The Validity of Notices of Readiness

by Tom Moisley

The giving of Notices of Readiness (“NOR”) at a load or discharge port is a seemingly straightforward task that nonetheless frequently gives rise to disputes. NORs may be invalid for all sorts of reasons but one of the common causes of invalidity is that the NOR in question was given when the ship was at the wrong place.

Where is the right place to give a NOR?

The answer depends on (i) the parties’ agreement and (ii) the common law. The parties to a charterparty are free to specify the place at which a valid NOR may be given. In the absence of any specific agreement the common law governs the position.

These principles were recently reconsidered in The Arundel Castle (Navalmar UK Ltd v Kale Maden Hammaddeler Sanayi ve Ticaret AS [2017] EWHC 116 (Comm)). In this case, an appeal to the High Court under Section 69 of the Arbitration Act 1996 was allowed on a point of law expressed to be as follows:

“On a proper interpretation of the fixture recap entered into between the parties dated 27 October 2014, if the [owners] had no right to tender Notice of Readiness outside port limits, what is the meaning of port limits?”

In other words, the question of general public importance identified to be answered by the High Court was the meaning of the phrase “port limits” in a voyage charterparty.

The facts in outline

The relevant terms of the voyage charterparty in question were as follows:

Clause 15:

“[Notice of Readiness] to be tendered at both ends even by cable/telex/telefax on vessel’s arrival at load/disch port within port limits. The [Notice of Readiness] not be tendered before commencement of laydays”.

Clause 35:

“Otherwise Gencon 94 printed form charterparty with logical amendments on [basis] the terms as per fixture recap.”

Clause 6(c) of Gencon 94 includes the following text:

“If the loading/discharging berth is not available on the vessel’s arrival at or off the port of loading/discharging, the vessel shall be entitled to give Notice of Readiness within ordinary office hours on arrival there …”

The vessel arrived off the agreed loading port of Krishnapatnam but the port was congested and the vessel was directed by the port authority to anchor outside the port. It was common ground that the vessel anchored at a place that was outside port limits as shown on the relevant Admiralty chart. It was, however, the place to which the vessel had been directed by the port authority.

The legal arguments

The owners advanced two legal arguments:

(i) That the phrase “port limits” included any area within which vessels are customarily asked to wait by the port authorities and over which the port authorities exercise authority or control; and

(ii) “Port limits” includes any area where vessels load or discharge cargo including berths, wharfs, anchorages, buoys and offshore facilities as well as places outside the legal physical or administrative area where vessels are ordered to wait for their turn no matter the distance from that area.

The latter argument was based on the definition of port limits in the Laytime Definitions of Charter Parties 2013, also adopted in the Baltic Code 2014.

The common law

The judge applied the so-called Reid test as set out by the House of Lords in The Johanna Oldendorff (Oldendorff (EL) & Co GmbH v Tradax Export SA [1973] 2 Lloyd’s Rep 285): that is that there were three essential factors to be satisfied before a ship can be treated as an arrived ship (and remember that a valid NOR can only be given once the ship in question is an arrived ship in the legal sense). The three factors identified by Lord Reid were:

• a ship must be within the port;

• at the immediate and effective disposition of the charterer; and

• her geographical position is of secondary importance but that it will be much easier to establish that the ship is fully at the charterers’ disposal if she is waiting at the usual waiting place.

The point to note in relation to the third bullet point above is that if the vessel is not waiting within the port at the usual waiting place then the burden will be on owners to show that the vessel was nevertheless at the immediate and effective disposition of the charterer.

The Reid test requires a vessel to be within the port, and in the judgment, it is suggested by Lord Reid that whether this is so can be determined in most cases by considering:

• whether there is any national or local law that defines the limits to the port in question; and/or

• if there is no such law, then is the place in question within the area over which the port authority exercises powers to regulate the movement and conduct of ships?

Why did the owners’ appeal fail?

The short answer to this question is that it failed for lack of evidence and so this case, in addition to providing a timely reminder on some of the factors which apply so as to determine whether a NOR is valid or invalid, also serves as a reminder that cases decided under English law are decided by reference to evidence and without evidence a party may be right as a matter of law but will still not succeed in court. It appears that no evidence as to national or local Indian law was led on the extent of the port limits in question, nor did the owners lead any evidence to show that the place where the port authority directed the vessel to wait was a place over which the port authority exercised any form of control. The arbitrators were simply left with the Admiralty chart and so the court held that, given the paucity of evidence available to them, the arbitrators did the best they could and were entitled to reach the conclusion they did on the basis of the information contained on the chart. The court also noted that the parties had amended the “at or off” wording found in Gencon 94 to a “within port limits” wording, thus ruling out any place outside port limits.

If you require further information or advice regarding the contents of this article please contact Tom Moisley whose details appear below.

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About the contributor

  • Tom Moisley Partner

    Tom is a partner in the Shipping Group in our London office. His practice includes casualty work, contractual disputes, including those arising out of charter parties, ship management contracts and bills of lading.

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