A “maritime COVID” case in the Admiralty Court. First of many?

One of the features of the pandemic has been to throw some businesses into insolvency. This recently became an issue in P&O Princess Cruises International Ltd v The Demise Charterers of the Vessel ‘Columbus’ [2021] EWHC 113 (Admlty) (26 January 2021)  as regards lay-up charges for cruise vessels at the Port of Tilbury following the collapse of the CMV cruise line.

(1) P&O Princess Cruises International Ltd v The Demise Charterers of the Vessel ‘Columbus’ [2021] EWHC 113 (Admlty) (26 January 2021) Admiralty Registrar Davison

In March 2020 the pandemic caused cruise line CMV to suspend operations. Layup at the Port of Tilbury was agreed verbally at the rate of £3,000 per vessel per week. The Port did not look with favour on extended lay-bys as these tended to interfere with the trading upon which the Port’s business model was based. Vessels on extended lay-by blocked berths that could otherwise have been in use for working vessels whose quick turnaround enabled the Port to charge for embarking and disembarking passengers and goods and for other services. On 19 June 2020, the Vessels were detained by the Maritime and Coastguard Agency for non-payment of crew wages. A month later, the CMV empire collapsed. Some of the CMV companies went into administration on 20 July 2020. Shortly after in an exchange of emails the Port, pursuant to the “Extra Charges Schedule” found on its website and disseminated to regular port users (which included the Vessels’ former agents) by Notice to Mariners purported to switch the Vessels from the agreed lay-over rate of £3,000 per week to the “published tariff” rate which involved a dramatic increase over the previous agreed rate.

The combined effect of sections 26 and 31 of the Harbours Act 1964 summarised by Lightman J in The Winnie Rigg [1999] QB 1119 at 1125B:

“The Act of 1964 in section 26 provides that harbour authorities shall (notwithstanding any provision in earlier legislation) be free to charge such “ship, passenger and goods dues” as they think fit (subject only to the provision of a right of objection under section 31 to the Secretary of State.”

The issues were whether this power was subject to a requirement of reasonableness and the effect, if any, of the amendment from 26 June 2020 of the Insolvency Act 1986 by the Corporate Insolvency & Governance Act 2020.

(1) The relevant Port Regulation 5.6 required “reasonable prior notice” which was manifestly not complied with because the email gave less than 12 hours’ notice and the letters gave no notice at all. Less than 12 hours’ notice would not qualify as “minimum practicable”, let alone reasonable, notice. In the circumstances then prevalent a reasonable period would have been 28 days. The notice of variation was effective in accordance with that period of notice and was not required to be limited. Regulation 5.6 is not qualified by a requirement that charges may only be varied by an amount which is reasonable. The wording of 5.6 was clearly intended to give the Port complete freedom to increase the charges as it saw fit, on reasonable notice.

Although the email and the letters referred to the “published tariff”, had they used words such as “charges per Extra Charges Schedule” or similar the result would be no different. In that scenario, no one on the Vessels’ side could have thought that the part of the Schedule referring to “negotiated” rates for “extended lay-by” was the applicable part – because the negotiated rate had just been withdrawn. Equally, this was not a case of a failure to leave a berth at the required time “on completion of cargo operations”. That left only the rate for a vessel “detained at the port”. The Vessels had indeed been detained at the Port

If and to the extent that it was necessary for the Port to rely upon the Regulations’ statutory origin for their binding effect, then Section 22 of the 1968 Act would not prevent that as it makes the binding effect of the 2005 Regulations subject to a requirement that “a relevant extract from subsisting regulations” was “included in each schedule of charges published by the Port Authority”. In 1968 that would, no doubt, have taken the form of the Regulations (or at least Regulation 5) being cited alongside the Extra Charges Schedule or perhaps included in the same booklet or fixed to the same notice board. The Extra Charges Schedule stated in the top line, immediately below the title, that it was to be read in accordance with the Port of Tilbury’s General Terms and Conditions – 2005 Edition. That was, and was acknowledged to be, a reference to the 2005 Regulations which were on the same website. That plainly satisfied the requirements of Section 22, the statutory intention of which was to bring the 2005 Regulations to the attention of the Port’s users and to make them readily accessible.

(2) The position was not affected by the new Section 233B (3) inserted into the Insolvency Act 1986 which provides that

(3) A provision of a contract for the supply of goods or services to the company ceases to have effect when the company becomes subject to the relevant insolvency procedure if and to the extent that, under the provision—

(a) the contract or the supply would terminate, or any other thing would take place, because the company becomes subject to the relevant insolvency procedure, or (b) the supplier would be entitled to terminate the contract or the supply, or to do any other thing, because the company becomes subject to the relevant insolvency procedure.”

Although section 233B of the Insolvency Act 1986 was capable of qualifying the right of a supplier of services to terminate or “do any other thing” in respect of a company which had entered administration, that was not relevant here because the counterparties to the contracts were two CMV companies Mythic and Lyric, neither of which were in administration.

Admiralty Registrar Davison concluded, somewhat reluctantly, that the Port was entitled to its lay-up charges, stating.

58.       By implementing an increase from the agreed rate to the “tariff” rate, the Port, which already had a privileged position under statute, has considerably advanced that privileged position at the expense of other creditors. That observation is tempered by the fact that the Port was willing to reduce its rate to £10,000 per week (which, had it been necessary, I would have designated a “reasonable rate”) provided that the arrears were brought up to date. It was not the Port’s fault that that did not happen. Nevertheless, the overall recovery of the Port remains disproportionate to the services provided, the size of the available funds from the sales of the Vessels and the other claims against those funds.

59.       The Admiralty Court has no residual jurisdiction to moderate a claim so characterised. This claim, as with any claim, has to be assessed in accordance with the Port’s legal rights. I have found those rights to be clear.

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