Invalid notice of readiness and laytime: Commercial Court revisits The Happy Day
Commercial Court decisions on the impact on the running of laytime of an invalid notice of readiness (NOR) are a rare event. InTrans Trade RK SA v Sebat Shipping and Trading Company,1 the Commercial Court has restated the orthodox principles governing the commencement of laytime where a NOR is invalid. The court confirmed that, in the absence a valid NOR, laytime does not run unless there is (a) an agreement to the contrary; or (b) waiver or estoppel. The commencement of cargo operations is not alone sufficient grounds to find waiver and therefore to trigger laytime.
The decision follows The Happy Day2 and confirms the law as understood in a number of practitioner’s textbooks.3 It will be of particular relevance to those involved in voyage charter disputes where defective NORs and laytime are in issue.
Background
This dispute arose under a voyage charter for the carriage of barley on board the MV Sebat (the Vessel) owned by Sebat Shipping and Trading Company / the Defendant (the Owners) and chartered to Trans Trade RK SA (the Charterers).
At the port of Brake, Germany (the discharge port) the Master tendered NOR immediately on arrival at the pilot station at the same time as ending the Vessel’s sea passage, on 10 May 2022. The Vessel did not anchor until around an hour later. No subsequent NOR was served. The Vessel berthed and the hatches were opened, only for fumigation issues to significantly delay discharge. The Vessel was subsequently instructed to leave the berth, with the discharge operations finally commencing in late July 2022. Given this delay, Owners raised a significant demurrage claim for discharge port demurrage.
Arbitration
The Owners commenced arbitration proceedings, claiming demurrage at both the load and discharge ports. The arbitral tribunal found that the NOR tendered at both the load port and the discharge port were invalid, as both were tendered while the Vessel was still underway and therefore before the Vessel was an arrived ship. The key issues in dispute related to discharge port demurrage.
The tribunal upheld the Owners’ claim for demurrage in part. The period from tendering NOR at the discharge port to opening hatch covers was not recoverable because the NOR was invalid. However, notwithstanding the validity of the NOR, the tribunal determined that laytime commenced when the hatches were opened, describing this as “trite law”. The tribunal amended its award to clarify that this was a reference to the Court of Appeal decision in The Happy Day.
The Charterers appealed on the basis that the tribunal had erred in law in holding that laytime had commenced notwithstanding the invalid NOR.
Commercial Court judgment
The Commercial Court overturned the tribunal’s award, dismissing Owners’ discharge port demurrage claim and remitting the issue of costs in the arbitration back to the tribunal.
The point of law considered by the Commercial Court was narrow: can commencement of cargo operations trigger commencement of laytime where no valid NOR has been served?
The court summarised the law and relied on The Mexico I, where the Court of Appeal made clear that invalid NOR cannot operate as a “delayed-action device” to automatically start laytime once the vessel subsequently becomes ready.4 That position was reaffirmed in The Happy Day where the Court of Appeal held that, where NOR is invalid, “time will not start to run until a valid NOR is given” subject to two exceptions where there is (a) “an agreement” to the contrary; or (b) “there is a waiver or an estoppel”.
In this case, there was no express agreement to vary the common law position, so to succeed with their claim Owners had to rely on either waiver or estoppel. In considering the tribunal’s award, the court found that Owners had not pleaded waiver, nor was waiver considered in the tribunal’s award at any point. Therefore, the tribunal could not have decided that Charterers waived the invalidity of the NOR by reason of actual waiver. The court permitted the possibility that the tribunal may have relied on the doctrine of “deemed” waiver, perhaps in reliance on the judgment of Potter LJ in The Happy Day, That judgment provided that laytime can commence when an invalid NOR is served where (a) the form of the NOR is proper; (b) the vessel is accepted for cargo operations by charterers; and (c) discharge commences without charterers rejecting the NOR or reserving their rights. If so, “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 charter-party as if a valid notice of readiness had been served at that time.”5 The court in the present case clarified that The Happy Day judgment does not give rise to a doctrine of “deemed waiver”, which bypasses the orthodox requirements for waiver, and that no such doctrine exists under English law. Waiver always requires (i) actual knowledge of the relevant facts or rights; and (ii) unequivocal communication by words or conduct that a party will not enforce their legal right.
There may be circumstances where charterers’ silence after receiving an invalid NOR can amount to waiver upon commencement of cargo operations. For this to apply (a) the invalid NOR must be in the correct format; (b) charterers must have knowledge the NOR is invalid; (c) charterers should not have already rejected the invalid NOR or reserved their rights; and (d) charterers must accept the Vessel for cargo operations. Consequently, the Court of Appeal found the charterers in The Happy Day had waived their rights. No such findings were made by the tribunal in the present case; in particular, there was no analysis of waiver and no findings as to the Charterers’ knowledge of the invalidity of the NOR at the time they were said to have waived their contractual rights. The Commercial Court declined to accept a test for waiver which would undermine the well-established requirement that waiver involves a conscious and informed election, and reduce it to an automatic rule triggered by conduct alone. Accordingly, the court held that the tribunal had erred in law. The award was therefore varied to exclude the substantial demurrage claim, leaving only the load port demurrage and fumigation expenses otherwise recoverable.
HFW comments
Issues relating to validity of NOR and commencement of laytime are a routine occurrence for voyage charters, and this decision is therefore a helpful clarification of the orthodox principles and a chance for the English High Court to revisit these issues 24 years after The Happy Day, reflecting how rarely these issues are decided outside of arbitration. The decision itself restates the principles regarding validity of NOR from the practitioner’s textbooks. Commencement of cargo operations does not automatically start the laytime clock where an invalid NOR has been tendered. The Happy Day does not provide a general mechanism for curing invalid notices and its application is confined to cases of true waiver of election based on factual circumstances. Therefore, no easy shortcut relying on “deemed waiver” exists.
There are some unusual implications of this orthodox position.
- First, the decision seems to punish the officious charterer who enquires immediately as to the validity of the NOR. This charterer is more likely to be held to have waived their contractual rights than a charterer who waits until presentation of the demurrage claim, i.e. after cargo operations are completed, before scrutinising the validity of the NOR. In the latter case, there is no basis for a finding of waiver.
- Equally, the decision suggests that certain types of invalid NOR are now more likely to give rise to waiver. The requirements to tender a valid NOR are twofold: (a) the ship is at the required destination; and (b) the ship is ready for cargo operations. In port charters, invalidity may be more apparent when it results from a ship not being physically ready for cargo operations, rather than incorrect destination. The destination issue may only become apparent following subsequent investigations into the precise location where NOR should have been tendered and the customary waiting place at the port, etc. Therefore, in principle, invalidity of a NOR due to a failure of readiness appears more likely to trigger a waiver of rights on commencement of cargo operations.
Where charterers have any uncertainty as to validity of a NOR, it may be advisable to issue a reservation of rights to protect against waiver.
For owners, the decision is a helpful reminder to continue to tender new NORs without prejudice to any previous NOR on arrival at a load or discharge port. This practice increases the likelihood that a subsequent valid NOR will cure an earlier invalid NOR. Equally, Masters should exercise caution when tendering NOR on arrival. A quick-fire tender of NOR may start the laytime clock running as soon as possible, but the consequences are severe if tendered when still technically underway and not an arrived ship.
Hazel Yi, Trainee Solicitor, assisted with the preparation of this briefing.
Footnotes
- Trans Trade RK SA v Sebat Shipping and Trading Company [2026] EWHC 950 (Comm).
- The Happy Day [2002] EWCA Civ 1068; [2002] 2 Lloyds’ Rep 487.
- Carver on Charterparties (3rd ed., 2024) at para. 9-102 and Scrutton on Charterparties (25th ed., 2024) at para. 9-081.
- Paragraph 513 of The Mexico I [1990] 1 Lloyd’s Rep 507; paragraph 64 of Trans Trade v Sebat.
- Relying on Paragraph 85, The Happy Day [2002] EWCA Civ 1068
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