Marine & Transit - April 2010

Port or berth charter - Who pays for delay?

Novologistics Sarl v Five Ocean Corporation (The “Merida”) – Commercial Court (Gross, J.) [2009] EWHC 3046 (Comm)

As between owners and charterers, who is responsible for delay in loading a vessel following its arrival at the load port?  Under established charter party law, if there is a port charter, the owners are entitled to tender notice of readiness (NOR) immediately upon arrival at the port and any delay thereafter will be for the charterer’s account.  On the other hand, if there is a berth charter, NOR cannot be tendered until the vessel actually berths at a berth within the port and any delay incurred waiting for a berth will be for the owner’s account.

This issue arose in The “Merida”, a case on appeal to the Commercial Court from a London arbitration.  Gross J had to decide whether the charter was a port charter or a berth charter and accordingly which of owners or charterers was responsible for delay in loading at the load port due to congestion.

The charter party was for the carriage of a cargo of steel plates from China to Bilbao and Cadiz in Spain. The vessel arrived at the Chinese load port of Xingang and immediately tendered NOR. The vessel then anchored awaiting a berth. However due to congestion at the port the vessel did not berth for some 20 days. The owners accordingly pursued a claim for demurrage of about US$500,000 for the resultant delay in the vessel’s loading.

The charter party was based on a “recap” which rather unusually did not refer to a previous pro-forma charter party.  The charter included the following terms:

One good and safe chrts’ berth terminal 4 stevedores Xingang to one good and safe berth Cadiz and one good and safe berth Bilbao - (described by the Judge as the “opening term”)

clause 2

[1] The vessel to load at one good and safe port/one good and safe charterers’ berths Xingang and to discharge at one good and safe port/one good and safe charterers’ berth Cadiz and at one good and safe port/one good and safe charterers’ berth Bilbao.

[2] Shifting from anchorage/warping along the berth at port of load and at ports of discharge to be for owners’ account, while all time used to count as lay time.

The arbitrators had found that the wording of clause 2 provided for a port charter, as primarily it referred to both safe ports and berths and also the shifting time provision allowed for the master to tender NOR once the vessel arrived at the port, as had in fact occurred.

Following review of the authorities however, Gross J came to the opposite conclusion, deciding that the arbitrators had erred in finding that there was a port charter.  He considered that the charter was in fact a berth charter. 

It was necessary to identify what was the “specified destination” under the charter (The “Johanna Oldendorff” [1974] AC 497) and whether that destination was the port or was a berth within the port (The “Radnor” [1955] 2 LLR 668, The “Finix” [1975] 2 LLR 415 and The “Puerto Rocca” [1978] 1 LLR 252).  

In this case the Judge ruled that the opening term of the charter identified the destination as the berth at terminal 4 at the port of Xingang.  The judge further held that clause 2 did not qualify the opening term so as to turn the charter into a port charter.  The clause merely introduced a safe port warranty that reiterated the existing safe berth warranty provided for in the opening term.  The judge therefore allowed the charterer’s appeal with the consequence that the owner’s claim for demurrage failed.

The case illustrates that owners and charterers must consider very carefully the precise wording introduced into such lay time clauses when negotiating the charter party contract.