Fercometal S.A.R.L. v Mediterranean Shipping Company S.A. (Simona)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Bridge of Harwich,Lord Templeman,Lord Ackner,Lord Oliver of Aylmerton,Lord Jauncey of Tullichettle |
| Judgment Date | 16 June 1988 |
| Judgment citation (vLex) | [1988] UKHL J0616-2 |
| Date | 16 June 1988 |
| Court | House of Lords |
[1988] UKHL J0616-2
Lord Bridge of Harwich
Lord Templeman
Lord Ackner
Lord Oliver of Aylmerton
Lord Jauncey of Tullichettle
House of Lords
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Ackner. I agree with it and for the reasons he gives I would dismiss the appeal with costs.
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Ackner. I agree with it and for the reasons he gives I would dismiss the appeal with costs.
My Lords,
This appeal raises one short question - did the respondents ("the charterers") in the circumstances which I will describe, lose their right to cancel the charterparty which they had entered into with the appellants ("the owners"). The Court of Appeal concluded, applying well established principles of the law of contract concerning discharge by breach, that this right had not been lost. However, leave to appeal to your Lordships' House was given by the Court of Appeal, so that consideration might be given by your Lordships to a controversial case decided in that court over 80 years ago, upon which the appellants have essentially based their appeal.
The Facts
These can be shortly stated. On 11 June 1982 the charterers entered into a charterparty with the owners for the carriage of a part cargo of 6,000 tonnes of hot rolled steel coils from Durban to Bilbao in the vessel Simona. Box 19 in the charterparty which was headed "Cancelling date (Cl. 10)" contained the words "LAYCAN 3/9 July 1982."
So far as material, clause 10 provided:
"10. Should the vessel not be ready to load (whether in berth or not) on or before the date indicated in Box 19, charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel's expected arrival at port of loading …"
The only other clause to which I need make reference is clause 46 which provided:
"The owner has the option to complete with other cargo but this is not to interefere with loading/discharging operations.…"
It is important at this stage to emphasise that the charterers' right to cancel given by clause 10 was an independent option, only exercisable if the vessel was not ready to load on or before 9 July 1982. Clause 10 did not impose any contractual obligation upon the owners to commence loading by the cancellation date.
On 29 June the owners advised the steel shippers that the vessel was nominated to load the steel from 6-9 July at 1,500 tonnes per day. On that day an application for a loading permit (I.D. 100) was submitted on the basis of the vessel's estimated time of arrival being 4 July and estimated departure date from Durban being 11 July.
On the following day, 30 June, the owners advised the steel shippers in Durban that the vessel was renominated to load on 13-16 July. On that day an amended I.D. 100 was tendered and showed the estimated time of arrival of the vessel as 7 July with a departure estimate of 17 July. The document gave details regarding the sequence of work and showed that parcels of copper and a substantial parcel of granite would be loaded before the 6,000 tonnes of steel. This change of plan, it is common ground, was in no way caused by the charterers.
On 2 July the charterers received a telex message from the owners requesting an extension of the cancelling date, so as to cover the cargo loading dates from 13-16 July. Within a couple of hours there was a conversation between Mr. Schweitzer, the Managing Director of the charterers, and Mr. Storm, the Managing Director of the owners in South Africa. In that conversation Mr. Schweitzer pressed upon Mr. Storm the gravity of the situation regarding the delivery of the steel to Spain before August, because of the holiday period in Spain which commenced in the early part of that month. Mr. Storm suggested that the cargo be over-carried to North Europe and then brought back south, by which time the holidays would be over in Spain. This, however, was not acceptable and shortly after this conversation and on the same day a telex was sent from the charterers to the owners, stating that the proposed new loading dates were not acceptable and accordingly that the charterers were cancelling the contract. Again, on that day, 2 July, the charterers lined up the fixture of the Leo Tornado, subject to the cancelling of the Simona. This vessel was "spot" at Durban and would be taking only the charterers' steel. In the words of the arbitrators, she was a "better bet for making Spain before the holidays."
It is common ground that the action of the charterers in giving the notice purporting to cancel the contract was premature. It constituted an anticipatory breach and repudiation of the charterparty, because the right of cancellation could not be validly exercised until the arrival of the cancellation date, some seven days hence. It is equally common ground that this repudiation was not accepted by the owners. On 5 July the owners had a change of heart and telexed that the Simona would start loading on 8 July. Although it was possible at the time this telex was received to withdraw the notice of cancellation of the charterparty, since the notice had not been accepted, and to refrain from fixing the Leo Tornado, the charterers did not by this stage trust the owners. They preferred to confirm the fixture of the Leo Tornado, which in any case assured them of a speedier arrival time at Bilbao. They accordingly on that day confirmed the fixture. Later on the same day the owners again notified the charterers by telex that the Simona would be ready to load steel p.m. on 7 July or a.m. on 8 July.
On 8 July the Simona arrived in the morning and tendered notice of readiness. The charterers rejected this notice endorsing it "vessel off charter 2/7" and on that day they began loading steel into the Leo Tornado. The owners' notice of readiness was in fact a false notice of readiness, because they were not able immediately to load the charterers' cargo. They were then loading other cargo namely the copper and/or the granite. The owners' agents, notwithstanding this situation, immediately wrote to the charterers' agents stating that, following the refusal to sign the notice of readiness, they were intending to hold a draft survey which would be required for the owners' dead freight claim. On the following day the owners' London solicitors telexed to the charterers that the vessel was now open in Durban for the charterers' cargo, i.e. the vessel was free of other engagements. This, again, was incorrect, in that other cargo was still being loaded on the vessel. The telex asked the charterers to confirm their intentions, but no response was given until Monday, 12 July, when the charterers sent a further cancellation notice.
The owners' claim to dead freight, originally advanced by way of counter-claim in arbitration proceedings succeeded, and the charterers were ordered to pay to the owners U.S.$116,870 plus interest from 1 September 1982, to the date of the award, namely 16 November 1984. The basis of the arbitrator's decision is encapsulated in paragraph 8 of their reasons which is in these terms:
"The charterers' conduct and actions during the period 2-8 July were such as to relieve the owners from complying with all conditions precedent which would otherwise have to be performed by them prior to the loading of cargo. The charterers waived any requirement that the owners should serve any notices or have the vessel ready to load because such notices and/or readiness were not required in view of the charterers' intention not to load the steel on the Simona in any event. The English law does not require a party to perform empty formal gestures in circumstances where the other party to the contract has manifested an unequivocal intention not to perform the contract in any event, see Braithwaite v. Foreign Hardwood Co. [1905] 2 K.B. 543. This principle is applicable even in circumstances where the contract has not been terminated by the acceptance of a repudiation …"
The charterers appealed to the High Court pursuant to the provisions of the Arbitration Act 1979 and by a judgment dated 31 October 1985 Leggatt J. allowed the appeal and, in effect, set aside the award. However, he did so on an issue relating to the burden of proof, which the arbitrators had wrongly decided in favour of the owners. He did not deal with their reasoning in paragraph 8. In the Court of Appeal the argument centred upon whether applying the Braithwaite decision, the charterers had lost their right to cancel as a result of their prior unaccepted repudiation. Parker L.J., in an impressive judgment with which Sir Nicholas Browne-Wilkinson V.-C. and Ralph Gibson L.J. agreed, concluded they had not.
The Effect of a Repudiation
The earlier authorities, when faced with a wrongful neglect or refusal, were concerned to absolve the "innocent party" from the need to render useless performance, which the repudiating buyer had indicated he no longer wanted. In Jones v. Barkley (1781) 2 Doug. 684 one finds the seeds of the later doctrine of accepted anticipatory breach. Lord Mansfield said, at p. 694:
"One need only state what the agreement, tender, and discharge were, as set forth in the declaration. It charges, that the plaintiffs offered to assign, and to execute and deliver a general release, and tendered a draft of an assignment and release, and offered to execute and deliver such assignment, but the defendant absolutely discharged them from executing the same, or any assignment and release whatsoever. The defendant pleads, that the plaintiff did not actually execute an assignment and release; and the question...
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