China National Foreign Trade Transportation Corporation v Evlogia Shipping Company S.A. of Panama (Mihalios Xilas)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE GEOFFREY LANE,LORD JUSTICE EVELEIGH |
| Judgment Date | 05 July 1978 |
| Judgment citation (vLex) | [1978] EWCA Civ J0705-2 |
| Court | Court of Appeal (Civil Division) |
| Date | 05 July 1978 |
[1978] EWCA Civ J0705-2
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the High Court of Justice
Queen's Bench Division
Commercial Court
(Mr. Justice Kerr)
The Master of the Rolls (Lord Denning)
Lord Justice Geoffrey Lane and
Lord Justice Eveleigh
In The Matter of the Arbitration Act 1950 and
In The Matter of an Arbitration
MR. K.S. ROKISON, Q.C. and MR. M. MOORE-BICK (instructed by Messrs. Richards, Butler & Co., Solicitors, London) appeared on behalf of the Claimants (Appellants).
MR. A. DIAMOND. Q.C. and MR. B. COLES (instructed by Messrs. Holman Fenwick & Willen, Solicitors, London) Appeared on behalf of the Respondents.
In June 1973 the owners of the Greet vessel "Mihalios Xilas" let her on a time charter to the China National Trade Transportation Corporation. It was no doubt a nationalised Corporation of China. The time charter was "for a period of 8/10 months in charterers' option". She was delivered on 13th July, 1973. So the charterers were at liberty to re-deliver the vessel at any time between 13th March, 1974 (the end of the 8th month) and the 13th May, 1974 (the end of the 10th month), plus any margin needed for a legitimate last voyage. The charterers were to pay hire monthly in advance in external sterling in London. In default of payment, the owners were to have the right of withdrawing the vessel from the service of the charterers.
The vessel made several trips across the Pacific between China and U.S.A. Each month the charterers paid the monthly hire in advance: but the practice was for them to deduct any disbursements which had been made by them on account of the owners - provided that they were supported by vouchers supporting them. No deductions were permitted in practice unless supported by documentary evidence in the shape of vouchers.
No trouble arose until the ninth month, which began on 13th March, 1974. The total hire payable in advance for that month was $119,759.37. But the charterers made deductions of $31,354.96. So they only paid net $88,404.41. That is about 75 per cent of the whole. They paid it in advance in due time, but the owners disputed the deductions. They said that they were inadmissible. On that account the owners claimed that the charterers were "in default of payment". On 26th March, 1974, the shipowners withdrew the vessel from the charterers' service.
This left the charterers in a sorry plight. The vessel was then in Vancouver. On her previous voyage they had been to theGulf of Mexico and had discharged cargo at Galveston and New Orleans. She had called in at Cristobel. She had gone up to Vancouver to load cargo for her final voyage to China. She was being scaled and cleaned at Vancouver. She had taken on fuel in her "bunkers in large quantity. She was nearly ready to load cargo for China when the owners withdrew her from the service of the charterers. By this time the market had risen. The charterers had to hire a substitute vessel to carry the cargo to China. The shipowners no doubt employed the "Mihalios Xilas" at the high market rates,
The charterers claimed that the withdrawal was wrongful and claimed damages for wrongful withdrawal. The matter went to arbitration in London. The two arbitrators disagreed. The umpire found in favour of the charterers and awarded them nearly $420,000. As to part of that sum, $260,000, he stated a case for the opinion of the courts. The judge decided in favour of the owners. The charterers appeal to this court.
I must now turn to the details on which the case depends.
THE MATERIAL CLAUSES
"Clause 6: "The Charterers to pay as hire: U.S. $6.60 per ton on vessel's actual deadweight per Calendar month commencing (from the time the vessel is delivered and placed at the disposal of the charterers) until her re-delivery to the owners.
In default of payment the Owners to have the right of withdrawing the vessel from the service of the charterers, without noting any protest and without interference by any court or any other formality whatsoever and without prejudice to any claim the Owners may otherwise have on the charterers under the charter". Clause 39: "Payment of hire to be made within seven working days from the time of her delivery and within seven working days fromthe date of every subsequent month in cash in external sterling in London to Williams and Glyns Bank Limited, 22 St. Mary Axe, London E.C.3. for the credit of Marathon Shipping Co, Ltd., London, without discount every calendar month in advance, except for the last month's hire to he estimated and paid in advance, less hunker cost and Owners' disbursements and other items of Owners' liability up to such time as vessel is expected to be re-delivered".
There were several clauses by which hire paid in advance was to be refunded or adjusted, e.g. on being requisitioned, or when off-hire, but there was no provision for it being refunded or adjusted in case of withdrawal. The charterers' London agents were Lamberts. The owners' London Agents were Marathon.
THE 9th PAYMENT
The 9th month commenced on 13th March, 1974. Allowing for two non-working days, the "seven working days" expired on 22nd March, 1974. Within that time, on Thursday, 21st March, 1974, Lamberts duly paid the sum of $88,404.41 to Williams & Glyns Bank Ltd. for the credit of Marathon: and this was accepted by the bank and placed to Marathon's credit. This was the 9th month's hire in advance, less a deduction of $31,354.96.
THE DEDUCTION MADE BY THE CHARTERERS
When making that payment, the charterers' London agents informed the owners' London agents that the deduction of $31,354.96 was a figure that the London agents had received from China. At that date they did not have the details. These details were coming by mail from their principals in Peking. These were received by the charterers' agents in London on the morning of Friday, 22nd March, 1974, and immediately telephoned to the owners' London agents and confirmed by a letter collected by handat noon on the same day. These details were supported by vouchers. except for three items which were stated to he "estimates". They were as follows:-
| Est. advance at Galveston … … Est. advance at New Orleans… … Est. hunkers and Disbts. on redelivery |
| $9,500.00 $4,000.00 $18.000.00 $31,500.00 |
THE ESTIMATES WERE ERRONEOUS
These estimates were erroneous, in these respects:-
(i) The charterers deducted $4,000 and $9,500 for estimated disbursements at Galveston and New Orleans. These deductions were not admissible at that stage because they were not supported by vouchers: but the estimates were extremely accurate and were supported later by vouchers for $4110.34 and $9403.17, which were in the post. So the deductions were premature, but otherwise perfectly valid.
(ii) The charterers deducted $18,000 for "estimated bunkers and disbursements on redelivery". This deduction was not admissible at that stage, because the 9th month was not, as it turned out, the "last month". It was also excessive, because there was a clause in the charterparty which required the vessel to be redelivered with 200/350 tons fuel-oil and 40/60 tons diesel-oil: at the price of £8 and £10 respectively. That cost would only come to about $10,000, and even allowing something for estimated owners' disbursements, the estimated deduction of $18,000 was not reasonable but was excessive. The umpire so found.
THE KNOWLEDGE OF THE OWNERS
As soon as the owners' London agents on the 21st March, 1974 received the short payment they knew that it was short: and that the charterers were "in default", or at any rate would be.Nevertheless they accepted the short payment. On the next day on Friday morning the 22nd March, 1974 they received the details and knew at once that the deductions were not admissible. It was apparent to them that the charterers were treating the 9th month as the last month of the charterparty and were making deductions in accordance with the provisions of clause 39. The umpire found that: "On receipt of the information contained in the letter of 22nd March, the Owners' London agents were, or should reasonably have been aware, that charterers expected to redeliver the vessel during or at the end of the 9th month of the Charter and were treating the 9th month as the final month of the charter".
But the owners knew that the vessel was already committed by the charterers to a voyage from Vancouver to China - and that her commitments were such that she could not be redelivered by the end of the 9th month (13th April, 1974) but probably only redelivered towards the end of April, 1974. The umpire found that:- "The owners' London agent (Mr. Dempster) considered that Charterers deduction for estimated bunkers remaining on board on redelivery and Owners' disbursements up to the time of redelivery were unjustified: and in the view of Marathon (the owners. London agents) the vessel could not be redelivered at or before the end of the 9th month".
THE OWNER'S DELAY
Despite that knowledge, the owners did not at once withdraw the vessel. As soon as the short payment was offered on Thursday, 21st March, 1974, they accepted it. As soon as details were given on Friday, 22nd March, 1974, they retained the payment. If they were to withdraw the vessel on the ground that the 9th month was not the last month, they ought to have withdrawn the vessel straightaway: but they did not do so. On Monday, 25th March, 1974,they gave an ultimatum to the charterers, in this form:-
"If full details of the deductions are not given by noon on 26th March, together with vouchers supporting them, the owners will withdraw the vessel".
That was an impossible request because the...
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