Commencement of Laytime

Davies Donald

• Publisher: Informa Law from Routledge
• Year: 2013
• ISBN:
  9781135116668
• Edition: 4
• Topic: Law
• Subtopic: Maritime Law
• Index: Law

Commencement of Laytime is the only in-depth examination and discussion concerning the most important financial aspect of laytime which can affect all voyage charter parties and international contracts for the sale of goods. The information is presented in a style which is readable by ship operators, traders and other lay persons as well as legal professionals.

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 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, 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 Leonisv. 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 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.

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 ap...