A couple of years ago I conducted a typical LMAA arbitration about laytime and demurrage.
It was all about the service of the Notice of Readiness (NOR).
It surprised me to find that there is no actual authority as to when, as a matter of law, an owner is required to do this.
The recent Commercial Court decision, Trans Trade RK SA and Sebat Shipping and Trading Company, illustrates that any owner should serve, and keep re-serving (without prejudice to the earlier ones), if the owner wants to recover any demurrage (and possibly avoid paying despatch).
The court found that the tribunal was wrong on the key point and that was:
Where the owners of a vessel under a voyage charterparty fail to serve a valid notice of readiness at a load or discharge port and there is no agreement, waiver or estoppel having the effect that an invalid notice is treated as valid, when does laytime start to run, if at all?
The short answer is — it doesn’t.
The tribunal had appeared to have relied upon the “deemed waiver” of a defective NOR ie served at the wrong place or time which was said to derive from an earlier decision of the court in The Happy Day which in short was said to be this — if there is a defective NOR but nonetheless the charterers commence cargo operations, then they are taken to have waived the defect. In short, cargo operations equals commencement of laytime.
The court said there was no such thing as deemed waiver and that the Happy Day said no such thing.
Any owner will still have to show that waiver applies.
What is this?
It arises where one party to the contract, the innocent party, is given a right under that contract and, provided it has some knowledge of the circumstances giving rise to that legal right, agrees with the contract breaker that he will not exercise that right or behaves in such a way so as to lead the contract breaker that he will not exercise that right — it is said that this message whether through express agreement or by conduct has to be clear and unequivocal. Silence, on its own, will not suffice here.
In short, any owner will have to go through the hoops and establish all the necessary ingredients of waiver before it can apply — there is no deemed waiver simply because cargo operations commence.
From this, I think that the lessons to be learnt are- for any owner, if in doubt, keep serving NORs without prejudice to the validity of any previous NORs and when serving an NOR expressly ask the charterers to acknowledge receipt and confirm that they accept validity, stating that the absence of any reply will be relied upon by owners.
For more information on the implications of this decision, contact our marine lawyers.