This article is focused on the statutory right of challenge contained in section 31 of the Harbours Act 1964 in relation to the levying of ship, passenger and goods dues under the Harbours Act 1964 or local harbour legislation, and pilotage charges under the Pilotage Act 1987.
However, there are other routes of challenge, including bringing a ‘claim in restitution’ requiring the statutory harbour authority (SHA) to repay, in respect of charges which have been levied outside of its charging powers. These claims can arise, for example, where an SHA has levied a ship due where an exemption applies, or in respect of wider charging powers, levying a charge that the SHA does not have a statutory power to impose. These claims can be brought against current and historical charges, subject to limitation periods. In such circumstance it is very important that specialist legal advice is taken before raising any defence as it is possible defences to a claim will be lost if incorrect first steps are taken.
SHAs have been provided with a power under section 26 of the Harbours Act 1964 to levy such ship, passenger or goods dues as they think fit, subject to any exemptions.
Competent harbour authorities (CHA) also have the ability to make reasonable charges in respect of the pilotage services provided by them under section 10 of the Pilotage Act 1987.
The importance of such dues to the viability of ports and harbours is recognised in the severity of enforcement measures available to SHAs. However, for harbour users, the levying of such dues can have a significant impact. Therefore, as a safeguard, section 31 of the Harbours Act 1964 provides a right of objection to the Secretary of State (section 31 challenge).
A section 31 challenge against the imposition of ship, passenger and goods dues, can be brought by any person with a ‘substantial interest’, on four grounds:
During the Littlehampton Harbour section 31 challenge, which was decided in 2022, the Department for Transport proceeded on the basis that a person paying ship, passenger and goods dues had a ‘substantial interest’. As such, the ‘substantial interest’ requirement is easily met.
Under section 27A of the Harbours Act 1964 it is possible, in certain circumstances, for a harbour authority to make a combined charge in respect of ship, passenger and goods dues and other charges and combined charges are not themselves challengeable through section 31 proceedings. However, this cannot be done if a person liable to pay the charge objects to paying a combined charge.
Section 10(6) of the Pilotage Act 1987 applies the right of challenge in section 31 the Harbours Act 1964 to pilotage charges, with amendments. The main difference is that challenges may be brought by:
The permissible grounds for such an objection are that:
Once a challenge has been lodged, the harbour authority notified and the objection not withdrawn, the Secretary of State must cause an Inquiry to be held, unless the Secretary of State is satisfied that they can properly proceed to a decision without one.
The starting point for successfully defending a section 31 challenge is to demonstrate the reasonableness of the charges imposed. Consideration of the process followed in making such a charge and whether it complies with the Ports Good Governance Guidance will be important.
You will need to provide written evidence including witness statements. You can also expect to be asked questions by a barrister, acting for the challenging parties, and the Inspector hearing the Inquiry during its course. It is therefore really important that a clear and structured process is followed when setting charges each year and that ship, passenger and goods dues, and pilotage charges are clearly identifiable in the SHA’s Schedule of Charges, otherwise other charges may get caught within the scope of the challenge.
Following completion of the objection process which, as mentioned above, is likely to include an inquiry, the secretary of state must either approve the charge for a period not exceeding 12 months or, if the objection is upheld, direct the SHA to make such changes with respect to the charge as would meet objections made on any of the four grounds specified above.
When considering whether a ship, passenger or goods due or pilotage charge has been or can be properly imposed, full consideration of the local legislation and national legislation applying at the relevant port or harbour will be required, along with a consideration of the process followed or to be followed in imposing such a due and imposing the Ports Good Governance Guidance.
Finally, there are a number of common danger areas associated with commercial arrangements with port customers that increase the risk of a successful section 31 challenge. We would be happy to spend 15 minutes discussing them in general terms with any SHA or CHA free of charge if you would like to give us a call.
If you would like advice, please contact Lara Moore or Ione McGregor in the marine team who would be happy to assist.
