Facts
Sebat Shipping and Trading Company (“Owners”) entered into a voyage charterparty (the “Charter”) with Trans Trade RK SA (“Charterers”) in respect of the Sebat (the “Vessel”). Laden with a cargo of barley in bulk, the Vessel proceeded to Brake, Germany, and tendered notice of readiness at the pilot station on 10 May 2022 (the “NOR”). The Vessel was not an arrived ship at the time of the NOR, and no other notice of readiness was given. The Vessel proceeded to the berth and the hatches were open in readiness for discharge on the morning of 14 May.
The Vessel was then ordered to leave the berth because tests showed phosphine gas levels in excess of the safety limit. The Vessel’s phosphine levels remained high until at least 28 July, the reason for which was unknown. The Vessel returned to berth and completed discharge on 30 July 2022.
The Award
Owners commenced arbitration claiming demurrage for the delay at the discharge port. Each party alleged that the other was responsible for the delay. There was also disagreement over whether the NOR was valid, whether laytime had ever commenced and, if so, when.
The Tribunal found in favour of Owners, holding that they were entitled to demurrage notwithstanding the fact that the NOR was invalid. They reasoned that, in the absence of a valid NOR, it was “trite law” that the trigger for commencement of laytime was the commencement of cargo operations which in this case occurred, at the latest, on 14 May when the cargo hatches were opened.
Following an application by Owners for clarification of the award under s.57 of the Arbitration Act 1996 (the “Act”), the Tribunal made its amended award in May 2025 (the “Award”) clarifying that: (i) laytime commenced on 16 May at 0800 (in accordance with the laytime clause in the Charterparty); and (ii) that the justification for the principle that commencement of cargo operations started laytime in the absence of a valid NOR was the Court of Appeal decision of The Happy Day.1
The High Court
Charterers appealed on a question of law under s.69 of the Act. The question for the Court to determine 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?”
It was common ground between the parties that the answer to this question was that laytime would not run at all. However, their submissions focussed on the question of whether the Tribunal found that the Charterers had waived the invalidity of the NOR tendered by the Owners so as to allow laytime to commence. Citing The Happy Day, Owners argued that there had been a ‘deemed waiver’ on the part of Charterers when they gave orders to open the hatches in preparation for discharge.
The appeal was heard by Peter MacDonald-Eggers KC, sitting as a Deputy Judge of the High Court (the “Judge”). He held that the Tribunal had decided laytime began to run from the commencement of cargo operations without considering whether Charterers had waived the invalidity of the NOR. The NOR, invalid as it was, could not have started laytime running, and the Tribunal had erred in finding that the commencement of cargo operations had that effect.
The Judge also held that, even if the Tribunal had decided the case on the basis of waiver, no principle of deemed waiver existed in law in the way that Owners argued. Without a valid NOR, laytime would not commence unless there was a waiver, estoppel or agreement between the parties. The decision in The Happy Day should not be interpreted as justification to find that there had been a waiver of an invalid NOR in circumstances where the full requirements for an actual waiver, i.e. knowledge of the invalidity plus clear and unequivocal conduct, were not met. The Charterers’ appeal was therefore allowed.
Takeaways
Commencing cargo operations does not, by itself, start laytime. That was always clear, but frequently overlooked. The idea that cargo operations automatically start the laytime clock after an invalid NOR has now been laid to rest: absent a valid NOR, laytime does not commence without either a later, valid NOR or an agreement, waiver or estoppel which must be made out on the facts. This will not always be the case, as this decision shows, leaving shipowners deprived of demurrage in circumstance where they might otherwise have been expecting it.
1 [2002] 2 Lloyds Rep. 487
