Charterparty – Voyage – Arrived ship – Port charterparty – Test of 'arrived ship' – Four successive stages of a voyage charterparty.

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Cases referring to this case:

E. L. Oldendorff & Co. GmbH v Tradax Export S.A. (The Johanna Oldendorff) [1974] AC 479

For education purposes only

Under a voyage charterparty of December 1, 1967, the owners of the motor vessel Johanna Oldendorff chartered her to carry grain from USA to "to London or Avonmouth or Glasgow or Belfast or Liverpool/Birkenhead (counting as one port) or Hull’ at the charterers’ option.

Clause 3 provided that:

… Time to count from the first working period on the next day following receipt during ordinary office hours of written notice of readiness to discharge whether in berth or not. Receivers of the cargo are in no case obliged to take delivery at night without their consent. Discharge to be free of expense to the vessel.

Further to instructions, the vessel proceeded to Liverpool/Birkenhead and anchored at Mersey Bar anchorage on January 2, 1968, but no berth was nominated by then. The next day she proceeded to Prince’s Pier landing stage, Liverpool, and cleared with the customs. She was then ordered by the port authority to proceed back to anchor at the bar light vessel.

At 14.40 hours on January 3, 1968, she anchored at the Mersey Bar, the usual waiting place for grain ships discharging at the port, which although within the legal limits of the port was 17 miles from the docks. NOR was tendered and received at 14.30 on January 3. The vessel lay at anchor at the bar from January 3 to 20 ready, so far as she was concerned, to discharge.

The owners claimed demurrage on the ground that the lay time for discharge started at 08.00 on Thursday, January 4, 1968. Their claim for demurrage depended upon when the vessel became an arrived ship. The arbitrators failed to agree; and, on a reference, the umpire made his award, in the form of a special case for the opinion of the court, in favour of the owners with an alternative award in favour of the charterers. Donaldson J. on appeal on a case stated upheld the alternative award in favour of the charterers. The Court of Appeal, by a majority, (Buckley and Roskill L.JJ, Lord Denning M.R. dissenting) affirmed that decision.

In the House of Lords, before Lord Reid, Lord Morris of Borth-Y-Gest, Viscount Dilhorne,Lord Diplock and Lord Simon of Glaisdale. March 22, 26, 27, 28, 29; April 2; July 18 1973.

Lord Reid at p.529-530:

There are a number of passages in the judgment of Kennedy L.J. which must be considered [ in Leonis Steamship Co. Ltd. v  Rank Ltd. [1908] 1 K.B. 499, 517]… he says that her destination is that point which the parties have chosen to designate as the destination, and says that in practice this is generally a port or dock with a berth. Then, having said that the limits of a port may be very wide, he continued, at p. 519:

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. …

The present state of the law is rather unusual. It has always been held that the Court of Appeal in Leonis Steamship Co. Ltd. v  Rank Ltd. [1908] 1 K.B. 499 laid down general principles which must be followed; the difficulty has been to find out what those principles are. Buckley L.J. and Kennedy L.J. each delivered long judgments and Lord Alverstone C.J. agreed with both. So he must have thought that there was no substantial difference between them and that has been the view of almost all the many judges who have since then had to consider the matter. The judgment of Kennedy L.J. has generally been regarded as the leading judgment, perhaps because it is rather less obscure than that of Buckley L.J.

…  It is argued for the charterers that this House finally determined the meaning of the judgment of Kennedy L.J. in The Aello [1961] A.C. 135 and that we ought not to reopen the question.’

at p.531

This appears to me to make it perfectly clear that Kennedy L.J. meant that the commercial area includes the area within the port at which waiting vessels lie. It is true that in Leonis that area was close to the loading berth and it may be that in 1907 it was unusual for the waiting area to be at any great distance from the loading berths; ships were smaller, congestion may not have been so great and communication between ship and shore was not so rapid. So there was no reason for Kennedy L.J. to have prominently in mind a case where the waiting area was distant from the loading berth. But he was not basing his judgment on distance. He was basing it on commercial good sense and I find it quite incredible that if he had been faced with a case where, although the waiting area was distant, that had no commercial significance and the ship was as fully at the disposal of the charterer as if she had been within a few hundred yards, he would have decided the case the other way.

In The Aello [1961] A.C. 135 the facts were unusual. The usual waiting place for vessels arriving at the port of Buenos Aires was close to the loading berth but owing to temporary congestion the port authority decided that ships which arrived and had no cargo waiting for them must wait at a point which, though within the limits of the port, was some 22 miles from the loading area. So the Aello had to wait there, and Ashworth J., the Court of Appeal and the majority in this House decided that while there she was not an arrived ship. Ashworth J. decided the case on its special facts and perhaps the Court of Appeal and the House could also have done so. But they did not.

at p.535:

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 lie, she will be in such a position unless in some extraordinary circumstances proof of which would lie in the charterer.

Per Lord Diplock at p.553-554:

Voyage charters have been the subject of litigation in the English courts since the 16th century. Even in those days, merchants and shipowners recognised that ship’s time lost was money lost, and 16th century charter parties contained provision for payment of demurrage by the charterer if loading or discharging were prolonged beyond the agreed "lay time," specified in the charterparty as the period during which it was to be available to the charterer for that purpose.

Despite the transformation that has taken place in shipping, in port facilities and in communications during the last four hundred years, the business nature of the adventure to which the contract between charterer and ship owner relates remains essentially the same. It is an adventure which of its nature has always been exposed to the risk of being prevented, impeded or delayed by a variety of causes beyond the control of either party. If it is known in advance how loss due to delay from any particular cause is to be borne as between charterer and ship owner, account can be taken of the risk in fixing the freight payable. What matters from a commercial point of view is not so much that the risk should be borne by one party rather than by the other, but that it should be known, at the time the charterparty is made, by which of them it will be borne.

… It is inherent in the English legal system that when conditions do change this development should at first be piece-meal. The cases that come before the courts raise specific problems for which it is the practice of English judges to seek empirical solutions by inquiring what the parties, as reasonable businessmen, must have intended should be the legal obligations of each in those particular circumstances which have given rise to the dispute. It is not their habit to formulate some broader principle of which the empirical solution is but a specific application. But the time comes when such a formulation is both practicable and desirable. Practicable, because it becomes possible to identify some factor common to previous empirical solutions; desirable, because it provides a criterion which businessmen who enter into charterparties can apply in order to ascertain by whom the loss caused by a particular risk will be borne.’

at p.556-557:

The adventure contemplated by a voyage charter involves four successive stages. They are:

(1) The loading voyage, viz. the voyage of the chartered vessel from wherever she is at the date of the charterparty to the place specified in it 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 voyage, viz. the voyage of the vessel to the place specified in the charterparty as the place of delivery.
(4) The discharging operation, viz. the delivery of the cargo from the vessel at the place specified in the charter party as the place of discharge and its receipt there by the charterer or other consignee.

In all four of these stages acts of performance by the ship owner are called for; in the two voyage stages acts of performance by him alone. … Loading and discharging are joint operations.

… The standard forms of charterparty do not usually include an exception clause for delay caused by the inability of the vessel to load or to discharge her cargo because of congestion at the place, whether berth or dock or port, specified in the charterparty as the place of loading or discharge. So any loss due to delay from this cause falls upon the party who is thereby prevented from doing timeously what, by the terms of the charterparty, he had undertaken the primary obligation to secure was done.
Herein lies the importance of the four stages into which the adventure is divided. Each must be completed before the next can begin. So until the vessel has reached the spoofed place of loading on the loading voyage or the specified place of discharge on the carrying voyage, the contractual obligation to bring the vessel there lies on the ship owner alone; and any loss occasioned by delay in doing so falls upon him.

at p.560-561:

If a port is congested so that on arrival within its limelights 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.

… 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 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.

Leonis Steamship Co. Ltd. v Rank Ltd. [1908] 1 K.B. 499, C.A. considered.

The Aello [1961] A.C. 135, H.L.(E.) overruled.

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