Colonial Bank v European Grain and Shipping Ltd (Dominique)
| Jurisdiction | England & Wales |
| Judge | Lord Keith of Kinkel,Lord Brandon of Oakbrook,Lord Oliver of Aylmerton,Lord Goff of Chieveley,Lord Jauncey of Tullichettle |
| Judgment Date | 09 February 1989 |
| Judgment citation (vLex) | [1989] UKHL J0209-1 |
| Date | 09 February 1989 |
| Court | House of Lords |
[1989] UKHL J0209-1
House of Lords
Lord Keith of Kinkel
Lord Brandon of Oakbrook
Lord Oliver of Aylmerton
Lord Goff of Chieveley
Lord Jauncey of Tullichettle
My Lords,
I have had the opportunity of considering in draft the speech to be delivered by my noble and learned friend Lord Brandon of Oakbrook. I agree with it, and for the reasons he gives would allow the appeal.
My Lords,
The subject matter of this appeal is a claim by the appellants ("the bank") as assignees of the owners of the m.v. Dominique ("the owners") to recover from the respondents ("the charterers") advance freight which the bank alleges became payable by the charterers under a voyage charterparty relating to that vessel made between the owners and the charterers in June 1982. The charterers dispute that any such freight became payable, but it is agreed between the parties that, if it did, the amount of it was U.S.$223,676.
The bank's claim was referred to arbitration by three arbitrators in London, who by a reasoned award made on 12 February 1986 decided in favour of the charterers and dismissed the claim. The bank appealed with leave to Hobhouse J. in the Commercial Court [1987] 1 Lloyd's Rep. 239, who by an order dated 24 October 1986 allowed the appeal and awarded to the bank the full amount of their claim. The charterers appealed to the Court of Appeal (Fox, Croom-Johnson and Mustill L.JJ.) [1988] 3 W.L.R. 60, which by an order dated 21 December 1987, as amended on 14 January and 11 April 1988, allowed the appeal, set aside the order of Hobhouse J. and restored the arbitrators' award. The bank now brings a further appeal from the decision of the Court of Appeal with the leave of your Lordships' House.
The facts found by the arbitrators are as follows. By an assignment under seal dated 14 April 1982 the owners assigned absolutely to the bank all the earnings of the Dominique including all freight. By a charterparty dated 16 June 1982 the owners chartered the Dominique to the charterers to proceed to Kakinada, in India, and there load a cargo of agricultural products in bulk for carriage to European ports. Under that charterparty the Dominique loaded at Kakinada between 28 June and 13 July 1982 various parcels of cargo, in respect of which bills of lading were signed between those dates and on 14 July 1982. On that date the Dominique left Kakinada bound for Colombo for bunkers. At about the same time the bank received notice that the vessel's Club entry would be cancelled with effect from 28 June 1982, and they accordingly gave to the charterers written notice of the assignment referred to earlier. On 19 July 1982 the Dominique arrived at Colombo and was arrested by previous suppliers of bunkers to her. The Dominique remained under arrest and it became apparent to both the charterers and the bank that the owners had no funds of their own with which to procure her release and that the Club would not assist them. By a telex from the charterers to the owners dated 22 July 1982 the charterers justifiably elected to treat the owners' conduct as a repudiation of the charterparty. By 26 July 1982 all the bills of lading previously signed had been surrendered, which I take to mean delivered, to the shippers. On 12 August 1982 the charterers obtained the leave of the court in Colombo to discharge the cargo from the Dominique. During September 1982 the cargo, following such discharge, was trans-shipped to another vessel. That vessel then on-carried the cargo to European ports where it was discharged during November 1982. The Dominique was later sold by order of the court in Colombo.
The cost to the charterers of discharging and trans-shipping the cargo at Colombo, and having it on-carried to European ports and discharged there, exceeded the amount of the advance freight claimed from them by the bank.
The charterparty was on the Gencon form with typed alterations, a series of additional typed clauses and an addendum, and was governed by English law. The essential provision relating to the payment of advance freight was clause 16 of the additional typed clauses, which was in these terms:
"16. Freight shall be prepaid within five 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 [a named bank in the Piraeus]."
The charterers disputed their liability to pay the advance freight claimed by the bank on two grounds. The first ground was that the charterers, by accepting the owners' repudiation of the charterparty, had lawfully brought the charterparty to an end before the owners' right to be paid freight under clause 16 had accrued. The second ground was that, if, contrary to the first ground, the owners' right to be paid freight under clause 16 had accrued before the charterparty was brought to an end, the charterers were entitled to set off against the bank's claim to freight the damage suffered by them as a result of the owners' repudiation.
Hobhouse J. considered, rightly in my view, that the grounds for disputing liability relied on by the charterers raised four questions for decision. Using my own words, I would formulate those four questions as follows: (1) Had the owners' right to advance freight accrued before the charterparty was terminated by the charterers' acceptance of the owners' repudiation of it? (2) If such right had so accrued, did it survive such termination? (3) If so, would the charterers, had the owners not assigned their right to freight to the bank, have been entitled to set off against such right the damage suffered by the charterers as a result of the owners' repudiation of the charterparty? (4) If not, are the charterers nevertheless entitled to such set-off as against the bank claiming as assignees?
Question (1): Accrual of owners' right to advance freight
The answer to this question depends on two matters. The first matter is the sequence of the relevant events as found by the arbitrators. The second matter is the true construction of clause 16 of the charterparty.
So far as the first matter is concerned the arbitrators found the sequence of the relevant events to have been as follows: (i) on 14 July 1982 the signing of the bills of lading was completed; (ii) on 22 July 1982 the charterparty was terminated by the charterers' acceptance of the owners' repudiation of it; and (iii) by 26 July all the bills of lading had been surrendered to the shippers. The expression "by 26 July," used by the arbitrators in relation to event (iii) above, is in a sense equivocal, in that, on a literal interpretation, it might refer to any date not later than 26 July, including a date earlier than 22 July. The inference which I would draw, however, is that, while the arbitrators were unable to fix the date with certainty, they were satisfied that it was later than 22 July. In any case, in so far as it would be to the advantage of the bank to have had a finding that the surrender of the bills of lading was completed before the termination of the charterparty on 22 July, they failed to obtain such finding.
So far as the second matter is concerned, it was recognised by both courts below that clause 16 of the charterparty is confusingly drawn and because of that difficult to interpret. The main difficulty arises from the apparent conflict between the first phrase of the clause, which reads "freight shall be prepaid within five days of signing and surrender of final bills of lading," and the second phrase, which reads "full freight deemed to be earned on signing bills of lading." For the bank it was contended that the effect of the two phrases taken together was that the owners' right to the freight accrued on completion of the signing of all the bills of lading, but payment was postponed until five days after the bills of lading, having been signed, were delivered to the shippers. On this basis the owners' right to freight accrued on 14 July 1982, well before the termination of the charterparty on 22 July. For the charterers it was contended that their obligation to pay the freight and the corresponding right of the owners to be paid the freight were both governed, and governed only, by the first phrase. On that basis the owners' right to be paid the freight accrued after 22 July 1982.
While the matter is far from easy, I consider that the contention for the bank is to be preferred to that for the charterers. The reason why I take that view is that the contention for the charterers gives no effect to the second phrase of clause 16 "full freight deemed to be earned on signing bills of lading," whereas the contention for the bank does. This conclusion accords with the decision of the Court of Appeal on a different but comparable clause in a charterparty in Vagres Compania Maritima S.A. v. Nissho-Iwai American Corporation [1988] 2 Lloyd's Rep. 330.
I would therefore answer question (1) by saying that the owners' right to freight accrued before the termination of the charterparty.
Question (2): Effect of charterparty being terminated
The principles of law applicable when a contract is terminated by the acceptance by one party to it of a repudiation by the other party to it are not in doubt. They were clearly and simply stated by Dixon J. in McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 476-477, where he said:
"When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from further performance of...
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