Colonial Bank v European Grain and Shipping Ltd (Dominique)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE FOX,LORD JUSTICE MUSTILL,LORD JUSTICE CROOM-JOHNSON |
| Judgment Date | 21 December 1987 |
| Judgment citation (vLex) | [1987] EWCA Civ J1221-7 |
| Docket Number | 87/1319 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 1987 |
[1987] EWCA Civ J1221-7
Lord Justice Fox
Lord Justice Croom-Johnson
Lord Justice Mustill
87/1319
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR JUSTICE HOBHOUSE)
Royal Courts of Justice
MR MARTIN MOORE-BICK, Q.C., instructed by Messrs Richards Butler, appeared for the Appellants (Respondents).
MR BERNARD EDER, instructed by Messrs Holman Fenwick & Willan, appeared for the Respondents (Appellants).
I will ask Lord Justice Mustill to give the first judgment.
This is a dispute between Colonial Bank and European Grain and Shipping Limited concerning freight under a voyage charterparty. Since the parties have at successive stages of the proceedings exchanged positions as appellants and respondents I will refer to them as "the Bank" and "the Charterers" respectively. The facts are very simple, if not in all respects entirely clear.
On 14th April 1982 Vilamoura Maritime Inc. ("the Owners") assigned to the Bank all the earnings of their vessel "DOMINIQUE". By a charterparty on the Gencon form dated 16th June 1982 the Owners chartered "DOMINIQUE" to the Charterers at a lump sum freight for a voyage from Kakinada in India to European ports. The crucial provision of this charter read as follows:
"Freight shall be prepaid within 5 days of signing and surrender of final Bills of Lading, full freight deemed to be earned on signing Bills of Lading, discountless and non-returnable, vessel and/or cargo lost or not lost and to be paid to the account of Messrs. Empan Maritime Inc., account No. USD 5796660 via Algemene Nederland Bank, Piraeus branch, 25, Akti Miaouli."
I should also mention two further provisions, on which reliance was placed during argument:
"The Captain to sign Bills of Lading at such rate of freight as presented without prejudice to this Charterparty, but should the freight by Bills of Lading amount to less than the total chartered freight the difference to be paid to the Captain in cash on signing Bills of Lading.…
"Owners/Master herewith authorize Charterers or their assigns:
"(a) at ports of loading to issue and to sign clean Bills of Lading, without prejudice and/or reference to this Charterparty. The Owners guarantee by signing this Charterparty that their rights and obligations are limited within the terms, conditions and exceptions of this Charterparty. They having no rights whatsoever under the Bills of Lading issued.
"(b) to stamp Bills of Lading 'freight paid' whenever required by the Charterers, provided Owners have received 100% of the freight.…"
Loading began under the charter on 16th June 1982. On 14th July the vessel sailed, bills of lading having been signed: by whom, it does not appear. On or shortly after 14th July the Bank gave notice of assignment to the Charterers. On 19th July the vessel arrived at Columbo and was arrested by creditors. The Owners were insolvent, and could not procure the release of the vessel. Accordingly on 22nd July the Charterers elected to bring the charter to an end on the ground of wrongful repudiation. Their right to do so has not been challenged, and the arbitrators have found that the charterparty came to an end on that date.
The arbitrators have also found that by 26th July all the bills of lading had been surrendered to the shippers. They do not state by whom the bills were surrendered, or what the act of surrender comprised. This had caused some problems during the argument of the appeal, in the context of certain contentions developed on the effect of clause 37 of the charter. Since, however, I am satisfied that these arguments do not advance the resolution of the dispute, I will not explore the undoubtedly difficult question of the respective rights and duties of the Owners, the Charterers and the shippers in relation to the signature and handing over of the bills of lading. For the time being it is sufficient to record that the arbitrators have not found whether the five day period stipulated by clause 16 was still running at the moment when the contract of affreightment came to an end.
Subsequently, the Charterers made unsuccessful efforts to arrange the continuation of the DOMINIQUE's voyage, but ultimately had to give up, and procure the onshipment of the cargo by another vessel. It is found that they acted reasonably in doing so, and that the costs which they incurred exceeded the amount of freight.
On facts such as these, if the dispute had not been concerned with the very specialised field of carriage by sea under a voyage charter, the case would probably have seemed quite straightforward. The Owners had promised to carry the goods to destination for an agreed remuneration. Through a repudiatory breach they had totally failed to do so. The damage to the Charterers exceeded the agreed remuneration. In such a case, nobody would ordinarily have any interest in whether a right to freight had accrued notwithstanding that the time fixed for payment of freight was still running when the contract came to an end. The common sense analysis would be that even if it were to be assumed that the Owners' right to freight survived the termination of the contract, this right could not in equity be enforced in the face of an over-topping right in the charterers to recover damages for repudiation, a right so closely linked to the claim for freight that the enforcement of one could not properly be considered in isolation from the other. Then, when attention was turned to the position of the assignee Bank, it would need no elaborate citation of authority to show that the Bank (albeit an innocent party) could be in no better position than the Owners from whom their rights derived, and that their claim must inevitably fail.
The case is, however, much complicated by the fact that the relationship between claims for freight and cross-claims for breach of charter is undeniably governed by rules very different from those which apply to ordinary contracts for the performance of services: see the decision of the House of Lords in Aries Tanker Corporation v Total Transport (1977) 1 Ll.L.R. 344, and a long line of prior authority. In the event, the ascertainment of the respective rights of the two innocent parties in this case requires consideration of three novel issues. First, if the freight had not been assigned would the Owners have had a right (apart from any question of cross-claim) to recover the agreed freight, notwithstanding that the contract had been discharged as a result of their own wrongful repudiation before the expiry of the period of five days from the surrender of the bills? Secondly, if the Owners did have a valid claim for freight, did the existence of the Charterers' cross-claim to recover damages for repudiation form a ground upon which the Charterers could validly have resisted the Owners' prima facie right to collect the freight? Third, if the claim for damages would have been available against the Owners only by way of counterclaim, can it nevertheless form a ground for denying to the Bank an immediately enforceable award for the alleged freight?
On the first of these issues the panel of arbitrators before whom the dispute was brought, and Mr Justice Hobhouse who heard an appeal from their award in the Commercial Court, have concurred in deciding in favour of the Bank, holding that the Owners did have a right to freight which was not defeated by the frustration of the charterparty. The arbitrators and the learned judge did not however agree on the two remaining issues. On the second, the judge concluded that the cross-claim would not have been available as an answer to the claim for freight if it had been advanced by the Owners. The arbitrators did not squarely address this problem, but instead decided on the third issue that even if the Charterers had no more than a counterclaim against the Owners, it could still be a fatal impediment to the claim by the Bank. The judge disagreed. On his view, the assignee Bank could not be subject to a mere personal cross-claim against the assignor, especially one which arose after the cause of action for freight came into existence.
In the result, therefore, the arbitrators decided in favour of the Charterers and the judge in favour of the Bank.
The Charterers now appeal on all three issues.
The Owners' right to freight.
Mr Moore-Bick Q.C. for the Charterers maintained—and here his submissions corresponded with the general approach adopted by the learned judge—that the first issue should be tackled in two stages, first by analysing the status of the Owners' right to freight at the moment when the contract came to an end, and then by considering whether that right survived the termination. For the Bank, Mr Eder submitted that the right course was to enquire first whether the freight clause itself prescribed what was to happen if the contract was discharged before the time for payment had arrived and that only if the answer was negative should the court go on to analyse the position in terms of classical contract law. I agree with Mr Eder in this respect. The enquiry should begin with the clause.
One approach to the issue of construction which thus falls to he decided would he to examine each of the groups of words constituting the clause and then see how their several meanings can most convincingly be assembled into a single coherent reading. I think it improbable that such a method would bear fruit. Although some of the turns of phrase have a familiar ring and may be assumed to be of respectable antiquity, there is no authority which...
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