AET Inc Ltd v Arcadia Petroleum Ltd "Eagle Valencia"

Where a charterparty makes free pratique relevant to the commencement of laytime, its express clearance machinery governs. If free pratique is not granted within the specified period after the original notice of readiness, that notice is invalid, although a fresh notice may be given once clearance is granted. The contractual exception for clearance granted only on berthing operates by reference to what actually happened. A notice of readiness need not follow a prescribed form if it accurately states that the vessel is ready and satisfies the contractual requirements. A demurrage claim is not fully and correctly documented unless it includes a valid notice of readiness. An alternative claim based on a later notice is extinguished if that notice was not submitted within the contractual time limit.

The Owners claimed demurrage from the Charterers under a Shellvoy 5 charterparty. The vessel arrived at Escravos and tendered a notice of readiness before free pratique was granted. Free pratique was granted more than six hours later, before the vessel berthed. The Master then sent two further emails.

Walker J upheld the Owners’ primary claim, construing the clearance clause as preserving the original notice of readiness. He also permitted an alternative case based on the later emails, but held that it was not fully and correctly documented within the contractual time limit. The Charterers appealed on the construction of the clearance clause and the effect of the demurrage time bar.

1. Appeal allowed. Longmore LJ gave the leading judgment, with Richards and Etherton LJJ agreeing. Judgment was entered for the Charterers.
2. The Court of Appeal preferred the Charterers’ construction of SAC 22.1. Clause 13 did not prevent a notice of readiness being tendered before free pratique where clearance was expected to be a formality. However, SAC 22.1 provided that, if free pratique was not granted within six hours after the original notice, that notice became invalid. The word fail was apt to include the non-occurrence of the grant; no separate notification that free pratique had been failed was required. A fresh notice could be tendered once free pratique had been granted, with laytime then commencing under SAC 22.3. Since clearance occurred more than six hours after the original notice, the original notice was invalid: [12], [16]–[17].
3. SAC 22.5 was construed as applying where the authorities did not grant free pratique at the anchorage or other place but cleared the vessel when she berthed. In that situation the original notice remained valid, subject to SAC 22.6 where the delay was caused by the Owners’ fault. The provision depended on what actually happened, not on an investigation into port practice: [13]–[15].
4. The later email of 15.39 on 16 January was a valid fresh notice of readiness under SAC 22.2. No prescribed form was required. It accurately stated that the vessel was ready in all respects, and its without-prejudice reference to the original notice did not detract from its character as a fresh notice. The second email merely recorded that free pratique had been granted and was not itself a further notice: [18]–[21].
5. Clause 15(3) required the demurrage claim to be fully and correctly documented within 90 days. A valid notice of readiness was an essential supporting document. Although the Owners’ claim identified the time spent at Escravos and was submitted promptly, reliance only on the contractually invalid notice meant that the claim was not fully and correctly documented. The alternative claim was therefore extinguished. It was reasonable to expect Owners claiming demurrage to include alternative notices of readiness where validity might be disputed: [22]–[30].

1. Court of Appeal (Civil Division): The appeal from [2009] EWHC 2337 (Comm) was allowed and judgment was entered for the Charterers.
2. High Court of Justice, Queen’s Bench Division, Commercial Court: Walker J upheld the Owners’ primary demurrage claim on the construction of SAC 22.5. He permitted an alternative case based on the later notices but held that it was not fully and correctly documented within the contractual time limit.