or discharging berth will be provided to the vessel on her arrival at or off the port which she can reach safely without delay proceeding normally. Where the charterer undertakes the berth will be ‘ALWAYS ACCESSIBLE’, he additionally undertakes that the vessel will be able to depart safely from the berth without delay at any time during or on completion of loading or discharging.’’ As illustrated in the previous paragraphs ‘‘reachable on arrival/always accessible’’ provisions in a voyage charterparty have considerable advantages for owners of vessels; there may yet be further advantages in respect of the assessment of damages (see paragraph 61 et seq. on this aspect) since it has to be remembered that the provisions do not deal directly with the commencement of laytime but allow owners damages because of the breach by charterers in not

19. [1984] 1 Lloyd’s Rep. 38. 20. [1987] 1 Lloyd’s Rep. 48.

115

Para. 53

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

providing a berth ‘‘reachable on arrival’’ or ‘‘always accessible’’ at the time of the vessel’s arrival at or off the loading/discharging port; it follows that the principles relating to damages are applicable. Because of the decisions of the English courts and arbitrators regarding ‘‘reachable on arrival’’ many charterers will not agree such a provision in their charterparties; they sometimes go further in that they will not warrant the safety of the loading/discharging place (not necessarily relevant to the commencement of laytime in the wider sense). It may be that the victories of the owners in the Sixties, Seventies and Eighties in respect of ‘‘reachable on arrival’’ have turned out to be of a Pyrrhic nature with charterers switching from the Asbatankvoy form to other charterparties which do not contain a ‘‘reachable on arrival’’ term and, further, make it clear that laytime will not run when bad weather, pilot/tug strikes etc. prevent a vessel berthing when she arrives off the loading/discharging port. See ASDEM UPDATE—May 2005 for evidence regarding companies moving away from using the Asbatankvoy form. It is mentioned that the word ‘‘accessible’’ can be used to advantage by charterers regarding the commencement of laytime. For example, in the Shellvoy 5 and the Shellvoy 6 charterparties it is stipulated: ‘‘Time at each loading or discharging port shall commence to run 6 hours after the vessel is in all respects ready to load or discharge and written notice thereof has been tendered by the master or Owners’ agents to Charterers or their agents and the vessel is securely moored at the specified loading or discharging berth. However, if the vessel does not proceed immediately to such berth time shall commence to run 6 hours after (i) the vessel is lying in the area where she was ordered to wait or, in the absence of any such specific order, in a usual waiting area and (ii) written notice of readiness has been tendered and (iii) the specified berth is accessible. A loading or discharging berth shall be deemed inaccessible only for so long as the vessel is or would be prevented from proceeding to it by bad weather, tidal conditions, ice, awaiting daylight, pilot or tugs, or port traffic control requirements (except those requirements resulting from the unavailability of such berth or of the cargo).’’

It follows that if a berth is inaccessible at the time that the vessel arrives at or off the loading/discharging port laytime will not commence if the inaccessibility arises from bad weather, tidal conditions, ice, awaiting daylight, pilot or tugs or port traffic control requirements save for those requirements resulting from the unavailability of a berth or cargo. What this wording does is to restore to the owners the risk of what was thought to be theirs in times past but the charterers retain the risk of berth congestion which, again traditionally, was thought to be theirs. In arbitration LMLN 463—2 August 1997 an interesting point came up regarding whether ‘‘always accessible’’ also meant ‘‘always leavable’’. It was an unsafe port case where after completion of loading the vessel had to wait nine hours 30 minutes for a high tide in order to unberth. Thereafter the vessel dropped anchor in the inner port and had to wait a further 21 hours 42 minutes for the high tide in order to sail out of the port. The owners contended that those delays were caused by the charterers’ breach of contract where the relevant charterparty clause read: ‘‘That the vessel . . . shall . . . proceed to one safe port and there load at one safe loading berth in charterers’ opinion, always accessible, always afloat, a full and complete cargo in bulk of . . . ’’

116

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 53

One of the contentions of the owners was that the berth was not always accessible and that the charterers should have ordered the vessel to a berth where there would be access to and from the berth at all times. In other words, access to the berth for the vessel to reach it and access from the berth to the open sea. In the event, the berth designated turned out to be not always accessible. It was held that the textbooks were of little assistance seeming to concentrate on ‘‘always accessible’’ being synonymous with ‘‘reachable on arrival’’. Its possible application to departing from the berth appeared to have been ignored entirely. Similarly, the Voylayrules 1993 only explained that ‘‘reachable on arrival’’ of ‘‘always accessible’’ meant that the charterer undertook that when the ship arrived at the port there would be loading/discharging berth for her to which she could proceed without delay. They made no reference to a ship leaving a berth or a port. The inference was that charterers agreeing ‘‘always accessible’’ terms were under an obligation to provide a berth which was available immediately on arrival, but that that particular regime did not apply after the ship was actually in the berth, when the normal charterparty provisions as to laytime would apply. The tribunal had also looked at the English dictionary definitions of ‘‘accessible’’, and whether it meant accessible (or ‘‘exitable’’) from the berth as well as accessible (‘‘reachable’’) to the berth. They had all referred to ‘‘approach’’ and being ‘‘within reach’’, or ‘‘easy to reach or to get into’’, or ‘‘a way or means of approach’’, and none had made any mention of access from as opposed to access to. Accordingly, the warranty did not extend to leaving the berth. Even if the warranty of ‘‘always accessible’’ did extend to departure from the berth, the circumstances which prevented the ship from leaving became relevant. In the present case, it was simply the state of the tide. The rise and fall of the tide was such an everyday occurrence that it could in no sense be viewed as abnormal or phenomenal. Since this was a berth charterparty, where the vessel’s obligation was to reach the berth, and any weather or navigational hazards en route were to be borne by the owners, it seemed to the tribunal that exactly the same conditions should apply when leaving the berth. Consequently, even if the warranty extended to departure from the berth, waiting for the tide to flood sufficiently for the vessel to leave the berth was a delay for which the charterers could not be held responsible. There have been no further reported arbitrations on the subject and also no judgments. The decision of the tribunal is, perhaps, arguable, but appears to be the only one in existence at the moment. While the tribunal did look at Voylayrules (which makes no reference to a ship leaving a berth or port) it did not have the benefit of seeing Baltic Code 2003 which specifies that ‘‘always accessible’’ additionally undertakes that the vessel will be able to depart safely from the berth without delay at any time during or on completion of loading or discharging (see earlier in this paragraph). Neither did the tribunal appear to consider the full effect of ‘‘always’’ in the phrase ‘‘always accessible’’. The Conoco Weather Clause was mentioned earlier in paragraph 50 and was cited in full. The opinion was ventured that if the clause was a later type-added clause to a reachable on arrival provision it would have the effect of halving the laytime used in circumstances where bad weather prevented the vessel berthing 117

Para. 53

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

when she arrived off the loading/discharging place. Although arbitrations have taken place in London regarding the subject since the last edition (detailed later in this paragraph) they have not, as yet, been reported in the LMLN reports. It appears that there has only been one arbitration in New York in respect of the subject and this was reported many years ago in LMLN 452—1 March 1997 (SMA No. 3290). It was detailed in the last edition and it remains in this edition for, at least, completeness even though, in general, London arbitrators take a different approach to the majority arbitrators in the reported New York arbitration (see below). The vessel Alaska was chartered on the Asbatankvoy form for a voyage from Skikda, Algeria, to one or two safe US Atlantic, Gulf or Caribbean ports. A dispute arose as to demurrage at the loading port. The charterers claimed that on the disputed days, they were required to pay only one-half demurrage because of the wording of the Conoco Weather Clause, which read: ‘‘Delays in berthing for loading or discharging and any delays after berthing which are due to weather conditions shall count as one-half laytime, or, if on demurrage, at one-half demurrage rate.’’

The owners contended that that clause should be narrowly construed to apply only to delays in getting into a berth which had already been designated by the charterer in accordance with the charterer’s obligations under clause 9 of the Asbatankvoy form. The owners also argued that the clause did not apply where the charterer had not as yet met its overriding obligation to procure a cargo for the vessel as well as its duty of procuring a berth ‘‘reachable on her arrival’’. It was held (by a majority), that it was clear that the weather did at times interfere with some operations in the port. However, it was not at all clear that those weather conditions were responsible for the delays experienced by the Alaska. The first delay occurred before the vessel’s turn to berth had arrived, and before a berth had been designated and procured by the charterer. The intended berth was occupied when NOR was tendered and the Alaska was third in the lineup for that berth. This was an Asbatankvoy form of charter, the same form as in The ‘‘Laura Prima’’.16 There, the charterer could not be excused for delays ‘‘getting into’’ berth, but that distinction was not enough to excuse the charterer from its duty to designate and procure a berth ‘‘reachable on her arrival’’ under clause 9. The Conoco Weather Clause did not go far enough to change that rule. It spoke of ‘‘berthing’’ rather than ‘‘getting into’’ berth, but that distinction was not enough to excuse the charterer from its duty to designate and procure a berth ‘‘reachable on her arrival’’ under clause 9. The dissenting arbitrator (whose view the writer thinks is to be preferred) had this to say regarding the initial period of delay when the port was closed due to bad weather and no berth was available for the vessel: ‘‘The panel majority concludes it is inappropriate to apply the clear and relevant provisions of Special Clause 9—Conoco Weather Clause—because Charterer failed to designate and procure a berth reachable on arrival as per Clause 9. First of all, Clause 9 is not a berth availability clause, although Laura Prima, supra, has considered it so in determining whether a charterer may invoke the last sentence of Clause 6. It cannot and should not be considered as a bar to Charterer’s right to apply the one-half laytime/demurrage of the Conoco Weather

118

R E AC H A B L E O N A R R I VA L / A LWAY S AC C E S S I B L E

Para. 53

Clause to weather related delays in berthing and after berthing. There is no language in the Conoco Weather Clause to suggest that it is in any way tied to Clause 9 and the alleged obligation to provide a berth reachable on arrival. Nor does it make commercial sense to condition the Conoco Weather Clause, or for that matter a number of other laytime exception clauses, to the ‘berth availability’ provision of Clause 9. The Conoco Weather Clause is a special rider provision to the charter party designed to simplify and clarify the one-half ‘storm’ severity requirement of Clause 8 and to expressly provide for its application to waiting time and time getting into berth. It is nothing more than a bargained for allocation of risk for weather related delays. Simply stated, the Conoco Weather Clause provides for an alternative one-half laytime/demurrage application when adverse weather periods are encountered. However, the panel has declined to apply the Conoco Weather Clause, not because there were no weather related port closures, which there were, but because of the Clause 9 berth availability concept. That interpretation reads a condition into the Conoco Weather Clause which is simply not there.’’

Although there have been no reported London arbitrations there have been a number of unreported arbitrations regarding the Asbatankvoy form with an added Conoco Weather Clause. It appears that the majority of London arbitrators have applied the clause to bad weather circumstances which prevent a vessel berthing when there is no berth reachable on arrival because of the bad weather. Further, there have been arbitrations where London arbitrators have applied the demurrage clause 8 of the Asbatankvoy in a ‘‘reachable on arrival’’ context, see earlier LMLN 267—27 January 1990 in paragraph 52 and the later 2005 arbitration below. In the 2001 San Carlos arbitration three well known London arbitrators had no hesitation in concluding that if the vessel was delayed from berthing because of bad weather (thus a breach of clause 9 of the Asbatankvoy) that fell within the agreed Conoco Weather Clause and the clause would be applicable so that laytime would count on a half time basis. They said that the decision in The ‘‘Laura Prima’’ did not override express exceptions to laytime such as the added Conoco Weather Clause. In a more recent, 2005 arbitration, it was common ground that the loading berth was not reachable on arrival because of another ship being on the berth so that the charterers were in breach of clause 9 of the charter. The question was whether or not the charterers were precluded from relying on the laytime/demurrage exceptions in clauses 8 and 42 of the charterparty and in circumstances where the vessel had berthed and by which time she was on demurrage. Clause 8 read: ‘‘DEMURRAGE . . . if, . . . . Demurrage shall be incurred at ports of loading and/or discharging by reason of fire, explosion, storm, BAD WEATHER or by a strike, lockout, stoppage or restraint of labour or by breakdown of machinery or equipment in or about the plant of the Charterer, supplier, shipper or consignee of the cargo, the rate of demurrage shall be reduced one-half of the amount stated in Part 1 per running hour or pro rata for part of an hour for demurrage so incurred. . . . ’’ (The words ‘‘Bad Weather’’ did not appear in the standard form version of the charterparty and were inserted electronically into the actual charterparty, in accordance with cl. 1 of the Lukoil standard terms, in capital letters.)

Clause 42 (Conoco Weather Clause) read: ‘‘Delays in berthing or loading or discharging and any delays after berthing which are due to weather conditions shall count as one half laytime or, if on demurrage, at one half demurrage rate.’’

119

Para. 53

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

The majority (both leading maritime arbitrators) held that the delays in loading, because of bad weather, were covered by clauses 8 and 42 of the charterparty and should only count half time for demurrage. In reaching their conclusion the majority considered the owners’ contention that, since the berth was not reachable on arrival, as it clearly was not, the charterers were in breach of charter and thus could not rely on the bad weather half demurrage/laytime exceptions in clauses 8 and 42 of the charterparty. The central premise of their argument was that the bad weather was only encountered because the vessel could not berth on arrival and therefore the charterers were relying on their own breach. The owners relied on the decision of the House of Lords in The ‘‘Laura Prima’’. The majority said that The ‘‘Laura Prima’’ was not concerned with a demurrage exception, which necessarily would assume a breach of charter, but an exception to the running of laytime. It was concerned with whether a delay in getting into berth beyond the charterers’ control, as excepted by the last sentence of clause 6 of the Asbatankvoy form, was affected by the duty in clause 9 to procure a berth that was reachable on arrival; clauses 6 and 9 had to be read together as a coherent scheme. The House of Lords held merely that a delay in getting into berth required the berth to have been one which was reachable on arrival in the first place. It went no further than that and, importantly, Lord Roskill made it plain that the decision did not generally affect the operation of other laytime exceptions or a fortiori demurrage exceptions. This approach appeared to be reinforced in the two subsequent judicial decisions in The ‘‘Fjordass’’21 and The ‘‘Sea Queen’’.22 The majority also said that the owners’ contention might have confused the above principle with the similar but analytically very different one that unless an exception is very clearly applicable to demurrage as well as to laytime, it should not apply to demurrage since it is only because of the excess over the laydays (itself a breach) that the vessel is exposed to the relevant peril; hence the often-misleading mantra ‘‘Once on demurrage always on demurrage’’. As is clear from The ‘‘Spalmatori’’23 and The ‘‘Saturnia’’,24 it is a principle of construction of charterparties, not a principle governing how one approaches exceptions which are expressly and plainly demurrage exceptions. Clauses 8 and 42 are both without question demurrage exceptions; they operate only because the charterer is in breach of charter in not loading or discharging within the agreed laytime. The application of the relevant exceptions is not concerned with the reason why the laytime has been exceeded but why there is relevant delay during the time on demurrage. They tested their conclusion by supposing that the berth had been reachable on arrival and the vessel had gone straight in but the terminal had thereafter been very slow in loading and thus exposed the vessel to the delaying bad weather. There could then be no question of the half-demurrage provision not applying. There was no good reason for assuming that a reachable berth means that one is not at risk to further delays and, above all, the risk of being exposed to later events which fall within demurrage exceptions.

21. [1988] 1 Lloyd’s Rep. 336. 22. [1988] 1 Lloyd’s Rep. 500. 23. [1964] A.C. 868. 24. [1987] 2 Lloyd’s Rep. 43.

120

DA M AG E S — I M P L I E D T E R M S

Para. 54

Although there was a dissent it is submitted that the majority arbitrators were correct and in line with other leading London maritime arbitrators. Before leaving this paragraph and moving to damages and implied terms mention is made of an interesting unreported 1997 arbitration regarding reachable on arrival, the Conoco Weather Clause, and circumstances where a vessel waited in a queue for a particular berth. The vessel arrived off the port early on 17 December and it was common ground that laytime commenced 6 hours later. Unfortunately, the vessel was unable to proceed to her loading berth until 30 December due to a combination of the effects of congestion and adverse weather on the ships ahead in the queue for berthing. Because of the vessel’s deadweight, there was only one berth which could accommodate her and that was occupied on her arrival. In addition to the vessel that was alongside, there were a further seven vessels ahead waiting for the berth. The arbitrators said it was necessary to look at clauses 6 and 9 of the Asbatankvoy form plus the negotiated additional Conoco Weather Clause. It was common ground that once the vessel berthed delays due to weather should count as half time but the parties differed as to the application of the clause to delays prior to berthing where the vessel was not at the front of the queue. The question was whether all time lost until she did come to the head of the queue was delay due to congestion or whether for the periods sought to be excluded by the charterers, the proximate cause was weather and not congestion. It was decided that: (a) The Conoco clause refers to delays in berthing and therefore those periods when berthing was prevented by bad weather rather than bad weather preventing the vessel currently in berth from loading. (b) There was no conflict between the Conoco added clause and the printed clauses in the charterparty. They could be read together in such a way as to make sense and it was a rule of construction that if that is possible that is the way the charter should be construed. (c) The clause should be construed contra proferentem the charterers and, as a matter of causation, the only delays in berthing that would count against the owners, for which time would run at half rate, were those that occurred while the vessel was at the head of the queue and therefore the next vessel to berth. Once the vessel had reached that situation the clause would protect the charterers either where the weather prevented her from berthing or prevented the vessel then in berth from leaving the berth. In either case it would be fair to say that she was delayed in berthing due to weather. The charterers’ argument that the proximate cause of delay can change while in the queue, from congestion to adverse weather, even though there may still be several ships ahead of her, was not accepted. DAMAGES—IMPLIED TERMS 54. While ‘‘reachable on arrival’’ and ‘‘always accessible’’ provisions are express clauses in charterparties which invoke principles of breach of contract/damages they 121

Para. 54

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

are not always looked upon in that light by many persons in the shipping world. Strictly speaking, any breach of the provisions by a charterer has to be looked at within the context of the principles relating to damages so that the party breached against is put in the same position as if the contract had been performed, but more about that later in this chapter under ASSESSMENT OF DAMAGES. While some express clauses which impinge upon the geographical arrival of a vessel will be mentioned in the following paragraphs the major consideration will attach to implied terms which bear upon the commencement of laytime, such as the obligation of a charterer to provide a cargo and the obligation to act with reasonable dispatch to enable a vessel to become an ‘‘arrived ship’’ both of which concern readiness as well as reaching the agreed destination. Before going further it is emphasised that in the past a fairly stringent approach has been applied in respect of implied terms and laytime/demurrage provisions in a charterparty (see above, paragraph 12); however, as stated by Mr Justice Steyn (above, paragraph 12) such provisions are not immune from the application of general principles of contract law regarding the implication of terms. The general principle is that a term will be implied if it is necessary, in the business sense, to give efficacy to the contract. It was thus stated by Lord Justice Bowen in The ‘‘Moorcock’’25—where it was decided that a term should be implied into a contract for the use of a wharf that it was safe for the ship to be at the wharf: ‘‘Now, an implied warranty, or, as it is called, a covenant in law, as distinguished from an express contract or express warranty, really is in all cases founded upon the presumed intention of the parties, and upon reason. The implication which the law draws from what must obviously have been the intention of the parties, the law draws with the object of giving efficacy to the transaction and preventing such a failure of consideration as cannot have been within the contemplation of either side; and I believe if one were to take all the cases, and there are many, of implied warranties or covenants in law, it will be found that in all of them the law is raising an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have.’’

A term will not be implied merely because it would have been reasonable to have inserted it in the contract or because it would make the carrying out of the contract more convenient, nor will it be implied if the contract is effective without the proposed term and it is not obvious that it was the intention of the parties at the time. In the words of Lord Justice Scrutton: ‘‘A term can only be implied if it is necessary in the business sense to give efficacy to the contract; that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated someone had said to the parties, ‘What will happen in such a case?’ they would both have replied: ‘Of course, so and so will happen; we did not trouble to say that; it is too clear.’ That is, the so-called officious bystander test.’’

In the absence of appropriate exceptions in the charterparty it is the absolute duty of the charterer to furnish a cargo so long as he can do so legally. This had been established before The ‘‘Aello’’26 but this House of Lords decision affirmed the

25. (1884) 14 P.D. 64. 26. [1960] 1 Lloyd’s Rep. 623.

122

DA M AG E S — I M P L I E D T E R M S

Para. 55

general principle and applied it to arrived ship circumstances (see earlier, Chapter 1, for its relevance to reaching the agreed destination). 55. The vessel, bound for Buenos Aires to load a cargo of maize, anchored at the Intersection (22 miles from the dock area) and waited there from 12 October until 29 October. At the date of the charterparty the system of traffic control operating in the port of Buenos Aires did not permit vessels arriving to load maize to enter the commercial area of the port until they had obtained a ‘‘giro’’ or permit. This was issued by the customs authority on the ship’s application only when the shipper had obtained from the Grain Board a certificate to the effect that cargo had been allocated. Once the giro had been obtained, the ship could proceed to the dock area, where vessels due to load grain usually lay, and wait there until a loading berth became available. At the relevant time supplies of maize were coming down to the port so slowly that, by August, there was a congestion of vessels arriving to load maize. On 1 September, to meet the temporary emergency, the port authority changed the previous system of traffic control by passing a resolution that, before a giro could be issued, not only must the Grain Board’s certificate be obtained, but also a cargo ready to be loaded must be available. The charterers did not have a cargo ready to be loaded when the vessel arrived at the Intersection; therefore, they could not obtain a giro and the vessel could not become an arrived ship. The House of Lords held that the charterers were not relieved of their absolute obligation to provide a cargo by showing that they had taken all reasonable steps to provide it. There were no facts known to both parties which modified the charterers’ obligation; the material factor which prevented the ship from becoming an arrived ship was the resolution of 1 September which, at the date of the charterparty, was not known to either party. Accordingly, the shipowners were entitled to counterclaim against the charterers by way of damages in respect of demurrage lost by the failure of the ship to become an arrived ship. The principle to be derived is that, if the provision of a cargo is necessary to enable the ship to perform its obligation, namely, to become an arrived ship, the implied absolute obligation of the charterer is to provide the cargo, or at any rate a reasonable part of it, in time to enable the ship to perform its obligation. It is absolute in the sense that, although the charterer has exercised reasonable diligence to provide the cargo, that does not excuse him unless he can pray in aid such vitiating elements of contract law as frustration or illegality. What has been stated above regarding the charterers’ absolute obligation does not, in practice, help owners as much as one would think. While there may be occasions when a vessel has to wait off a port and, in reality, the waiting is because of cargo not being available, owners cannot always prove this. The evidence is more frequently that the vessel is simply waiting for a berth because of congestion and not because of the non-availability of cargo, so that the absolute obligation of the charterer does not come into effect on that many occasions. Further, in many loading areas involving bulk cargoes it is very difficult to get appropriate and detailed evidence showing the availability of a cargo for a vessel from a time point of view. However, it does behove owners to make more efforts, through local agents, 123

Para. 55

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

to ascertain the arrival time of cargoes at the stipulated loading berth, including grain elevators; there have been arbitrations where owners have been able to show that no cargo was available for the vessel when she arrived at or off the loading port and this was causative of the vessel not being able to proceed to a berth. While on the topic of absolute obligations mention is made again of the inconsistency between the position as between providing a cargo and providing a berth. This aspect was raised in Chapter 1 (above, paragraph 10). It certainly seems sensible to line up the obligations to supply a cargo and a berth on the same basis since one is inextricably bound up with the other. Further, absolute obligations are useful in that they reduce the area of argument as compared to the test of reasonableness. This, in turn, leads to simplicity. 56. It is well established law that, as a general rule, where in the written contract it appears that both parties have agreed that something shall be done which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect; see the classic statement of Lord Blackburn in Mackay v. Dick.27 From that classic statement can be derived an implied term that both parties to a contract act with reasonable dispatch in co-operating with the other party and performing their part of the contract. The principle has relevance to the commencement of laytime as was illustrated in the case of The ‘‘Atlantic Sunbeam’’.28 The vessel was chartered for a voyage from the United States to one or two safe berths or ports on the east coast of India. The charterers directed the vessel to Calcutta where she could not become an ‘‘arrived ship’’ unless (a) ‘‘prior entry’’ had been obtained by the owners and (b) a document called a ‘‘jetty challan’’ had been obtained by the charterers from the port commissioners. The ‘‘prior entry’’ was obtained by the owners but four days were wasted in obtaining the jetty challan. A dispute arose between the parties and was referred to arbitrators who held that the charterers were liable in damages to the owners for the delay. The award was in the form of a special case and the question for the court was whether upon the facts found and the true construction of the charter (including any implied term thereof) the charterers were in breach of their contractual obligations to the owners. Mr Justice Kerr (as he then was) decided that the term to be implied into the charterparty was that the charterers were bound to act with reasonable dispatch and in accordance with the ordinary practice of the port of Calcutta in doing those acts which had to be done by the charterers to enable the vessel to become an ‘‘arrived ship’’ and the burden of proving that the charterers were in breach of that term lay with the owners but the arbitrators were, of course, entitled to draw inferences adverse to the charterers if there were unexplained periods of delay or inactivity. The principles adumbrated above are frequently applied to disputes between owners and charterers. However, it is emphasised that the test is only one of 27. (1881) 6 App. Cas. 251. 28. [1973] 1 Lloyd’s Rep. 482.

124

DA M AG E S — I M P L I E D T E R M S

Para. 57

reasonableness. However much one would like to see it, there is no requirement of a high standard of initiative let alone any excess of zeal to be implied. If, for instance, there are two procedures in a certain port whereby a vessel’s documentation can be dealt with, one on paying an expedition fee or taking some special steps, and the other one the ordinary procedure, then it appears that the charterers would be under no implied obligation to use the speedier and unusual procedure; see what Mr Justice Kerr had to say at page 488. If owners want charterers to be obliged to a speedier and different procedure then such has to be obtained by way of an express term in the charterparty contract. The difference between the absolute obligation in respect of supplying a cargo and the obligation of reasonable dispatch in respect of co-operating to ensure an ‘‘arrived ship’’ formed the basis of some discussion in the recent case of The ‘‘World Navigator’’29; see below, paragraph 62. 57. Circumstances which arise frequently regarding the obligation to exercise reasonable dispatch and the commencement of laytime are those in relation to the inspection of a vessel when she arrives off a port. It is common for a vessel to arrive off a port but laytime cannot commence until an express provision in the charterparty regarding the inspection of the vessel’s cargo spaces has been satisfied (more about this under later sections dealing with readiness and notice of readiness). Obviously, in some circumstances it is in the charterers’ interests to delay inspecting the vessel whereas, from the owners’ point of view, an inspection should take place as soon as possible in order that laytime can commence. In such circumstances the obligation of the charterers already referred to in the previous paragraph should apply so that they exercise reasonable dispatch in carrying out the inspection. In many circumstances, this will result in an inspection as soon as the vessel arrives off the port so that, so long as the vessel’s cargo spaces are in order, laytime will commence. However, there are sometimes delays in the inspection of a vessel and, if the charterers cannot show good reason for the delay, the owners may be compensated for the time so lost. Problems arise in practice where there are weather conditions (wind and/or swell) where the vessel lies at anchor off a port which makes it difficult to get a boat to a vessel and the charterers take advantage of this to delay an inspection of the vessel. In some cases the delay is justified for the simple reason that the weather conditions are so poor that a small boat cannot get to the anchorage in order to put an inspector on board the vessel. On the other hand, there have been cases where no great efforts have been made by the charterers to put an inspector on board in conditions where the weather is inclement but, perhaps, not sufficiently poor to prevent a boat getting out to the vessel if real efforts had been made so to do. If the owners can produce evidence that a boat could and should have moved to the vessel then a tribunal will accept that the charterers did not act with reasonable dispatch. Unfortunately, owners’ representatives do not always think about obtaining this evidence at the relevant time so that when a dispute comes to arbitration the tribunal is left with inconclusive evidence as to whether or not a boat could have reached the vessel in 29. [1991] 2 Lloyd’s Rep. 23.

125

Para. 57

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

the conditions which were in existence, in which case the charterers get the benefit of the doubt because of the onus of proof being on the owners (see above, paragraph 56). In The ‘‘Ino’’ 1979 arbitration, the vessel was not inspected at the outer anchorage (where she lay for four days) with the result that the notice of readiness did not become valid until five days after it had been tendered. The umpire said (inter alia): ‘‘In this case the charterers accepted the notice some five days after it was tendered. On the face of it any contract term requiring both the parties to play their part in bringing about the desired result obligates both the parties to co-operate and to act reasonably and diligently in so achieving the desired result. In other words, did the charterers act reasonably and with due diligence in accepting the notice tendered on 3 May only on 8 May? Again, there is a lamentable lack of evidence. The only evidence there is (which was not rebutted by owners in any way) was that it was physically impossible for any surveyor to reach and inspect the vessel before it passed from the outer into the inner anchorage. I strongly suspect that in view of the port’s congestion and the knowledge that many days would pass before loading could commence, the charterers’ sense of urgency was somewhat blunted and that they found it convenient to delay inspection of the vessel until the vessel had reached the inner anchorage. However, I am bound to determine the matter on the evidence before me and on that basis I am reluctantly obliged to hold that there was no breach of charterers’ obligations to use due diligence in effecting the vessel’s inspection and that therefore the notice was effectively accepted at 10.00 hrs on Monday, 8 May.’’

In a later arbitration LMLN 328—30 May 1992, the owners were successful regarding an implied term as applied to the facts of the case. The charterparty stipulated, ‘‘Ship’s holds to be odourless and free from insects, properly swept, cleaned and dried to the satisfaction of shippers’ or charterers’ agents before loading . . . ’’. The vessel arrived at the loading port on 6 October and tendered a notice of readiness at 19.00. The charterers did not arrange to survey the holds until 10.00 on 8 October. It was held (inter alia) that unless there was a good reason why the survey could not have been held earlier, it was incumbent on the charterers to play their part by arranging prompt inspection on arrival, which had not been done in the present case. Accordingly, the notice of readiness should have been accepted on the opening of offices on 7 October. In yet a later reported arbitration, LMLN 459—7 June 1997 the implied obligation regarding a prompt inspection was dealt with more thoroughly and although it was a time charterparty arbitration it has much relevance to the inspection of a vessel by charterers within the context of commencement of laytime and the implied obligation of reasonable dispatch. The owners claimed time charter hire or damages equivalent to hire arising out of the alleged inordinate amount of time taken by the charterers to carry out an inspection at the commencement of the charterparty. The vessel had previously been on charter to the charterers for a period of 12 months prior to the present charter. Redelivery under the previous charter had taken place on 8 January 1992 and it had been agreed prior to redelivery that the vessel would be fitted with new cargo pumps to improve her performance prior to entering into the present charter. The vessel arrived at Rio de Janeiro on 28 January. It was the owners’ intention to drydock her for her annual drydocking survey and to attend to outstanding items from her last special survey, as well as to replace two reciprocating cargo pumps with 126

DA M AG E S — I M P L I E D T E R M S

Para. 57

centrifugal pumps. The vessel was in drydock between 17 and 21 February and repairs then continued at a layby berth. The laycan under the charterparty was 27/29 February, but on 24 February the owners requested an extension beyond 29 February because of unforeseen delays. The owners’ case was that all repairs were completed to the satisfaction of the Class (Lloyd’s Register) surveyor on 27 February, and that the yard allowed the vessel to remain at the layby berth whilst the crew continued to carry out routine maintenance awaiting delivery to the charterers under the new charterparty. However, Lloyds did not issue an Interim Certificate of Class until 10 March. At 11.00 hours on 28 February the owners confirmed to the charterers that the vessel was ready for inspection by the charterers. On 5 March two ABS surveyors inspected the vessel on behalf of the charterers. They returned on 6 March to continue the inspection, and again on 7 March, when they completed their inspection. ABS sent their report to the charterers on 9 March, but that report was not forwarded to the owners until 13 March. The owners’ case was that nothing further was heard from the charterers or ABS between 7 March and 12 March, when the charterers sent a fax setting out alleged deficiencies found during the ABS inspection which the charterers requested should be remedied before the vessel was accepted under the charter. The owners carried out the necessary work, which was completed on 15 March to the satisfaction of the Class surveyor. A further complication arose on 16 March when the charterers informed the owners that the Diretoria de Portos e Costas (‘‘DPC’’) had determined on the basis of the ABS report that the vessel was not in a safe condition to operate in Brazilian waters. The ABS surveyor visited the vessel for a further inspection on 17 March and confirmed that the repairs had been carried out properly. However, it was not until 19 March that the DPC confirmed that the vessel was approved for operation in Brazilian waters. At 17.00 hours on 19 March, the vessel was approved by the Port Captaincy. The charterparty was on the Shelltime 3 form, and provided: ‘‘Clause 3—Owners agree to let and charterers agree to hire the vessel for a period of 12 months . . . commencing from the time and date of delivery of the vessel . . . The vessel shall be delivered by owners at Rio de Janeiro with full ship inspection by Petrobras and regular inspection by Port Captaincy . . . Clause 43—Drydocking—Owners warrant that the vessel will not drydock during c/p period and will comply with all requirements with class society and/or Brazilian port authorities . . . Clause 75—Inspection—Before the vessel is delivered to charterers all tanks/lining/piping pumping arrangements and other vessel specifications laid down in the charterparty shall be inspected by owners, charterers and Port-Captaincy. When it is jointly agreed that the vessel satisfies the above mentioned requirements the vessel will be considered on hire at delivery port specified in clause 3. Each party shall pay for their own costs for such survey but time required for the above inspection shall be for owners’ account.’’

The owners submitted that they had presented the vessel for delivery at 11.00 hours on 28 February and that they were entitled to hire or damages equivalent to 127

Para. 57

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

the rate of hire from that time until 20.00 hours on 19 March, making due allowance for the periods of actual inspection. They also claimed for the cost of bunkers consumed during that period. It was held that the words of clause 75 were so clear that there could be no doubt that inspections by the charterers and the Port Captaincy were a condition precedent to the due delivery of the vessel under clause 3. However, the rigour of that construction was mitigated by implying terms that the charterers should co-operate in carrying out their inspection as quickly as possible after the vessel had been tendered for delivery, and that the charterers should not interfere with any arrangements which the owners might have made with the Port Captaincy, and that the charterers should notify the owners immediately of the results of the inspections. The burden was on the owners to show that the charterers were in breach of those implied terms, and that that breach had resulted in the delay complained of. The absence of any attempt on the part of the charterers to explain the steps which they had taken to carry out the inspections and the reasons for what was clearly on its face an inordinate period of delay (having regard to the equivalent inspection under the previous charterparty) was bound to lead the tribunal to the conclusion that there was a prima facie breach of the implied obligations relied on by the owners. On the evidence, the vessel had not in fact been ready for delivery under the new charter until 10 March. However, the report of the ABS surveyor instructed on behalf of the DPC which had been sent to the charterers on 9 March was not forwarded to the owners until 13 March. The charterers’ obligation was to pass on that report immediately they received it on 9 March. The owners could have remedied the defects noted in the ABS report by 12 March had the report been passed on to them promptly. It was therefore likely that the owners would have been able to deliver the vessel into service in accordance with the requirements of the charterparty by 17.00 local time on 13 March, six days earlier than in fact happened. Accordingly, the owners were entitled to damages equivalent to the daily rate of hire for the period of six days during which delivery was delayed as a result of the charterers’ breach of their implied obligation. See also later paragraphs 62 and 126 for more on the implied obligation of reasonable dispatch. At one time it was postulated whether or not the charterers should be under an absolute obligation to put an inspector on board the vessel timeously. In The ‘‘Tres Flores’’30 the tribunal, on an alternative basis, decided that there was an absolute obligation on the charterers to inspect the vessel timeously. This case will also be referred to later under readiness but suffice it to say at the moment that the vessel arrived off Varna on 22 November; no berth was available for several days and she was not inspected by the port authorities until 27 November, at which time pests were found in the cargo spaces and fumigation was ordered. On 1 December the charterers accepted the notice of readiness. The reason for the delay in the inspection was the bad weather which prevented an inspector getting out, in a boat, to the

30. [1973] 2 Lloyd’s Rep. 247.

128

DA M AG E S — I M P L I E D T E R M S

Para. 57

vessel. The owners claimed for the time that the vessel was waiting from 22 November to 27 November (in that laytime commenced) but failed on the grounds that the vessel was not ready to load cargo when she arrived off Varna. On the alternative argument by the owners for damages for detention because of the failure of the charterers to inspect the cargo spaces timeously the courts reversed the tribunal and decided that any obligation to inspect the cargo spaces was not an absolute one; since bad weather prevented the inspection of the cargo spaces between 22 November and 27 November there was no breach of any obligation by the charterers so that the owners were not entitled to damages for detention. An implied term may also arise regarding a charterers’ obligation to accept a notice of readiness within a reasonable time, see later Chapter 6, LMLN 434—22 June 1996 (also referred to earlier in paragraph 30 regarding another aspect) and LMLN 338—17 October 1992. Both of these arbitrations are detailed later in paragraph 118. Such a term as above will only be implied if necessary to give business efficacy to the contract and, in any event, the charterers will be able to set-off the laytime in any damages computation, if the carrying voyage has been completed. In LMLN 329—13 June 1992 the owners claimed damages for detention at the discharge port. The vessel arrived on 9 November and waited until 26 November before the receivers accepted the notice of readiness. The delay arose as a result of a dispute over the sale of the cargo. The charterers had sold the cargo to purchasers who in turn had sold it on to other purchasers. However, some difficulty had arisen as between the first and second purchasers which led to the delay in the acceptance of the notice of readiness and the consequent delay in the discharge of the vessel. The owners relied on The ‘‘Atlantic Sunbeam’’,31 and contended that the charterers were under an obligation to act with reasonable diligence in carrying out their part of the contract. That they had failed to do in arranging for a party to be available at the port of discharge capable of accepting the notice of readiness and procuring the discharge of the cargo. They contended that the charterers were therefore in breach of an independent obligation in respect of which the owners were entitled to a separate cause of action for damages. It was held that that was an attractive argument, but it was inconsistent with legal precedent. The freight paid by the charterers included the privilege of using a certain number of laydays without incurring liability for delay. The laydays were available for use at the port of discharge after the vessel had completed her voyage. The notice of readiness was accepted by the agents, who were unable to obtain acceptance from the receivers. However, the fact that notice of readiness was not accepted by the receivers was not relevant to consideration of whether or not a vessel was an arrived ship. This was a case where the approach voyage had been completed. In The ‘‘Delian Spirit’’,32 it had been held that if the charterers were guilty of a breach causing delay to a vessel that had completed her voyage, they were entitled to apply their laytime so as to diminish or extinguish any claim for delay. That 31. [1973] 1 Lloyd’s Rep. 482. 32. [1971] 1 Lloyd’s Rep. 506.

129

Para. 57

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

principle was applicable to the present case. Accordingly, the charterers were entitled to laytime being counted during the period of the delay. 58. It appears that the only implied absolute obligation of the charterers which has relevance to the commencement of laytime is that in respect of providing a cargo, all other obligations appeared to revolve around the test of reasonableness. An interesting recent case concerning the absolute obligation of the charterers and the unreadiness of the vessel to load cargo when she arrived at the loading port is that of the Court of Appeal in The ‘‘Nikmary’’,33 where the decision of the commercial judge was upheld; he had decided that the charterers were liable to the owners for a sizable sum of demurrage in respect of the detention of the vessel. The vessel was charterered on the Asbatankvoy form with the standard notice of readiness clause and the standard cleanliness clause. An amended operations clause 30 stipulated: ‘‘ . . . (i) The Owner shall clean the tanks, pipes and pumps of the Vessel to the satisfaction of the Charterer’s Inspector who shall inspect the Vessel as per local and/or Charterer’s requirements prevailing at the time. ... (v) Owner shall indemnify Charterer for all direct and/or indirect costs and consequences as a result of the Vessel not being clean to the satisfaction of jointly appointed Inspector and should the Charter not be cancelled all time until connection of hoses, after the Vessel has been passed as clean to the satisfaction of jointly appointed Inspector, shall not count as laytime, or if on demurrage, as time on demurrage.’’

On 2 December 2000 the vessel arrived at the Indian port of Sikka and gave readiness to load a cargo of gasoil. She entered berth on 3 December where her tanks were inspected by a surveyor (Caleb Brett) on behalf of charterers Vitol and the shippers Reliance Petroleum Ltd. (Reliance). The vessel was rejected on the ground that the tanks were unfit to load gasoil. The vessel shifted to the anchorage to carry out further cleaning. On 5 December the vessel’s tanks were passed fit for loading and the master gave notice at 19.30 that day. From 5 December until 2 January 2001 the vessel remained at the anchorage waiting for a cargo. On 2 January the vessel entered berth at 15.00 and loading was completed on 3 January. The owners claimed demurrage in respect of the time spent waiting at Sikka. They contended that the delay was due to the absence of cargo. The charterers submitted that the vessel had simply lost her turn in the queue as a result of the time taken to carry out additional cleaning and had been forced to wait while cargo was supplied to other vessels which had arrived within their nominated loading periods. They further argued that by virtue of clauses 6, 7, and 30(v) none of the time spent waiting at Sikka counted for the purpose of calculating laytime and demurrage. The delay of the vessel was caused by the fault of the owners themselves and the charterers were relieved of liability to pay demurrage. It was held by the Court of Appeal (inter alia) that: 33. [2004] 1 Lloyd’s Rep. 55.

130

DA M AG E S — I M P L I E D T E R M S

Para. 58

(1) A voyage charterer owed an absolute and non-delegable duty to provide a cargo for loading, and charterparty exceptions would normally be read as protecting a charterer only in respect of its duty to load, and not as covering its duty to provide cargo, although they might cover the latter if sufficiently clear and distinct words were used. (2) The charterer’s duty was to provide the cargo for loading within the stipulated lay days; Universal Cargo Carriers Corp. v. Citati (No. 1),34 considered. (3) The problem faced by the charterers was not a problem in obtaining access to or loading immediately accessible cargo; the reason why the Nikmary was not permitted to berth was not that the other vessels were occupying the shipper’s berth or had arrived first at the anchorage, to wait their turn to do so; it was a contractual reason, namely that, in so far as the charterers had any continuing contractual right to cargo at all, it was one which was postponed to all those other buyers to whom the charterers had or incurred December commitments; the shipper’s problem was a contractual procurement problem which related to the charterers’ business and arrangements and meant in effect that the charterers had no cargo available until early January 2001 for loading. (4) The delay in getting into berth could not be delay caused for a reason over which the charterers had no control. (5) Clause 30(v) could not assist the charterers. Despite the unqualified language of the clause it could not extend to circumstances of delay caused by a charterer’s failure to provide a cargo ready for loading. The charterers were in breach of charter in failing to have cargo available for loading when or six hours after the vessel became ready to load at 22.00 on 5 December 2000 or at any later time until 2 January 2001. In that situation, clause 30(v) did not apply. (6) The delay was not caused by anything which could properly be regarded as either a breach of contract or relevant fault on the part of the owners; the vessel did not fail to proceed with due despatch; nor did the crew fail to do as much as they could have done during the voyage to clean her; nor could the vessel with reasonable efforts have been made ready to load before 5 December; the fact that she presented after the cancelling date was not a breach; it merely gave the charterers a right to cancel which they chose not to exercise; rejection by the ‘‘jointly appointed inspector’’ under clause 30 would have had a similar effect; all that happened was that the vessel gave an (ineffective) notice of readiness and presented before cleaning had been completed; that was not a breach but even if it were to be regarded as involving a breach or a fault it caused no delay in loading. The appeal would be dismissed. If ever a case emphasises the importance of the absolute obligation of a voyage charterer to provide a cargo for shipment it must surely be this decision by the 34. [1957] 1 Lloyd’s Rep. 174.

131

Para. 58

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

Court of Appeal. The case also has relevance to Chapter 4 regarding cargo spaces (paragraph 64 and onwards) and to Chapter 5 in respect of breach of contract (paragraph 90 and onwards). The duty to exercise reasonable dispatch applies to owners as well as charterers but, in practice, the implied obligation is a sword more frequently used by owners to attack charterers rather than the reverse. However, the implied obligation was tried by a charterer in The ‘‘Pericles Halcoussis’’35 arbitration where the main dispute between the parties concerned the commencement of laytime and the loading port of Dumai and/or whether or not the owners were in breach of contract because of the absence of an SKU certificate at the relevant time. The salient facts, as far as the latter point was concerned, were: (a) The vessel arrived off Dumai at 05.00 on Thursday, 11 August; an appropriate notice of readiness was tendered at that time by the master but was not accepted by the shippers until 15 August. (b) An SKU permit was issued at Jakarta on Friday, 12 August valid from 10 August until 10 November 1983. An urgent cable to this effect was sent from the owners’ agents in Jakarta to agents in Dumai on Friday, 12 August. (c) The vessel did not berth until 03.45 on Monday, 15 August; pratique was granted at 03.55 and cargo lines were connected at 05.30. The notice of readiness was accepted by the shippers at 03.45 on 15 August, the time that the vessel berthed. (d) There was no express clause in the charterparty about an SKU certificate. On the alleged breaches of contract that the vessel did not have an SKU certificate at the time of contracting or at the time that the vessel arrived off the loading port, the tribunal emphasised the promptness of the fixture and decided that, although there was no valid SKU certificate for the vessel at the date of the fixture, the owners wasted no time in getting one so that, in the event, it was effective as from the time that the vessel arrived off the port; even if it were not, the owners had still acted with reasonable dispatch in obtaining the SKU certificate. This according to the tribunal, substantiated that there was no breach of contract by the owners regarding their obligation to exercise the utmost dispatch to obtain an SKU certificate. In another arbitration, LMLN 248—6 May 1989, the charterers prayed in aid an implied term in respect of the master of the vessel. The ship was chartered on the Asbatankvoy form containing a ‘‘reachable on arrival’’ provision and the usual clause 6 which provided: ‘‘Upon arrival at customary anchorage at each port . . . the Master or his agent shall give the charterer or his agent notice by letter, telegraph, wireless or telephone that the vessel is ready to . . . discharge cargo, berth or no berth, and laytime, as hereinunder provided, shall commence upon the expiration of six hours after receipt of such notice, or upon the vessel’s arrival in berth . . . whichever first occurs. However, where delay is caused to vessel getting into berth after giving notice of readiness for any reason over which charterer has no control, such delay shall not count as used laytime.’’ 35. 1985.

132

DA M AG E S — I M P L I E D T E R M S

Para. 59

The vessel arrived off the discharge port at 23.00 on Saturday, 2 February. At 23.50 a cable was sent to the official agents advising them of the fact and that the ship was ready to discharge. That cable was not received by the charterers’ agents until 08.42 on 3 February. The charterers submitted that that notice was invalid. They argued that there was an implied term of the charter that ‘‘the master and/or crew would do as soon as practically possible any and all the things necessary or customary to be done by them on arrival at the discharging port in order to facilitate the prompt berthing of the ship and the discharge of her cargo’’. The charterers maintained that the ship should have called the Port Control by VHF immediately on her arrival so as to register. The point was that the master (as the tribunal found) had not registered the vessel with the port authority, so that by the time the vessel was in a position to get into an available berth a subsequent vessel, which had registered in the early hours of 3 February, was given priority for berthing. It was held that the implied term contended for satisfied none of the usual tests. Neither the officious bystander, nor the parties, would say that ‘‘of course’’ it was to be implied. It was not necessary to give business efficacy to the contract, and it was not even reasonable. The officious bystander, if asked, would say that the detailed arrangements for berthing the ship—including the giving of any necessary notice to the authorities so as to allow prompt berthing arrangements to be made—was something that fell within the sphere of responsibility of the charterers. That was all the more so when a particular port had or might have special requirements, knowledge of which was unlikely to be at all widespread, especially because such requirements might be changed without notice or might be more or less rigorously enforced according to whim. Masters were normally entitled to expect that agents would deal with formalities and give particular advice if the ship itself was required to take some steps. The charter was, in a business sense, perfectly workable without the implication of any term such as that contended for. The burden was expressly put on the charterers to designate and procure a berth reachable on the ship’s arrival. There were detailed provisions for the giving of notice and the running of laytime. Shortly after the charter was fixed, the charterers had provided detailed voyage orders, including particulars as to the giving of various notices. Yet they said nothing about the alleged need to register by VHF immediately on arrival at the discharge port. In any event, even if such a term was to be implied, the charterers had not proved that the master had failed to do anything that he ought reasonably to have known was required by regulations, custom or practice. Accordingly, the notice of readiness was valid. The implied term ploy of the charterers appeared to have been made to get around the ‘‘reachable on arrival’’ provision of the charterparty but failed in principle and on the facts. 59. Although, as stated above (paragraph 54) there is a stringent test in respect of implying a term into laytime/demurrage provisions, the principle is adopted and tried fairly frequently. Apart from the circumstances already mentioned, where 133

Para. 59

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

parties have sought the application of an implied term there are other circumstances which may arise on an ad hoc basis which give rise to consideration of the principle by maritime arbitrators. For example, it sometimes happens that charterers as sellers/buyers of goods, have not satisfied certain requirements under their sale contracts and this has a knock-on-effect whereby laytime does not commence for the vessel carrying the goods; in such circumstances charterers may be liable to owners because of breach of their obligation to exercise reasonable dispatch to enable the vessel to become an ‘‘arrival ship’’. See The ‘‘World Navigator’’,36 below, paragraph 62, for an illustration of a seller’s implied obligation in respect of co-operation/reasonable dispatch in the context of documentation. Yet another area where the implied term principle may be relevant is that in relation to the appointment of agents; this may apply to both owners and charterers in respect of an implied term to appoint a competent agent to fulfil the duties ordinarily required of agents at the loading/discharging ports in circumstances where the agent fails to act reasonably in ensuring that a vessel becomes an ‘‘arrived ship’’. In any event, the party appointing an agent will usually be responsible for any failure by that agent in respect of exercising reasonable dispatch. If there is a failure by the agent appointed on behalf of the charterers the owners may be entitled to damages for the delay. Conversely, if there has been a failure regarding the agent appointed on behalf of the owners, which prevents the vessel becoming an ‘‘arrived ship’’, the owners will of course have no claim against the charterers for the delay and may be liable to them under a counterclaim for e.g. extra expenses relating to storage/transportation of the cargo. It is possible, although unlikely in modern times, for a term to be implied into a charterparty by way of custom/usage which affects a vessel being ‘‘an arrived ship’’ in respect of reaching the agreed destination. All the reported cases in respect of this topic are of nineteenth century vintage when custom/usage was much more relevant. 60. From time to time charterers fall foul of their obligation to exercise reasonable dispatch in the context of nominating a port in sufficient time to avoid delay and this affects the commencement of laytime. If a charterparty provides for a vessel to proceed to a port as ordered and for discharging port orders to be given in the course of the vessel’s passage from the loading port, it is the obligation of the charterer to furnish the requisite orders within whatever time may be specified or, if no time be specified, within a reasonable time. A breach of the implied obligation regarding a reasonable time can give rise to a claim for damages by the owner. In The ‘‘Timna’’37 the vessel was chartered for a voyage carrying grain from Virginia to European ports. Part of the cargo was for delivery at Bremen and part for an unspecified destination. At the time the vessel passed Lands End, Bremen was intended as a second discharge port but the charterers instructed the vessel to proceed to the River Weser and said that they would name the first discharging port later. On reaching the mouth of the Weser firm orders had not been given to those 36. [1991] 2 Lloyd’s Rep. 23. 37. [1970] 2 Lloyd’s Rep. 409.

134

A S S E S S M E N T O F DA M AG E S

Para. 61

on the vessel by the charterers. The following day the master took the vessel up river to Bremerhaven but the charterers refused to accept the notice of readiness tendered there by the master, telling him that the vessel was intended for Brake which was a port further up river. The owners did not consider this an order to proceed to Brake and the vessel remained at Bremerhaven waiting for orders for some 16 days. The owners claimed demurrage and/or detention. It was decided by Mr Justice Donaldson (as he then was) that the vessel was never an arrived ship at Bremerhaven (so that laytime could not commence) but that the detention claim succeeded on the basis that the charterers were in breach of their reasonable dispatch obligation to give orders for the first discharging port and that the message given to the master regarding the intention for Brake did not amount to an order to go to Brake. The charterers were liable in damages from the time when the orders should have been given (3 January) until the time when they were in fact given (19 January). The charterers contended that no damages should be awarded to the owners because the vessel would have waited in any event outside the port, without laytime commencing, and, therefore, no loss was suffered. However, they were unable to prove that no loss was suffered and the owners were awarded damages, on the basis of the vessel’s demurrage rate for the whole of the period that the vessel was delayed, no set-off being made in respect of the allowed laytime (see the next paragraph for further consideration of this case). ASSESSMENT OF DAMAGES 61. An important matter can be the calculation of damages in a breach of contract situation. The basic principle is that a party should be put, as far as is reasonably possible, in the same position as if the contract had been performed subject of course to the rules relating to remoteness and mitigation. By and large there should be no windfall for the party breached against but simply a true measure of the loss which has been suffered by that party. In The ‘‘Timna’’ (see paragraph 60, above) Mr Justice Donaldson had this to say regarding damages: ‘‘It is, of course, the law that a claimant must prove his loss. However, a merchant ship is a profit-earning chattel, and in the case of this ship it is agreed that the measure of loss for the vessel’s detention is U.S. $2,500 per day or pro rata, i.e., the same rate as that agreed between the parties as applicable to demurrage claims. If, therefore, the owners prove that the ship was detained in a non-profit-earning state by the need to await orders, they establish a prima facie loss which, in the absence of further evidence, becomes a proved loss. If, on the other hand, there is evidence that the vessel could not have been used as a profit-earning chattel, even if she had not been so detained, the prima facie loss is rebutted. I see no reason to infer that the vessel could not have become an arrived ship at an earlier point of time than was in fact the case, just because no berth regularly used for the discharge of the type of cargo concerned was available. The absence of such a berth no doubt induced the charterers to delay nominating the first port of discharge, since it ensured that the vessel could not become an arrived ship at what, from their point of view, might be a premature moment, but that is quite another matter and involved a breach of their obligations under the charterparty. On the existing state of the evidence, I find the loss proved.’’

As stated already he awarded damages for the whole of the 16 days that the vessel was out of orders from the charterers without any set-off in respect of the allowed 135

Para. 61

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

laytime (which would of course become relevant when laytime actually commenced). The award of damages was affirmed in the Court of Appeal,38 Lord Denning adding (page 94 of the law report): ‘‘In any case, I think that Mr Goff was wrong in putting the burden of proof on the shipowners. It was the charterers who were in breach. It was for them to nominate a port. It does not lie in their mouth to say: ‘If we had nominated a port, the vessel could not have got there as an ‘‘arrived ship’’’. The matter was never put to the test, and it was their fault it was not put to the test. If they wished to say that there was no damage, they ought to have proved that there was no port at all to which the vessel could get as an ‘arrived ship’. They got nowhere near proving it.’’

The judgments of the High Court and Court of Appeal made no reference to setting off laytime in respect of a damages computation; the emphasis was very much on proving the loss and the onus of proof. Whether or not laytime should be set off in a damages calculation was touched upon in The ‘‘Delian Spirit’’, see below. In The ‘‘Delian Spirit’’39 (referred to on other matters in Chapters 1 and 2) the owners appeared to get a windfall from the High Court. It was decided that the vessel was waiting for a berth within the limits of the port so that, on the face of things, laytime commenced but also that the charterers were in breach of the ‘‘reachable on arrival’’ provision in the charterparty. Originally, the shipowners claimed demurrage on the basis that time spent at the anchorage counted as laytime, but later restated their claim as one of damages for delay with a claim for demurrage in the alternative, the damage being based upon a delay of four and a half days while the vessel was waiting in the roads. The charterers maintained that no damages were payable because the vessel was an ‘‘arrived ship’’ as soon as she had arrived in the roads and an award of damages would deprive them of the benefit of 120 running hours of laytime which would have had the effect of more than exhausting the time that the vessel was waiting for a berth. It was held by Mr Justice Donaldson (as he then was) that the charterers had two quite distinct obligations, one under the ‘‘reachable on arrival’’ provision and the other one to load and discharge the vessel within the laytime. In point of time these two obligations may or may not overlap wholly or partly but a breach of either must be considered separately from a breach of the other save in so far as it can be shown that the interaction of the clauses presents a situation in which no losses flowed from the breach. In the present case, the charterers were in breach of their obligation under the ‘‘reachable on arrival’’ provision whether or not the vessel was an arrived ship and their liability to compensate the owners for any loss occasioned thereby does not deprive them of the benefit of the laytime. It is true that the laytime is wasted if the vessel is not at her berth but this flows from the charterers’ failure or inability to secure a berth for her and may well involve them in a further breach of contract in failing to complete loading and discharging within the laytime (indeed, it did in the present case). It does not flow as such from the operation of the ‘‘reachable on 38. [1971] 2 Lloyd’s Rep. 91. 39. [1971] 1 Lloyd’s Rep. 64; [1971] 1 Lloyd’s Rep. 506 (C.A.).

136

A S S E S S M E N T O F DA M AG E S

Para. 61

arrival’’ provision and is not a case of their being deprived of the benefit of the laytime by the operation of that clause. Mr Justice Donaldson went on to decide that the owners were entitled to damages for four and a half days of delay even though the laytime, if applied, would have extinguished any claim by the owners. His lordship was motivated, to a certain extent, by the overwhelming probability that, if a berth had been available and there had in consequence been no breach of contract by the charterers, the vessel would have gone straight in to a berth and would have completed loading and have sailed as expeditiously as she did four and a half days earlier. The charterparty did not provide for the payment of dispatch money so the owners would have had the use of their vessel four and a half days earlier than in fact occurred, without cost to them. The Court of Appeal reversed Mr Justice Donaldson, deciding that the charterers were entitled to their full laytime as from when the vessel arrived and gave notice and it was only after using up that laytime that they were liable to demurrage at the agreed rate and they were not additionally liable for damages for delay under the ‘‘reachable on arrival’’ provision of the charterparty. Lord Denning (the then Master of the Rolls) said that he could not agree with the High Court judge since it would be most unjust that the charterers should be made liable twice over. He stated that the answer was given by a long line of cases which had established that where charterers had been guilty of a breach causing delay they were entitled to apply their laytime so as to diminish or extinguish any claim for the delay leaving the owners to claim for demurrage at the agreed rate for any extra delay over and above the laytime. The reason is because they have bought their laytime and paid for it in the freight and are entitled to use it in the way which suits them best and in particular to use it so as to wipe out or lessen any delay for which they would otherwise be responsible. The position is now clear enough on the authorities that if a vessel has arrived at her destination then the charterers will be entitled to set off any laytime against the time that a vessel is waiting off a port when a breach of contract by them has occasioned that delay. If the vessel has not arrived at her destination then the position appeared to be open at one time. Sir Gordon Willmer, in The ‘‘Delian Spirit’’40 had this to say: ‘‘I prefer to say no more upon the difficult question which might have arisen if the vessel had not been found to be an arrived ship at the time when she was lying in the roads. But I certainly do not wish to be taken as accepting that, even in that situation, the owners would necessarily be entitled to prosecute an independent claim for damages, without giving credit for the laytime to which the charterers were entitled, and for which, as we have been reminded, they paid when they paid the freight.’’

In the same case Lord Denning delivered obiter that the laytime should be applied against the time the vessel is waiting in respect of a damages computation. He said: ‘‘The answer is given by a long line of cases which establish that where the charterers have been guilty of a breach causing delay, they are entitled to apply their laytime so as to diminish 40. [1971] 1 Lloyd’s Rep. 506.

137

Para. 61

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

or extinguish any claim for the delay, leaving the shipowners to claim for demurrage at the agreed rate for any extra delay over and above the laytime. The reason is because they have bought their laytime and paid for it in the freight, and are entitled to use it in the way which suits them best, and in particular to use it so as to wipe out or lessen any delay for which they would otherwise be responsible.’’

Lord Denning appeared to be putting it very wide in that a charterer would always be entitled to set off the laytime vis-`a-vis the waiting time in any damages computation irrespective of whether or not the vessel had reached the exact geographical destination. The matter is no longer open since it came up for consideration in The ‘‘Mass Glory’’,41 which was an appeal from a decision by London arbitrators. The case concerned a number of issues, including the setting off of laytime aspect. The vessel entered Xiamen on Sunday, 14 June 1998 and passed the normal inward inspection later that day. She was then ready to berth and a berth was available for her, but she was unable to occupy it because the cargo documents were not in order and because the sellers of the cargo ordered the vessel not to allow anyone to have access to the vessel without production of an original bill of lading. The master gave notice of readiness at 08.00 hours on Monday, 15 June but it was common ground that both voyage charters were berth charters and that since the vessel was not prevented by congestion from reaching her berth the notice of readiness was invalid. The problems with the cargo documents were not resolved until 9 August. Discharging began later that day but no further notice of readiness was given then or at any time after she reached her berth. Discharge was completed on 19 August and the vessel left for Nantong to discharge the remainder of her cargo. The owners under each charterparty claimed damages for detention from the charterers in respect of the time lost while the vessel was kept waiting at Xiamen. The disputes were referred to arbitration. The arbitrators held that the delay to the vessel at Xiamen was caused by the charterers’ breach of contract, that since the notice of readiness given on 15 June was invalid time did not start to count and the laytime exceptions did not apply while the vessel was waiting at the anchorage, and the whole of the time was to be taken into account in calculating damages for detention. This decision of the arbitrators was upheld in the Commercial Court by Mr Justice Moore-Bick, who had these important words to say: ‘‘It has long been recognized that the completion of the carrying voyage is a critical stage in the adventure, not least because it marks the point at which the charterer’s obligation to co-operate with the owner in discharging the goods begins. For this reason it is usually also the point at which notice of readiness can be given in order to bring into operation the laytime and demurrage provisions of the charter and at which the risk of delay to the vessel passes from the owner to the charterer. The purpose of a notice of readiness in this context is twofold: to inform the charterer that the vessel has completed the carrying voyage and is at his disposal for the discharging of cargo; and to start the running of laytime. Unless the

41. [2002] 2 Lloyd’s Rep. 244.

138

A S S E S S M E N T O F DA M AG E S

Para. 62

parties have agreed otherwise a valid notice of readiness cannot be given until the vessel had reached her agreed destination, whether that be the port, berth or some other place identified in the charter.’’

He declined to adopt Lord Denning’s obiter (see above) and he also distinguished the case from the earlier 1991 World Navigator judgment (see later paragraph 62), as had the arbitrators, so that he rejected the premise that laytime saved should be set off regarding the damages claim. While we now have some authority on the subject the author feels some disquiet about the result for the simple reason that a charterer buys the laytime and yet cannot have it set off in a damages computation simply because, strictly speaking, laytime has not commenced. While seeing the logic of not being able to set off something which has not yet commenced it is surely artificial to allow this somewhat theoretical point to deny a charterer what appears to be sensible, practical and just. To put it in a nutshell, it seems illogical to offset laytime if the vessel (in the case of a port charterparty) is anchored a few hundred metres within the port limits but not to do so if the vessel is anchored a few hundred metres the other way and just outside the port limits, after the completion of the sea voyage. The breach of contract, and the resulting delay, is the same whether or not the vessel is a little one side or the other of a line which, to a certain extent, may be somewhat artificial. Of course, the author realises that the Mass Glory case was concerned with a berth charterparty but it does not see why that should obfuscate a practical and fair application whereby a charterer is allowed what appears to be a sensible and just approach to a damages computation which would, in the event, appear to be in line with the general principles relating to damages. Surely, a charterer should be allowed to set-off the laytime which is bought in the contract in respect of a claim against him for damages where the vessel he has chartered waits at or off a port for a loading/discharging berth, after the completion of the sea voyage. Otherwise the owners of a vessel may obtain a windfall, as they did in The ‘‘Delian Spirit’’, prior to the appeal to the Court of Appeal (see above). Having said the above, the fact is that we now have judicial authority on the matter and, since the Mass Glory decision was never appealed, we have to wait for an appeal to the Court of Appeal or to the House of Lords for any change in this aspect of maritime law. The judgment is, perhaps, another example of too much respect being paid to Lord Diplock’s four stages, in particular ‘‘the carrying voyage’’; after all, there is a sound argument that, practically speaking the carrying voyage ends when a vessel gets at or off a discharging port (anchors or lies there) which may or may not be in within port limits, in the case of a port charterparty. As mentioned more than once in the book, if the vessel has reached a place from which notice of readiness can be given the owners’ remedy is not to claim for damages but to give a notice of readiness and use the laytime as a set-off, see for example LMLN 672—17 August 2005 in Chapter 1 and LMLN 329—13 June 1992 set out earlier in this chapter when dealing with implied terms. 62. Although not on all fours with the damages point referred to earlier, and being concerned with a sale contract rather than a voyage charterparty, the Court of 139

Para. 62

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

Appeal decision in The ‘‘World Navigator’’42 is of interest in how damages were dealt with by that court also, in respect of an implied term; although it was a contract appertaining to the sale of goods it was concerned with laytime/demurrage. Roplack Enterprises sold a quantity of 12,000 tonnes of maize f.o.b. Rosario to Kurt A. Becher. The contract was on two standard sets of conditions, namely GAFTA 64 and the Argentine Centro conditions. Clause 7 of GAFTA 64 provided: ‘‘7. Delivery— . . . Vessel to load in accordance with the custom at port of loading unless otherwise stipulated . . . ’’

The Argentine Centro conditions provided: ‘‘Loading Rate: . . . sellers guarantee provided vessel is able to receive, a minimum average loading rate of 500 tonnes per weather working day . . . Buyers to give sellers at least 15 days notice of readiness of vessel to load . . . ’’

The buyers nominated the vessel World Navigator to load the maize. She arrived at Zona Comun and tendered notice of readiness. The authorities instructed her to remain at Zona Comun because of congestion at Rosario Roads. Since the shipper’s documentation was not in order the World Navigator lost her place in the loading schedule and was overtaken by other vessels. The vessel following the World Navigator moored at 06.10 on 25 June 1985. World Navigator eventually moored at 03.00 on 18 July 1985. She loaded a total of 24,000 tonnes and finished loading on 22 July 1985. The buyers claimed that the sellers had the obligation to deliver the goods by loading them when the vessel was ready to receive them, and that the delay in loading the 12,000 tonnes fell squarely on the sellers. The sellers were accordingly liable for the additional demurrage the vessel incurred. The GAFTA Board of Appeal rejected the buyers’ claim on the ground that although the sellers were in breach of contract the buyers had suffered no loss. The vessel in the event used less than 18 days of laytime whereas, under the sale contract, 24 days were allowed. The buyers appealed and Mr Justice Phillips held that: (1) the evidence demonstrated that the World Navigator could not berth without the co-operation of the sellers in providing appropriate loading documentation and it was common ground that it was necessary to imply into the f.o.b. contract a term requiring the sellers to provide that co-operation; there was an implied obligation on the sellers to act with reasonable dispatch and in accordance with ordinary practice in doing those acts which were necessary to enable the buyers to present their vessel for loading at the berth; if availability of goods sold was necessary to enable the buyers’ vessel to berth there was an absolute obligation on the sellers to have the goods available when the vessel arrived provided 15 days’ notice had been given; it might be that this obligation could be extended to cover the procurement of documentation if this was something solely within the control of the sellers;

42. [1991] 2 Lloyd’s Rep. 23.

140

A S S E S S M E N T O F DA M AG E S

Para. 62

(2) if the sellers were in breach of the duty that they were under, the immediate consequence of their breach was that the World Navigator was detained for a period which on the board’s findings was about 17 days before being permitted to berth; when assessing the damages the board should not have proceeded on the premise that had the vessel berthed promptly the sellers would have loaded so slowly that they would have used all the available laytime; the board’s task was to ask how long loading would have taken had the World Navigator berthed promptly without losing her place in the queue; if the sellers were in a position to influence the loading rate then the board ought to have considered how they would have done so and that question fell to be answered by considering all the factors that would have been likely to influence their conduct; both appeals would be allowed and the awards remitted to the board for reconsideration of the buyers’ claim for damages for detention. The sellers appealed, the issues for decision being: (1) What was the sellers’ obligation, if any, with regard to enabling the vessel to reach the loading berth after having received a valid notice of readiness? (2) What was the sellers’ obligation with regard to the rate of loading once the vessel had berthed and was able to receive the cargo? (3) On what basis should damages be assessed if the sellers were in breach of an obligation under (1) above? It was held by the Court of Appeal (Lord Justices Parker and Staughton and Sir David Croom-Johnson), that (1) there was an obligation to do all that was necessary to enable the vessel to berth on the expiry of the 15 days’ notice; it was probably impossible and undesirable to define the precise ambit of the obligation for in all cases what was to be implied would or might be dependent on both the terms of the contract and the surrounding circumstances: (2) the GAFTA provision was that the vessel was to load in accordance with the custom of the port unless otherwise stipulated; the Centro clause did otherwise stipulate and under that clause the sellers would not be in breach if they maintained an average of at least 500 tonnes a day; the clause was intended to be a comprehensive clause providing as it did for exceptions from laytime; and the sellers were entitled once the vessel was in berth to take up to 48 counting days to load the complete cargo or 24 counting days to load the contracts in question; (3) if the breach had not occurred laytime would have begun to run on 26 June and the sellers’ obligation would have been to load in the number of counting days arrived at by the application of the Centro terms but no more; a defendant in performing his contractual obligations was assumed to have chosen to perform them in the way least beneficial to the plaintiff; there was no question of looking at the extraneous events and therefore no question of it being permissible to look at the probabilities; the rate at which the sellers had chosen to load was not in any sense an event extraneous to the contract; it was expressly provided that they should load at a minimum average rate of 500 tonnes per day and they were entitled to load faster; there was nothing in the award to show that loading in the customary manner at Rosario would have prevented the sellers using all the time which the contract allowed; the buyers were not entitled to damages and the appeal would be allowed. 141

Para. 62

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

While there was no direct consideration of setting off laytime in a damages computation the parties appeared to accept that this principle was operative in the circumstances of the vessel being at Zona Comun with a loading port (Rosario) some 200 miles away (same facts as The ‘‘Adolf Leonhardt’’); of course, it may be that no point was ever taken with the actual owners in respect of the vessel not having reached the agreed destination of Rasario and that the parties proceeded on the basis that a valid notice of readiness could be given at Zona Comun (thus obviating an argument that since the vessel had not reached the agreed destination a claim in damages for detention should not include a set-off in respect of the laytime). On the implied term aspect there was discussion, which resulted in obiter only, regarding why there should be an absolute obligation in respect of the charterers’ obligation to supply a cargo (irrespective of whether they exercised reasonable dispatch) as in The ‘‘Aello’’, whereas, otherwise, the obligation is only one of reasonable dispatch, as in The ‘‘Atlantic Sunbeam’’. Lord Justice Staughton had this to say: ‘‘It may well be that the cases can be reconciled if one has regard to the precise task which remained unperformed in each. In The ‘Aello’ the charterers had not obtained a giro permit, because they did not have cargo available ready to be loaded. That was held to be solely their concern, and they must bear the responsibility for lack of a cargo even though their best endeavours had failed to find one. In The ‘Atlantic Sunbeam’, on the other hand, the obstacle was delay in obtaining a jetty challan, which required the co-operation not only of the consignees or receivers but also of the port authority and the customs. It was at least possible that the port authority or the customs had caused the delay. Having explored the problem thus far, I agree with Lord Justice Parker that it need not be decided in this case, having regard to our conclusion as to damages if there was any breach of an implied term.’’

The Court of Appeal decision emphasised the benefit to a defendant of the ‘‘least burdensome obligation’’ (see (3) above) in addition to airing some views and doubts in respect of implied obligations as related to absolute/reasonable dispatch obligations. On a final note regarding damages in general it is emphasised that while in practice the daily rate used is usually the demurrage rate of the vessel it does not necessarily follow that this is so for all damages computations. The true measure of damages may result in owners being entitled to more than the demurrage rate (market rises sharply and rapidly); alternatively there can be reverse circumstances where they are entitled to less than that rate. It is also mentioned that principles of causation, mitigation, and remoteness of damage are applicable to any assessment of damages although in practice these principles rarely produce problems in respect of laytime/demurrage disputes. However, the case of The ‘‘Eurus’’43 raised interesting matters in relation to foreseeability and remoteness of damage. The case is also referred to earlier in paragraph 42 in relation to custom. The vessel Eurus was chartered on the Asbatankvoy for a voyage to carry a minimum cargo of 122,000 metric tons of Forcados crude oil from Nigeria to a range of possible discharging ports. The charterers wanted loading to be completed 43. [1996] 2 Lloyd’s Rep. 408 (Com. Ct.) and LMLN 473—20 December 1997 (C.A.).

142

A S S E S S M E N T O F DA M AG E S

Para. 62

in February 1992 so that they could obtain a February bill of lading. This was because the February 1992 price of Forcados crude was US$0.60 per barrel cheaper than the January price. Under the charter the vessel was not due to arrive and give notice of readiness until 31 January. To ensure completion of loading in February the charterers, on 24 January, sent instructions by telex that notice of readiness was not to be tendered to the terminal at Forcados before 11.00 on 31 January at the earliest. Because of a misunderstanding by the Master, the vessel moved into berth at 00.30 on 31 January without waiting to tender notice of readiness. Loading commenced at 06.36. At 12.00 the Master gave an estimated time of completion of 01.00 on 1 February. The charterers gave instructions to the owners to request the vessel to slow down to ensure a bill of lading dated 1 February. Loading was completed at 01.30 on 1 February. Neither the charterers nor the owners knew that there was a rule in Nigeria (‘‘the 8 o’clock rule’’) that any oil shipment which was completed before 8 am on the first day of any month was treated as though it had been completed on the last day of the preceding month. Because of the 8 o’clock rule, the Master was compelled to sign a bill of lading dated 31 January, notwithstanding that loading had in fact been completed at 01.30 on 1 February. As a result of the loading being completed before 8 am on 1 February the charterers had to pay an extra US$681,934 for their oil to their suppliers. The charterers brought arbitration proceedings against the owners claiming damages or an indemnity under clause 36 of the charterparty which provided: ‘‘Owners shall be responsible for any time, costs, delays or loss suffered by charterers due to failure to comply fully with charterers’ voyage instructions provided such instructions are in accordance with the charterparty and custom of trade.’’

The arbitrators held that the charterers’ instructions to the vessel not to tender a notice of readiness amounted to an instruction not to present or berth for loading prior to that time. They went on to hold (by a majority) that the claim in damages failed because the 8 o’clock rule was not foreseeable and the damages were therefore too remote, but that the claim for an indemnity succeeded because that was a pure question of causation, and the Master’s failure to follow his instructions had indeed caused the loss. The owners appealed to the High Court. Mr Justice Rix allowed the appeal, holding that on its true construction clause 36 was not an indemnity but was a term which required the owners to comply with charterers’ voyage instructions, provided such instructions were in accordance with the charter and custom. The charterers appealed to the Court of Appeal. It was held that the case for the charterers was that clause 36 was an indemnity clause, although damages were an alternative remedy. In its role as an indemnity clause, it required proof that the loss was caused by failure to obey the charterers’ orders, but not that the loss should be within the reasonable contemplation of the parties. That was the route which the arbitrators had adopted. The problem was to be treated as a question of interpretation of the contract. Did clause 36 provide that the charterers could recover even if the loss suffered was not within the reasonable contemplation of the parties? 143

Para. 62

B R E AC H E S O F C O N T R AC T / DA M AG E S R E A R R I V I N G

What was the purpose with which clause 36 was intended to fulfil? It had been common ground before the arbitrators that clause 36 contained an implied term requiring the owners to comply with the charterers’ voyage instructions. However, there was such a term without clause 36. On the face of the charterparty the charterers had an option to nominate the loading port, the discharging port(s) and the quantity and grades of cargo. If the charterers had that right the owners must have had a corresponding duty to obey. The extent of the charterers’ right to give other orders was not clear; but whatever it was, the owners must again have had a duty to obey. The words ‘‘provided such instructions are in accordance with the charterparty and custom of the trade’’ showed that clause 36 was not intended to increase the scope of the charterers’ right to give orders. Any implied term derived from clause 36 would therefore be surplusage. As to the purpose of clause 36, the Court of Appeal could not see why the parties would have wished to provide that, for some breaches of contract by the owners, the charterers’ loss would be recoverable whether or not it was within the reasonable contemplation of the parties, whilst for all other breaches the ordinary rule as to damages in a contract case would apply. It was not the intention of the parties to provide, by clause 36, that a particular kind of breach of contract by the owners should attract liability even for unforeseeable consequences, whilst in the case of all other breaches of contract the ordinary rule of remoteness would apply. That could not be extracted from the wording of clause 36; and even if it arguably could be, the Court was now enjoined to have regard to the purpose or aim of contractual provisions as well as to the actual words used—see Investors Compensation Scheme Ltd v West Bromwich Building Society,44 per Lord Hoffmann. The decision of the judge would be upheld and the appeal dismissed. The real interest in the case is that in relation to causation and remoteness of damage. What the arbitrators decided (the vessel could not berth and commence loading prior to tendering a notice of readiness) was based upon the particular facts of the case since the charterers had given express instructions that a notice of readiness was not to be tendered before a specific time and that the owners were in breach of this instruction. The arbitrators did not even suggest that the common law functions of a notice of readiness had an additional general potential function in that a vessel could not berth and commence loading prior to tendering a notice of readiness, as mooted in [1997] LMCLQ at pages 486/7.

44. The Times, 24 June 1997.

144

CHAPTER FOUR

READINESS

GENERAL 63. The second requirement to be satisfied in order for laytime to commence under the common law is that the vessel must be ready to load or discharge the whole of her cargo when she has reached her destination and/or when a notice of readiness is tendered. Under English common law a notice of readiness is only required at the first loading port (absent a custom that a notice has to be given at other ports) although, in practice, it is usual for a charterparty to contain an express clause which requires the tendering of a notice of readiness at both the loading and the discharging ports and frequently also at second or subsequent loading and discharging ports. Readiness involves the vessel being available to the charterers for use by them and this, in turn, requires that: (a) the vessel’s cargo spaces are ready for loading or discharging; (b) the vessel is properly equipped for loading or discharging operations and such is in a state of readiness; (c) all relevant documentation is in order, sometimes referred to as legal readiness.

CARGO SPACES INCLUDING THE TRES FLORES DECISION 64. In practice it is the cleanliness of the cargo spaces prior to loading which gives the most problems in respect of readiness and which prevents the laytime clock from starting to tick. The common law position has been set out in several cases over the years but was emphasised in the much-publicised case of The ‘‘Tres Flores’’.1 The case is worth looking at in detail since it is the leading case on the subject, being referred to time and time again in arbitrations. The facts were that by a charterparty on a Synacomex form the owners of the vessel chartered her for a voyage from Varna to Famagusta and Beirut to carry a cargo of bulk maize. The charterparty provided (inter alia):

1. [1972] 2 Lloyd’s Rep. 384; [1973] 2 Lloyd’s Rep. 247 (C.A.); cited above, paragraphs 39 and 57, on other matters.

145

Para. 64

READINESS

‘‘6 . . . Any time lost in fitting the shifting boards or other material do not count as laytime. Before tendering notice, the Master has to take necessary measures for holds to be clean, dry, without smell and in every way suitable to receive grain to Shippers’ Charterers’ satisfaction. . . . 21 . . . At loading port, time to commence whether the vessel be in berth or not . . . at 2 p.m. if written notice is given during usual local office hours before noon and at 8 a.m. next working day if notice is given during usual office hours after noon. Master is allowed to give notice of readiness by telegram when ship has arrived on the road of loading port.’’

Although the charterparty contained an express clause regarding the state of the vessel’s holds prior to tendering notice of readiness (which in the event militated against the owners), the standard required under this clause was virtually synonymous with the common law; in fact, all the judges involved in the case (High Court and Court of Appeal) laid stress on the common law position in respect of cargo spaces. The further facts were that the vessel arrived at Varna at 05.00 on Sunday, 22 November, and anchored on account of no berth being available. Notice of readiness was declared by the master and delivered to the agents at Varna at 10.00 on the Sunday. Owing to heavy weather the vessel could not be inspected while at anchor until 15.15 on Friday, 27 November and, at the inspection which took place then, pests were found in the cargo spaces and fumigation was ordered in order to make the vessel ready for loading maize. Fumigation took place between 15.00 and 19.30 on Monday, 30 November, and cost $170.94; at the latter time the vessel was in all respects ready for loading and her notice of readiness was accepted by the agents at 11.00 on Tuesday, 1 December. The vessel berthed on 7 December and completed loading on 13 December. Evidence was adduced by the charterers to show that the cargo was in the loading port on 23 November. The owners contended that, in view of the type-added clause 21 of the charterparty, laytime should commence at 14.00 on Monday, 23 November. The vessel had reached the agreed destination and, as far as the master was aware, the vessel was ready for loading; the fact that the vessel could not be inspected for five days after arrival (the inspection showing that the vessel was not ready in all respects) should not detract from the intention of the type-added clause which was to apply the laytime calculations to laytime spent waiting off the port. They further contended that they should not, at the very least, be worse off than if an inspection had taken place at the time or soon after the arrival of their vessel off the port. According to the owners, if an inspection had taken place when the vessel arrived at the agreed destination, fumigation would have been effected soon afterwards and laytime would have commenced. The charterers submitted that, in view of the conditions to be satisfied under the law in order for laytime to commence, and the fact that the vessel was not ready when she arrived at the agreed destination, laytime could not commence until 14.00 on 1 December. The two arbitrators (they did not call in an umpire) published a joint award in favour of the owners of the vessel. They considered that the intention of the parties, to be derived from the words agreed by them, was that any time spent at or off port after reaching the agreed destination was to enter into the laytime calculation. It seemed to them that the type-added clause was tailor-made for the situation which 146

C A R G O S PAC E S

Para. 64

occurred at the loading port, a situation not uncommon, namely, that, through no fault of the owners, a vessel has to wait off a port for a berth to become available. They went on to say that, had they decided otherwise, the type-added clause would not have been of much help to the owners. While they were mindful of the strictness of the common law relating to an ‘‘arrived ship’’ they were also mindful of the words of Lord Justice Devlin (as he then was) in Ingram v. Little2 when he stated: ‘‘The great virtue of the common law is that it sets out to solve legal problems by the application to them of principles which the ordinary man is expected to recognise as sensible and just. The true spirit of the common law is to override theoretical distinctions when they stand in the way of doing practical justice.’’ The arbitrators were obviously sympathetic to the owners in the situation which had arisen and decided for them on the basis that laytime commenced. In the alternative, they decided in favour of the owners that there was an absolute obligation to inspect the vessel by the charterers after she had arrived at Varna and, since this obligation was breached, the owners should get damages for the delay to their vessel. In the High Court, Mr Justice Mocatta decided on the evidence that the vessel was not ready to load on Sunday, 22 November, and could not give a notice of readiness to load on that day because her holds were infested; this was a serious matter when one was contemplating the loading of a grain cargo, even though it only took four and a half hours and no very great expenditure of money to rid the vessel of the pests. On the aspect relating to the type-added clause, his lordship stated that although the clause contained words which sought to protect the shipowner as regards the initiation of laytime, it was only so in respect of geographical requirements and it did not lessen the requirement regarding the state of the vessel’s cargo spaces. He went on to say: ‘‘It is the duty, in my judgment, of the shipowner to make his ship fit to carry cargo. If he does not do this, he is not in a position, as long as his ship is unfit, to give a valid notice of readiness. No doubt to certain facts, as in all branches of the law, the maxim de minimis would apply, but I do not consider that the facts here fall within that maxim at all.’’

He reversed the arbitrators’ decision on the commencement of laytime as he did also their alternative decision vis-`a-vis the absolute obligation to inspect the vessel. This decision was appealed but the Court of Appeal upheld Mr Justice Mocatta. The following are parts of the judgments by the Lords Justices of Appeal which are now embodied in English maritime commercial law and which are frequently referred to in arbitrations: Lord Denning, Master of the Rolls: ‘‘One thing is clear, in order for a notice of readiness to be good, the vessel must be ready at the time the notice is given, and not at a time in the future. Readiness is a preliminary existing fact which must exist before you can give a notice of readiness. . . . In order for it to be a good notice of readiness, the Master must be in a position to say ‘I am ready at the moment you want me, whenever that may be, and any necessary preliminaries on my part to the loading will not be such as to delay you’. Applying this test, it is apparent 2. [1962] 1 Q.B. 31.

147

Para. 64

READINESS

that notice of readiness can be given even though there are some further preliminaries to be done, or routine matters to be carried on, or formalities observed. If those things are not such as to give any reason to suppose that they will cause any delay, and it is apparent that the ship will be ready when the appropriate time arrives, then notice of readiness can be given. In the present case there were pests in the hold such as to make the ship unready to receive cargo. Fumigation was not only a preliminary, nor a routine matter, or a formality at all. It was an essential step which had to be taken before any cargo could be received at all. Until the vessel had been fumigated, notice of readiness could not be given. It has always been held that, for a notice of readiness to be given, the vessel must be completely ready in all her holds to receive the cargo at any moment when she is required to receive it.’’

Lord Justice Roskill (as he then was): ‘‘First, it has been accepted in this branch of the law that a vessel which presents herself at a loading port must be in a position to give the charterer unrestricted access to all her cargo spaces before she can give a valid notice of readiness. This state of readiness must be unqualified. It is not open to the shipowner to say: ‘Here is my ship; she is not quite ready but I confidently expect to be able to make her ready by such time as I consider it likely that you will in fact need her.’ The charterer has contracted for the exclusive and unrestricted use of the whole of the vessel’s available cargo space, and he is entitled to expect that that space will be placed at his disposal before he can be called upon to accept the vessel as having arrived and therefore being at his risk and expense as regards time. Secondly, I do not think that this principle is in any way weakened by the decision in Deppe. . . . In my judgment the essential distinction between the present case, on the one hand, and Deppe and The ‘Delian Spirit’ on the other, is that in those latter cases the matters which remained to be done before the vessel could begin to discharge or load were in the nature of normal and usual preliminaries which would require to be carried out in every case, whereas the fumigation in the present case could not so be described. Thirdly, the adoption of the test contended for . . . would introduce an unwelcome element of uncertainty into this area of the law. In a case such as Deppe, some slight delay may occur after the vessel has berthed and before cargo operations can begin, but it is delay which is to be expected as normal and is predictable within narrow limits. The charterer can safely accept the vessel’s notice of readiness knowing that he can act upon it because, apart from the usual preliminaries, the vessel will be fully available to him as soon as she berths. Such a position would not obtain if Mr Mustill’s proposition were accepted. In a case such as the present a statement in the notice of readiness that the ship was ready would be factually incorrect and that statement could only become correct (if at all) at some future date which could not be accurately predicted and of which a shipowner’s honest prediction might well be subsequently falsified by intervening events. A ship in order to be ready and thus entitled to give valid notice of readiness must be ready to obey the charterer’s orders whenever they are given. In the present case the ship was not in a position to do this since at the time when she gave notice she could only be made ready by fumigation of then unknown extent at some future time. The fallacy in the appellants’ argument was (if I may say so) aptly pointed out by my lord, Lord Justice Cairns, during yesterday’s argument when he said that if the argument be right, a charterer might have to pay demurrage as liquidated damages for failing to load when the ship was in fact unfit to load. That is not and never has been the law. In my judgment the law is correctly set out in the first full paragraph on p. 130 of Scrutton on Charterparties, 17th ed. (1964): ‘The degree of necessary readiness of the ship for her part is relative to that of the charterers or consignees for theirs. Therefore the ship need not be absolutely ready (e.g. by having all her gear fixed up for the work) at a time when the charterers or consignees are not in a position to do any of their part of the work, so long as the ship can be absolutely ready as soon as they are.’

148

C A R G O S PAC E S

Para. 64

I would qualify this statement in only two respects. First, a short delay after berthing while the vessel carries out the usual preliminaries for loading or discharging will not affect her readiness if she is otherwise ready—that is clear from the Deppe case. Secondly, I venture to think that there might usefully be added in the next edition of Scrutton at the end of the passage I have quoted, the words suggested this morning by Mr MacCrindle, ‘whenever that may be’. That addition would I think put the position beyond all doubt and is in accord not only with Deppe but also with the judgments of Mr Justice Devlin and of Lord Justices Tucker and Cohen in the Noemijulia case. If it be said that the maintenance of an absolute rule of this kind (subject only to questions of de minimis) may work hardship on shipowners or lead to unjust results, the answer is that the parties are always free to modify the common law rule. In the present case that rule might have been modified by a ‘time lost waiting for berth’ provision. But in this class of case, where not only questions of laytime and demurrage arise, but also the right of a charterer to cancel because a ship is not ready by a stated date, it is of crucial importance that the basic principle must be able to be simply applied to the given facts of a particular case. Certainly it is essential in commercial matters and certainly is more important than that there may be hardship in a particular case because the application of the principle may cast the incidence of liability one way rather than the other. . . . ’’

It is mentioned, for the sake of completeness, that the amendment referred to by Lord Justice Roskill has been made and is now in Scrutton. Lord Justice Cairns: ‘‘There is . . . nothing . . . to support the view that a ship can be considered to be ready to load unless her holds are free of other cargo and free from any contamination which would make her unsuitable for loading with the cargo in question . . . I do not consider this strict rule as to holds is limited to cases where the place of arrival is the place where loading is to be effected. If a few remnants have been left in the hold or if some cleaning remains to be done, that will be taken care of by the de minimis rule. In The ‘Aello’3 and The ‘Delian Spirit’4 it was accepted that mere formalities need not necessarily be carried out in order to make a ship ready to load; and in the Noemijulia case5 it was recognised again as being a completely strict rule in relation to holds.’’

The Aello3 and Delian Spirit4 judgments have already been referred to on other matters (see Chapters 1, 2 and 3) and The ‘‘Delian Spirit’’4 will be referred to again later in this chapter (see paragraphs 78 and 79, below) as will the Deppe and Noemijulia5 judgments (see paragraphs 72–74, below). The above judgments emphasise the strictness of the English common law in respect of a vessel’s cargo spaces vis-`a-vis the giving of a notice of readiness. This is something which owners of vessels have to live with and the principles can have serious repercussions for them in situations where only very minor cleaning is required to put the holds in a condition required by those who are going to load the vessel. Of course, in some circumstances, the de minimis rule will give some help to shipowners since arbitrators may tend to take a sympathetic view of circumstances where the amount of cleaning is very slight and causes no intrinsic delay. While a vessel will not be ready to load/discharge cargo if her cargo spaces are unready because of infestation (as in The ‘‘Tres Flores’’) the position will be otherwise if the infestation lies within the 3. [1960] 1 Lloyd’s Rep. 623. 4. [1971] 1 Lloyd’s Rep. 506. 5. Noemijulia v. Minister of Food, (1949–50) 83 Ll.L.Rep. 500.

149

Para. 64

READINESS

cargo and/or arises because of infestation coming on board the vessel with the cargo. In The ‘‘Epaphus’’6 the vessel was unable to enter Ravenna since her draught exceeded the allowable maximum and it was arranged that the vessel should go to Ancona. She arrived there and berthed at 13.40 on 22 May having presented a notice of readiness at 07.37 that day. About 688,150 tonnes of cargo was discharged. The vessel returned to Ravenna where she arrived on 27 May 1981, awaiting a berth. A further notice of readiness was presented on 28 May 1981, at 09.40 and the vessel finally berthed on 30 May 1981. It was then found on opening the hatches that the cargo was slightly infested with live insects and the cargo had to be fumigated; a disinfestation certificate was not received until 11 June. The vessel commenced discharge on Friday, 12 June at 08.00 and completed discharge on Thursday, 16 July at 10.00. The buyers of the cargo, standing in the shoes of charterers, contended that the vessel was not ready to discharge cargo when she presented a notice of readiness on 22 May; an effective notice could not be given until 11 June. It was held by Mr Justice Staughton (as he then was) that: on 28 May the vessel was fit and ready to discharge her cargo; the problem was the presence of insects in the cargo and since there was no finding that the insects were the fault of the vessel, the vessel was ready to discharge and time started to count at 8.00 a.m. on 29 May following the notice of readiness given in Ravenna on 28 May; the submission that the risk of deterioration in the condition of the rice was by the sale contract, if not by the charter, placed on the buyers would be rejected. On appeal it was held by the Court of Appeal that the infestation affected only the readiness of the cargo to be discharged not the readiness of the vessel to discharge that cargo and the learned judge was plainly right in holding that any infestation of the cargo did not affect the readiness of the vessel as a vessel to do her part in the discharge of the cargo; the buyers’ contention that the vessel was not ready to discharge and could not give an effective notice of readiness before 11 June would be rejected. It was put by Lord Justice Donaldson M.R.: ‘‘The infestation of the cargo escaped the attention of the port authorities at Ancona, assuming that it then existed, which must be considered probable, but it caused a hold-up in discharge when the vessel eventually entered Ravenna after lightening. The award finds that the vessel gave notice of readiness at 09.40 hours on 28 May 1981, and that the infestation was detected when the hatches were opened after she had berthed on Saturday, 30 May. On Monday, 1 June, application was made for the fumigation of the cargo and a disinfestation certificate was received on Thursday, 11 June. Thereupon discharge began. On these facts Mr Merriman argued here and below that the vessel was not ready to discharge, and could not therefore give an effective notice of readiness, before 11 June. The learned judge rejected this contention, holding that any infestation of the cargo did not affect the readiness of the vessel, as a vessel, to do her part in the discharge of the cargo, this having always been the test applied. This is plainly right. The infestation affected only the readiness of the cargo to be discharged, not the readiness of the vessel to discharge that cargo which is quite different. The appeal on this point therefore fails.’’

6. [1986] 2 Lloyd’s Rep. 387; [1987] 2 Lloyd’s Rep. 215.

150

C A R G O S PAC E S

Para. 65

The Tres Flores decision was applied in the more recent case of The ‘‘Virginia M’’7 which related to whether a vessel was ready to discharge her cargo when she only had 15 tons of fresh water remaining on board and this amount of fresh water would not have permitted her steam driven winches to have discharged all the cargo because of the amount of fresh water required for the auxiliary boiler to provide steam for the winches. The case is considered in more detail later (paragraph 75) but suffice it to say for the moment, that the High Court decided that the vessel was not ready to discharge her cargo when she tendered a notice of readiness, with the result that laytime did not run during the period that the vessel was waiting for a berth with an insufficiency of water; there was no clause in the charterparty which provided compensation to the owners for time lost waiting for a berth so that the unreadiness of the vessel, because of a lack of fresh water, had a disadvantageous effect as far as the owners were concerned. Although the case was concerned with matters other than the physical readiness of cargo spaces it emphasised, as did The ‘‘Tres Flores’’, the disadvantage to owners in a vessel being found not ready to load/ discharge cargo some time after she arrives at or off a port when she waits a considerable time for a berth (without an appropriate compensatory clause) and the unreadiness relates back to the time that a notice of readiness was given, thus making it a nullity, with the result that laytime does not commence and run during the period that the vessel waits for a berth in a state of unreadiness. 65. Although in The ‘‘Tres Flores’’ Lord Denning said that for a notice of readiness to be given the vessel must be completely ready in all her holds to receive the cargo at any moment when she is required to receive it (see earlier paragraph 64) this must be in the context of the contractual cargo for the port in question. In LMLN 337—3 October 1992 a tribunal decided that a valid notice of readiness could be given in circumstances where the vessel had slops of a previous cargo in one tank (No. 4C) where the charterers had exercised their option to load at two ports and the tank in which the slops were contained was not originally required for the first loading port. It was held that although The ‘‘Tres Flores’’ made it clear that the whole of the vessel’s available cargo-space had to be available to the charterers at the time a notice of readiness was given the situation was clearly different in the context of the exercise of an option to load at two ports. This was not a case of future readiness or of any necessary preliminary still to be performed by the owners. The vessel was in all respects ready to load all the nominated cargo. The fact that the charterers subsequently changed their minds and decided to load all the cargo at one port could not retrospectively invalidate the notice of readiness. It was clear that, had the original nomination been maintained, the original notice of readiness would have been unassailable since the vessel would have loaded and proceeded to the second loading port with the slops in No. 4C tank as envisaged by the owners. It was common for tankers to arrive at loading ports with cargo tanks filled with ballast and to discharge that ballast during loading. In such a case, or in circumstances where a master retained ballast in some tanks to enable a vessel to sail 7. [1989] 1 Lloyd’s Rep. 603.

151

Para. 65

READINESS

between loading ports with a part cargo, it could not thereafter be said that the vessel was not ready because all the tanks were not available for loading at the first port. On this last mentioned aspect see also earlier paragraph 31, in particular LMLN 299—20 April, 1991. Again, in the recent LMLN 676—12 October 2005, the vessel was chartered on an amended Asbatankvoy form for the carriage of a cargo of paraxylene from Haifa to two safe ports Taiwan. After the fixture was concluded, the charterers obtained an option from the owners to load at Haifa and Iskenderun, and in due course exercise that option, such that when the ship arrived at Haifa she was intended to load at both ports. Two days after arrival at Haifa and the tendering of notice of readiness the charterers said that they only wanted to load at Haifa, and not at Iskenderun. Meanwhile, the ship had not berthed. That was because the charterers had problems with the shippers. Another ship took the berth to which the vessel would otherwise have gone. After tendering notice of readiness the vessel was inspected on behalf of the charterers. The surveyor required certain tanks to be further cleaned. However, those were not the tanks that were required for loading at Haifa if, as was then intended, the ship was to load at two ports. The charterers said that the ship was not ready to load, and therefore the notice of readiness was not valid. Accordingly, they disputed the owner’s entitlement to demurrage as claimed. It was held, that the central issue was whether, for the notice to have been valid, the ship had to be fully ready in all her tanks, or whether it was sufficient that those tanks that would have been required for loading at Haifa alone—had the charterers not subsequently reneged on the exercise of their option—were ready for loading. In principle, a notice of readiness had to be read in the context of the circumstances prevailing at the time it was given. In the present case, the relevant circumstances were the fact that the ship was destined to load at two ports, and that the tanks required for the first were in fact ready. On that basis, and subject to the terms of the charter, the notice was valid. What was required of the ship at the time notice was given was that she load at Haifa a limited quantity of cargo into certain tanks which were then ready. Did the provisions of the charter relating to notice of readiness affect the default position previously outlined? Printed clause 6 of the charter read: ‘‘Upon arrival . . . at each port of loading . . . the master . . . shall give the charterer . . . notice . . . that the vessel is ready to load . . . cargo . . . and laytime . . . shall commence upon the expiration of six hours after receipt of such notice, or upon the vessel’s arrival in berth . . . whichever first occurs . . . ’’

Whilst Interchem clause 2, which in the event of conflict had to prevail, read: ‘‘Laytime . . . shall commence to run 6 hours after the vessel is in all respects ready to load . . . and written notice thereof has been tendered . . . ’’

In addition, Interchem clause 11 provided: ‘‘Vessel to clean . . . to the charterer’s inspector’s satisfaction. If the vessel is not accepted after first inspection the vessel to continue cleaning for owner’s time and account . . . ’’

152

C A R G O S PAC E S

Para. 66

It was not commercially sensible to read words such as ‘‘in all respects’’ in Interchem clause 2 as meaning that, at the time notice was given, the ship had to be ready to load all her cargo, wherever it might be destined to be loaded. What was required was that she was ready to do what the charterers at that time and place wanted her to do. In the present case, that was to load a part cargo at Haifa, and the vessel was perfectly capable of doing that. Nor did Interchem clause 11 affect the position. Again, the cleanliness required had to be that needed to enable the ship to do what she was saying, by her notice, she was ready to do, i.e. to load a part cargo at Haifa. Accordingly, the tribunal was in agreement with the tribunal in LMLN 337—3 October 1992. The recent decision in The ‘‘Nikmary’’8 was of no relevance. The owner’s claim for demurrage succeeded. In LMLN 285—6 October 1990 a question arose as to whether a notice of readiness could be given when the vessel was being used for storage purposes. Under the terms of the charterparty the charterers had an option to use the ship for up to 20 days as a floating storage facility against the payment of hire amounting to $13,000 per day. The charterers exercised that option and the ship lay off the discharge port acting as a storage facility. The owners gave a notice of readiness to discharge while the vessel was still lying off the discharge port acting as a storage facility and she remained at anchor for another five days or so. The owners submitted that the six hour period ran from the giving of the notice and that once the storage period ended the ship went straight onto demurrage, having arrived from the loading port on demurrage. The charterers contended that the notice period could not run until the storage period had come to an end and that they were entitled to credit for an additional six hours. It was held that the charterers’ contention would be rejected. There was nothing in the charter to prevent the ship giving a valid notice of readiness while she was still performing storage services. The purpose of the period of grace was to allow the charterers an opportunity to make preparations when they did not or might not know exactly the ship’s position. In the present case, they were more than aware of the ship’s precise position so there was no commercial reason for them to be given any further period of grace. 66. Readiness in respect of cargo spaces includes readiness regarding cargo which is overstowed where different parcels are carried on the same voyage with different charterers. In such circumstances the cargo which is overstowed is not considered ready for discharge until it becomes accessible and it is at that moment of time that the master should give a notice of readiness for the cargo which is overstowed; accessibility is all that is required, it not being necessary for all the top cargo to be discharged. The dangers of not giving a notice of readiness at that time are considered fully later in Chapter 6 as are other aspects relating to a notice of readiness; as will be seen, a notice of readiness given prematurely is a nullity (see Chapter 6) so that it behoves the master of a vessel to ensure that a notice of readiness is given when the vessel is ready to discharge; if a notice of readiness has been given at an earlier time (which may not have been valid) a further notice should be given when 8. [2004] 1 Lloyd’s Rep. 55.

153

Para. 66

READINESS

the vessel is truly ready. Vessels often have to wait for a berth with overstowed cargoes and this can give rise to problems in respect of compensation for time lost waiting for a berth (see paragraphs 39 and 40, above); since a vessel will not be ready until the overstowed cargo is accessible owners require very clearly worded clauses if they wish to obtain compensation for the period during which the vessel waits for a berth but is not ready to discharge the overstowed cargo during that period. As mentioned in paragraphs 39 and 40, there may be drawbacks in a ‘‘time lost waiting for berth to count as laytime’’ clause although in paragraph 39 a 1982 reported arbitration is detailed where the arbitrators solved the problem by way of a purposive approach in circumstances of overstowed cargo. 67. The degree of cleanliness required in a vessel’s cargo spaces will vary very much depending upon the cargo and trade in question. For many cargoes only minimal cleaning may be necessary but for other cargoes a high degree of cleaning may be required, e.g. carriage of grain and foodstuffs and clean liquid cargoes such as naphtha and aviation spirit. For some cargoes there may be specific and very detailed cleaning clauses in the charterparties, some of which will be mentioned later. Since it is invariably a question of fact whether cargo spaces are sufficiently clean for the intended cargo very little gets reported by way of court decisions and reported arbitrations. (Each case turns on its own facts so that, usually, there are not issues of principle and in any event arbitrators are the final arbiters on facts.) One reported arbitration is LMLN 239—31 December 1988 where the vessel was chartered under Asbatankvoy form for the carriage of a cargo of fuel oil, having previously carried cargoes of crude. One of the issues in the arbitration concerned the commencement of laytime. The parties had agreed that time was to count as soon as the owners gave a valid notice of readiness. At 10.00 on 29 June the master tendered notice of readiness. However, the arbitrators found that the vessel was not in fact ready to load at that time since the cargo tanks had not been fully cleaned. Butterworth machinery was still being used intermittently until about midday on 1 July, and the pumps were used there-after from time to time. On 5 July at 08.30 the master filed cables to the agents and the cargo receivers which read: ‘‘[Vessel] has collected all the remain cargo on board after wash tanks amounting 300 M3 in No 2C ready give ashore when ship berthed for loading in compensation for the quantity reported as shortage as agreed with you on completion of discharging.’’

It was held that the ship was ready to load for the purposes of giving a valid notice of readiness when her tanks had been cleaned and the water and crude slops collected into separate tanks. The Chief Officer’s evidence was to the effect that the whole operation had been completed by the evening of 28 June. However, that evidence would be rejected. The ship was not in fact ready to load the fuel oil cargo until shortly before the cables of 5 July were sent. The notice of readiness given on 29 June was accordingly invalid. However, from that time on the charterers, the shippers and the agents knew that the ship was at anchorage cleaning her tanks prior to the intended loading under the charter. On a number of occasions between 30 154

C A R G O S PAC E S

Para. 67

June and 4 July the master had advised the charterers (who had known of the purported notice on 29 June) that the ship was still at anchor awaiting a berth. Then, on 5 July, the master had sent to the agents and the shippers (who were also receivers of the previous crude cargo) the cables already quoted. In the context of the knowledge which all relevant parties then had, and of the cable notices of 29 June and the subsequent cables from the master, the 5 July cables should be treated as valid notices. Alternatively, at about the time they were sent the ship became ready, and the notices previously given became valid. On the basis that the first approach was correct, and allowing time for the cables to be received, laytime stated to count at 10.30 on 5 July. In the light of the ‘‘Mexico 1’’ Court of Appeal decision (see later Chapter 6) it may be that the arbitrators’ conclusion was incorrect regarding the validity of the 5 July notice of readiness although it would appear, on the brief reported facts, that there may have been an estoppel by convention because of the communications between the parties during the period 30 June to 5 July whereby the charterers were estopped from denying the validity of the 5 July notice of readiness. The degree of the cleanliness required to make the vessel ready, for the purpose of tendering a valid notice of readiness and the terms of the charterparty, may depend upon what is known to the parties in addition to the surrounding circumstances. For example, in LMLN 62—18 March 1982 the vessel was chartered to load a cargo of heavy grain, sorghum or soyas from a U.S. gulf port to North African ports. The ship arrived at the loading port on 13 July 1979 and was inspected by the National Cargo Bureau Surveyor and by the U.S. Department of Agriculture Surveyor. The NCB Surveyor passed holds 1, 2, 3 and 5 on 14 July and hold 6 on 16 July. The USDA Surveyor however rejected all 6 holds on 14 July on account of paint and rust scale and did not pass the holds until 10.00 on 17 July, after cleaning by shore contractors. Notice of readiness was given on that day and the owners contended that laytime began at 08.00 on 18 July, and that on this basis 2 days 20 hours 10 minutes demurrage was earned at the loading port. The charterers contended that as the vessel was not clean on arrival at the loading port the owners were in breach of lines 11 and 12 of the charterparty and were therefore liable in damages. The relevant charterparty lines read as follows: ‘‘The . . . now discharging at . . . where expected to complete discharge . . . and sail in ballast 18.00 hrs 10 July for loading port, where expected ready to load, basis . . . , 13 July 1979, all going well. Owners to instruct the master to thoroughly wash the holds and hatches during the ballast voyage to load port so as to be clean on arrival.’’

The charterers submitted that they had an obligation to give bills of loading dated 10 July, subject to a penalty for later bills and that they had already cancelled one vessel as she was too late as a result of having dirty holds. The present vessel in fact had to wait for a berth for some 8 days after being passed by the surveyor as there was congestion at the loading port. Furthermore, while the vessel was being cleaned, several other vessels had entered the loading port and had taken turn ahead of her. The charterers claimed that had the vessel been ready on arrival, the period of waiting for berth would have been avoided. On this basis the charterers submitted 155

Para. 67

READINESS

that they were entitled to deduct that period from the time used and calculated that despatch in the amount of $12,823.35 was payable by the owners. It was held, that the owners’ description of the vessel in line 10 of the charterparty as ‘‘expected ready to load, basis [name of loading port], 13 July’’ was hedged by the proviso ‘‘all going well’’. In the light of what occurred, the arbitrators could not consider that that estimate was given recklessly by the owners, in such a manner as to give risk to liability. According to the evidence both deck and cabin crew had been engaged on the work of washing the holds and hatches during the ballast voyage, and in fact the vessel was clean on arrival. The arbitrators could not interpret lines 11 and 12 of the charterparty as imposing on owners the obligation to have paint and rust scale removed from the holds in time to enable the vessel to be accepted as ready on 13 July by the USDA Surveyor. Such an obligation would have required more specific wording. The owners had simply undertaken to make the holds clean. There was no undertaking that the vessel, within the short time available, would be ready to meet the stringent requirements of the USDA Surveyor. It is possible that owners may put themselves under a particularly heavy burden in respect of cleaning because of what they agree with charterers. See for example LMLN 445—23 November 1996. No charterparty had been signed but the agreement between the owners and the charterers was set out in two telexes. The described cargo was ‘‘bulk rice’’ and clause 26 of an earlier charterparty was incorporated into the agreement and read: ‘‘ . . . vessel to present at loading port with holds clean dry and able to pass NCB/USDA Inspection for loading bulk edible milled rice.’’

It was held that clause 26 was not inconsistent with the description of the cargo and that it should not be struck out (as contended for by the owners). There was a world of difference between, on the one hand, the description of a cargo to be carried, and on the other hand the standard to which a ship might be required, contractually, to clean. Further, the phrase ‘‘bulk rice’’ was capable of covering any type of rice from the coarsest to the most refined, from that requiring minimal cleaning to that requiring the highest possible standards. There was thus no inconsistency between the description of the cargo and clause 26 of the earlier charterparty. Accordingly, the ship was not sufficiently clean by the cancelling date and the charterers where entitled to cancel and to recover damages. This arbitration also has relevance to readiness/cancellation, see later paragraph 123. It will be implied that any inspection carried out by, or on behalf of the charterers, has to be conducted properly and reasonably but this will be of no avail to the owners unless they comply with the cleanliness required in the context of what may be difficult circumstances. In LMLN 332—25 July 1992 the vessel was chartered on the Sugar Charterparty. She arrived at the loading port and gave notice of readiness at 13.48 on 12 February. The following day, the holds were inspected by surveyors appointed by the charterers’ agents, who rejected her as she was undergoing cleaning by the crew from a previous cargo of fishmeal. 156

C A R G O S PAC E S

Para. 67

The vessel was subsequently inspected and rejected on 17 and 21 February on account of the presence of fishmeal odour. From 17 February onwards the owners vigorously protested against the vessel’s rejection, contending that she was to all intents and purposes clean. On 23 February, a joint survey was held, attended among others by a surveyor appointed by the owners’ P & I Club and a surveyor appointed by Lloyd’s agents at the request of the charterers. Traces of fishmeal were found in the holds. The charterers’ surveyor rejected the vessel again on account of the smell of fishmeal and bleach in the holds, and the Lloyd’s surveyor concurred that the vessel could not be considered ‘‘clean or odour free’’. The P & I Club’s surveyor disagreed. He considered the holds were clean and traces of fishmeal negligible. In his view, the faint odour in the holds would not have affected the shipment of sugar, particularly in view of the fact that this was packed in polypropylene bags lined with polythene. He considered that the charterers’ surveyor was unreasonably cautious because of instructions from the ultimate purchasers that ‘‘holds should be exhaustively free from odour’’. The vessel was finally accepted on 26 February, when a second notice of readiness was given. The charterers contended that laytime commenced at 14.00 on 26 February. The owners submitted that it should be treated as having commenced at 14.00 on 12 February, following the issue of the first notice of readiness. They said that the charterers’ agents’ judgment as to the condition of the holds had to be exercised reasonably, and that their decision as to the suitability of the holds was unreasonable. It was held that there was an obligation on the charterers’ agents to judge the condition of the holds on proper and reasonable grounds. Their decision had to be exercised on the basis of an objective assessment of the vessel’s holds. The evidence of the P & I Club’s surveyor, who did not see the vessel prior to the survey on 23 February, was of comparatively little help in judging the condition of the vessel when the first notice of readiness was given. It was incontrovertible that the vessel was not fit to load the sugar cargo prior to 22 February. The continued refusal to accept the readiness of the holds between 22 and 26 February could not be regarded as improper or unreasonable. It was accepted that absolute cleanliness and absolute freedom from odour could not reasonably be achieved in a ship’s holds. The degree of cleanliness acceptable had to some extent be a subjective assessment which took into account the nature of the previous cargo and of that to be loaded. Minor residues of an odoriferous cargo would obviously be of more consequence when loading foodstuffs than would say, ore. The charterers had claimed damages inter alia on the basis that the owners had failed to take reasonable steps to ensure they presented an acceptable and fit vessel for the carriage of the cargo. It was accepted, following dicta in the Democritos9 that the owners were under an obligation to use reasonable despatch in tendering the vessel in a fit condition to load the cargo. The problems of cleaning a vessel from fishmeal were notorious. There was no real chance of getting the ship ready in time unless the owners had checked what 9. [1976] 2 Lloyd’s Rep. 149.

157

Para. 67

READINESS

was required in order to clean after fishmeal and arranged for a professional team to clean at the previous discharge port as and when each hold became ready. They should at least have had arranged for professional help with the necessary equipment and chemicals to be ready on the vessel’s arrival at the loading port under the present charterparty. In the event, the initial efforts of the crew were not very effective. It could not be said that the owners had used reasonable diligence to get the vessel ready within a reasonable time when there were still residues of cargo in the cargo spaces on 22 February. Accordingly, the owners were in breach, and were liable to the charterers in damages. A good illustration of what may occur in practice, in respect of cleanliness, is set out in the next paragraph by way of a one-time typical arbitration. The subject matter overlaps Chapter 5 because of the specific clause in the charterparty but it relates to a situation which occurs frequently in U.S.A. grain loading ports in respect of cargo spaces; further, and in any event, the standard of cleaning required under the specific clause probably equates with that required under the common law for a grain-type cargo. 68. In The ‘‘Dubhe’’10 arbitration the relevant parts of the charterparty were, as follows: ‘‘Vessel to load under inspection of National Cargo Bureau, Inc., and a United States Department of Agriculture Grain Inspector and/or a Grain Inspector holding a licence issued by the United States Department of Agriculture pursuant to the U.S. Grain Standards Act, in U.S.A. Ports as required by Charterers . . . (Lines 22/23.) Notification of the vessel’s readiness must be delivered at the office of the charterers or their agents during ordinary office hours (Sundays and holidays excluded) at or before 16.00 hours or at 12.00 if on Saturday, the vessel also having been entered at the Custom House, accompanied by pass of the Inspector’s attesting to the fact that the vessel is clean-swept and ready in all compartments without the use of artificial linings and the laydays will then commence at 07.00 hours on the next business day whether in berth or not.’’ (Lines 63/66.)

The facts were that the vessel arrived at Mobil anchorage at 07.30 on 16 November. There was infestation in some of the holds and they had to be cleaned but, by 14.45 on Sunday, 19 November, all the holds had been passed by the National Cargo Bureau (NCB) and the United States Department of Agriculture (USDA). A notice of readiness was tendered at 09.00 on 20 November but the vessel remained at anchor waiting for a berth until 1 December. She berthed at 07.10 on 1 December alongside the grain elevator and, between 08.00 and 09.00 the USDA made a further inspection of the holds. They failed to pass holds Nos. 2 and 5 as two live insects were found in these spaces. These holds were sprayed between 14.00 and 16.00 on 1 December and at 20.30 the holds were inspected by USDA and were passed. Some of the other holds had begun loading earlier in the day, one as early as 09.15. The owners contended that laytime should commence at 07.00 on Tuesday, 21 November. According to them, the vessel had been passed by both NCB and USDA 10. 1981.

158

C A R G O S PAC E S

Para. 68

on Sunday, 19 November, so that notice of readiness tendered on 20 November was good. Their primary case was that the charterparty provisions, in respect of readiness and the giving of notice, were satisfied by Sunday, 19 November, and that, therefore, the notice given on the Monday must have been good. The main contention of the charterers was that the vessel, on her arrival, was not in fact ready to load, and the original notice of readiness did not reflect the true facts; the re-inspection on 1 December proved that the vessel was not ready in all compartments to load cargo when she gave her notice of readiness on 20 November; further, she was not in every way fitted for the voyage as required by an express clause in the charterparty. In an overall general conclusion the charterers submitted that, if all the requirements of readiness, subject to minimal qualifications, are not satisfied when a notice is given, or if subsequently it is found that notice does not reflect the true facts, the notice is wholly ineffective and thus invalid. The arbitrator did not find the matter easy of resolution. It was his view that one should look first at the laytime code in the charterparty in order to see if the laytime clock had started and then to consider if the clock was prevented from running because of a breach of contract whereby an assessment of damages could be reflected by adjusting the laytime computation. He went on to say: ‘‘The charterparty provisions make it clear that a notice of readiness can be delivered, whether in berth or not, accompanied by the pass of the Inspectors attesting to the fact that the vessel is clean-swept and ready in all compartments for loading. The inspection must be, because of lines 22/23 of the charterparty, a combination of the NCB and USDA. The NCB passed the vessel for loading on November 18 and USDA on November 19. At 14.45 on November 19 both authorities had passed the vessel; the NCB certificate stated that the holds had been passed to load and the USDA certificates stated, ‘stowage space examined and found to be substantially clean and dry, and ready to receive grain on the above date’. If the charterers had been prepared to commence loading that afternoon then such was permitted. Therefore, at that time the owners were in a position to deliver a notice of readiness, in compliance with lines 63/66 of the charterparty, in that there was an Inspector’s pass attesting to the fact that the vessel was clean-swept and ready to load in all relevant compartments. The notice of readiness tendered on the Monday morning was a good notice at that time and, therefore, sufficient to trigger off the laytime clock. I see no injustice whatsoever to the charterers in this, particularly as they only accepted the notice subject to the terms of the charterparty so that their rights, in respect of any breach of contract coming to light as a later stage, were being preserved and could, if relevant, have the effect of clawing back, by way of damages, any time allowed unjustifiably to the owners through the running of the laytime clock. Therefore, I am for commencing the laytime clock at 07.00 on Tuesday, November 21. The charterers contended that the later discovery of the insects made the original notice of readiness invalid. I do not think that this can be so in view of what I have already stated, the notice being good at the relevant time. Neither do I consider that The ‘Tres Flores’11 case helps the charterers since that case was concerned with the inspection of a vessel days after her arrival at the port, there being no inspection when the vessel arrived. . . . I now turn to the breach/damages aspect of the arbitration. In view of the insects which were discovered on December 1 the charterers do have a case that the vessel was not in every way fitted for the voyage. Anyway, I shall assume such so that the charterers are entitled to damages in respect of any loss/damage flowing from the breach. The question then arises, ‘what loss/damage did the charterers suffer on account of the later discovery of the insects?’ It appears that the loss could only be the time lost, vis-`a-vis the loading of the vessel, 11. [1973] 2 Lloyd’s Rep. 247.

159

Para. 68

READINESS

occasioned by the vessel’s holds being sprayed and re-passed. The statement of facts shows that Nos. 2 and 5 holds were failed by 09.00 on December 1 and were not ready, to the charterers, until 20.30 on that day. It does seem that this did not affect loading in other holds and that, in any event, no more than one hold was being loaded, at any one time. However, the position is not abundantly clear from the documentation and I have to remember the words of Lord Denning from The ‘Tres Flores’9 that all cargo spaces should be accessible to the charterers. Therefore as I see it the maximum loss to the charterers was the loss of time from 09.00 to 20.30 on December 1; therefore, in order to compensate the charterers in respect of the owners’ breach of contract the time from 09.00 to 20.30 on December 1 cannot count as time on demurrage.’’

The circumstances which arose in The ‘‘Dubhe’’12 arbitration are relatively common particularly in grain loading ports. It is emphasised that other arbitrators might well have taken a different approach to the Dubhe12 arbitrator on similar facts and concluded that the Tres Flores11 principle was applicable so that the notice of readiness could not be valid until after the work required, as a result of the further inspection at the loading terminal, had been performed. The problem is sometimes taken care of by way of the following added words to a Dubhe style notice of readiness clause: ‘‘If after berthing the vessel is found not ready in all respects for loading the actual time lost from the discovery thereof until she is in fact ready to load will not count as laytime.’’ Those words have much to commend them in that they are fair to both parties. 69. As mentioned in paragraph 64, above (Lord Justice Roskill and Lord Justice Cairns), the de minimis principle may be of help to shipowners in some circumstances but such are likely to be limited in number. What degree of uncleanliness falls under the de minimis rule is a matter of conjecture and it is thought that, in practice, the uncleanliness would have to be very minor to be adjudged of no account in order to invoke the de minimis principle. In The ‘‘Tres Flores’’11 the arbitrators did not apply their minds to the de minimis principle but the High Court judge was convinced that it could not avail the owners even though it only took four and a half hours and $170.94 to clear up the infestation. Further, if an express clause in the charterparty specifies that the vessel can only be ready after being passed by a named authority then that appears to be the end of the matter since the express requirement becomes a condition precedent to the tendering of notice of readiness. In The ‘‘Despina’’13 an arbitrator did apply the de minimis principle in circumstances where the vessel had been failed initially by inspectors but then passed after the cargo spaces had been cleaned. The vessel had to wait for a berth (no ‘‘time lost waiting for a berth’’ provision in the charterparty) and did not go alongside until seven days later at which time loading of all holds commenced except for one hold which was sprayed for one hour on account of larva. The arbitrator decided that the small amount of infestation and spraying was of a trifling nature and could be disregarded under the de minimis principle; he also found that the rejection of the

12. 1981. 13. 1980.

160

C A R G O S PAC E S

Para. 70

hold caused no delay to the completion of the loading since the hold in question was one of the earlier holds to complete loading. Again, in The ‘‘Irinikos’’14 arbitration an arbitrator applied the de minimis principle in circumstances where there was a conflict of evidence concerning the dryness of the vessel’s cargo spaces late one afternoon. The vessel moved into berth in the early hours of the next morning and commenced loading at 06.00; he decided that the vessel was ready at 16.00 but, if there was any further drying of cargo spaces to take place, such was of a minor nature and could be disregarded under the de minimis principle. 70. The previous paragraphs have referred mainly to grain or grain-type cargoes not only because of their propensity to problems but also because of the large number of arbitrations which have taken place over the years concerning uncleanliness/infestation of hold and the commencement of laytime with such cargoes. The subject is also of importance in the carriage of bulk liquid cargoes although it does not appear to show in so many arbitrations, probably because the loading of crude oil (which forms the major amount of bulk liquid carried) does not demand the same standard of cargo space cleaning, also because of the particular cleaning clauses in various tanker charterparties. In the carriage of clean bulk liquid cargoes, the degree of cleanliness is very stringent but arbitrations appear to be few and far between since a vessel usually has to satisfy the charterers or an independent inspector at the loading port so that, in the event, the inspector becomes something of a quasi-arbitrator. A common type clause in a tanker voyage charterparty is: ‘‘Master to clean vessel’s tanks, pipes and pumps, to Charterer’s satisfaction’’. A very simply worded clause but sufficient to allow the charterer’s representatives to press for as much cleaning as can reasonably be demanded. The owners do have a safeguard in that, if the charterers or their representatives are unreasonable in their demands concerning the amount of cleaning, they may be in breach of the implied term to exercise reasonable dispatch (see above, paragraphs 56–57) so that the owners would be entitled to damages for delay resulting from such a breach. In most cases the damages would be based on allowing the laytime to commence in accordance with the time when the vessel’s tanks had been sufficiently cleaned for the loading of the cargo in question. In practice, it is difficult for owners to go behind the charterer’s inspector, because of lack of proof. There may be no surveyors available to call in quickly to provide an assessment of the state of the vessel’s tanks to convince the charterers’ representatives that the tanks are sufficiently clean; further, even if a surveyor can be found, the result can often be a conflict of evidence between two surveyors so that an arbitration at a later date can be a game of chance. Charterers do not appear to take advantage of the strict Tres Flores15 point as frequently as they might do in the tanker trades. In many cases they apply a breach/ damages approach to the uncleanliness of cargo tanks and only deduct laytime for

14. 1977. 15. [1973] 2 Lloyd’s Rep. 247.

161

Para. 70

READINESS

the period that the vessel is not available to them for the loading of cargo because of the unreadiness of the cargo tanks—a very fair approach in circumstances where, on occasions, they have a valid argument that laytime need not commence until the tanks are clean and a further notice of readiness has been tendered. In some instances, the specific laytime provisions will bite so as to trigger off laytime leaving it that laytime will be suspended for the time that the cargo spaces have to be cleaned as appears to be the case with the Beepeevoy 3 and similar-type cleaning clauses. If there is a ‘‘reachable on arrival’’ clause in the charterparty and the charterers are in breach regarding this provision, then a damages situation results so that the owners get compensation for the delay arising from the breach which may not include time spent cleaning the cargo spaces to make the vessel ready. A 1999 reported arbitration, LMLN 511—10 June 1999, illustrates the kind of problem which can arise with a clean type bulk liquid cargo. The vessel was chartered on the Asbatankvoy form for the carriage of a cargo of benzene. She arrived at the loading port pilot station at 07.30 on 12 August, and the master tendered notice of readiness. At 20.42 the same day the vessel shifted into the inner anchorage where she remained at anchor for six days. Surveyors attending on behalf of the charterers had boarded the vessel at 17.00 on 18 August to carry out an internal cargo tanks inspection. At 21.00 the surveyors rejected the cargo tanks because wall wash tests showed an unacceptable quantity of chlorides in all cargo tanks. The master was asked to steam wash all tanks for a period of 6 hours prior to each inspection. The master immediately started to steam-clean #1C in compliance with the surveyors’ request and informed the disponent owners. The disponent owners contended that the level of chlorides present would not damage the benzene. They told the master to complete the steaming cycle in #1C tank but not to carry out any further cleaning. They called in their own surveyor who carried out an inspection at the inner anchorage at 11.00 on 19 August. The surveyor carried out a visual check on the condition of the tanks and found them clean, apart from a few small stains on the tank ladders and sounding pipes. He did not carry out wall wash tests. He concluded that the tanks were clean enough to load benzene. The vessel berthed at 20.18 on 19 August. The charterers’ surveyors made a second inspection and the vessel successfully passed her second wall wash tests at 07.00 on 20 August. The cargo hoses were connected at 08.30 the same day and sufficient cargo was loaded to enable the taking of samples of the first foot of cargo in #2C tank at 09.15. Thereafter, the first foot cargo quantity was circulated through lines, pumps and tanks before accumulating in #3P at 1230, following which a tank cleanliness certificate was issued by the surveyors. Loading of cargo commenced at 18.30 on 21 August and completed at 03.20 on 23 August. Hoses were disconnected at 04.00, documents placed on board at 05.30, and the vessel sailed at 07.40. The disponent owners counted laytime from 00.01 on 16 August and contended that laytime was used and the vessel entered demurrage at 17.55 on 17 August and that demurrage then ran continuously through to disconnection of cargo hoses at 04.00 on 23 August. 162

C A R G O S PAC E S

Para. 70

It was held that the evidence showed that apart from 1C, none of the tanks had been steam-cleaned in accordance with the instructions of the charterers’ surveyors, yet the vessel passed a second wall wash test when it appeared that the tanks were in the same condition as during their earlier inspection. It was therefore clear that one or other of the wall wash tests was unreliable. In such circumstances had there been no other relevant evidence, it would have been reasonable for the tribunal to conclude that the vessel was probably ready in every respect to load her cargo on the occasion of the master tendering notice of readiness on 12 August. However, during the submission process, evidence was adduced to the effect that a surveyor from SGS attended the vessel on 15 August whilst she was anchored at the inner anchorage. The master reported to the disponent owners on 15 August that the SGS surveyor had found the centre tanks ‘‘ok’’ but had suggested that the four wing tanks should be re-washed. In fact, the SGS report recorded that #1P, 1S, 3P and 3S ‘‘were not clean and require recleaning’’. According to the master, that cleaning process took the form of 5/6 hours washing of each of the four tanks with hot salt water followed by fresh water with final crew hand cleaning ‘‘if necessary’’. Nonetheless, the master rendered a second notice of readiness at 21.35 on 15 August even though washing of the wing tanks was still in progress at that time, and a third notice of readiness was tendered at 10.48 on 16 August stating that the vessel had arrived at the pilot station at 07.30 on 12 August ‘‘and is ready in all respect to load her cargo since then . . . ’’. The information contained in the third notice of readiness was misleading because it was clear that at the time it was tendered, tank washing was still in progress. It followed that neither the first, second nor third notice of readiness was valid in that at the time each of those notices was tendered, further tank cleaning was either necessary or was actually in progress, and the vessel was not ready in every respect to commence loading her cargo of benzene. In fact, the vessel was not ready in all respects until the early afternoon of 17 August. No subsequent notice of readiness was tendered. Since the master did not tender a valid notice of readiness between the vessel’s arrival on 12 August and her eventual commencement of loading, the tribunal had to decide when, if at all, laytime commenced at the loading port. Both sides had referred to The ‘‘Mexico 1’’.16 The disponent owners had submitted that laytime should start at latest upon commencement of cargo operations which, they said, was when cargo hoses connected prior to pumping cargo into the vessel—i.e. at 08.30 on 20 August. The charterers had contended that loading commenced properly only at 18.30 on 21 August. The evidence was that the reason for the substantial delay between the taking of samples of the first foot of cargo (09.15 on 20 August) and the issuance by the charterers’ surveyors of the tank cleanliness certificate (12.30 on 20 August) on the one hand, and the commencement of loading of the main body of cargo at 18.30 on 21 August on the other hand, was due to problems with the cargo not being within contract specification and was not due to any problems with the vessel. Accordingly, the candidates for the commencement of laytime were:

16. [1990] 1 Lloyd’s Rep. 507.

163

Para. 70

20 August

READINESS

08.30 Hoses connected 08.42 Commencement of first foot test 12.30 Completion of first foot test Issuance of cleanliness certificate

In the tribunal’s view, provided that the subsequent first foot test was passed successfully, which in the present case it was, laytime should be deemed to have commenced with the connection of cargo hoses in readiness to commence loading operations. Accordingly, time would be counted from 08.30 on 20 August through to the disconnection of cargo hoses at 04.00 on 23 August. The above arbitration is a good example of owners losing out because of the later discovered unreadiness of the vessel in circumstances where vessels have to wait for a berth and the charterparty does not contain an appropriate congestion type clause. 71. It has already been mentioned that in practice it is very common for cargo spaces to be found not ready some considerable time after a vessel arrives at or off a port/terminal and has to wait for a berth. The situation is so common that owners should attempt to get particular clauses in their charterparty contracts so that they get compensation for time actually lost waiting for a berth; some usual clauses have been mentioned earlier in Chapters 2 and 3 (e.g. time lost waiting for a berth, reachable on arrival). Charterers, understandably, may be reluctant to agree a ‘‘reachable on arrival’’ provision but may be more amenable to a ‘‘time lost waiting for a berth’’ provision or something similar. Two decisions by the same commercial judge illustrated the continuing problem and they also evidenced his purposive approach to the construction of the relevant charterparty clauses in circumstances where the cargo spaces were found insufficiently clean after the tendering of a notice of readiness. In The ‘‘Linardos’’17 the owners chartered their vessel Linardos to the charterers for the carriage of coal from Richards Bay, South Africa to Antwerp on the terms of the Standard Form Richards Bay Coal Charter (RBCT) the laydays/cancelling days being 1 October and 10 October 1991. On arrival at Richards Bay, no berth was available for docking. The vessel nevertheless tendered a notice of readiness to load at 16.50 on 4 October 1991, from its position off-shore. The vessel did not dock until 08.50 on 7 October, and was inspected by the marine surveyor who found water and rust in her hatches and failed her for loading. She was not finally accepted as ready until 06.30 on 8 October. A dispute later arose under the charterparty as to whether the 4 October notice was valid given that at the time of tender the vessel was not in truth ready for loading. The material provisions of the charterparty were as follows: Clause 4 Lines 67–78: ‘‘Time commencing, subject always to the undermentioned provisos, 18 hours after Notice of Readiness has been give by the Master, certifying that the vessel has arrived and is in all respects ready to load, whether in berth or not . . . Any time lost subsequently by vessel not 17. [1994] 1 Lloyd’s Rep. 28.

164

C A R G O S PAC E S

Para. 71

fulfilling requirements for Free Pratique or readiness to load in all respects, including Marine Surveyor’s Certificate . . . or for any other reason for which the vessel is responsible, shall NOT count as notice time or as time allowed for loading.’’

Clause 24: ‘‘RBCT Regulations to apply to this Charterparty.’’

Clause 25: ‘‘In the event of vessel having to wait for berth at load/discharge port due to congestion then Notice of Readiness may be tendered by cable or telex or off the port whether in berth or not, whether in port or not, whether in free pratique or not, whether customs cleared or not.’’

RBCT regulations clause 2.12: ‘‘Vessels– 2.12.1 shall be required to present a Master’s certificate that the holds have been washed and dried prior to tendering Notice of Readiness; 2.12.4 if berthed and the holds are not passed as clean, will be required to vacate the berth and will lose their loading turn. The Notice of Readiness will only be accepted after receipt of an independent marine surveyor . . . that the vessel is clean, dry and free of contaminants.’’

The reference to RBCT Regulations was to Richards Bay Coal Terminal Regulations. The charterers challenged the validity of the notice of readiness, the arbitrator found that the notice of readiness was valid and awarded the owners the full amount of their demurrage claim in the sum of $40,277.77 plus interest. The charterers appealed to the High Court against the finding on the notice. It was held by Mr Justice Colman that: (1) although in general a valid notice of readiness could not be given unless and until the vessel was in truth ready to load it was always open to the parties to ameliorate the black or white effect of the principle by express provisions to the contrary; (2) the express provision in clause 4 lines 75 to 78 as to what was to happen in the event of time lost subsequently by vessel not fulfilling requirements for ‘‘ . . . readiness to load in all respect, including Marine Surveyor’s Certificate’’ contemplated loss of time due to the occurrence of surveyor declaring the holds unfit after the master had already presented what on the face of it was a perfectly valid notice of readiness; the argument that lines 75 to 78 should be construed as confined to loss of time due to events occurring after the giving of notice of readiness would be rejected; and the effect of clause 4 was to contract out of the normal rule that the vessel must be ready at the time of giving notice; (3) a notice of readiness proved to be given by the master or chief officer with the knowledge that it was untrue i.e. in the knowledge that the vessel was not then ready would be ineffective to start time running; there had to be by implication a requirement of good faith; (4) the RBCT regulations and clause 2.12.1 in particular contained nothing to suggest that presentation of the master’s certificate that the holds had been washed and dried prior to tendering notice of readiness was to have any other function than 165

Para. 71

READINESS

part of the ‘‘requirements in respect of the Notice of Readiness’’ which the regulations required to be satisfied before the vessel would be allocated to a berth; the general incorporation in clause 24 of the general requirement in clause 2.12.1 did not make that requirement a condition precedent to the commencement of time; the arbitrator was right in his conclusion that the regulations did not supplement the effect of clause 4 and the appeal would be dismissed. In The ‘‘Jay Ganesh’’18 the owners chartered their vessel to the charterers for the carriage of bagged rice from Ben Qasim in Pakistan to various ports in West Africa. The charterparty was on the World Food Programme voyage charter (‘‘Worldfood’’) which provided: ‘‘8(a) At each port of loading and discharging notice of readiness shall be given by the Master to the Charterers . . . when the vessel is in the loading or discharging berth and has obtained customs clearance and free pratique and is in all respects ready to load and discharge. (b) At loading port before tendering notice of readiness the Owners . . . shall ensure that all holds . . . are clean, dry and free from smell and in all respects suitable to receive the cargo to the . . . Charterers’ satisfaction. (c) If a loading/discharging berth . . . is not available upon the vessel’s arrival at or off the port, notice of readiness may be given upon arrival at the customary waiting place at or off the port, whether cleared at Customs or not and whether in free pratique or not. However if upon the vessel’s arrival at or off the port she is prevented from proceeding to the loading/discharging berth by her inefficiency . . . notice of readiness may only be given when such hindrance(s) has (have) ceased . . . 9. Laytime Counting (Loading and Discharging). (c) If the notice of readiness has been tendered while the vessel is at or off the port, in accordance with Clause 8(c) the laytime shall commence to count and shall count as if the vessel were in berth . . . (e) If after berthing the Vessel is found not to be ready in all respects to load/discharge, the actual time lost until the Vessel is in fact ready to load/discharge (including customs clearance and free pratique if applicable) shall not count as laytime or as time on demurrage.’’

The vessel proceeded in ballast to the anchorage of the loading port and gave notice of readiness on 10/11 August 1990. There was no berth available. On 28 August the vessel was inspected by the charterers’ representative and the master was instructed to clean the holds and remove the infestation of insects. On 7 September the vessel shifted from the anchorage into berth. On 8 September the vessel was inspected and the surveyor found that the infestation was still present. She was declared unfit to load the rice cargo and her holds needed fumigation. On 9 September she was reinspected and declared fit to load. Loading commenced on 10 September. The owners claimed demurrage and the dispute was referred to arbitration. The arbitrators found that when the master gave notice of readiness to load on 10/11 August he believed that the vessel was physically ready to load but in truth she was at that time unknown to the master infested with insects and mites. The arbitrators held that the shipowners were entitled to recover demurrage and that a valid notice had been given. There was an appeal. The issue for decision was whether the notice of readiness given on 10/11 August was a nullity because the vessel’s holds were then infested so 18. [1994] 2 Lloyd’s Rep. 358.

166

C A R G O S PAC E S

Para. 71

that time did not commence until the commencement of loading on 10 September, or whether as the shipowners contended that notice was valid so as to start the running of laytime from 10/11 August but subject to the deduction of about 212 days from berthing on 7 September to being ready to load on 9 September. It was held by Mr Justice Colman that: ‘‘(1) the charter imposed on the owner, as a matter of contract, exactly the duty as to physical readiness of the cargo spaces which he would have had at common law; to make sure before giving notice of readiness that they were in all respects fit to receive the cargo and only to give notice if he had ensured that; just as the effect of clause 9(e) in relation to free pratique was to deal with additional delay arising from the fact that the master gave the notice of readiness under a misapprehension as to the medical condition of the crew, so must its effect in relation to physical unreadiness be to deal with additional delay which the master gave notice contrary to the owners’ duty at common law and under clause 8(b) under a misapprehension as to the physical condition of the cargo spaces; time being thrown away in both cases it was the scheme of the contract that the owners should bear the expense of the delay; (2) the overall effect of clauses 8 and 9 was that this form of charter required that the charterers must pay for waiting time at the anchorage when they had not provided a berth, but that if the vessel then caused delay after arrival in berth because she was not in truth then ready to load or discharge that loss of time was to be borne by the owners; (3) the failure to obtain free pratique or to obtain charterers’ satisfaction would be analogous to the failure to obtain a marine surveyors’ certificate and it was no less unrealistic to distinguish between delay cause by unreadiness attributable to events existing when the notice was given and delay caused by subsequent events; the purpose of the clause was to make the owners pay for the loss because the master, albeit innocently, gave notice that his vessel was ready when in truth it was not and to make the charterers pay for the delay caused by their failure to provide a berth; the appeal would be dismissed. The ‘‘Linardos’’ [1994],17 applied.’’

In a much later arbitration LMLN 636—31 March 2004 (already referred to in Chapter 1 regarding geographical arrival and also later in Chapter 7 regarding exceptions), one of the issues was whether, as the owners argued, the notice of readiness given on 29 July was valid, and only the period following the refusal of the local inspector at the loading port to be satisfied as to the cleanliness of the vessel’s holds for loading until he passed them should be regarded as: ‘‘ . . . all time lost due to the vessel’s holds not being ready to receive the cargo until vessel’s holds are ready to receive the cargo not to count as laytime . . . ’’ (Recap clause 11);

or whether, as the charterers argued, the vessel’s uncleanliness prevented a valid notice of readiness being given so that laytime did not commence until the surveyor was satisfied. The owners relied on the decisions of Mr Justice Colman in The ‘‘Linardos’’17 and The ‘‘Jay Ganesh’’.18 The charterers contended that those decisions should be distinguished on the facts and/or that they should be regarded as clearly out of step with other judgments which stressed the importance of the accuracy of the facts stated in the notice of readiness before it could be effected. They said that in the present case the notice of readiness was clearly inaccurate in stating that the vessel was ready to load. It was held that, it was true that in the present charter the recap clause 11 was quite separate from the notice of readiness provisions in clause 24, whereas in The 167

Para. 71

READINESS

‘‘Linardos’’ the notice of readiness and requirement for a Marine Surveyor’s certificate as part of the vessel’s readiness were both in clause 4 of that charter. However, in The ‘‘Jay Ganesh’’ the two aspects (giving of NOR and cleanliness, and loss of time due to the vessel being found not to be ready) were in separate clauses (8 and 9). Mr Justice Colman said, at page 362: ‘‘The overall effect of clauses 8 and 9 is accordingly, that this form of charterparty requires that the charterers must pay for waiting time at the anchorage when they have not provided a berth but if the vessel then causes delay after arrival in berth because she was not in truth then ready to load or discharge, that loss of time is to be borne by the owners. That is an entirely logical division of the risk of delay between the parties.’’

Accordingly, the tribunal considered that it had to follow the guidance so provided by Mr Justice Colman as the wording and layout of the present charter could not be distinguished from The ‘‘Jay Ganesh’’ provisions. Nor was there a sufficient, if indeed any, distinction that could be drawn between the facts of the present case and the two previous cases. The charterers had submitted that Mr Justice Colman regarded it as being necessary that there had to be a requirement of good faith in the giving of the NOR, without which it would not be effective to start time running. The charterers asserted that extensive cleaning, descaling and preparation of the holds was required before they were ready. The owners had challenged that assertion. The tribunal’s finding was that, whatever was the exact cleaning that was required (and there were few facts about that), there was no evidence that the notice of readiness was given in anything other than good faith. As to the charterers’ submission that the decision in The ‘‘Linardos’’ and The ‘‘Jay Ganesh’’ were out of step, both decisions originated from awards by extremely experienced LMAA tribunals, and the judge in question (Mr Justice Colman) had spent his career frequently involved in charterparty cases. Far from being out of step with shipping law and decision in this area of maritime jurisprudence, the tribunal considered that those decisions represented a wholly logical and commercial exception to the readiness requirement in a notice of readiness, and was one which followed from the language used in the charter. Accordingly, the wording of recap clause 11 was sufficient to qualify the normal readiness requirement of the notice of readiness. The plain and ordinary meaning of the words ‘‘all time lost . . . ’’, when included in a clause dealing with the satisfaction of ‘‘local inspectors’’ as to the readiness of the holds, could only be that where there was dissatisfaction, then the time involved from the inspection to the satisfaction of the inspector was excluded from laytime which was otherwise running from the expiry of the notice of readiness. The issue would be decided in favour of the owners. The above cases and arbitration are very good examples of charterparty clauses not being sufficiently clear regarding what happens in respect of the very common type circumstances of a vessel having to wait for a berth and subsequently cargo spaces failing to pass the required standards of readiness. While the decisions by Mr Justice Colman were eminently sensible and showed a purposive approach to the interpretation of the charterparty clauses in question there would have been no necessity for the arbitrations and the court proceedings if the parties had agreed simple and 168

C A R G O S PAC E S

Para. 71

clear wording which left it in no doubt that the owners would have received compensation for the period that their vessels were waiting for berths and subsequently were found to be not ready to load/discharge their cargoes. Before suggesting an appropriate clause to cover the situation, the commercial justice of such a clause was put by Mr Justice Colman in his ‘‘Linardos’’ judgment: ‘‘If it were not for lines 75 to 78, owners whose vessel, having given notice of readiness at the anchorage, then had to wait for a period of several days or even weeks because no berth was available, was found on getting into berth to need one final washing of one or more of her cargo spaces, perhaps only a few hours work, could lose the benefit of all time lost at the anchorage. The printed form of this charterparty avoids that very commercially unbalanced result.’’ (Emphasis by the author.)

The commercial judge surely hit the nail on the head regarding a commercially unbalanced result so that, in the context of commercial justice, it makes sense to have a simple and clear clause in a voyage charterparty which leaves it in no doubt that when a vessel is waiting for a berth, particularly in respect of congestion which results in no berth being available to the vessel, and later the cargo spaces are failed, time counts in favour of the owners but on the basis of the laytime exceptions being applicable. Such a clause could read: ‘‘If a loading/discharging berth is not immediately available at the time of the vessel’s arrival at or off the loading/and discharging port/terminal laytime shall commence . . . and shall run subject to the laytime exceptions irrespective of whether the vessel is subsequently found not to have been ready to load/discharge cargo. Laytime, or time on demurrage, will not run during any periods when the vessel has to be cleaned in order for the vessel to load/discharge her cargo.’’

A sentence could also be inserted in such a clause to the effect that any notice of readiness given by the master had to be given in good faith although this will be implied, in any event, because of what Mr Justice Colman had to say in the ‘‘Linardos’’: ‘‘In the arbitration it was submitted that the master must have acted in bad faith when he gave his notice of readiness but in the motion before this Court no alternative case was put forward founded upon the allegation that the master did act in bad faith or indeed was negligent when he did give the notice of readiness. It is therefore unnecessary for the purpose of this appeal to determine that issue. It is sufficient to say for present purposes that a notice of readiness proved to be given by the master or chief officer with knowledge that it was untrue, that is to say in the knowledge that the vessel was not then ready would be ineffective to start time running. There must by implication be a requirement of good faith.’’

An even simpler clause, although not so attractive to charterers, reads: ‘‘Provided always that if a loading/discharging berth is not immediately available at the time of the vessel’s arrival at or off the loading/discharging port all time waiting thereafter for a berth shall be paid for by the charterers at a rate of $ . . . per day.’’

There are, of course, other forms of words which could make variations to the above clauses in simple and clear language so as to remove any doubts as to what the parties intended in the common type circumstances cited above. The failure to do so can result in owners losing out despite having a congestion type clause in respect of tendering a notice of readiness. In LMLN 545—28 September 2000, a case concerned more with documentation and legal readiness (see 169

Para. 71

READINESS

also later paragraph 78 and onwards) than cargo space readiness, the owners submitted that laytime commenced at 13.00 on 28 May whereas the charterers contended that the laytime clock did not start running until 07.00 on 10 June. The difference arose out of the position taken by the charterers that the vessel’s initial notice of readiness was bad in that the master and three other crew members did not have valid vaccination certificates when the vessel arrived off the loading port, and that that amounted to the unreadiness of the vessel to load, which was not cured until late on 9 June when the vessel obtained free pratique and the port authority authorised the vessel to berth. The vessel was chartered on the Sugar Charter Party form. The relevant clauses were, as follows: ‘‘19. At . . . loading port, laytime . . . to begin at the next regular working period commencing before 3pm after written/cables/telexed notice of readiness to receive cargo has been tendered to Agents in ordinary office hours, whether in berth or not, whether in port or not, whether customs cleared or not . . . 45. In the event of congestion at load and /discharge, Master has the right to tender his notice of readiness by cable/radio from customary anchorage, whether in port or not, whether in berth or not, whether entered customs or not, whether in free pratique or not, and time to commence as per Charter Party.’’

The vessel arrived off the loading port at 19.30 on 27 May and tendered a notice of readiness. No berth was available for her and no port health officials boarded the vessel, because of bad weather. Port agents advised the charterers on 28 May (copy to the owners) that there was a berthing prospect of 3 June if ‘‘cargo/docs ready’’. That advice was repeated on 30 May but on 2 June the agents advised that the berthing prospect for the vessel was 4 June if the cargo/documents were ready, and they further advised that the vessel would be inspected by port health authorities on that day, at the outer roads, if weather permitted. On 3 June the agents advised that the port health authorities had discovered crew members without valid vaccination certificates for yellow fever and that the crew members would have to be vaccinated with the vessel remaining in quarantine for a period of 10 days. The affected crew members were the master, 2nd engineer, 3rd engineer and the chief cook. In the event, it was not until 9 June that the agents advised that the port health authorities had authorised the berthing of the vessel as from 17.00 hours that day and the vessel berthed at 20.20. Free pratique was granted at 20.45 and loading commenced at 22.05. The owners submitted that laytime commenced at 13.00 on 28 May and ran continuously thereafter. They said that clauses 19 and 45 of the charterparty were unambiguous in providing for a valid notice of readiness to be tendered whether or not the vessel was in free pratique. The NOR tendered at 19.30 on 27 May was valid in that the obtaining of the necessary vaccination certificates was a pure formality which did not cause any delay to the vessel so that it did not invalidate the 1930 NOR—see The ‘‘Delian Spirit’’.19 They said that the real cause of the delay was the charterers’ failure to supply the cargo at the relevant time. They also cited The ‘‘Linardos’’20 and said that their submissions accorded with an objective view of 19. [1971] 1 Lloyd’s Rep. 506. 20. [1994] 1 Lloyd’s Rep. 28.

170

C A R G O S PAC E S

Para. 71

fairness between parties, and were consistent with the approach taken by Mr Justice Colman in that case. The charterers contended that the clear inference of clause 19 was that, although the vessel did not require free pratique on arrival, the vessel should obtain free pratique at the first opportunity and not at any stage in the future. The owners had to ensure that the vessel and crew were in the best possible position to be granted free pratique at the first inspection by the port health authorities. They relied on The ‘‘Tres Flores’’.21 The absence of four vaccination certificates when the vessel arrived at the loading port from ‘‘an infected area’’ amounted to failure by the owners to present a vessel which satisfied a valid notice of readiness. For the whole of the time that the vessel did not satisfy the port health authorities she was not at the full and immediate disposition of the charterers. It was held that The ‘‘Delian Spirit’’ was not relevant because, as a matter of fact, the obtaining of free pratique at the loading port was not a pure formality. The master and three of the other crew members did not have valid vaccination certificates, and free pratique could not be granted until vaccination had taken place and the port health authorities granted free pratique. It was the decisions in The ‘‘Tres Flores’’ and The ‘‘Linardos’’, which were relevant to the present case, as well as The ‘‘Petr Schmidt’’22 and The ‘‘Agamemnon’’ LMLN 473—20 December 1997, where fundamental principles regarding the commencement of laytime (as set out in The ‘‘Mexico 1’’23) were emphasised. In The ‘‘Tres Flores’’ there was nothing like the present clause 45 which referred specifically to congestion and permitted the master to tender a notice of readiness when he arrived off the loading port whether in free pratique or not in the circumstances of congestion. There was no problem in distinguishing the cases so as to give effect to clause 45 of the present charterparty. Clause 45 was tailor-made for congestion, and on the assumption that the clause did bite when the vessel arrived off the loading port, it had to follow that the master had been right to tender a notice of readiness at that time. That situation was very common in practice and it was such in The ‘‘Linardos’’ so that the same principles were applicable. In The ‘‘Linardos’’, Mr Justice Colman decided the case in favour of the owners on the basis of the wording in the commencement of laytime clause 4 of the charterparty, at lines 75–78, ‘‘any time lost subsequently by vessel not fulfilling requirement for . . . ’’. He said that those words contemplated that subsequent to the giving of a notice of readiness the loading of the vessel would be delayed, and further contemplated that the causes of such delay might be failure to obtain free pratique or unreadiness to load in all respects or other reasons for which the vessel was responsible. Those words were not in the charterparty in the present case, so The ‘‘Linardos’’ could be distinguished. However, The ‘‘Linardos’’ charterparty did have a clause (clause 25) which was almost identical to the present clause 45, and while Mr Justice Colman did not decide The ‘‘Linardos’’ by invoking clause 25, he 21. [1973] 2 Lloyd’s Rep. 247. 22. [1997] 1 Lloyd’s Rep. 284. 23. [1990] 1 Lloyd’s Rep. 507.

171

Para. 71

READINESS

did have something important to say about it—see the two paragraphs of his judgment in the left-hand column on page 32 of the report beginning ‘‘The arbitrator came to the same conclusion’’ and ending ‘‘that very commercially unbalanced result’’. Those paragraphs in Mr Justice Colman’s judgment made it clear that unless there were particular words in a charterparty which contracted out of the normal rule regarding the vessel to be ready at the time of the giving of a notice of readiness, the normal rule would be applicable albeit that it might lead to a very commercially-unbalanced result. That was the result for the owners in the present case since, because of the tribunal’s finding that obtaining free pratique was not a pure formality, the notice of readiness which was tendered on 27 May was invalid and of no effect. Further, there were no particular words in the present charterparty which contracted out of the normal rule requiring a vessel to be ready at the time that a notice of readiness was tendered. While clause 45 of the charterparty might incline an arbitrator to the view that the normal requirements should not apply (as did the arbitrator in The ‘‘Linardos’’ with a similar worded clause) it was clear from the judgment of Mr Justice Colman in that case that such a view was not permitted. The facts of the case emphasised that if owners wanted compensation for when their vessels had to wait for a berth, they should ensure that their charterparties contained clear and appropriate clauses to reflect that. Since the port authorities did not authorise the berthing of the vessel until the evening of 9 June, and free pratique was not granted until 20.45 of that day, it followed that laytime commenced at 07.00 on 10 June. The owners claim would be dismissed. The arbitrators took a strict approach in distinguishing their case so as not to apply The ‘‘Linardos’’ judgment in favour of the owners; much importance was attached to the words ‘‘any time lost subsequently by vessel not fulfilling requirements for . . . ’’ in The ‘‘Linardos’’. Their decision contrasts with that of the arbitrators in the later arbitration LMLN 636—31 March 2004 (already detailed earlier in this paragraph and where there was an ‘‘any time lost provision’’) and illustrates, again, the need for owners to strive for an appropriate and clearly-worded congestion type clause in their charterparties. The contents of this paragraph are also relevant to Chapter 5 which covers special clauses in the context of readiness.

EQUIPMENT 72. Any equipment which has relevance to the loading/discharging operations has to be in a state of readiness; such equipment may include derricks, cranes, winches, hatches, pumps, crude oil washing machines, shifting boards, vacuvators, etc. The state of readiness only has to be such that the equipment can be made ready and available for use when actually required. Not only is it a pointless exercise to have equipment such as derricks rigged to work while waiting at an anchorage but, in some circumstances, it might even be dangerous. On the other hand, if the relevant equipment is not ready and available for use when required, after the vessel has reached the agreed destination, then the vessel will not be ready so as to satisfy the 172

E QU I P M E N T

Para. 72

second requirement needed for the commencement of laytime; further, it would appear that the readiness must be such that the equipment is capable of loading/ discharging the whole of the cargo at the time that the notice of readiness is tendered. The cases Armement Adolf Deppe v. Robinson,24 Sun Shipping v. Watson and Youell,25 Noemijulia v. Minister of Food,26 The ‘‘Demosthenes V ’’ (No. 1)27 and The ‘‘Virginia M’’28 are important cases to look at in order to see the approach of the courts over the years regarding the required degree of readiness for a vessel’s equipment. The recent Virginia M case is considered since it indirectly concerned equipment, albeit that the case focused upon the lack of fresh water to supply steam for the vessel’s winches. In Armement Adolf Deppe24 the ship was to proceed to Avonmouth for discharge. She reached that port and entered the dock on 28 October; since no discharging berth was available, she moored at buoys. Discharge could have been carried out at the buoys but the consignees of the cargo did not want this. The hatches had not been removed nor had the owners’ stevedores brought all their discharging gear on board. The Court of Appeal held, reversing the High Court judge, that the vessel was ready to discharge and that the laydays began to run on 28 October. Lord Justice Swinfen Eady in his judgment said: ‘‘It is the duty of the merchants to co-operate with the owners in the receipt of cargo, and upon the facts I am satisfied that the only reason why the ship did not take on board the gang and rig the gear to fulfil the owners’ duty in discharging was that the receivers were not desirous of receiving the cargo at the buoys and were so not willing to co-operate in her discharge there and made no preparations for doing so. The ship was lying at a waiting berth, her voyage being ended; it would have been an idle form to take on board and open hatches and make other preparations at the buoys when there was no desire or intention of the merchants to receive cargo until the ship was berthed at the quay. The ship was ready to discharge in a business and mercantile sense, and the idle formality of incurring useless expense was not necessary as a condition precedent to the commencement of the lay days.’’

The judgment is full of common sense; the only surprising thing about the case is that the High Court decided the matter in the reverse way. The case is to be contrasted very much with that of Sun Shipping v. Watson and Youell25 where the court was concerned with shifting boards and the loading of grain in bulk. The vessel had to load a cargo of grain at certain Danube ports and she arrived at Braila on 4 June where a portion of the cargo was loaded; she then went to Galatz and continued the loading which was completed on 20 June. The charterers claimed that laytime should not count on 5, 6 and 7 June because the vessel was not ready in all holds as work was in progress on the erection of shifting boards. At the time that the notice of readiness was given the vessel had not finished putting up her shifting boards (fixed to prevent the grain from working from one side to the other); it was possible to commence loading when the boards were only partly fixed. 24. [1917] 2 K.B. 204. 25. (1926) 24 Ll.L.Rep. 28. 26. (1949–50) 83 Ll.L.Rep. 500, and (1950) 84 Ll.L.Rep. 354 (C.A.). 27. [1982] 1 Lloyd’s Rep. 275. 28. [1989] 1 Lloyd’s Rep. 603.

173

Para. 72

READINESS

It was decided by Mr Justice Rowlatt that ‘‘it was quite clear that, if no shifting boards had been put in, the ship was not ready to load; if that was so, and though she may be ready to load when some, but not all, of the boards were put in, you get into the case a question of degree and fact and I think that the construction should be adopted that the shifting boards have got to be ready and fitted before the ship could be said to be ready. Further, it is said that there is no evidence that the Charterers were prevented from loading; that probably is the case but, as far as I know, that has nothing to do with it; the ship to be ready to load before the time begins to run; and there is an end of it.’’

This judgment appears on the harsh side rather in line with The ‘‘Tres Flores’’29 but, of course, the decision is very much different, in principle, to that of the Court of Appeal in the Armement Adolf Deppe case.24 73. The next case in chronological order is that of Noemijulia v. Minister of Food.30 The vessel arrived at Buenos Aires with inward cargo and there was a collapse of the main mast due to steps taken in extinguishing a fire in a storeroom. Temporary repairs were effected and the ship was given a certificate of seaworthiness for her voyage homewards with grain. No. 3 hold (tween and lower) was occupied by bunker coal. Notice of readiness was given by the shipowners in accordance with the charterparty but was refused by the charterers on the grounds (inter alia) that the ship had no main mast or after derricks and that No. 3 hold still contained bunker coal. The umpire found that No. 3 hold was designed as reserve bunker space and that No. 3 tween deck and No. 3 lower hold, if not used for reserved bunkers, were capable of carrying cargo; that, in order to proceed to the nearest bunkering port on the homeward voyage, sufficient reserve bunkers could have been carried in No. 3 tween deck leaving No. 3 lower hold free for grain and that the ship was not ready to load by her cancelling time in that she was without main mast or after derricks and in that part of her No. 3 lower hold was not free for grain. The case then went to the High Court where Mr Justice Devlin (as he then was) decided the case in favour of the owners of the vessel and reversed the award of the umpire. He decided against the charterers on the point relating to bunkers/No. 3 hold (on this he was upheld by the Court of Appeal in that the master was entitled to take bunkers for the whole of the voyage and not just the nearest bunkering station) and, in deciding on the other aspect of the case, he held that the charterer was entitled to no more than the reasonable co-operation of the shipowners in selecting and working the most convenient method of loading, and that the evidence of the absence of a main mast and after derricks (which defects could probably have been remedied in time if the method of loading required their use) was inadequate to discharge the onus upon the charterer of showing that the defects in the ship’s equipment were such that she would probably be unready or unable to employ or assist in any reasonable method of loading which might be decided upon. Before going further, it is stressed that this case was really concerned with the cancellation of the vessel, also that the charterer had no express right to use any part of the ship’s gear and the charterparty did not prescribe any particular method of 29. [1973] 2 Lloyd’s Rep. 247. 30. (1949–50) 83 Ll.L.Rep. 500; (1950) 84 Ll.L.Rep. 354 (C.A.).

174

E QU I P M E N T

Para. 74

loading or allow the charterer to select such a method. Having said that, the following words of Mr Justice Devlin are pertinent: ‘‘The lack of main mast and after derricks meant a deficiency in the ship’s gear which might have interfered with the loading of Nos. 4 and 5 holds. The extent of the possible interference is dependent upon the method of loading and is detailed in the case. The authorities on readiness to load mostly deal with the condition of the holds. But it is not disputed that the principle in some form must be applied to the ship’s gear, where it has to be used; for it would be pointless to insist on the space being available if the ship was in no condition to play her part in filling it. But it does not follow that the principle is to be applied with the same stringency . . . it would be unsatisfactory if the work of making ready had to be chased by the work of loading; the shipper wants to know all is in readiness before he begins, and it is best to make a firm rule. The ship’s gear is different; some of it may not be required at all; some of it may not be needed until an advanced stage of loading, and the keeping of it in constant readiness from the first moment to the last may involve labour and expense unnecessarily. I think, that outside the clear rule about the condition of the holds, some elasticity is permissible. In particular, Lord Justice Swinfen Eady lays down the test of readiness in a business and mercantile sense and deprecates the idle formality of incurring useless expense. Apart from useless expense, I find it hard to believe that if, for example, a winch, which would not be needed for some days after loading began, required an hour or two’s overhaul, the cancellation of the charter would be justified. Examples of this sort could be multiplied and would serve to show that a test which produces a sensible result in the case of the holds may not work equally well in respect of gear.’’

He went on to say that if the charterparty expressly gave to the charterer the right to use any part of the ship’s gear the end result might be different, as it also could be with a charterparty which prescribed a particular method of loading or allowed the charterer to select a method of loading where the ship’s gear was required for such methods. The decision of Mr Justice Devlin was taken to appeal but the Court of Appeal upheld the judgment. Lord Justice Tucker stated: ‘‘It seems to me that there is a real distinction to be drawn between the cargo space and the gear. The charterer is entitled to control of the whole of the cargo space from the outset of the voyage.’’ Lord Justice Cohen had this to say: ‘‘I agree with the learned Judge that there is a difference, if not in principle, at least in the application of the principle, between space in the hold and readiness of ship’s gear’’. There is perhaps, a fine point of distinction between Lord Justice Tucker and Lord Justice Cohen/Mr Justice Devlin but in practice the distinction between them appears to be of no practical significance; so long as there is a difference in the application of the principle regarding readiness, to equipment as compared to the cleanliness of cargo spaces, that should suffice to ensure that the strictness of the Tres Flores19 decision does not impinge in such a way regarding the equipment of the vessel so as to result in a departure from common sense and practical justice. 74. In The ‘‘Demosthenes V’’ (No. 1),31 the decision appeared to be more marginal than in the previous cases adverted to in respect of equipment. The facts were that the vessel arrived at Alexandria at 15.30 on 26 May with a cargo of grain and she anchored in the inner port giving a notice of readiness at 11.40 on the following day, 31. [1982] 1 Lloyd’s Rep. 275.

175

Para. 74

READINESS

27 May. That notice was rejected on the ground that the vessel was not equipped with the necessary vacuvators for the discharge of cargo in accordance with clause 18 of the charterparty so that, consequently, the vessel was not ready for the discharge of cargo. No vacuvators were put on board the vessel until 12.00 on 29 May when three of them were put on to the ship. It was doubtful whether any vacuvators could have been put on board the vessel before that time and the three vacuvators that were put on board the vessel were capable of discharging cargo at a greater rate than that specified in the charterparty. The charterparty provided that there should be six vacuvators and three more vacuvators could have been obtained within a matter of hours. Three more vacuvators were obtained at 11.30 on 15 June at which time the vessel was still waiting in the inner port without having starting the discharge of cargo. There was a finding by the arbitrator that any lack of vacuvators between the arrival of the vessel at Alexandria and 15 June was not causative of any delay in the berthing of the vessel. The relevant provisions of the charterparty were: ‘‘Notification of the vessel’s readiness must be delivered at the office of Charterers . . . at or before 4 p.m. . . . laydays will then commence at . . . 8 a.m. on the next business day whether in berth or not at discharge. Notice of readiness at port of . . . discharge is only to be tendered at the office of Charterers, Receivers or their Agents on official business days during office hours not after 4 p.m. . . . Owners to supply sufficient vacuvators . . . to operate same capable of discharging at charterparty rate of discharge. Cargo to be discharged by Receivers . . . at the average rate of 1,500 tons per weather working day of 24 consecutive hours provided vessel can deliver at this rate . . . .’’

By an addendum it was agreed that the discharging rate be amended to 1,000 metric tons per weather working day and for the owners to guarantee minimum six vacuvators at the discharging port. It was decided by Mr Justice Staughton (as he was then) that: (1) There was no express link between the notice of readiness clause and those requirements as to vacuvators; all that was required before notice of readiness was given was that the vessel ought to be ready; and that had no connection with vacuvators which the owners would supply for the operation of discharging. The vacuvators were essentially equipment which was to emerge from the shore when the operation of discharge was to commence. The vessel as a vessel was ready and all that had not been done was to supply the equipment which the owners were to supply for the purpose of discharge. In the circumstances, the notice of readiness which was given on 27 May was a valid notice. (2) However, if the vessel had not been, in point of a physical state, ready to discharge on 27 May and the vacuvators were an essential part of the vessel’s readiness, the vessel would still have been ready at any rate from 29 May because at that time there were three vacuvators on board and a further three could have been obtained within a matter of hours. (3) If the notice of readiness given on 27 May had been invalid then once the vessel became ready a further notice period was necessary; here the court 176

E QU I P M E N T

Para. 75

would have required a great deal of persuading to reach the view that the charterers, who had had notice of the vessel’s arrival, were entitled to allow her to sit there for a period of just over two weeks and not pay demurrage or bear the cost of the time that had elapsed merely on the ground that they had not received notice from the owners that another three vacuvators could be obtained within hours. The judge’s decision in fact upheld the award of the arbitrator. In making his decision Mr Justice Staughton did not have to give a ruling between the competing principles in The ‘‘Tres Flores’’32 and Armement Adolf Deppe33 (because of what he decided in (1) above) but he did consider it just in case he was found to be wrong on appeal in respect of his decision in (1) above (in fact the case never went to appeal). He considered, by way of obiter, the more difficult issue which was, if the ship was not, in point of her physical state, ready to discharge on 27 May, whether the notice was still valid because she could have been made fit within such time as the charterers could conceivably have required for her to start discharging. His lordship appeared to think that it was a marginal point but, at the end of the day, he rejected the application of the Tres Flores32 approach and was of the opinion that the facts of the instant case fell within the Armement Adolf Deppe33 principle. In coming to this conclusion he relied (inter alia) on the words of Lord Justice Roskill (as he then was) in The ‘‘Tres Flores’’32: ‘‘In my judgment the essential distinction between the present case, on the one hand, and Armement Adolf Deppe and The ‘Delian Spirit’ . . . on the other, is that in those latter cases the matters which remained to be done before the vessel could begin to discharge or load were in the nature of normal and usual preliminaries which would require to be carried out in every case whereas the fumigation in the present case could not so be described.’’

Mr Justice Staughton said that he would be prepared to describe the supply of vacuvators in the present case as normal and usual preliminaries, at any rate in the case of a vessel which has to be discharged in that way, in contrast with the fumigation in the Tres Flores32 case. Mr Justice Staughton also has some obiter dicta regarding the giving of a further notice of readiness (see decision (3) earlier in this paragraph) but, since this aspect will be considered later in Chapter 6 (see paragraph 107 et seq.), no further mention will be made of it except to say that, in view of the Court of Appeal decision in The ‘‘Mexico 1’’, and later cases, he was probably wrong on this point. 75. The ‘‘Virginia M’’ facts have already been adumbrated earlier in paragraph 64. In more detail they were that the vessel was chartered for a voyage from Constanza to one safe port in Nigeria, charterers’ option, with a cargo of bagged calcium ammonium nitrate. The laytime allowed at the discharge port was in excess of 15 weather working days and the charterparty provided for notice of readiness to be given at the discharge port. After several changes of destination the vessel was finally ordered to Lagos where she arrived at 08.30 on 8 March with about 15 tons of fresh 32. [1973] 2 Lloyd’s Rep. 247. 33. [1917] 2 K.B. 204.

177

Para. 75

READINESS

water remaining on board. The vessel’s main propulsion was a four-cylinder Doxford engine but her auxiliaries and in particular her steam winches were steam driven, the steam being provided by an auxiliary boiler; subject to using salt water in an emergency she was dependent upon having a supply of fresh water (about 20 tons per day) to feed her boiler and provide the steam necessary to run her auxiliaries. A notice of readiness was tendered by the vessel at 10.00 on 8 March and a dispute arose as to whether this notice was valid. The arbitrators found that the vessel could have proceeded to a discharging berth when she arrived at Lagos if one had been available and she could have commenced discharge of cargo but this could not have lasted for more than a day at most with the fresh water then on board. In fact the vessel waited for a berth until late March but she received a supply of fresh water on 13 March. The majority of the arbitrators held, in deciding for the owners, that in order to give a valid notice of readiness the vessel had to be ready, apart from routine formalities, to discharge or load at the time of giving notice. She did not have to sustain her readiness for any length of time. Provided that notice was given in accordance with charterparty stipulations, that would be good notice. Thereafter, the laytime provisions of the charterparty took over and governed what was to happen after notice had been given. If at some time later the vessel had to cease discharge due to the fault of the owner/vessel then the laytime ceased to count against the charterer. Before Mr Justice Hobhouse (as he then was), in the High Court, the rival contentions concerned whether or not the readiness must relate to the whole of the cargo or only some part of it and whether or not the readiness need only be readiness to start discharging cargo as opposed to readiness to continue to discharge it once started. He considered that the majority arbitrators’ approach was not proper or sound in law and decided that the readiness required was readiness to discharge the whole of the cargo that was the subject matter of the charterparty; it did not suffice that the vessel was ready to discharge some of the cargo if she was not ready to discharge the remainder. It was not enough for the shipowner to say: ‘‘True I am not ready now but I will be ready as soon as you the charterer are ready.’’ In coming to his conclusions as above his lordship did give consideration to Sun Shipping v. Watson and Youell34 and Armement Adolf Deppe v. John Robinson35 but not to Noemijulia v. Minister of Food36 and The ‘‘Desmosthenes V ’’.37 He also gave consideration to what Mr Justice Diplock had to say in The ‘‘Massalia’’ (No. 2)38 and the obiter dicta of Mr Justice Evans in The ‘‘Mexico 1’’39; both of these cases concerned overstowage of cargo and the latter judgment stated: ‘‘It is also well established, subject always to express argument in a particular case, that notice of readiness cannot be given until the vessel in question is ready to load or to discharge the whole of the cargo in question’’ [emphasis supplied]. 34. (1926) 24 Ll.L.Rep. 28. 35. [1917] 2 K.B. 204. 36. (1949–50) 83 Ll.L.Rep. 500. 37. [1982] 1 Lloyd’s Rep. 275. 38. [1960] 2 Lloyd’s Rep. 352. 39. [1988] 2 Lloyd’s Rep. 149.

178

E QU I P M E N T

Para. 75

Further, Mr Justice Hobhouse gave particular consideration to the Tres Flores Court of Appeal decision and, while it is difficult to reconcile some of his reasoning in relation to the usual preliminaries for loading/discharging and routine formalities on the one hand, and something which would prevent the vessel from being absolutely ready to load or discharge the cargo whenever the charterers might order her so to do, the fact is that the recent judicial inclination appears to be for a stringent approach to readiness of a vessel’s equipment (which may be caused by way of a lack of fresh water) as compared to the earlier approach to the courts in, for example, Noemijulia v. Minister of Food (see earlier paragraph 73) where a distinction was drawn between the application of the principle regarding readiness, to equipment, as compared to the cleanliness of cargo spaces. Mr Justice Hobhouse obviously adhered to the more stringent Tres Flores approach even though he was not dealing with the readiness of cargo spaces but inferentially, at least, with the readiness of equipment. The narrowing of approach was disappointing to some and not in accord with what Lord Justice Devlin (as he then was) had to say in Ingram v. Little40 (see earlier paragraph 64) in that, ‘‘the great virtue of the common law is that it sets out to solve legal problems by the application to them of principles which the ordinary man is expected to recognise as sensible and just. The true spirit of the common law is to override theoretical distinctions when they stand in the way of doing practical justice’’. Further, ‘‘some elasticity is permissible’’ as in Noemijulia v. Minister of Food (see above, paragraph 73) appears to have gone by the board although owners may still have the benefit of ‘‘preliminaries’’ in certain circumstances. In The ‘‘Virginia M’’ it may well have been that practical justice militated for the approach of the owners, which approach his lordship dealt with as follows: ‘‘I was urged by Mr Simon on behalf of the owners to approach the test of readiness as being wholly divorced from what may subsequently happen after laytime has begun to run. Events may occur after laytime has started which gave rise to laytime exceptions and therefore interrupt laytime or events may occur which amount to breaches of charterparty by the shipowners. He submitted that such considerations are distinct from and in contrast to what the shipowner has to do to make his ship ready to load or discharge. He used the analogy, which I accept in the context of the situation pertaining at Lagos as a useful analogy, of the vessel interrupting loading or discharging in order to bunker. (See Ropner Shipping Co. Ltd. v. Cleeves Western Valley Anthracite Collieries Ltd.41) However this points the absurdity of his argument once it is also accepted that readiness to load or discharge refers to readiness to load or discharge the whole of the relevant cargo. It is absurd, and would be wholly unbusinesslike, to say that laytime must be treated as starting even though, within a matter of minutes or hours of its doing so, laytime is interrupted owing to the incapacity of the ship to continue. If the vessel having proceeded into berth and having discharged some cargo has to stop and take on fresh water or bunkers either at that berth or another berth, that is not consistent with the vessel having been ready to discharge nor is it consistent with the criteria laid down in the authorities, in particular by the Court of Appeal in The ‘Tres Flores’.’’

With due respect to his lordship there is nothing absurd whatsoever in laytime commencing and then being suspended a matter of minutes or hours later; this is always happening in respect of ‘‘weather working days’’ and the effect of inclement 40. [1962] 1 Q.B. 31. 41. (1927) 27 Ll.L.Rep. 317.

179

Para. 75

READINESS

weather. What is the difference in principle between an interruption of laytime because of a breakdown of a vessel’s equipment and an incidence of weather? In practice, laytime is often interrupted soon after commencing, not just by an incidence of weather but also perhaps because of breakdown of equipment such as winches or cranes. However, it obviously behoves parties to be mindful of the judicial climate and to draw up their contracts accordingly. Leave to appeal the decision of Mr Justice Hobhouse was given but the parties settled the case before the appeal was due to be heard (thus indicating some doubts regarding the decision) so that the shipping community were denied the benefit of any erudition from the Court of Appeal or the House of Lords in respect of the points raised in the High Court. The decision of Mr Justice Hobhouse stands on the particular facts of the case; as his lordship himself stated, the burden of proof is upon the owners to prove the ‘‘preliminary existing fact which must exist’’ before a valid notice of readiness can be given; he further said, quite correctly, in some ports, maybe even in most ports of the world, the taking on board of further fresh water at a discharging berth may be a mere formality which will in no way impede or hold up the discharge of the cargo and will not prevent the vessel from being ready to discharge the whole cargo as soon as the charterers may wish and at the rate that they may wish. By analogy, what was decided in The ‘‘Virginia M’’ must also have relevance to equipment which is dependent upon electric power produced by a vessel’s generator, e.g. electric winches or pumps. It can therefore be a matter of some importance as to what defect is discovered in respect of a vessel’s equipment and the timing of such, in the context of a vessel waiting for a berth without an appropriate compensatory clause. It may be that charterers will be able to take considerable benefit from The ‘‘Virginia M’’, as applied to a vessel’s equipment, in circumstances where the evidence shows that a vessel’s equipment was not ready to load/discharge the whole of the cargo when she arrived off the loading/discharging port. However, in LMLN 351 (detailed earlier in paragraph 39) the tribunal decided that the fact that a windlass motor failed due to a latent defect subsequent to the vessel’s arrival, which delayed her from shifting to her loading berth, did not invalidate the notice of readiness which was given by the vessel on her arrival. Navigational equipment, charts and the trim of the vessel may all be aspects which relate to readiness to load/discharge cargo in the context of a valid notice of readiness. In LMLN 669—6 July 2005 the vessel was chartered on an amended Gencon form for the carriage of 60,000 metric tons of bulk phosphate from Aqaba to Paradip in India. The charterparty provided inter alia: Clause 6(C) ‘‘Time lost in waiting for berth to count as loading or discharging time, as the case may be.’’

Clause 20 ‘‘Breakdown of Equipment Anytime actually lost through lack of ship’s power breakdown or inefficiency of equipment or any neglect on the part of the vessel, its Owners, Master or crew or their Agents affecting the loading or discharging operation shall not count as laytime.’’

180

E QU I P M E N T

Para. 75

Clause 26 ‘‘Notice of Readiness to be tendered any time day or night, Sundays and Holidays included, whether in port or not, whether in berth or not, whether customs cleared or not, provided that the vessel being in free pratique. Laytime to commence 12 hours after the Notice of Readiness has been given, unless sooner commenced.’’

The vessel arrived at Paradip and tendered a notice of readiness at 08.30 on 9 July. The discharging berth was occupied when the vessel arrived, and so she remained at the roads. On 15 July the Harbour Master and a pilot boarded the vessel to take her into berth, but they refused to berth her, alleging five deficiencies, namely; the gyro compass was not working, the engines were not able to operate at their rated RPM and generate enough speed to manoeuvre in monsoon weather, the vessel did not have a proper chart for ‘‘approaches to Paradip’’ on board, the vessel had declared a draught of 12.5 metres in even keel in salt water whereas the maximum permissible draught in the port was 12.5 metres in dock water, and the vessel was drawing more than the draught declared and was trimmed down by the head and not responding to the engines and helm properly. As a result of the vessel’s rejection by the Harbour Master, the cargo receivers informed the owners that the vessel would only be berthed after the deficiencies complained of had been rectified. On 25 July the Harbour Master inspected the vessel again and on the 26 July he approved her entry into the port. However, the vessel did not berth immediately because of congestion. The vessel eventually berthed at 08.42 on 30 July, commenced discharge at 15.30 that day, and completing at 09.00 on 8 August. The charterers disputed the validity of the NOR tendered on 9 July. They said that laytime did not begin to count until the commencement of discharging operations at 15.30 on 30 July. They said that because of the deficiencies noted by the Harbour Master on 15 July the vessel was neither physically nor legally ready to discharge her cargo until cleared by the Harbour Master on 26 July; that whether or not there had been congestion at the berth the vessel would still not have been permitted by the Harbour Master to proceed from the roads without remedying the deficiencies. The owners maintained that the notice of readiness tendered on 9 July was valid and that the delay in berthing was attributable only to congestion. They also said that the combined effect of clauses 6(c) and 20 of the charterparty was that time was to count when the vessel was waiting for a berth and that, if there was any breakdown or inefficiency of equipment or any neglect or default of the vessel, only the time actually lost as a result of that would be excluded from laytime counting. The present case was similar to The ‘‘Linardos’’.42 The vessel was simply waiting for a berth up until 15 July and no time had been lost before the pilot boarded, so that time counted in full. The vessel would not have discharged until the freight had been paid, which had only been on 12 July and between 12 July and 15 July the

42. [1994] 1 Lloyd’s Rep. 28.

181

Para. 75

READINESS

berth had been occupied by another vessel. Consequently, laytime expired at 17.50 on 13 July before any attempt had been made to berth the vessel. The charterers accepted that the prima facie effect of the WIBON provisions of clause 6 was to transfer the burden of waiting time from the owners to them. However, they said that that was subject to the proviso that the vessel was to be at their immediate and effective disposal at the time that the notice of readiness was tendered and that that was not the case by reason of the defects noted by the Harbour Master. Clause 6(c) was only effective to make time count before the vessel had arrived at a point from which notice of readiness could be tendered. If then a valid notice of readiness could not be tendered for any reason, and laytime did not therefore count, neither could time count under Clause 6(c). Moreover, clause 6(c) only applied where the vessel was prevented from berthing by congestion at the berth. Even if there had been no congestion at the berth the Harbour Master would still not have permitted the vessel to proceed from the roads without remedying the deficiencies noted on 15 July. It was held that the first question was whether the notice of readiness tendered on 9 July was valid or not. It was a puzzling feature of the dispute that several of the concerns expressed by the Harbour Master on 15 July (and specifically those concerning the main engine operation and draught) evaporated when he attended the vessel again on 25 July even though nothing had been done by the owners and the crew in the meantime to alter the position. It could not be said with any certainty whether, if the Harbour Master had attended the vessel on 9 July, he would have adopted his view of 15 July (and rejected the vessel) or that of 26 July (and approved it for berthing). The only difference of note in the condition of the vessel between 9 and 26 July seemed to have been the problem with the gyro compass listed by the Harbour Master on 15 July. There was, however, no evidence or suggestion that the gyro compass had not been working when the notice of readiness was tendered on 9 July. For that reason, and because the other alleged deficiencies did not in the event prove to be impediments to berthing, the notice of readiness tendered on 9 July was valid and effective to trigger the commencement of laytime. While on this occasion the tribunal did not accept the evidence submitted by the charterers the arbitration illustrates the kind of readiness or unreadiness which may arise in practice regarding causation and a vessel’s notice of readiness. 76. Little need be said regarding the provision of dunnage and mats since it is now the charterers who invariably organise the loading and discharging of cargo and see to the provision of dunnage, mats, etc. However, if the charterparty contractual position between the parties be that the owners are to provide dunnage and mats these do not have to be laid in order to satisfy the condition of readiness unless, of course, the contract expressly so states; all that is required is that the relevant materials are ready to be used when required; see Grampian Steamship Co. Ltd v. Carver and Co.43

43. (1893) 9 T.L.R. 210.

182

D O C U M E N TAT I O N — L E G A L R E A D I N E S S

Para. 78

77. It was mentioned earlier in paragraph 20, when considering a berth charterparty, that the time of access to a vessel might have relevance to the commencement of laytime. If it be the ship’s obligation to provide access for shore personnel involved in the loading/discharging operations then a failure to provide the access may mean that the vessel is not ready to load/discharge cargo at the time she gives a notice of readiness under a berth charterparty and the condition of readiness will not be satisfied until access has been provided for personnel essential to the loading/ discharging operations. In the case of a port charterparty, where a vessel waits for a berth and laytime has commenced, then the failure to provide access at a later date may amount to a breach situation so that laytime will be suspended for the delay in providing the access assuming, of course, a legal failure by the owners in not providing access.

DOCUMENTATION—LEGAL READINESS—INCLUDING THE DELIAN SPIRIT DECISION 78. In order for a vessel to be ready all necessary papers have to be in order whereby the vessel, if required by the charterers, can proceed immediately to her loading or discharging place. There can be an exception to this whereby a mere formality is required at the behest of a port authority or some other organisation and this does not turn out to be a legal impediment to the commencement of the loading or discharging of the cargo. The papers which are usually required are those needed for the port authorities but there can be documentation appertaining to the cargo itself which might prevent the vessel being ready. In the latter case the responsibility for obtaining such may fall within the sphere of the charterers rather than the owners and, if the charterers fail to obtain the appropriate documentation, the owners may be compensated by damages for delay because of a breach of the implied term of reasonable dispatch by the charterers, see earlier The ‘‘Atlantic Sunbeam’’.44 Taking first free pratique (the vessel having a clean bill of health and probably the most important matter in practice) the older cases will not be cited in this work —suffice it to say that it used to be trite law that, if a vessel was refused free pratique, she could not be ready and, therefore, did not satisfy the second condition required in respect of the commencement of laytime. The all-important cases on the subject of free pratique are The ‘‘Austin Friars’’45 and The ‘‘Delian Spirit’’46 (the latter already cited on other matters in Chapters 1, 2 and 3). In The ‘‘Austin Friars’’45 the facts were that the vessel had sailed from Constantinople in ballast on an approach voyage to Galatz and on this voyage collided with another vessel which caused her to go back to Constantinople for temporary repairs. After these repairs were completed she sailed again for Galatz arriving there at 23.00 on 10 October. Nobody could board or leave the vessel until pratique was given after the ship had been visited by the port doctor. The doctor boarded the 44. Para. 56, above; [1973] 1 Lloyd’s Rep. 482. 45. (1894) 71 L.T. 27. 46. [1971] 1 Lloyd’s Rep. 64; [1971] 1 Lloyd’s Rep. 506 (C.A.).

183

Para. 78

READINESS

vessel the following morning and gave her a clean bill of health. Unfortunately, the charterparty provided that the charterers could cancel the charter if the vessel was not ready by midnight on 10 October which, in fact, they did. The main issue in the case was whether or not the charterers had the right to cancel the vessel and this, in turn, depended upon whether the vessel was ready in time. It was decided in the High Court that the vessel was not ready by midnight on 10 October so that the charterers were entitled to cancel the vessel. The judge saw no distinction between a medical officer in authority ordering a ship into quarantine and his prohibiting access to her until he can examine her. In both cases, a superior authority, in pursuance of regulations, disqualifies a ship from taking cargo on board. The decision appeared harsh but it emphasised the strictness of the common law in respect of the conditions to be satisfied for laytime to commence, at least in 1894. The ‘‘Austin Friars’’45 led to the proposition that a notice of readiness was not valid without free pratique. In the later case of The ‘‘Delian Spirit’’46 the subject of free pratique came to the fore (as did other matters which have been discussed in earlier chapters). The charterers directed the vessel to Tuapse and she reached the roads at that port on 19 February at 01.00. On the morning of that day the master gave a written notice of readiness to load which was accepted by the charterers’ agents. The vessel lay in the roads until 08.00 on 24 February when she was ordered by the charterers to go alongside a loading berth. She arrived in the loading berth at 13.20 and free pratique was granted at 16.00. One of the points at issue in the case was whether or not the vessel could be an ‘‘arrived ship’’ if free pratique had not been obtained. It was decided by Mr Justice Donaldson (as he then was) that the mere fact that free pratique had not been obtained did not prevent the vessel from being an ‘‘arrived ship’’ if it could be obtained at any time and without the possibility of delaying the loading and that, in the present case, the obtaining of free pratique had no effect on when the loading began. (In fact, the loading did not begin until 21.50 and the obtaining of free pratique had no bearing on loading not commencing until that time.) His lordship considered The ‘‘Austin Friars’’.45 He stated that difficulties flowed from the decision in that case but that, unless constrained by authority binding upon him, he would hold that a vessel is ready to load and can be an arrived ship if she is in such a state of physical and legal readiness that there was nothing to prevent her being made ready at once if required. He relied upon the Armement Adolf Deppe47 case in coming to this conclusion. He cited the words of Lord Justice Swinfen Eady (already referred to in paragraph 72) but he went further and stated: ‘‘It is an idle exercise to obtain free pratique before the time for loading unless it be required for ship’s purposes, and if it is a fact that it can be obtained at any time without the possibility of delaying the loading, the mere fact that it has not been obtained does not prevent the ship from becoming an ‘arrived ship’.’’

The case went to the Court of Appeal where the decision of Mr Justice Donaldson, on the pratique point, was upheld. Lord Denning (the then Master of the Rolls) had this to say: 47. [1917] 2 K.B. 204.

184

D O C U M E N TAT I O N — L E G A L R E A D I N E S S

Para. 78

‘‘It was said that the vessel was not ready to load until free pratique was given . . . in support of that proposition the case of The ‘Austin Friars’45 was cited. I do not think that case warrants that proposition. It was a very special case. I can understand that, if a ship is known to be infected by disease such as to prevent her getting her pratique, she would not be ready to load or discharge. But if she has apparently a clean bill of health, such that there is no reason to fear delay, then even though she has not been given her pratique, she is entitled to give notice of readiness, and laytime will begin to run. That is supported by the case of the hatch covers, see Armement Adolf Deppe.47’’

In The ‘‘Delian Spirit’’48 the judges took a practical common sense approach to bring the law into harmony with modern conditions of shipping practice/operations. The result is that at common law the actual obtaining of free pratique is not now a requirement before a ship can be considered ready. The position will be different if the charterparty contains an express clause making the obtaining of free pratique a condition precedent to the tendering of a notice of readiness but this aspect will be considered later (see Chapter 5). Despite the sensible decision in The ‘‘Delian Spirit’’48 a vessel will not be ready at common law if pratique has been refused. The ‘‘Delian Spirit’’ was only concerned with a vessel which had not obtained free pratique and the obtaining of such was a mere formality in the circumstances. If the inspection by the port authority had not been a mere formality but had resulted in the vessel being refused pratique then, of course, she would not be ready under common law and, presumably, could not have been ready at an earlier moment of time. Although not a commencement of laytime case The ‘‘Apollo’’49 is a good illustration of the action of health officials being more than a ‘‘mere formality’’. The vessel was chartered on the New York Produce form. While she was discharging at Naples two of her crew members were taken to hospital with suspected typhus. She then sailed to Lower Buchanan to load. On arrival off that port she was met by health officials who, upon being told of what had happened at Naples, inspected the crew and the ship. Although no evidence of typhus was found, the officials disinfected parts of the ship before granting free pratique. The delay in obtaining free pratique because of the inspection and disinfection caused nearly 30 hours loss of time to the charterers. They claimed they were entitled to put the ship off-hire under clause 15. It was held by Mr Justice Mocatta that the action of the health officials was more than a mere formality in the circumstances, that it prevented the full working of the vessel and she was off-hire during the time which was lost. Obviously, the same approach would have been taken if the circumstances had been a voyage charterparty and readiness in the context of commencement of laytime. Therefore, if a vessel has been waiting for a berth and some days later pratique is refused then any notice of readiness given when the vessel arrived must surely be invalid so that laytime cannot commence. Here again, special charterparty clauses such as those relating to ‘‘waiting for a berth’’ and a ‘‘berth reachable on arrival’’ may have relevance. For an interesting arbitration relating to free pratique and special clauses see the reported arbitration LMLN 545—28 September 2000 which is detailed earlier in paragraph 71 and readiness and cargo spaces. 48. [1971] 1 Lloyd’s Rep. 64; [1971] 1 Lloyd’s Rep. 506 (C.A.). 49. [1978] 1 Lloyd’s Rep. 200.

185

Para. 78

READINESS

In different ports of the world there are different approaches regarding inspections by port health and other authorities. The principle enunciated in The ‘‘Delian Spirit’’48 in relation to pratique is also applicable to other types of inspections which take place in various ports of the world. In a London arbitration, LMLN 35—5 March 1981, the owners claimed for balance of demurrage, the dispute being concerned with the commencement of laytime. The owners contended that laytime commenced at 08.00 on 10 May (notice of readiness having been tendered at 08.00 on Saturday, 8 May) while the charterers submitted that it did not commence until 14.45 on 13 May; the difference between the parties concerned the effect of the inspection of the vessel by Chinese harbour authorities on 12 May, the charterers arguing that such was a condition precedent to the commencement of laytime. The owners took the view that the inspection was a mere formality which should have no effect on the commencement of laytime. The inspection itself took 40 minutes and there was no evidence to show that this was other than the approximate usual time for this type of inspection. The inspection did not find anything untoward with the vessel and was not causative of any delay to her since, after the inspection, the vessel waited for a discharge berth for about a week. The arbitrator decided the case in favour of the owners. He considered that a fairly broad approach should be taken to preliminaries which have to be carried out when vessels arrive at a port and such preliminaries cannot be carried out for some time after the vessel has arrived, assuming no failure by those on the vessel in presenting the vessel for the preliminaries. He accepted the owners’ argument that a routine inspection is a mere formality which can be ignored for the purpose of the commencement of laytime and that it is not a condition precedent or something of such substance that it prevented the triggering of the laytime clock. In support of his decision the arbitrator relied upon part of Lord Denning’s judgment in The ‘‘Tres Flores’’,50 as follows: ‘‘ . . . notice of readiness can be given even though there are some further preliminaries to be done, or routine matters to be carried on, or formalities observed. If those things are not such as to give any reason to suppose that they will cause any delay, and it is apparent that the ship will be ready when the appropriate time arrives, then notice of readiness can be given.’’

In a later reported arbitration LMLN 421—23 December, 1995 the vessel was chartered on the Gencon form for the carriage of a cargo of bagged fertilisers. After the vessel had berthed at the discharge port a period was spent obtaining Port Authorities’ clearance. The charterers contended that this period should be discounted from the computation of laytime. It was held that the clearance was to be regarded as a formality. There was no evidence that time was lost during it. It accordingly counted against laytime. An important document in relation to the legal readiness of a tanker, vis-`a-vis United States waters, is the US Coast Guard tank vessel examination letter (‘‘TVEL’’). In a New York arbitration, LMLN 416—14 October 1995 (no English arbitration as yet to the writer’s knowledge) the sole arbitrator had to decide (inter alia) whether or not the obtaining of a TVEL was a mere formality in relation to the 50. [1973] 2 Lloyd’s Rep. 247.

186

D O C U M E N TAT I O N — L E G A L R E A D I N E S S

Para. 78

tendering of a notice of readiness. The OBO vessel Permeke was chartered on the Exxonvoy 84 form for the carriage of a cargo of crude oil from Mongstad to New York. After loading cargo at Mongstad the vessel sailed for New York, arriving at the pilot station on the morning of 1 April 1994. The vessel tendered NOR for discharge at 12.12 hours. At the time NOR was tendered the vessel did not have a valid US Coast Guard tank vessel examination letter (‘‘TVEL’’) (not obtainable until after first arrival in the USA following an inspection by the Coast Guard). US law prohibited foreign flag vessels from off-loading oil on US waters without a TVEL. Accordingly, at the owners’ request the US Coast Guard boarded the vessel at 09.25 hours on 2 April 1994 for the purposes of carrying out a detailed examination of the vessel and its intentional trading and safety certificates. No deficiencies were found, and at 13.00 hours that same day the US Coast Guard issued a TVEL to the vessel. The programmed discharge of part cargo into the barges began at 01.25 hours on 3 April 1994. The dispute concerned when laytime at New York began. The owners relied on the fact that the TVEL inspection was completed with no time having been lost to the charterers, and submitted that laytime commenced at 18.12 hours on 1 April 1994, or six hours after the vessel tendered its NOR. The charterers contended that in the absence of the required TVEL the vessel was not ‘‘ready’’ for discharge and its NOR was both premature and invalid so that laytime could not commence until 19.00 on 2 April. The charterparty did not specifically refer to the vessel having a TVEL but it did contain a clause which required the vessel to have on board all certificates or other documents required by the laws of the countries to which the vessel might be ordered. The sole arbitrator rejected the owners’ contentions and held (inter alia) that the fact that the TVEL was issued without difficulty was evidence that the vessel was well maintained and did comply with international safety requirements. That might account for the owners’ confidence in making the representations they did. However, the issue was not the physical condition of the vessel but what effect the absence of a valid TVEL had on the NOR and the commencement of laytime. Laytime did not begin to count until six hours after the TVEL was issued, or 19.00 hours on 2 April 1994. Other New York arbitrators have taken a similar approach in later aribtrations. It may well be that London arbitrators would take a similar approach to that taken in New York so as to decide that the obtaining of a TVEL is more than a mere formality. Owners can get round the problem by way of an agreed charterparty clause which is tailor-made for the circumstances, such as: ‘‘In the event that the vessel requires a TVEL inspection prior to the commencement of cargo operation at any United States port, NOR may be tendered upon arrival, prior to the inspection by the US Coastguards. Provided that the inspection commences within the six hours allowance and the vessel is granted a TVEL, then the NOR will be deemed to be valid. Should the vessel fail to pass the inspection, the NOR would be deemed to be invalid and cannot re-tendered until the vessel has passed the examination and a TVEL is issued. All time lost shall not count as used laytime, or demurrage, if the vessel is on demurrage. Furthermore, any additional costs incurred due to such failure shall be for the account of the vessel Owner. These costs shall include, but not be limited to, tugs pilots and other port costs.’’

187

Para. 78

READINESS

See Laytime and Demurrage in the Oil Industry by Edkins and Dunkley,51 page 10. 79. The preceding paragraphs, in respect of documentation/legal readiness, have been mainly concerned with pratique/health and inspections by port authorities under the common law. The principles involved can, of course, also be applied to other areas (not covered by express provisions in the charterparty) which affect legal readiness. Examples are certificates appertaining to deratisation and stability as required under international regulations, also documentation which has to be lodged with customs in order for a vessel to obtain customs clearance. A deratisation certificate, or the lack of it, figured prominently in The ‘‘Madeleine’’.52 Although this case was concerned with the cancelling of a charterparty it drove home the importance of documentation required under international/national regulations. The charterers were held entitled to cancel the charterparty in circumstances where the vessel’s deratisation certificate expired a few days before the cancelling date and the owners of the vessel were unable to get a new certificate, without a fumigation, before the expiry of the cancelling date. Obviously, in the context of the commencement of laytime, the vessel would not be deemed ready if she did not have a valid deratisation certificate at the time that notice of readiness was tendered. There have been a good many disputes over the years in circumstances where vessels tendering for the loading of grain have not been properly documented in respect of stability information/calculations, as required under international legislation, and this has been causative of the delay at the loading port. Arbitrators have no compunction whatsoever in deciding that a vessel is not ready in such circumstances. Regarding clearance by customs, the regulations appertaining to such may vary from country to country and from port to port. It is up to owners to know the relevant regulations, when involved in voyage charterparties, so that they are not penalised because vessels are not cleared through customs timeously thus preventing the commencement and running of laytime. The problem can be acute in some ports of the world where customs clearance cannot be obtained until after a vessel gets into a berth so that the vessel cannot satisfy legal readiness until that time which may, on occasions, be many days/weeks after anchoring off the port in question. Unless the clearance by customs can be considered a mere formality, as per The ‘‘Delian Spirit’’,53 laytime will not commence; therefore, the owners will be losers unless they have a compensatory clause in the charterparty for berth congestion. Clearance by customs will be a mere formality in many ports of the world but, at others, clearance can be complicated and in no way be considered a mere formality. Legal readiness, in relation to customs, was considered in The ‘‘Antclizo’’.54 Although the case was very much concerned with an express clause relating to ‘‘having been entered at Custom House’’ (this aspect is considered fully later in paragraph 86), prior entry at the Custom House was effected for the vessel before 51. LLP Limited, 1998. 52. [1967] 2 Lloyd’s Rep. 224. 53. [1971] 1 Lloyd’s Rep. 64; [1971] 1 Lloyd’s Rep. 506 (C.A.). 54. [1991] 2 Lloyd’s Rep. 485; [1992] 1 Lloyd’s Rep. 558 (C.A.).

188

D O C U M E N TAT I O N — L E G A L R E A D I N E S S

Para. 79

she arrived and customs permission to discharge at the inner anchorage, i.e. to break bulk in stream, was obtained, but actual completion of final entry was not effective until after a notice of readiness had been tendered by the vessel soon after she arrived off the port. The charterers took the point that even if the special clause regarding ‘‘entry at the Custom House’’ was satisfied at the time the notice of readiness was tendered (by way of the ‘‘prior entry’’), the vessel was not at that time ready to discharge her cargo, in that strict legal discharge could not have commenced until some time later; therefore, the notice of readiness was not valid. It was held by Mr Justice Hirst, adopting the findings of the umpire in the arbitration, that the vessel satisfied the ‘‘readiness at once’’ test when the notice of readiness was tendered; he applied the criteria of Mr Justice Donaldson and Lord Justice Roskill from the Delian Spirit and Tres Flores cases; see earlier in this paragraph, also paragraph 64. In the Court of Appeal the decision of Mr Justice Hirst was upheld; giving the leading judgment Lord Justice Parker set out fully passages from The ‘‘Tres Flores’’ and The ‘‘Delian Spirit’’ (the latter case which he thought to be of critical importance to the instant case) and also the passage from Scrutton set out earlier in paragraph 64. He then went on to say: ‘‘How then does the present case stand in the light of the authorities? Clearly the charterers could not have required the vessel to discharge until she reached the Inner Anchorage. As she had already been given permission to discharge there she could, if the receiver had had lighters waiting, have been required to discharge. On the arbitrator’s findings had that happened there would have been no material delay. Either the preventive officer would have been present and granted inwards entry or if he was not available discharge would have commenced. There is, it is true, a possibility that if a preventive officer had been there and become suspicious there would have been a delay but in The ‘Delian Spirit’ there was a possibility that at an inspection some reason might have been found not to grant free pratique. Furthermore, in the case of the ship’s tackle or hatches there is always the possibility that some unforeseen accident will occur which will result in a delay. Those possibilities cannot in my judgment affect the validity of a notice of readiness. If they do, no notice of readiness could, as it seems to me ever be given. In The ‘Delian Spirit’ Donaldson J. at first instance observed: ‘There is no evidence before me that the performance of the quarantine inspection while the vessel was in berth had any bearing on the time taken to begin and carry out the operation of loading.’ In the present case, not only is there no evidence that the inward entry requirements had any bearing on the operations of discharging, there are the specific findings of the arbitrator which I have already cited. In my judgment the case is covered by The ‘Delian Spirit’ and I therefore conclude that the notice of readiness was valid and that the charterers’ appeal fails.’’

Regarding the passage from Scrutton which reads: ‘‘The degree of necessary readiness of the ship for her part is relative to that of the charterer or the consignees for theirs. Therefore the ship need not be absolutely ready (e.g. by having all her gear fixed up for the work) at a time when the charterer or consignees are not in a position to do any of their part of the work, so long as the ship can be absolutely ready as soon as they are, whenever that may be. Nor apparently need the ship have obtained free pratique provided that the practice in the port and the actual medical condition of the crew are such that pratique can subsequently be obtained without delaying the loading or discharge. Similarly, the ship can be ready to load for the purpose of starting laytime, even if she has not yet complied with all the local routine formalities.’’

189

Para. 79

READINESS

his Lordship had this to say, earlier in his judgment: ‘‘Although this statement must in my view be read with caution for it may seem to suggest that a notice will be valid if, when given, the vessel will be ready to load at some future time. In a sense this is of course true. Where a berth charterparty provides for notice to be given whether in berth or not it can be given when the vessel has arrived at the port notwithstanding that it may take many hours steaming before she can reach a berth and in fact be physically ready to load or discharge as the case may be. Equally, as pointed out in the article, if her loading or discharging tackle is not rigged a valid notice can be given notwithstanding that the vessel is not then in fact ready to discharge. Mr Hamilton rightly stresses the words ‘whenever that may be’ which appear in the article and which plainly indicate that when the notice is given the situation must be such that at the earliest time that the charterers or consignees can be ready to perform their part in loading or discharging, the vessel will, barring accidents, be ready at once to perform her part in such operations. Mr Hamilton further submitted that a notice will be premature and invalid if when given there is even a possibility that she will not be ready at the earliest moment that the charterers or consignees can require loading or discharge. I cannot accept this. It is in my view contrary to the authorities to which I now turn.’’

It is submitted that the Court of Appeal’s decision is sound in the light of practical and commercial common sense and militates for customs clearance being mere formalities in very many ports: however, it in no way watered down the vessel’s obligation that when the notice of readiness is given the situation must be such that at the earliest time that the charterers or consignees can be ready to perform their part in loading/discharging, the vessel will, barring accidents, be ready at once to perform her part in the loading/discharging operations. Other factors which are relevant to the readiness of a vessel are the various regulations which have come into force over the years such as port state control (‘‘PSC’’), the international safety management code (‘‘ISM’’) and the international ship and port security code (‘‘ISPS’’). Obviously, if a vessel fails any of these regulatory features this will, in many instances, affect the readiness of the vessel to load or discharge cargo when she arrives at a port. PSC has been in operation since 1982 in Europe and has expanded to cover most of the world (save for the USA which has its own strict control measures). A large number of vessels have been detained over the years although there seems to have been improvements in recent times: for example the detentions in Europe in 2004 had reduced to 1,187, down from 1,764 five years previously. The ISM code came into effect in 1998 and provides that every company to which it applies has to obtain a Document of Compliance (‘‘DOC’’) and a Safety Management System (‘‘SMS’’). A designated person (having access to top management in the company) has to be appointed in order to ensure that the company’s SMS is operated effectively. The combination of the ISM code and increasing PSC has resulted in fewer sub-standard ships being operated. Parties do agree special ISM clauses albeit that such may not be necessary in view of the code being very much an owners’ responsibility. BIMCO has produced a standard clause which reads: ‘‘From the date of coming into force of the International Safety Management (ISM) Code in relation to the vessel and thereafter during the currency of this Charter Party, the Owners shall procure that both the vessel and ‘The Company’ (as defined by the ISM Code) shall comply with the requirements of the ISM Code. Upon request the Owners shall provide a

190

D O C U M E N TAT I O N — L E G A L R E A D I N E S S

Para. 79

copy of the relevant Document of Compliance (DOC) and Safety Management Certificate (SMC) to the Charterers. Except as otherwise provided in this Charter Party, loss damage, expense or delay caused by the failure on the part of the Owners or ‘The Company’ to comply with the ISM Code shall be for the Owner’s account.’’

The ISPS code came into force on 1 July 2004 and vessels run the risk of being refused entry into ports if they do not have their security plans in order; ports face financial consequences if they fail to comply with the code. The implementation of the code by IMO was in response to the international threat of global terrorism. Compliance with the code is checked by port state control officers. There have been resultant delays to vessels and this is likely to be a continuing fact of life with disputes arising between owners and charterers regarding delays and expenses which arise from the implementation of the code. BIMCO has produced ISPS clauses for both time and voyage charterparties. The last mentioned, which has relevance to the commencement of laytime, and which was revised in June 2005 in the light of earlier criticisms, states: ‘‘(a)

(i) The Owners shall comply with the requirements of the International Code for the Security of Ships and of Port facilities and the relevant amendments to Chapter XI of SOLAS (ISPS Code) relating to the Vessel and ‘the Company’ (as defined by the ISPS Code). If trading to or from the United States or passing through United States waters, the Owners shall also comply with the requirements of the US Maritime Transportation Security Act 2002 (MTSA) relating to the Vessel and the ‘Owner’ (as defined by the MTSA). (ii) Upon request the Owners shall provide the Charterers with a copy of the relevant International Ship Security Certificate (or the Interim International Ship Security Certificate) and the full style contact details of the Company Security Officer (CSO). (iii) Loss, damages, expense or delay (excluding consequential loss, damages, expense or delay) caused by failure on the part of the Owners or ‘the Company’/‘Owner’ to comply with the requirements of the ISPS Code/MTSA or this Clause shall be for the Owners’ account, except as otherwise provided in this Charter Party. (b) (i) The Charterers shall provide the Owners and the Master with their full style contact details and, upon request, any other information the Owners require to comply with the ISPS Code/MTSA. (ii) Loss, damages or expense (excluding consequential loss, damages or expense) caused by failure on the part of the Charterers to comply with this Clause shall be for the Charterers’ account, except as otherwise provided in this Charter Party, and any delay caused by such failure shall count as laytime or time on demurrage. (c) Provided that the delay is not caused by the Owners’ failure to comply with their obligations under the ISPS Code/MTSA, the following shall apply: (i) Notwithstanding anything to the contrary provided in this Charter Party, the Vessel shall be entitled to tender Notice of Readiness even if not cleared due to applicable security regulations or measures imposed by a port facility or any relevant authority under the ISPS Code/MTSA. (ii) Any delay resulting from measures imposed by a port facility or by any relevant authority under the ISPS Code/MTSA shall count as laytime or time on demurrage, unless such measures result solely from the negligence of the Owners, Master or crew or the previous trading of the Vessel, the nationality of the crew or the identity of the Owners’ managers. . . . .’’

191

Para. 79

READINESS

The result of the above is that so long as any delay is not caused by the owners’ failure to comply with their obligations under the code a vessel will be entitled to tender a notice of readiness and laytime will run during any delay periods arising from measures imposed by any authority under the code save where they arise solely from the negligence of the owners or the crew, or the previous trading of the vessel. Although the revised clause is less favourable to owners of vessels than the original BIMCO clause it remains not unfavourable to owners. Parties are, of course, free to agree their own ISPS clauses and many of them are so doing by varying the BIMCO ISPS clause. For example, the VITOL ISPS clause varies (c)(ii) above so that any delay resulting from measures imposed by an authority under the code shall count only as half laytime or half time on demurrage absent any failure by the owners. The LUKOIL ISPS clause (based on BIMCO with CHEVTEX amendments) has a similar effect regarding (c)(ii). At the moment it is too early to say how ISPS clauses will work out in practice, as there has been insufficient time for disputes to work through the arbitration process and to see how arbitrators deal with problems which will undoubtedly arise from the application of the ISPS code. It appears that some owners have been trying to claim that if a berth is not ‘‘reachable on arrival’’ (clause 9 of the Asbatankvoy) any delay due to compliance with ISPS regulations should count in full for laytime (see ASDMEM UPDATE—May 2005). This must surely be untenable in view of what has been said earlier in Chapter 3 (paragraph 53) regarding ‘‘reachable on arrival’’ and exception clauses. Much of what has been said above regarding ISPS clauses is also relevant to Chapter 5 where special clauses regarding readiness are considered.

DRAUGHT (DRAFT)/LIGHTENING 80. No mention of a vessel’s draught has yet been made in this chapter and this factor may have relevance to a vessel’s readiness and also to lightening. If the owners are aware or should have been aware, of any draught restrictions regarding the named port in the voyage charterparty then the risk of not complying with these restrictions may fall upon them. A vessel may be delayed in proceeding to a berth because of fluctuations in the depth of the water available at certain times of the day; alternatively, because of fluctuating depths of water over a longer period due to tidal effects as governed by the phases of the Moon. In those circumstances, a vessel can be delayed in being ready to load or discharge and this may prevent the commencement of laytime. Owners may be able to claim compensation for delay because a berth is not ‘‘reachable on arrival’’55 on account of a lack of water but that will usually be in circumstances where the charterparty contains an express clause regarding the maximum draught of the vessel when she arrives at a port and she arrives within that maximum (see The ‘‘President Brand’’56). Since special clauses usually govern the 55. See above, paragraph 45 et seq. 56. [1967] 2 Lloyd’s Rep. 338; above, paragraph 45 et seq.

192

D R AU G H T ( D R A F T ) / L I G H T E N I N G

Para. 80

subject it will be left over for more detailed consideration in Chapter 5 under special clauses having relevance to readiness. In general, if lightening takes place before a vessel has become an ‘‘arrived ship’’, laytime does not, strictly speaking, commence unless there is a particular clause in the charterparty to this effect. On the other hand, if a vessel has become an ‘‘arrived ship’’ laytime will commence and will continue during the lightening operation. A problem which may arise is where a vessel is unable to get into her discharging berth, by reason of her draught, in a berth charterparty and requires lightening and where the vessel is in all other respects ready to discharge the cargo. In those circumstances can a notice of readiness be tendered before the vessel berths? Absent any particular clauses in the charterparty detailing the position regarding the tendering of a notice of readiness in those circumstances the judicial authority is on the side of owners in that where a berth charterparty states expressly that the vessel might require lightening a notice of readiness may be given before the berth is reached and when lightening is due to take place, see The ‘‘Petros Hadjikyriakos’’,57 The ‘‘Apollon’’58 and The ‘‘Savvas’’,59 in particular the reasoning of Mr Justice Bingham (as he then was) in The ‘‘Appollon’’ at page 414: ‘‘Clearly the parties to this charterparty contemplated that two kinds of discharge might be involved: lightening by discharge into barges and discharge alongside a berth. I find in the language of the charterparty no indication that notice of readiness could be given only when the vessel was ready for the second stage and not when it was ready for the beginning of the first stage. In any port where lightening is necessary or may be necessary to enter a berth it must be foreseeable that there may be delay before the extent of the lightening needed is known. Under this charter the risk of delay in obtaining a berth rests on the charterer.’’

The position will be different if the vessel arrives at the discharge port with a draught in excess of the agreed charterparty maximum draught. The charterers will be entitled to claim damages for breach of contract by the owners so that would allow them to claw back any time lost to them arising from the breach of contract—see later paragraphs 92 and 93 regarding arbitrations concerned with this aspect. A question may arise, what is the position if a berth charterparty makes no express reference to lightening? On the assumption that the port of discharge is named and that there is no berth in the named port which the vessel can get into without lightening, it appears that a valid notice of readiness cannot be tendered until the vessel gets into the discharging berth and is ready to discharge the cargo, this being on the basis that the owner, in accepting the named port of discharge, also accepts that the vessel will be able to get into the port with the contractual cargo in the conditions to be expected for the relevant time of the year. Many charterparties make express provisions for lightening in order to detail the position between the parties regarding the tendering of a notice of readiness. Those provisions may be very detailed, particularly in tanker voyage charterparties. For example, clause 15 of the ExxonMobil VOY 2000 states: 57. [1988] 2 Lloyd’s Rep. 56. 58. [1983] 1 Lloyd’s Rep. 409. 59. [1982] 1 Lloyd’s Rep. 22.

193

Para. 80

READINESS

‘‘LIGHTERING/DISCHARGE AT SEA/CARGO ADVISOR (a) Except when required by reason of fault attributable to Vessel, any lightening or discharge at sea or at a place outside a port shall be at the expense of Charterer and, notwithstanding Clauses 11, 13(a) and 14(a) and (b), time used for such lightening or discharge shall count as laytime or as time on demurrage, as provided below: (i) If the Vessel is lightered at sea or at a place outside a port, laytime or, if Vessel is on demurrage, time on demurrage shall commence when Vessel arrives at the lightering site designated by Charterer and shall end when disconnecting of the cargo hoses from the last cargo receiving vessel has been completed. (ii) If Vessel is fully discharged at sea or at a place outside a port, laytime or, if Vessel is on demurrage, time on demurrage shall commence upon the expiration of six (6) hours after Vessel arrives at the lightering site designated by Charterer or when Vessel is all fast alongside the first cargo receiving vessel, whichever occurs first, and when disconnection of the cargo hoses from the last cargo receiving vessel has been completed. . . . ’’

Although a different charterparty was under consideration in LMLN 488—21 July 1998 (Asbatankvoy) the arbitration is of interest since it concerned (inter alia) the effect of a lightering provision in a rider clause to the charterparty which read: ‘‘27. Lightering/STS If lightering/STS is required at any designated port, safe place, or anchorage, time, costs consumed performing this operation (including back loading) shall count as laytime or time on demurrage. In either event, time shall commence six hours after anchoring or whenever the lightering/STS craft is all secure alongside, whichever occurs first. The anchorage, STS or lighterage area shall not be considered as an additional port or berth. Any running time from such lightering area to berth shall not count as laytime or time on demurrage.’’

The facts were that, on 7 February, as the vessel was proceeding to the discharge port, it was indicated to the master from the charterers that there would be lighterage in the roads that should commence at the end of the next week. On 8 February it was indicated from the charterers that at the moment there were no berthing prospects available and the vessel would have to lighter to reach an appropriate draft for berthing, which would take about 30 hours. At 18.30 on 10 February the vessel anchored off the discharge port and gave notice of readiness indicating that the vessel was now waiting for lightening/discharging. On 12 February the owners’ managers were informed by the charterers that the receivers had advised that due to port traffic about three vessels were engaged for lightering so that the lightering for the subject vessel was not expected before 15 February. In the event, after further updates, the vessel berthed on 4 March. Hoses were disconnected at 17.30 on 6 March. The owners submitted that laytime recommenced at the discharge port at 00.30 on 11 February. The charterers contended that the notice of readiness tendered at 18.30 on 10 February was invalid, due to it being tendered outside the time specified for the tendering of notice of readiness by clause 16 of the Rider. They said that the only laytime, which ran at the discharge port, was during the lightering period on 22–24 February and upon the vessel’s arrival at the permanent berth on 4 March. They further contended that under clause 27 of the Rider dealing with lightering, it was implicit that laytime only commenced 6 hours after tendering a valid notice of readiness at the customary anchorage, or when a lighter was secure 194

D R AU G H T ( D R A F T ) / L I G H T E N I N G

Para. 80

alongside, whichever first occurred. No notice of readiness having been validly tendered, laytime could only commence once a lighter was alongside on 22 February. Alternatively, if clause 27 of the Rider did not depend on notice of readiness being tendered in accordance with clause 16 of the Rider they argued that they were entitled to rely upon the last sentence of clause 6 of the Asbatankvoy form as the berth referred to in that sentence could only equate to the lighters being alongside ready to receive cargo from the vessel. The charterers said that they were not in breach of the ‘‘reachable on arrival’’ warranty because they had provided a place reachable on arrival where lightening was to take place and did take place and which was part of the discharge operation. It was held, that the charterers’ arguments would be rejected. Clause 27 of the Rider had no requirement for the giving of notice of readiness before time commenced when lightering was required, and clearly provided for a separate regime to that in clause 16. It was not implicit that under that clause laytime only commenced 6 hours after tendering a valid notice of readiness. Nor did the laytime, which commenced in accordance with clause 27 of the Rider only run until lightening was concluded. Once started, laytime continued (although by the conclusion of lightening the vessel was on demurrage). In any event, on the basis of The ‘‘Petr Schmidt’’ and the reasoning of Lord Justice Mustill in The ‘‘Mexico 1’’,60 by the termination of lightening the charterers were under no doubt that the vessel had arrived and was ready to discharge so that the notice of readiness given outside the prescribed time on 10 February would, either by the end of lightening have taken effect, or there was an estoppel by convention based on the conduct of the parties that precluded the charterers from taking any point regarding the giving of an invalid notice of readiness. Even if the owners had not been entitled to rely on clause 27 of the Rider, because an invalid notice of readiness had been given the tribunal would still have held, following The ‘‘Petr Schmidt’’, that the notice of readiness was not a nullity, but simply non-contractual and therefore, as said by Justice Longmore in The ‘‘Petr Schmidt’’ at page 287: ‘‘There is in my view no good reason why the notice should not be effective as at the time when the contract fixes for it to be tendered’’. (This would have been 00.01 on 11 February so time would have commenced at 06.01 on 11 February.) The present case, like The ‘‘Petr Schmidt’’, was not a case where (as in The ‘‘Mexico 1’’) a notice was inaccurate because the vessel was not in fact ready. Here the charterers were undoubtedly perfectly well aware from the master’s messages to all interested parties on 7 February, as the vessel was approaching the discharge port, that her ETA was 18.00 that day and from the repetition of the notice of readiness message to other interested parties around 18.30 on 10 February that the vessel had now anchored, and that the vessel was indeed arrived at the discharge port. As early as 12 February the receivers were advising the prospects of lightering to the owners, and the tribunal had no doubt that at all material times, including 00.01 on 11 February, the charterers were perfectly well aware of the vessel’s arrival. Nor could the tribunal accept the charterers’ argument that, in the alternative if laytime had commenced in accordance with clause 27 of the Rider 60. [1990] 1 Lloyd’s Rep. 507.

195

Para. 80

READINESS

then, in accordance with the last sentence of clause 6, as there was delay in the vessel getting into berth after giving notice of readiness for a reason over which the charterer had no control, such delay should not count as used laytime. The anchorage position where the lightering took place did not constitute a berth within the meaning of clause 9 of the charterparty so that the charterers were in breach of the opening sentence of that clause whereby they were obligated to designate and procure a discharge place or alongside vessels or lighters ‘‘reachable on her arrival’’. The vessel was at the place where lightering ultimately took place for some two days between 22 and 24 February, but on the true construction of the charterparty the discharge place intended by clause 9 was clearly not an intermediate lightening point when the vessel subsequently performed her discharge elsewhere at berth. That was underlined by clause 27 of the Rider. The charterparty drew a distinction between a lighterage area simply for the purpose of lightening the vessel, and a place where a substantial discharge took place, whether that be by lighterage or in berth. In those circumstances, the charterers were precluded by The ‘‘Laura Prima’’61 from relying upon the protection of the last sentence of clause 6 of the charterparty. The owners’ laytime calculation at the discharge port was correct. In a later arbitration, LMLN 647—1 September 2004 (also referred to in Chapter 1 regarding geographical arrival), the parties had agreed that the discharge of cargo would be at Qingdao, without lightening. In the event it was agreed that the discharge port would be changed to Yantai where it would be necessary for the vessel to lighten. It was further agreed that the lightening would be carried out in safe conditions under the master’s supervision and approval and that if the master considered it was unsafe to commence or to continue discharge he would remove his vessel from alongside and laytime was to count. The vessel had to wait about five days before she was able to start lightening because of strong winds and rough seas. Once she had been able to berth at the floating terminal, where lightening was to take place, lightening had to be interrupted for almost a day, again because of strong winds and rough weather. The charterers said that time did not run during these periods. It was held that the periods in question fell within the terms of the addendum and such weather as fell within the terms of the addendum was to count for laytime purposes.

TANKERS—BALLASTING/DEBALLASTING 81. Virtually all tankers arrive off their loading port containing ballast water and this ballast may have to be pumped out, or partly so, before loading can commence, although with the modern tendency of tankers having segregated ballast tanks the problem is correspondingly reduced. The ballast is a necessity for safety purposes so that it should not prevent the master from tendering a good notice of readiness. In fact, it appears to be the accepted practice in the tanker trade that a good notice of readiness can be tendered even though some of the cargo spaces contain ballast. It 61. [1982] 1 Lloyd’s Rep. 1.

196

TA N K E R S — B A L L A S T I N G / D E B A L L A S T I N G

Para. 81

also appears to be tanker practice that the time taken in deballasting, while the vessel is alongside a loading terminal, does not count for laytime purposes if it delays/interrupts the loading operation. This is a sensible and practical approach albeit that the common law, strictly applied, may militate for a different result in that (i) a vessel cannot be ready to load cargo with ballast water in cargo spaces and (ii) once commenced laytime runs continuously unless express exceptions come into effect. In the event, most tanker charterparties contain special clauses regarding ballast and some of these are considered later. One might analogise, to a certain extent, between the removal of ballast water and preliminaries as explained by Lord Denning in The ‘‘Tres Flores’’,62 although there are obvious weaknesses in such an analogy. One day there may be a judicial ruling regarding the effect on the commencement of laytime by ballast in a tanker’s cargo spaces (absent a special clause in the charterparty) but no doubt, in the meantime, owners and charterers will continue their sensible and practical practice of ballast water in cargo spaces not interfering with the giving of a notice of readiness when a tanker arrives at or off a port. This practice appears to have been adopted by many maritime arbitrators in London although there is little in respect of reported arbitrations regarding the subject. There is one reported arbitration, LMLN 337—3 October 1992 (also cited earlier in paragraph 65) where the tribunal took what appeared to be a sensible and commercially correct approach and held (inter alia): ‘‘It was common for tankers to arrive at loadports with cargo tanks filled with ballast and to discharge that ballast during loading. In such a case, or in circumstances where a Master retained ballast in some tanks to enable a vessel to sail between loading ports with a part cargo, it could not therefore be said that the vessel was not ready because all the tanks were not available for loading at the first port.’’

There is also the arbitration cited earlier in paragraph 31 (LMLN 299—20 April 1991) where the tribunal held (inter alia) that a valid notice of readiness could be tendered where one of the vessel’s holds (she was an OBO) was ballasted. There are other reported arbitrations where the tribunals do not appear to have taken such a commercially sensible approach but this may have been because of the constraints of the wording agreed between the parties and that the deballasting/ ballasting caused delay in respect of the cargo operation. An example of the former is the arbitration reported in LMLN 72—5 August 1982. Owners chartered their vessel on an STB VOY form for the carriage of a cargo of crude oil from Das Island to Mohammedia. The ship had utilised all the laytime available to her before arrival at the discharge port. Notice of readiness was accepted at Mohammedia at 09.30 on 10 March 1981; the ship was in berth at 12.45; hoses were connected at 14.40, and pumping commenced at 15.25. At 08.00 on 11 March 1981 the ship started to ballast, and ballasting continued until 05.00 on 12 March. Meanwhile, discharge continued through one 12in. hose until 18.25 on 12 March. Hoses were disconnected at 18.40. The owners submitted that time on demurrage continued until discharge of cargo was completed and hoses were disconnected. The charterers contended that time 62. [1973] 2 Lloyd’s Rep. 247; above, paragraph 64.

197

Para. 81

READINESS

on demurrage stopped at 08.00 on 11 March, when the ship started to ballast, although this was some 36 hours before discharge of cargo was completed. They relied on lines 173–175 of clause 11 of the Charterparty, which provided: ‘‘Laytime, or if the vessel is on demurrage, time on demurrage shall continue until the hoses have been disconnected or until ballasting begins at the discharge port(s), whichever occurs first.’’

The owners argued that this could not be the intention of the clause. The ship might have started to ballast for safety reasons. Mohammedia was an open roadstead and the master was being cautious. Furthermore, the ship might have been freshening up her permanent ballast and not ballasting for the purpose of increasing her draft prior to sailing. The ship might have had two ballasting systems, one constituting permanent ballast and the other being ballast for the unladen voyage. It was held that there was no evidence of the existence of permanent water ballast or of ballast water being freshened up during operations commencing at 08.00 on 11 March. Clause 11 was puzzling. It may be that in days of old the clause had some meaning if the shore connection were used for ballasting after completion of discharge, but this did not take place at Mohammedia. There was no doubt that in roads exposed to adverse weather such as is likely to occur in early March, the master felt it safer to increase his draft to avoid having a light ship at the mercy of sudden gusts. Clause 11 was not a sensible clause, but the parties had accepted it. Accordingly, demurrage time stopped when ballasting began, even though the cargo had only partially been discharged. Judgment for the charterers. The arbitrators took a very literal interpretation to clause 11 of the charterparty and it seems that no consideration was given to the fact that a vessel might start taking on ballast before all her cargo has been discharged. It is mentioned, for the sake of completeness, that although it did not appear to have been put forward in this particular arbitration there would seem to be no valid reason why the owners could not have put forward a claim for detention during the period in question since the vessel was being detained for the charterers’ purpose which was the discharge of cargo. While, strictly speaking, particular clauses relating to deballasting should be considered in Chapter 5 it makes sense to consider them now when dealing with tanker deballasting. Before citing the more common type of deballasting clauses, mention is made of a reported arbitration LMLN 304—29 June 1991 which, although concerned with demurrage rather than the commencement of laytime, is of interest because of the tribunal’s approach to the application of a wide exemption clause to a deballasting period. Typewritten clause 46 read: ‘‘Neither owner nor charterers shall be responsible if, in the event of strikes of workmen, lockout, riots or floods or any accident or cause beyond the control of either party, loading or unloading of the vessel is delayed, prevented or interrupted. In such circumstances, laytime will not commence, or if commenced, will not continue until the cause of the interruption or delay is removed.’’

One issue in the arbitration was whether the owners’ demurrage claim should be reduced in respect of a period of 3 hours’ deballasting at the loading port. The charterers sought to rely on clause 46, emphasising that the ship was bound to arrive 198

TA N K E R S — B A L L A S T I N G / D E B A L L A S T I N G

Para. 81

in ballast, so that the need to deballast her was a cause beyond the control of either party. They said it was a self-evident fact that loading was delayed whilst deballasting was carried out. Alternatively, they suggested that they should not be liable for the time spent deballasting because during it the ship was not available to them for loading. It was also the case that if the ship had gone straight to her berth, she could not have given a valid notice of readiness until she had completed deballasting. It was held that the charterers were entitled to rely upon clause 46. The tribunal was prepared to infer that loading could not take place until deballasting had been completed, and was thus delayed by performance of that operation. The owners’ claim for demurrage was to be reduced accordingly. While the above decision appears open to criticism regarding the application of clause 46 (no express mention of time on demurrage) it is assumed that the tribunal was influenced by the deballasting affecting the loading operation so that the owners should not get the benefit of time counting for demurrage purposes when the loading operation could not take place. The arbitrators would obviously have been on much stronger ground, in the application of the type-added clause 46 if the circumstances had been either that laytime was about to commence or that laytime was running prior to the vessel going on demurrage. Turning now to tailor made clauses in respect of the commencement of laytime and deballasting the Vegoilvoy tanker voyage charterparty contains a notice of readiness and commencement of laytime clause which reads: ‘‘When the vessel has arrived at the port of loading or discharge and is ready to load or discharge, a notice of readiness shall be tendered. . . . The vessel shall be deemed ready within the meaning of this clause . . . whether or not she has ballast water or slops in her tanks. Laytime shall commence . . . .’’

The clause makes it abundantly clear that the vessel is ready in respect of the commencement of laytime, even though there is ballast water in the cargo tanks. Further, this particular charterparty does not suspend the running of laytime for normal deballasting operations even if they interfere with the loading of cargo so that the charterparty is advantageous for owners of tankers. The majority of tanker voyage charterparties differ from the Vegoilvoy in that they do not contain a ‘‘deemed ready’’ provision regarding ballast water in cargo tanks and, further, they usually include an express exception in respect of time lost in handling ballast. For example, Tankervoy 87, while permitting a notice of readiness to be tendered at a customary anchorage or waiting place (when many tankers will invariably have ballast in cargo spaces if at the loading port) goes on to say: ‘‘Time lost owing to any of the following causes shall not count as laytime . . . in handling ballast unless carried out concurrently with cargo operations such that no time is lost thereby . . . ’’

Beepeevoy 4 and Shellvoy 6 charterparties take a similar approach but the Asbatankvoy charterparty (applicable to deballasting and not ballasting), while permitting a notice of readiness to be tendered at a customary anchorage, states: ‘‘Time consumed by the vessel in . . . discharging ballast water or slops, will, not count as used laytime.’’

199

Para. 81

READINESS

The result is that under the Asbatankvoy charterparty causation regarding the loss of time has no relevance since, according to the wording of the clause, laytime will not run during deballasting operations even if such are not causative of any loss of time to the charterers in the loading operations. To sum up in respect of ballasting/deballasting there appears to be no judicial authority which has considered the matter in detail under the common law. Absent a special clause in the charterparty which deals with the matter expressly (such as cited above and to be recommended in order to remove doubt) different tribunals have taken different approaches when applying the common law. It can perhaps be said that, under the common law in respect of readiness, some arbitrators will consider that a vessel is ready to load with ballast in some of the vessel’s tanks (necessary for safety purposes) so that a valid notice of readiness can be tendered and this, in any event, is what the majority of organisations in the tanker trade appear to accept. A practical and sensible approach is that if deballasting is taking place concurrently with the cargo operations commencement of laytime should not be affected. But if it does interfere with cargo operations then this will affect the running of laytime save perhaps for circumstances where deballasting/ballasting are carried out as a necessity in respect of the vessel.

200

CHAPTER FIVE

SPECIAL CLAUSES/BREACHES OF CONTRACT DAMAGES RELEVANT TO READINESS (INCLUDING DRAUGHT AND BILLS OF LADING AND FAULT OF OWNERS) SPECIAL CLAUSES 82. It is usual for charterparties to contain special clauses regarding readiness —they are frequently rolled up with clauses dealing with notice of readiness provisions. For such a clause, in a short and simple form, see earlier The ‘‘Tres Flores’’1; for a more comprehensive clause, see The ‘‘Dubhe’’2 arbitration, both of which were concerned with dry bulk cargoes. These clauses, although eminently sensible to have in a charterparty in order to clearly set out the position between the parties, often do no more than add some flesh to the underlying common law bare bones (for example, the owners failed under the common law in The ‘‘Tres Flores’’1 even without the special clause and the owners also would have failed under the common law in The ‘‘Dubhe’’2 arbitration regarding the time before the vessel was first passed by the NCB and the USDA). In areas other than dry bulk cargoes, cleaning clauses may be more comprehensive although it is questionable whether they add more to the requirement of readiness which would in any event be applied to a particular cargo under the common law. In the bulk oil trade a good example of a cleaning clause is that in the Beepeevoy 4 charterparty which reads: ‘‘Without prejudice to Clause 1, Owners shall use due diligence to ensure that the Vessel presents for loading with her tanks, pumps and pipelines properly cleaned to the satisfaction of any inspector appointed by Charterers and ready for loading the cargo described in Sections C and D of PART 1. Any time used in cleaning tanks, pumps and pipelines to Charterers’ inspector’s satisfaction shall not count as laytime or, if the Vessel is on demurrage, as demurrage and shall, together with any costs incurred in the foregoing operations, be for Owners’ account.’’

For completeness clause 1 of the Beepeevoy 4 states: ‘‘Owners shall, before, at the commencement of, and throughout the voyage carried out hereunder, exercise due diligence to make and maintain the Vessel, her tanks, pumps, valves and pipelines tight, staunch, strong, in good order and condition, in every way fit for the voyage and fit to carry the cargo stated in Sections C and D of PART 1, with the Vessel’s machinery, boilers and hull in a fully efficient state, and with a complement of Master, 1. [1973] 2 Lloyd’s Rep. 247; paragraph 64, above. 2. 1981; paragraph 68, above.

201

Para. 82

C L AU S E S / B R E AC H E S R E R E A D I N E S S

officers and crew who are fully qualified as evidenced by internationally recognised certification (and endorsements where applicable) and are experienced and competent to serve in the capacity for which they are hired.’’

The charterers, by linking the above clauses, ensure that the seaworthiness clause is in no way prejudiced by the cleaning clause. There are many other tanker voyage charterparties which contain identical or very similar clauses. What has been stated above at paragraph 54 et seq. and paragraph 67 et seq. regarding cleaning to ‘‘charterers’ satisfaction’’ or ‘‘charterers’ inspector’s satisfaction’’ has relevance in that there may be a safeguard to owners (by way of an implied term of reasonable co-operation) in circumstances where the charterers’ inspector may be over-fastidious: however, it may be much better and fairer if the parties agree a cleaning clause such as seen in a standard charterparty for the carriage of chemicals (Bimchemvoy), and some ad hoc charterparties, which reads: ‘‘Owners shall clean Vessel’s tanks pipes and pumps at their expense and in their time and unless the Master certifies that Vessel’s coils have been tested and found tight, shall test tightness of coils at their expense and in their time to the satisfaction of Charterers’ inspector. If, in Owners’ opinion, acceptance of the tanks and/or coils is unreasonably withheld, then an independent inspector shall be appointed whose decision shall be final. If the independent inspector considers that the tanks are insufficiently clean to receive the cargo, then they shall be further cleaned at Owners’ expense and time to the satisfaction of the independent inspector whose fees and expenses shall be paid by the Owners. If the independent inspector considers that the tanks are sufficiently clean to receive the cargo his fees and expenses plus any loss of time and expenses incurred by Owners shall be borne by Charterers.’’

Special clauses regarding a vessel’s equipment do not usually impose a more stringent position than that under the common law although, here again, they can be very useful for clarification as to what equipment the owners have to provide and, further, how the equipment is to be operated. In the tanker trade, we now see special clauses regarding crude oil washing and inert gas systems and while some of these may appear stringent at first sight they, in general, reflect what the common law would probably say regarding equipment which, under the contractual terms (express or implied), are required for the loading/discharging of cargo. Examples of these clauses are seen in clauses 12 and 19 Part B of the Beepeevoy 4 which reads: ‘‘12.1 Owners undertake that the Vessel is equipped with a fully functional IGS which is fully operational or, if not in use, capable of being fully operational on the date hereof, that they shall so maintain the IGS for the duration of this Charter, and that the Master, officers and crew are properly qualified (as evidenced by appropriate certification) and experienced in the operation of the IGS. Owners further undertake that the Vessel shall arrive at the loading port with her cargo tanks fully inerted and that such tanks shall remain so inerted throughout the voyage and the subsequent discharging of the cargo. Any time lost owing to deficient or improper operation of the IGS shall not count as laytime or, if the Vessel is on demurrage, as demurrage. 12.2 The Vessel’s IGS shall fully comply with Regulation 62, Chapter II–2 of the SOLAS Convention 1974 as modified by its Protocol of 1978 and any subsequent amendments and Owners undertake that the IGS shall be operated by the Master, officers and crew in accordance with the operational procedures as set out in the IMO publication entitled ‘Inert Gas Systems 1990’ (IMO 860E) as same may, from time to time, be amended.

202

S P E C I A L C L AU S E S

Para. 82

12.3 If Charterers so require, Owners shall arrange for the Vessel’s tanks to be de-pressurised to facilitate gauging and sampling or to be de-inerted or gas freed to facilitate inspection, in each case in accordance with the operational procedures referred to in Clause 12.2. Any time taken to de-pressurise, gauge, sample and re-pressurise, or to de-inert or gas free, inspect and re-inert thereafter shall count as laytime or, if the Vessel is on demurrage, as demurrage. 19.8 Owners undertake that the Vessel is equipped with a fully functional Crude Oil Washing System and that the officers and crew are properly qualified (as evidenced by appropriate certification) and experienced in the operation of such system. Whilst Charterers may instruct Owners to carry out additional crude oil washing in all tanks which contained the cargo the Master shall, in any event, arrange for crude oil washing of the cargo tanks at the discharge port to the MARPOL minimum standard, as set out in the Vessel’s Crude Oil Washing Operation and Equipment Manual. When the Vessel carries out crude oil washing to the MARPOL minimum standard, in the absence of instructions from Charterers to carry out additional crude oil washing, there shall be no increase in the time allowed for discharge of the cargo. If Charterers instruct Owners to carry out additional crude oil washing then the period referred to in Clause 19.3.2, 19.4 or 19.5 as the case may be, shall be increased by twenty-five per cent (25%). Owners shall carry out crude oil washing concurrently with discharge of the cargo and the Master shall provide a crude oil washing log identifying each tank washed, and stating whether such tank has been washed to the MARPOL minimum standard or has been the subject of additional crude oil washing.’’

In the area of documentation/legal readiness, express clauses (as compared to the common law) may make the position difficult for shipowners, particularly those clauses which relate to pratique and customs entry/clearance and other documentation (considered in the following paragraphs). It is emphasised that, if parties have agreed special words to cover certain circumstances then they are bound by such so that, unless relief can be found under ambiguity or the de minimis rule or estoppel or some other principle, courts, and tribunals, will hold the parties to what they have agreed. The clauses relating to cleanliness and documentation are invariably conditions precedent to the tendering of a notice of readiness so that the notice will not be valid unless the clauses have been complied with. For example, in the arbitration reported in LMLN 328—30 May 1992 (also cited in paragraphs 57, 82 and 118 regarding other matters) the facts were that on 15 May the vessel was subchartered by disponent owners on the Sugar Charterparty, clause 17 of which provided: ‘‘Ship’s holds to be odourless and free from insects, properly swept, cleaned and dried to the satisfaction of shippers’ or charterers’ agents before loading. Ship’s holds to be washed down only if cargo injurious to sugar carried previously, and if done, holds to be completely dry before tendering notice of readiness.’’

The vessel tendered notice of readiness under the voyage charterparty at 08.00 on 26 May. The vessel had not, as at that date, been delivered by the registered owner to the disponent owners. Delivery under the head charter did not take place until 28 May, on which date SGS carried out a survey in respect of the head charter. The certificate of delivery recorded that the hatches required more cleaning and removal of peeled paints. The holds were eventually passed clean at 18.00 on 3 June. The disponent owners brought arbitration proceedings against the voyage charterers, claiming demurrage. The charterers contended that the notice of readiness was not valid because, when it was tendered, the vessel had not been in a condition 203

Para. 82

C L AU S E S / B R E AC H E S R E R E A D I N E S S

to load cargo. The disponent owners accepted that the period between the time when the holds were failed on 31 May and eventually passed on 3 June should not count. However, they argued that the notice of readiness was valid because the vessel was available and ‘‘ready’’ in the legal sense. They argued that clause 17 was not a condition precedent that had to be fulfilled before a valid notice of readiness could be tendered. It only imposed a requirement that had to be fulfilled prior to loading and it was not worded so that it could be construed as a condition precedent. It was held, that although there was no specific reference in the survey reports to previous cargo residues, it was to be assumed that they would have been ‘‘injurious to sugar’’ since otherwise the presence of the cargo residues would have been a matter of indifference to the surveyors. If that assumption was correct, the obligation that the holds should be washed down and dry was one that applied before the notice of readiness could be tendered. The obvious intention of the parties, as well as the need to give a business efficacy to the clause would require one to imply a term that the washing down had to be carried out effectively. That had not been done until 3 June. Even if it was assumed that only the first part of the clause was applicable, the owners’ argument would be rejected. Although clause 17 was not flagged ‘‘condition precedent’’, it was difficult to see how the clause could be construed as anything else. The entitlement of a charterer to have presented to him holds that were in sufficiently good condition to avoid a serious danger of contamination or damage to the cargo was an extremely important entitlement. If a charterer faced problems under his sale contracts with purchasers of the cargo because the cargo had become damaged or contaminated because of the condition of the holds, possible indemnity rights against the owners, even if they turned out to be enforceable, would not provide adequate protection to a charterer, whose commercial reputation might suffer if the condition of the cargo led to disputes as to quality. Given the fundamental importance of clause 17 for a charterer, it must have been the intention of the parties that it should be fulfilled before the vessel could be considered ready to load. In other words, it did constitute a condition precedent. The notice of readiness was accordingly invalid when tendered, and laytime did not commence until 18.00 on 3 June. The disponent owners’ claim would be dismissed. The condition precedent approach will, in general, only be applicable if the charterparty clause in question, regarding readiness, is sufficiently clear. In LMLN 446—7 December 1996 the vessel was chartered on the Gencon form for the carriage of a part cargo of 10,000 metric tons of ‘‘12M DEBAR IN BUNDLES OF ABOUT 2.5 MTS’’. The owners claimed demurrage. The charterers contended that the delay at the loading port which gave rise to the demurrage claim was caused by the owners’ breaches of contract. The charterers argued that the difficulties at the loading port arose due (1) to the fact that the master had not prepared an adequate stowage plan, and (2) to various characteristics of the ship which were said to constitute breaches of charter by the owners. So far as the stowage plan point was concerned, clause 24 of the charter provided for notice of readiness to be tendered, and concluded: 204

S P E C I A L C L AU S E S

Para. 83

‘‘Owners upon fixing to present intended stowage plan 24 hours prior arrival latest prior tendering notice of readiness, Owners/Master to tender final stowage plan.’’

It was held that the charterers’ submission that the presentation of a proper stowage plan was a condition precedent to the ship’s entitlement to give a valid notice of readiness would be rejected. That was not what clause 24 said, either expressly or by implication. The obligations upon the owners set out by that clause were quite distinct, and breach of them might have consequences, but one of those was not the invalidation of any notice of readiness given. See also later paragraph 87 regarding a condition precedent, in particular The Shackleford and LMLN 266. 83. The obtaining of free pratique in the context of special clauses and the commencement of laytime have been the subject of several arbitrations over the years. In The ‘‘Tielrode’’3 arbitration, the argument concerned the exact date of the commencement of laytime at Riga, the port of discharge. The vessel arrived in Riga Roads on 29 February at 06.00 but, because of congestion, could only berth on 13 March. Free pratique was granted after berthing on the same day, at 10.30. The relevant charterparty clause stipulated: ‘‘Notice of readiness to be delivered by the vessel during official working hours after receiving free pratique, whether in berth or not, whether in port or not, whether entered Customs or not . . . ’’. Notice of readiness was given by the vessel on 29 February at 10.00 while she lay in the roads but, at the same time, the ship had not received free pratique. The arbitrator decided in favour of the charterers in that the notice of readiness was not good until after the vessel had received free pratique because of the express words in the contract which had been agreed between the parties. He said that it was unfortunate that at Riga pratique could not be obtained by radio before arrival, as was the practice at many other ports but, since pratique could not be given until after the ship had berthed, that was the end of the matter. Although the obtaining of pratique was a mere formality it was a specific requirement of the contract and, although he sympathised with the owners for the unfortunate turn of events, the express term won the day. Free pratique was included in the contract and its terms must be respected and given their intended meaning. The arbitrator did not think that the terms ‘‘whether in berth or not’’, ‘‘whether in port or not’’ superseded the primary pratique condition. In the later Pegasus4 arbitration, a different arbitrator came to the same conclusion regarding a charterparty which contained (inter alia) the words ‘‘time to count 6 hours from . . . and in free pratique whether in berth or not . . . ’’. The vessel arrived at the Tyne Roads on 21 October at 21.18 and the master immediately gave a notice of readiness. This notice was refused by the charterers on account of the vessel not having obtained free pratique; consequently, the vessel moved to a position where pratique could be obtained and, as soon as it was effected, the charterers accepted the notice of readiness.

3. 1973. 4. 1975.

205

Para. 83

C L AU S E S / B R E AC H E S R E R E A D I N E S S

The owners relied upon The ‘‘Delian Spirit’’5 (no express clause in the charterparty relating to pratique and the court decided it was a mere formality to obtain such) in support of their contention that the notice of readiness given on 21 October was a valid notice. However, the arbitrator took the same approach as the previous arbitrator and decided the case against the owners. He stated that, since the parties had agreed an express clause in respect of the matter he had no alternative but to decide the commencement of the laytime aspect in favour of the charterers, the parties having specially agreed that time was not to count until after the vessel was in free pratique so that that amounted to a condition precedent to the commencement of laytime. At least, in this case, the owners were able to mitigate the position to a certain extent because of the early refusal of the charterers to accept the notice of readiness so that the master moved his vessel into a position whereby he could obtain free pratique and then tendered a valid notice of readiness. The two arbitrations mentioned above were decisions made many years ago and it was thought that there would be no more arbitrations concerning the obtaining of free pratique/commencement of laytime when the charterparty contained an express clause amounting to a condition precedent. However, in a 1986 arbitration6, the facts were virtually identical to the two arbitrations cited above in that there was an express clause stating that time was not to count until after (inter alia) the vessel was in free pratique and, factually, the obtaining of free pratique was a formality since it was granted immediately. Again, the owners relied on The ‘‘Delian Spirit’’5 in support of their argument. The arbitrator decided that it was clearly distinguishable from The ‘‘Delian Spirit’’5 since there was no express requirement in that case that the vessel be in free pratique at all. In the present case, there were clear, unambiguous, express terms that the vessel had to be in free pratique before notice of readiness could be given. That requirement was a condition precedent so that no valid notice of readiness could be given until it had been complied with. There may be charterparty clauses which are not as clear as those referred to above and where the obtaining of free pratique is mentioned expressly in a clause which also includes other factors and options and the interpretation of such leads to difficulties and arbitrations. In LMLN 411—5 August 1995 the vessel was chartered to carry a cargo of iron ore pellets in bulk from one safe berth/port at a named Chilean port to one safe berth/port at another named port. Clause 52 of the charter provided: ‘‘Laytime for loading shall commence 12 hours after notice of readiness is tendered, whether vessel is in berth or not, or when loading commences whichever is sooner. Notice of readiness to load shall be tendered with clean holds, hatches open and in all respects ready to load, at any time day or night Sundays, Holidays included after the vessel has duly arrived at the port of loading subject to free pratique being granted prior to or on arrival in berth of loading provided however that if free pratique is not granted prior to or on arrival in berth of loading due to causes attributable to the vessel then such notice of readiness shall be tendered if and when vessel is in free pratique with clean holds, hatches open and in all respects ready to load.’’ 5. [1971] 1 Lloyd’s Rep. 506; see above, paragraph 78 et seq. 6. LMLN 179—11 September 1986.

206

S P E C I A L C L AU S E S

Para. 83

The vessel arrived at the loading port on 16 July at 06.00 hours. Notice of readiness was tendered simultaneously. She took her pilot at 06.47 hours and she reached the loading berth at 07.20 hours, mooring operations commenced at 07.25 hours and were completed at 09.08 hours. The authorities boarded at 09.00 hours and free pratique was granted at 09.45 hours. The vessel commenced loading at 10.20 hours and completed loading on 17 July at 14.10 hours. The owners submitted that time started to count upon commencement of loading at 10.20 hours on 17 July. The charterers contended that time started to count 12 hours after free pratique had been granted, i.e. from 21.45 hours on 17 July. They argued that the Master’s notice of readiness had no effect and should have been re-tendered when free pratique was granted at 09.45 hours on 16 July. It was held that it was clear that the intention of clause 52 was that if loading commenced before the notice time elapsed then laytime commenced at the moment that loading commenced, and any conditions attaching to the notice of readiness regarding pratique or other matters became irrelevant. It was an alternative option, available to the owners, of commencing laytime at the very moment that loading commenced, irrespective if details relating to the notice of readiness such as obtaining free pratique. In fact, the clause had the effect of a waiver regarding notice of readiness details once loading had commenced. That was understandable since once loading had commenced the notice of readiness usually became irrelevant regarding the commencement of laytime although it might still be relevant if it eventually transpired that the vessel was not in fact ready to load all hatches at the time that loading commenced and the charterers claimed damages from the owners for breach of contract in not tendering a vessel which was in fact ready to load cargo in all hatches at the time that loading commenced. But the charterers would in any event have a sound claim against the owners for damages under the common law irrespective of the status of the notice of readiness, if indeed the facts were that the vessel was not ready to load the cargo in all hatches and that that was the causative of loss of time to the charterers. Since loading commenced at 10.20 hours on 16 July laytime commenced at that time. Accordingly, the charterers’ argument would be rejected. However, in LMLN 417—28 October 1995 the charterers succeeded in an arbitration before a sole arbitrator where the charterparty clauses were more complicated. The vessel was chartered on the Stemmor form as amended. She arrived at the loading port at 22.47 hours on 26 May, tendering notice of readiness immediately. The notice was accepted by the shippers at 08.00 hours on 27 May. Loading started at 14.30 hours on 31 May, free pratique not having been obtained until 13.00 hours on 29 May. The charterers referred to clause 6 of the charterparty and contended that laytime could only start at 08.00 hours on 30 May, being 08.00 hours on the day following the obtaining of free pratique, since free pratique had been obtainable at the anchorage. The owners said that laytime started counting at 08.00 hours on 28 May. The charterparty provided (with typewritten inserts shown in bold face type): Clause 2 (line 27) 207

Para. 83

C L AU S E S / B R E AC H E S R E R E A D I N E S S

‘‘After arrival written or by cable notice is to be given . . . of the vessel being in all respects ready . . . Prior to tendering Notice the vessel’s holds are to be washed, swept and cleaned and dry and free of loose rust scale . . . If after berthing any cleaning or drying . . . is to be carried out, then same to be at owner’s expense and time. If upon vessel’s hold inspection she is found unsuitable and consequently loses her turn for berthing, then laytime is not to count until such time as vessel is actually berthed. However, time lost waiting for berth prior to first inspection to be counted as laytime if vessel is kept waiting for a berth due to port congestion . . . ’’

Clause 6 (line 53) ‘‘Time for loading to count from 8am on the next working day after the ship is reported and ready, and in free pratique provided free pratique obtainable at anchorage and written notice tendered (whether in berth or not) whether in port or not, whether customs cleared or not, whether in free pratique or not . . . steamer to be reported during official hours only.’’

It was held that at first sight, it appeared that there was a conflict between the words inserted at the beginning of clause 6 (‘‘provided free pratique obtainable at anchorage’’) and those inserted later on which included the phrase ‘‘whether in free pratique or not’’. If there had been such a conflict, the tribunal would have concluded that the first insertion should prevail because it was focused on a particular set of circumstances (being a proviso that pratique was obtainable at the anchorage) whereas the latter words were general. However, on further reflection, the tribunal’s view was that the charterers’ approach to the interpretation of the clause was correct, and that the first insertion concerned the condition the ship had to be in, in order for time to start counting on the next working day, whereas the later insertion related to the condition she might be in when giving a notice of readiness. Either way, the construction of the clause favoured the charterers. Free pratique was obtainable at the anchorage and it was obtainable upon the ship’s arrival if appropriate arrangements were made, so that time could not count until 8 a.m. on the next working day after the ship was actually in free pratique. If the tribunal’s preliminary view of the clause had been correct (which view had been rejected), a valid notice could not be given until the ship was actually in the free pratique. The owners had also said that more weight should be given to the second insertion because the words ‘‘in free pratique’’ in line 52 appeared in print. The answer to that was that the insertion following the words ‘‘and in free pratique’’ was typewritten and could not be read separately from the preceding printed words, so no greater weight was to be given to the second insertion on that ground. It remained to deal with the question of the effect, if any, of the notice having been accepted by the shippers at 08.00 hours on 27 May. One answer to that, on the construction of clause 6 preferred by the tribunal, was that all the requirements spelt out there had to be satisfied before laytime started; i.e. the ship had to be (i) reported, (ii) ready, (iii) in free pratique and (iv) written notice had to have been tendered. In addition, there were none of the ingredients required for an argument of waiver or estoppel to succeed. That was all the more so since the printed requirement that notice of readiness should also be accepted had been deleted. It was permissible to look at the deletions made to standard printed forms of contract, 208

S P E C I A L C L AU S E S

Para. 83

and it was therefore at least highly arguable that the parties intended that acceptance or non-acceptance of the notice of readiness should have no effect on the counting of laytime. The owner’s claim for demurrage accordingly failed. A few years later an arbitration, LMLN 488—21 July 1998, involved the absence of free pratique where the relevant clauses were: ‘‘2 . . . In any event Charterers shall have the benefit of six hours notice of readiness at all ports . . . ’’ ‘‘Free Pratique (clause 22) If free pratique is not granted promptly upon arrival, Master will immediately protest in writing by cable/telex to port authorities, and owners must attach such protest to the demurrage claim, if any, otherwise time so lost shall be for owners account.’’

The vessel arrived at the loading port at 02.30 on 4 February and tendered notice of readiness at that time. The vessel proceeded into berth, being all fast at 08.36. Hoses were connected by 09.35. Free pratique was granted at 11.00. The vessel commenced loading at 11.20 and hoses were disconnected at 19.50 on 5 February. The owners submitted that laytime ran from 08.30 on 4 February, when the vessel actually berthed, until 19.50 on 5 February. The charterers contended that laytime should not commence until 11.00 on 4 February, being the time at which free pratique was granted. They contended that that was the case under the general law or alternatively by virtue of the specific terms of clause 22 of the Rider to the charterparty which related specifically to free pratique. It was held that laytime commenced at the loading port at 08.30 on 4 February. That was the expiration of the 6 hour notice period under clause 6. The absence of free pratique until 11.00 of 4 February did not nullify the notice of readiness given at 02.30. The obtaining of free pratique was merely a formality and did not prevent a valid notice of readiness being given at 02.30 (see The ‘‘Delian Spirit’’7). The ‘‘mere formality’’ doctrine could be over-ridden by an express free pratique clause. Clause 22 of the Rider did not have that effect, i.e. to make the obtaining of free pratique a condition precedent to the giving of a valid notice of readiness. As Mr Justice Longmore (as he then was) had commented in The ‘‘Petr Schmidt’’8 ‘‘in the absence of express wording, courts generally lean against constraint clauses as conditions precedent to liability’’. Clause 22 of the Rider was not so drafted. Rather it was a ‘‘time so lost’’ clause requiring a party seeking to rely upon it to assert and establish what time was lost by the absence of free pratique. No such attempt had been made in the present case, and it was clear to the tribunal that no time was in fact lost. The owners’ laytime calculation at the loading port was correct. A later arbitration, LMLN 538—22 June 2000 concerned a notice of readiness clause which read : ‘‘Immediately after arrival of the ship at the pilot station both at loading and discharging ports, whether in port or not, whether custom cleared or not, but always in free pratique, written or

7. [1971] 1 Lloyd’s Rep. 506. 8. [1997] 1 Lloyd’s Rep. 284.

209

Para. 83

C L AU S E S / B R E AC H E S R E R E A D I N E S S

wireless notice of readiness is to be tendered by . . . Laytime . . . shall commence at 13.00 hours if notice of readiness tendered up to and including 12.00 hours same day . . . ’’

Notice of readiness was given at 09.06 on 18 March. On that basis the owners submitted that laytime began at 13.00 on 18 March. The charterers contended that since the vessel did not obtain free pratique until 19.00 on 20 March laytime did not commence until 13.00 on 21 March. The owners responded that the fact that free pratique was only granted on 20 March did not mean that the ship was not in ‘‘free pratique’’ for the purpose of clause 22 of charter on giving notice of readiness on 18 March. The ship in fact had a free bill of health. She was, on 18 March, in a fit state to obtain free pratique on first inspection. It was a pure formality, they said, that the ship could not be inspected for the purpose of free pratique until she arrived at the inner anchorage, which she did on 20 March. The owners relied on The ‘‘Delian Spirit’’.7 It was held that The ‘‘Delian Spirit’’ was concerned with a different issue, namely whether a ship could be regarded as an ‘‘arrived ship’’ if she was not in free pratique. The point in the present case was not whether the ship was an ‘‘arrived ship’’ but whether she complied with the explicit requirement that the ship should be in ‘‘free pratique’’. The ship did not comply until 19.00 on 20 March, when she was given free pratique. Laytime could not therefore commence until 13.00 on 21 March. The above arbitration affords a good illustration of obtaining free pratique being a condition precedent, as opposed to the wording in the earlier arbitration above, LMLN 488—21 July 1998. It is emphasised that any requirement for free pratique has to be clearly expressed in order to be considered as a condition precedent. As mentioned in the earlier arbitration, the courts generally lean against constraint clause as conditions precedent to liability. An interesting point of construction came before the courts in Odfjfell Seachem v. Continentale des Petroles et D’Investissements9 where the charterparty was on the terms of an amended BPVOY 4 form. One of the disputes related to the commencement of laytime at the loading port. The charterparty provided: ‘‘Notwithstanding tender of a valid NOR by the vessel such NOR shall not be effective nor become effective, for the purposes of calculating laytime, or if the vessel is on demurrage, demurrage unless and until the following conditions have been met: 6.3.3 Free pratique has been granted or is granted within six (6) hours of the master tendering NOR. If free pratique is not granted within six (6) hours of the master tendering NOR, through no fault of owners, agents or those on board the vessel, the master shall issue a protest in writing (NOP) to the port authority and the facility at the port (the terminal) failing which laytime or, if the vessel is on demurrage, demurrage shall only commence when free pratique has been granted . . . 7.3.2 Laytime, or if the vessel is on demurrage, demurrage, shall commence, at each loading and each discharge port, upon the expiry of six (6) hours after a valid NOR has become effective as determined under cl. 6.3, berth or no berth, or when the vessel commences loading, or discharging, whichever first occurs.’’

Notice of readiness was given at 01.30 on 27 September. Free pratique was not obtained until 10.30. The owners said that laytime commenced at 10.30 but the

9. [2005] 1 Lloyd’s Rep. 275.

210

S P E C I A L C L AU S E S

Para. 84

charterers said that it commenced at 16.30, i.e. six hours after free pratique was granted. In deciding the case against the charterers it was held, by the Commercial Court (Mr Nigel Teare QC), that: The commencement of laytime was governed by clause 7. It started six hours after a valid NOR had become effective or when the vessel commenced loading, whichever first occurred. When a valid NOR became effective it was governed by clause 6.3. One requirement was that free pratique had been granted. If it had been granted before NOR was given that requirement was satisfied and the NOR was effective when it is given. If free pratique was granted within six hours of NOR being given it was common ground between the parties that the NOR was effective immediately the NOR was given. (It was not argued that in such case the NOR only became effective once free pratique was granted.) In such cases laytime commenced upon the expiry of six hours from the NOR becoming effective. If free pratique was not granted through no fault of the ship and the master issued a protest then it seemed that the NOR became effective on the issue of his protest. If no such protest was issued then clause 6.3.3 provided that ‘‘laytime shall commence when free pratique has been granted.’’ Having regard to the purpose of cl. 6.3 this was odd because clause 6.3 was intended to state when a NOR becomes effective not when laytime commenced running. However, I do not consider it permissible to read the words at the end of clause 6.3.3 as stating merely that the NOR becomes effective once free pratique has been given; for the words state in terms that laytime shall commence when free pratique has been granted. Clauses 6.3.3 and 7.3.2 have to be read together and the way to do so which does least violence to the language of each clause is to regard clause 6.3.3 as stating when laytime commences in the event that free pratique is granted more than six hours after issue of the NOR and to regard clause 7.3.2 as being impliedly subject to any contrary provision in clause 6.3.3. For these reasons the charterers do not have a real prospect of showing that laytime commenced at 16.30 on 27 August. Upon the true construction of the charterparty laytime commenced at 10.30 on 27 August. The decision has some importance since the type of clauses in issue has similarity to many which are used in the tanker trade. The above arbitrations illustrate the economic loss which may fall upon owners of vessels if a charterparty contains an express clause regarding the obtaining of free pratique before notice of readiness can be tendered. A vessel may have to wait for several weeks because of port congestion in circumstances where the charterparty does not contain a compensatory type clause for waiting for a berth. There are still quite a few ports in the world where a vessel cannot obtain free pratique until she actually gets into a berth in the port or, alternatively can only obtain free pratique by waiting for a small vessel with port health authorities on board to visit the vessel at an outer anchorage. In the latter circumstances heavy weather may prevent the vessel being visited for days. 84. LMLN 274—5 May 1990 illustrated the application and effect of a condition precedent relating to port formalities in circumstances where the vessel arrived 211

Para. 84

C L AU S E S / B R E AC H E S R E R E A D I N E S S

within port limits in a port charterparty. The vessel arrived at the outer anchorage of the discharge port at 07.20 on 20 April and tendered a notice of readiness which was not accepted until 08.00 on 6 May (by which time the vessel had berthed). The vessel had waited at the anchorage (some 60 miles from the discharge port) from 20 April until 14.20 on 4 May when she started to proceed up river. The prolonged waiting time was due to berth congestion. Clause 52 of the charterparty provided: ‘‘Laytime shall commence 24 hours after master’s notice of readiness to discharge has been accepted within ordinary business hours . . . whether in berth or not provided formalities for entering port have been passed by Port Authorities.’’

The charterers contended that the vessel had not been passed by the port authorities regarding formalities for entering the port until 5 May so that clause 52 of the charterparty was not satisfied at the outer anchorage. The charterers said that clause 52 was not satisfied until the completion of the ‘‘Entry Joint Inspection’’ which took place between 21.10 and 22.00 on 5 May. It was held that it was probably the case that the joint inspection was a mere formality so that, in the absence of other considerations, the charterers ’ contention would have no merit (see The ‘‘Delian Spirit’’5). The inspection in the present case lasted some 50 minutes and would have been a mere formality having no effect on the commencement of laytime were it not for the important words in clause 52 ‘‘provided formalities for entering port have been passed by Port Authorities’’. Those express words could not be satisfied until all formalities for entering the port (including the joint inspection) had been completed. It was somewhat artificial for owners to argue that since the vessel was legally within the port at the outer anchorage, all formalities for entering the port had been passed. Vessels were forever entering the legal limits of the port and then anchoring before later moving into the heart of the port to undertake the commercial operations of loading/discharging, and this often required formalities or further formalities to be completed. It was unrealistic to say that all formalities to enter a port had been complied with when certain formalities still had to be completed before the vessel could move into the loading/discharging area of the port albeit that she had got within the legal limits of the port where, as in the present case, no formalities had to be carried out to allow the further progress of the vessel in to the heart of the port. The Guide to Port Entry made it clear that formalities had to be undertaken when a vessel got close to the heart of the port (some 60 miles up-river from the outer anchorage) when a vessel would be boarded by the harbour authorities and (inter alia) a crew inspection took place. Therefore, it was not possible for formalities to be completed for entering the port, in the practical/commercial sense, while the vessel was at the outer anchorage. The owners had agreed an express clause that formalities for entering the port had to be passed in order to present a valid notice of readiness. Therefore, the passing of the formalities became a condition precedent for the tendering of a notice of readiness under clause 52. While the joint inspection might well have been a mere formality, it was still a formality which fell within the ambit of the express clause of 212

S P E C I A L C L AU S E S

Para. 85

the charterparty and had to be satisfied before a valid notice of readiness could be tendered. The charterers’ argument was correct. A valid notice of readiness could not be tendered until ordinary business hours on 6 May, so that laytime did not commence until the morning of 7 May. The arbitration should be compared with that set out earlier in paragraph 78, LMLN 35—5 March 1981, where it was decided that the 40-minute inspection was a mere formality which had no effect on the commencement of laytime: however, there was no express clause relating to port authority formalities in the earlier arbitration. 85. Although conditions precedent are to be applied strictly, their harsh and commercially unrealistic results may be avoided by way of the de minimis principle or by an estoppel or by construing the words in a broader sense. In The ‘‘Sati Rani’’10 arbitration the charterparty stipulated: ‘‘Time for loading shall commence to count 24 hours after the written notice, and a certificate from a Marine Surveyor approved by the Charterers certifying the vessel’s readiness in all cargo spaces, whether in berth or not, has been given by the Master or agents . . . that the steamer is ready to receive cargo.’’

The vessel arrived at the outer anchorage on 30 May at 12.48 and gave a notice of readiness. She berthed on Monday, 2 June at 14.00 and the notice of readiness was accepted by the charterers at 15.30 on that day. The vessel commenced loading at 16.40. On 3 June the marine surveyor’s certificate was issued following inspection of the holds at 09.30 on that day. The charterers contended that laytime should not commence until 09.30 on 4 June in view of the charterparty provision cited above. The tribunal decided that notice of readiness given on 30 May at 12.48 was a good notice, its reasoning being as follows: ‘‘It appears to us that, in view of loading having commenced on June 2 at 16.40, the survey on June 3 turned out to be a mere formality. The survey showed that the vessel’s compartments were ready in all respects and had no effect on the loading operation which had commenced the previous day. Since the survey turned out to be a mere formality, and did not lead to any interruption in the loading process, it should have no effect on the laytime computation. Where there is a mere formality to be effected, which does not affect the position in any way, the tendency is to disregard the formality, see The ‘Delian Spirit’11; we realise that, in that case, there was no express wording as in the charterparty now before us, but we think that a general principle has been evolved which allows a liberal approach to be taken to wording in a clause which turns out to have no intrinsic relevance when the facts and charterparty provisions are looked at in a global sense and without undue fastidiousness. Further, the de minimis principle militates against the charterers.’’

It is submitted that although the arbitrators might have been correct in the application of de minimis principle they were wrong in their other reasoning: after all the clause was specific in that time could not commence until after a surveyor’s certificate was issued. They could have come to a less favourable decision to the owners perhaps by way of the application of estoppel, the basis being that, by 10. 1977. 11. [1971] 1 Lloyd’s Rep. 506.

213

Para. 85

C L AU S E S / B R E AC H E S R E R E A D I N E S S

commencing to load the vessel at 16.40 on 2 June, the charterers impliedly accepted the notice of readiness to load at that time (but see later on this aspect in Chapter 6); however, this would have resulted in the laytime commencing at a later time than that decided by the arbitrators but before the time contended for by the charterers. Alternatively, the charterers might have been in breach of the implied obligation to survey the vessel with reasonable dispatch if there were facts to support this, thus allowing the owners a claim in damages for the time lost by a delayed certificate. 86. Problems regarding the commencement of laytime have arisen, particularly in Indian ports, regarding customs clearance. LMLN 90—14 April 1983 illustrated such a problem. The vessel was chartered on a Baltimore Grain form to carry a cargo of wheat from the United States to Bombay. Clause 26 provided: ‘‘Vessel to tender notice of readiness to discharge to charterer or his agents during the ordinary office hours on a weekday before 4 pm, similarly before noon if on a Saturday, vessel having been entered at the Custom House and in free pratique and ready in all respects to discharge the cargo, time will then commence 24 hours after acceptance of tender.’’

The vessel arrived at Bombay at 15.00 on 22 October 1976 and gave notice of readiness to discharge at 10.00 on Saturday, 23 October by which time she had filed a ‘‘prior to entry’’ with the customs. Charterers endorsed the notice ‘‘received subject to relevant charterparty terms and confirmation from concerned authorities regarding the time of arrival, entry and grant of free pratique’’. The vessel commenced discharging at 21.15 on 27 October. The issue between the owners and charterers depended on whether the notice of readiness was valid when given and received at 10.00 on 23 October, or whether it only became valid at 10.45 on Monday, 25 October, which was when inward entry was obtained. The arbitrators found that when notice of readiness was tendered and received at 10.00 on 23 October: (a) (b) (c) (d)

the the the the

vessel vessel vessel vessel

was was was was

an ‘‘arrived ship’’; entered at the Custom House; in free pratique since 17.30 on 22 October; ready to discharge cargo.

The charterers contended, however, that with regard to (b), prior actual entry had not been made at the time of tendering notice of readiness since the vessel did not obtain inward entry until 25 October; therefore she did not have break bulk permission from customs; therefore she could not discharge her cargo until 25 October. It was held that it was well known that the custom at Indian ports was to lodge prior entry to a vessel’s arrival. A ‘‘prior entry manifest’’ was filed with customs to enable the receivers to process the documents required for receiving and clearing the goods. Final entry was a routine matter which had nothing to do with receivers and did not prohibit discharge by the receivers. Although final entry might be applied for over the weekend it could not be granted until the following business day. If a vessel arrived after business hours on Friday, final entry might not be obtained until the following Monday morning. This is what happened in the present case. 214

S P E C I A L C L AU S E S

Para. 86

If the vessel had been required to discharge cargo before 10.45 on 25 October she would have needed the break bulk authorisation. However, as she only berthed and commenced operations on 27 October the authorisation was not required on the 23rd. Furthermore, the real test when tendering notice of readiness was that propounded by Lord Denning M.R. in The ‘‘Tres Flores’’,12 namely that the master can say: ‘‘I am ready at the moment you want me when ever that may be, and any necessary preliminaries on my part to the loading will not be such as to delay you. . . . Applying this test it is apparent that notice of readiness can be given even though there are some further preliminaries to be done, or routine matters to be carried on, or for formalities to be observed. If those things are not such as to give any reason to suppose that they will cause any delay, and it is apparent that the ship will be ready when the appropriate time arrives, then notice of readiness can be given.’’

In the present case, evidence showed that once prior entry had been filed with customs, the application to break bulk was a mere formality, and that ‘‘break bulk’’ permission was not usually granted until the receivers signified an intention to break bulk. Accordingly, the notice of readiness tendered at 10.00 on 23 October was valid at the time of service, and laytime started running at 00.00 on Monday, 25 October. Soon after this arbitration two cases went to the High Court, on similar facts, The ‘‘Apollon’’ and The ‘‘Delian Leto’’. In The ‘‘Apollon’’13 and in The ‘‘Delian Leto’’14 each of the laytime clauses contained a condition precedent that the vessel concerned should have been entered at the Custom House before laytime could commence, as in the London arbitration. In both of the High Court cases an issue was raised as to whether it was necessary for the full customs procedure to be followed before a valid notice of readiness could be given or whether it would be sufficient for the first or ‘‘prior to entry’’ stage to have been completed. Both High Court judges decided that the initial stage would be sufficient. In his Apollon13 judgment Mr Justice Bingham (as he then was) had this to say about the charterers’ contention that entry of the vessel under ‘‘prior to entry’’ rules did not satisfy the charterparty which referred to ‘‘the entry of the vessel at the Customs House’’. ‘‘In my judgment this is a point of quite unreasonable technicality and one which cannot prevail against the clear and, to my mind, very convincing reasoning of the learned umpire. He was, in my judgment, entitled to hold that for all practical purposes the entry that mattered was the entry that occurred on September 19, that being, so far as customs were concerned, the formal prelude to discharge. Although the language of the charterparty did not expressly refer to entry under the ‘prior to entry’ rules, it was, in my judgment, both the correct and the commercial construction of this contract that the vessel was indeed entered at the time when entry was necessary and required in order to permit discharge.’’

12. [1973] 2 Lloyd’s Rep. 247. 13. [1983] 1 Lloyd’s Rep. 409. 14. [1983] 2 Lloyd’s Rep. 496.

215

Para. 86

C L AU S E S / B R E AC H E S R E R E A D I N E S S

Both High Court judges took the same approach as the arbitrators in not being too technical. The decisions show that the judges and arbitrators often adopt a commercial approach where possible to reflect not only the practicalities of a situation but also common sense. In the later cases of The ‘‘Albion’’15 and The ‘‘Nestor’’16 both Mr Justice Webster and Mr Justice Leggatt (as he then was) decided, on the facts found by the arbitrators, that ‘‘entered at the Custom House’’ meant final customs entry rather than ‘‘prior to entry’’ so that the owners did not satisfy the condition precedent until the time of the final customs entry. Both judges were influenced by sections 30 and 31 of the Indian Customs Act 1962, which legislation had not been emphasised in The ‘‘Apollon’’ and The ‘‘Delian Leto’’. The ‘‘Albion’’ and The ‘‘Nestor’’ will not be considered in depth since they, along with The ‘‘Apollon’’ and The ‘‘Delian Leto’’ were cited in the later The ‘‘Antclizo’’17 where the Court of Appeal upheld Mr Justice Hirst who, coming to a different conclusion to the judges in The ‘‘Albion’’ and The ‘‘Nestor’’, decided that entry at the Custom House occurred at the prior entry stage. Prior to The ‘‘Antclizo’’ (see later) the matter was considered by the Indian High Court at Bombay in The ‘‘Jag Leela’’18 (judgment December 1988). On the same condition precedent the charterers argued that the commercial interpretation of the charterparty had to be considered as superseded by the general law, and that since section 31 of the Customs Act did not permit the master to discharge the cargo at an Indian port until ‘‘entry inwards’’ or final entry, laytime commenced 24 hours after final entry was granted and notice of readiness to discharge was served on the charterers. The charterers cited The ‘‘Apollon’’19 and The ‘‘Delian Leto’’20 and relied on The ‘‘Albion’’21 and The ‘‘Nestor’’.22 The shipowners contended that ‘‘entry inwards’’ or final entry could not be imported into the charterparty contract, and that once the conditions of the charterparty had been complied with, notice of readiness on the charterers would be sufficient compliance for laytime to commence 24 hours after service of such notice. The shipowners argued that the charterparty should be interpreted uninfluenced by the provisions of the Customs Act, because the terms of the charterparty, which was a commercial document, had to be interpreted in accordance with their ordinary commercial connotation. ‘‘Entered at Custom House’’ was a term of art used in any standard charterparty but not found in the Customs Act. Therefore, the words ‘‘entry inwards’’ in section 31 of the Customs Act had to be construed in the sense it was used in the Act, and was nothing to do with the charterparty. Accordingly, once the customs authorities had granted ‘‘prior entry’’, that should be considered as ‘‘entered at Custom House’’ as contemplated under the charterparty. 15. [1987] 2 Lloyd’s Rep. 365. 16. [1987] 2 Lloyd’s Rep. 649. 17. [1991] 2 Lloyd’s Rep. 485; [1992] 1 Lloyd’s Rep. 558. 18. LMLN 242—11 February 1989. 19. [1983] 1 Lloyd’s Rep. 409. 20. [1983] 2 Lloyd’s Rep. 496. 21. [1987] 2 Lloyd’s Rep. 365. 22. [1987] 2 Lloyd’s Rep. 649.

216

S P E C I A L C L AU S E S

Para. 86

It was held that the court was concerned with the words ‘‘entered at Custom House’’ as set out in the charterparty. Although those exact words were not found in the Customs Act, the phrase which came nearest was to be found in section 30(1), which provided that a ship’s agent ‘‘shall, within 24 hours after arrival thereof at a customs station, deliver to the proper officer . . . an import manifest . . . in the prescribed form.’’ That was nothing but entering at Custom House. That was the one thing the ship’s agent had to do for entering the customs area. The rest was for the proper officer. The charterparty could not provide for what the customs officer had to do. It could only provide for what the parties to the agreement had to do. It had, therefore, to follow that on a ‘‘prior entry’’ being made, and a notice of readiness being given, 24 hours thereafter laytime should necessarily begin. That was the law. That was the law as understood by commercial men. It was true that in The ‘‘Albion’’ and The ‘‘Nestor’’ the English courts had taken a contrary view. The Indian court was not bound by those decisions. It had respect for them, but that should not and could not overawe the court’s sense of judgment. For the English judges, the Indian law was essentially a question of fact, but for the Indian court it was otherwise. It was a living instrument operating within the parameters of actual experience. The English courts had missed the significance of section 30 of the Act, and also the role of the proper officer, and above all the object of the Act. It could not be said, even remotely, that the Customs Act purported to regulate in any manner the jural relations or obligations of the parties arising under the charterparty. Accordingly, the shipowners’ submissions would be upheld. The decision of the Indian High Court (since upheld in the Bombay Court of Appeal) made sense in the context of ‘‘commencement of laytime’’. Although having no binding precedent it had persuasive cogency and it was referred to later in The ‘‘Antclizo’’. The Antclizo (also relevant in another context, see above, paragraph 79) was chartered for a voyage to Bombay with a clause in the charterparty that ‘‘laytime was to count from 24 hours after receipt of master’s notice of readiness to discharge . . . vessel also having been entered at Customs House and in free pratique whether in berth or not’’. An issue arose as to when the vessel was ‘‘entered at Custom House’’. By section 31(1) of the Indian Customs Act 1962 the master could not permit unloading until customs had granted ‘‘entry inwards’’ to the vessel. No such order would be given until an import manifest had been delivered. The learned umpire, having considered the 1962 Act and the Central Manual of the Import Department in the Customs Houses published by the Indian Central Board of Excise and Customs, found that Indian Customs encouraged delivery of the import general manifest before the expected date of arrival. Some days before arrival, local agents would prepare an import general manifest and an application for entry inwards, including an undertaking to enter the vessel immediately after arrival. They would take those documents to the Custom House and the vessel would be entered in the inward entry register and stamped as having been admitted under ‘‘prior entry rules’’. Prior entry was the name given by those in the Indian shipping trade and the customs authorities to the system of lodging the import general manifest and 217

Para. 86

C L AU S E S / B R E AC H E S R E R E A D I N E S S

application for entry inwards. The system was widely used for the purpose of saving time in completing customs procedures. It was used for 95 per cent of vessel discharging at Bombay. A vessel on whose behalf prior entry procedures had been completed was described in the Indian shipping trade as having been ‘‘entered’’ with customs. Where the vessel was to be discharged at inner anchorage, her agents had to obtain special permission to break bulk in stream from the customs import department. After approval, the vessel was treated by customs as if she had received an order granting entry inwards before completion of the inward entry register. The umpire found that the prior entry procedure had been completed and the vessel was entered at the Custom House before notice of readiness was given. The charterers submitted that the umpire was wrong in concluding that the vessel was entered once prior entry procedure was completed. They argued that on the proper construction of the clause ‘‘entry at Customs House’’ was not made until the final stage of entry inwards procedure, that was, final entry. It was held by Mr Justice Hirst23 that entry at the Custom House occurred at the prior entry stage where an actual physical entry in the register at the Custom House took place followed by the posting of prior entry on the notice board at the Custom House; prior entry was not a mere ‘‘application’’ but was a substantive procedure so that a vessel on whose behalf this procedure had been completed was at all material times described as having been entered with the customs; the owners’ construction was correct and there was no fault in the umpires’ chain of reasoning and the facts found by him in reaching that conclusion. In his analysis and reasoning Mr Justice Hirst stated that there was a very substantial and significant body of additional material which was not before the court in the earlier cases and that he had to put his own construction on the charterparty clause in the light of all the evidence and must apply that construction to the facts before him as found by the umpire. The most salient features were, he said: (1) Discharge at Bombay became legal when the preventive officer permitted inward entry, i.e. between prior entry and final entry. This critically weakened the tie between the crucial words in the clause and final entry. (2) Prior entry mattered a very great deal, not only intrinsically, since it involved both physical entry in the register and display in the notice board, but also in the perception at all material times of traders and the customs authorities at Indian ports, and in the eyes of the domestic law as found (at any rate at first instance) in the Indian courts. This was in very strong contrast to the evidence before Mr Justice Webster and Mr Justice Leggatt, which led them to treat prior entry as a mere application for final entry. (3) Not only did the present evidence significantly upgrade the intrinsic importance of prior entry for the reasons given in the previous paragraph, but it also downgraded the intrinsic importance of final entry since the 23. [1991] 2 Lloyd’s Rep. 485.

218

S P E C I A L C L AU S E S

Para. 86

umpire’s findings showed clearly that, in accordance with the manual and the practice of the Indian ports, discharge would normally have begun before the final entry was completed. (4) An application for entry inwards had been lodged in the course of the prior entry procedure, but in no way derogated from the substantive significance of prior entry. (5) So far as commercial good sense was concerned, the owner’s construction seemed much more appropriate, seeing that prior entry is a physical entry in the register to which all relevant parties attach importance for the reasons given above, and also seeing that it constitutes the only entry made as a matter of practice, in accordance with the provisions of the manual, prior to the commencement of discharge. In the Court of Appeal Lord Justice Parker, giving the leading judgment, stated that in the absence of binding authority he would have no hesitation in upholding the conclusion of the umpire and Mr Justice Hirst in that the vessel was entered at the Custom House on completion of prior entry. Regarding the thrust of the charterers’ argument (since prior entry does not carry with it an order permitting inwards entry, prior entry was not within the ambient of the clause and only final entry at completion of the procedures would satisfy the clause) he had this to say: ‘‘This argument has obvious difficulties. First, if notice cannot be given until final entry and this does not take place until after inwards entry has been granted and discharge has been commenced it is at the least unlikely that clause 34 was intended to produce the result contended for. To provide for a 24-hours notice of readiness to be given after discharge has already begun, in my view makes no sense at all. Secondly, the vessel, as a fact, is physically entered at the Customs House when Prior Entry is completed. Its name and particulars will have been entered in the register, it will have been given a rotation number and the customs will have published on the notice board the fact that Prior Entry or entry prior to arrival is complete. Thirdly, Prior Entry is an important matter for importers, who will then know that they can proceed under s. 46 of the 1962 Act and make arrangements for discharge. It is true that at that stage the vessel cannot lawfully discharge but what happens thereafter does not appear to me to constitute entry of the vessel at the Customs House. Subsequent steps lead not to that but to final admission of the manifest. Mr Hamilton submits that completion of Prior Entry does not amount to entry at Customs House because it does not convey to the charterers that the vessel can legally discharge. In my view that argument is misconceived. Entry at Customs House is to precede notice of readiness and it is notice of readiness which is intended to and does convey to the charterers that the vessel has been so entered, has obtained free pratique and is both physically and legally ready to discharge. It may be defective because the vessel has not been so entered or has not obtained free pratique or has not obtained an inwards order or because for some reason the vessel is not physically ready to discharge, but they are separate matters and do not in my view assist in the construction of the clause. Furthermore, although it was submitted that the Indian law was irrelevant to the construction of a charterparty governed by English law, it is in my view of great importance. If in Indian law a vessel is entered at the Customs House on completion of prior entry it must in my judgment follow that, at least prima facie such entry satisfies the requirements of clause 34. There is no binding authority which would compel me to reach a different conclusion from that of Hirst J. and the arbitrator and I accordingly conclude that the vessel was entered at the Customs House at the time notice of readiness was given.’’

219

Para. 86

C L AU S E S / B R E AC H E S R E R E A D I N E S S

He dealt with the four earlier High Court authorities in which the question whether prior entry was within the clause had been considered, very briefly, concluding: ‘‘Hirst J. considered all four cases at length and concluded that on the basis of the findings in the present case he should not follow that last two cases. I agree with his analysis of those cases and do not repeat it. It is common ground that in the present case the question of the law and practice at Bombay was considered in much greater detail than in any of the four earlier cases and the subject of much more detailed findings than in any of them. On the basis of those findings which I have summarised earlier in this judgment Hirst J. was in my judgment correct in declining to follow the two more recent cases.’’

The Court of Appeal refused leave to appeal to the House of Lords so it appears that the long-running saga of disputes concerning Indian ports and ‘‘entered at Custom House’’ is now at an end. Although each case turns on its own facts it now seems unlikely that charterers will be able to contend that laytime does not commence on the basis of a ‘‘prior entry’’. It is a pity that the court cases in 1983 were not more detailed in respect of back-up evidence and that one of them did not go through to the Court of Appeal for a ruling from that court; this would in all probability have put an end to disputes concerning the matter as from that time thus saving the arbitrations and further High Court cases which took place in the late Eighties. 87. Entry at the Custom House may pose problems in respect of ports other than Indian ports because of a restriction regarding when a vessel can be entered at the Custom House. The importance of entry at the Custom House for the purpose of commencement of laytime and adhering to a condition precedent is nowhere better illustrated than in The ‘‘Shackleford’’.24 The case is also important in respect of estoppel and the acceptance of a notice of readiness (to be considered later in Chapter 6). One of the important facts in the case was that a vessel could not be entered at the Custom House at the port in question until after she berthed (somewhat similar to The ‘‘Tielrode’’ arbitration and free pratique; see earlier paragraph 83). At the time of the fixture the discharge port of Constanza was congested and it was not unlikely that the port would be congested for the period of performance under the charter. The all-important charterparty provision stipulated: ‘‘Notification of the vessel’s readiness at port of discharge must be delivered at . . . vessel also having been entered at the Customs House and the laydays will then commence at 8 a.m. on the next business day, whether in berth or not, whether in port or not, whether in free pratique or not.’’

Before going further, it is worth remarking that the owners had managed to obtain a clause whereby the harshness of the Tielrode arbitration type decision would be avoided. On first appearance, it would seem that the owners were well covered for port congestion since it is not unusual to be able to enter a vessel at the Custom House while anchored in the roads. The vessel arrived at Constanza Roads on Friday, 15 October, at 08.26 and the notice of readiness was given immediately by cable by the master and this notice was 24. [1978] 1 Lloyd’s Rep. 191; [1978] 2 Lloyd’s Rep. 154 (C.A.).

220

S P E C I A L C L AU S E S

Para. 87

accepted by the receivers on the same day. The vessel was lying at the usual waiting anchorage at the port and was at the immediate and effective disposition of the charterers. Customs entry could not be obtained until the vessel berthed—in the ordinary way, customs entry at the port was a pure formality. The vessel moved to a berth to bunker on 26 November and obtained customs clearance at 18.20 on that day. The owners contended that laytime commenced at 08.00 on 16 October and the charterers militated for 08.00 on 27 November. Obviously, there was a considerable sum of money at stake. Leaving aside any arguments relating to estoppel in respect of the acceptance of the notice of readiness (see later, Chapter 6) so as to concentrate on the application of the relevant clause to the facts, the arbitrator (although he decided in favour of the owners on the estoppel argument) would, on the basis of the charterparty words ‘‘whether in berth or not, whether in port or not, whether in free pratique or not’’, and the impossibility of obtaining customs entry while the vessel was in the roads, have decided the commencement of laytime point in favour of the owners, partly on the basis that the words ‘‘whether in berth or not’’ were inconsistent with and overrode the reference to the customs entry. However, Mr Justice Donaldson (as he then was) took a different view and decided that customs entry was a condition precedent which had to be satisfied before the notice of readiness became good. On the ‘‘whether in berth or not’’ argument by the owners, he saw some force in it but not as much as might appear at first sight. He said that as it was a berth charter, the words ‘‘whether in berth or not’’ referred to discharging berths and showed that the notice of readiness could be given if customs entry was obtained at some other berth, e.g. a bunkering berth, as indeed occurred at Constanza. His lordship put the matter succinctly, as follows: ‘‘The clause was the brainchild of the charterers, who knew that customs entry could not be obtained at Constanza until after the vessel had berthed, albeit not necessarily at the discharging berth—a bunkering berth would do. There was a very real risk of delay by congestion at the port, and, in the event, the vessel waited for about six weeks for a discharging berth. Other things being equal, it was in the charterers’ interest to put this ‘misfortune risk’ upon the shipowners. The shipowners are part of the Rethymnis and Kulukundis organisation, who are large and experienced shipowners and managers. In 1964, BIMCO had warned shipowners about the dangers of accepting the stipulation ‘vessel also having been entered at the Custom House’, particularly in relation to Genoa. It was explained that this stipulation was dangerous to the interest of shipowners at ports where customs house entry could not be obtained until after entering port or berth. I do not know to what extent the presence of this unusual clause was reflected in the agreed rate of freight and do not inquire. Both parties were, or should have been, equally well informed as to the risks attendant upon carrying cargo to Constanza. Both parties must be deemed to have known precisely what the clause meant, even if I have had to give it considerable thought and even if, hereafter, my brethren in higher courts do not agree with me or with each other. Both parties must be deemed to have freely and voluntarily accepted the distribution of risk which results from the clause. No question of ‘merits’ therefore arises. It is simply a question of determining what the parties agreed and applying that agreement to the facts.’’

The Court of Appeal upheld the decision of Mr Justice Donaldson and, in the leading judgment, Sir David Cairns dealt with the matter perfunctorily: 221

Para. 87

C L AU S E S / B R E AC H E S R E R E A D I N E S S

‘‘For the owners is contended that the words ‘vessel also having been entered at the Custom House’ are overridden by the words ‘whether in berth or not, whether in free pratique or not’. I do not see how that could possibly be so. The latter words do not conflict with the earlier words, but make it clear that laydays are to commence at the time specified notwithstanding that certain events, which might in some circumstances delay the commencement of laytime, had not taken place. If at Constanza it was to be expected that all these events would have taken place before customs entry it merely means that the later part of the clause has no effect. . . . Like Mr Justice Donaldson, I quite fail to see how any reasonable construction of the clause could fail to give effect to the words relating to customs entry.’’

The ‘‘Shackleford’’ illustrated what was, at least in the late 1970s, something of a divide between arbitrators and judges regarding a condition precedent which it was impossible to satisfy at the time intended (under the terms of the charterparty) for the tendering of a notice of readiness. In fact, the obtaining of customs entry at Constanza turned out to be a trap for the owners within the notice of readiness provisions which, because of the wording, ‘‘whether in berth or not, whether in free pratique or not’’, militated strongly for laytime to run in a port congestion situation. Even though obtaining customs clearance may be a condition precedent a notice of readiness clause may be suitably worded to give the owners relief in certain circumstances. For example, in LMLN 648—15 September 2004, the additional clause 22 of the charterparty read: ‘‘If Owners fail . . . to obtain customs clearance . . . either within the 6 hours of notice of readiness originally tendered or when time would otherwise normally commence under this charter, then the original notice of readiness shall not be valid. Owners responsible only if vessel fails clearance, that is, customs inspectors fail vessel after an inspection . . . vessel is only then not considered cleared.’’

Notice of readiness was tendered at 12.24 on 19 March. The owners contended that laytime started six hours later. Customs clearance was only obtained at 22.40 on 21 March. The delay in obtaining that clearance was not due to any problems concerning the ship but was attributable (as inferred by the tribunal) to delay on the part of the authorities. The charterers argued that laytime only started to count at 22.45 on 21 March, when loading started. The owners contended that the last sentence of additional clause 22 meant that if on inspection the ship was passed the original notice was valid. It was held that the object of clause 22 was to provide an exception to the counting of laytime. That exception applied in certain specified circumstances. The words ‘‘Owners responsible only if vessel fails . . . ’’ had to be read in the light of that purpose. The tribunal had no hesitation in concluding that the owners’ approach was right, namely that what the clause meant, in its concluding sentence, was that the exception was only to apply if the vessel failed on inspection. Whilst the use of the words ‘‘Owners responsible’’ was not ideal, it was at least consistent to an extent with the opening words ‘‘If Owners fail’’, and the tribunal did not see how it could realistically be read so as to mean—as the charterers had argued—that the sentence in question only limited any liability the owners might otherwise have to charterers for costs and expenses that might result from the failure to obtain clearance, pratique or papers. Not only was no part of the clause concerned with such costs and expenses, but they would in any event be for the owners’ account and there was 222

S P E C I A L C L AU S E S

Para. 87

no warrant for suggesting—extraordinarily—that if the vessel were not to satisfy the necessary requirements in time, then any such expenses should suddenly fall to the charterers’ account but for the concluding sentence. Therefore, the tribunal would find for the owners. The strict adherence to a condition precedent by the courts in The ‘‘Shackleford’’25 has ensured that, by and large, arbitrators have themselves to take a strict approach. For example, in LMLN 266—13 January 1990 the vessel was chartered under the Asbatankvoy as amended to carry a cargo of crude oil from Africa to the U.S. for discharge into lighters. The charterparty provided that the vessel was to comply with all U.S. Coast Guard regulations and contained a warranty by the owner that at all necessary times the vessel would have on board all certificates required for service in the United States. The charterparty further provided that laytime should commence six hours after receipt of notice of readiness by charterers or when the first lighter arrived alongside, whichever occurred first. United States law required that a ‘‘certificate of compliance’’ had to be issued before foreign vessels could operate in navigable waters of the United States or could carry out the function of transferring oil. Such certificate was issued only after the vessel had been examined and found to be in compliance with the prescribed regulations. The vessel arrived at the lightering anchorage at 16.30 hours on 4 August. Despite the fact that the vessel had no certificate of compliance on board the owners gave a notice of readiness. The certificate of compliance was eventually issued at 16.00 on 5 August. There was a dispute about laytime. The owners said that laytime commenced at 22.30 on 4 August. The charterers said that laytime commenced at 11.00 on 6 August when the lighter made fast alongside. The charterers contended that because of the absence of a certificate of compliance on board the vessel at the time when the owners gave their notice of readiness at 16.30 on 4 August, that notice was premature and wholly ineffective. The owners were entitled to give a new notice of readiness at 16.00 on 5 August when the certificate came to hand. The owners said that the notice of readiness was validly given as there was no provision in the charterparty that the procurement of a valid certificate of compliance was a condition precedent to the giving of notice of readiness; that the certificate was secured before the arrival of the lighter so that no time was lost; that the vessel was ‘‘ready’’ both in a physical and a legal sense when the notice of readiness was tendered at 16.30 on 4 August. It was held that a legal and contractual requirement that the vessel should have on board all certificates without which she could not operate on the navigable waters of the United States or transfer oil could hardly be more clearly a condition precedent to the giving of a notice of readiness indicating her readiness to discharge. It was not sufficient that the vessel was physically ready. She had to be legally ready as well. Accordingly, the notice which the owners purported to give at 16.30 on 4 August 25. [1978] 1 Lloyd’s Rep. 191; [1978] 2 Lloyd’s Rep. 154 (C.A.).

223

Para. 87

C L AU S E S / B R E AC H E S R E R E A D I N E S S

was premature and wholly ineffective and a nullity. The charterers were entitled to be put in the same position as if the notice of readiness had been given at 16.00 on 5 August when the certificate was issued. Laytime for discharging therefore started to count from six hours afterwards, i.e. at 22.00 hours on 5 August. See also earlier paragraph 82. The arbitration also contained an estoppel point regarding the acceptance of a notice of readiness and it will be cited again later on this particular topic (Chapter 6). 88. Regarding the express wordings ‘‘vessel being in free pratique’’ and ‘‘having been entered at the custom house’’ (considered earlier in paragraphs 83 and 87) such are defined in Voylayrules 1993 as, ‘‘VESSEL BEING IN FREE PRATIQUE’’ and/or ‘‘HAVING BEEN ENTERED AT THE CUSTOM HOUSE’’ shall mean that the completion of these formalities shall not be a condition precedent to tendering notice of readiness, but any time lost by reason of delay in the vessel’s completion of either of these formalities shall not count as laytime or time on demurrage. The Baltic Code 2003 has similar wording but does say, to the effect, that the words may be a condition precedent if so expressed in the charterparty; it reads, ‘‘the completion of these formalities shall not be a condition precedent to tendering notice of readiness, unless the charterparty expressly requires their completion before notice is tendered. If it does not, any time lost by reason of delay on the part of the vessel in the completion of either of these formalities shall not count as laytime or time on demurrage’’. The rules and the code will only apply if they are specifically incorporated into the charterparty contract and it may be that charterers are not that keen to have such definitions in their contracts since they take away rights which they would otherwise have under the common law in respect of the application of the words in question.

BREACH OF CONTRACT/DAMAGES (INCLUDING DRAUGHT AND BILLS OF LADING AND FAULT OF OWNERS) 89. This book is mainly concerned with commencement of laytime and specific clauses bound up with readiness and the tendering of a notice of readiness. The clauses are part of the laytime code so that they do not usually come into the reckoning in respect of breach of contract/damages in the context of charterers claiming against shipowners for damages because a vessel is not ready to load/ discharge cargo. Clauses appertaining to laytime per se will not usually provide charterers with potential claims for damages unless the clauses are worded in such a way that non-compliance with them amounts to a breach of contract. In practice, there are very few laytime type clauses which have such wording and there is no need for them since charterers invariably have a remedy in damages for a breach of other and non-laytime clauses which, although they may relate to some of the requirements relating to the commencement of laytime (in particular, the readiness of cargo spaces and equipment) and so overlap in this respect, are 224

B R E AC H O F C O N T R AC T / DA M AG E S

Para. 90

designed to impose express obligations on shipowners in respect of their vessels and their equipment so that any breach gives rise to a potential claim for damages by charterers. In addition, charterers have rights under cancellation clauses which may also, in certain circumstances, allow a claim for damages in addition to the express right to cancel the contract. There are many examples of express clauses which give charterers remedies in damages and which relate to the readiness of the vessel and her equipment, such as ‘‘every way fitted to carry . . . ’’, ‘‘in a thoroughly efficient state’’, ‘‘being seaworthy and having all pipes pumps and heater coils in good working order . . .’’. If shipowners are in breach of these clauses then charterers are entitled to claim for loss/ damage flowing from any breach subject to arguments in respect of mitigation and remoteness of damage. Of course, laytime will not usually start under the laytime provisions if a vessel is in breach of one of these types of clauses but, even if it did, the charterers would be able to claw back any loss of time for breach which caused loss of time by way of having the laytime suspended. It is possible for the owners to be in breach of a clause as above regarding the vessel’s equipment but for laytime to run simply because the breach of contract is not causative of loss. For example, a vessel’s gear may be defective but shore gear is used, and was intended to be, for the loading/discharging of the cargo. In a breach situation the charterers have to show that any breach was causative of loss/damage; a completely different approach to that of a condition precedent which has to be satisfied before laytime commences. Non-laytime clauses which are relevant to the readiness of a vessel frequently bite regarding stand-by time for shore labour. It often happens that labourers are ordered up to start loading/discharging a vessel for the arrival time of a vessel in her intended berth. If the vessel is not ready to load/discharge at that time laytime will not commence but the charterers may have to look to one of the non-laytime clauses to see if they can show a breach of such so as to be entitled to claim, in damages, against the owners for the stand-by labour charges. 90. It is sometimes questioned as to whether a vessel is ready, for the purposes of tendering a notice of readiness, if the owners are exercising a lien on the cargo. In Gill & Dufus S.A. v. Rionda Futures Ltd.26 the dispute was between sellers and buyers of cargo and the second issue was whether a valid notice of readiness had been given or whether there was some failure by the owners in this respect. At the time the notice was tendered there were two reasons why the vessel would not in fact have discharged the cargo. First, the owners would not have discharged cargo until they had received security in respect of a general average incident. Second, the owners had been instructed not to discharge the vessel as a result of instructions passed to them by the shippers pursuant to instructions from the plaintiffs which emanated from the buyers, who had no intention of allowing discharge to take place until their sub-buyers had opened a letter of credit or paid for the goods. It was held that when notice of readiness was given, the vessel had to be both legally and physically ready to discharge the cargo. She had to be at the disposal of 26. [1994] 2 Lloyd’s Rep. 67.

225

Para. 90

C L AU S E S / B R E AC H E S R E R E A D I N E S S

the charterers. The only respect in which it had been suggested that the Opal Islands was not at the disposal of the charterers was that it was said that her owners were asserting a lien for general average. Although there was no case which was direct authority for the proposition advanced by the plaintiffs, it nevertheless received considerable support from the decision of Mr Justice Evans in The ‘‘Boral Gas’’ (see next paragraph 91 for details).27 Provided the shipowners’ exercise of their lien for general average was both lawful and reasonable (which it was), its exercise did not prevent the shipowners from tendering a valid notice of readiness. The test was not whether the vessel was willing to discharge, because a vessel might be both physically and legally ready and at the disposal of the charterers without being willing to discharge the cargo. The defendants had submitted that while that might be the position as between the shipowners and the charterers, it was not the position as between the plaintiffs as sellers and the buyers. They argued that the buyers came under no obligation with regard to the discharge of the vessel until after tender of notice of readiness, the vessel being at the time of such tender ready and willing to discharge her cargo and at the disposition of the buyers for that purpose and until such time as they became obliged to take up the shipping documents. In other words, time could not begin to run until the vessel was at the disposal of the buyers. The correctness of the defendants’ submission depended upon the true construction of the contract. Despite the defendants’ arguments to the contrary, the true construction was that the master had to give a notice of readiness which complied with the detailed provisions of the contract and was valid from the shipowners’ point of view, and that such a notice was valid under the contract whether or not documents were tendered before or after the vessel arrived. 91. Although unusual it is possible that the readiness of a vessel is affected by the breach of an express term of the contract by charterers so that they are liable in damages to the owners and this may affect the commencement of laytime. In The ‘‘Boral Gas’’27 the vessel was chartered on the Asbatankvoy form for eight consecutive voyages for the carriage of a cargo of anhydrous ammonia. The charterparty provided: ‘‘E. Cargo, 8 consecutive voyages . . . Cargo quantity 3000 mt fully refrigerated anhydrous ammonia each voyage 5% more or less owners option. M.3(a) The ship shall be clean and ready in all respects before tendering notice of readiness. The ship shall be refrigerated and the cargo tanks to be pre-cooled to minus 33 degrees C . . . Ammonia cargo will be pumped into ship at minus 33 degrees C or below temperature. No venting and draining of ammonia during loading/unloading operations. In other words vessel should be in every way fit to load and discharge cargo at minus 33 degrees C . . . and this temperature to be maintained throughout the voyage . . . up to completion of unloading operations . . . Notice of Readiness should be tendered when the vessel is so ready, except the period dusk to dawn, and laytime will count after six hours of such Notice of Readiness . . . M.4 Vessel to go deep sea for cooling down if necessary, and time consumed for precooling not to count as laytime. Shippers to supply ammonia for purging and pre-cooling operations 27. [1988] 1 Lloyd’s Rep. 342.

226

B R E AC H O F C O N T R AC T / DA M AG E S

Para. 91

at the loading port and such quantity to be included in the bill of lading. But any quantity discharged short of the bill of lading figure shall be paid by owners to charterers at the C and F price. M.8(c) Vessel must maintain about minus 33 degrees Centigrade temperature to facilitate loading/unloading and should be equipped with adequate discharge pumps and other facilities . . . ’’

The arbitrators found that the standard loading/cooling technique was for the vessel first to load a small charge of cargo, say 30 tons, and then over the course of several hours, by internal circulation of the product under pressure, bring down the temperature of the cargo tanks appropriately for the receipt of refrigerated liquid gas. The operation was known as ‘‘pre-cooling’’ and the small charge of cargo was referred to as the ‘‘pre-coolant’’. The vessel was ordered to the first loading port, Umm Said (Qatar), and arrived there on 27 July 1981. No berth was available and the vessel remained at anchor until 7 August when she berthed in order to load 30 tonnes of ammonia for pre-cooling purposes. After this was loaded she returned to the anchorage. She reberthed and gave notice of readiness to load on 10 August. The vessel therefore was kept waiting for the pre-coolant from 28 July until 7 August. The pre-coolant was provided by the Qatar Fertiliser Company (‘‘QFC’’) who were the shippers of the cargo subsequently loaded. One issue before the High Court was whether the charterers were in breach of the charterparty by reason of the failure of QFC or anyone else to supply the required charge of ammonia. The majority of the arbitrators held that they were. The dissenting arbitrator considered that the owners were obliged to make the vessel ready for loading, that it was up to them to obtain the necessary ‘‘foot’’ (or charge) from the shippers, if there was none already on board, and that the amount of the charge was agreed to be added to the bill of lading weight as ‘‘a facility granted by charterers to the owners, so that the ship would not have to pump out the coolant back to shore and return it to the shippers’’. It was held by Mr Justice Evans that clause M.4 envisaged, if it did not require, that ‘‘shippers’’ would provide the ammonia; the shippers were identified in the charter as the factors of the charterers from whom the vessel was to receive the cargo; it was assumed that the charterers would make the appropriate arrangements for the supply of the ammonia and QFC became the shippers by virtue of whatever contractual arrangements were made between it and the charterers; the charterers undertook to procure delivery by the shippers of the quantity of ammonia required and the arbitrators correctly inferred that the charterers’ undertaking was that the shippers would do this within a reasonable time after receiving notice of the vessel’s requirements; the shippers’ failure to provide the ammonia within such time constituted a breach of the charter by the charterers. In respect of the damages arising from the charterers’ breach of contract his lordship found the arbitrators’ reasoning confusing and remitted the award to them for further consideration. However, he did say regarding the measure of damages: ‘‘The measure undoubtedly is the amount of loss suffered by the shipowners through the unlawful detention of the ship. At the relevant time the laytime had neither begun nor

227

Para. 91

C L AU S E S / B R E AC H E S R E R E A D I N E S S

expired, and so no claim for demurrage can arise. The agreed demurrage figure nevertheless may be regarded as the appropriate amount to award as unliquidated damages—this is a question of fact for the arbitrators to consider and decide. They have in fact awarded eight days damages for detention at the demurrage rate.’’

It is not known how the arbitrators eventually assessed the damages but it is submitted that one way, and perhaps the fairest, would have been to have run a laytime computation after the time of the vessel’s arrival (allowed laytime was 72 running hours) in order to arrive at the loss to the owners arising from the charterers’ breach of contract, particularly since it appeared that the daily damages rate equated with the demurrage rate. 92. Special clauses relating to draught give rise to disputes which affect the commencement of laytime, either indirectly under damages or directly because of the express words in the draught clause. It is common for owners to undertake in the charterparty that a vessel’s maximum draught on arrival at the discharge port is not to exceed a certain figure. If the vessel arrives with a draught in excess of this then the owners are in breach of contract and are liable for any loss/damage flowing from this breach of contract subject, of course, to arguments relating to mitigation and remoteness of damage. Since it is a breach of damages situation the charterers have to show that the breach is causative of loss and, in many circumstances, there will be no loss in respect of delay for the simple reason that the overdraught does not prevent vessel moving into the discharging area. The laytime will commence in accordance with the laytime provision and the breach of contract will be non-causative of delay so as not to affect the commencement and the running of laytime. If the charterers can show that the overdraught is causative of delay then, naturally, the laytime calculation will be affected and it may be that laytime will not even commence or, if it has commenced, will have to be suspended. A special clause relating to draught may have something to say regarding laytime and prevent its commencement even if the excess draught is not causative of delay. An interesting arbitration which concerned overdraught and special draught clauses was that of The ‘‘Winston’’.28 The relevant charterparty provisions were: ‘‘ . . . proceed to . . . 1/2 safe berths Port Said. Owners undertake that vessel’s maximum draught on arrival at discharge port not to exceed 32 feet salt water without any deduction . . . Clause 22. Master to declare by cable to Receivers and Harbour Master time of dropping anchor at discharging port and at the same time tender Notice of Readiness to Receivers or their Agents by cable or otherwise and laytime will then commence to count 24 hours after vessel’s dropping anchor at the outer roads, outer port anchorage, whether vessel in berth or not, whether vessel in port or not, in which case customs clearance not required, whether vessel in free pratique or not. Clause 23. Any alleged excess draught of the vessel must be declared by the Receivers on arrival and the Notice of Readiness must be rejected at that time otherwise the Notice of Readiness remains fully valid and counting of time will continue to run without interruption.’’

28. 1985.

228

B R E AC H O F C O N T R AC T / DA M AG E S

Para. 92

The vessel arrived off Port Said on 23 June and immediately sent a notice of readiness by cable; she was lying at the outer anchorage and could not berth because of port congestion. No inspection of the vessel was made by the charterers and no draught readings were taken. It was not until the receivers’ surveyor made a draught survey on 11 July that it was discovered that the draught was in excess of 32 feet. The two principal questions for the consideration of the tribunal were: (1) What was the actual draught of the vessel at the time she arrived off Port Said? (2) If the draught in (1) above was more than that stipulated in the charterparty what effect, if any, did this have on the laytime/demurrage calculation? The tribunal found that the vessel was drawing 32′ 112″ salt water when she arrived off Port Said so that, obviously, there was a breach of contract by the owners. However, the tribunal also decided that the vessel could have brought herself on to an even keel of 32′ at any time by pumping out some of the fresh water which was in the vessel’s tanks. Turning to the effects of the owners’ breach of contract the tribunal was of the view that clause 23 of the charterparty was tailor-made for the circumstances of overdraught on the vessel’s arrival. It did not affect the commencement of laytime since it was not a separate clause which had the effect of making the draught limitation a condition precedent to the tendering of a notice of readiness. Clause 22 of the charterparty spelt out how the notice of readiness should be tendered and made no reference to the notice of readiness including details of the vessel’s draught. The notice of readiness which was tendered on 23 June was a valid notice; it did not, as it did not have to, include details of the vessel’s draught. Information regarding the vessel’s arrival draught had been cabled to relevant persons before the vessel arrived off Port Said. The tribunal decided in favour of the owners on the basis that any initial breach of contract did not affect the commencement of laytime because the notice of readiness provision clause did not contain any details regarding draught and that the tailor-made clause 23 (which dealt with draught) had no real relevance since breach of the clause was not causative of any loss to the charterers. Although the tribunal did not mention preliminaries and The ‘‘Tres Flores’’29 it could have done so on the basis that the vessel could always have rapidly achieved an even keel of 32′ by pumping out fresh water from the vessel’s tanks. This could always have been done as the vessel was moving into berth so that it could be categorised as a preliminary which did not affect the commencement of laytime. Regarding the special clause 23 the tribunal decided against the charterers because the receivers did not activate the clause when the vessel arrived off Port Said. In fact, the receivers made no complaint about the vessel’s draught until after a draught survey on 11 July (almost three weeks after the vessel arrived off the port). The tribunal decided that the receivers’ failure to utilise clause 23 left the 23 June notice of readiness valid so as to trigger off laytime on 24 June. 29. [1973] 2 Lloyd’s Rep. 247.

229

Para. 92

C L AU S E S / B R E AC H E S R E R E A D I N E S S

The tribunal also emphasised that the draught of the vessel could easily have been read at the outer anchorage at or soon after the vessel’s arrival on 23 June—it only necessitated the sending of a boat to the anchorage so that any remedy regarding overdraught and the commencement of laytime always lay in the hands of the receivers/charterers. If the receivers had checked the draught when the vessel arrived off Port Said then they could have rejected the notice of readiness when it was tendered, thus leaving the owners to see that the vessel’s draught was adjusted so as to bring it to 32′ salt water and then to tender another notice of readiness. 93. The ‘‘Pan Journey’’30 arbitration was also concerned with draught; further, it raised interesting points of causation, de minimis, and ‘‘knock-on’’ effects. The charterparty contained an express warranty: ‘‘Owners undertake vessel’s arrival draught will not exceed 37′ 5″ salt water’’. The vessel arrived at the Aqaba anchorage on 10 January 1985 and tendered a notice of readiness; she then waited for a discharging berth. When the pilot boarded her on 24 January to berth her at her designated berth, the No. 1 berth, he refused to take her in on the grounds that she was over draught; at that time the midship’s draught was 37′ 7.5″. On 8 February the vessel began lightering at berth No. 3 in order to reduce her draught; on that day her draught was reduced to 37′ 6″ and was further reduced to about 36′ 1″ on 10 February when she moved back to the anchorage. As a result of priority being given to vessels with government cargoes, she was not able to berth until 2 March. Again, the vessel had to move off the berth to make way for another vessel with government cargo. Eventually, on 27 March, she completed discharge of cargo. The owners calculated that laytime and demurrage ran without interruption (except for days excepted under the terms of the charterparty) from 10 January to 27 March 1985. They calculated that demurrage started accruing on 16 February. Their calculation of 38.5903 days at a daily demurrage rate of US$5,500 less 2.5 per cent commission gave them a net demurrage entitlement of US$206,940.48. The charterers, however, argued that the vessel’s inability to berth on 24 January was due to a breach of the charterparty by the owners. Allowing for the interruption that would have occurred as a result of priority being given at the No. 1 berth to government cargo on the Seabird, they calculated that discharge would have completed on 19 February. The vessel would therefore have been on demurrage for only 2.19 days. The tribunal decided that there was a breach of the charterparty absolute undertaking in respect of draught and that the owners could not take any benefit under the de minimis principle. Without deciding what difference would have been de minimis, it seemed that an excess draught of 2.5″ could not be so described, particularly in the light of the importance of an undertaking regarding a vessel’s maximum arrival draught. The tribunal also decided that the vessel’s draught warranty was not a condition for the tendering of a valid notice of readiness, it being an independent warranty, a breach of which allowed the charterers to claim damages in respect of their loss. Laytime was triggered off by the 10 January notice of readiness and continued to 30. 1986.

230

B R E AC H O F C O N T R AC T / DA M AG E S

Para. 94

run until 24 January since the breach of contract was not causative of any delay to the vessel as she had to wait for a berth, in any event, during the 10–24 January period. Regarding the period after 24 January it was decided that the owners remained in breach of contract concerning the draught until 8 February but that complications arose, in respect of assessing damages, because vessels carrying government cargo took priority. The tribunal concluded, on the evidence, that even if the vessel had been able to berth on 24 January she would have had to move off her berth on 31 January because of a priority cargo and that there would have then been a pattern of delays thereafter because of priority cargoes so that the only loss of time to the charterers, arising out of the breach of contract in respect of draught, was the 24–31 January period. The result was a reduction in the time on demurrage by eight days. 94. While the arbitrations referred to in paragraphs 92 and 93 concerned breaches of contract by the owners in respect of draught the later arbitration, LMLN 510—27 May 1999, related to a breach of contract by the charterers. Clause 11 of Part 1 of the charter provided that the charterers guaranteed that a minimum of 9.5 metres salt water would always be available. However, at the port chosen by the charterers no more than 8.15 metres was available. That meant that if the vessel was to discharge at the nominated port some of the cargo would first have to be discharged into lighters. In the event the parties reached agreement that the lightening period should be dealt with on the basis of discharge at a rate of 1,500 mt per weather working day, Sundays and holidays included. The lightening operation was seriously delayed, initially due to non-availability of barges, and subsequently because of bad weather. The cargo to be lightened was some 4,499.97 mt. At the rate agreed that meant that the time allowed was some 3 weather working days. As provided for in the charter, the remainder of the cargo was to be discharged on the basis of customary quick despatch. The vessel arrived off the discharge port at 05.00 on 27 September and tendered notice of readiness. Time commenced at 14.00 that day. On that basis, the time allowed would have expired at 14.00 on 30 September. No cargo had in fact been discharged by the time laytime expired due to non-availability of barges. Nor had any time been lost. It was common ground that it was to be implied in the agreement that 3 weather working days would be allowed for lightening and that if the operation was not completed in that time the owners would be entitled to be compensated for the further detention of the vessel at the rate of $10,000 per day. There was a dispute as to the method of calculation. It was held that the owners had run time to 11.00 on 7 October, which was when the vessel commenced discharge of the balance of the cargo after having berthed alongside. However, in the tribunal’s view, detention consequent on lightening should have ceased at 13.00 on 6 October, when the last lightening barge left the vessel. On that basis, the vessel was detained from 14.00 on 30 September until 13.00 on 6 October, a total of 5 days 23 hours and not the longer period claimed by the owners. 231

Para. 95

C L AU S E S / B R E AC H E S R E R E A D I N E S S

95. Problems can arise which impact on the commencement of laytime regarding the non-production of bills of lading bearing in mind that a vessel’s master may refuse to start discharging cargo until an original bill of lading is presented, alternatively until the charterers or the receivers of the cargo produce a letter of indemnity which is acceptable to the owners of the vessel. Such a letter of indemnity is, strictly speaking, illegal so that owners do not have to accept such unless, of cause, the parties have agreed to the contrary. Having said that, from a practical point of view, there are some ports where the authorities do not allow a vessel to refuse to discharge cargo once it has berthed. However, in general, commencement of laytime will not be affected where a master refuses to give a delivery of cargo without the production of a bill of lading. For example, in LMLN 587—16 May 2002 there was a delay between the time of the ship’s arrival at her discharging port at 01.25 hours on 21 November, and her berthing at 21.30 on 24 November. Discharging started the next day. The charterers said that the owners were responsible for the delay. It was held, that the tribunal could not accept the charterers’ case that the delay had to be laid at the owners’ door. The fact was that bills of lading were not available when the ship arrived, and it was their absence, coupled with the absence of a letter of indemnity, that led to the ship not being berthed and discharged earlier. As between owners and charterers, the provision or non-provision of cargo documents permitting discharge was plainly a matter for charterers. So they had to bear the consequences of any delay arising from late production of such documents. What had caused the delay in the commencement of discharging was the absence of bills and of a letter of indemnity. To the extent that the charterers sought to say that it was for the owners to demand a letter of indemnity, the tribunal could not agree less. It was true that under clause 29 of the charter the owners were obliged to accept a letter in the form there specified, but it was obviously for the charterers to procure and offer one. That they had totally failed to do. The charterers had suggested that production of a bill of lading was relevant only to discharge, not to berthing. In itself that argument might be correct. But it did not help in the present case, because even if the ship had been berthed earlier she would not have started discharging materially earlier than she in fact did. Further, the owners could not be blamed for any delay in berthing for another reason, namely that the agents, who were charterers’ agents, gave express instructions that the ship was not to berth pending the arrival of the documents. In those circumstances the owners’ claim had to succeed. Depending on the circumstances, decisions can go either way, depending on the charterparty terms and also the conduct of the parties. While, in the main, decisions by London arbitrators have gone in favour of owners, LMLN 619—7 August 2003 illustrates where the owners of the vessels did not act reasonably in the surrounding circumstances. The vessel arrived outside Swinoujscie and dropped anchor at 14.30 on Tuesday 29 May. After delaying for just over one day because the original bills of lading were unavailable the owners agreed to allow the vessel to enter the port. The pilot boarded at 22.45 on 30 May and she was all fast alongside in Swinoujscie at 02.00 on 31 May. The master tendered two notices of readiness, the first at 14.30 on 29 May, and the second at 02.00 on 31 May. The charterers 232

B R E AC H O F C O N T R AC T / DA M AG E S

Para. 96

contended that the first notice was invalid because at that time the berth was free and available for the vessel. In consequence, laytime only commenced following the tender of the second notice of readiness. It was held that the parties had agreed a berth charter under the provisions of which notice of readiness to discharge had to be tendered from the first discharging berth unless Swinoujscie was affected by congestion (Rider Clause 28) when the master was permitted to tender notice once the vessel had arrived within the commercial area of the port. It was plain from the evidence that the vessel was delayed by the owners in berthing on arrival at Swinoujscie because the original bills of lading were unavailable. They were eventually presented at 12.00 on 31 May. The owners accepted that the first notice was invalid and that laytime did not commence until 08.00 on 1 June. They claimed compensation for time lost by the vessel waiting outside Swinoujscie between her arrival at the anchorage and her eventual berthing, less the shifting time, on the basis that they were entitled to keep the vessel outside the port in the absence of the original bills of lading as the only way within which to keep control of the cargo. However, the evidence indicated that the arrival of the bills of lading was always imminent, and that the owners had received assurances from shoreside to that effect. The owners had other choices than to disregard those assurances. They might have berthed at Swinoujscie on arrival and commenced discharge in reliance on the agents’ assurance that arrival of the bills was imminent; or berthed and kept the hatch covers closed until the bills had arrived; or berthed and discharged against a letter of indemnity. In each case, a valid notice of readiness could have been tendered and laytime would have commenced as of 08.00 on 31 May. Late arrival of original bills of lading was endemic in international trade. That was due in most cases to routine banking procedures and banking delays and was not the fault of shippers, charterers, traders or receivers. It was especially likely to be the case where, as in the present case, the original discharge port intention was altered during the voyage. There was no need to keep the vessel outside Swinoujscie and there was no reason why the charterers should be expected to compensate the owners for the choice exercised by the owners; there was no real risk that the owners would have been forced to discharge cargo in Poland against their will. Accordingly, the owners’ claim for damages for detention failed. 96. An interesting arbitration relating to the production of bills of lading and the commencement of laytime was that reported in LMLN 628—12 December 2003. The vessel was chartered for a voyage with a cargo of sunflower seeds from Gladstone to Bin Qasim. It was apparent to the charterers that the bills of lading would not be available at Bin Qasim when the vessel arrived there and the charterers accordingly tried to agree terms with the owners for letters of indemnity for discharge without presentation of original bills of lading before the vessel arrived at Bin Qasim. Since there was no provision in the charterparty by which the owners agreed to deliver the cargo without production of bills of lading against letters of indemnity they took the view that they were not under any obligation to deliver the cargo at Bin Qasim against a letter of indemnity from the charterers and that any agreement to 233

Para. 96

C L AU S E S / B R E AC H E S R E R E A D I N E S S

do so would be a concession on their part. The charterers, on the other hand, argued that they were not under any obligation to provide the owners with a letter of indemnity to procure discharge of the cargo. The vessel arrived at Bin Qasim by 4 March and there was much backing and filling regarding the wording of an indemnity with such being finally signed and presented to the owners on the evening of 11 March. In addition, the bills of lading were also released by the owners’ agents in Sydney on 12 March. However, by that time it was too late for arrangements to be made to discharge cargo over the weekend of 13/14 March and accordingly the vessel only berthed on the afternoon of 15 March. Discharge commenced at 19.25 that day and was completed at 17.35 on 17 March. The owners calculated laytime on the basis that time began to count at 15.00 on 5 March and expired at 18.36 on 10 March, the vessel thereafter being on demurrage for 6 days 22 hours 59 minutes. That produced a demurrage claim of US$48,703.47. The charterers contended that the notice of readiness only became valid on the release of the bills of lading on 12 March, and that time thereafter commenced at 09.00 on 15 March. On that basis, despatch of US$2,773.26 was earned. It was held that, whilst the charterers were correct in saying that they were not under any obligation to provide the owners with a letter of indemnity to procure discharge of the cargo, they were not entitled to expect the owners to discharge or deliver the cargo unless the original bills of lading were surrendered or some agreement reached regarding the terms of a letter of indemnity. Any idea the charterers might have had that the owners were obligated to agree the terms of any letter of indemnity offered to them was misconceived. The charterers had to bear the responsibility for the delay which arose from the late conclusion of their sale arrangements and errors in the terms of the letters of indemnity sent to the owners. However, the owners also had to bear some responsibility for the delay that took place in resolving the matter, particularly when they were seeking to claim demurrage for the full period of the delay. The owners’ actions had prolonged the delays that arose following the charterers’ failure to conclude their sale arrangements promptly after the vessel sailed from Gladstone. To that extent the tribunal found that the owners only had themselves to blame for at least part of the delay and could not therefore expect to recover the demurrage claimed in full. Whilst it was difficult to quantify precisely the extent of that additional delay the tribunal considered that it was appropriate to reduce the owners’ demurrage claim by two days, on the basis that the vessel might otherwise have commenced and completed discharge operations that much earlier than she eventually did. Accordingly, the owners’ discharge port demurrage claim would be reduced to US$34,703.47. 97. Previous editions of this book have not considered fault of the shipowner (as opposed to a breach situation) in the context of an owner using the vessel for his own purposes (e.g. bunkering, repairs) when the vessel arrives and is waiting to load or to discharge cargo. Usually, the subject has more relevance to laytime after it has commenced running but it is possible that fault, taken on the basis of a so-called 234

B R E AC H O F C O N T R AC T / DA M AG E S

Para. 97

‘‘wider principle’’, prevents the commencement of laytime, at least in practical terms. Take for an example, a vessel arriving off a loading port and being advised to wait for a berth; if during that period she proceeds to a bunkering berth to take on bunkers can the charterers claim that laytime cannot commence running during that period? The case of The ‘‘Stolt Spur’’31 had a number of comments to make regarding an owner using what might be considered as idle time for his vessel to perform other tasks. The ‘‘Stolt Spur’’ was a parcel tanker which arrived at the discharge port of Mumbai but no berth was likely to be available for 15 days for the first charterers’ parcel of cargo. The owners sent the vessel to discharge another two parcels of cargo for different charterers as well as performing some tank cleaning at sea, all within 15 days. In the event the owners claimed laytime and demurrage from the first charterer for all the waiting time. The claim was disallowed by the arbitrators on the basis that when the vessel was discharging the other parcels of cargo and tank cleaning she was not available to the first charterer so that laytime should not count. On appeal, Mr Justice Smith upheld the decision of the arbitrators. In so doing he canvassed earlier decisions such as Ropner v. Cleeves,32 The ‘‘Fontevivo’’,33 and The ‘‘Lefthero’’.34 At issue was the ‘‘wider principle’’ referred to by Mr Justice Parker in The ‘‘Union Amsterdam’’,35 put by Mr Justice Smith as follows: ‘‘It seems to me that charterers, if they are to succeed on this issue, must rely upon the ‘wider principle’ referred to by Mr Justice Parker in The ‘Union Amsterdam’ and which formed the basis of his third reason for rejecting the claim for demurrage in that case. That principle was the basis of the Court of Appeal’s judgment in Re Ropner Shipping Co. Ltd.36 There, charterers were not liable for demurrage where the shipowners removed the ship to take on bunkers, for reasons unconnected with the charter in question, and there was no finding by the arbitrator that the charterers would not have been able to load, even if the ship had been there.’’

Mr Justice Smith went on to say: ‘‘Mr Justice Evans in The ‘Lefthero’ acknowledged that the ‘wider principle’ reflects a qualified, and not an absolute, obligation upon the owners. He also acknowledged that it often does not find expression in the authorities. However, it seems to me that there are first instance judgments other than The ‘Lefthero’ in which it is recognized. These cases seem to me to support the view of Mr Justice Evans that the obligation of the charterers to pay demurrage depends upon the owners fulfilling a qualified obligation to have the vessel ready and able to give discharge in accordance with the contract.’’

and he concluded: ‘‘Drawing together these authorities, I conclude that the ‘wider principle’ recognized by Mr Justice Evans in The ‘Lefthero’ is reflected in the judgments of . . . It might be that it is properly to be regarded as a kind of ‘fault’ on the part of the owners, which by its very nature prevents cargo operations. It might be regarded as a separate principle from that whereby

31. [2002] 32. (1927) 33. [1975] 34. [1992] 35. [1992] 36. (1927)

1 Lloyd’s Rep. 786. Ll.L.Rep. 317. 1 Lloyd’s Rep. 339. 2 Lloyd’s Rep. 109. 2 Lloyd’s Rep. 432. Ll.L.Rep. 317.

235

Para. 97

C L AU S E S / B R E AC H E S R E R E A D I N E S S

fault prevents laytime or demurrage from running. Unless the principle in Budgett v. Binnington requires that the fault for which the owners are responsible be the only cause, or the only effective cause, of the cargo operations not progressing, it does not seem to me to matter which of these views is preferred. I consider that if a vessel is unavailable for cargo operations it is natural to regard that in itself as preventing the loading or discharge of the vessel. It is a cause of any delay in cargo operations. This, it seems to me, is why the ‘wider principle’ in no way conflicts with such authorities as . . . If a vessel is not available for the charterers’ cargo operations but is being used by the owners for their own purposes, there is no reason that they should pay compensation. She is not being detained by the charterers.’’

The above decision goes against the commercial grain held by many in the shipping world and also the views of some commercial lawyers. After all, the unavailability of the intended berth was the only reason discharge of cargo was delayed and there was no real prejudice to the charterers of the first parcel by the owner’s actions in discharging other parcels of cargo first and carrying out some tank cleaning. Their reasoning is that, in addition to commercial commonsense, some of the earlier court decisions give support to the premise that time does not count if, when the charterers are denied the use of the vessel, they intended to use the vessel. Unfortunately, Mr Justice Smith refused the owners leave to appeal his decision so there is no question of the Court of Appeal deciding the matter for the time being. In the meantime, owners of vessels will have to live with the decision and, on the basis of its reasoning, it would appear that the question posed at the beginning at this paragraph has to be answered in the affirmative so that charterers are entitled to contend that laytime does not commence running in the bunkering circumstances which were cited therein. 98. When considering laytime per se in the context of breach of contract/damages, the implied term of reasonable dispatch/co-operation can have relevance to the readiness of a vessel although its use appears to be of limited application, probably because of the burden of proof which owners have to satisfy before they can avail themselves of it. The principle has already been discussed above at paragraph 56 et seq., where it was shown that the implied term can be of use to owners of vessels in certain circumstances. Regarding the readiness of a vessel, the principle may be relevant in respect of cargo spaces and documentation. For example, if charterers delay in the inspection of a vessel (see in particular paragraph 57) they may be in breach of their implied obligation if they have acted unreasonably, as they may also be in breach of their obligation regarding documentation if they delay in fulfilling their obligations, see The ‘‘Atlantic Sunbeam’’.37 There is no point in repeating what has been detailed earlier but, for the sake of completeness, paragraph 56 et seq. are adopted here in extenso.

37. [1973] 1 Lloyd’s Rep. 482; above, paragraph 56.

236

CHAPTER SIX

NOTICE OF READINESS INCLUDING RELEVANT SPECIAL CLAUSES AND ACCEPTANCE OF NOTICE OF READINESS

NOTICE OF READINESS— COMMON LAW 99. Leaving aside for the moment any particular clauses agreed between the parties regarding a notice of readiness, in order to consider the position solely under English common law, a notice of readiness only has to be given at the loading port. The requirement to give a notice of readiness at the loading port falls within the ambit of the common law rule that where the acts of one party are not within the knowledge of the other then the obligations of the other, which depend upon the knowledge of these acts, do not commence until that other has, or should have, that knowledge. In Vyse v. Wakefield1 (failure to tell the assured by the person effecting the insurance for the assured that an insurance policy would be null and void if the assured went outside Europe) it was put by Lord Abinger, Chief Baron: ‘‘ . . . where a party stipulates to do a certain thing in a certain specific event which may become known to him, or with which he can make himself acquainted, he is not entitled to any notice, unless he stipulates for it; but when it is to do a thing which lies within the peculiar knowledge of the opposite party, then notice ought to be given him.’’

The requirement is eminently sensible and practical so that the charterer is made aware of the readiness of the vessel at the loading port and can then work the vessel as he sees fit. Under the common law there is no requirement for any further notice of readiness to be given either at other loading ports or at the discharging port(s). This also makes sense since, once the vessel has tendered for loading, the charterers control the vessel to a large extent and are in a position to follow the progress of the vessel through her voyage until the completion of her discharge of cargo. In practice, charterparties invariably contain express provisions regarding a notice of readiness at ports other than the first loading port but that is another matter—such provisions will be considered later. At common law, a notice of readiness can be given either orally or in writing. In practice it is sensible to put it in writing from a proof point of view in case argument develops as to when a notice of readiness was given: it may be far more difficult to prove that an oral notice of readiness was given at a particular time compared to the passing over of a written notice of readiness.

1. (1840) 6 M. & W. 442.

237

Para. 99

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

The notice of readiness should be given to the charterers or their agents (shippers or receivers may be agents for this purpose) or to any other person directed by the charterers. Charterparty Laytime Provisions 1980 and Voylayrules 1993 (both only applicable if expressly incorporated into the charterparty) state that notice of readiness (NOR) shall mean the notice to the charterer, shipper, receiver or other person as required by the charterparty that the vessel has arrived at the port or berth, as the case may be, and is ready to load or discharge. Baltic Code 2003 (also only applicable if expressly incorporated) states the same but with the addition, (alternatively: the notice may be specified to relate to the vessel arriving at/off the port or berth). The alternative definition is one which may be more of a notice of arrival than a notice of readiness, strictly speaking. There can be occasions when an owner wishes to differentiate between a notice of arrival and a notice of readiness where the owner intends to make a claim against a charterer for damages for detention. This arose in LMLN 566—23 July 2001 (already referred to in Chapter 1, paragraph 21, in respect of port or berth charterparty). The vessel arrived at Novorossisk to discharge at 17.30 hours on 21 March. The relevant entry in the statement of facts recorded that original bills of lading were unavailable to commence/complete cargo inward formalities, without which the vessel was unable to berth and discharge. As a result, the master tendered a notice of arrival and the vessel anchored to wait inward clearance. The notice of arrival said that it ‘‘should not be taken as purporting laytime to commence by any concerned party and any time waiting for receivers to present original bills of lading as per port regulations complete cargo documentation will count as detention time.’’ This was done in order to enable the owners to have immediate access to detention money at the rate of US$6,000 per day as provided by Rider clause 47. A week later, on 28 March, the receivers presented the original bill of lading to the forwarders, who completed the cargo paperwork by 14.00 hours on 1 April, at which time the master tendered a notice of readiness. A berth became available on 4 April and the vessel shifted from her anchorage at 17.06 hours and tied up all fast alongside the berth at 19.12 hours. The owners contended that the master had given notice to the agents and charterers of the vessel’s arrival at Novorossisk, that the notice of arrival was ineffective to start the running of laytime as the vessel was not an arrived ship as no berth had been nominated by the charterers, and the vessel could not berth due to the lack of bills of lading required to complete the cargo documentation (which was required by the port authorities to allow the vessel to enter the port and to discharge her cargo). It was the owners’ view that the charterers’ failure to ensure that the original bills of lading were sent to the receivers and/or their failure to ensure that the cargo was customs cleared and to make requisite payments and/or to nominate a berth and/or to proceed to a berth, all constituted a breach and/or breaches by the charterers of their obligations under the charterparty. In particular, the owners contended that the charterers were in breach of their obligations to act with reasonable diligence to enable the vessel to become an arrived ship and to berth, also that they used the vessel as a warehouse until they and the receivers had completed their arrangements. The owners claimed damages for detention for the period between the vessel’s arrival at Novorossisk at 17.30 hours on 21 March until 14.00 hours on 1 April. 238

N OT I C E O F R E A D I N E S S — C O M M O N L AW

Para. 99

It was decided that the position was that in order to claim that the vessel was detained the owners had intentionally instructed the master not to tender notice of readiness, but to tender instead a notice of arrival. The notice specifically said that it ‘‘should not be taken as purporting laytime to commence by any concerned party’’. The charterers had relied on that comment, and had argued that they were entitled to take the notice of arrival at its face value, and not count laytime until after a valid notice of readiness had been properly served, relying on the owners’ own evidence that such a notice of readiness was not served until 14.00 hours on 1 April, on which basis laytime commenced 24 hours later in accordance with clause 22 of the charterparty. The charterers’ argument would be rejected. The notice may have been termed a ‘‘notice of arrival’’ instead of a ‘‘notice of readiness’’ but the notice tendered on 21 March fulfilled the functions of a notice of readiness. The only cause of potential delay in discharging (other than berth congestion) was the lack of the original bill of lading and/or completion of inward cargo paperwork and/or payment of import duties and railway fees, none of which was within the powers of the owners, and all of which were the responsibility of the receivers. Thus, whereas the owners were wrong in their attempt to manipulate the clear provisions of Rider clause 47 beyond its natural meaning, the charterers were equally wrong to refuse to count laytime on the basis of the vessel’s arrival at Novorossisk on 21 March and her joining the queue at that time, all in accordance with the charterparty. Accordingly, the charterers were not liable to pay damages for detention for the time waiting to berth. Laytime counted as per the charterparty terms. This arbitration also has some relevance to Chapter 5, paragraphs 95 and 96. Extreme care should be exercised by owners, masters or any person giving a notice of readiness to ensure that the notice is tendered to the correct person or organisation. A master may think that tendering a notice of readiness to one of the port authorities is sufficient to constitute a good tender of a notice of readiness to the charterers and may come unstuck because of this. In two cases, one of which concerned commencement of laytime, the owners lost arguments relating to the agency position of a port authority and a refinery vis-`a-vis charterers. In The ‘‘Isabelle’’2 one of the questions to be answered by the High Court was whether or not an order by the port authority for the vessel to wait for a berth was an order by the charterers in circumstances where there was only one loading berth for the vessel and the charterers’ agents (Sonatrach, a large local oil company) were the shippers of the cargo. Mr Justice Goff (as he then was) decided, on the evidence, that the port authority was fulfilling no other function than ordering the vessel to wait and there was no evidence that the shippers ordered the vessel to wait off the port. Even on the basis that the charterers simply left the port authority to nominate a loading berth, it did not follow from that delegation that any order by the port authority to the vessel to wait was an order made by them on behalf of the charterers. It was inevitable that where, as here, there was only one loading jetty for tankers

2. [1982] 2 Lloyd’s Rep. 81.

239

Para. 99

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

and congestion in the port, the port authority, in the exercise of its own administrative function, would have ordered the vessel to wait outside the harbour while other vessels loaded and it could not be inferred that such orders were the orders of the charterers. On its face the decision may appear impractical and uncommercial but it was in the context of a charterparty clause which read: ‘‘14. . . . laytime shall at each loading and discharging port commence when the vessel is in all respects ready to load or discharge and written notice thereof has been received from the Master . . . by the Charterers . . . and the vessel is securely moored at the berth or other loading or discharging spot. Whether or not the specified berth or other loading or discharging spot is available and accessible if the vessel is nevertheless ordered by Charterers to wait before proceeding thereto laytime shall commence six hours after written notice of readiness has been received and the vessel is securely moored at the customary anchorage.’’

In enlarging on his decision the learned judge stated: ‘‘It is against this background that I turn to consider the owners’ submissions. Their first argument was that the vessel was required to wait by the port authorities and/or Sonatrach, who were for this purpose the agents of the charterers. Now the evidence before the court indicated that there was at the time only one berth (i.e. one side of the jetty) at which the Isabelle could have loaded. I will, however, assume that, in fact, the charterers simply left it to the port authority to nominate a loading berth—i.e. to identify the berth where the vessel was to load. But it does follow from this delegation that any order by the port authority to the vessel to wait was an order made by them on behalf of the charterers. In point of fact, the port authority must have ordered the vessel to wait. There is no evidence that Sonatrach did so. But every port authority exercises control over the ships in the area of the port and where, as here, there is only one loading jetty for tankers and congestion in the port, it is inevitable that the port authority, in the exercise of its own administrative function, will order vessels to wait outside the harbour while other vessels load at the jetty. There is no evidence at all in the present case that the port authority was fulfilling any other function than this. Certainly they were not acting on any instructions from the charterers, who had no control over the port authority in this respect; and it is quite impossible to infer that the orders of the port authority to wait were the orders of the charterers. This submission of the owners is simply an attempt to read the second sentence of cl. 14 as though it read ‘Time lost in waiting for berth to count as loading time’ (or ‘as discharging time’, as the case may be). It cannot be read in that way, and the submission fails.’’

The case went to appeal but the owners got very short shrift in the Court of Appeal,3 the only judgment being that of Lord Justice Donaldson (as he then was) who said: ‘‘The learned judge in a full and carefully reasoned judgment has set out the facts, the areas of dispute, the shipowners’ arguments and his reasons for rejecting them. For my part, I see no advantage in seeking to repeat this exercise using my own words since I am fully content to adopt his judgment as my own, and to say that for those reasons I would dismiss the appeal.’’

Nothing could have been more succinct. In The ‘‘Mediolanum’’4 the argument related to the agency function of the refinery at a bunkering port. The owners contended that the refinery was the agent of the charterers regarding the provision of fuel and also for the purpose of indicating and selecting the ultimate place within the port to which the vessel was to proceed for 3. [1984] 1 Lloyd’s Rep. 367. 4. [1984] 1 Lloyd’s Rep. 36.

240

N OT I C E O F R E A D I N E S S — C O M M O N L AW

Para. 99

bunkering. The vessel grounded while en route to the bunkering berth to which it had been directed by the refinery. The Court of Appeal decided that the refinery was the agent of the charterers for the purpose of the charterers’ obligations under the charterparty to provide fuel but was not the agent of the charterers for the purpose of communicating or selecting the ultimate place to which the vessel was to proceed for bunkering, which turned out to be unsafe, particularly when the charterers’ agents had previously ordered her to proceed to a different and safe place at that port. The above cases illustrate that care is required regarding the giving of notices/ orders as between the parties to a contract. It is up to owners to make certain to whom notices should be tendered to avoid charterers taking a point that they were not given a notice of readiness which, in turn, might prevent the commencement of laytime. It is possible that arbitrators may take a more generous approach to owners than judges regarding the tendering of notices. For example, in LMLN 205—12 September 1987 the charterers relied, in a demurrage dispute with the owners, upon clause 4 of the Vegoilvoy form which provided for notice of readiness to be tendered ‘‘to the charterer or its agent’’ and for laytime to start running six hours after such tender. It was held that although it was true that notice of readiness had not been given to the charterers, notice had been given to the shippers or consignees or forwarding agents who were, in each case, the relevant party for the purposes of knowing of the ship’s readiness so that arrangements to load/discharge could be made. The charterers appointed no agents as such. At the times the relevant voyages were performed and the relevant notices were given, no complaint had been raised by or on behalf of the charterers in relation to the notices. Under those circumstances, the parties to whom the notices were in fact given had to be considered as ‘‘agents’’ for the purposes of clause 4 of the charter, and the notices were therefore valid. Again, in LMLN 493—29 September 1998, the vessel was chartered on the Asbatankvoy form. Clause 6 provided that ‘‘Upon arrival at customary anchorage . . . the Master . . . . shall give the charterer . . . notice . . . . That the vessel is ready to load or discharge cargo, berth or no berth, and laytime . . . shall . . . . Commence upon the expiration of six hours after receipt of such notice, or upon the vessel’s arrival in berth . . . whichever first occurs.’’ The charterers said that a notice of readiness given on 2 February and received by the shippers and the local agents was not a valid notice because it had not been given to them or their agents. They relied on clause 6 of the charterparty. It was held, that the local agents were, as the evidence tended to show, the only agents at the port and acted as agents for both the ship and the shippers. For the purposes of tendering a notice of readiness, the shippers and their agents were to be treated as if they were ‘‘charterers’ agents’’, unless the charterparty specifically designated other agents, which it had not done. Accordingly, the notice of readiness was validly tendered. Although arbitrators may take a reasonably broad approach to the tendering of a notice of readiness vis-`a-vis shippers, consignees, etc. instead of charterers, owners should instruct masters to adhere as strictly as they can to the charterparty terms in respect of the person(s) to whom a notice of readiness should be tendered. Further, 241

Para. 99

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

if tendered to an agent it has to be the agent of the charterers or the shippers or the consignees and not just the owners’ agents. 100. Despite not giving a notice of readiness laytime may still commence if the charterers were aware, or should have been aware, of the readiness of the vessel to load. Some persons think that it is still an open question whether that is sufficient to start the laytime clock. Although there is no modern direct authority on the point it seems commercially sensible that there be no need for a notice of readiness from the vessel if the charterers are aware, or should be aware, of the readiness of the vessel to load. In A/B Nordiska Lloyd v. J. Brownlie5 Lord Justice Scrutton said obiter: ‘‘ . . . whether it is enough that the charterer knows of the presence of the ship from other circumstances, although he has no notice from the shipowner. That question, in my view, is not decided by Stanton v. Austin6 and remains open for decision in some other case which raises the question on a charter which does not exclude the point.’’

This case, was in essence, concerned with a notice of readiness under a cancelling clause so that the obiter dictum of Lord Justice Scrutton is very much peripheral. In Franco-British Steamship v. Watson and Youell7 the charterparty provided for the loading of cargo at Galatz. Written notice of readiness to receive cargo was given at the charterers’ office at a nearby port (Braila, where inward cargo was being discharged) on a Saturday before a holiday Monday; orders to go to Galatz were given on the Wednesday and the vessel waited there for a further six days before being ordered to load. No written notice was given at Galatz but the charterers were aware of the arrival and readiness to load on the Thursday. Loading time was to begin ‘‘from the morning after . . . and notice of readiness given . . . ’’. It was held that a verbal notice was sufficient in the circumstances, Mr Justice Horridge having (inter alia) this to say: ‘‘There is no request that notice in writing should be given and, therefore, verbal notice would be sufficient . . . When she came to Galatz the Captain would have to see the charterers . . . under these circumstances it seems to me impossible to say there was not material on which the umpire could find that the charterers had notice of readiness for the ship to load . . . I cannot say that time did not run because the Master did not go up into the office and say formally, ‘I give you notice that my ship is ready to load’.’’

Although the matter is certainly not free from doubt on legal authority, it is submitted that, on balance, there is no need to give a notice of readiness when the charterers are aware, or should be aware, of the readiness of the vessel to load in circumstances when the charterparty does not call for a written notice of readiness. In the last edition of the book considerable space was taken up in considering if a written notice of readiness, called for under the charterparty, could become unnecessary if the charterers were aware that the vessel was ready to load or

5. (1925) 30 Com. Cas. 307. 6. (1872) L.R. 7 C.P. 651. 7. (1921) 9 Ll.L.Rep. 282.

242

N OT I C E O F R E A D I N E S S — C O M M O N L AW

Para. 102

discharge. In support of this premise the cases of Barrett v. Davies,8 The ‘‘Mozart’’,9 and others, were referred to. The point was well laboured but it has now been decided by the courts to be wrong, in particular by the Court of Appeal in The ‘‘Happy Day’’10 (see later in this chapter for a detailed consideration of the case). The result is that if the charterparty calls for a written notice of readiness (as the vast majority do) such has to be complied with in order for the laytime to commence and a master of the vessel should insure that the notice of readiness clause is strictly adhered to regarding where it is given and when and to whom it is given. A master should bear in mind the words of Mr Justice Donaldson (as he then was) in The ‘‘Timna’’11 (cited earlier on other matters): ‘‘It is a good working rule . . . to give notice of readiness and to go on giving such notices in order that, when later the lawyers are brought in, no one shall be able to say: ‘If only the Master had given notice of readiness, laytime would have begun and the owners would now be able to claim demurrage’.’’

Mr Justice Donaldson also said, a little later in the same judgment: ‘‘Just as it is a good working rule for Masters, when in doubt, to give notices of readiness, it is an equally good working rule for charterers’ agents to reject them if there is any conceivable doubt as to their validity.’’

The importance of the latter words will become clear when considering the acceptance of a notice of readiness within the context of estoppel; see later in this chapter, paragraphs 112–115. 101. There may be occasions when the doctrines of estoppel and waiver are of use to owners when a valid notice of readiness has not been given by the master, either verbally or in writing. This doctrine has developed much over the years and will be considered in more detail later in this chapter. Suffice it to say, for the moment, that the conduct of the charterers may be such as to preclude them from contending that laytime cannot commence because the master has not given a valid notice of readiness. For example, when charterers commence loading the vessel, an estoppel or waiver argument may be available to the owners to prevent the charterers taking a notice of readiness point, although some doubts were thrown upon that argument in The ‘‘Mexico 1’’; but the Court of Appeal, in the more recent case of The ‘‘Happy Day’’12 covered this area in detail, see later paragraph 117. 102. Under the common law a notice of readiness can be given at any time of the day and on any day of the week unless it is unlawful to do so at the port in question, something which is most unlikely in this day and age. Therefore, apart from the unlawful aspect, there are no restrictions whatsoever in respect of when a notice of readiness can be tendered although, in practice, special charterparty clauses (to be considered later) may ensure that a notice of readiness can only be validly tendered 8. [1966] 2 Lloyd’s Rep. 1. 9. [1985] 1 Lloyd’s Rep. 239. 10. [2002] 2 Lloyd’s Rep. 487. 11. [1970] 2 Lloyd’s Rep. 409. 12. [2002] 2 Lloyd’s Rep. 487.

243

Para. 102

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

at stipulated times. This is particularly so in the dry cargo trade; however, in the tanker trade, express provisions do not usually derogate from the common law position whereby a notice of readiness can be given at any time.

NOTICE OF READINESS— EXPRESS CLAUSES 103. Express clauses regarding a notice of readiness come in a great number of forms and varieties—they can range from a simple clause such as: ‘‘Time to commence 24 hours after notice of readiness has been tendered in writing’’ to more sophisticated clauses such as: ‘‘Notification of the vessel’s readiness must be delivered at the office of the charterers or their agents, at or before 4 p.m. (or at or before 12 noon if on Saturday). The vessel also having been entered at the Custom House, accompanied by pass of the inspector of vessel’s readiness in all departments, and the lay days will then commence at 7 a.m. on the next business day.’’

No matter how they are worded the clauses are to be complied with although principles relating to de minimis, construction of the words used, and waiver/estoppel may be effective so as to afford some relief to owners from a strict compliance with the clause. Many clauses state that a notice of readiness must be given in writing and there have been some disputes over the years regarding whether a notice of readiness given by cable, telegram, telex, facsimile or e-mail satisfies this requirement. Common sense decrees that it should do so and this has been the approach of London maritime arbitrators—in fact, one cannot think of any arbitrator who would take a different view. The common sense approach is embodied in Charterparty Laytime Definitions 1980 (applicable to those who incorporate them into their contracts) where it is stated that, in relation to a notice of readiness, ‘‘in writing’’ means a notice visibly expressed in any mode of reproducing words and including cable, telegram and telex while Voylayrules 1993 and Baltic Code 2003 (also applicable only if incorporated into the charterparty contract) goes further by stating ‘‘in writing’’ shall mean any visibly expressed form of reproducing words; the medium of transmission should include electronic communications such as radio communications and telecommunications. It is thought that maritime arbitrators will always take a broad approach to ‘‘in writing’’ so as to give a modern application to the words in the context of any new electronic machinery involved in maritime operations. Difficulties can arise in respect of the actual time that a notice of readiness is given when transmitted by way of cable, telegram, telex, facsimile or e-mail. In the case of a telex there should usually be little or no problem since the evidence should show when the telex notice of readiness printed out on the charterers’ telex and that will constitute the time that the notice of readiness was tendered The same goes for facsimile and e-mail. In the case of a cable or telegram, problems may arise as to when the cable or telegram was actually received in the charterers’ camp. No problems perhaps when a cable goes directly from a vessel to the charterers’ office or that of their agents but, on some occasions, a cable or telegram has to go via a land line and there may be a certain amount of guesswork as to when the cable was 244

N OT I C E O F R E A D I N E S S — E X P R E S S C L AU S E S

Para. 103

received, particularly in holiday periods and night-times when offices are not manned. In a London maritime arbitration13 the charterers contended that, since the notice of readiness which had been sent by way of cable had been endorsed with a time and date as 08.30 on 6 March, the notice was not effective until that time, even though it had been transmitted by cable, from the vessel, many hours earlier. The tribunal held that the charterers’ argument would be rejected. The tanker trades customarily continued round the clock and the evidence showed that a notice of readiness was tendered by cable at 04.30 on 3 March, which was also recorded on the formal notice of readiness. Notice by cable or radio was accepted as written notice although the tribunal divided on whether the fact that it was being recorded as sent by cable meant that some time ought to be allowed for transmission time, namely, between sending and receiving. The majority accepted that the use of the word ‘‘cable’’ meant that land lines were used and considered that three hours was an appropriate delay between sending and receiving. The dissenting arbitrator considered that there was insufficient evidence to depart from the usual practice of regarding a radio message as received at the same time as it was sent from the vessel and regarded ‘‘cable’’ as being synonymous with ‘‘radio’’. This kind of problem is very unlikely in view of parties now using faxes, e-mails etc. As can be seen from one of the clauses set out at the beginning of this paragraph, it is common for a notice of readiness to have to be given within stipulated times. Another usual provision is for the notice to be given during office working hours. Both kinds of clauses may give rise to disputes. For example, in The ‘‘Eurobreeze’’14 arbitration, a notice of readiness was given in the early hours of Saturday (04.15) and the charterparty stipulated: ‘‘Laytime at Rostock shall commence from 2 p.m. Monday to Friday if NOR is given between 8 a.m. and noon and from 8 a.m. next working day if NOR is given between noon and 5 p.m. Time from Saturday noon or on a day preceding a legal holiday until 8 a.m. Monday or next working day not to count, even if used.’’

The above clause said nothing about the tendering of a notice of readiness on a Saturday. The owners contended that the notice of readiness given at 04.15 on the Saturday was good and that laytime commenced at 08.00 on the Monday morning whereas the charterers submitted that 14.00 on the Monday was the appropriate time for the starting of the laytime clock, based upon the contention that a valid notice of readiness could not be tendered until 08.00 on Monday morning. Although the parties only differed by six hours regarding the commencement of laytime there was a knock-on effect, bound up with the following weekend, which made a difference of just over two days in respect of the time on demurrage. The facts were: (a) Saturdays at Rostock were ordinary working days for the loading and discharging of cargo.

13. LMLN 151—15 August 1985. 14. 1984.

245

Para. 103

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

(b) The normal office hours at Rostock on Saturdays were from 08.00 to 12.00 hours. (c) The offices of the agents handling the vessel at Rostock were normally open on Saturday mornings and were so on the Saturday in question. Counsel could put no authorities before the arbitrator which would have been of any guidance to the resolution of the matter. The owners put their case in that the clause dealt with the effectiveness of notices for two situations only (the tendering of a notice between 08.00 and 12.00 on Mondays to Fridays and the tendering of a notice between 12.00 and 17.00 on Mondays to Fridays) and, since there was no express provision for the tendering of a notice on Saturday mornings, a term should be implied that a notice tendered during normal office hours on a Saturday morning should be effective so as to commence laytime at 08.00 on the Monday morning. The charterers submitted that one should hesitate before implying the term suggested by the owners since there may have been cogent reasons for the noninclusion of Saturday mornings in the clause with the effect that it was not envisaged that a notice of readiness would be tendered on a Saturday morning. Alternatively, if it was envisaged that a notice could be given on a Saturday morning then, in view of the wording of the clause, the notice could not be effective until the Monday morning. Under either approach, laytime would not commence until 14.00 on the Monday; further, their approach did the least violence to the clause and, in any event, there was no reason why a special case should be made for Saturdays. The arbitrator did not find the dispute easy of resolution because of the evenly balanced contentions of the parties. As a matter of first impression he was of the view that a notice given on a normal working day, within normal office hours, should be effective irrespective of the relevant clause in the charterparty having a lacuna regarding Saturdays; the purpose of tendering a notice of readiness was to give the charterers sufficient time to organise labour for the loading/discharging operations and that was why its effectiveness was related, in so many instances, to the usual office working hours. Since the evidence was clear that the usual office hours were 08.00 to 12.00 on Saturdays and that the agents in question were working those hours he was for implying a term into the contract so as to give it business efficacy. Without rewriting the contract he thought a tribunal should fill gaps to ensure that the contract was workable in line with the intention of the parties, such intention to be gleaned objectively from the words used by them, and if necessary, praying in aid the relevant surrounding circumstances. He went on to decide in favour of the owners, as follows: ‘‘Since the Clause had the port of Rostock specifically in mind, and since Saturday was a normal working day along with Mondays to Fridays, also that notices could be tendered during normal office hours Mondays to Fridays, it appears sensible to treat them together for the purposes of tendering a notice of readiness as far as non-excepted periods are concerned. Saturday morning was a non-excepted period and I think that everything fits into place, leaving no lacuna, if a term is implied into the contract that a notice of readiness tendered on Saturday morning, before the expiry of normal office hours, becomes effective so as to trigger off the laytime clock at 08.00 on the Monday morning. The implying of this term fills the gap

246

N OT I C E O F R E A D I N E S S — E X P R E S S C L AU S E S

Para. 104

in the notice clause as well as permitting a procedure which is usual when this kind of notice clause is used in a voyage Charterparty.’’

104. In LMLN 408—24 June 1995 the issue was whether a valid notice of readiness could be given on 26 December. The vessel was chartered on a Amwelsh form as amended for the carriage of a cargo of bulk coal from Australia to Turkey. The vessel arrived at the loading port at 08.24 hours on 26 December and tendered notice of readiness. That was a Saturday, but although it was the day after Christmas it was not celebrated as Boxing Day, the latter public holiday being gazetted for the following Monday 28 December. The vessel did not berth on arrival because her berth was occupied and remained anchored until Friday 1 January (also a public holiday) when she shifted to berth and in the same evening commenced loading. She then sailed for Turkey. The loadport statement of facts said that the notice of readiness was accepted at 09.00 hours on 29 December, the Tuesday following the weekend extended by the public holiday on Monday. The issue related to the appropriate day to deem the notice of readiness accepted. If Tuesday was the appropriate day, then by line 29 of the charterparty the notice should have been accepted at 00.01 on that day. Clause 4 of the charterparty, as amended, provided: ‘‘The Cargo to be loaded into vessel at the rate of 30,000 metric tons per weather working day(s) of 24 consecutive hours Sundays and holidays included See also Clause 35 laytime commencing 24 hours Charterers’ option 12 hours after vessel tenders and is ready to load, [unless sooner worked, whereupon time is to commence] and written notice is given of the vessel’s being completely discharged of inward cargo and ballast in all her holds and ready to load, such notice to be given between business hours of 00.01 and 24.00.’’

(The typewritten insertions are in bold print. The square brackets were not in the charterparty clause either in its original form or as amended, but were inserted by the arbitrators in their Reasons to assist their commentary.) Clause 35 had the rubric ‘‘Loading and Discharge’’, but the only relevant part said: ‘‘ . . . Time for discharge port to commence 24 hours, or in charterers option 12 hours after Notice of Readiness tendered, unless sooner commenced. Declarable latest upon vessel’s arrival load port.’’

It was held that the words within the square brackets in clause 4 were, in the tribunal’s opinion, a provision to deal with the situation when the charterers elected to work the vessel prior to the expiration of the 24 hours notice period (or 12 hours if the charterers had exercised their option in clause 35). If the vessel was ‘‘sooner worked’’ then time commenced immediately. That stipulation could therefore be put to one side. Without it, the main thrust of clause 4 was seen to be that laytime was to commence 24 (or 12) hours after the vessel tendered, was ready to load, and had given written notice of readiness being completely discharged of inward cargo and ballast. The clause then dealt with when the notice might be given and specified ‘‘between business hours of 00.01 and 24.00’’. Elsewhere, at clause 15, there was the stipulation that the vessel could not tender before 9 a.m. on 16 December. Further, if the vessel was not ready at the loading 247

Para. 104

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

port before 24.00 hours on 24 December, the charterers had the option of cancelling the charter, declarable on the notice of readiness being given. It followed that the charterparty contemplated the possibility of a notice being effective even if served at, say, 23.30 hours on 24 December. Clause 15 therefore provided not only the dates on which a notice might validly be tendered (and not risk being cancelled) but also the precise minutes at which that period opened (9 a.m. on 16 December) and closed (24.00 hours on 24 December). Returning to the stipulation at clause 4 regarding ‘‘business hours’’, the printed text left blanks in line 29 which had been completed in typewriting with the hours ‘‘00.01’’ and ‘‘24.00’’. The key word here was ‘‘business’’. There could be no doubt that when the phrase ‘‘business hours’’ was used and defined as, say, 08.00–17.00 hours, then that precluded the service of a notice (immediately effective) not only outside of those hours on a business day, but also at any time during a relevant holiday, e.g. a Friday in a Muslim country. The original printed text in the charterparty went on to stipulate the period of 9 a.m. to 1 p.m. on Saturdays as a legitimate period for tendering notice. The whole of that Saturday stipulation had been struck out at that point, not just the hours on that day. In the tribunal’s opinion that showed that the parties had addressed their minds to the point and agreed that notice of readiness could properly be tendered throughout a Saturday—within the hours 00.01 and 24.00 hours inserted in the preceding blanks. The charterers had argued that by striking out the ‘‘Saturday’’ phrase the parties should be taken to have agreed that notice could not be tendered on a Saturday at all. But it seemed to the tribunal to be irrational for the ‘‘business hours’’ on Monday to Friday to be extended to every minute of every day only to be followed by a two day forbidden period. The charterers’ argument on that point would be rejected. Read in conjunction with clause 15 it seemed clear enough that the objective intention of the parties when contracting was to permit a notice of readiness to be tendered at any minute throughout the whole period 9 a.m. 16 December to 24.00 hours on 24 December except on a holiday. In other words, for the purpose of tendering a notice of readiness, the loading port business hours were deemed to be continuous whether or not the shipping offices were in fact open and/or attended. Such a regime was not exceptional at a busy and prominent international bulk coalshipping port such as the designated loading port in the present case. On the tribunal’s view of the construction of clause 4, the tribunal was left only with the necessity of being satisfied that the notice of readiness was in fact tendered in accordance with the contractual provisions. In the tribunal’s opinion the parties had agreed, contractually, to regard Saturdays as business days, and as 26 December was not one of the four recognised holidays at the loading port, that did happen. Accordingly, the owners’ submission as to when laytime commenced would be accepted. 105. Two London arbitrations have been reported regarding disputes relating to a requirement that notice of readiness be given within office hours when the notice was given on a Saturday morning and, in each case, the office was closed. 248

N OT I C E O F R E A D I N E S S — E X P R E S S C L AU S E S

Para. 105

In the earlier arbitration, LMLN 15—29 May 1980, a notice of readiness was tendered at 08.50 in Lisbon on Saturday, 18 September, and the owners contended that laytime commenced at 08.00 on Monday, 20 September. The charterers submitted that laytime did not commence until 08.00 on the Tuesday because, as the receivers’ office was closed on Saturdays, notice of readiness could not be tendered until the Monday. The charterparty provided: ‘‘Discharge time to count from the first working period on the next working day following receipt during ordinary office hours of written notice of readiness to discharge.’’ The issue was whether or not Saturday mornings, in Lisbon, came within the ambit of ‘‘ordinary office hours’’. The facts were that the port was open on Saturday mornings and all port authorities were available during such times, stevedoring on Saturday mornings was compulsory although at premium rates, all shipping agents were closed on Saturday mornings except those attending vessels, the majority if not all of importers/exporters were closed on Saturday mornings and one of the provisions of the charterparty stipulated that the cargo was to be received at destination at the rate of so many tons per weather working day of 24 consecutive hours, Saturday afternoons/Sundays excepted. The arbitrator decided that, on balance, the evidence gave greater support to the charterers’ submission. More weight should be given to the evidence relating to business offices rather than to the hours which port authorities and stevedores had to work, it being well known that the latter often have to work outside ordinary hours in order to keep the operational side of shipping and ports in motion; therefore, written notice of readiness could not be received until Monday morning in view of the receivers’ office being closed on the Saturday. The later arbitration, LMLN 44—9 July 1981, concerned the discharge port of Liverpool. The vessel arrived at the Mersey Bar at 03.09 on 5 June 1981, which was a Saturday. Notice of readiness was given by telex to the charterers’ agents at 09.55 and to the charterers themselves at 10.00—being a Saturday, neither the charterers’ nor their agents’ offices were open. The relevant charterparty clauses were: ‘‘8 . . . At discharging port notification of vessel’s readiness to discharge must be delivered at the office of charterers or their agents at or before 4 p.m. (or at or before 12 noon if on Saturday), vessel also having been entered at the Custom House subject to clause 10 and laydays will then commence at 7 a.m. on the next business day, whether in berth or not . . . 10. At the nominated discharge port, should discharging berth be unavailable on vessel’s arrival, time is to count from 7 a.m. on the next working day after notice of arrival at the anchorage . . . has been given to charterers or their agents during ordinary office hours, whether vessel has been entered at Custom House or not . . . ’’

The charterers’ argument was that clause 10 applied on the facts of this case and that since the Saturday telex was not sent during ‘‘ordinary office hours’’ laytime did not commence until 7 a.m. on the Tuesday. Charterers submitted that clauses 8 and 10 were distinct and separate and each clause had to be dealt with in isolation. Clause 8 dealt with the situation where a discharging berth was available for the vessel on her arrival; clause 10 applied where a berth was unavailable. Furthermore, clause 10 was the appropriate clause for dealing with notice of arrival at the anchorage, rather than notice of readiness (as per clause 8). Clause 10 was therefore the applicable clause in the present case and was capable in itself of triggering off the 249

Para. 105

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

laytime clock. There was no need to look at any other wording in the charterparty and in particular, the meaning of ‘‘ordinary office hours’’ must be found from the actual factual circumstances rather than looking at other charterparty clauses. The owners submitted that both clauses had to be looked at together and that clause 8 represented that the charterers’ offices would be open until noon on a Saturday for the purpose of tendering a notice of readiness. The meaning of ‘‘ordinary office hours’’ in clause 10 had to be construed in the light of this representation. Furthermore, clause 23 also showed that the charterers’ offices would be open at least until 11 a.m. on a Saturday. Clause 23 provided: ‘‘23. Orders for discharging port to be given within 48 hours of receipt of Master’s wireless application . . . when vessel is 96 hours off Land’s End. If Master’s application is received after 11 am on a Saturday, the time allowed to charterers shall be 52 hours instead of 48 hours as above.’’

It was held that laytime commenced at 7 a.m. on the Monday. Clauses 8 and 10 were directly linked and had to be looked at together. The intention behind the clauses was to provide alternatives for the commencement of laytime depending on whether the vessel could not be entered at the Custom House on, or prior to, her arrival. The words ‘‘during ordinary office hours’’ in clause 10 did not derogate from the owners’ right to give a notice up until noon on a Saturday which was expressly provided for by clause 8. In any event, clauses 8 and 23 did show that the charterers looked upon Saturday morning as being good for the tendering of notices, whether they be notices of readiness or of arrival at an anchorage. Furthermore, the charterers’ argument that clause 8 applied only when a discharging berth was readily available was not strictly correct since a vessel could enter at a Custom House without being at a discharging berth, and thus still be in a position to give notice of readiness under clause 8 (this being a port and not a berth charterparty). There was some illogicality in the charterers’ construction in the context of commencement of laytime, particularly because of the link-up between the two clauses. The timing of the entering of the vessel at the Custom House should not affect the intention of the parties regarding the commencement of laytime; the intention was to put the owners in the same position, vis-`a-vis commencement of laytime, whether or not the vessel could enter at the Custom House at, or before, arrival, so as to give a notice of readiness. The ‘‘Danita’’15 gave some support to the arbitrator’s decision when looking at clause 8, for amplification of the words ‘‘ordinary office hours’’ in clause 10 of the charterparty. In that case the learned judge decided that what was called ‘‘ordinary office hours’’ in the second part of the clause should be treated in the same way as the rather more detailed definition of ‘‘ordinary office hours’’ in the first part of the clause. Although not of major importance it was felt that clause 23 of the charterparty afforded further support for the owners’ contention that the charterers were holding out that ordinary office hours included Saturday morning. While it might be exiguous in effect when taken in isolation it helped, when looking at matters as a whole, 15. [1976] 2 Lloyd’s Rep. 377.

250

N OT I C E O F R E A D I N E S S — E X P R E S S C L AU S E S

Para. 105

to come to a conclusion that the charterers looked upon Saturday morning as being good for the tendering of notices, whether they be notices of readiness, or notices of arrival at an anchorage, etc. There were good grounds for the two arbitrators taking a different approach in the two arbitrations for the simple reason that, apart from anything else, the clauses agreed between the parties in the later arbitration were very different to those in the earlier arbitration. While it may be that other arbitrators might have come to different conclusions in respect of the two arbitrations it is submitted that the decisions of the different arbitrators were unlikely to fall within the category of being obviously wrong (a ground for granting leave to appeal in a one-off case) although the later decision may appear suspect to some in that, although a charterparty should be construed as a whole, clause 10 of the charterparty seemed to be tailormade for the circumstances in question. The decision evidenced a sympathy to owners regarding the commencement of laytime, something not unknown in an area where many take the view that laytime should commence as soon as reasonably possible after the vessel’s arrival. Another London arbitration which is of interest regarding office hours is LMLN 594—22 August 2002. It was not concerned with office hours and Saturday mornings but office hours in general. The charterparty provided: ‘‘At first (or sole) discharging port, anytime to commence 24 hours after written notice of readiness to deliver cargo has been tendered to Agents in ordinary office hours, whether in berth or not, Saturdays after noon, (except in Lagos where from Fridays 5 pm Saturdays), Sundays (or local equivalents) and holidays excepted . . . ’’

The statement of facts said that ‘‘working hours’’ in Lagos began each working day at 07.30 hours. The shipowners took that as evidence that office hours began at the same time. That information coincided with that provided by the BIMCO ‘‘Holiday Calendar’’ for the port of Lagos. However, the charterers contended that office hours were different from port working hours, and argued that office hours in Lagos began at 08.00 hours. BIMCO had been asked to provide an opinion, and had pointed out that ‘‘office hours’’ and ‘‘working hours’’ did not necessarily coincide; also that according to their data (which was admittedly several years old), private sector office hours in Lagos began 08.00 hours Monday to Friday, although public sector office hours began at 07.30 hours. On a private sector basis the office opening hours on the relevant date would have been at 08.00 hours. That assumption had been confirmed directly by local agents who had stated unequivocally ‘‘The normal office hours at Lagos commence at 08.00 hours and not 07.30 hours’’. The local correspondents of the shipowners’ P&I Club had responded that port authority offices ‘‘and offices of associated companies such as agents’’ opened in Lagos at 07.30 hours, Mondays to Fridays. Moreover, the port agents for the vessel nominated by the charterers in accordance with clause 27 of the charter had advised that their offices were open from 07.00 hours. With that conflicting evidence in mind, the tribunal had to decide on the meaning of the reference to ‘‘ordinary office hours’’ agreed in the charterparty. Clearly ‘‘working hours’’ were not the same as ‘‘office hours’’. Furthermore, the opening 251

Para. 105

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

hours of the port authority and public offices were not necessarily the same as the office hours of the private sector. However, even in respect of the private sector office hours the evidence was conflicting. On the one hand, the local correspondents had contended that offices of companies associated with the port, such as agents, opened at 07.30 hours. The evidence from the port agents nominated by the charterers appeared to support that statement (even though those agents opened particularly early at 07.00 hours), whereas the information from other local agents —themselves port agents—indicated that agents’ offices opened only at 08.00 hours. It was held that, without any precise definition of the term ‘‘ordinary office hours’’, one had to apply commercial logic. The reference in the present case surely meant the ‘‘ordinary office hours of cargo receivers or their agents’’ where notice of readiness was to be tendered. The ordinary office hours of the private commercial sector in Lagos—for example, banks, etc.—was of less importance. Indeed the charterparty referred specifically to the tendering of the notice’’ . . . to Agents in ordinary office hours’’, which would be interpreted to mean ‘‘to the vessel’s agents in the ordinary office hours of port agents in the port of Lagos’’. In the present case the ordinary office hours of the vessel’s port agents began at 07.00 hours on a weekday morning. However, evidence from the P&I Club correspondents was to the effect that, in general, port agents’ offices opened at 07.30 hours, in line with the opening hours of the port authority, which one would expect. In the tribunal’s view, the evidence established that office hours commenced at 07.30 hours, as contended for by the owners. 106. Since The ‘‘Petr Schmidt’’16 concerned a notice of readiness tendered outside and prior to the hours stipulated in the charterparty it might be appropriate for it to be included in this part of the book. However, it seems more sensible and logical to consider the case in detail in the next section of the book which deals with the correctness of the notice of readiness and includes the important Court of Appeal decision in The ‘‘Mexico 1’’.17 Suffice it to say, at this stage, that the ‘‘Petr Schmidt’’ case decided that the notice of readiness in question was given prior to and outside of the specified hours in the charterparty but that it could be deemed to have been tendered at the commencement of the office hours on the next working day. See later paragraph 111 for detailed consideration of the case.

CORRECTNESS OF NOTICE 107. A notice of readiness is a statement that the vessel is ready to load/discharge either under the common law (requirement only for the first loading port) or the express provisions of the charterparty. This statement involves the vessel having reached the agreed destination, port, dock or berth in addition to being ready to 16. [1997] 1 Lloyd’s Rep. 284; [1998] 2 Lloyd’s Rep. 1 (C.A.). 17. [1990] 1 Lloyd’s Rep. 507.

252

C O R R E C T N E S S O F N OT I C E

Para. 108

load/discharge. As has been shown already, some express provisions of a charterparty are well detailed regarding what has to be carried out prior to the tendering of a notice of readiness, e.g. pratique, clearance, passes, etc. The question has arisen in the past as to whether, when a notice of readiness is given, the facts of which it speaks have to be in existence at that time. There is also the further question, if a notice of readiness is not a valid notice when first given, does it have to be given again when the facts of which it speaks come into existence or does it become valid as soon as such facts come into existence? The first question was answered at least as far back as Graigwen v. Anglo-Canadian18 where Mr Justice McNair decided that the facts relating to the notice (namely, entry at Custom House and readiness in that case) must be true at the time when the notice was given, otherwise the notice will be bad. The principle has been emphasised in more recent cases like The ‘‘Tres Flores’’,19 see earlier paragraph 64, in particular the words of Lord Denning: ‘‘One thing is clear, in order for a notice of readiness to be good, the vessel must be ready at the time the notice is given, and not at a time in the future. Readiness is a preliminary existing fact which must exist before you can give a notice of readiness.’’

and The ‘‘Virginia M’’20 where Mr Justice Hobhouse (as he then was) drew particular attention to the above words of Lord Denning (see earlier paragraphs 64 and 75 for details regarding this particular case). 108. The other question (does the master have to give a further notice of readiness when the facts necessary to make the notice good come into existence?) has been considered in at least five judgments, The ‘‘Massalia’’ (No. 2)21; Christensen v. Hindustan Steel Ltd.22; The ‘‘Helle Skou’’23; The ‘‘Demosthenes V ’’24 and The ‘‘Mexico 1’’.25 The last named authority removed the earlier doubts in respect of the matter but before considering that case it is thought apposite to look into the earlier cases. There have also been later judgments where the Court of Appeal decision in The ‘‘Mexico 1’’, on this aspect, has been followed, including the important Court of Appeal judgment in The ‘‘Happy Day’’.26 In The ‘‘Massalia’’ (No. 2)27 the vessel was chartered to carry a part cargo of flour from Europe to Colombo and had liberty to complete the cargo en route with other goods in the same holds as the flour. Some of the flour became overstowed by general cargo. When the vessel berthed at Colombo discharge commenced in respect of some of the flour but it was not until three days later that all the flour cargo became accessible.

18. [1955] 19. [1973] 20. [1989] 21. [1960] 22. [1971] 23. [1976] 24. [1982] 25. [1990] 26. [2002] 27. [1960]

2 2 1 2 1 2 1 1 2 2

Lloyd’s Lloyd’s Lloyd’s Lloyd’s Lloyd’s Lloyd’s Lloyd’s Lloyd’s Lloyd’s Lloyd’s

Rep. Rep. Rep. Rep. Rep. Rep. Rep. Rep. Rep. Rep.

260. 247. 603. 352. 395. 205. 275; see also paragraphs 72 and 74, above. 507. 487. 352.

253

Para. 108

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

It was held by Mr Justice Diplock (as he then was) that notice of readiness to discharge referred to readiness to discharge the flour cargo in the particular charterparty and that, although given at a time when the ship was not ready to discharge all of the flour cargo, it took effect as soon as all the flour was available for discharge so that it was unnecessary to serve a new notice of readiness at that time. His lordship did not give any detailed reasoning for this decision—perhaps there was no need to since it accorded so much with commercial common sense. However, in the later case of Christensen v. Hindustan Steel Ltd.,28 Mr Justice Donaldson (as he then was) declined to follow the approach of Mr Justice Diplock. In different circumstances (no overstowed cargo) he held that the Massalia30 decision turned upon very special facts and did not cast doubt upon the general rule that a notice of readiness is wholly ineffective (emphasis supplied) if, subject to minimal qualifications, the vessel is not ready to discharge at the time at which it is given. In the case before him, the charterers had no special source of information as to the state of readiness of the vessel. In The ‘‘Helle Skou’’29 (Mr Justice Donaldson) the judge was able to decide the case in favour of the owners of the vessel on the basis that the charterers initially accepted a notice of readiness albeit that they might have a claim against the owners for damages in respect of breach of contract because the vessel’s cargo spaces had not been properly cleaned. On the notice of readiness point he had the following to say, some of which is apposite to waiver/estoppel vis-`a-vis the acceptance of a notice of readiness (see paragraphs 112 et seq.): ‘‘There have been many cases of notice of readiness being rejected as premature and subsequently accepted: see, for example The ‘Tres Flores’,30 but I think that this is the first case in which charterers have accepted such a notice and later claimed to reject it. I do not think that they can do so. As Mr Hallgarten pointed out, the contrary view would enable a charterer to reject a notice of readiness and to start laytime all over again if he discovered some lack of readiness in the ship at a late stage in loading. And this would be the case even if the cargo did not have to be discharged. A notice of readiness which is rightly rejected is a nullity, save to the extent that, with the express or implied agreement of the charterers, it may be left with them instead of being reserved and will then take effect when it truly represents the facts. But this notice was far from being a nullity. It was the key which unlocked the holds of the vessel and allowed loading to begin. And it was the charterers’ act which created this position. Whether it is labelled as waiver to estoppel or something else, I do not consider that the charterers can resile from this position, save upon grounds of fraud.’’

It is clear from the cases of The ‘‘Helle Skou’’29 and Christensen v. Hindustan Steel Ltd.31 that Mr Justice Donaldson (as he then was) was firmly of the view that a further notice of readiness would have to be given by a master save to the extent that, with the express or implied agreement of the charterers, the notice could be left with them instead of being re-served. In practice, a notice of readiness is frequently if not usually left with the charterers, even when the notice is rejected, so that it may not have been difficult, in many circumstances, for arbitrators to have decided that 28. [1971] 29. [1976] 30. [1973] 31. [1971]

1 2 2 1

Lloyd’s Lloyd’s Lloyd’s Lloyd’s

Rep. Rep. Rep. Rep.

395. 205. 247. 395.

254

C O R R E C T N E S S O F N OT I C E

Para. 109

there was an implied agreement between the parties that a notice of readiness could be left with the charterers so that it took effect when it truly represented the facts. The ‘‘implied agreement’’ point is no longer good because of what the Court of Appeal had to say in The ‘‘Mexico 1’’ (see later paragraph 109). In any event, there was a conflict between the two High Court decisions of Mr Justice Donaldson and the decision of Mr Justice Diplock in The ‘‘Massalia’’ (No. 2).32 In The ‘‘Demosthenes V ’’ (No. 1),33 Mr Justice Staughton (as he then was) found it unnecessary to decide the point as to whether a notice which was invalid when given became valid when the facts changed and satisfied, strictly speaking, the notice of readiness. He said that the authorities on the point were perhaps a little sparse. The ‘‘Massalia’’32 and Christensen v. Hindustan31 were cited (but not The ‘‘Helle Skou’’29) and he also had cited to him the words of Lord Justice Roskill (as he then was) in The ‘‘Tres Flores’’30: ‘‘notice of readiness that the ship will be ready to load at some future time is a bad notice’’. Without deciding the point Mr Justice Staughton indicated how he felt about the matter by stating, on the basis of the facts of the case before him (see earlier paragraph 74 about waiting for further vacuvators): ‘‘The point did not actually arise in the Tres Flores30 case because there was no argument there—as far as I can see, as to whether an old notice became validated when the ship was ready, or whether a fresh notice had to be given. It seems to me by no means easy to decide between those authorities, and I do not do so. But I just say this. I would require a good deal of persuading to reach the view that the charterers, who had had notice of this ship’s arrival, were entitled to allow her to sit there for a period of just over two weeks, and not pay demurrage or bear the cost of the time that had elapsed, merely on the ground that they had not received notice from the shipowners that another three vacuvators could be obtained within a matter of hours.’’

The sympathies of Mr Justice Staughton were not difficult to infer: he was veering to the approach taken by the vast majority of commercial shipping arbitrators. However, in the event, a later and higher authority (the Court of Appeal in The ‘‘Mexico 1’’) chose to take a different approach; see later paragraph 109. 109. The Court of Appeal’s decision in The ‘‘Mexico 1’’34 (impeccable logic, but perhaps lacking commercial/practical common sense and reality) has caused a certain amount of consternation in shipowners’ and ship operators’ offices throughout the world because of its repercussions regarding all voyage charterparties which are subject to English law. The case (inter alia) considered and cleared up differences of opinion which had been in existence for some 30 years regarding the effectiveness or otherwise of a notice of readiness which, when given, is not a so-called ‘‘good notice’’. Does the master have to give a further notice of readiness when the facts necessary to make the notice good come into existence? The alternative proposition was that the notice, although not being valid when given, had an inchoate status and became valid and effective when the appropriate facts came into

32. [1960] 2 Lloyd’s Rep. 352. 33. [1982] 1 Lloyd’s Rep. 275. 34. [1990] 1 Lloyd’s Rep. 507.

255

Para. 109

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

existence. The latter proposition had been favoured by virtually all London commercial maritime arbitrators. Clause 24 of the Mexico 1 charterparty of 27 July 1984 provided that ‘‘at loading and discharging ports notice of readiness shall be delivered in writing at the office of the shippers/receivers. . . . Time to commence to count next working day 08.00 hours . . . ’’. The vessel loaded part cargoes of maize and beans for the charterers and the owners also loaded various cargoes for their own account. At the final discharge port of Luanda the master cabled a notice of readiness to the agents on 20 January when he arrived at the port and he telexed a further notice to the receivers on the following day. At that time the cargo of maize was partially overstowed with beans and with cargo carried for the owners’ account. Unloading of cargo commenced on 28 January and it was not until 6 February that the maize cargo was cleared of overstowed cargo and accessible. No further notice of readiness was tendered at that time. Discharge of the maize was not then begun because the vessel was put out of berth to give priority to another vessel. After a delay of eight days the vessel reberthed and commenced discharging the maize cargo. The two arbitrators agreed a joint award (not calling upon the umpire who attended at the hearing). They applied the inchoate theory to the maize cargo and decided that the initial cabled notice of readiness (which was not valid because the maize was not accessible when given) became valid when the maize became accessible, that is, on 6 February. They followed The ‘‘Massalia’’35 which they thought still to be good law despite later judicial and text book doubts. They found that the discharging of the other cargo overstowing the maize was an operation openly performed with the active participation of the mutual agents to the parties and was hence patent to the charterers. They also found that it appeared that the receivers, agents and the master on the spot all realistically treated the initial notice of readiness as one which would be effective as soon as all requisite conditions of accessibility were met: however, they did not make this a separate ground for deciding in favour of the shipowners on the basis of waiver/estoppel. On appeal to the High Court,36 Mr Justice Evans reversed the arbitrators on the inchoate status of the notice of readiness but still decided the case in favour of the shipowners on the basis of an estoppel or waiver in that the receivers and agents proceeded on the basis that the original invalid notice became valid and effective when the state of unreadiness caused by the overstowage was replaced by one of readiness for discharge. He held that: (1) when the charter required a notice of readiness to be given the charterer was entitled to insist that the laytime could not begin until the notice had been given; if he so acted to waive that right, in whole or in part, then laytime would begin notwithstanding that the required notice or valid notice had not been given; (2) if an inaccurate notice was invalid when given, then the circumstances in which no further notice was required were limited to those where there 35. [1960] 2 Lloyd’s Rep. 352. 36. [1988] 2 Lloyd’s Rep. 149.

256

C O R R E C T N E S S O F N OT I C E

Para. 109

were further dealings between the parties after the invalid notice was given, which resulted in the charterers’ losing the right to insist that a valid notice of readiness should have been served; (3) in the absence of special factors (such as particular circumstances, waiver, estoppel) a master must give a further notice of readiness because in those circumstances there was nothing to prevent the charterers from relying upon the contractual requirement that notice must be given before laytime could begin and an invalid notice was a nullity; this was not a rule of law but the requirement of the clause on its sensible and true construction; (4) an inaccurate notice was invalid and a nullity unless it was accepted or acknowledged by the charterers as a valid notice with effect from some later time; the arbitrators’ conclusion that laytime began immediately the maize cargo became fully accessible for discharge was correct; the notice became effective for the purposes of clause 24 at 10.25 on 6 February and laytime began under the clause at 8 a.m. on 7 February. On the waiver/estoppel aspect he had this to say: ‘‘The arbitrators’ conclusion that laytime began immediately the maize cargo became fully accessible for discharge is correct in law, therefore, if the facts entitled them to hold that the charterers waived the right to require a notice of readiness in accordance with clause 24, or are otherwise prevented by law from asserting that right. An alternative possibility is that they waived or lost the right to require that a further notice should be given when the cargo became ready for discharge, thereby accepting or acknowledging that the original notice should become effective for the purposes of clause 24. In my judgment, the facts found by the arbitrators do not justify the wider conclusion that the charterers effectively released the shipowners from the need to give any notice under clause 24. There is no finding to this effect. Rather, the findings are that the receivers and agents proceeded on the basis that the original (invalid) notice became valid and effective, presumably for the purposes of clause 24, when the state of unreadiness caused by overstowage by other cargo was replaced by one of readiness for discharge. If these findings affect the charterers as well as the receivers and agents, then in my judgment the correct conclusion in law is that the notice became effective for the purposes of clause 24 at that time (10.25 on 6 February). Whether this was by implied (or express) agreement, or by ‘waiver, estoppel or something else’ (per Mr Justice Donaldson) it is unnecessary to inquire. That position cannot be resiled from now. It will follow that laytime began under the clause at 8 a.m. on the next working day (7 February).’’

In the Court of Appeal the issues were canvassed by Lord Justice Mustill (as he then was—the other two Lord Justices concurring): the court upheld Mr Justice Evans on the pure notice of readiness point (thus continuing the reversal of the arbitrators, but reversed him on the ‘‘estoppel, waiver or something else’’ aspect, thus overall deciding against the shipowners and in favour of the charterers. It was held (inter alia) that: (1) the contract provided for laytime to be started by the giving of notice of readiness; the learned judge was right to reject the argument that the notice was a delayed-action device, effective to start the laytime automatically when at a later date the vessel became ready to discharge the 257

Para. 109

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

contractual cargo; and was right to reject the submission that time began when the charterers knew or ought to have known of the readiness; (2) on the facts, waiver, estoppel or agreement could not be inferred; the notice of readiness was invalidly given but the arbitrators had found that it was accepted and since such acceptance must have been given in reliance on the master’s implied assurance that the vessel was ready for discharging it could not have any value; when the ship was ready to discharge the contractual cargo there was no notification to the charterers or their agents nor was there anything in the award by way of intimation on the part of the charterers that they accepted that the laytime could now begin; and there was no basis in the award for finding that the laytime began before the operation of discharge; ... (4) the charterers conceded that laytime began to run when the discharge of the maize actually commenced; the appeal would be allowed to the extent that laytime for the discharge commenced at the time when the discharge itself commenced. Regarding the inchoate theory and The ‘‘Massalia’’35 Lord Justice Mustill considered it appropriate to consider the question entirely afresh. He distinguished between the idea of an inchoate notice of readiness in its purest form (invalid notice automatically takes effect, without more, as a notice at the moment when the ship becomes ready), which he found impossible to accept, and a modified version whereby the notice would be effective, not when the ship was ready for discharge but when the charterers knew of this and, perhaps with the added qualification, ‘‘have the means of knowledge’’. He had this to say, in rejecting the owners’ contentions: ‘‘To start at the beginning one must ask whether the laytime would automatically begin upon the ship’s becoming ready, even if no notice was ever given at all. (I stress ‘automatically’ because for the time being I exclude special facts which might found an express or implied agreement, waiver or the like). The owners have not sought to assert an affirmative answer, for such a proposition would be unarguable in any case where the charterer expressly relates laytime to the giving of a notice. One must then enquire what reason there would be for reaching a different answer when the master had given a notice stating that the ship was ready when she was not? If there is any reason, it must be found in the idea that the master’s message, which was not a valid notice, and which moreover stated something which (in terms of English charterparty law) was untrue, nevertheless had validity as an ‘inchoate’ notice. This word served a useful forensic purpose in the argument addressed in The ‘Massalia’, but with due respect to counsel (as he then was), I am unable to give it a precise meaning: and the word must have a precise meaning if a document which all agree was ineffective when given is afterwards to be given some effect. Perhaps it means that the notice of readiness is to be taken as incomplete, with the master announcing the arrival of his vessel at the port, but saying nothing about its readiness to discharge the contractual cargo; and that the message is to be taken as automatically completing itself with the words ‘and also take notice that my ship is now (at 10.25 hours on 6 February) ready to deliver your cargo’—even though nothing was then said or done by either party. I confess that I can see no way in which these words could be notionally added, any more than if the master (as he should in law have done) had said nothing about readiness at all on 21 January, so far as concerned the cargo of maize.

258

C O R R E C T N E S S O F N OT I C E

Para. 109

An alternative understanding of the concept of an inchoate notice is that the message should be construed as saying ‘Please be advised of the arrival of the above-named vessel at the port of Luanda at 12.00 hours 20/1/85. The vessel is not now ready to commence discharging cargo, but will be ready at some time in the future which I cannot specify’. The most obvious objection to this interpretation is that it is not what the message actually said. But even if it could be strained to have this meaning, by what mechanism could it be said that, at the moment when the discharge became possible, and when nothing else happened, there was a compliance with the requirements of clause 24 that: ‘ . . . notice of readiness shall be delivered at the office of the Shipper/Receivers or their Agents.’ To my mind the contract provided with absolute clarity what step must be taken to start the laytime, and I find it impossible to say that the taking of this wrong step is somehow to be deemed as the taking of the right step. Moreover, I would find it very odd if the contract had contemplated any such result. At common law no notice of readiness is required at the discharging port to place the charterer under the obligation to take delivery of the cargo: he is expected to be on the lookout for the ship and for his cargo. Here, as is nowadays commonplace, the parties have stipulated for the giving of a notice to be the trigger for the charterers’ obligations. There must have been some reason for this. Why construe the clause as omitting half the requirement for a valid notice of readiness? And why above all construe it as starting the charterers’ obligation by reference to an event (namely readiness) happening at a precise moment of which he has no notice and may be completely unaware? I can see no ground for such an unbusinesslike reading of a perfectly clear contract. No doubt oppressed by the practical difficulty just mentioned the owners have modified the pure inchoate theory, so as to make the time run, not when the ship is ready for discharge, but when the charterers know of this: and, perhaps, with the added qualification ‘have the means of knowledge’. It seems from the part of their reasons which I have quoted that the arbitrators were disposed to accept this proposition. To my mind, although this variant of the argument removed one flaw, it simply adds another. For although it does at least avoid the consequence that the time allowed to the charterer for performing discharge is running even though he may have no means of knowing that performance is even possible, it substitutes a basis for the computation of laytime which must be a fertile source of dispute. Even in the absence of a provision such as clause 31, which expressly makes the furnishing of a countersigned time sheet a part of the mechanism for the payment of demurrage, the assembling of a time sheet is an important part of business in the port. For this purpose certainty is essential. The parties know when the ship berthed; when discharging began; when it finished. But in many cases the owners and their agents will not know when the charterers or their agents became aware that the cargo was ready; and still less will they know, or be able to agree with the charterers, when the latter ought to have been aware of it. Moreover, quite apart from the practical objections to this variant of the argument, it does not meet the fundamental objection that the contract provides for laytime to be started by the notice (which means a valid notice) and in no other way. I would therefore agree with the learned judge in his rejection of the argument that the notice was a delayed-action device, effective to start the laytime automatically when, at a later date, the ship became ready to discharge the contractual cargo: and also the linked argument that time began when the charterers knew or ought to have known of the readiness.’’

The end result is abundantly clear in that, absent special factors like an implied agreement, waiver, estoppel etc., laytime does not commence, where there is a contractual written notice of readiness which triggers off laytime, until a valid notice of readiness has been tendered. In the light of the Court of Appeal’s decision it is imperative that masters of vessels follow the advice given by Mr Justice Donaldson 259

Para. 109

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

(as he then was) in The ‘‘Timna’’37 (see earlier paragraph 100) in that masters should, as a good working rule, give notice of readiness and should go on giving such notices in order that, at a later date, nobody can contend that a valid notice of readiness was not given at a particular stage in the operations. In The ‘‘Mexico 1’’ the courts were also concerned with waiver/estoppel (where, as already stated, the Court of Appeal took a different approach to the High Court) but see later, paragraph 112 et seq., for particular discussion of this aspect. The ‘‘Mexico 1’’ decision is considered further in paragraph 110 by way of a reported arbitration and also by way of the recent decisions in The ‘‘Petr Schmidt’’ and The ‘‘Agamemnon’’ (see later, paragraph 111, for consideration of both cases). 110. A Mexico 1 point arose in the arbitration reported in LMLN 387—3 September 1994 where the arbitrators avoided the strict approach of the Court of Appeal decision. The vessel was chartered for the carriage of grain from the US Gulf to Spain. The charterparty provided that notification of the vessel’s readiness to load should be delivered in writing at the office of the charterers or their agents between 09.00 and 17.00 on all days except Sundays and holidays, and between 09.00 and 12.00 on Saturdays. The charterers or their agents were not required to accept notice of readiness on Saturdays after 12.00 or on Sundays or holidays. Following receipt of readiness to load or discharge, laytime would commence at 08.00 on the next day, Sundays and holidays excepted. Clause 17(d) provided: ‘‘At the loading port(s), master’s notice of readiness shall be accompanied by pass of the National Cargo Bureau . . . and USDA Inspector and Grain Inspector’s Certificate of vessel’s readiness in all six holds and such wing tanks required for loading for the entire cargo covered by this charterparty . . . ’’

The vessel arrived at the pilot station of the loading port at 07.42 on Thursday 31 January and was all fast at the elevator at 11.00 at which time a notice of readiness was tendered. The main holds were passed by USDA and NCB inspectors at 11.45 and the stevedores reported for work at 08.00 the following day, 1 February, at which time the statement of facts recorded that the notice of readiness was accepted. However, at some earlier point of time, after the inspection of the main holds, it was decided that the vessel would need to use some of her wing tanks for the carriage of the cargo. The wing tanks were inspected and passed by both USDA and NCB at 06.45 on 1 February. Those tanks were then used for the carriage of grain. It was apparent that two written notices of readiness came into existence, both stating that they had been tendered at 11.00 on 31 January, even though they recorded the times of events which occurred subsequent to the time when the notice was said to be tendered, the times having been filled in by hand. One notice stated that it was accepted as of 11.50 on 31 January, which was immediately following the passing of the main holds by the inspectors. The other stated that it was accepted 37. [1970] 2 Lloyd’s Rep. 409.

260

C O R R E C T N E S S O F N OT I C E

Para. 111

at 08.00 on 1 February, which was the commencement of office hours following the passing of the vessel’s wing tanks. Both notices had been signed by the shippers. Given the clear provisions of clause 17(d) that the notice of readiness should be accompanied by the pass of NCB and the USDA inspectors relating to the six holds and such wing tanks as should be required for loading, the charterers contended that any notice tendered at 11.00 on 31 January could not be a valid notice of readiness as neither the holds nor wing tanks had been passed at that time. They also said that having regard to The ‘‘Mexico 1’’38 the subsequent passing of the vessel’s holds by the inspectors did not validate that notice so as to trigger the commencement of laytime. Relying on the principle that the notice was not a delayed action device, effective to start the laytime automatically when, at a later date, the ship became ready to discharge the cargo, the charterers said that a fresh notice of readiness was required for the commencement of laytime, which notice was never given. The owners contended that the second notice was valid. It was held, although it was not clear when the second notice of readiness was prepared, it appeared that it had been prepared by the master as soon as he became aware that the wing tanks were to be inspected. On the other hand, it also appeared that the master did not wish to retract from the earlier notice of readiness given at 11.00 am on 31 January, presumably believing that it was in the owners’ interest for a notice to be given immediately on arrival even though it was not possible for the vessel to tender a valid notice at that time. Whilst there was no evidence one way or the other as to whether the notice was handed to the charterers before or after the inspection of the wing tanks had taken place, it had been prepared in such a way as to allow for the recording of events as they occurred. A copy of the notice was returned to the vessel showing that it had been accepted at 08.00 on 1 February by the shippers who were acting as the charterers’ agents for that purpose. As that was the earliest time at which a valid notice of readiness could have been tendered, that acceptance had to be to some effect. Either the notice should be treated as if it had been given again or a fresh one had been given at that time. In the case of The ‘‘Mexico 1’’ the notice of readiness was purportedly accepted by the charterers at a time when the vessel was not ready for discharge. In the present case the acceptance took place at a time when the vessel was ready for discharge and a valid notice of readiness could have been tendered. The vessel did in fact commence loading at that same time. As the following day was a Saturday laytime accordingly commenced at 08.00 on Monday 4 February. The owners were correct in their contention that the second notice was valid. 111. The ‘‘Petr Schmidt’’39 was concerned with notices of readiness tendered outside the hours stipulated in the charterparty but the vessel was in fact ready to load or discharge cargo at the time that the notices were given. Were the notices invalid as per The ‘‘Mexico 1’’? 38. [1990] 1 Lloyd’s Rep. 507. 39. [1997] 1 Lloyd’s Rep. 284 and [1998] 2 Lloyd’s Rep 1 (C.A.).

261

Para. 111

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

The charterparty provided: ‘‘ N OT I C E O F R E A D I N E S S

Upon loading at customary anchorage at each port of loading or discharge, the Master or his agent shall give the charterer or his agent notice by letter, telegraph, wireless or telephone that vessel is ready to load or discharge cargo, berth or no berth, and laytime, as hereinafter provided, shall commence upon the expiration of six hours after receipt of such notice or upon the vessels arrival in berth . . . whichever first occurs.’’

There was an additional typed clause 30 which provided: ‘‘ 3 0 N OT I C E O F R E A D I N E S S C L AU S E

Vessel not to tender notice of readiness at loading port prior to laydays unless charterers give their consent to do so. Notice of readiness at loading and discharging port is to be tendered within 06.00 and 17.00 hrs local time.’’

The vessel arrived at the loading port at 08.00 on 6 August 1994. She anchored at that time and, when in fact ready to load, tendered a notice of readiness at 00.01 on 9 August. She berthed at 00.40 on 10 August and loading commenced at 02.00 on that day. The vessel then arrived at the first discharge port at 18.00 on 16 August 1994 and notice of readiness was tendered at that time. She was in fact ready to discharge. She berthed at 07.50 on 17 August and discharge of cargo commenced at 13.45 on that day. The vessel subsequently arrived at the second discharge port at 18.00 on 18 August 1994 and a notice of readiness was tendered at that time. Again, she was ready to discharge. She berthed at 11.50 on 19 August and discharge of cargo commenced at 17.40 on that day. The owners contended that laytime commenced as follows: (a) at 12.00 on 9 August at the loading port, that is six hours after the first moment when notice of readiness was permitted to be given according to clause 30 of the charterparty; (b) at 07.50 on 17 August at the first discharge port, that is at the time of berthing which occurred before the expiration of six hours after the first moment when notice of readiness was contractually permitted; (c) at 12.00 on 19 August at the second discharge port that is six hours after the first moment when notice of readiness was contractually permitted. The arbitrators decided that the notices of readiness, although they were not given during the hours stipulated by the charter, were not legal nullities and took effect so as to commence laytime, in accordance with clause 6, six hours after 06.00 in the morning of the day (or day after) they were given. The charterers appealed to the High Court. They submitted that a notice of readiness given outside the specified hours was invalid and a nullity. They said that the giving of a timely notice of readiness was a condition precedent to running of laytime both as a matter of pure construction and of authority. The owners submitted that the notices of readiness were good notices in the hands of the charterers at 06.00 hours on the relevant day. It was held by Mr Justice Longmore (as he then was) that: (1) the clause did not say in terms that a notice of readiness given outside the contractual hours would not merely prevent laytime from starting but was to be regarded as a nullity so that a second notice of readiness would be 262

C O R R E C T N E S S O F N OT I C E

(2)

(3)

(4)

(5)

(6)

(7)

Para. 111

required; in these days of instantaneous communication it was somewhat surprising to be told that a notice of readiness given five minutes before the contractual time was to be treated as a complete nullity; and it was strangely uncommercial that the charter should require in that event, a second notice of readiness to be given; in the absence of express wording, the courts generally leaned against construing clauses as conditions precedent to liability; and clause 30, requiring a timely notice of readiness to be given, would not be construed as imposing a condition precedent to the beginning of laytime provided always that the vessel was in fact ready when the notice was given; the vessel was ready when the notices were given; they were notices which stated the truth viz. that the vessel was ready to load or discharge; the only thing wrong about the notices was the time that they were tendered, which was outside the contractual hours specified in the contract; to say that such notices were invalid and must therefore be nullities begged the question; they were accurate but non-contractual in that they were tendered outside the contractual hours; that did not make them invalid notices in the sense of being nullities; timing provisions had nothing to do with whether notices were nullities and it was only if a notice was untrue that it made sense to say that it was invalid in the sense of being a nullity; although it might be correct to say that a notice given outside the contractual hours was invalid in the sense that it did not comply with the contract it did not follow that the courts should hold that a premature notice of readiness was a nullity and of no effect; there was no good reason why the notice should not be effective as at the time which the contract fixed for it to be tendered; Transgrain Shipping Ltd. v. Global Transport, The ‘‘Mexico 1’’.40 it was impossible to see any real prejudice in a premature notice provided it did not have contractual consequences before the time stipulated in the contract; and there was no prejudice to the charterer because if circumstances changed so that the ship was in fact not ready at the contractual time of 06.00 the notice would be invalid in the traditional sense; the vessel was ready when the notice of readiness was given and she was also ready at 06.00 hours when the charterers were in receipt of an accurate notice of readiness; the arbitrators said that there was a valid tender of notice of readiness at the next 06.00 in circumstances when it was actually transmitted and received outside of the 06.00—17.00 period, there being no further action required by anybody nor any change in circumstances; that conclusion would be agreed with and the award would be upheld.

The charterers appealed, the question of law for decision being: Whether if a clause in a charterparty required a notice of readiness to be tendered within particular 40. [1990] 1 Lloyd’s Rep. 507, distinguished.

263

Para. 111

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

hours of the day and it was, in fact, tendered outside those hours but at a time when the ship was physically ready to load or discharge, it was an invalid notice and a nullity so that a fresh notice had to be given before laytime could begin, or whether the notice took effect when those hours began? It was held by the Court of Appeal,41 that: (1) the telex message was sent out of hours in the knowledge that it would remain on the receivers’ machine until the following day when it would be available for office staff to deal with it at or after 06.00; this was a clear case of ‘‘tender’’ at that time; neither the fact that the message was ‘‘received’’ by the charterers’ machine at the same time as it was sent, nor the possibility that the office staff might take it off the machine and even deal with it before 06.00, prevented this from being a ‘‘tender’’ at 06.00 for the purposes of clause 30. (2) a notice was invalid if the statements made in it were in fact incorrect when the notice was tendered, received or given; but it did not follow that the statements could not also relate to the time when they were made; the primary requirement was that they should be statements of existing fact; and there was an implied representation that the statements were accurate at the moment when the notice was tendered but this did not mean that the notice was invalid because the statements were made at some earlier time; in such a case the implied representation was that the statement remained accurate when tendered. (3) a notice which was tendered outside the hours permitted by clause 30 was non-contractual and could not be relied on as a valid notice, meaning effective to start the time clock running for loading or discharge; notices tendered outside the permitted hours were non-contractual and therefore ‘‘wrong’’, and not to be relied on as having contractual effect at the time of tender; whether the defect was ‘‘cured’’ by the passage of time was a question of fact rather than law. (4) the notice was given in writing and by means which were equivalent to leaving it at the offices to be attended at 06.00 the following day; there was a tender at 06.00 whether or not there was previously a tender at the time when the telex or fax message was sent; clauses 6 and 30 should be read together and the receipt by the charterers of the notice could be said to be the counterpart of the tender by the owners; the appeal would be dismissed. In deciding as above the Court of Appeal considered The ‘‘Mexico 1’’,42 and The ‘‘Agamemnon’’43 (the latter also referred to Chapter 1 in respect of arriving at the agreed destination). Regarding The ‘‘Agamemnon’’, which judgment came between that of Mr Justice Longmore and the Court of Appeal in The ‘‘Petr Schmidt’’, it was suggested by counsel in The ‘‘Petr Schmidt’’ that Mr Justice Thomas’s decision in 41. [1998] 2 Lloyd’s Rep. 1. 42. [1990] 1 Lloyd’s Rep. 507. 43. [1998] 1 Lloyd’s Rep. 675.

264

C O R R E C T N E S S O F N OT I C E

Para. 111

The ‘‘Agamemnon’’ was inconsistent with Mr Justice Longmore’s judgment at first instance. Lord Justice Evans did not think so and was of the view that what Mr Justice Thomas said, when referring to The ‘‘Petr Schmidt’’, was: ‘‘The notice was sent by telex or fax after 17.00 hours local time and was on the receiving machine of the charterers at 06.00 hours the following morning. At the time it was sent and at 06.00 the following morning, the vessel was in compliance with the condition for giving the notice of readiness—being at the contractual position and being ready to discharge. The arbitrators held that it was a valid notice and there was a valid tender of notice at 06.00 hours the following morning. That decision was upheld by Mr Justice Longmore. He agreed with that reasoning and held that the notice was a valid notice. He concluded that there was no good reason why a notice given in these circumstances should not be effective as at the time at which the contract fixed for it to be tendered. I respectfully agree with that decision.’’

Lord Justice Evans went on to say that, in his judgment, that was a correct analysis of the issue and of Mr Justice Longmore’s decision in the present case. Moreover, in his respectful view, Mr Justice Thomas’s decision in The ‘‘Agamemnon’’ was entirely correct. Lord Justice Peter Gibson, while agreeing with the above reasoning of Lord Justice Evans, also had the following pertinent words to say: ‘‘The result for which Mr Priday contended seems to me manifestly to accord with commercial common sense. The fact that the transmission of the telex or fax giving notice of readiness occurred too early to comply with the terms of clause 30 was of no practical significance for the charterers. As the experienced arbitrators said, it would never have occurred to the Master to send another notice of readiness after 06.00 hours as he would only have repeated what he said previously; thus the sending of another notice would have appeared a futile exercise. As the arbitrators pointed out, a notice of readiness telexed into the charterers’ office at 05.59 would on the charterers’ view be invalid, whereas a notice telexed a minute or two later would be valid even though the office had not been opened at the time. The arbitrators considered that to be a commercial nonsense and they referred to the commercial practice whereby notices are accepted as having been given at the start of office hours on the next working day.’’

Sir Christopher Slade agreed with the judgments of Lord Justice Evans and Lord Justice Peter Gibson and concurred in dismissing the charterers’ appeal and upholding the arbitrators’ award. He also had this to say: ‘‘Laytime under this charterparty was pressed to begin on the expiration of six hours after receipt of the notice of readiness. The commercial purpose of the second sentence of clause 30, as I would infer, must have been to ensure that the charterers or their agents should not be saddled with the receipt of a notice of readiness, and the consequent commencement of laytime, between 17.00 hours and 06.00 hours, that is to say outside what might be regarded as office hours. The primary conclusion reached by Lord Justice Evans namely that on the facts of the present case there was a ‘tender’ at 06.00, is in my judgement entirely consistent not only with this commercial purpose but also with the wording of clause 6 and 30, which I think should be read together. The wording of clause 6 makes it clear that the time of the giving of the notice plus the receipt thereof are the relevant factors for the purpose of the clause.’’

Commonsense came out top at all levels, by the arbitrators, by the Commercial Judge and by the three Lord Justices of Appeal so that in general, a written notice of readiness, given to the charterers outside the office hours, will be considered to 265

Para. 111

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

have been tendered at the commencement of hours on the next working day, absent any special factors. The ‘‘Agamemnon’’44 has already been referred to in the context of a vessel having to reach the agreed charterparty destination before a valid notice of readiness can be tendered; see earlier paragraph 21 for the brief facts of the case and what was decided by the arbitrators and the commercial court judge (in outline). Mr Justice Thomas (as he then was) had two questions to consider on the basis of which leave to appeal was granted: 1. Upon the true construction of the charterparty, what is the effect of a notice of readiness which is given at a time when the vessel is ready but for the fact that she has not arrived at the place required under the charterparty? 2. In particular, what is the effect upon such notice of readiness if the vessel, remaining in the same state of readiness, subsequently arrives at the place at which the charterparty required the notice to be given? His Lordship decided that when the notice of readiness was given at the South West Pass, the vessel had not, on the findings of fact made by the arbitrators, reached a point as close to the loading berth as she might be permitted to approach; she only reached that point when she arrived at the Baton Rouge anchorage at 10.25 on 7 October. Thus at the time the notice was given, the Owners had not complied with the terms of the charterparty for the giving of notice. It was not a valid notice and could not operate as the event to trigger the commencement of laytime. Therefore, as in The ‘‘Mexico 1’’, unless something happened after the notice was given to make laytime start, it never started at all. No further notice was given and nothing further of relevance happened which is raised by the questions before the court on the appeal. The owners sought to distinguish The ‘‘Mexico 1’’ on the basis that the notice was untrue in that the ‘‘Mexico 1’’ was not in fact ready to discharge the cargo (although the notice stated that it was), thus making the notice invalid, whereas in The ‘‘Agamemnon’’ the notice was truthful in its terms but inchoate because it had not been given at the right point of time. Mr Justice Thomas said that the notice in The ‘‘Agamemnon’’ was not truthful (the vessel had not reached the point which it was permitted to reach that was nearest to Baton Rouge), but he went on to consider the position if the notice had been a truthful notice and came to the same conclusion: the decision in The ‘‘Mexico 1’’ was quite clear that a valid notice of readiness can only be given when all the conditions set out in the charterparty for its giving had been met, including the geographical position, and the charterparty geographical position had not been met by the Agamemnon when the notice of readiness was sent when the vessel arrived at the South West Pass. The port of Baton Rouge did not extend all the way down to the Pass; it had its own physical boundaries and was in effect a separate port with its own authority like other ports on the Mississippi River.

44. [1998] 1 Lloyd’s Rep. 675.

266

C O R R E C T N E S S O F N OT I C E

Para. 111

The owners also sought to rely upon the decision of Mr Justice Longmore in The ‘‘Petr Shmidt’’ (see earlier this paragraph). Mr Justice Thomas did not accept that The ‘‘Petr Shmidt’’ was of help to the owners, although he agreed with that decision, of which he had the following to say: ‘‘It applies the principles set out in The ‘Mexico 1’; the notice was valid as the conditions stipulated in the charter as to the readiness of the ship and her arrival at the contractual place of destination had been met. The decision was solely concerned with the time of tender of a notice which was in fact valid as it met the conditions stipulated both at the time it was sent and the time it was tendered. At the time the notice of readiness was given in this case, the vessel was not at the point she was required to be at and therefore the conditions for giving a notice were not met.’’

In his conclusion Mr Justice Thomas also had the following pertinent words to say: ‘‘In my judgment the decision in The ‘Mexico 1’ is clear. . . . It has been observed . . . that this decision caused a certain amount of consternation in shipowners’ and ship operators’ offices throughout the world because of its repercussions regarding all voyage charterparties which are subject to English law. If the shipping community did not find the law as clearly set out by Lord Justice Mustill (as he then was) in The ‘Mexico 1’ met its commercial needs, it was open to them to modify the language of charterparties to start laytime running in a different way, by a simple provision that would permit the giving of an inchoate notice which would take effect on a subsequent event. They no doubt might have hesitated long and hard before doing so, as the principles on which The ‘Mexico 1’ is based are straightforward, easy to operate and give rise to far fewer problems than contractual language that would enable ‘inchoate’ notices to be given which would take effect upon a further event stipulated in the charterparty. In any event, as has been repeatedly pointed out, there has long been a simple solution to hand. As long ago as 1970, Mr Justice Donaldson said in The ‘Timna’ [1970] 2 Lloyd’s Rep. 409 at 411 all Masters should: ‘Go on giving such notices in order that, when later the lawyers are brought in, no one shall be able to say: ‘‘If only the master had given notice of readiness, laytime would have begun and the Owners would now be able to claim demurrage.’’ ’ The Master could easily have done so in the present case. This requirement is simple and makes for much greater commercial certainty than attempts to revive the concept of allowing inchoate notices to be given which take effect upon a subsequent event.’’

It is obvious from cases like The ‘‘Agamemnon’’ that masters of vessels are not doing what they were exhorted to by Mr Justice Donaldson (see above and also earlier at paragraph 100) and no doubt many masters will continue not to take heed of the English law regarding the valid tendering of a notice of readiness. It may well be that the time has come when owners of vessels, if they have not already done so, should give serious thought to making a radical change to their approach to the commencement of laytime and the tendering of a notice of readiness (NOR). They should be thinking of a notice of arrival (NOA) clause in their charterparties whereby the laytime clock starts ticking as soon as the vessel arrives off the pilotage area for the port (or for a stipulated number of hours after the notice of arrival is tendered) and the vessel is in all respects ready to commence loading/discharging, whether in berth or not or whether or not a notice of readiness is tendered, and laytime is only suspended for the laytime exceptions and/or breaches of contract by the owners which occasion delay to the charterers. 267

Para. 111

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

The later cases of The ‘‘Mass Glory’’45 (already referred to Chapter 3, paragraph 61 in relation to damages) and The ‘‘Happy Day’’46 also had something to say about the correctness of a notice of readiness. They adopted and confirmed The ‘‘Mexico 1’’ and The ‘‘Agamemnon’’ in respect of the strict approach to the correctness of a notice of readiness as set out earlier in this chapter. Both of the former cases are considered later, in the next section of the book, which relates to the acceptance of a notice of readiness and also to waiver and to estoppel.

ACCEPTANCE OF NOTICE OF READINESS INCLUDING WAIVER/ESTOPPEL ETC. 112. In the past there was some controversy in respect of circumstances where charterers or their agents or those to whom a notice of readiness should be tendered accepted a notice which had been tendered by the master; in such circumstances, was it the end of the day in that the charterers could not, thereafter, say that the notice of readiness was invalid so as to prevent the running of the laytime clock? Even if the laytime clock started in such circumstances the charterers may be able to claim damages against the owners (and so recover the demurrage which would otherwise fall upon them) if there was a breach of contract by the owners, e.g. vessel required by an express provision to be presented with holds clean and, after the commencement of loading, one of them is found to be dirty and this causes some delay in the loading operation. Therefore, in some circumstances, it may not matter if the notice of readiness is accepted since charterers will be able to claw back time ostensibly lost to them under the breach/damages principle. However, there can be other circumstances where notice of readiness is accepted (not just received) and the vessel is delayed in berthing by way of a cause which does not amount to a breach of contract by the owners such as bad weather. Alternatively, a condition precedent such as entry at the Custom House is not satisfied. In such circumstances, does laytime commence? Before going further it is worth mentioning that Mr Justice Donaldson (as he then was) did say, in The ‘‘Helle Skou’’,47 that if a notice of readiness was accepted by the charterers they could not resile from this (see earlier, paragraph 108), save upon grounds of fraud. In that case the facts were that, by a provision in the charterparty the vessel was to be presented for loading with holds clean and dry and free from smell. The vessel arrived at Antwerp on 22 January to load a cargo of skim milk in bags. Notice of readiness was given on 23 January and the charterers made no attempt to inspect the vessel prior to the commencement of loading. Stevedores boarded the vessel at 08.00 on 24 January and loading commenced at 08.30; later on 24 January there was a reported smell of fishmeal in some of the holds. In the event the partially loaded cargo had to be discharged so that the vessel could be cleaned; she reberthed on 28 January and reloading commenced on 29 January. 45. [2002] 2 Lloyd’s Rep. 244. 46. [2002] 2 Lloyd’s Rep. 487. 47. [1976] 2 Lloyd’s Rep. 205.

268

AC C E P TA N C E O F N OT I C E O F R E A D I N E S S

Para. 113

In deciding that the charterers had accepted the notice of readiness and could not later claim to reject it (save upon grounds of fraud which were in any event absent) the judge stated what has already been set out earlier in paragraph 108 and then went on to hold, in respect of the breach by the owners and damages, that the charterers would suffer no loss if laytime was taken to commence when the vessel returned to the loading berth (13.30 on 28 January) and on the assumption that the cost of the abortive loading and discharging of cargo had been met in some other way. The decision made sense from a practical/commercial viewpoint but it may not lie easily with the Court of Appeal’s decision in The ‘‘Mexico 1’’48; see earlier paragraph 109 and later paragraph 116. The cases dealing directly with the subject are The ‘‘North King’’,49 The ‘‘Shackleford’’50 and The ‘‘Mexico 1’’48 but, indirectly the Court of Appeal decision in Panchaud Fr`eres S.A. v. Etablissements General Grain Co.51 which case has, in the writer’s opinion, relevance to the subject. 113. In The ‘‘North King’’49 the vessel arrived at the loading port at 22.30 on Friday, 31 October, and anchored. On Saturday, 1 November, at 09.00 the owners’ agents at the port tendered to the charterers’ agents a notice of readiness and, below the signature of the owners’ agents, there was typewritten: ‘‘The notice of readiness was tendered and accepted at 09.00 on November 1 as per charterparty, time to commence as per charterparty dated . . . ’’ This typed sentence was followed by the signature of the charterers’ agents. The case went to arbitration and the umpire found that the charterers’ agents, with actual or ostensible authority of the charterers, agreed to accept the notice of readiness on 1 November and, pursuant to that agreement, they so accepted it. He also found that the charterers were estopped from objecting to the notice which had been given. When the case arrived in the High Court, under the special case procedure, Mr Justice Mocatta decided the case on the basis that the charterers’ agents, acting with the authority of their principals, had accepted the vessel’s notice of readiness on a Saturday which was a holiday, when arguably under the charterparty they should not have done so, in pursuance of an agreement with the owners’ agents. In view of this decision, he did not have to decide on the estoppel point but he did go on and have this to say about estoppel as an independent argument: ‘‘I have no doubt that the proper inference of fact is that a representation was made to the effect that if a proper notice, in the sense that the ship was then ready physically was given on November 1, before noon, it would be treated as having the same effect as a similar notice given on any other Saturday. The question, however, whether the owners acted upon that representation in a way in which they would not otherwise have acted is, perhaps, more difficult. Accordingly, although it may be that on the point of estoppel, if it had stood alone, I would have reached the conclusion that the owners were entitled to succeed, I think it best not to base my judgment in the alternative upon that, but to restrict it to the firm ground with which I have already dealt, namely, that there was an agreement between the parties the effect 48. [1990] 1 Lloyd’s Rep. 507. 49. [1971] 2 Lloyd’s Rep. 460. 50. [1978] 1 Lloyd’s Rep. 191 and [1978] 2 Lloyd’s Rep. 154; above, para. 87, regarding special clauses having relevance to readiness. 51. [1970] 1 Lloyd’s Rep. 53.

269

Para. 113

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

of which was to treat Saturday, November 1, in the same way as any other Saturday for the purposes of the giving of a notice of readiness.’’

It appears, from the obiter dicta of Mr Justice Mocatta that he would have wanted to have seen some reliance by the owners on the representation by the charterers before deciding that the owners were entitled to an estoppel because of the acceptance of the notice of readiness by the charterers. Reliance can form an essential part of the doctrine of estoppel and will be referred to again later in this chapter. Before leaving The ‘‘North King’’49 mention is made of what the learned umpire (the author of Summerskill on Laytime) had to say in respect of the charterers’ contention that, since the acceptance was based upon ‘‘as per charterparty time to commence as per charterparty . . . ’’, this was a qualification to the acceptance of the notice of readiness so that the notice of readiness could not be effective until Monday, 3 November in view of the charterparty requirement that notice of readiness could not be given on the Saturday. The learned umpire had this to say: ‘‘I do not read the words ‘as per C/Party’ as a qualification to their acceptance, but rather as an acknowledgement that the Notice of Readiness was in all respects in accordance with the requirements of the Charterparty. Their acceptance that time was to commence ‘as per Charterparty’ similarly in my view acknowledged that laydays would commence on the next business day thereafter.’’

It is pointed out that there has been no judicial ruling regarding what the learned umpire stated above save that Sir David Cairns did say, in the Court of Appeal in The ‘‘Shackleford ’’,52 that ‘‘acceptance of a notice of any kind usually means acceptance of the notice as an effective notice’’; see later paragraph 114. Estoppel, vis-`a-vis a notice of readiness, did not raise its head in the courts again for something like seven years after The ‘‘North King’’.49 During that time many maritime arbitrators in the City of London were reluctant to decide against charterers on an estoppel point simply because of a naked acceptance of a notice of readiness by the charterers or their agents. It was not until the Shackleford50 decision that the spotlight once again focused upon the subject in the courts. 114. The ‘‘Shackleford ’’50 tended to have special circumstances which allowed it to be distinguished from the run of the mill circumstances (notice of readiness tendered by the master and simply endorsed ‘‘accepted’’) for an estoppel to operate in favour of the owners. Some of the facts have already been set out earlier (see paragraph 87) in that the vessel had to wait at an anchorage for some considerable time before moving into a discharging berth. The all-important facts, vis-`a-vis estoppel, were that notice of readiness was immediately given after the vessel arrived at Constanza Roads on 15 October and was accepted at that time by the receivers. The receivers endorsed their acceptance on a notice of readiness. Some days later, on 23 October, the receivers’ agents cabled the master stating that they had contacted the receivers and that time should count as per charterparty terms from arrival. On 28 October the receivers’ agents cabled the owners’ agents in London again stating that time was counting from arrival at Constanza Roads according to 52. [1978] 2 Lloyd’s Rep. 154.

270

AC C E P TA N C E O F N OT I C E O F R E A D I N E S S

Para. 114

the charterparty. The vessel did not obtain customs clearance until 26 November when she went to a berth to bunker. In the arbitration the arbitrator decided that the charterers were estopped from denying that they had accepted a notice of readiness and his decision on this aspect was upheld in the High Court. The arbitrator did make a finding that the owners and/or master relied upon the receivers’ acceptance of the notice of readiness inasmuch as they made no attempt to procure an earlier berth, for example, a bunkering or watering berth, so that customs entry might be obtained at an earlier date. In his judgment, Mr Justice Donaldson (as he then was) stated that the notice of readiness could have been rejected for prematurity or it could have been ignored. In fact, it was expressly formally accepted on no less than three occasions. He referred to his earlier decision in The ‘‘Helle Skou’’.53 In his judgment, acceptance of the notice created an estoppel by conduct within the doctrine propounded in Panchaud Fr`eres S.A. v. Etablissements General Grain Co.54 and the charterers could not be heard to allege that the notice was premature. In respect of the charterers’ argument that any plea of estoppel involved a finding that the person putting forward the plea relied upon the conduct of representation and did so to his detriment, his lordship did not wholly agree. He cited what Lord Denning said in the Panchaud Fr`eres case54 in that the basis of estoppel by conduct is that a man has so conducted himself that it would be unfair or unjust to allow him to depart from a particular state of affairs which another has taken to be settled or correct. In other words, you cannot blow hot and cold. He also cited what Lord Justice Winn had to say in the same case: ‘‘ . . . what one has here is something perhaps in our law not yet wholly developed as a separate doctrine—which is more in the nature of a requirement of fair conduct—a criterion of what is fair conduct between the parties. There may be an inchoate doctrine stemming from the manifest convenience of consistency in pragmatic affairs, negativing any liberty to blow hot and cold in commercial conduct.’’

Mr Justice Donaldson then went on to say: ‘‘I do not understand these judgments as any evidence of positive reliance. If a man so conducts himself that another can reasonably regard a particular state of affairs as existing or settled, the only question is whether or not in all the circumstances it would be unfair to allow him to resile. It was in this context that the position of the other party had to be considered: deliberate action or inaction and reliance upon the alleging estoppel conduct will provide good, and probably overwhelming, reason for holding that it would be unfair and unjust to allow any resilement; evidence that the conduct was unnoticed or disregarded, or treated as of no importance, might well lead to the opposite conclusion.’’

The decision of Mr Justice Donaldson regarding estoppel was upheld by the Court of Appeal. Giving the leading judgment, Sir David Cairns stated that the receivers had to have authority to make some commercial decisions on behalf of the charterers and as a matter of commercial practicality they must have had implied authority to waive a condition regarding the commencement of laytime. Almost 53. [1976] 2 Lloyd’s Rep. 205; earlier, para. 108. 54. [1970] 1 Lloyd’s Rep. 53.

271

Para. 114

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

nothing was said regarding the Panchaud Fr`eres case54 save that the case was one of estoppel between buyer and seller and simply gave a general account of the circumstances in which estoppel by conduct could arise. In more detail in respect of the estoppel point the charterers submitted five reasons why there was no estoppel, two of which were: (1) that charterers got no benefit from accepting the notice of readiness and it was relevant to take into account the unlikelihood of their surrendering the protection of clause 13; (2) that there was no express surrender of the condition as to customs entry. Sir David Cairns had this to say: ‘‘Now it is clear that in construing a contract it is right to take into account all the surrounding circumstances. I think that the same is true in the realm of estoppel: what is said or written is to be interpreted in the light of the circumstances, and words should not be given a meaning which obviously could not be intended in those circumstances. But a clear meaning cannot be rejected because it involves the surrender of rights; the surrender may have resulted from generosity, from carelessness or from the lack of communication between principal and agent. If what is said is sufficiently clear and is relied on it can make no difference that what was said was not in the best interest of the person on whose behalf it was said. Now to found an estoppel there must be a clear representation: Woodhouse A.C. Israel Cocoa S.A. v. Nigerian Produce Marketing Co. Ltd.55 The speeches in the House of Lords, however, show that reasonable clarity is sufficient: see per Lord Pearson at pp. 450 and 762C and per Lord Salmon at pp. 457 and 771D. Now it is true that in this case there was no express surrender of the condition as to customs entry and that the only endorsement made on the notice of readiness was the signature and stamp of Agroexport against the words ‘time accepted’ in print and ‘15th October 1976 at 08.26’ in handwriting. I have no doubt that that was sufficient to constitute ‘acceptance’—whatever acceptance may mean. The wording of the two cables is puzzling because of the words ‘as per charter-party terms’ in the one and ‘according to the charter-party’ in the other. But the words ‘your time should count . . . from arrival’ and ‘time counting from arrival on roads’ can only refer to laytime and are only consistent with the notice of readiness having been accepted as a valid notice of readiness so as to start the laytime clock running. Mr Rix contends that the endorsement might mean merely ‘received’ or ‘accepted as a true statement that the vessel is in a state of readiness to discharge’. Either of these seems to me a strained meaning. Acceptance of a notice of any kind usually means acceptance of the notice as an effective notice. The experienced arbitrator and the experienced commercial judge so interpreted this acceptance without any indication that it had occurred to them that it could have any other meaning. In my judgment they were right to do so.’’

The above gives support to the premise that if charterers or their agents accept a notice of readiness, simply by the endorsement ‘‘accepted’’, and this is relied upon, that will be binding upon the charterers as an effective notice of readiness save where the notice is shown to be bad and, of course, where there has been fraud. 115. Despite the Shackleford56 decision some arbitrators continued to be reluctant to allow owners the benefit of an estoppel when charterers or charterers’ agents simply endorsed a notice of readiness with ‘‘accepted’’ so that the acceptance appeared to be something of a formality. For many arbitrators there had to be, in general, something more than a mere acceptance of a notice of readiness (often looked upon as nothing more than a receipt), such as the circumstances in The 55. [1972] 1 Lloyd’s Rep. 439; [1972] A.C. 741. 56. [1978] 1 Lloyd’s Rep. 191 and [1978] 2 Lloyd’s Rep. 154; see para. 114, above.

272

AC C E P TA N C E O F N OT I C E O F R E A D I N E S S

Para. 115

‘‘Shackleford ’’.56 For example, in The ‘‘Achillet’’57 arbitration58 the vessel arrived off the loading port on 21 March and tendered her notice of readiness which was accepted by the charterers’ agents on 22 March. In the meantime, the vessel remained at anchor awaiting berthing instructions. The vessel berthed late on 22 March and inspection of the cargo tanks occurred at 04.30 on 23 March; the tanks were found unsuitable for the intended cargo and it was not until 25 March that loading the vessel commenced. The owners contended that laytime was commenced by the acceptance of the notice of readiness by the charterers’ agents on 22 March but the tribunal, in a unanimous award, decided against them on this contention. The arbitrators had this (inter alia) to say: ‘‘The owners relied upon the Shackleford decision in support of their contention that the refinery, by way of the acceptance of the notice of readiness of March 22, estopped the charterers from denying the validity of the notice of readiness. The Shackleford56 case had its own special facts which supported an estoppel argument; further, there was no question of the Shackleford being rejected on account of the state of her cargo spaces after she had berthed, as in the present case. While we might well like to find a way to allow the owners the benefit of the time while the vessel was waiting off Aden we do not think that an estoppel can be established where mere acceptance of the notice of readiness on the evening of March 22 was followed by a rejection of the vessel not many hours later; further, there was no reliance by the owners on the acceptance of the notice neither did they suffer any detriment on account of the acceptance of the notice. The mere acceptance of the notice of readiness could not, in the context of all the relevant circumstances, be considered as a surrender by the charterers of their fundamental right to reject the notice of readiness when it became clear that the vessel was not ready to load the intended cargo. Much more was required from the charterers’ camp in order for an estoppel to be founded whereby there was a clear meaning that laytime would commence irrespective of the result of an inspection of the cargo tanks which was due to take place in the near future. It is worth mentioning that the notice of readiness which was passed to the refinery read ‘please acknowledge receipt by signing and returning to me the attached three copies’ and was followed by the typed, ‘accepted on’; we think that the refinery were making more of an acknowledgment of a receipt than a binding acceptance of a notice of readiness. The owners’ estoppel argument fails.’’

The above case could, in the light of The ‘‘Mexico 1’’ and earlier decisions, have been decided, with the same end result, by the application of the premise that a notice of readiness, which is bad when given, is a nullity and therefore of no effect so that, absent waiver/estoppel, a further notice of readiness had to be tendered when the vessel was ready to load/discharge. Other arbitrations involving a premature notice of readiness and acceptance of a notice of readiness/waiver/estoppel were reported in 1987, 1989, 1990 (all of which are considered below). In LMLN 262—18 November 1989 the vessel was chartered under the Vegetable Oil Charterparty form (‘‘Vegoil’’). The owners tendered notice of readiness to load at 08.30 on 30 November. At that time the vessel was still outside the commercial limits of the port and was therefore not an arrived ship. The vessel did not come within the limits of the port until 18.50 on 30 November.

57. 1985. 58. Also cited in LMLN 180—25 September 1986.

273

Para. 115

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

There was a dispute as to when laytime commenced. It was held that the effect of The ‘‘Massalia (No. 2)’’59 and The ‘‘Mexico 1’’60 was that there was no general rule that premature notice of readiness became automatically effective when a vessel became ready. The general rule was that a notice had to be valid when tendered and if it was invalid it was ineffective. Once the conditions for a valid notice of readiness had been tendered, a fresh notice had to be tendered. If it was not tendered, the original notice could only be considered to have become effective in the event of the charterers having waived their contractual entitlement to a valid notice (which would in fact be a second or further notice). In the present case although the notice was premature and invalid, the charterers treated the notice as being effective because in reliance upon it they had the cargo available for immediate loading when the vessel berthed. The owners’ agents were given no reasons to suspect that the charterers were treating the original notice as anything other than valid and effective. The charterers therefore waived their right to a fresh notice. Arrival at the deep water anchorage at 18.50 on 30 November therefore triggered the running of laytime. In the above arbitration the tribunal had The ‘‘Mexico 1’’ High Court decision before it but it did not have the benefit of the Court of Appeal’s judgment regarding estoppel (see later paragraph 112); it might have made a different decision if it had applied, strictly, what the Court of Appeal had to say in respect of waiver/estoppel in the context of a notice of readiness. However, in LMLN 206—26 September 1987 the vessel was chartered on the Baltimore Form C charter for a voyage from the U.S. Gulf to the Arabian Gulf. Printed lines 63 to 66 of the charterparty provided that notice of readiness to load had to be ‘‘accompanied by pass of the Inspectors attesting to the fact that the vessel is clean-swept and ready in all compartments . . . ’’ The vessel tendered notice of readiness which was not accompanied by the requisite inspectors’ pass. The charterers’ agents accepted that notice of readiness. It was not until a day later that the requisite pass was issued. The charterers contended that the notice of readiness was invalid because it was not accompanied by the requisite pass. The owners argued that even if the initial notice of readiness was defective, the fact that the charterers’ agents accepted the notice precluded the charterers from relying upon any defect in it. It was held that it was sometimes unclear whether the obligations listed before a valid notice of readiness could be given constituted conditions precedent or whether they constituted obligations whose breach gave rise only to the right to recover damages. A close reading of lines 63 to 66 showed that the obligation to have a pass accompanying the notification was one that was closely bound up with the giving of the notification. It could not be treated as an independent obligation. Accordingly, the obligation to obtain the appropriate pass was a condition precedent and the notice of readiness that was tendered was invalid. However, that initial notice of readiness had been accepted by the charterers’ agents some two hours after it had been tendered. The owners had argued that as 59. [1960] 2 Lloyd’s Rep. 352. 60. [1988] 2 Lloyd’s Rep. 149.

274

AC C E P TA N C E O F N OT I C E O F R E A D I N E S S

Para. 115

a result of the acceptance of the notice of readiness and/or the fact that the vessel was subsequently prepared for the loading of cargo, the charterers had waived or were estopped from relying upon any defect in the notice of readiness. The general rule was that before a valid notice of readiness could be tendered all the requirements imposed by the charterparty had to have been satisfied. However, in certain circumstances, a charterer might be estopped from relying upon a defect in a notice—see The ‘‘Shackleford’’.61 Two of the main factual considerations underlying the Shackleford decision were the difficulty faced by the owner in establishing the true position and the closely connected identity of the charterers and their agents. Such considerations might be very significant when one was considering a port in Eastern Europe. However, they could scarcely apply to a port in the United States. The owners could have been in no doubt about the fact that the U.S. Department of Agriculture inspection had not taken place at the time when the initial notice of readiness was tendered. Furthermore, although from a strict legal point of view an agent could act in such a way as to bind his principal, the owners would have had no reason to assume that the agents in question could be identified more closely with their principals than any other apparently independent port agent. In addition, there was no evidence that the owners had in any way acted to their prejudice as a result of the charterers’ agents having accepted the notice of readiness. Consequently, the arguments of waiver and/or estoppel would be rejected. Laytime commenced at 08.00 on the day after the requisite pass had been issued. And again in LMLN 266—13 January 1990 (also referred to earlier in paragraph 87, Chapter 5 regarding special clauses applicable to readiness) the owners failed in an acceptance of readiness contention. The vessel was chartered under the Asbatankvoy as amended to carry a cargo of crude oil from Africa to the U.S. for discharge into lighters. The charterparty provided that the vessel was to comply with all U.S. Coast Guard regulations and contained a warranty by the owner that at all necessary times the vessel would have on board all certificates required for service in the United States. The charterparty further provided that laytime should commence six hours after receipt of notice of readiness by charterers or when the first lighter arrived alongside, whichever occurred first. United States law required that a ‘‘certificate of compliance’’ had to be issued before foreign vessels could operate in navigable waters of the United States or could carry out the function of transferring oil. Such certificate was issued only after the vessel had been examined and found to be in compliance with the prescribed regulations. The vessel arrived at the lightering anchorage at 16.30 on 4 August. Despite the fact that the vessel had no certificate of compliance on board the owners gave a notice of readiness. The cargo interests, not realising that a certificate of compliance had not been issued, accepted and signed the notice of readiness. The certificate of

61. [1978] 1 Lloyd’s Rep. 191.

275

Para. 115

N OT I C E O F R E A D I N E S S A N D I T S AC C E P TA N C E

compliance was eventually issued at 16.00 on 5 August. The lighter made fast alongside at 11.00 on 6 August and discharge commenced thereafter. There was a dispute about laytime. The owners said that laytime commenced at 22.30 on 4 August. The charterers said