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The relevant clause in the charterparty read: ‘At first or sole discharging port, notice to be given to Receivers/agents during normal local office hours and laytime to start counting at 8am next working day, whether in berth or not, whether in port or not, whether in free pratique or not, whether customs cleared or not.’ 

In a joint award, London arbitrators held that the commencement of discharge had the effect of a valid notice of readiness and laytime commenced in accordance with the charterparty on the expiry of the notice period. Owners were awarded demurrage accordingly. Charterers obtained leave to appeal on a point of law.

The Decision at First Instance
The judge at first instance, Mr. Justice Langley, held that, in the absence of a valid notice of readiness, laytime never began. In consequence, owners were not entitled to demurrage and charterers were entitled to despatch.

The judge quoted with approval from the headnote to the judgment of the Court of Appeal in ‘The Mexico 1’ [1990] 1 Lloyd’s Rep. 507, to the effect that it was right to reject the arguments
(a) that a notice of readiness was a delayed-action device, effective to start laytime automatically when at a later date, the ship became ready to discharge the cargo and
(b) that time began in any event when the charterers knew, or ought to have known, of the ship’s readiness.

The judge relied also on the first instance decision in the case of the ‘Agamemnon [1998] 1 Lloyd’s Rep 675, in which it was held that, following the ‘The Mexico 1’, a notice of readiness, given at a time when the vessel had not arrived at the place required under the charterparty, did not become valid automatically when the vessel became an ‘arrived ship’.

In both ‘The Mexico 1’ and ‘The Agamemnon’, charterers had conceded that laytime commenced once cargo operations began. No such concession was made in ‘The Happy Day’ case.

Owners appealed.

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The Court of Appeal Decision
Lord Justice Potter delivered an agreed judgment.

After considering the relevant authorities, he concluded that, at the time of the first instance decision in this case, the law was to the following effect:

1. In a case where the notice of readiness given was invalid for prematurity, the doctrine of the ‘inchoate notice’ [namely, the doctrine that an invalid notice becomes automatically valid, once the circumstances constituting its invalidity have ceased to apply] was not available to the owners to start laytime running as soon as the vessel became ready to unload, even though the charterers were aware of its readiness.
2. Time would not start to run until a valid notice of readiness was given, in the absence of an agreement to dispense with it, or unless there was a waiver or estoppel binding upon the charterers in respect of the necessity for a further (and valid) notice.

The question whether or not such agreement, waiver or estoppel could be established was a mixed question of law and fact and depended on the circumstances of the particular case.

In this case, where unloading commenced with the knowledge and consent of the charterers or their agents and without any reservation of the charterers’ position, the question was whether that fact alone gave rise to an implied agreement, waiver or estoppel. The court held that, on the findings of the arbitrators, there was no implied agreement in this case; nor were the findings adequate to sustain an estoppel. The position was, however, different with regard to waiver.

The court set out the principle that whether or not the party entitled to notice has waived a defect upon which he subsequently seeks to rely depends upon the effect of the communications or conduct of the parties, the intention of the party alleged to have waived his rights being judged by objective standards. Lord Justice Potter continued:

"This being so, it seems to me clear that, in an appropriate commercial context, silence in response to the receipt of an invalid notice in the sense of a failure to intimate rejection of it, may, at least in combination with some other step taken or assented to under the contract, amount to a waiver of the invalidity or, put another way, may amount to acceptance of the notice as complying with the contract pursuant to which it is given."

The court held that, on the basis of the findings of fact made by the arbitrators in this case, it was properly open to them to conclude that, as at the time discharge commenced, the charterers had waived any reliance on the invalidity of the notice of readiness served upon the receivers or their agents as a means of deferring operation of the laytime regime provided in the charterparty. "The context", the court said, " was as follows. The owners had served notice of readiness upon the receivers’ agents in purported compliance with the charter at a time shortly before [the vessel] arrived at berth. Having arrived at berth, the vessel was in fact ready to commence the cargo operation required and neither the owners nor the Master received any intimation of rejection or reservation so far as the validity of the notice was concerned. The charterers were well aware of the matters which the notice was concerned to convey, namely the arrival of the vessel and its readiness to discharge… Furthermore, they were aware through the receivers’ agents as their agents for service of the notice that it had been served prior to arrival at the berth. Thereafter, those receivers’ agents themselves accepted instructions to discharge the vessel without any reservation of the charterers’ position as to the validity of the notice they had earlier received. On an objective construction of those matters, although the charterers were not under a contractual duty to indicate rejection of the notice, by their failure to do so, coupled with their assent to commencement of discharging operations, they intimated, and a reasonable shipowner would have concluded, that the charterers thereby waived reliance on any invalidity in the notice and any requirement for a further notice."

The court agreed with the arbitrators’ finding that, once the notice previously tendered was accepted as valid on commencement of loading, the remaining provisions of the charterparty regarding laytime came into effect, with the result that laytime began the following Tuesday, September 29, after expiry of the notice period.

On the question whether the receivers’ agents had authority to waive a condition of the commencement of laytime [namely, a valid notice of readiness], the court held as follows. "If the charterparty provides that notice of readiness is to be served not upon the charterers but upon the receivers/agents through whom the charterers propose to perform their obligation to discharge then, so far as the owners are concerned, the receivers are not only the charterers’ agents to receive the notice of readiness but also the persons to whom he is entitled to look to make decisions as to the readiness of the vessel and its equipment for discharge to begin…. I consider that, in these circumstances, as a matter of commercial practicality, the receivers/agents must have implied authority to waive a condition as to the commencement of laytime…. In my view, on the facts found by the arbitrators, the receivers/agents had implied authority to waive the invalidity of the notice."

Accordingly, the court concluded:
"Laytime can commence under a voyage charterparty requiring service of a notice of readiness when no valid notice of readiness has been served in circumstances where:

In such circumstances, the charterers may be deemed to have waived reliance upon the invalidity of the original notice as from the time of commencement of discharge and laytime will commence in accordance with the regime provided for in the charterparty, as if a valid notice of readiness had been served at that time… In appropriate circumstances, the same result may follow by application of the doctrines of variation [of the agreement] and estoppel."

Judgment was accordingly given in favour of the owners.

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