Czarnikow Ltd v Koufos (Heron II)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SELLERS,LORD JUSTICE DIPLOCK,LORD JUSTICE SALMON,Lord Justice Sellers |
| Judgment Date | 05 April 1966 |
| Judgment citation (vLex) | [1966] EWCA Civ J0405-2 |
| Date | 05 April 1966 |
| Court | Court of Appeal |
In the Matter of The Arbitration Act 1950
In the Matter of an Arbitration
[1966] EWCA Civ J0405-2
Lord Justice Sellers
Lord Justice Diplock and
Lord Justice Salmon
In The Supreme Court of Judicature
Court of Appeal
(From: Mr. Justice McNair - London)
Mr. A.J. LLOYD (instructed by Messrs. William A. Crump & Son) appeared on behalf of the Appellants (Claimants).
Mr. M.J. MUSTILL (instructed by Messrs. Ince & Co.) appeared on behalf of the Respondent.
This is an appeal relating to damages only in a claim by the charterers against the owner of the chartered ship. The learned Umpire who stated the Special Case on which the dispute has been brought before the courts would have found in favour of the charterers but Mr. Justice McNair applied what he regarded as the law and the established practice and found for the shipowner.
The question is whether in the circumstances of the present case as found by the Award the charterers are entitled to recover as damages for delay the difference in the market value of a cargo of Hungarian sugar between its value on the day when it might have arrived if the shipowner had completed the voyage without deliberate interruption and the day when the cargo in fact arrived after the delay occasioned by the breach of the charter-party.
I have used the words "might have arrived" because the period of a voyage from Constanza in the Black Sea to Basrah at the head of the Persian Gulf, a distance of 4,370 sea miles, might be said to be a voyage of 20 days as a fair prediction but such a voyage might vary between a day or two more or less. Sea and weather, tide and wind, have not yet been conquered, although the hazards of sail-power have been greatly controlled. Also, without the shipowner's default, engines and the shafts and mechanisms which take their driving power do not perform with complete consistency.
In the course of the voyage and in breach of the charter-party the ship called at Berbera and took on an additional cargo which she delivered at Bahrein. She also called at Abadan for bunkers. These diversions occasioned a delay of 9 days (inadvertently stated as 10 days in the Case) in arriving at Basrah. During those 9 days the value of sugar in the Basrah market declined and this decline was perhaps accentuated if not wholly caused by a shipment of about 8,000 tons of Formosan sugar (a more normal source of supply for Basrah) by the s.s. "Youmnly", which arrived at Basrah within the 9 days period. The cargo of3,000 metric tone of Hungarian sugar on the contractual voyage was an experimental or pioneering cargo, the first, it appears, to be put on the Basrah market. The Special case finds that "one of the factors which would normally affect prices is the arrival of a steamer carrying a cargo of sugar to be sold on or through the market"; (paragraph 20 (B)).
After referring to the decision of The Parana (1877 2 probate page 118) and reading the most relevant extract from the judgment of the Court of Appeal (Lords Justices James, Mellish and Baggallay), delivered by Lord Justice Mellish, Mr. Justice McNair (than whom no one has had greater legal experience of commerce transacted by means of charter-party) said this: In my judgment, ever since that date it has been the general rule of practice, not a rule of law but a general rule of practice, that damages in the case of a breach of contract for carriage by sea, the breach involving delay, do not ordinarily give rise to this measure of damages for the reason which I think is plain in this judgment: nobody can know with any certainty how long a sea voyage would take, still leas may they say what the market will be when the ship does ultimately reach that port".
The decision in The Parana was reached in these circumstances. The claim of the charterers against the shipowners for damages for loss of market had originated before the Registrar in Admiralty after the shipowners had admitted default and liability. Mr. H. C. Rothery, the Registrar, had had twenty-three years' experience in that office. His reasoned judgment in which he reviewed the authorities up to that date is reported fully in 1876 1 Probate at page 453 in the course of reporting the appeal to Sir Robert Phillimore from the Registrar's Report.
The Registrar had concluded his report with these words: "The practice of the Court of Admiralty, in refusing to entertain such claim for loss of market in such cases, is in accordance with that of the Courts of Common Law. I may add that the merchants by whom I am assisted entirely concur with me in the conclusion to which I have come".
Sir Robert Phillimore on appeal in a reserved judgment reversed the finding of the Registrar and said that he ought to have included in the damages the difference between the market price of the cargo at the time when it was delivered and at the time when it ought to have been delivered.
It was in those circumstances that the matter cane before the Court of Appeal in March of 1877. This Court in those early days of its existence in a reserved judgment reversed the judgment of Sir Robert Phillimore and held that the consignee could not recover damages for loss of market where, on account of defects of the ship (establishing default and breach of contract of the shipowners) the voyage had been protracted and in the meantime the market price of the goods shipped had fallen.
That case has been distinguished in cases since that date but the decision has been accepted and unchalenged in the courts. It fits this case entirely. The decision has been accepted in the formulation of the law in the leading text books, in Scrutton on Charter Parties and in particular in the last edition, the 11th edition by Lord Justice Scrutton himself, and in Carver on Carriage of Goods by Sea. The rule has been questioned in a recent edition (the 12th edition, of 1961) by the learned author of Mayne on Damages. In the United States of America, at least in some States, the rule seems to be contrary to that of The Parana and to give the charterer the benefit of the rule which prevails in respect of carriage by land. It is I would agree desirable that great trading communities engaged in international trade should agree and not conflict in their interpretation of obligations and liabilities under trading contracts of somewhat similar character but the divergence of such contrary judicial opinion as may be found in the United States of America has existed over 40 years and may be attributed to a different approach.
The questionings give rise to a reconsideration of the practice and the rule in this country but even if this Court were free to take a different view (which I cannot see that it is) we should not readily overrule that which has stood for so long,some 90 years, which has been clearly enough stated to be understood by those whose trade it governs and which, as the learned judge points out, has been the basis on which shipowners and charterers alike have traded over the years. In my opinion, with deference to my brethren who think otherwise, the decision was good law and good sense in 1877 and it is equally so now.
The "Heron II", the chartered ship in question, was no greyhound of the seas. She was a tramp steamer of mediocre capacity and I doubt if she would far excel the achievements of many of the steamships plying the seas in 1877. It is true that sailing ships had not by then ceased to trade but the steamship was well known and active. The "Parana" herself was a steamship. The uncertainty of the duration of the voyage was no doubt a factor behind the judgment in The Parana but it was not stated as the sole basis of the judgment or perhaps as the most vital matter.
The judgment showed foresight in contemplating the voyage by sea which might be carried out according to what is sometimes referred to as a "tight schedule" and gave complete recognition to circumstances which might permit damages for delay to be recovered. An illustration can be extracted from the present case. If the contract had been made on the basis, express or implied, that the ship was required to deliver her cargo of Hungarian sugar before the anticipated arrival of the "Youmnly", which in fact spoilt the market, I do not doubt that the charterers would have succeeded. It would fall into line with established authorities where the carrier has been held liable for the loss of a market which he had contracted to reach by a given time.
The judgment in The Parana which commences on page 120 of the report might well be cited in full for it contains matter relevant to, and perhaps decisive of, most of the points here arising but for brevity I will cite some, though no doubt rather lengthy, extracts.
Lord Justice Mellish commences the judgment in this way: "The question we have to decide is whether, if there is unduedelay in the carriage of goods on a long voyage by sea, it follows as a matter of course that, if between the time when the goods ought to have arrived and the time when they did arrive, there has been a fall in the price of such goods, damages can be recovered by the consignee of the goods". The important words in that sentence are, "it follows as a matter of course".
The judgment continues: "Mow there is really no difficulty as to the general principles upon which the courts assess the damages. They are accurately stated in the judgment of Sir Robert Phillimore; 'The principle is now settled that whenever either the object of the sender is specially brought to the notice of the carrier, or circumstances are known to the carrier from which the object ought in reason to be inferred, so that the object may be taken to have been within the contemplation of both parties,...
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