Notice Of Readiness – Laytime, Despatch and Late Redelivery

April 2002

Following in the footsteps of the "Happy Day" decision¹ the validity of a Notice of Readiness and the commencement of laytime have recently been considered again by the Commercial Court².

The vessel, the "Mass Glory" was involved in the following arrangements between the following parties:

The Parties

The Agreements

Bonusnauta (the Owners)

¯

Time Charter

Navios International Inc (Navios)

¯

Voyage Charter

(Berth Charter)

Terms similar to below

Goldbeam Shipping Limited (Goldbeam)

¯

Voyage Charter

(Berth Charter)

Synacomex form: 1 bulk cargo (out of 3 to 5 under contract) from South America to South East Asia and the Far East

Glencore Shipping Limited (Glencore)

The facts:

9 May 1998: Loading complete at Rio Grande and Xiamen, China declared as discharge port

14 June 1998: Vessel enters Xiamen and passes inward inspection. Vessel ready to berth and berth available but cargo documents are not in order.

15 June 1998: 08.00 hours master gives Notice of Readiness but vessel remained at anchorage until

9 August 1998: Documentation resolved, vessel proceeds to berth and discharge commences.

14 August 1998: Discharge completed.

The only Notice of Readiness given is the one given on 15 June 1998. However, as both voyage charters were berth charters the notice was invalid (the only exception being where there is congestion in the berth).

Goldbeam and Navios claimed damages for detention from Glencore and Goldbeam respectively. Both disputes were referred to the same arbitration. The arbitrators found:

1. The Notice of Readiness was invalid and damages for detention were payable in respect of the entire period while the vessel was at anchorage.
2. Nonetheless, laytime began to run when the vessel entered its berth and began to discharge on 9 August. This was because the vessel would, in fact, have been able to enter a berth on 14 June but for the charterers’ breach of contract (failure to provide the necessary cargo documentation). But for this, the Notice tendered on 15 June would have been valid and the charterers should not be allowed to benefit from their own breach by claiming despatch.

3. Due to the delay at Xiamen, the vessel was returned late to Banusnauta rendering Navios liable for additional hire. The tribunal held that this loss was not too remote for Navios to recover from Goldbeam. Was Goldbeam allowed to recover this loss from Glencore? The arbitrators referred to authorities which held that where the breach of a sub-charter put the disponent owner in breach of the head charter, the disponent owner was entitled to be indemnified in full in respect of its liability under the head charter provided only that it had not failed to mitigate its loss³. The tribunal found that there had been no failure on the part of Goldbeam to mitigate its loss. Accordingly, Glencore was liable to indemnify Goldbeam in full.

Glencore and Goldbeam appealed to the High Court. The decision was as follows:

1. As the vessel had not berthed on 15 June, no valid Notice of Readiness could be tendered. Pursuant to Clause 6 of the charterparty laytime commenced following the giving of notice of readiness "whether the vessel be in berth or not", but clause 37 made it clear that notice of readiness could only be given before reaching the berth if the berth was unavailable due to congestion. Further "whether in berth or not" only applies where a berth is unavailable⁴. This did not apply in this case. The owners were not entitled to give Notice of Readiness on 15 June and laytime did not commence. This is in accordance with what the parties agreed in their contract. This is the case even if the inability to berth was the result of the charterers’ breach. Equally, laytime did not commence automatically when discharge commenced.⁵ It was not the charterers’ fault that the notice was invalid; the notice was invalid because it had been given prematurely. It was open to owners to give another Notice of Readiness once in the berth.
2. Moreover, as laytime never commenced, none of the laytime was used. Therefore, for the purposes of the despatch provisions, all of that time was saved entitling the charterers to despatch ($6,000 per day) for the whole period allowed for laytime.
3. The judge agreed with the arbitrators that it was not too remote for Navios to claim from Goldbeam the additional hire paid for late redelivery of the vessel to Bonusnauta. Goldbeam were aware that Navios were deponent owners and therefore, it was reasonably forseeable that, as a result, the vessel was on time charter, that the delay in Xiamen could result in late redelivery and that additional hire would be payable by Navios⁶ . However, as to Goldbeam’s right to an indemnity from Glencore, it was not enough to consider whether the chain of causation was not broken as between the respective parties’ claims. It was also necessary to consider whether such an eventuality was in the contemplation of the parties when they entered into the contract. This was not considered by the arbitrators at the original hearing and the question was therefore to be referred back to the arbitrators for consideration.

1. See footnote 5 below.

2.Glencore Grain Ltd v Goldbeam Shipping Inc (The "Mass Glory") - QBD (Com Ct)(Moore-Bick J) - 25 January 2002

3. The Sargasso [1994] 1 Lloyd's Rep 412 and Sacor Maritima SA v Repsol Petroleo SA [1998] 1 Lloyd's Rep 518

4. Bulk Transport Group Shipping Co Limited v Seacrystal Shipping Limited (the Kyzikos) ([1989] AC 1264)

5. (Transgrain Shipping BV v Global Transporte Oceanico SA (the Mexico I) [1990] 1 Lloyd's Rep 507, T. A. Shipping Limited v Comet Shipping Limited (the Agamemnon) [1998] 1 Lloyd's Rep 675, Glencore Grain Limited v Flacker Shipping Limited (the Happy Day) [2001] 1 Lloyd's Rep 754). Click here to view Steamship report on the first instance decision in the "Happy Day". (The subsequent Court of Appeal decision in the "Happy Day" is also covered in that article).

6. (Koufos v C Czarnikow Ltd (the Heron II) [1969] A C 350)