Arta Shipping Company Ltd v Thai Europe Tapioca Service Ltd (Johnny)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE ORR,SIR DAVID CAIRNS |
| Judgment Date | 25 March 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0325-2 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 March 1977 |
[1977] EWCA Civ J0325-2
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the High Court of Justice
Queen's bench Division
In the Matter of an Arbitration
(Mr. Justice Donaldson)
The Master Of The Rolls (Lord Denning)
Lord Justice Orr and
Sir David Cairns
MR. A. E. DIAMOND, Q. C. and MR. M.G. COLLINS (instructed by Messrs. Holman, Fenwick & Willan, Solicitors. London) appeared on behalf of the Plaintiffs (Appellants)
MR. R. ALEXANDER, Q.C. and MR. J. HAVELOCK-ALLAN (instructed by Messrs. Clyde & Co., Solicitors, London) appeared on behalf of the Defendants(Respondents).
The facts are short and stated in the Special Case. So I will go straight to the point.
Clause 7 is the usual continuation clause in the Baltime form of Time Charter. It is designed so as to allow the charterer a small extension beyond the 13 months maximum: but to insist that, if he does so, he cannot get away with it at the low charter rate as in Hector v. Sovfracht (1945) King's Bench 343. He must pay the market rate for the extended time.
The continuation clause only applies to a short extension. The charterer is allowed to order the vessel on a last voyage if it can be reasonably calculated that it will allow redelivery "about" the end of the thirteen months. I should think "about" would be only two or three days. But he is not allowed to order the vessel on a last voyage if it is likely to be late by more than two or three days.
In view of the concession made by the parties that clause 7 applies to this case (see clause 4 of the Special Case), we must assume that when this vessel was ordered on her last voyage to Karachi, it could reasonably be calculated that she would be redelivered at Karachi "about" the end of the 13 months, that is, "about" 7th November, 1974 - that is by, say, 10th November, 1974. In point of fact she was, for some reason or other, delayed for a much longer time. It was for nearly thirty days until 7th December, 1974. But, in view of the concession, clause 7 must be applied to 30 days, just as it would be to 3 days.
In testing the position, I propose to take a case where the last voyage was not covered by clause 7 at all. Assume that, at the time when the vessel was ordered on her last voyage, it was plain that she would be 30 days late after, the 13 months had ended. Suppose that, at the time of this last order, the marketrates had risen, and the charterer sought to take advantage of them so as to profit from those rates. That would be an illegitimate last voyage. The owners could have refused to take the vessel on it. If they did not refuse, but allowed the vessel to perform that illegitimate last voyage, it is plain the owners could recover either damages or a quantum meruit - see The Dione (1975) 1 Lloyd 115 at page 118. In either case the amount would be assessed at the market rate then ruling for a time-charter trip for that voyage at that time. That is for a time charter for the period of time occupied by such a voyage based on spot rates for the voyage charter but adjusted to a time charter basis. That would obviously be fair and just. The charterer, by sending her on that illegitimate last voyage, would have received the high market rate then ruling and should pay damages based on that rate for that voyage, that is, for the remainder of it after the 13 months had expired.
Now take the case where the last voyage was covered by Clause 7. That means that, st the time when the vessel was ordered on her last voyage, it was calculated that she might be two or three days late, but no more. The effect of Clause 7 is that the owners could not refuse to take the vessel on that voyage. They would have had to perform it. But otherwise the effect would be the same as in the previous illustration. The charterer would have to pay for the two or three extra days at the market rate then ruling for a time-charter trip for that voyage at that time. That again is only fair and just. The charterer, by sending her on that extended last voyage, would have received the high market rate then ruling for the whole voyage, to the port of Karachi taking into account the unpopularity of that port. He would still retain much benefit from this last voyage.
Right up to the last day of the thirteen months, he would only have to pay hire to the owners at the charter rate. Then he would have to pay the market rate - the higher rate - only for the two or three days.
Those illustrations seem to me to give a fair and just interpretation of the charter: and I am confirmed in this view by the fact that the Umpire himself so decided.
The opposite view seems to me to be very legalistic. It goes like this: Under the original charter for 11/13 months the hire was assessed on a time-charter basis. It follows that under any lawful extension of that time-charter, the hire should be assessed on a like basis. Especially as the concluding words of clause 7 draw a comparison between "the rate stipulated herein" and "the market rate". Like must be compared with like. So the extended time should be paid for on a strictly time basis and not on a voyage basis. If it is asked, On what time basis? How long a time charter? Six weeks? Or Six years? The answer is said to be 11/13 months because that is the nearest comparable time charter to this one. So the question becomes: What rate of hire would be quoted for a further 11/13 months time charter at the end of the first 13 months?
That seems to me to be a lawyer's argument. It is utterly divorced from commercial reality. I am quite sure that the Umpire was right to reject it.
There is a practical point, too, which Mr. Diamond mentioned. It was this: If "market rate" is different for an illegitimate last voyage from an extended voyage under clause 7, it would provoke conflicts of a most undesirable kind as to whether the last voyage was legitimate or illegitimate. There would be uncertainty and disputes which would be...
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