Ship owners may now face trouble when claiming contractual damages from charterers whose use of their ships for loading and discharging cargo exceeds the agreed duration, after a recent High Court ruling.
In the case of the ship Happy Day, the High Court took a strict approach in deciding on the validity of a Notice of Readiness (NOR), which was the trigger for the owner's ability to bring such a claim.
The deal between the owner and charterer of the Happy Day was under the Synacomex charterparty form. The master tendered the NOR on the vessel's arrival in the port of Cochin, but was unable to berth until the following day, when unloading started.
The ship owner claimed demurrage (contractual damages for the prolonged unloading) but the charterer argued that the NOR was invalid – having been given prematurely, before the vessel was at the berth – so the owner could not claim for the extra time used.
The owner succeeded at arbitration, but the High Court upheld the charterer's appeal, rejecting the claim for demurrage and finding the owner liable for despatch.
The court took the view that, under the charterparty, a valid NOR was necessary for the claim to succeed. In its absence, the agreed duration for loading and unloading (known as laytime) could only be triggered by an event such as a waiver or an implied agreement.
On the facts of the case, the court was unable to find such an alternative event able to trigger laytime.
The London P&I Club is warning its members to take care to avoid losses arising from technical deficiencies in the tendering of NORs.
The club suggests that: “Owners should try to agree charter provisions enabling laytime also to be started by other events, e.g. commencement of discharge, and should re-tender NORs, without prejudice to the original if there is any doubt over their validity.”
The London P&I Club insures cargo of over 33 million gross tonnage.