Didymi Corporation v Atlantic Lines and Navigation Company Inc.
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,LORD JUSTICE BINGHAM,LORD JUSTICE NOURSE |
| Judgment Date | 23 October 1987 |
| Judgment citation (vLex) | [1987] EWCA Civ J1023-2 |
| Docket Number | 87/1024 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 October 1987 |
[1987] EWCA Civ J1023-2
Lord Justice Dillon
Lord Justice Nourse
Lord Justice Bingham
87/1024
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM AN ORDER OF MR JUSTICE HOBHOUSE
Royal Courts of Justice
MR GORDON POLLOCK Q.C. and MR GRAHAM DUNNING, instructed by Messrs Clyde & Co., appeared for the Appellants (Defendants).
MR STEPHEN TOMLINSON, instructed by Messrs Holman Fenwick & Willan, appeared for the Respondents (Plaintiffs).
I will ask Lord Justice Bingham to give the first judgment.
On 20th January 1987 Mr Justice Hobhouse decided a number of preliminary questions of law in an action brought by the owners of the vessel Didymi as plaintiffs against the time charterers of that vessel as defendants. The questions concern the validity and effect of a clause in the charterparty designed, broadly speaking, to compensate one or the other party if the vessel's speed or fuel consumption should vary from a norm prescribed in the charterparty. The learned jduge's answers to those questions were largely favourable to the owners, and the charterers accordingly appealed.
The vessel is a bulk carrier of some 33,000 deadweight tons. She was built in 1976. She was time chartered by a charter dated 26th March 1979 for five years, three months more or less in charterers' option. In the preamble to the charterparty the vessel was described as being "capable of steaming, fully laden, under good weather conditions [See Clause 30] about 16 nautical miles on daily consumption of about 39/40 long tons of best grade fuel oil, maximum viscosity 1500 seconds plus about 2 long tons M.D.O." The daily hire was $5,800 during the first year, rising to $7,000 during the last period of charter. The off hire clause, clause 15, was struck out of the New York Produce Exchange form on which the charter was based and a typed clause was substituted. I draw attention to sub-clause (b) of the substituted clause, which read:
"Also, if upon the voayge the speed be reduced by defect in or breakdown of any part of her hull, hatchcovers, machinery or equipment, the time so lost and the cost of any extra fuel consumed in consequence thereof shall be deducted from the hire."
The charterers were accordingly to be relieved of the obligation to pay hire and were to be compensated for the cost of bunkers during time lost through defect or breakdown of the vessel.
Clause 29 of the charterparty contained a very detailed statement of the vessel's characteristics, hold capacities and so on, and contained in sub-clause (22) a series of figures for consumption of fuel oil at various slow steaming speeds. There was an arbitration clause in the charterparty which provided for disputes to be referred to arbitration by two arbitrators and an umpire, all of them to be members of the Baltic.
I come then to clause 30, on which this appeal turns, and I think that I should read the whole of that clause. As set out in the charterparty, the first two paragraphs out of five are numbered, but for convenience the succeeding three paragraphs have been treated as if they were numbered sequentially:
"30. PERFORMANCE:
(1) The deadweight, amount of constant, lub oils, stores and provisions together, speed and fuel consumption of the vessel, as stipulated in this Charter Party, are representations by the Owners. Should the actual performance of the vessel taken on an average basis throughout the duration of the Charter Party show any failure to satisfy one or more of such representations, the hire shall be equitably decreased by an amount to be mutually agreed between Owners and Charterers but in any case no more than that required to indemnify the Charterers to the extent of such failure, this Charter otherwise to remain unaffected. No deduction from hire to be made without Charterers producing written evidence of any financial loss.
(2) The Owners stipulate that the vessel is capable of maintaining in good weather conditions and shall maintain throughout the period of this Charter Party on all sea passages from seabuoy to seabuoy (speed will be determined by taking the total miles at sea divided by the total hours at sea as shown in the logbooks) a guaranteed average speed of 15.5 knots in good weather conditions (smooth seas, winds less than 3 on the Beaufort Scale) on a guaranteed daily consumption of 40/41 long tons of best grade Fuel Oil having a maximum viscosity of 1500 seconds, provided the vessel will not remain immobilized for lengthy periods in port(s) and/or anchorage(s).
(3) The speed and consumption, as guaranteed by the Owners in Paragraph (2) above, will be reviewed by Charterers at the end of the duration of this Charter Party, and if it is found that the vessel has failed to maintain as an average during the period of the Charter Party the speed and/or consumption stipulated above, the Charters shall be indemnified by way of reduction of hire, in accordance with paragraph (1) above.
(4) Similarly, if it is found that the vessel has maintained as an average during the period of the Charter Party a better speed and/or consumption [than] those stipulated in paragraph (2) above, then Owners shall be indemnified by way of increase of hire, such increase to be calculated in the same way as the reduction provided in the preceding sentence. (5) If, however, the vessel has reduced speed at Charterers' request, the period involved shall not be included for the purpose of assessing the vessel's performance."
Before turning to the detail of the clause, I would mention certain general points which strike me on first looking at it. First, it is, I think, probably safe to infer, as the judge did, that the clause is of commercial rather than legal draftsmanship. If that is so, then one should not approach the clause on the assumption that the practices and conventions of legal draftsmanship have necessarily been observed.
Second, the speed and consumption figures in sub-clause (2) differ from those in the preamble. They refer to 15.5 knots on 40/41 long tons of fuel oil, as compared with 16 knots on 39/40 long tons in the preamble. That difference makes sense, since the preamble refers to the vessel's capacity at the date of the charterparty, whereas clause 30(2) contains figures intended to apply throughout the period of the charter.
Third, clause 30(1) provides for charterers to be compensated if the vessel fails to fulfil, or live up to, her charterparty description in any one of a number of respects; it is not limited to speed and consumption.
Fourth, in respect of speed and consumption, the broad thrust of the clause strikes me as clear. If the vessel performs worse than specified in sub-clause (2), then charterers are to be compensated. If the vessel performs better than specified in sub-clause (2), then the owners are to be compensated. It would appear that the hire is to be adjusted so that, if the performance of the vessel varies from the norm stipulated in sub-clause (2), the hire will be adjusted so as to put the parties in the same position as if the vessel had performed in accordance with the norm. It would be dangerous to speculate on the commercial negotiations which led to the clause. It is, however, as I think, probably safe to infer that the parties considered the charterparty rates to be fair and reasonable as at the date of the charterparty on the assumption that the vessel performed as in sub-clause (2) throughout the period of the charter. It might follow that the charterparty rates would be too expensive if the vessel performed less well, and too cheap if the vessel performed better. Accordingly, one finds provision for retrospective adjustment after the period of eating when the proof of the pudding is available.
Fifth, there is no provision for the owners to be compensated, except in relation to improved speed and consumption.
Sixth, the clause apparently represents a commercial bargain made between commercial men. The court should seek to give effect to the intentions of the parties as expressed, even imperfectly, in an agreement of this kind if it can reasonably do so. It should avoid an over-rigorous legalistic approach and should not defeat the expressed intentions of the parties if these can be reasonably ascertained from the documents.
The parties, by agreement, posed ten questions for the decision of the judge. He answered eight and held that two questions did not arise. Three of his answers are accepted and no challenge is raised on the two questions which he held did not arise. This appeal accordingly concerns his answers on the remaining five questions.
The first question was in these terms:
"Whether the said clause is sufficiently complete and/ or certain and/or clear as to constitute a concluded and enforceable agreement to indemnify Owners by way of an increase of hire?"
The judge answered that question "Yes", and the charterers strongly contend that the answer should be "No" on two main grounds.
The first ground, argued with great cogency and persuasiveness by Mr Pollock on behalf of the charterers, is that sub-clause 30(1), on which the rest of the clause depends, amounts to a mere agreement to agree and so in law is no contract and gives rise to no enforceable rights or duties. The charterers directed attention to the words "the hire shall be equitably decreased by an amount to be mutually agreed". Any increased hire for the owners, they contended, had similarly to be mutually agreed, and Mr Pollock urged that the words "to be agreed" were a condition precedent upon which the...
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