The happy day

Flacker Shipping Limited v Glencore Grain Limited (sub nom 'The Happy Day') (CA, 2002) raised a question which Lord Justice Mustill, in The Mexico I [1990], left open for “detailed exploration” should it arise in the future

This question was: what are the rights of owners to demurrage and charterers to despatch when, under a charterparty which requires a notice of readiness (NOR) to trigger the start of laytime, the owners give an invalid NOR, yet, without further NOR being given, the vessel commences and completes cargo operations over a period well in excess of the number of days provided for?
The voyage charterparty in question was a berth charterparty, and NOR had to be tendered at the berth in order to trigger the commencement of laytime.
The vessel arrived off the port of Cochin on 25 September 1998, but could not get into the berth because she had missed the tide. Nonetheless, the master gave NOR at that time, from the anchorage. That NOR was premature and tendered from the wrong place, and thus invalid when given. The vessel berthed the next day and commenced discharge. No further NOR was tendered on berthing or at all. As a result of various delays, discharge was not completed until 25 December 1998, a full three months after NOR had been tendered from the anchorage.
The owners claimed demurrage in respect of the substantial delays that had occurred. The charterers denied that they were under any liability for demurrage, claiming that no valid NOR had ever been tendered, so laytime had never begun to run. Following their argument through to its logical conclusion, they claimed despatch in respect of laytime saved at the discharge port.
The commercial arbitrators did not accept the charterers' contentions. They held, in effect, that laytime began to run as if a valid NOR had been tendered on berthing.
The charterers were granted permission to appeal on the following question of law arising out of the arbitrators' award: can laytime commence under a voyage charterparty requiring service of a NOR when no valid NOR was ever served? And if so, when does it commence?
On appeal to the Commercial Court, the charterers' arguments were better received. Mr Justice Langley, founding himself on obiter dicta of Lord Justice Mustill in The Mexico I and of Mr Justice Thomas in The Agamemnon [1998], held that there were no findings of fact made by the arbitrators which could justify a conclusion that laytime commenced, as a result of the application of principles of waiver, estoppel, implied agreement, futility or otherwise. Judge Langley therefore held that the owners were not entitled to any demurrage and that the charterers were entitled to be paid despatch by the owners in respect of laytime saved.
On further appeal to the Court of Appeal, the owners were ultimately successful. Lord Justice Potter, in a thorough judgment, came to the following conclusion: laytime can commence under a voyage charterparty requiring service of a NOR when no valid NOR has been served, in circumstances where: (a) a NOR valid in form was served upon the charterers or receivers as required by the charterparty; (b) the vessel thereafter arrived and was, or was accepted to be, ready to discharge to the knowledge of the charterers; and (c) discharge thereafter commenced to the order of the charterers or receivers without either having given any intimation of rejection or reservation in respect of the NOR previously served or any indication that further NOR was required before laytime commenced. In such circumstances, the charterers may be deemed to have waived reliance upon the invalidity of the original NOR, and laytime would commence as if a valid NOR had been served at that time.
This judgment merits close reading. It comprehensively deals with the general law relating to waiver and has interesting things to say about the authority of receivers/agents to waive conditions as to the commencement of laytime on behalf of charterers. Most importantly, though, it gives clear guidance to commercial arbitrators as to the type of circumstances which will justify a conclusion that laytime has commenced in the absence of a valid NOR.
Bernard Eder QC of Essex Court Chambers and Michael Ashcroft of 20 Essex Street, instructed by Ince & Co, were counsel for the owners