The Court of Appeal has recently issued its judgment in the case of Flacker Shipping Ltd v. Glencore Grain Ltd. The “Happy Day” and has allowed the ship owners’ appeal. See News Update No. 16 for details of the High Court decision. The Court of Appeal concluded that the charterers had effectively waived any right to rely on the invalidity of the original NOR even though it was invalid because it had been tendered prematurely. The NOR had been tendered in a valid form, the charterers had accepted the vessel as ready to discharge and discharge had been completed to the charterers’ instructions. At no time had the charterers rejected the NOR or reserved their position. They had not indicated that another NOR had to be tendered to trigger the start of laytime. Laytime commenced as per the terms of the charter party. The judgment no doubt comes as a relief to ship owners. Some experienced lawyers have suggested that the decision appears to be based on “the demands of commercial good sense” (the words of Lord Justice Potter who delivered the judgment) rather than previously established legal principles. However, the judges have gone to some length to differentiate between their decision based on the doctrine of waiver and the leading cases on the validity of notices of readiness, The “Mexico I” [1990] and The “Agamemnon” [1998]. In these cases it was clearly established that an invalid NOR cannot become valid at a later date. However, the charterers have indicated that they do not intend to seek to appeal to The House of Lords. The judgement goes into considerable detail, 29 pages in total, and usefully defines the legal principles of variation by agreement, waiver, and estoppel by convention. It is worth studying for these points alone. The conclusion is that if charterers wish to object to the validity of an NOR, they should do so at the time of the event. The advice to owners, however, must still be that where they have any doubt that an NOR might not be valid, they should ensure that further NOR’s are issued until the matter has been resolved. Please let us know if you would like fuller details of this decision.
Since offering copies of our Excel spreadsheet that uses the pumping performance formula to calculate any time lost due to the pumping inefficiency of the vessel, more than 50 companies have asked for a copy. We believe that most of them have accepted the underlying principle that pumping warranties are indemnity, not penalty, clauses. If you still do not have a copy and would like one, please let us know by email and we can send it by return.
While ship owners will be satisfied with the result of the appeal in the “Happy Day”, charterers have been quick to take advantage of the High Court decision in Stolt Tankers Inc. V. Landmark Chemicals SA (The “Stolt Spur”) [2001] LMLN 579 which we referred to in our last newsletter No. 19. In this case, the judge agreed with the arbitrators that if the vessel was unavailable to the charterers for their cargo operations because she was being used by the owners for their own purposes, the owners were deriving a benefit even if the vessel was still waiting for a berth. Therefore, there was no reason for the charterers to pay compensation, i.e. demurrage, during this period.
We have recently seen several charterers cite this case in support of their argument that time taken for bunkers should be deducted from the laytime calculation even though the bunkering operation did not delay the vessel in any way. To counteract this we have also seen new chartering clauses that give owners the right to carry out bunkering without interrupting laytime/ demurrage when the vessel is waiting for a berth.
Although it is 20 years since the “Laura Prima” decision, owners and charterers with fertile imaginations persist in attempting to reinterpret the meaning of “reachable on arrival” in clause 9 of Asbatankvoy. This helps to explain why Asbatankvoy, more than all other tanker charter parties combined, continues to provide maritime lawyers with a steady flow of business. We have recently seen various arguments over when laytime should run if the vessel is unable to berth immediately upon arrival. The House of Lords’ decision in “The Laura Prima” [1982] was primarily concerned with the relationship between “reachable on arrival” in clause 9 and the final sentence of clause 6. Lord Roskill said: “’Reachable on arrival’ is a well-known phrase and means precisely what it says. If a berth cannot be reached on arrival, the warranty is broken unless there is some relevant protecting exception... . The berth is required to have two characteristics; it has to be safe and it also has to be reachable on arrival.” In other words, when the ship arrives there must be a safe berth available and reachable before the charterer can rely on the last sentence of Cl.6 which states “However, where delay is caused to Vessel getting into berth after giving notice of readiness for any reason over which Charterer has no control such delay shall not count as used laytime” . If charterers want to ensure that time lost due to particular events will not count as laytime and/or demurrage they must include additional clauses in their charter parties to cover this. This is what Lord Roskill was referring to by the words “unless there is some relevant protecting exception”. Additionally, the half-rate exceptions to demurrage in clause 8 have been considered by most London arbitrators to be such protecting exceptions, but only once the ship is on demurrage.