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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Flacker Shipping Ltd v Glencore Grain Ltd [2002] EWCA Civ 1068 (15 July 2002)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1068.html
Cite as: [2002] 2 LLR 487, [2002] 2 All ER (Comm) 896, [2002] 2 Lloyd's Rep 487, [2002] EWCA Civ 1068
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- This is an appeal by Flacker Shipping Limited (“owners”), the owners of the M.V. “Happy Day” from a decision of Langley J handed down in the Commercial Court on 25 January 2001 in respect of an appeal by Glencore Grain Limited (“charterers”) against an interim final arbitration award in favour of owners in relation to their claim for inter alia demurrage under a voyage charterparty, the charterers having taken a period of some three months to discharge the vessel’s cargo of wheat at the port of Cochin. The decision is reported under the name Glencore Grain Ltd –v- Flacker Shipping Ltd (‘The Happy Day’) at [2001] 1 Lloyds Rep 754.
- As the judge put it below, subject to a number of important procedural points, the case raises in stark circumstances a question which Mustill LJ (as he then was), in The Mexico 1 [1990] 1 Lloyd’s Rep 507 at 510, left open for ‘detailed exploration’ should it arise in the future, namely what are the rights of owners to demurrage and charterers to despatch when, under a charterparty which provides for a Notice of Readiness (“NOR”) to be given at the discharge port to trigger the start of laytime, the owners give NOR which is invalid for prematurity, yet the vessel thereafter, and without further NOR being given, commences and completes discharge over a period well in excess of the number of laydays provided for. The arbitrators decided that laytime commenced to run as if the notice had been correctly given at the time when loading commenced. The question of law in respect of which permission to appeal was granted was ‘Can laytime commence under a voyage charterparty requiring service of a notice of readiness when no valid notice of readiness is ever served? If so, when does it commence?’ The charterers contended on appeal to the judge that the arbitrators were wrong in their decision and that, as no valid NOR had ever been given, no demurrage ever became payable; indeed, to the contrary, they made a claim for despatch. The judge allowed the charterers’ appeal.
- The vessel was a voyage charter on an amended Synacomex form containing the following relevant clauses:
- In the light of Clause 3, the arbitrators found that the charterparty was a berth charter, rejecting an argument to the contrary which owners had advanced in relation to the port of Cochin. That finding was not the subject of any appeal.
- The relevant findings of fact made by the arbitrators were as follows. The vessel completed loading 23,000 mts of wheat at Odessa on 6 September 1998, departing for Cochin where she arrived off the port on Friday 25 September 1998 at 1630 hours. At the time of her arrival off the port the vessel could not immediately enter port in order to berth because she had missed the tide. Nonetheless, the Master purported to give NOR by cable at 1630 hours on 25 September 1998. Because the charterparty was a berth charter and there was no congestion at the berth, the NOR was premature and was thus invalid when given: see The Kyzikos [1989] AC 1264.
- The vessel was able to enter the port on the morning tide of Saturday 26 September, berthing at 1315 hours.
- No further NOR was ever given. However, discharge commenced on Saturday 26 September and as a result of various delays was not completed until 25 December 1998.
- The major part of those delays, which gave rise to what the arbitrators described as the ‘major issue’ between the parties arose because of the non-availability of the original bills of lading at Cochin. The arbitrators found at paragraphs 7-11 of their award that, following arrival of the vessel, the original bills were not available when the vessel was ready to discharge. As it was the owners’ responsibility to see that the cargo was delivered to its rightful owners, they requested a Letter of Indemnity (“LOI”) from charterers to enable discharge and delivery to the receivers without production of the original bills. The charterers refused, saying that, having sold the cargo to receivers, responsibility for the bills did not lie with the charterers and the owners should obtain security from the receivers. The owners then instructed the agents at Cochin, N. Bhasmer-Kimi, who were both the receiver’s agents and the sub-agents of Galaxy Mumbai, the agents appointed by the owners on the nomination of the charterers pursuant to Clause 10 of the charter, to discharge the cargo into a warehouse under the custody of the port authority until presentation of the original bills. The original bills were slow in being presented so that the customs sheds became full and no more space was available. The arbitrators found against the charterers on this issue, holding that they were under a continuing obligation to procure the presentation of the original bills of lading. The arbitrators concluded paragraph 11 of their award by stating:
- When, later in their award, the arbitrators turned to deal with the question of NOR at Cochin, they found that, at the time it was tendered, the NOR was marked ‘received’. In summarising the contentions of the parties, the arbitrators referred to the fact that there was a Statement of Facts ‘signed by all parties’ which noted that NOR had been ‘accepted’. That was in fact a reference to the Statement of Facts which had been signed by the vessel’s agents, M. Bhasmer-Kimi, as ‘receiver’s agents’, and the Master on 25 December. That Statement recorded, so far as material:
- The award, dated 22 February 2000, was that of two arbitrators, Alan Burbridge esquire and Michael Baskerville esquire. It was made following the exchange of written submissions and documents, no oral attended hearing having been requested. The material paragraphs of the award are at paragraphs 30-33 which read as follows. Having summarised the facts briefly as I have done (but without at that stage having referred to the Statement of Facts) the award continued:
- The notable feature in relation to paragraph 33 of the Award is that, having rejected the submissions of the owners as recorded and having apparently treated the observations of Mustill LJ in The “Mexico 1” and of Thomas J in The “Agamemnon” as ‘binding authority’ which meant that the owner’s case would fail in the absence of a concession from charterers, the arbitrators nonetheless concluded that laytime commenced at 0800 on Tuesday 29 September, which was the first moment on which it could have commenced under clause 30 of the charterparty if valid NOR had been given in accordance with that clause at the time loading in fact started. That was, of course, a conclusion in accordance with the alternative submission of the charterers as set out in paragraph 30 of the Award. However, it is clear that the alternative was a ‘fall-back’ submission and not a concession, the charterers’ primary case being that the NOR when tendered was invalid and that, since no fresh NOR had been tendered, laytime never commenced and no time counted against the charterers. It was that primary case which the arbitrators had at first sight accepted in paragraph 32 of their award quoted above.
- The charterers were granted permission to appeal on a single question of law namely:
- There was no cross-appeal by the owners against the rejection by the arbitrators of the submissions made to them and no respondent’s notice was served setting out alternative grounds for upholding the Award. Since no further findings of fact were sought, it was expressly accepted for the owners that the appeal had to be argued on the basis of the findings of fact made by the arbitrators. However, permission to appeal having been granted, in his witness statement of 18 September 2000, Mr Spark, the owners’ solicitor, sought ‘to define further the grounds upon which the Respondent will contend that the award .... should be upheld’ namely
- Objection was made to the judge on behalf of the charterers to these arguments being advanced when they had not been made the subject of a respondent’s notice in accordance with paragraph 20(3) of the Arbitration Practice Direction. Miss Healy for the charterers stressed the importance of observing these provisions, so that a judge considering an application for permission to appeal can also consider whether the matter requires to be remitted to the arbitrators for further findings of fact (see the observations of Thomas J in The “Agamemnon" at pages 682-3). However, the judge stated that he did not think it sensible to exclude from consideration a document which had been expressly referred to at paragraph 33 of the Award, not least because the submissions did not take the charterers by surprise or unprepared (as had been the case in The “Agamemnon”), having been ‘flagged’ in Mr Spark’s statement. The judge said he saw no real injustice to the charterers in permitting the arguments to be raised on the basis that the owners were strictly limited to, and bound by, the findings which had been made by the Arbitrators and, if and to the extent that those findings were insufficient to sustain the submissions which the owners made, then those submissions must fail.
- In his judgment, Langley J considered the judgment of the court in The Mexico 1 and applied the view of Mustill LJ as stated in that case that where an invalid NOR to Discharge is given and discharge takes place without the giving of any further notice then:
- Langley J held that, in this context, the fact that discharge commenced to the knowledge of the charterers without protest or reservation on their part was not in itself a sufficient happening to make laytime start. He pointed out that in The “Mexico 1” the court rejected the notion that an invalid NOR could be treated as “inchoate”, becoming effective once the cargo was or was known to be available for discharge. He stated that he could see no basis on which a different conclusion could be justified by substituting the time when discharge actually commenced for the time when the vessel was or was known to be ready for discharge. He founded his judgment upon the observations of Mustill LJ in The “Mexico” 1, which he considered to be supported also by the decision of Thomas J in The “Agamemnon”. The judge preferred the reasoning in The “Mexico 1” and The “Agamemnon” to what he regarded as the inconsistent reasoning of Donaldson J in The “Helle Skou” [1976] 2 Lloyd’s Rep 205 at 214. Langley J said:
- He also rejected the submission of the owners that he should apply the principle of ‘futility’, propounded by Lord Denning MR in Barrett Bros (Taxis) Limited –v- Davies [1966) 1 WLR 1334, to the need for the owners to serve a further valid NOR once discharge had commenced, on the ground that there is a distinction between a notice provision which is intended only to provide information (as in the Barrett Bros case) and one which is the prescribed trigger for the running of time for the purposes of other specific contractual obligations as in the case of NOR. He held that there were no findings of fact made by the arbitrators which were directed to the plea, or could justify the conclusion, that there had been an estoppel, waiver or implied variation of the contract in relation to the need for a valid NOR. He stated his conclusions in those respects as follows:
- In the absence of contract or custom, there is no common law requirement that the shipowner must give NOR to unload to the charterers. However, where (as is usual) NOR is required, the proper contents of the notice depend upon the terms of the charter. In the absence of any specific additional requirements it should state (i) that the vessel has arrived at the place (e.g. a particular port, area or berth) where, under the terms of the charter, she may tender notice and (ii) that the vessel is ready to perform the cargo operation required. A notice which states that the vessel is ready, but which is given at a time when it is not actually ready, is not a valid notice. These matters are not in issue. Nor is it in issue that the purpose of NOR is that of defining the time at, or following which, laytime starts to run for the purpose of calculating the period allowed to the charterers under the charter for loading or discharging; that will in turn regulate the liability of the charterers to pay demurrage if the period for loading is exceeded and charterers’ right to payment by owners of despatch in respect of working time saved. That being so, if, having given premature NOR, the vessel arrives at berth and the work of unloading proceeds with the knowledge and consent of the charterers but exceeds the period of laytime provided for in the charter, the question arises whether the law is such that it permits the charterers to treat laytime as never having commenced, to deny liability for demurrage and, indeed, to claim despatch for the entire period of laytime. It is the submission of the owners on this appeal that that is a surprising proposition productive of injustice and cannot be derived from the authorities relied upon before the judge. The charterers, on the other hand, assert (as the judge held) that such is indeed the effect of the authorities and is in any event the correct position.
- In this respect it is convenient to consider the principal authorities to which we have been referred in chronological order and to make brief reference to the submissions of the parties as to their ambit or affect.
- In Franco-British Steam Ship Company Limited –v- Watson & Youell (1921) 9 Lloyd’s List Reports 282 the question arose in relation to notice at the loading port. The vessel arrived at the port of Galatz on 11 November to load cargo in circumstances where (as the arbitrator found) the charterers, who were also the ship’s agents, were aware of her arrival and of her readiness to load on that date. The Captain did not receive orders to proceed to dock to load until 17 November. So far as loading was concerned the charter stated ‘Time for loading to count from the morning after the steamer’s arrival and report at the customs ... and ready to load in all her holds and notice of readiness given ... between the hours of 9 am and 5 pm on ordinary working days’. There being no requirement for notice in writing the judge stated that verbal notice would be sufficient. The arbitrators did not state in their findings that verbal NOR had been given. They simply found that the charterers were aware of the vessel’s readiness to load. Horridge J said:
- Miss Healy, for the charterers, has submitted that the judge’s decision was based upon an implied finding by the arbitrator that verbal NOR was in fact given. In the light of the terms in which the judge expressed himself, it is not clear that that is so. It seems to me that Mr Eder QC for the owners, is right in submitting that the true basis of the decision was that no NOR was held to be required in a situation where the charterers were aware that the ship was ready to load. That said, however, the facts could hardly have been stronger, or the unreality of a different decision greater, in a case where the charterers were themselves the ship’s agents.
- In Pteroti Compania Naviera SA –v- NCB (The “Khios Breeze”) [1958] 1 QB 469 the charter provided: ‘Time to commence twenty-four hours ... after vessel is ready to unload and written notice given ...’. The charterers began discharging their cargo from the ship as soon as it berthed. A few hours later NOR to unload was served on the charterers which expired twenty-four hours later. The owners claimed that laytime began to run from the time when the charterers began to discharge the vessel, while the charterers claimed that time did not begin until the expiry of the NOR. Diplock J found in favour of the charterers. In the course of a short judgment he stated:
- In The Khios Breeze, the court was concerned with cargo operations which took place before the time that laytime could in any event commence because of the notice provisions in the charterparty. No NOR had been served at all when loading began and thus no deemed waiver in respect of its form or prematurity arose. The owners sought to eliminate a 24-hour free period to which charterers were entitled in any event if owners tendered NOR. They also sought to argue that laytime could run prior to the earliest moment at which NOR could have been validly tendered. Diplock J did not have to consider, and therefore expressed no views directed to, a situation in which charterers submitted that laytime did not start at all. Mr Eder has submitted, correctly in my view, that strictly speaking The Khios Breeze is an authority only on waiver of the free period and not on waiver of the requirement for NOR, which was neither argued nor discussed in the judgment (see also Tiberg: The Law of Demurrage (4th ed) at p.215 and Davies: Commencement of Laytime (3rd ed) at p.260).
- In The Helle Skou [1976] 2 Lloyd’s Rep 205 NOR was given once the vessel was at its designated berth under a berth charter which also provided that the vessel should be presented with holds clean and dry and free from smell. On the morning following receipt of the notice the charterers began loading without having inspected the vessel to ascertain whether it was in fact free from smell. It was not so free and, soon after, the cargo so far loaded was discharged while the vessel was moved from the berth to a buoy for cleaning. Donaldson J stated:
- This is a decision upon which Mr Eder for the owners places great reliance. He points out that, prior to the decision of Langley J, The Helle Skou had not been questioned in any subsequent decision. It is cited by leading textbook writers without any adverse comment, save for the observation in Davies: Commencement of Laytime (3rd ed) at 247 that while the decision made sense ‘from a practical/commercial viewpoint ... it may not lie easily with the Court of Appeal’s decision in The “Mexico 1”’ (see further below). It was also cited without adverse comment by Sir David Cairns in The Shackleford [1978] 2 Lloyd’s Rep 154 at 160 rhc.
- Mr Eder relies upon The Helle Skou as a decision in which Donaldson J treated commencement of loading as acceptance of NOR which was in fact invalid because the vessel was not in a state of physical readiness to load. Without resorting to precise analysis as to whether the charterers’ act in commencing loading was to be ‘labelled as waiver or estoppel or something else’ Donaldson J considered that, once loading had started, it was not open to the charterers to take the point that the NOR was invalid. Miss Healy, on the other hand, asserts, both as a matter of principle and as a result of the observations in The Mexico 1 to which I shall shortly turn, that in a case of alleged waiver, estoppel or variation, it is necessary that there should be available findings of fact by the arbitrator sufficient to justify dispensing with the requirement for a valid NOR under one or other of those legal labels. She points out that, in The Helle Skou, the arbitrators had incorporated in their findings of fact at least some details about the commencement and course of the loading operations, whereas the arbitrators in this case have made no more than bare reference to them. She also submits that the language of Donaldson J suggests that he had in mind application of the concept of an ‘inchoate’ notice served upon charterers i.e. a notice which, though invalid when given, had an inchoate status and became valid and effective when the appropriate facts came into existence. Miss Healy rightly asserts that such a doctrine, which had been favoured by most London commercial maritime arbitrators up until the time of the decision in The Mexico 1, was laid to rest in that case. However, I do not think it is apparent that Donaldson J applied the doctrine in The Helle Skou. In the passage on which Miss Healy relies and which I have quoted above, the judge referred to the example of a notice being treated in that way with the agreement of the charterers.
- In The Shackleford, NOR to discharge at the port of Constanza was required ‘vessel also having been entered at the Customs House and the laydays will then commence on the next business day, whether in berth or not, whether in port or not, whether in free pratique or not’. The vessel arrived in Constanza Roads, immediately giving NOR on 15 October, which notice was accepted by the receivers on the same day by endorsing ‘accepted’ upon it. Customs entry could not be obtained until the vessel berthed and this did not occur until 26 November. The arbitrator held that the charterers were estopped from denying that they had accepted the NOR and made a finding that the owners and/or Master relied upon the acceptance of the NOR by the receivers in that they made no attempt to procure an earlier berth, such as a bunkering or watering berth, so that Customs entry might be obtained at an earlier date. Donaldson J stated at first instance, [1978] 1 Lloyd’s Rep 191 at 197 that NOR could have been rejected for prematurity or it could have been ignored; however, it was formally accepted on no less than three occasions. Therefore the charterers could not subsequently be heard to assert that the notice was premature. The essential difference between that case and this is of course that the NOR was endorsed “accepted” rather than merely “received”, so that Donaldson J at first instance made a clear finding of estoppel by conduct: see p.198 lhc. As Sir David Cairns observed at p.159 lhc:
- Sir David Cairns stated at 159 rhc-160 lhc:
- I now turn to the decision in The Mexico 1 upon which Langley J, and Miss Healy in her submissions to this court, placed so much reliance. In that case clause 24 of the charterparty provided that ‘at loading and discharging ports notice of readiness shall be delivered in writing at the office of the shippers/receivers ... Time to commence to count next working day 0800 hours a.m. whether in berth or not’. The vessel had loaded part cargoes of beans and maize for the charterers which were overstowed by parts of the completion cargo. At the final discharge port of Luanda the vessel gave NOR to discharge on 25 January. Because of the overstowage the maize cargo did not become accessible for the purposes of discharge until 6 February and the cargo of beans did not become fully accessible for discharge until 19 February. In the event the cargo was discharged between 19 February and 25 April and the owners claimed demurrage. No further NOR was given. The arbitrators applied the inchoate theory to the maize cargo, treating the original NOR as “inchoate becoming complete and effective when the maize cargo became fully accessible” i.e. on 6 February. They also found that, by commencing discharge of the maize on 19 February, the charterers “plainly waived any entitlement they may have had to being given a fresh notice of readiness”. While they made a further finding that “it appears that receivers, agents and Master on the spot all realistically treated the notice as one which could be effective as soon as all requisite physical conditions on accessibility were met”, they did not treat this as a separate ground for deciding in favour of the shipowners on the basis of waiver/estoppel.
- On appeal to the High Court, Evans J reversed the decision of the arbitrators as to the inchoate status of the NOR but nonetheless decided the case in favour of the shipowners as one of waiver/estoppel on the basis of the arbitrators’ findings in relation to the manner in which the receivers and agents had proceeded. He stated:
- He went on to hold that the agents, who were appointed by the owners, and had (as the arbitrators found) performed functions for both owners and charterers/receivers, including receipt of the NOR, had authority from the charterers (whether or not any express authority had been given) to decide not to reject the notice but instead to proceed on the basis that it would become effective when all the requisite physical conditions of accessibility were met. He adverted to:
- On further appeal to this court, Mustill LJ gave a judgment in which Farquharson LJ and Sir Denys Buckley concurred. Mustill LJ considered the “inchoate notice” doctrine, distinguishing between its application (a) in its purest form (namely as an invalid notice automatically taking effect as at the moment when the ship became ready) and (b) in a modified version whereby the notice might become effective not simply when the ship became ready for discharge, but when the charterers first knew or had the means of knowledge that it was ready (see pp 512 rhc – 513 rhc). In relation to his rejection of the doctrine in its purest form he said
- In relation to the doctrine in its modified version (which the arbitrators had been disposed to accept) he said:
- In that passage of his judgment Mustill LJ did not refer to the effect of actual commencement of discharge. In that respect, he stated earlier in his judgment (at p.510 lhc):
- Returning to the matter later in his judgment, in relation to the findings of the arbitrators that the receivers and agents proceeded on the basis that the original (invalid) notice became valid and effective once the vessel became in fact ready for discharge, Mustill LJ said as follows:
- Mustill LJ then went on to consider what facts the arbitrators had found which could justify an inference of waiver/estoppel/variation. He said:
- The Mexico 1 was followed and applied by Thomas J in The Agamemnon [1998] 1 Lloyd’s Rep 675 in which the issues for decision were (1) what was the effect of a written NOR given at a time when the vessel was ready but for the fact that she had not arrived at the place required under the charter; (2) in particular what was the effect upon such NOR if the vessel, remaining in the same state of readiness, subsequently arrived at a place at which the charter-party required the notice to be given. It was a case, where, NOR having been given at one point on the Mississippi River, the charterers’ agents were thereafter in regular contact with the master during the up-river transit and were therefore fully aware of the vessel’s arrival at anchorage in the loading port at which NOR was to be given. A similar concession was made by counsel for the charterers as was made in The Mexico 1 to the effect that laytime commenced when the vessel actually started to load. Thomas J stated that he did not therefore explore such questions as might otherwise arise as to the basis on which laytime started and, like Mustill LJ, left it for detailed consideration if it should arise in the future. Having similarly rejected and refused to apply the concept of an inchoate notice, Thomas J stated:
- Thus, on the basis of the decision in The Mexico 1 as applied in The Agamemnon the law at the time of the decision of Langley J was to the following effect. In a case where NOR has been given which is invalid for prematurity, the doctrine of ‘inchoate’ notice is not available to the owners to start laytime running as soon as the vessel becomes ready to unload (even though the charterers are aware that it is in fact ready). Time will not start to run until valid NOR is given, in the absence of an agreement to dispense with such notice, or unless there is a waiver or an estoppel binding upon the charterers in respect of the necessity for further (valid) notice. The question whether or not such agreement, waiver or estoppel can be established (which is a mixed question of law and fact) must depend upon the circumstances of the case. In particular, in a case where unloading has commenced with the knowledge and consent of the charterers or their agents and without any reservation of the charterers’ position, the question arises whether that fact alone gives rise to an (implied) agreement, waiver or estoppel (as suggested by the decision of Horridge J in the Franco-British Steamship case and of Donaldson J in The Helle Skou, but doubted and left for later decision by Mustill LJ in The Mexico 1). By his decision, Langley J answered that question in the negative for the reasons already quoted in paragraph 14 above.
- The reasoning of Langley J has recently been followed and applied by Moore-Bick J in Glencore Grain Limited –v- Goldbeam Shipping Inc [2002] EWHC 27(Comm) which I understand is also the subject of an appeal to this court not yet heard. It is not necessary to refer to the facts of that case which were complicated and involved other issues not relevant to this case. Suffice it to say that one of the points which arose involved a similar question to that decided by Langley J in circumstances where, in setting out their award, the arbitrators had made no finding of any agreement on the part of charterers to treat NOR prematurely given as effective from the time when discharge began, nor had they stated that the charterers waived their rights with effect from that time. At para 35 of his judgment, Moore-Bick J observed:
- Having considered the observations of Langley J in this case which I have already quoted at paragraph 14 above, Moore-Bick J stated at para 40 of his judgment:
- Turning finally to the decisions upon futility, the case of Barrett –v- Davies was concerned with a term in a motor insurance policy, stated to be a condition precedent, which required the insured to give particulars in writing as soon as possible after any accident. The insured did not give such particulars or forward to insurers a notice of intended prosecution later received following an accident in which he was involved. However, the insurers received such particulars from the solicitors for the other party to the accident and were aware of the circumstances and intended prosecution from the police themselves. The majority of the Court of Appeal (Lord Denning MR and Danckwerts LJ) held that it was unnecessary for the insured to send the information in the circumstances, Lord Denning observing in the course of his judgment at p.1339F:
- That observation was adopted and applied by Mustill J in The Mozart [1985] 1 Lloyd’s Rep 239 in relation to the provision of a charterparty that any time lost by reason of accidents to machinery or any cause beyond the control of the charterers affecting loading of the cargo was not to be computed as part of the loading time provided that
- No notice was given by the charterers in a situation in which the Master was aware of all the circumstances relating to a breakdown in machinery in the course of loading, which Mustill J held was a cause beyond the control of the charterers. In reliance upon the observations of Lord Denning which I have already quoted, Mustill J stated:
- Observing that Lord Denning’s words were directly in point, Mustill J stated:
- In The Chanda [1985] 1 Lloyd’s Rep 563 Bingham J was concerned with a laytime clause which contained the provision:
- It also provided that any time lost by reason of floods or any cause whatsoever beyond the control of the charterers affecting the loading of the cargo was not to be computed as part of loading time unless the vessel was already on demurrage. Following the decision in The Mozart, Bingham J held that it was not necessary for an intention to deduct to have been expressly communicated in circumstances where the cause of the late arrival of the cargo had been earlier communicated to the owners. In construing the effect of the various communications between the charterers and the owners and Master as amounting to sufficient notice, Bingham J stated:
- In making his submissions to us, to which I shall turn shortly, Mr Eder attached some importance to the fact that Clause 30 of the charterparty contained no express requirement that NOR should be in writing at the discharge port (c.f. the provision of Clause 6 as to NOR at the loading port). That was a submission which had apparently not been relied on before the arbitrators, but was advanced before the judge. In that connection Langley J recorded in his judgment the submission of Miss Healy that, had the point been made before the arbitrators, she would have sought to argue that Clause 6 had in fact been amended/agreed so as to require notice in writing. On this appeal, she applied to adduce evidence to that effect pursuant to the respondent’s notice.
- In my judgment her application should be refused. For my part, I do not consider that the point whether the NOR was required to be written or could be given orally has any substantial implications for this appeal. In any event, I consider that it is now too late to adduce additional evidence on the point. Clause 6, as found by the arbitrators, was in the form which appeared in the charterers’ own submissions before them and, whether or not charterers thought anything would turn on the point, it was clearly their responsibility to submit an accurate statement of the terms of the charterparty to the arbitrators. Alternatively, they could have sought an adjournment to put in their evidence before the judge. Not having done so, I do not consider that they should have a second chance of adducing the evidence in this court. Miss Healy submitted that if the appellants had sought to uphold the arbitrators’ decision on the grounds that NOR did not have to be in writing, it was incumbent upon them to make the point in a respondents’ notice so that the court could consider whether remission to the arbitrators was required in accordance with the Commercial Court Arbitration Practice Direction. I do not seek to undermine what has been said by judges of the Commercial Court as to the importance of complying with the Practice Direction. However, it seems to me that the arbitrators were entitled to proceed on the basis that the form of the charterparty placed before them and quoted in the submissions of the charterers was correct.
- As a preliminary to his submissions, Mr Eder has emphasised the unfairness or ‘commercial absurdity’, as he describes it, of a situation in which charterers, aware of the readiness of a vessel, are enabled to perform their work of loading or discharge wholly outside the time provided for such operation and even to earn despatch simply because the NOR was invalid for prematurity. He cites observations to that effect in Davies: The Commencement of Laytime (3rd ed) at p.260, in which the author states his view that the commencement of loading/discharging should act as a waiver to the tendering of NOR, the commencement of loading/discharging becoming a substitute for such tender. He also refers to the views of Tiberg (4th ed) at p.214 that an estoppel arises by the charterers’ participation in unloading following awareness that the vessel is ready. Tiberg cites two U.S. decisions in support of that view (Washington Marine Co –v- Rayner Mill & Lubmer (1912) 198F 142 and The Driebergen (1932) AMC 1552) which in fact put the position as one of waiver of the necessity for the written NOR provided for in the charterparty. The English authority cited is that of Kawasaki Kisen Kabushiki Kaisha –v- Bantham Steamship Company Limited [1938] 1 KB 805.
- However, that is not an authority which relates to a laytime regime, although the circumstances may be said to be analogous, namely the giving of NOR at the start of a time charter for the purpose of the commencement of the obligation to pay hire. More significantly, it is not, on analysis, an authority upon estoppel as the editors of Tiberg suggest, but rather appears to have been decided upon the construction of the particular terms of the charterparty in that case. The charter provided that payment of hire should be made as from delivery of the vessel, such delivery to count from 7am on the working day following that on which notice had been given by the owners before 4pm ‘but if required by the charterers, loading to commence at once, such time to count as hire’. On arrival of the vessel the charterers immediately requested the Master to start loading which he did. He did not subsequently give NOR, because he did not consider it necessary, until expressly asked to do so by the charterer’s agents who then relied upon that notice as delaying the start of the obligation to pay hire until 7am on the day following its service. Branson J held that the proviso which I have quoted was an alternative to the giving of notice specifically provided for in the charter. He observed:
- Despite the words of Branson J quoted above, Mr Eder recognises that his argument is not sustainable simply upon the hypothesis of unfairness or commercial absurdity. Given the specific laytime regime laid down in Clause 30 of the charterparty, and accepting that the effect of the authorities is that an invalid NOR, cannot, without more, be relied upon for the purpose of triggering laytime, he accepts that if the decision of the arbitrators is to be upheld it must be justified on the basis that their findings of fact and/or the inferences properly arising therefrom gave rise either to an implied variation of the contract or a species of waiver or estoppel by convention which prevents the charterers from relying on Clause 30 in relation to the calculation of laytime. In this connection, he acknowledges that the facts found by the arbitrators are sparse and that, at first sight, they made a finding which was contrary to what they stated to be binding authority. However, he invites us to approach the case on the basis that (i) prior to that comment, the arbitrators had correctly stated the law earlier in their award, when they said that “the courts have not so far been required to make a judgment” upon whether or not the concessions made by the charterers in The Mexico 1 and The Agamemnon were correctly made; (ii) the arbitrators’ own conclusion must have been based on their view that the proposition involved in such concession, namely that following receipt of an invalid NOR, the laytime regime might nonetheless be triggered by the commencement of loading was indeed correct. Since these were experienced maritime arbitrators who were well aware (and had recorded) that the charterers had not made a similar concession in this case, I consider that we should indeed adopt the approach suggested by Mr Eder. I am fortified in this view by reason of the fact that it is clear from the charterers’ written submissions to the arbitrators which were placed before us in connection with Miss Healy’s application to adduce further evidence, that the question expressly reserved by Mustill LJ in The Mexico 1 was stated to be an ‘important question of law which remains open to be decided by the Tribunal’.
- In relation to the conclusion of the arbitrators, Mr Eder also submits that we should have regard not only to the finding of fact that discharge commenced on Saturday 26 September but also to the assumption the arbitrators must have made as to the authority of M Bhasmer-Kimi & Co, the agents at Cochin, who were not only the vessel’s agents but the receiver’s agents to whom notice of readiness was obliged to be given under Clause 30. Mr Eder submits that, in the light of that fact and of the arbitrators’ finding that the Statement of Facts was “signed by all the parties” (although not expressly signed by Bhasmer-Kimi for the charterers) the arbitrators plainly regarded Bhasmer-Kimi as endowed not only with the authority to act for the charterers at the discharging port in connection with the receipt and/or acceptance of NOR but also to waive the condition as to the commencement of laytime (c.f. The Shackleford, paragraphs 27-28 above). That is an attractive submission. However, it is subject to objection by Miss Healy on the following grounds which form the subject of a Respondents’ Notice.
- Miss Healy puts the matter in this way. She submits that it is apparent from the first sentence of paragraph 31 of the Award (see paragraph 10 above) that the owners’ argument upon estoppel before the arbitrators was solely based on the assertion that the NOR had been marked “accepted”. Having found that it had merely been marked “received”, the arbitrators shortly observed that that fact ‘dealt with the owner’s argument of estoppel’, at the same time noting that the owners had not placed reliance upon the (inaccurate) statement in the Statement of Facts that it had been “accepted” on the date it was tendered (see paragraph 9 above). In those circumstances, Miss Healy submits that the arbitrators were not required to direct their minds to the necessity or otherwise of making findings of fact as to the precise circumstances in which unloading commenced, the state of the charterers’ knowledge as to readiness, or the authority of the receivers’ agents. Nor, in the appeal before the judge, did the owners file any respondents’ notice seeking to remit the award to the arbitrators for further findings of fact in that respect. That being so, she argues that the judge should never have permitted the owners to run their arguments as to variation, waiver, estoppel, or futility at all, because consideration of those matters required findings of fact from the arbitrators upon the matters mentioned.
- I do not think that the judge was in error in that respect, given that he made clear the acceptance of the owners that the appeal fell to be argued “on the basis only of the findings made by the Arbitrators”. With the same limitation, the judge admitted argument based upon the Statement of Facts on the basis that the owners were limited to, and bound by, the findings which had been made by the arbitrators (see paragraph 14 above). Miss Healy has relied upon those words of the judge to submit that it would be wrong for this court to seek to draw inferences as to the reasons for the arbitrators’ decision which in effect amount to additional findings of fact as to the basis on which the parties acted when discharge commenced or when the Statement of Facts was signed. She relies upon the observations of Steyn LJ in The Baleares [1993] Lloyd’s Rep 215 at 228:
- Those are salutary words. However, I would observe at once that this is not a case where the owners seek to challenge or qualify the arbitrators’ findings of fact, still less their conclusion of law, on the basis of inferences which should be drawn from those findings, they rather seek to defend the arbitrators’ conclusion against the attack of the charterers, on the basis that no error of law is apparent on the basis of the findings of fact which were made. The charterers, being the appellants before the judge, the onus rested upon them throughout to establish an error of law on the part of the arbitrators in coming to the conclusion they did, or that the arbitrators came to a conclusion which, on the facts found, no reasonable body of arbitrators could have reached. If the court is hampered in ascertaining the true basis of the arbitrators’ conclusions by the absence of findings of fact directed to the underlying issues, and if that is because those issues were not canvassed before the arbitrators, then the court should not seek to fill the gap with its own surmise as to what the arbitrators would have been likely to have found. In such a situation, the solution is to remit the reward for further findings of fact by the arbitrators. If, however, the arbitrators’ findings of fact are sufficient to justify their decision in law, such a step may not be necessary.
- Before turning to address the particular headings of variation, waiver and estoppel in the light of the parties’ submissions, I pause to refer shortly to arguments presented by Miss Healy by which she has sought to resist the undoubted force of Mr Eder’s argument as to the unfairness and commercial absurdity of the position where, in circumstances of this kind, a charterer is found to be entitled to despatch.
- First, Miss Healy submits that it is not in every case that injustice will result from delays by the charterers which prolong loading beyond the laydays provided for. She says that, in this case, that result only obtained because the owners did not seek damages for detention of the vessel for failure of the charterers to present or procure the production of the original bills of lading which the Master was entitled to receive before discharge to the receivers, but sought only an award under the laytime code. I do not find that a persuasive point because, as it seems to me, the charterers cannot in the ordinary way be in breach of their obligation to procure production of the original bills until in receipt of NOR. Thus, proof of breach by the charterers was dependent upon establishing that valid NOR had been given, or dispensed with by reason of the charterers’ waiver etc.
- Second, Miss Healy says that it is not open to a party to complain of the result when he has signed a contract which lays down strict requirements in the interests of certainty and the avoidance of disputes. That seems to me a submission of some force and it is certainly one which has been emphasised in previous decisions. Nonetheless, I do not consider that, having regard to the overall purpose of the clause concerned and the commercial background against which the parties dealt, they may not, in appropriate circumstances, be treated as having waived a particular requirement, or to have acted on a common assumption as to its operation or application.
- Third, Miss Healy asserts a particular need for strictness and/or certainty in relation to NOR and demurrage against the commercial setting that in any given case there may be a string of dependent sale contracts containing terms which themselves refer to an obligation of the buyer to pay demurrage under the sale contract by reference to the relevant charterparty: see for instance Clause 14 of FOSFA International Form 54, effective from 1st February 2000 (‘Contract for Vegetable and Marine Oil (in Bulk) CIF Delivered Weight’) which provides that ‘Buyers shall take delivery with customary quick despatch after notice of readiness has been given by the shipowner or representative/s in accordance with the Bill/s of Lading, Charterparty or Contract of Affreightment. Otherwise Buyers to be liable to pay demurrage at the rates stipulated in the Charterparty or Contract of Affreightment”. In such a case the liability of the buyer for demurrage is of course to the seller who may or may not be the charterer, and will usually be dependent upon whether or not the seller is himself liable. If, as is usual, the undertaking is to pay at the rate stipulated in the charterparty, it will ordinarily be the case that such clause takes effect according to the liability for demurrage under the charter, as varied or affected by any waiver/estoppel between owners and charterers. I do not consider that the possibility of a ‘knock-on’ effect in buyer/seller arbitrations in a case where that is not accepted to be the position should be permitted to govern the proper approach to the obligations under the charter as between owners and charterers.
- Miss Healy’s most telling argument seems to me to be that emphasised in a number of the cases to which I have previously referred, namely that the purpose of a laytime clause is to create certainty where otherwise there might be argument over the moment of commencement of the laytime and the precise amount of demurrage/despatch payable. She submits that in such cases parties should be held to the word of their bargain, there being two commercial solutions following the demise of the inchoate notice doctrine. The first is for the parties to provide in the contract a provision ‘in any event laytime commences when discharge begins’. The second is for the Master of the vessel to take the precaution of giving successive notices of readiness in any case where the question of whether or not the vessel is an arrived ship is in doubt: see the observations of Donaldson J in The Timna [1970] 2 Lloyd’s Rep 409 at 411 lhc, and by Thomas J in The Agamemnon: see paragraph 37 above. Miss Healy submits that the court should not respond to the blandishments of owners to alleviate a ‘hard’ case by strained application of the principles of variation, waiver or estoppel in a situation where the originating cause of any ‘unfairness’ is the failure of the owners to give a valid NOR (per Moore-Bick J at paragraph 40 above). Finally, in this connection, Miss Healy submits that this is not a case where reliance can or should be placed on the ‘futility’ cases. She submits that the function of NOR is not simply to convey information as to the readiness of the vessel which information may or may not already be in the possession of the charterers; it is also a step provided for in the contract to bring the laytime regime into operation, whereby the risk of delay in discharging is transferred from the owners to the charterers (again, see Moore-Bick J at paragraph 40 above).
- Although variation, waiver and estoppel by representation are traditionally treated as virtually interchangeable pleas in support of the assertion that, on the basis of particular facts, a party has lost or may not now enforce his rights under a written contract, they are by no means synonymous. In particular (a) a variation alters the obligations to be performed under the original contract, whereas waiver and estoppel are conduct on the part of one party which does not alter the terms the contract but merely affects the remedies in respect of a breach of those terms by the other party: see Enrico Furst & Co –v- WE Fricher Limited [1960] 2 Lloyd’s Rep 340 per Diplock LJ at 349; (b) because the same formalities apply to a variation as to the formation of an original contract, a plea of variation must sustain analysis in terms of offer, acceptance and certainty of terms.
- Mr Eder submits that the appropriate analysis in contractual terms is that of an offer by the owners to allow the charterers to discharge the vessel on the basis that the previously tendered NOR was valid and that laytime would run throughout discharge, which was accepted by charterers without suggesting that the NOR was invalid or that laytime was not running; alternatively, an offer by charterers to discharge the vessel on the basis that the previously tendered NOR was valid and/or that laytime would run during discharge, accepted by owners in allowing discharge to proceed. In this connection he relies upon the principle that the law applies an objective test as to the communications between the parties, whether by words or conduct, and submits that each must be taken to have appreciated that the other was acting on the basis attributed to them.
- The difficulty with such a formulation however is that the court is being asked to spell positive offer and acceptance out of conduct alone in a situation where the parties’ obligations were governed by a formal written contract pursuant to which the owners were at all times purporting to act. There was thus no apparent bilateral intention to vary or re-negotiate the express terms of the charter, as opposed to an apparent willingness on the part of the charterer to treat as valid a notice appropriate in form and purportedly served in compliance with the terms of the charter (see ‘Waiver’ below).
- Broadly speaking, there are two types of waiver strictly so-called: unilateral waiver and waiver by election. Unilateral waiver arises where X alone has the benefit of a particular clause in a contract and decides unilaterally not to exercise the right or to forego the benefit conferred by that particular clause. It has been described as:
- So far as waiver by election is concerned, the basic proposition is that where two possible remedies or courses of action are to his knowledge open to X and he has communicated his intention to follow one course or remedy in such a manner as to lead Y to believe that his choice has been made, he will not later be permitted to resile from that position: see Scarf –v Jardine (1882) 7 App Cas 345 per Lord Blackburn at 360-1 and Kammins Ballroom Co –v- Zenith Investments [1971] AC 850. Waiver by election is essentially an illustration of the general principle that a party to a contract may not both approbate and reprobate: see the classic exposition of Isaacs J in Craine –v- Colonial Mutual Fire Insurance Co Limited (1920) 28 CLR 305 (High Court of Australia) at pp 327-8 . In The Kanchenjunga [1990] 1 Lloyd’s Rep 391 at 397-399, Lord Goff of Chieveley dealt at some length with the principles underlying the doctrine of waiver by election in relation principally to the situation where:
- Thus, it is clear that whether or not the party entitled to notice has waived a defect upon which he subsequently seeks to rely, will depend 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. 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.
- Waiver is closely associated with the law of estoppel in that, in the case of estoppel (and at this point I leave aside estoppel by convention), it is necessary for there to have been an unequivocal representation of fact by words or conduct and, in waiver, there must similarly have been an unequivocal communication of X’s intention, whether by words or conduct. As observed by Phillips J in Youell and Ors –v- Bland Welch & Co Limited (‘The Superhulls Cover-Case) (No 2) [1990] 2 Lloyd’s Rep 431 at 450:
- In relation to waiver, it is important to note certain features of the doctrine around which the submissions of the parties have revolved:
- On the basis of the findings of fact made by the arbitrators in this case, it was, in my view, properly open to them to conclude that, as at the time discharge commenced, the charterers had waived any reliance on the invalidity of the NOR served upon the receivers or their agents in accordance with the requirements of the charterparty as a means of deferring operation of the laytime regime provided for in Clause 30. The context was as follows. The owners had served NOR upon the receivers’ agents in purported compliance with the charter at a time shortly before she 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 NOR was concerned. The charterers were well aware of the matters which the NOR was concerned to convey, namely the arrival of the vessel and its readiness to discharge because, as the arbitrators found, following the arrival of the vessel the charterers received a direct request for a letter of indemnity to enable discharge to the receivers to take place. Furthermore, they were aware through the receivers’ agents as their agents for service of NOR 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 NOR 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 NOR, 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 upon any invalidity in the NOR and any requirement for a further notice.
- Miss Healy submits that the court is not entitled to come to that conclusion because (1) there is no express finding on the part of the arbitrators as to the state of knowledge of the charterers; (2) commencement and/or continuation of discharge without more is at best an equivocal act which cannot found a plea of waiver; (3) the acts relied on in support of the plea of waiver are the acts of the receivers’ agents. Miss Healy submits that, while plainly they had authority to receive NOR, the question of their authority to waive any invalidity was a mixed question of fact and law (c.f. The Shackleford) in relation to which the arbitrators were never required to make a finding because, before them, the plea was simply one of estoppel based incorrectly upon inscription of the word ‘accepted’ upon the NOR at the time of its receipt.
- As to point (1), for the reasons set out in paragraph 69 above, I consider it is clear from the arbitrators’ findings of fact that the charterers and/or the receivers’ agents had knowledge of the material facts relevant to their position whether to accept or reject the NOR.
- As to point (2), it seems to me that the context in which the conduct of the charterers falls to be judged is not simply the immediate factual context but the commercial context and the purpose of the contractual requirement to serve NOR which is to trigger the charterers’ obligation to unload whereby laytime starts to run immediately (in the absence of express provision), or in accordance with a specific regime of the kind provided in Clause 30. In those circumstances, as it seems to me, if (i) in purported compliance with the terms of the charterparty the Master serves on the charterers or their agents for service NOR which is in fact invalid because the ship has not yet arrived, and (ii) thereafter the charterers and/or the receivers to whom NOR is required to be given become aware of the actual readiness of the vessel, and (iii) the charterers and the receivers’ agents, being aware of the facts giving rise to the invalidity, do nothing to indicate any rejection or reservation in respect of the NOR, but instead commence unloading, then there is every good reason for the reasonable shipowner to assume an intention and acceptance by the charterers that laytime should start to run without the formal necessity of a fresh notice, such intention and acceptance being unequivocally communicated by involvement in the operation of unloading. The only realistic basis on which the conduct of the charterers/receivers could be regarded as equivocal in relation to their intention to waive the invalidity of the notice is to make the assumption that the charterers intend, and reserve the right, later to rely upon the invalidity without disclosing that intention, when, as commercial men, they must be aware that if such intention or reservation were made clear, the shipowner would immediately serve fresh NOR to protect his position. An assumption of lack of fair dealing of that kind is not one which it seems to me appropriate to make on an objective consideration of the parties’ intentions for the purposes of the doctrine of waiver.
- Miss Healy has a further point which she submits gives rise to equivocality. It is this. She submits that, even if it could be said that there was a waiver by charterers of the invalidity of the NOR by reason of its prematurity, that still leaves open the question as to the extent to which there is waiver of the detailed provisions contained in Clause 30 as to the commencement and calculation of laytime on the assumption that a valid notice has been served. If, it is to be said that, by participating in the commencement of discharge on Saturday 26 September 1998, the charterers/receivers accepted the validity of the NOR, does that indicate an intention that laytime commences immediately, or does it require that NOR be treated as notionally given at the time discharge commenced, leaving intact mutatis mutandis the specific provisions in Clause 30 as to the interval before laytime starts to run and as to the days to be included in it? It seems to me that the latter is plainly the case. Not only was it the conclusion of the arbitrators. It entirely accords with commercial good sense. The unequivocal indication arising from commencement of loading was that the notice previously tendered was at that point accepted as valid, but it was no more than that. On that basis, the detailed provisions as to laytime contained in Clause 30 were apt to apply as from the time of the validation of the notice by acceptance, and neither the conduct of the charterers/receivers nor the circumstances of the case suggested waiver in that respect.
- As to point (3), Miss Healy’s argument is that, where the charter provides that laytime will commence only upon (valid) NOR, the onus must be upon the owners as the party seeking to override that provision to demonstrate that the receivers/agents, as the parties upon whose conduct the owners rely in assertion of their plea of waiver, were authorised to vary or dispense with the need for valid NOR to be given. She says it is not axiomatic that where one party appoints an agent to receive formal notice of an event on his behalf, he endows that agent with actual or implied authority to waive a defect in or underlying such notice. She submits that the decision in the The Shackleford to the effect that it was within the receivers’ authority to accept premature NOR is not authority for a proposition of law applicable to all cases, but was a conclusion based on the arbitrators’ findings in the case before the court. Thus, she submits that, even if the owners could demonstrate that the conduct of the receivers and/or Bhasker-Kimi amounted objectively to acceptance on their part that laytime should be treated as having commenced under the charterparty, that would be insufficient without more to bind the charterers. I do not accept that is so.
- Again, it is relevant to turn to the overall context. As made clear in Postlethwaite –v Freeland (1880) 5 App Cas 599 at 608, per Lord Selborne:
- That being so, if the charterparty provides that NOR 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 charterer’s agent to receive the NOR 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 such discharge to begin. Like Sir David Cairns in The Shackleford, 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. Although the decision in The Shackleford was reached in the clearest of circumstances i.e. where the NOR had been expressly endorsed “accepted”, it depended on a principle of waiver or estoppel apt to apply more widely than in those limited circumstances. It was on the basis of the court’s own view of the law in that case that it concluded it was open to the arbitrator to decide, in the absence of any evidence directed to the point, that such implied authority existed in the case before him. I share that view, and it similarly seems plain to me in this case that the arbitrators must so have decided. While Miss Healy complains that there appears to have been no evidence directed to the point because of the limited way in which the case on estoppel was put, it is pertinent to observe that, it having been the contention of the owners that the receivers/agents had accepted an invalid NOR, it was open to the charterers to take the point that they lacked authority to do so; however they did not. In my view, on the facts found by the arbitrators, the receivers/agents had implied authority to waive the invalidity of the NOR.
- It is clear to me that so to hold is not contrary to the ratio decidendi of any decision prior to that of Langley J; see the analysis of the authorities at paragraphs 18-38 above. In my view the circumstances of the case and the demands of commercial good sense are such that the court should be reluctant to apply or adopt doubts expressed in obiter dicta (even from so distinguished a source as Mustill LJ) so as to arrive at a result whereby, despite the fact that the vessel has arrived, NOR has been tendered and the unloading operation commenced without any reservation expressed in respect of it, the charterers are free of any constraints upon the time which they take in unloading and, despite delays for which they would otherwise be liable for demurrage, they are in fact entitled to despatch.
- For the reasons which I have set out, I consider the doctrine of waiver may be invoked and applied in such a case and that the commencement of loading by the charterer or receiver without rejection of or reservation regarding the NOR can properly be treated as the ‘something else’ which Mustill LJ indicated was required to be added to mere knowledge of readiness on the part of the charterers, in order for a finding of waiver or estoppel to be justified. Not only does the commencement of loading manifest an acceptance of the vessel’s readiness to load, it also meets the concern of Mustill LJ that to argue (as it was in The Mexico 1) that laytime should begin at the point when the charterers or their agents became aware that the cargo was ready, would give rise to uncertainty and substitute a basis for the computation of laytime which would be a fertile source of dispute. I therefore disagree with the view expressed by Langley J that he could see no basis on which a different conclusion from that reached in The Mexico 1 could be justified by substituting the time when discharge actually commenced for the time when the vessel was first known by the charterers to be ready to discharge. For the same reason I disagree with the judge when he expressed the view that the reasoning of Donaldson J in The Helle Skou could not stand with that in The Mexico 1, in that it represented an application of the inchoate notice concept which did not survive that latter case. As already indicated in paragraph 26 above, I do not read The Helle Skou (which was not referred to in the judgment of Mustill LJ in The Mexico 1), as involving an application of the inchoate notice doctrine. Rather, I consider it to be an authority supportive of the view that the doctrine of waiver is available to assist the owners in the circumstances of this case. I would hold that the arbitrators were correct to find in favour of the owners that laytime commenced at 0800 on Tuesday 29 September 1998.
- Since I am of that opinion, it is not strictly necessary to consider Mr Eder’s alternative submission, namely that at, or as from, the time of commencement of discharge, the parties were operating upon a common assumption that the NOR was valid and/or that it was unnecessary for the owners to serve a further NOR in order to start laytime running, so that an estoppel by convention arose whereby the charterers were precluded from later asserting that the NOR served was invalid.
- Estoppel by convention may be held to arise where both parties to a transaction:
- See to similar effect Hiscox –v- Outhwaite [1992] 1 AC 562 at 574-575 per Lord Donaldson MR and authorities there cited.
- For the doctrine to operate, there must be some mutually manifest conduct by the parties, which is based on a common assumption which the parties have agreed on, and for that purpose
- Mr Eder’s submissions in respect of estoppel by convention principally centred upon the Statement of Facts and the inferences to be drawn from the fact that (a) the NOR was stated to have been “accepted” and (b) the parties had signed a timetable of events which appeared to be based on the laytime provisions and therefore to assume their application. The arbitrators expressly observed that the owners had not relied upon the Statement of Facts in support of their plea of estoppel, which depended upon a misunderstanding. Further, it is not clear that the arbitrators took account of the detailed content of the Statement of Facts in reaching their decision. Given that the approach of a tribunal of first instance to any question of estoppel by convention must be to examine and make findings as to the actual state of mind of the parties concerned (and for this purpose the charterers’ state of mind and knowledge may call for separate examination from that of the receivers/agents) it seems to me that, contrary to the position on waiver, the findings of the arbitrators are inadequate to sustain their decision on the basis of (an inferred) estoppel by convention.
- I turn briefly to deal with Mr Eder’s submission based upon the decision in Barrett Bros –v- Davies. He submits that the observations of Lord Denning MR in the context of that case at p.1339 are authority for the wider proposition that where the service of a valid notice is a condition precedent to the triggering of a contractual right/privilege, that contractual right/privilege may be triggered even in the absence of a valid notice where the other party is in any event aware of all the facts that would be contained in such a notice. That seems to me an unjustifiably wide submission. In Barrett Bros –v- Davies the principle that the law never compels a person to do that which is useless and unnecessary was propounded in the context of a case of unilateral waiver, i.e. where the terms of a contract included a provision inserted entirely for the benefit of the insurer. While the decisions in The Mozart and The Chanda involved application of the principle in rather different circumstances, neither was concerned with service of a notice which had not merely the function of conveying information but also the function of bringing into effect a particular provision in the contract in a particular manner. I am inclined to think that to apply Lord Denning’s principle in such a case would be to extend its ambit beyond that anticipated by him at the time (cf the observations of Parker J in The Rio Sun [1982] 1 Lloyd’s Rep 404 at 409). I am hesitant to apply the “futility” principle on any “stand alone” basis for avoiding a contractual requirement for NOR to be served. I do not consider it is necessary to do so for the purposes of this case and I, therefore, take the point no further.
- In the context of this case I would answer the question of law in relation to which leave was granted as follows. 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 (a) a notice of readiness valid in form is served upon the charterers or receivers as required under the charterparty prior to the arrival of the vessel; (b) the vessel thereafter arrives and is, or is accepted to be, ready to discharge to the knowledge of the charterers; (c) discharge thereafter commences to the order of the charterers or receivers without either having given any intimation of rejection or reservation in respect of the notice of readiness previously served or any indication that further notice of readiness is required before laytime commences. 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. By answering the question in that way, I should not be thought to doubt that, in appropriate circumstances, the same result may follow by application of the doctrines of variation and estoppel.
- For the reasons which I have set out at length above I would allow this appeal and set aside paragraphs 1, 2 and 3 of the judge’s order dated 25 January 2001 and restore the award of the arbitrators dated 22 February 2000.
- I agree.
- I also agree.
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION COMMERCIAL COURT
(Mr Justice Langley)
Strand, London, WC2A 2LL | ||
B e f o r e :
LADY JUSTICE ARDEN
and
SIR DENIS HENRY
____________________
| FLACKER SHIPPING LIMITED | Appellant | |
- and - | ||
GLENCORE GRAIN LIMITED | Respondent |
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Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Siobán Healy (instructed by Richards Butler, London) for the respondents.
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AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Potter:
INTRODUCTION
THE CHARTER PARTY
3. Being so loaded, the vessel shall proceed direct to 1-2 safe berth(s) anchorage(s) [various named ports] in Charterers’ option
[An addendum to the charterparty added the port of Cochin, India, to the list of discharge ports]
5. Cargo to be ... discharged at the expense and risk of ... charterers ... Discharging to be effected at the average rate of 1,500 metric tonnes per weather working day of 24 consecutive hours pro rata. Laytime to be non-reversible ...
6. Laytime at loading ... port shall commence ... if written notice of readiness to load is given ...
7. Demurrage is payable at the rate of US$ 4,500 per day ... Owners to pay Charterers Despatch money for working time saved in loading/discharging at the rate of US$ 2,250 per day of 24 consecutive hours or pro rata ...
10. ... At discharging port Owners to appoint agents nominated by Charterers.
23. The freight is payable as follows: 95% less commission, brokerage, estimated despatch in loading, if any and Owner’s contribution towards extra insurance payable within three banking days after signing all the required number clean Bills of Lading ... Balance plus demurrage or less despatch as the case may be payable after completion of discharge against Timesheets, Statements of Facts and Notices of Readiness ...
28. If by reason of congestion the vessel is unable to enter the loading/discharging ports, Master has the privilege to tender Notice of Readiness in accordance with the Charter Party by cable radio and laytime is to commence as per clause 6, 30 and 31, whether in berth or not, whether in port or not, whether in free pratique or not, whether entered customs or not, provided vessel has arrived in the commercial area of the port or any anchorage designated by Port Authorities. Shifting time from anchorage or place of waiting to loading/discharging berths not to count ...
30. 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.
Time from Friday 5pm until Monday 8am ... not to count even if used.
RELEVANT HISTORY
“it follows that any time lost as a consequence counts against the charterers as either laytime or demurrage, subject to what we say further below.” (emphasis added)
5. Vessel berthed at (Q.6): 1315 hrs on 26/09/98
6.
7. NOR tendered: 1630 hrs on 25/09/98
8.
9. NOR accepted 1630 hrs on 25/09/98
10.
8. Discharge commenced: 1700 hrs on 26/09/98
THE AWARD
“30. ... the charterers submitted that as it was a berth charter the vessel should have completed the voyage i.e. reached the berth, before tendering the NOR, and that as she was not at the immediate and effective disposition of the charterers the NOR then tendered was invalid. Moreover, since a fresh NOR was not tendered on arrival at the berth, laytime never actually commenced and therefore no time counted against the charterers. In the alternative, if the tribunal held that the timing should count, the proper calculation would be that NOR would not have been effective at the time of berthing since this was outside office hours being a Saturday. Therefore it would become effective at 0800 hours on Monday 28th September, with laytime commencing to run at 0800 hours on Tuesday 29th September.
31. The owners contended that the charterers were estopped from advancing this argument, on the ground that the NOR had been marked as “accepted” when tendered. Moreover, they said, the addendum to the charter party whereby they agreed to discharge at Cochin instead of at one or more of the ports named in the charterparty converted this into a port charter instead of a berth charter. The effect of this was that the NOR could be tendered immediately on arrival at the port instead of only when the ship reached the berth. In addition the draught available at Cochin at the time of the arrival was only 30ft brackish water, and as the vessel was drawing 32ft brackish water she was unable to enter the port immediately but had to wait for the next high tide. The time waiting for the tide should not count against them because, they said, by the charterparty the charterers warranted the vessel could safely arrive on 32ft salt water. In the alternative, even if the NOR was invalid when tendered it was established law that laytime started at the commencement of loading or discharging and the charterers’ submission was not only legally misguided but produced a commercially absurd result.
32. In our view the owners were mistaken, in four respects.
33.
Firstly, rather than it being established law that laytime starts as soon as loading or discharging operations are commenced, the authorities make it plain that in those cases this was a specific concession by the charterers concerned, and therefore the courts have not so far been required to make a judgment on this aspect. The eminent judges who were involved in these cases drew attention to this situation. Mustill LJ in The “Mexico 1” [1990] 1 LR 507 remarked that where a charterparty expressly related to the commencement of laytime the giving of a Notice of Readiness and where the notice was given at a time when the ship was not in fact ready to discharge the cargo, unless something happened after this notice was given to make the laytime start, it never started at all, with the consequence not only that the owners earned no demurrage but also that they were obliged to pay to their charterers despatch money for the whole of laytime. This was upheld in The “Agamemnon” [1998] 1 Lloyd’s Rep 675, when Thomas J said that since the decision in The “Mexico 1”, it has been clear that if the charterparty requires that a Notice of Readiness be given to start laytime, then a valid notice must be given before laytime can commence. Unless something happened after the notice was given to make laytime start, it never started at all. If the consequence of reading a contract as if it meant what it said was that, for instance, a master who was uncertain whether his ship was “arrived” or whether it was “ready” may find it prudent to give more than one notice – an inconvenient consequence – this came about not because Courts were more pedantic than commercial men, but because the commercial men who wrote the charterparty chose to make laytime refer to the happening of a particular event. He did not believe that any tribunal, whether Courts or arbitrator, did service to the interests of practical commerce by enforcing the parties’ rights as if the contract had expressed the commencement of laytime in terms of some quite different event. Strictly in accordance with binding authority therefore the owners’ case would fail. And none of the extremely lengthy period spent at Cochin counted as laytime unless the charterers had conceded otherwise.
33. Secondly as the charterers pointed out, the NOR was not marked as “accepted” but “received”, which dealt with the owners’ argument of estoppel, although a point which they had not taken up was that the Statement of Facts (signed by all parties) noted that the NOR had been “accepted”
Thirdly, the charter clearly does not contain the Charterers’ warranty of 32ft salt water, but in fact precisely the opposite, namely the owners’ warranty that the vessel’s arrival draught at the first or sole discharge port shall not exceed 32ft salt water.
Fourthly, clause 3 of the charter provides for discharging at 1-2 safe berth(s)/anchorage(s) and that in the case of named ports (as they were in this charter) the owners acknowledged them as safe and suitable for the vessel. The owners claimed that the addendum, by simply naming Cochin, somehow converted the charter into a port charter, in effect amending it so as to exclude all those printed and/or typed words mentioned above. We did not agree with the owners’ contention ... Accordingly, the true construction of this addendum was that Cochin was a named port which the owners acknowledged as safe and suitable for this vessel, that the charterers were entitled to discharge at 1/2 safe berth(s)/anchorage(s), and that it was a berth charter. As a result we find that laytime commenced at 0800 on Tuesday 29th September.
THE APPEAL BEFORE LANGLEY J
Can laytime commence under a voyage charterparty requiring service of a Notice of Readiness when no valid Notice of Readiness is ever served? If so, when does it commence?”
(1) The acceptance of the Notice of Readiness recorded in the Statement of Facts and the contention that the charterers ‘cannot go behind’ that acceptance by reason of the principles of estoppel or waiver or because of an inference of an implied agreement to vary the charter and accept the notice as valid.
(2) The acceptance of the notice as valid or as having been validly tendered by commencing discharge on September 26 in circumstances where the charterers had not rejected the notice as invalid relying on the same legal principle.
(3) The futility of serving a further notice when the charterers were aware, at least once discharge commenced, of all the information that would have been included in any further notice.
“... unless something happened after the notice was sent to make the laytime start, it never started at all, with the consequence not only that the owners have earned no demurrage, but also that they are obliged to pay the charterers despatch money for the whole of the laytime.”
“In reaching the conclusion he did, Mustill LJ emphasised (page 513) that the contract itself provided for the commencement of laytime to be started by a valid notice “and in no other way”, and that he rejected the notion (adopted by the arbitrators) that an invalid notice could be treated as “inchoate” becoming effective when the cargo was or was known to be available for discharge. For my part, I can see no basis on which a different conclusion could be justified by substituting the time when discharge actually commences for the time when the vessel was or was known to be ready for discharge. That too, absent estoppel or the like, would be to re-write the contract in a manner which I think to be illegitimate and inconsistent with the reasoning of Mustill LJ.”
“The notice that was given was not “accepted” by the charterers in any sense on which reliance can be placed by owners. The arbitrators found that it was only “received”. In any event, as I have said, when it was (if it was) accepted it was misleading. There is no basis for a finding that it was ever “accepted” subsequently. The only facts on which it is open to the owners to rely are that the discharge did commence on Saturday 26th September 1998 and continued thereafter and (if it is correctly so described) that the invalid notice was not rejected. If, as Mr Gross submitted, the commencement and continuation of discharge have the effect of validation of an invalid notice or is in some way to amount to a notional notice given on the first available opportunity which would comply with Clause 30, that in my judgment would be inconsistent with the judgment of Mustill LJ in The Mexico 1 rejecting the concept of an inchoate notice, and would also be to re-write the parties’ contract in effect to delete the clear requirement for a particular notice.
Nor do I think it possible to infer any agreement or convention from the mere facts of commencement and continuation of discharge and that an invalid notice was not rejected. It does not necessarily follow that charterers must have agreed to give up the right to a notice, particularly so when discharge commenced at a time when a valid notice could not have been given. It is also perhaps of some relevance that in circumstances of overstowage or contamination or the like a vessel may not be ready to discharge even though discharge has in fact commenced. Again, if such an inference were possible then it would be in effect to re-write Clause 30 so that it contained additional words such as “and in any event laytime to commence when discharge commences”. Consistent with the judgment of Mustill LJ and, I think, principle, something more is required to establish an agreement or estoppel (and the parties are agreed that “waiver” is no different) and Mr Gross cannot point to anything more because of the findings of fact to which he is restricted.
Miss Healy [for the charterers] also submitted that there was also no finding which would enable it to be concluded that the receivers of the cargo were or were authorised to act on behalf of the charterers to make any variations of the charterparty or to establish any ‘convention’. A similar point was raised and rejected in The Shackleford (pages 159-60). But it was there said that the point was one of mixed fact and law, and the arbitrator had or was held to have made a finding that the receivers were acting as agents for the charterers. Mr Gross cannot point to such a finding in this case, nor to any evidence as to the usual or ostensible authority of such an agent. Moreover I think the implication of agency as regards an express statement as to the running of the laytime as in The Shackleford may more readily be drawn than an inference of agency to make an agreement derived only from the fact of commencing discharge.
For these reasons in my judgment this appeal should be allowed and the finding in the last sentence of paragraph 33 of the Award must be set aside.”
THE AUTHORITIES
“The captain would have to see the charterers, as the ship’s agents, with reference to passing her through the Custom House and other matters, and under these circumstances it seems to me impossible to say there was not material on which the umpire could find that the charterers had notice of readiness of the ship to load. If that is so, and if they knew she was ready to load, and knew it when acting on behalf of the ship as agents – being themselves charterers – I cannot say time did not run because the master did not go up into the office and say formally: “I give you notice my ship is ready to load”. I think the umpire was entitled to draw the inference he did when stating that the charterers were aware of the ship’s readiness to load.”
“The only evidence that there is either of agreement or of waiver is that in fact the charterers did start to unload at the time that I have stated and that the vessel’s servants assisted in the operation in accordance with the provisions of the Clause by providing steam, steam-winches, winchmen, gins and portals ...
I can see no ground whatever on which I could infer an agreement here that because the charterers started to unload, and the shipowners' servants assisted in doing so at 2.30 in the morning, there was an agreement between the parties that laytime should start then instead of at the time provided for (in my view) on the plain construction of Clause 8. Equally I can see no grounds on which I should be entitled to hold that it had been waived by the charterers. It does not seem to me that either the clause relating to time commencing or the clause relating to notice is one which is put in solely for the benefit of the charterers; and I do not think that it is a clause to which waiver would apply in any event.
Mr Russell has sought to impress me that any advantage of starting to unload early accrues to the charterer because he gets his cargo quicker and he gets despatch money or pays less demurrage. It seems to me that resource and advantage fall to the shipowner in getting his vessel discharged as early as possible because he gets the use of his vessel. Whether one advantage outweighs the other in any particular case I do not know, and I do not think it matters. As I say, I think that there are advantages to both sides; and in those circumstances I am not prepared to infer any waiver of what I think are the plain terms of the clause itself.”
“The charterers clearly accepted this notice, because loading began on the morning of January 24 ...
The owners .. accept that the notice should not have been given because the vessel was not in fact ready to load, but contend that the charterers lost their right to reject the notice when they began loading. However, the owners concede that they are still liable for the charterers in damages and contend that this liability is met in full if laytime is taken to begin as soon as the vessel returned to the berth ...
There have been many cases of notice of readiness being rejected as premature and subsequently accepted ... but I think that this is the first case in which charterers have accepted such a notice and later claimed to reject it. I do not think that they can do so .... the contrary view would enable a charterer to reject a notice of readiness and to start laytime all over again if he discovered some lack of readiness in the ship at a late stage in loading. And this would be the case even if the cargo did not have to be discharged.
A notice of readiness which is rightly rejected is a nullity, save to the extent that, with the express or implied agreement of the charterers, it may be left with them instead of being re-served and will then take effect when it truly represents the facts. But this notice was far from being a nullity. It was the key which unlocked the holds of the vessel and allowed loading to begin. And it was charterers’ act which created this position. Whether it is labelled as waiver or estoppel or something else, I do not consider that the charterers can resile from this position, save upon grounds of fraud ...”
“Acceptance of a notice of any kind usually means acceptance of the notice as an effective notice. The experienced arbitrator and the experienced commercial judge interpreted this acceptance without any indication that it had occurred to them that it could have any other meaning. In my judgment they were right to do so.”
The relevance of the decision lies in certain observations concerning the authority of the receivers, relied upon by Mr Eder in the course of his submissions.
“The award proceeds on the tacit assumption that the receivers had authority to accept the notice of readiness. I would infer from this that in the arbitrator’s experience such an authority was normally given or was implied. On such a matter I would attach weight to the views of the commercial arbitrator.
Mr Rix draws an analogy with the agency of a bank to receive payments of freight and cites passages from speeches in the The Laconia [1977] 1 Lloyds Rep 315, to the effect that such an agency does not give implied authority to accept payments tendered late so as to waive the shipowners’ right to withdraw the vessel for non-payment ... I do not consider that the position of a receiver authorised to receive a notice of readiness is really comparable to the position of a bank authorised to receive payment. The receivers must have authority to make some commercial decisions on behalf of charterers. They must be able to decide whether the vessel and its equipment are in a state of readiness to begin discharge of the cargo. As a matter of commercial practicality I consider that they must have implied authority to waive a condition as to the commencement of laytime.”
After reference to various authorities cited to him, Sir David Cairns continued:
“It is therefore right to say that there is no authority either way which is binding on this Court or is directly relevant to the point we have to decide. The question is of course one of mixed law and fact; so far as the law is concerned I am of opinion that it is open to the arbitrator to decide on the basis of his own experience, in the absence of any evidence directed to the point, that the authority would be implied. And since par. 20 of his award, containing the express finding that Nablomar was acting as agent for the receivers, would be meaningless unless the arbitrator was also finding the receivers were acting in accordance with their authority as agents for the charterers, I am satisfied that he is to be taken as having found that they were so acting.
For these reasons I would hold that the acceptance of the premature notice of readiness was within the authority of the receivers.”
“In my judgment, the facts found by the arbitrators do not justify the wider conclusion that the charterers effectively released the shipowners from the need to give any notice under cl.24. There is no finding to this effect. Rather, the findings are that the receivers and agents proceeded on the basis that the original (invalid) notice became valid and effective, presumably for the purposes of cl.24, when the state of unreadiness caused by overstowage by other cargo was replaced by one of readiness for discharge. If these findings affect the charterers as well as the receivers and agents, then in my judgment the correct conclusion in law is that the notice became effective for the purposes of cl.24 at that time (10 25 on Feb 6th). Whether this was, by implied (or express) agreement, or by “waiver, estoppel or something else” (per Mr Justice Donaldson) it is unnecessary to enquire. That position cannot be resiled from now. It will follow that laytime began under the clause at 8 a.m. on the next working day (Feb 7).”
“A further possibility, which I need not decide ... that the charterers vested the same authority in the receivers, by the terms of cl. 28 itself.” [It seems clear that the reference to cl.28 is in error for cl.24].
“Why construe the clause as omitting half the requirement for a valid notice of readiness? And why above all construe it as starting the charterers’ obligation by reference to an event (namely readiness) happening at a precise moment of which he has no notice and may be completely unaware? I can see no ground for such an unbusinesslike reading of a perfectly clear contract.”
“To my mind, although this variant of the argument removed one flaw, it simply adds another. Although it does at least avoid the consequence that the time allowed for the charterer for performing discharge is running even though he may have no means of knowing that performance is even possible, it substitutes a basis for the computation of laytime which must be a fertile source of dispute. Even in the absence of a provision such as cl.31, which expressly makes the furnishing of a countersigned timesheet a part of the mechanism for the payment of demurrage, the assembling of a time sheet is an important part of business in the port. For this purpose certainty is essential. The parties know when the ship berths; when discharging began; when it finished. But in many cases the owners and their agents will not know when the charterers or their agents became aware that the cargo was ready; and still less will they know or be able to agree with the charterers, when the latter ought to have been aware of it. Moreover, quite apart from the practical objections to this variant of the argument, it does not meet the fundamental objection that the contract provides for laytime to be started by the notice (which means a valid notice) and in no other way.
I would therefore agree with the learned judge in his rejection of the argument that the notice was a delayed-action device, effective to start the laytime automatically when, at a later date, the ship became ready to discharge the contractual cargo: and also the linked argument that time began when the charterers knew or ought to have known of the readiness.”
“... unless something happened after the notice was sent to make the laytime start, it never started at all, with the consequence not only that the owners have earned no demurrage, but also that they are obliged to pay the charterers despatch money for the whole of the laytime. Given that the discharge of the maize cargo kept the ship at the port for more than two months, this proposition was unlikely to be well received by the arbitrators, and Counsel for the charterers prudently did not advance it, conceding that laytime began to run when the discharge of the maize actually commenced. While this makes good sense, it is not easy to work out precisely how the conclusion should be reached. The arbitrators, who had many live issues to discuss, contented themselves with saying that by commencing discharge the charterers plainly waived any entitlement they may have had to a fresh notice of readiness. I confess to some difficulty in finding the necessary elements of waiver in the bare fact that a discharge was carried out. For example, in Pteroti Compania Naviera SA –v- National Coal Board [1958] 1 Lloyd’s Rep 245; [1958] 1 QB 469, where the charter provided that time would commence 24 hours after the vessel was ready to unload and written notice given, and where discharge began before the vessel had given notice of readiness it was held that laytime did not run until the expiry of 24 hours from the notice. The owners argued that:
... the charterers by requiring delivery earlier are waiving their right to notice of readiness before they start to unload ... (see p.249 Col. 1: p.472 of the Report) ...
and alternatively that an agreement was to be implied that laytime was to start from the time at which loading in fact commenced. Each argument was summarily rejected. Since, however, Counsel in the present case are at one in stating that Pteroti sheds no light on the problem now before us I say no more about it, and I am content to accept the charterers’ concession without further scrutiny, reserving the point for detailed exploration if it should arise in the future.”
“Now I am not sure that I quite agree with the learned Judge that it is unnecessary to enquire into the way in which the conduct of the parties might turn a contract that laytime would start on the happening of one event into a contract that it would start on another. For my part I am sceptical about the deployment of the elusive concept of waiver, and would prefer to look for conduct from which one could infer either a bilateral agreement to vary the charter, or the existence of what has come to be called “estoppel by convention”: namely , a situation in which the parties, having conducted themselves on the mutual assumption that their legal relations take a certain shape, cannot afterwards be heard to assert the contrary. I do not for a moment doubt that such a state of affairs, if proof exists, could justify the conclusion that laytime began, after the giving of an invalid notice, but before the moment of actual discharge.” (emphasis added)
“What do we find here, a notice invalidly given. The arbitrators have found, via the statement of facts, that it was “accepted”. (Often this would be by counter signature of a document. Since the notice here was rendered by telex we do not know the form of acceptance). However, since as the arbitrators point out, the acceptance must have been given in reliance upon the Master’s implied assurance that the ship was ready for discharge, it cannot have any value. What else? Nothing, so far as the award is concerned. When the ship was ready to discharge the contractual cargo, there was no notification to the charterers or their agents. Nor is anything found in the award by way of an intimation on the part of the charterers they accepted that the laytime could now begin. It seems that the moment when the ship became ready for discharge passed in complete silence.
These are thin materials indeed for the inference of any waiver, estoppel or agreement. So thin that if I had understood the arbitrators as finding that there was a second ground of this kind quite distinct from the decision founded on the “inchoate” notice for identifying the commencement of discharge with the commencement of laytime it would have been for serious consideration whether the award should be remitted, to enable the arbitrators to state whether there were facts omitted from their notably full and clear reasons which justified the inference of a variation from the regime established by the contract.”
“It has been observed by a distinguished maritime arbitrator of very long experience that this decision caused a “certain amount of consternation in shipowners’ and ship operators’ offices throughout the world because of its repercussions regarding all voyage charterparties which are subject to English law”. [See Donald Davies: Commencement of Laytime (3rd ed) at para 105, p.234] If the shipping community did not find the law as clearly set out by Lord Justice Mustill (as he then was) in The Mexico 1 met its commercial needs, it was open to them to modify the language of charter-parties to start laytime running in a different way, by a simple provision that would permit the giving of an inchoate notice which would take effect on a subsequent event. They no doubt might have hesitated long and hard before doing so, as the principles on which The Mexico 1 are based are straightforward easy to operate and give rise to far fewer problems than contractual language that would enable “inchoate” notices to be given which would take effect upon a further event stipulated in the charter-party.
In any event, as has been repeatedly pointed out, there has long been a simple solution to hand. As long ago as 1970, Mr Justice Donaldson said in The Timna [1970] 2 Lloyd’s Rep 409 at p.411 all masters should:
“.... go on giving such notices in order that, when later the lawyers are brought in, no one shall be able to say: “if only the master had given notice of readiness, laytime would have begun and the Owners would now be able to claim demurrage”.
The master could easily have done so in the present case. This requirement is simple and makes for much greater commercial certainty than attempts to provide the concept of allowing inchoate notices to be given which take effect upon a subsequent event.”
“That is not surprising because there are no findings of fact that would support either of these conclusions. If time is to run at all in the present case, therefore, it can only be because the notice of readiness given on 15th June is to be treated as valid and effective to start time running in accordance with the terms of the charter. That being the case, I can see no basis on which the arbitrators could properly hold that laytime at Xiamen started to count from the commencement of discharge.”
“I entirely agree. When, as here, the terms of the contract are clear and the parties have not demonstrated an intention, by one means or another, to depart from them, there is no justification for seeking to modify those terms in an attempt to alleviate what is perceived to be some element of unfairness, especially in a case where that unfairness arises from the failure of one party to operate the contract in accordance with its terms. Nor do I think that one can properly resort to some wider concept of “futility” to obviate the need to give a notice of readiness under these circumstances. The case of Barrett Brothers (Taxis) Limited –v- Davis [1966] 1 WLR 1334 which was relied on before Langley J was concerned with a different kind of term in a different kind of contract. It is well understood that under a charter of this kind notice of readiness is given in order to start laytime running, not merely to provide the charterers with information which in many cases will already be in their possession. As such it represents an essential step in the contractual mechanism for allocating risk of delay in loading or discharging. Whether a step of that kind is essential in the performance of a contract is a matter for the agreement of the parties. If the parties have stipulated that a notice must be given in order to bring some other provision of the contract into operation, I doubt whether it could ever be dispensed with on the grounds that to give such a notice would be futile.”
“Seeing that they had received the information from the police, it would be a futile thing to require the motor-cyclist himself to give them the self-same information. The law never compels a person to do that which is useless and unnecessary.”
“No deduction of time shall be allowed for stoppage unless due notice be given at the time to the Master or owner.”
“I accept the charterers’ argument that the requirement to give a due notice - which in my judgment means no more than a notice which is appropriate in the circumstances – cannot sensibly be understood as requiring the charterers to notify the Master of something which, by combining his own observations with information conveyed to him by the people on the spot, he knows perfectly well already.”
“The Master had received all the information which, if I have correctly construed the charter, would have been contained in the notice. This being so, I conclude both by way of interpreting the words “due notice”, and by applying the law as stated in Barrett -v– Davies, that the charterers are not precluded from relying on the exception.”
“No deduction of time shall be allowed for stoppage, unless due notice be given at the time to the Master or Owner ...”
“In reaching that conclusion I rely on the observations of Lord Denning MR, Barrett Brothers (Taxies) Limited –v Davies ... [1966] 1 LR 1334 at ... 1339E-F. Whatever doubt may have been cast on other parts of that judgment I do not understand the authority of that particular observation to have been in any way undermined. I would furthermore conclude that to hold that the cable and the telex could not be read together to derive their true effect would be an unacceptable approach in a commercial field, where what matters is the substance and not the form of the communication.”
FURTHER EVIDENCE
THE PARTIES’ SUBMISSIONS
“I cannot see that any businessman can have any notion that there is any need to give a notice of readiness when his ship is already being loaded as hard as it can be by the charterers. That seems to me to be unpractical and absurd. I think, therefore, that the charterparty on its true construction provided for the delivery of the ship to begin, if the charterer so wished, before the expiration of a notice of readiness. In this case they took that alternative, and the period of twelve months began at three o’clock on April 13.”
In this case, there is of course no alternative to Clause 30 provided for in the charterparty in respect of the commencement of laytime.
“Parties sometimes resort to a more oblique way of challenging arbitrators’ findings of fact: the Court is asked to draw reasonable inferences from the arbitrators’ findings of fact. The purpose is often to put forward a new legal argument which was never advanced before the arbitrators. But it is contrary to well established principle for the Court to draw inferences from findings of fact in an award on the basis that it would be reasonable to do so. The only inferences which a Court might arguably be able to draw from arbitrators’ findings of fact are those which are truly beyond rational argument .... [should] .... be constantly vigilant to ensure that attempts to question or qualify the arbitrators’ findings of fact, or to dress up questions of fact as questions of law, are carefully identified and firmly discouraged.”
VARIATION BY AGREEMENT
WAIVER
“The abandonment of a right in such a way that the other party is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted.”
see Banning –v Wright [1972] 1 WLR 972 per Lord Hailsham LC at 97C-D. In such a case, X may expressly or by his conduct suggest that Y need not perform an obligation under the contract, no question of an election by X between two remedies or courses of action being involved. Waiver by election on the other hand is concerned with the reaction of X when faced with conduct by Y, or a particular factual situation which has arisen, which entitles X to exercise or refrain from exercising a particular right to the prejudice of Y. Both types of waiver may be distinguished from estoppel. The former looks principally to the position and conduct of the person who is said to have waived his rights. The latter looks chiefly at the position of the person relying on the estoppel. In waiver by election, unlike estoppel, it is not necessary to demonstrate that Y has acted in reliance upon X’s representation: see per Lord Goff of Chieveley in The Kanchenjunga [1990] 1 Lloyd’s Rep 391 at 399 RHC.
“Characteristically, the effect of the new situation is that a party becomes entitled to determine or to rescind the contract, or to reject an uncontractual tender of performance; but, in theory at least, a less drastic course of action might become available to him under the terms of the contract. In all cases, he has in the end to make his election, not as a matter of obligation, but in the sense that, if he does not do so, the time may come when the law takes the decision out of his hands, either by holding him to have elected not to exercise the right which has become available to him, or sometimes by holding him to have elected to exercise it ...”
In Bremer –v- Vanden [1978] 2 Lloyd’s Rep 109 the House of Lords was concerned with and applied the doctrine of waiver by election to a force majeure notice given by sellers to the buyers which was defective both in form and on the ground that it was given too late. Their Lordships treated the issue of waiver as an objective exercise based on the communications between the parties, Lord Salmon observing:
“I think that any reasonable sellers would rightly have inferred the buyers were accepting the notice as a valid and effective notice under cl. 22 save that the reference to 500 tonnes should be altered to 280 tonnes. To put it another way, the buyers made an unequivocal representation that they were treating the notice as a valid and effective notice under cl. 22. To make an unequivocal representation or waiver it is not necessary for the buyers to say “we hereby waive it”. It is quite enough if they behave in such a way that reasonable sellers would be led to believe that the buyers were waiving any defect there might be in the notice and were accepting it as effectively extending the date for delivery in accordance with the provisions of cl. 22.”
See also Bremer –v- Macprang [1979] 1 Lloyd’s Rep 221 per Lord Denning MR at 226 lhc and per Shaw LJ at 230 rhc.
“A party can represent that he will not enforce a specific legal right by words or conduct. He can say so expressly - this of course he can only do if he is aware of the right. Alternatively he can adopt a course of conduct which is inconsistent with the exercise of that right. Such a course of conduct will only constitute a representation that he will not exercise the right if the circumstances are such to suggest either that he was aware of the right when he embarked on the course of conduct inconsistent with it or that he was content to abandon any rights he might enjoy which were inconsistent with that course of conduct.”
(1) In order to demonstrate awareness of the right waived, it must generally be shown that X had knowledge of the underlying facts relevant to his choice or indication of intention: see Matthews –v- Smallwoood [1910] 1 Ch 777 per Parker J approved in the House of Lords in Fuller’s Theatre and Vaudeville Co –v- Rofe [1923] AC 435 at 443 (in the context of waiver of a right of re-entry).
(2) The court will examine any act or conduct alleged to be unequivocal in its context, in order to ascertain whether or not it is sufficiently clear and unequivocal to give rise to a waiver: see United States Shipping Board –v- JJ Masters and Co (1922) 10 Lloyd’s LR 573 per Atkin LJ at 578 col 2.
(3) The courts will also examine with care any agency relationship between X and any person alleged to have made the unequivocal communication on his behalf. If that person lacked the actual or ostensible authority to waive the right or rights concerned there will be no waiver: see Mardorf Peach & Co –v- Attoica Corporation of Liberia (“The Laconia”) [1977] AC 850 at 871B-872A.
“The duty of providing and making proper use of sufficient means for the discharge of cargo, when a ship has been chartered arrives at its destination and is ready to discharge, lies (generally) upon the charterer. If, by the terms of the charterparty, he has agreed to discharge it within a fixed period of time, that is an absolute and unconditional engagement, for the non-performance of which he is answerable, whatever may be the nature of the impediments which prevent him from performing it and which cause the ship to be detained in his service beyond the time stipulated.”
ESTOPPEL BY CONVENTION
“act on an assumed state of facts or law, the assumption being either shared by both or made by one and acquiesced in by the other: see Republic of India –v- India SS Co Limited (No 2) [1988] AC 878 at 913. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow them to go back on the assumption: K Lokumal & Sons (London) Limited –v- Lotte Shipping Co Pte Limited [1985] 2 Lloyd’s Rep 28: Norwegian American Cruises A/S –v- Paul Mundy Limited (The Vista Fjord) [1988] 2 Lloyd’s Rep 343; Treitel, the Law of Contract 9th ed (1995)” [See now Treitel 10th ed 110-111].
“Agreement need not be expressed, but may be inferred from conduct or even silence,”
per Staughton LJ, giving the judgment of the Court of Appeal in Republic of India –v- India Steamship Co Limited (‘The Indian Grace’) (No 2) [1997] 2 WLR 538 at 549.
FUTILITY
CONCLUSION
Lady Justice Arden:
Sir Denis Henry: