The Merida - port or berth charter?
Novologistics SARL v Five Ocean Corporation (The Merida) [2009] EWC 3046 (Comm)
Most voyage charterers we come across are "port" charters. That is good news for the shipowners concerned because it puts the risk of the congestion at ports on the charterers. Normally, it is easy to tell whether the charter is a port or berth charter, but this is not always the case, as this rather strange fixture recap for the Merida demonstrates. This case highlights the need for those who negotiate voyage charters to be clear about whether the fixture is a port or berth charter and, in particular, to ensure that the specific details of the laytime regime or references to it do not confuse the primary distinction between port and berth charters.
Facts and original Arbitration Award
On 5 February 2007, the owners of the MV Merida ("the vessel") entered into a voyage charterparty with charterers in relation to the carriage of steel plates from Xingang to Cadiz and Bilbao. The vessel arrived at Xingang and tendered NOR on 10 March. She waited at the anchorage for 20 days and then berthed, loaded and sailed in the space of just over a day.
Owners subsequently brought a claim in London arbitration for demurrage against charterers for just over US$500,000. The main issue before the Tribunal was whether the charterparty in question was a port or berth charterparty. If it was a port charter, owners' demurrage claim would succeed. If it was a berth charter, it would fail.
The charterparty was contained solely in a recap form which, unusually, did not refer to a pro-forma (i.e. it did not say, for example, "all terms and conditions as per Gencon "94"). It said as follows:
"One good and safe chrts' berth terminal 4 stevedores Xingang to one good and safe berth Cadiz and one good and safe berth Bilbao" (the "opening term")..
"n.o.r. / time-counting as per below c/p terms.
DETAILS TO THE C/P
CLAUSE 2
(1) The vessel to load at one good and safe port/one good and safe charterers' berth Xingang and to discharge at one good and safe port/one good and safe charterers' berth Cadiz and one good 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, but all time used to count as laytime
CLAUSE 4
At Port of Load and at Port of Discharge Notice of Readiness to be given and accepted in writing and only during the periods from 08:00 hours to 17:00 hours Mondays to Sundays
CLAUSE 6
.at Port of Load and at Ports of Discharge time to commence to count at 14:00 hours if written Notice of Readiness is given during ordinary office hours before noon or at 08:00 hours the next day if written Notice of Readiness is given during ordinary office hours after noon".
The Tribunal held that the charterparty was a port rather than a berth charterparty and allowed owners' claim for demurrage. The arbitrators stated that the charterparty was to be read as a whole and that Clause 2 clearly provided for a port charter in that it qualified the wording contained in the opening term by referring to both safe ports and berths. The Tribunal also held that Clause 2 provided for shifting time from the anchorage to the berth to count as laytime which, they decided, must have been on the basis of the master's ability to tender a valid NOR upon arrival. The Tribunal reasoned that if the charterparty in question had been a berth charter, there would have been no need for any such provision.
The charterers appealed to the Commercial Court, arguing that if the opening term stood alone, then it was clear that the charter was a berth charterparty. The opening term defined the contractual destination and this, they argued, formed part of the "main terms" of the charterparty which, in the event of inconsistency, should prevail over the later terms which amounted to "details". Charterers contended further that Clause 2(1) was not inconsistent with the opening term as it did nothing more than add a safe port warranty and had nothing to do with the contractual destination. They also argued that, in any event, had Clause 2(1) stood alone, the charterparty would still have been a berth charterparty. Furthermore, in relation to Clause 2(2), charterers submitted that the arbitrators had erred in that the provision as to time spent shifting only made sense in a berth and not a port charterparty.
Owners, on the other hand, argued that the charterparty should be construed as a whole and that there was no difference between the so-called "main terms" and the terms as to "details". Furthermore, they submitted, the opening terms should be seen as a short summary or recital, whereas Clause 2 of the charterparty contained the actual operating provisions and should prevail in the event of a conflict with the opening terms.
Commercial Court decision
Mr Justice Gross' starting point was the analysis of the essential characteristics and stages of a voyage charterparty set out by Lord Diplock in E.L Oldendorff v Tradax Export (The Johanna Oldendorff) [1974] AC 479. He concluded that the "opening term" of the charterparty was sufficient to make the charterparty a berth charterparty in that:
(a) It was in a form that identified the destination as the berth, as the specified destination was "good and safeberthXingang" (see The Radnor (1955) 2 Lloyd's Rep. 668, The Finix (1975) 2 Lloyd's Rep. 415 and The Puerto Rocca (1978) 1 Lloyd's Rep. 252) and;
(b) On its true construction, it expressly provided for Charterers to nominate the berth at Xingang, the express right being provided by the words "chrs' berth" (see Stag Line v Board of Trade (1950) 83 Ll L Rep.356 and The Isabelle (1982) 2 Lloyd's Rep.81)
Furthermore, in relation to Clause 2(1) of the charterparty, the judge concluded that if this clause had the meaning attributed to it by the Tribunal, then the opening term would be deprived of any meaning or purpose, which would be odd having regard to the structure of the charterparty. Instead, he preferred the approach that Clause 2(1) introduced a safe port/s warranty and reiterated the safe berth/s warranty, and noted that this construction would ensure that there was no inconsistency between the opening term and this clause.
As regards Clause 2(2), the judge decided it should be treated as neutral, because it signified nothing more than the parties making express provision for the costs and for the time involved in shifting and warping. If that interpretation was wrong, then the judge said that the Tribunal was in further error in stating that had this been a berth charter, there would have been no reason for a provision such as Clause 2(2). On the contrary, the judge found that if the charter was a port charter, then Clause 2(2) may have been unnecessary as it dealt with time counting in that the vessel would likely have been an arrived ship throughout. However, if the charter was a berth charter, then Clause 2(2) would have real meaning as absent some other express clause, no time would have counted prior to the actual berthing of the vessel. In fairness, the judge did recognise that this was an "apparent oddity", but said that it was "perhaps best not to speculate".
The judge therefore concluded that the charterparty was a berth and not a port charterparty. The appeal was allowed, and owners' claim for demurrage consequently failed.
http://www.incelaw.com/ourpeople/Ted-Graham
Further comment
Mr Justice Gross endorsed the principle as set out by Mr Justice Jackson in Kendrick v Kendrick [2006] EWHC 727 (TCC), which forms part of what has become known as the "Jackson" test - that the court will only reverse the decision of a commercial arbitrator who has relied on his experience in construing contractual documents or correspondence passing between members of his own trade or industry if it is satisfied that, despite the benefit of his relevant experience, the arbitrator came to the wrong answer. Nonetheless, the judge found that notwithstanding their experience, the arbitrators had got it wrong in the present case. However, he did emphasise that the arbitration had been dealt with on documents alone and therefore the arbitrators had not had the benefit of the arguments developed before the court.
The Merida - port or berth charter?
By: Ince & Co
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