Port Charterparty – “commercial area” test
The vessel was chartered to proceed to one or two safe loading ports or places on the Parana to load a quantity of grain, with a further quantity to be loaded either at La Plata or Buenos Aires at the charterers’ option.
The vessel loaded at Rosario and was ordered from there to Buenos Aires to load a cargo of maize.
Maize was in short supply and vessels to which a shipment had not been allotted were required to wait in the roads.
The vessel was delayed for seventeen days waiting for the availability of maize and consequently a permit to approach a berth.
The shipowners claimed that laytime commenced when the vessel anchored at the roads and refused to release the bills of lading without payment of their demurrage claim.
The charterers paid the amount of demurrage under protest and were the plaintiffs in the action to recover such payment.
The charterers contended that as the vessel had not reached the commercial area of the port of Buenos Aires, she was not an arrived ship and therefore laytime did not commence.
The owners put in a counterclaim for damages suffered by the charterers’ failing in their obligation to provide a cargo for loading.
Ashworth J in the Commercial Court held that the vessel was not an arrived ship. He upheld the shipowners’ counterclaim on the basis that, although the charterers were not to blame for their failure to provide maize, there was an absolute obligation on them to provide a cargo.
The parties’ claims cancelled each other out and there was no order as to costs.
The Court of Appeal (Lord Goddard CJ and Parker and Lloyd-Jacob LJJ – main judgment by Lord Parker) agreed with the findings of Ashworth J.
Basing his reasoning on the judgment of Kennedy, LJ in Leonis Steamship Co v Rank 1, Lord Justice Parker held that a ship arrived when she reached the “commercial area” of the port. The commercial area was “that part of the port where a ship can be loaded when a berth is available, albeit she cannot be loaded until a berth is available”.
The majority in the House of Lords (Lord Keith of Avonholm, Lord Jenkins and Lord Morris of Borth-Y-Gest) followed Lord Parker and affirmed the judgment in the Court of Appeal.
Lord Radcliffe delivered a dissenting speech which was concurred in by Lord Cohen.
All the judges attempted to follow the judgment of Leonis v Rank. The dissent is evidence of the ambiguity in the Leonis judgment.
The majority of judges favoured the propinquity principle ie. physical nearness to the loading spot or berth while the minority favoured the, more commercially sensible, principle of accessibility to the charterer.
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