Key takeaways
Court clarifies scope of period toll charges
Only applies after cargo operations conclude, not during delays.
Clear contract terms prevent costly disputes
Ambiguous clauses can lead to significant financial claims.
Ports must define charges transparently
Unclear or disproportionate fees risk legal challenge and reputational harm.
In a claim by Peel Ports Ltd against Swire Shipping PTE Ltd for ’period tolls’ totalling £248,026.22 arising from an extended discharge of cargo, the Admiralty Court has ruled in favour of the Defendant, stating that the claimed period toll was only to be applied to vessels occupying berths longer than necessary after cargo operations have concluded – not vessels with ongoing cargo operations.
The background facts
The case involved MV “KIATING”, a bulk carrier operated by the Defendant, which delivered a cargo of plywood and hardwood timber to the Port of Sheerness (the Port) in January 2022.
On opening the hatches, it was discovered that the cargo had shifted. This was partly due to heavy weather experienced during the voyage from the loadports in China and Malaysia, but was also said to have been contributed to by poor stowage/inadequate dunnage. As a result, delays were experienced when discharging the cargo at the Port, extending discharge operations beyond the estimated 42 hours to over 56 hours.
In addition, cargo operations were paused on two occasions whilst the vessel was shifted to allow incoming vessels to utilise the working berth. This meant that despite the Vessel arriving and starting discharge on 24 January 2022, it took until 12 February 2022 to complete cargo operations.
As well as additional equipment fees, increased discharge, stevedoring and berthing charges, the Port also levied a ‘period toll’ of £248,026.22 for occupying berths “…longer than necessary”, referencing clause 5 of the Port’s Terms and Conditions of Trading. In particular, Clause 5(4) provides;
“…Where a vessel remains alongside at the docks for a period longer than necessary for loading and/or discharging of cargo, a period toll will be charged…”
Whilst the Defendant paid all operational charges, it contested the period toll on the basis that, amongst other things, the period toll only applies to vessels that outstay their welcome after completing loading or discharging operations.
In response the Claimant argued it was also entitled to triple the claimed period toll as per sections 3, 64 and 68 of the Medway Ports Authority Act 1973, due to the Defendant’s refusal to pay. This meant that the sum claimed increased to £744,078.66.
The Admiralty Court decision
The primary issue was whether the period toll should apply to vessels where cargo operations are underway but are taking longer than expected due to non-compliance with Port requirements.
Whilst numerous arguments were considered (including contractual interpretation, the Claimant’s unilateral power to charge the period toll, existence of a supplemental agreement and quantum meruit issues), the Court ruled in favour of the Defendant, interpreting the relevant clause of the Port Charges) as applying only to vessels overstaying after cargo operations had concluded, not to Vessels that are mid discharge/loading. In particular, the use of the word ‘remains’ within Clause 5, suggested a vessel ‘overstaying’ rather than being berthed longer than estimated.
Accordingly, the Port’s claim for a period toll in this instance was dismissed. The Court also:
rejected the Claimant’s argument that the Defendant agreed to pay the period toll in a supplemental agreement contained in email exchanges with the Claimant. The Court held that the email exchanges added nothing, simply referencing the period toll as found in the relevant clauses of the Claimant’s Terms & Conditions, which the Court had already ruled did not apply in this case;
rejected the Claimant’s contention that the charges were levied on a quantum meruit basis, as the contract did not provide for additional charges being payable in these circumstances;
affirmed the Defendant’s position that estoppel should apply, as it had relied on the Port’s representations regarding the costs of shifting the Vessel and had not been informed of the period toll until 2 February 2022;
noted the Claimant’s contractual terms did not oblige it to complete a discharge within any particular timeframe or in any specific manner (e.g. number of cranes, stevedores, etc); and
noted as an “…eye-catching feature…” the Claimant’s attempt to recover three times the value of the period toll. Notwithstanding the Claimant’s arguments in support, the Court remarked that “…there could be no proper justification for a commercial organisation claiming a commercial debt being entitled to triple it”; and
noted potential double-counting in the period toll’s methodology.
Impact
This decision emphasises the need for ports to clearly incorporate and define relevant terms relating to the imposition of charges likely to be incurred by calling vessels and especially in relation to berthing and cargo operations – particularly where there may be onerous financial consequences associated with unexpected delays or ‘overstaying’ arising from stowage issues or similar.
Whilst the Court’s careful analysis of clause 5(4) of the Port Charges resulted in a rejection of the period toll in this instance, it is a timely reminder of the importance for parties faced with such charges (especially where they are significant) to consider whether they have been properly incorporated or if there is an argument of unreasonableness (such as double-counting). In such cases, the basis of ambiguous charges should be clarified and, if appropriate, challenged.
However, it should also be borne in mind that for ports to ensure the efficient use of limited resources, such provisions are often necessary to deter behaviour or events that may otherwise result in ‘berth-blocking’ and/or deprive the Port of income that would otherwise be earned but for the occupation of the berth. That said, it is important that such measures and/or charges are reasonable.
Furthermore, such measures should be clearly defined, unambiguous and proportionate to the cost, expense or lost revenue incurred by the Port as a result of the berth(s) not being available to other vessels, and not merely a charge representing an equivocal assessment of the economic value of the berth, supplemental to the payment of pre-existing charges.
Notably, the fact that the contractual terms did not oblige the Port to complete the discharge within any particular timeframe meant that it would have been difficult for the Court to determine the time from when the period toll was to run.
Comment
This decision highlights the value of clear and unambiguous language in contractual dealings between parties if lengthy and costly disputes over interpretation are to be avoided – and especially so where such claims are for payment of significant and supplementary sums.
It also serves as a timely reminder for parties to review their current contractual arrangements and ensure they are fit for purpose – especially where complex issues might arise.
