When Does Time begin to Run?
In the High Court case of AET Inc. Ltd. v Arcadia Petroleum (The ”Eagle Valencia”), the court considered the question of the validity of tender of notice of readiness under a Shellvoy 5 charterparty. The case provides an interesting example of a court looking at the charterparty in its entirety in order to determine the true intentions of the parties, rather than adhering to a strict interpretation of the wording of a single clause.
The charterparty clauses
Part II, cl. 13(1) of the Shellvoy form, as amended, provided as follows:
[13.1.a1]Time at each loading or discharging port shall commence to run 6 hours after the vessel is in all respects ready to load or discharge and written notice thereof has been tendered by the master or Owners’ agents to Charterers or their agents or the vessel is securely moored at the specified loading or discharging berth whichever first occurs.
[13.1.a2]However if the vessel does not proceed immediately to such berth time shall commence to run 6 hours after (i) the vessel is lying in the area where she was ordered to wait or, in the absence of any such specific order, in a usual waiting area and (ii) written notice of readiness has been tendered and (iii) the specified berth is accessible.
[13.1.a3] A loading or discharging berth shall be deemed inaccessible only for so long as the vessel is or would be prevented from proceeding to it by tidal conditions, awaiting daylight, pilots or tugs, or port traffic control requirements (except those requirements resulting from the unavailability of such berth or of the cargo)
The charter also incorporated the Shell Additional Clauses (SAC), clause 22 of which provided:
22 Clearance Clause
[22.1] If Owners fail
(A) to obtain customs clearance; and/or
(B) free pratique; and/or
(C) to have onboard all papers/certificates required to perform this Charter,
Either within the 6 hours after Notice of Readiness originally tendered or when time would otherwise normally commence under this Charter, then the Original Notice of Readiness shall not be valid.
[22.2] A Notice of Readiness may only be tendered when Customs clearance and/or free pratique has been granted and/or all papers/certificates required are in order in accordance with relevant authorities requirements.
[22.5] The presentation of the notice of readiness and the commencement of laytime shall not be invalid where the authorities do not grant free pratique or customs clearance at the anchorage or other place but clear the vessel when she berths.
[22.6] Under these conditions the NOR would be valid unless the timely clearance of the vessel for customs or free pratique is caused by the fault of the vessel.
The demurrage notification clause under the charter party required the charterers to be notified ‘within 60 days after completion of discharge if demurrage has been incurred’ and the claim to be “fully and correctly documented and received by charterers” within 90 days.
Background
The oil tanker ”Eagle Valencia”’ tendered NOR at the load port of Escravos at 11.48 hours on 15 January 2007. The authorities did not board the vessel until the following day and free pratique was only granted at 08.30 hours on 16 January. The Master protested to all relevant parties that free pratique had not been granted within 6 hours of the tender of NOR and sent two emails, one at 15.39 hours and the other at 15.53 hours on 16 January, to charterers and others confirming the original tender of NOR. As the berth was occupied, the vessel was required to wait at anchorage until 19 January and did not berth until 15.42 hours that day. When owners subsequently presented their claim for demurrage, charterers disputed it on the basis that, although they accepted that a valid NOR had been tendered on 15 January, it had been rendered invalid by the failure to obtain free pratique within 6 hours and that, accordingly, laytime only began to run when the vessel was all fast at the berth on 19 January.
In addition to the principal issue of whether or not the original NOR was rendered invalid by failure to obtain free pratique, the court also considered the question whether, if the original NOR was invalid, the two subsequent emails sent by the Master on 16 January constituted valid NORs.
Owners’ arguments
It was argued on behalf of the owners that the slight delay in obtaining free pratique was not due to any fault on their part, and was wholly beyond their control. The position at common law was that, barring some express contractual provision to the contrary, a valid NOR may be given without having obtained free pratique if it is reasonably believed to be a mere formality. Charterers’ strict interpretation of SAC 22, under which the slight and blameless delay put back the running of time for two days, had an unreasonable effect. In effect, the argument was that the charterers could not rely on SAC 22 because no one could have persuaded customs to come out to the vessel and grant free pratique in the 6 hour period contemplated by the charter. The final part of [22.5], a particularly badly drafted clause, could and should be read as indicating that the original NOR would not be invalidated if the vessel was cleared by the time she berthed, even if not within 6 hours of tender of NOR. There was no sensible commercial reason to distinguish between a situation in which the vessel was cleared at anchorage, but outside the 6 hours period, and a situation where she was cleared only on berthing. To remedy the infelicities of the original language, [22.5] should be construed as if the words ‘at latest’ were included, so that the latter part of the clause would read:
‘The presentation of NOR…shall not be invalid where the authorities do not grant free pratique…at the anchorage or other place but clear the vessel at latest when she berths.’
The parties could not, owners contended, sensibly have intended that [22.5] and [22.6] applied only to a case where free pratique is obtained only when the vessel berths.
Charterers’ arguments
On behalf of the charterers, it was contended that the purpose of SAC 22 was to ensure that the charterers knew where they stood as at the time when it was said that laytime began to run. [22.1] gave a liberty to tender NOR early provided each of (A), (B) and (C) were met. The effect was that owners could tender a NOR when the vessel was not yet in all respects ready, so long as she was ready in one of the three respects and would become ready in all respects within 6 hours. On that basis [22.3] was clear. As to [22.4], this made clear that it was not simply a question of the running of time; if there were delays, then extra times, costs and expense would be added to owners’ account. That left [22.5] and [22.6]. These were of limited application, being only concerned with the position where, at the port in question, the authorities did not grant free pratique at the anchorage, but only cleared a vessel once she berthed. This was not the case in Escravos. The vessel was, in fact, cleared at anchorage – “when she berths” meant “on or after berthing”. There was no need to imply a term, because on the general principles of construction, the language of the parties was the surest guide to their intention. A reasonable man was unlikely to imply a term if a contract worked perfectly well without it and nothing about the factual matrix in this case suggested that a reasonable man would be anxious to add anything that the parties had omitted. Effect must be given to what the parties had agreed, even though to some it might appear uncommercial.
As to the owners’ alternative case, that the subsequent emails of January 16 constituted valid NORs, counsel for the charterers referred to the common law position as summarised in para 15.23 of Voyage Charters:
‘…a notice which states that the vessel is actually ready, but is given at a time when she is not actually ready…is invalid… such a notice does not become valid as and when the ship becomes ready. English law does not recognise the concept of an “inchoate NOR” or a “delayed action device.”
What had been tendered on January 15 was invalid, and sending it again on January 16 could not make it valid.
Judgment
Finding for the owners, Walker,J held that they were entitled to succeed based on the original NOR tendered on January 15. SAC 22 supplemented II.13, and both were concerned with the allocation of risk. [13.1.a1] identified when time would start to run, the starting point being that that would be 6 hours ‘after the vessel is in all respects ready to load or discharge and written notice thereof has been tendered by the Master…to charterers…and the vessel is securely moored at the specified…berth.’ In an ideal world speedy and efficient performance of the charter would be achieved by the vessel proceeding to the berth without delay. However, [13.1.a2] recognised that the ideal might not be achieved and that there could be some delay before the vessel was securely moored at the specified berth. In that event, time was to begin to run 6 hours after each of three identified conditions were met. The first was that the vessel should be “lying in the area where she was ordered to wait or, in the absence of any such specific order, in the usual waiting area.” The second was that a written NOR had been tendered. The third was that the specified berth was accessible – with an additional sentence explaining what was meant by inaccessible, thereby allocating risk in relation to the events mentioned earlier.
The judge took the view that the general parts of SAC 22 were to be distinguished from [22.5] and [22.6]. Those two sentences had in mind the special position found in [13.1.a2] – cases where the vessel does not proceed immediately to her berth. The reference to “anchorage or other place” was a reference to the location of the vessel during the 6 hours after giving NOR. The absence of customs clearance and free pratique at that stage would cause no loss of time if customs clearance and free pratique could be obtained on berthing or earlier. It would be absurd to think that “when she berths” excluded clearance prior to berthing. Although it was apparent that the clause had not been drafted with the care one might have expected of a legal draftsman, [22.5] and [22.6] had a clear commercial purpose. It would be obvious to commercial parties that the general parts of SAC 22 were seeking to give charterers at least a measure of protection against adverse consequences if (A), (B) or (C) were not achieved when time would normally begin to run under II.13.
However, where the running of time fell within the special circumstances in [13.1.a2], a failure within 6 hours to obtain (A) or (B) would not necessarily have any adverse consequences for charterers. If the vessel fell within [13.1.a2] there was no need to obtain free pratique or customs clearance during the 6 hours immediately following the NOR. If customs clearance and free pratique were both obtained when the vessel berthed there would be no reason whatever for the general regime under SAC 22 to apply as regards (A) or (B). This was a common type of case where the parties had not used language with precision and it would be wrong to concentrate on individual words. The charterers’ focus upon the precise words used was misplaced. The history of events plainly brought the vessel within the special provision in [22.5] and [22.6]. At the expiry of the 6 hours identified in the second sentence of II.13(1)(a) the authorities had not granted free pratique. When she berthed, free pratique had been granted. Accordingly, whatever the extent of the additional benefit conferred on charterers by the general part of SAC 22, sub-clauses [22.5] and [22.6] had the effect that charterers could not claim that benefit.
The judge held, however, that the owners would not have succeeded on their alternative argument that the emails of 16 January constituted valid NORs. Under the demurrage notification terms of the charterparty, which provided for notice within 60 days and full documentation within 90 days, owners merely had to notify charterers that demurrage had been incurred. No quantification was required because mere notification would serve the purpose of clarifying where the parties stood. However, there was the further requirement that within 90 days the claim “shall be fully and correctly documented and received by the charterers.” It was fundamental to any demurrage claim that the stage when time started to run for the purposes of the claim be clearly identified. The documentation submitted to charterers clearly identified a claim that time started to run at Escravos 6 hours after the original NOR was tendered. There was no hint whatever that owners had a claim that time started to run 6 hours after one or other of the emails of 16 January and owners would be barred from asserting any such claim. With that conclusion, it was unnecessary to decide whether the emails of 16 January were capable of constituting NORs.
