UK: Commencement of Laytime - Glencore Grain Ltd v Flacker Shipping Ltd ("Happy Day")

Court of Appeal - 15 July 2002
Last Updated: 5 August 2002

In the absence of a charterer’s express reservation of his rights or rejection of an invalid Notice of Readiness given under a Charterparty, the commencement of cargo operations can amount to a waiver of the NOR invalidity by charterers, thereby starting laytime.

The Court of Appeal recently overturned Langley J’s Judgment (2001) 1 LLR 754, in a decision which owners will welcome.

In voyage charters, the amount of time allowed to load or discharge the cargo (laytime) will usually be triggered by the Master giving a valid Notice of Readiness. To be valid, the vessel must be at the agreed destination and be ready to commence cargo operations within the charterparty definitions, when the Notice of Readiness is given. It has long been held in cases such as the Mexico 1 (1990) 1 LLR 507 and the Agamemnon (1998) 1 LLR 675 that an invalid Notice of Readiness would not take effect when given or later, when the vessel was arrived and ready.

Neither of these cases had to decide whether laytime could start at all when no valid NOR was given and if it could, when it would commence. That was the question in the "HAPPY DAY".

In the "HAPPY DAY" the voyage charter was a berth charter. A valid Notice of Readiness could only be given when the vessel was securely moored at berth. The Master gave a Notice of Readiness when the vessel was waiting for the tide to berth. No further Notice of Readiness was given. The vessel berthed and started discharging the next day, completing three months later. Charterers argued that no valid Notice of Readiness was given, and therefore laytime never started.

The arbitrators held in owners’ favour. At first instance, (reported at (2001) 1 LLR 754) Langley J found in charterer’s favour, holding that the facts found by the arbitrators did not show there was a variation of the charterparty contract, or any waiver by charterers of their legal rights to receive a valid Notice of Readiness. Owners were ordered to pay despatch.

Potter LJ, giving the leading decision of the Court of Appeal, found that there was insufficient evidence to support owner’s arguments of variation of the contract and estoppel by convention. However, there was sufficient evidence/findings of fact by the arbitrators to support a finding that the charterers had waived their right to a valid Notice of Readiness.

The Court of Appeal held that where:

  1. an invalid Notice of Readiness is served;
  2. charterers do not give any rejection or reservation re the invalid Notice of Readiness, or an indication that a further NOR is required before laytime commences;
  3. the vessel later is, or is accepted to be, ready to commence cargo operations to the knowledge of the charterers; and
  4. cargo operations thereafter commence to charterers’/receivers’ order:

then charterers have waived the invalidity of the original Notice, upon the commencement of cargo operations. Laytime commences at that time, as if a valid Notice of Readiness had been served then.

All the above must be proved by owners. Potter LJ further said that where a NOR was to be given to Receivers’ agents, then, in the absence of evidence from charterers to the contrary, owners were entitled to assume that those agents had authority to act for the charterer, not only to receive the Notice of Readiness, but also to waive any condition regarding the commencement of laytime. Charterers have said they will not appeal.

The Court of Appeal’s decision does not change the tests an owner must pass to avoid the consequences of a Master giving an invalid Notice of Readiness. It does however make those tests easier to pass.

This decision will be as popular as the judgment of Langley J was unpopular. However, owners are not guaranteed to pass the tests above in every case, and in any event they are still at risk for time lost before commencement of cargo operations. Owners would still benefit from the Master giving repeat Notices of Readiness and from having a charterparty "backstop" clause providing that in the event that no valid Notice of Readiness had been tendered by commencement of cargo operations, laytime will commence at that time.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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