Cantiere San Rocco v Clyde Shipbuilding and Engineering Company
| Jurisdiction | Scotland |
| Judgment Date | 20 July 1922 |
| Date | 20 July 1922 |
| Docket Number | No. 93. |
| Court | Court of Session |
Lord Hunter, Lord President (Clyde), Lord Mackenzie, Lord Skerrington, Lord Cullen.
Contract—Termination—Impossibility of performance—Accrued rights of parties—Executory contract with enemy subject—Performance abrogated by outbreak of war—Instalment paid before outbreak of wear—Repetition of instalment.
In May 1914 a Scottish firm of engineers contracted with an Austrian firm of shipbuilders to build and supply a set of marine engines. The contract provided that an instalment of the price was to be paid on signature of the contract and the remaining instalments at specified stages of the construction; that within a fixed period plans and measurements were to be adjusted; and that the property was to pass as the work progressed. The first instalment had been paid, and the plans and measurements had been adjusted and approved but no part of the engines had been built, when war broke out and further performance of the contract became legally impossible. After the war the shipbuilding firm, which had become Italian in nationality, brought an action for repetition of the instalment paid.
Held (diss. Lord Mackenzie, rev. judgment of Lord Hunter) that, as the outbreak of war neither rescinded nor avoided the contract but merely discharged the parties from their respective obligations for further performance, the accrued rights of parties remained; and that, as the failure to complete and deliver the engines was due to a cause for which the defenders were not responsible, the pursuers were not entitled to repetition; and defenders assoilzied.
On 18th February 1921 The Cantiere San Rocco, S.A., Trieste, Italy, brought an action against The Clyde Shipbuilding and Engineering Company, Limited, Port-Glasgow, concluding for (1) declarator that the contract constituted by agreement and specification appended thereto, dated 4th May 1914, entered into between the defenders of the one part and the pursuers of the other part, was abrogated and avoided and dissolved by the existence of a state of war between Great Britain and Austria on 12th August 1914, and that the pursuers were entitled to payment of the sum of £2310 paid to the defenders by the pursuers under the contract, with interest thereon at the rate of 5 per centum per annum from the 12th day of August 1914 till payment; and (2) for decree for payment of the sum of £2310 with interest as aforesaid.
The following narrative of the facts is taken from the opinion of the Lord Ordinary:—
‘The pursuers in this action are a shipbuilding company carrying on business at Trieste, formerly in Austria now in Italy. The defenders are a company carrying on the business of shipbuilders and engineers at Port-Glasgow. The conclusions of the action are (first) for declarator that a contract entered into between the parties prior to the war was abrogated and avoided and dissolved by the existence of a state of war between Great Britain and Austria on 12th August 1914, and that the pursuers are entitled to payment of the sum of £2310 paid by the pursuers to the defenders; and (second) for payment of that sum. The defenders had a plea affecting the pursuers' title to sue, but this plea was withdrawn at the discussion in the Procedure Roll.
‘By a contract embodied in an agreement and specification, dated 4th May 1914, entered into between the defenders of the one part and the pursuers, The Cantiere San Rocco, S.A., of the other part, the defenders agreed to supply and deliver f.o.b. Port-Glasgow, and the pursuers agreed to purchase, one set of triple-expansion surface condensing screw marine engines with cylinders 26 in., 42 in., and 70 in. diameter by 48 in. stroke. By article 9 of that contract it was provided that, “In consideration of the said contractors supplying the engines and their appurtenances entirely in accordance with the terms of this agreement and the annexed specification, the purchasers shall pay the sum of”£11,550, to be paid as follows:—“By cash in London—20 per cent on signing contract; 20 per cent when the cylinders are cast and the boiler plates are in contractors' premises; 20 per cent when the boilers are tested and engine assembled; 30 per cent net cash in London in exchange for signed bills of lading and policies to cover insurance; 10 per cent after reception of engine and boilers and satisfactory trials.” The engines were to be completed and delivered at Port-Glasgow by 30th April 1915. By article 7 of the contract it was provided, “The whole of the work which from time to time may be in hand under this agreement shall become the absolute property of the purchasers subject only to the lien which the contractors shall have upon it for unpaid money.”*
‘On 20th May 1914 the pursuers paid to the defenders in terms of the contract the sum of £2310. Between the date of the contract and the declaration of war it appears that the defenders carried out a certain amount of preparatory work required by the contract. On 12th August 1914 Great Britain declared war against Austria, and it is admitted that the pursuers then became alien enemies and that the contract became eo ipso abrogated and avoided and dissolved on that date.’ The preparatory work referred to by the Lord Ordinary included the interchange and approval of the plans and measurements provided for by article 6 of the contract; but no part of the engines had been constructed by the outbreak of war.
The pursuers pleaded;—‘(1) The said contract having been abrogated and avoided and dissolved as condescended on, and the pursuers, The Cantiere San Rocco, S. A., being no longer alien enemies, decree should be pronounced in terms of the conclusions of the summons. (2) The said contract having become incapable of fulfilment as condescended on, the pursuers are entitled to repetition of the instalment paid by them in terms thereof, and decree should be pronounced in terms of the petitory conclusions of the summons. (3) The defenders having been unable to complete and deliver the said engines in terms of the contract as condescended on, they are bound to pay the pursuers, The Cantiere San Rocco, S.A., the sum sued for, and decree should be pronounced in terms of the petitory conclusions of the summons. (4) The defenders not having rendered to the pursuers any services in return for the sum paid by the pursuers, the pursuers are entitled to decree in terms of the petitory conclusions of the summons.’
The defenders pleaded, inter alia;—‘(6) The said contract having been dissolved solely by the declaration of war between Great Britain and Austria-Hungary, the defenders should be assoilzied. (7) The sum sued for having been paid by the pursuers to the defenders in terms of the contract between the parties, the defenders should be assoilzied. (8) The defenders having duly proceeded with the work required by the contract between its date and that of the outbreak of war, and/or the pursuers having received and accepted the services of the defenders in terms of the said contract, and restitutio in integrum being impossible, the defenders should be assoilzied.’
On 7th July 1921 the Lord Ordinary (Hunter) pronounced the following interlocutor:—‘Finds and declares that the contract entered into between the parties prior to the war was abrogated and avoided and dissolved by the existence of a state of war between Great Britain and Austria on 12th August 1914, and that the pursuers are entitled to payment of the sum of £2310 paid by the pursuers to the defenders, subject to such counter claim as may be afterwards established, and decerns: Quoad ultra continues the cause, and grants leave to reclaim.’
Lord Hunter's opinion.—[After the narrative quoted supra]—The pursuers maintain that, in consequence of the contract having become incapable of fulfilment, they are entitled to recover the money paid by them to the defenders in terms of the contract. The defenders, however, contend that rights acquired under the contract cannot be disturbed by the termination of the contract owing to a cause for which neither is responsible, and that they are therefore entitled to retain the payment made to them. A point of law of interest and importance, the solution of which is attended with difficulty, is thus raised between the parties.
In support of their contention the defenders rely upon a number of English cases. In Anglo-Egyptian Navigation Co. v. Rennie and AnotherELR, (1875) L. R., 10 C. P. 271, a firm of shipbuilders had contracted to repair a ship with materials partly new and partly old. The price of the work was to be £5800, to be paid in three instalments as the work progressed. The ship was lost after one of the instalments had been paid and after the new machinery contracted for was ready to be fixed on board. A second instalment was subsequently paid. The plantiffs in the action claimed delivery of the machinery, and, as this was refused, brought an action for the detention of the same or for recovery of the £4000 which they had paid. It was held that the contract was an entire and indivisible one for work to be done upon the plaintiffs” ship for a certain price, from further performance of which both parties were released by the loss of the ship; that the property in the articles manufactured was not intended to pass until they were fixed on board the ship; and that consequently the plaintiffs were not entitled to the boilers and machinery, nor to recover the £4000 paid, as upon a failure of consideration.
The doctrine upon which the defenders rely is more clearly illustrated in the series of cases which may be described as the Coronation cases. Contracts were entered into, under which high prices were agreed to be paid for the temporary use of premises from which the Coronation procession might be seen. On the postponement of the Coronation owing to the King's illness, a number of legal questions arising out of these...
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