Afovos Shipping Company S.A. v R Pagnan and F.lli

JurisdictionUK Non-devolved
JudgeLord Hailsham of St. Marylebone (Lord Chancellor),Lord Diplock,Lord Keith of Kinkel,Lord Roskill,Lord Brightman
Judgment Date27 January 1983
Judgment citation (vLex)[1983] UKHL J0127-1
Date27 January 1983
CourtHouse of Lords
Afovos Shipping Company S/A
Romano Pagnan and Pietro Pagnan (Trading as R. Pagnan & F.LLI)

[1983] UKHL J0127-1

Lord Chancellor

Lord Diplock

Lord Keith of Kinkel

Lord Roskill

Lord Brightman

House of Lords

Lord Hailsham of St. Marylebone (Lord Chancellor)

My Lords,


On the 18th June 1979, in circumstances hereafter to be described, the appellants as shipowners purported to withdraw the shipAfovos from a time charter dated the 8th February 1978 on the New York Produce Exchange form by which she was let to the respondents as charterers for two years three months more or less at charterer's option from delivery date on 14th February 1978. The purported ground was a right of withdrawal conferred by a clause in the charter. The formal question in this appeal is whether the appellants were entitled so to act, and whether their action was effective to achieve its purpose.


The commercial reality is, as happens not seldom, somewhat different. By a without prejudice agreement the ship remained on charter to the respondents for the rest of the charter period. The real question in dispute is whether the hire is to be at the original rate of U.S.$1.97½ per ton, or an enhanced rate reflecting the market at the time of the purported withdrawal. The difference is about U.S.$21/2 million.


The result of the appeal depends upon the construction of two clauses in the charter, and the effect to be given to the purported notice of withdrawal. It will be convenient to deal first with the terms of the two clauses to be construed, and then to recite the facts, of which the purported notice of withdrawal was one.


The arrangements for payment and the right of withdrawal were contained in clause 5 of the charter which provided as follows:—

"5. Payment of said hire to be made in London, to the FIRST NATIONAL BANK OF CHICAGO … London EC3P 3DR, for the credit of ANGELICOUSSIS SHIPHOLDING GROUP. LIMITED … in cash in United States Currency, semi-monthly in advance … otherwise failing the punctual and regular payment of the hire … the Owners shall be at liberty to withdraw the vessel from the service of the Charterers …"


This is the first of the two clauses which falls to be construed. The severity of the right of the withdrawal contained in the last phrase was mitigated by an "anti-technicality clause" contained in clause 31 of the charter. This anti-technicality clause was in the following terms:—

"31. When hire is due and not received the Owners, before exercising the option of withdrawing the vessel from the Charter-Party, will give Charterers fortyeight hours notice, Saturdays, Sundays and Holidays excluded and will not withdraw the vessel if the hire is paid within these fortyeight hours".


This is the second clause to be construed.


In the events which happened, the hire was punctually paid up to and including the 11th June 1979 when there occurred a chapter of accidents, for so only can it be described, which gave rise to the present dispute. On that date the respondents gave instructions in good time to their bankers, the Padua branch of the Credito Italiano, to pay the instalment then currentlydue for payment on or before the 14th June 1979 in accordance with the charter to the London branch of the First National Bank of Chicago for the credit of Angelicoussis Shipholding Group, Limited. This the Padua bank purported to do by telex on the 13th June. Both banks were in funds and were in account with one another. But for one unfortunate circumstance there was no reason why the transaction should not have been completed in due time.


The London branch of the Chicago bank had originally possessed three telex call numbers, the last two digits of which were respectively 16, 17, and 18. But that numbered 18 had been abandoned in 1975 and by 1979 had been allotted to a third party. Nevertheless, in the relevant directories for 1976, 1977 and 1978 the old call number had continued to be recorded under the name of the Chicago bank, and as at 14th June 1979 the Padua bank was using the 1978 edition. By a singular mischance the Padua branch tried first to connect with 16 and 17 and found, in the first case, that there was no reply and, in the second, that the number was engaged. The third time the Padua bank connected with the number 18 and there was a reply from the third party; and though the answering call was wrong the Padua bank transmitted the telex to the third party and the error was not discovered and corrected until the 19th June when the payment of the instalment was admittedly overdue.


In the meantime, on the 14th June 1979, which was the last day for paying the instalment, the appellants had purported to exercise their rights under clause 31. At 16.40 hours (London time) on that day, which was a Thursday, they sent to the respondents through their London agents the following telex:—

"Owners have instructed us that in case we do not receive the hire which is due today, to give charterers notice as per cl. 31 of the Charterparty for withdrawal of the vessel from their service".


The telex, we were told, was received five minutes later. Allowing for the intervening Saturday and Sunday, 48 hours from the receipt of this telex would have expired at 16.45 hours on Monday, 18th June. At 19.20 hours on that day the appellants sent to the respondents a telex purporting to withdraw the vessel from their service.


This resulted in a dispute giving rise to the present proceedings commenced by writ by the appellants as plaintiffs claiming on a specially indorsed statement of claim a declaration that they were entitled to withdraw the vessel. At first instance Lloyd J. decided in their favour, but his judgment was reversed by the Court of Appeal, and so the matter comes before your Lordships' House for final disposal by leave of the Appeal Committee.


A number of questions arose for debate at one time or another. Only a small number of these were still alive by the time of the appeal before your Lordships, and, in my view, the case can be disposed of by considering only two, viz:—

(1) At what point of time on the 14th June 1979, apart from the mitigation of clause 31, would the right of withdrawal have arisen under clause 5 of the charter?

(2) On the assumption that, at 16. 40 or 16.45 hours on the 14th June 1979, the point of time indicated by the answer to the first question had not been reached, were the appellants entitled to send a notice exercising their option under clause 31 in advance of that point of time?


In addition to these questions the Court of Appeal decided that the purported notice under clause 31 was deficient in point of form, not being in a sufficiently unqualified form. In the event, their Lordships did not find it necessary to hear argument on this last point, since, if the first two questions were decided in a sense adverse to the appellants, it was not necessary to decide it nor did it raise any question of general application, depending as it did upon the precise wording which the appellants chose touse. For myself I am far from saying that I am satisfied the Court of Appeal was wrong on this last point, but in the absence of argument and since it is unnecessary to decide the question, I prefer not to express a concluded opinion.


Of the two questions which must be decided, the second appears to me to be plain beyond argument. Both the grammatical meaning of clause 31 and the policy considerations underlying the contract require that the moment of time at which the 48 hours notice must be given did not arise until after the moment of time at which, apart from the clause, the right of withdrawal would have accrued. I agree with the judgments of the Court of Appeal that both the expression "due and received", and the reference to the right as an "option", really only admit of this sense. The argument which appealed to the learned judge that notice could be given at any time during the last day available for payment of the instalment (i.e. at any time after midnight on the 13th/14th June or alternatively at some point of time when it was unlikely that the instalment would be paid timeously) failed to make any impression on me at all. The notice can only be given "when hire is due and not received", which cannot arise before the time postulated by the answer given to the first question (whatever that answer may be), and the notice can only be given when there is (or apart from clause 31 would be) already in existence, an "option" capable of exercise of withdrawing the vessel from the charter party", and that option can only be exercised after the arrival of the same point of time.


Even if the point of clause 31 were ambiguous, which in my judgment it is not, I would be greatly impressed by the view of the Court of Appeal. Quite obviously the clause was inserted in order to save the charterer, who may (as in this case) be quite innocent even of the knowledge that his payment had not been received, from the extremely onerous effects (in this case a cost of $2½ million) of clause 5, and equally obviously if the appellants' arguments...

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62 cases
2 books & journal articles
  • Anticipatory Repudiation
    • Canada
    • Irwin Books The Law of Contracts. Third Edition Performance and Breach
    • 4 August 2020
    ..., 2008 ONCA 92. And see Q Liu, “The Test of Fundamentality in Anticipatory Breach Cases: Spirent v Quake ” (2008) 46 Can Bus LJ 443. 20 [1983] 1 WLR 195 (HL). 21 Ibid at 203. For discussion of Lord Diplock’s distinction between primary and secondary contractual obligations, see Chapter 20, ......
    • Singapore
    • Singapore Academy of Law Journal No. 2005, December 2005
    • 1 December 2005
    ...and F Lli (The Afovos) [1980] 2 Lloyd’s Rep 469. Lloyd J’s decision was affirmed by the House of Lords but on different grounds —[1983] 1 Lloyd’s Rep 335. 52 Supra n 51, at 473. 53 Geva, supra n 14, at p 282. 54 [1933] 1 KB 47(“the Rekstin case”). 55 [1977] QB 790 (“Momm”). 56 Ibid at 799—8......

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