Hong Kong Fir Shipping Company Ltd v Kawasaki Kisen Kaisha Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLORD JUSTICE SELLERS,LORD JUSTICE UPJOHN,LORD JUSTICE DIPLOCK
Judgment Date20 Dec 1961
Judgment citation (vLex)[1961] EWCA Civ J1220-3

[1961] EWCA Civ J1220-3

In The Supreme Court of Judicature

Court of Appeal

(From Mr. Justice Salmon – Middlesex)

Before:

Lord Justice Sellers

Lord Justice Upjohn and

Lord Justice Diplock

Hong Kong Fir Shipping Company
and
Kawasaki Kisen Kaisha Limited

Mr. ASHTON ROSKILL, Q. C., Mr. BASIL ECKERSLEY and Mr. B. DAVENPORT (instructed by Messrs. Constnt & Constant) appeared on behalf of the Appellant (Defendants).

Mr. STEPHEN CHPAMAN, Q. C., Mr. MICHAEL KERR, Q. C. and Mr. C. S. STUAGHTON (instructed by Messrs, William & Crump & Son) appeared on behalf of the Respondents (Plaintiffs).

LORD JUSTICE SELLERS
1

: Both parties to this action are resident abroad, the plaintiffs in Hong Kong and the defendants in Japan, and, in substitution for the arbitration provisions, they agreed to have the dispute tried in our Commercial Court and it came before Mr. Justice Salmon in the early part of this year.

2

The litigation arises out of a time charter-party dated Tokyo 26th December, 1956, on the printed form "Uniform Time Charter of the Baltic and International Maritime Conference", the relevant terms of which are set out in the judgment and need not be repeated here.

3

The plaintiffs had purchased a 25-year-old vessel called the "Antrim", which they renamed the "Hong Kong Fir", of some 5395 tons gross and 3145 tons net register, and this was its first charter under the new owners. The vessel was delivered on the 13th February, 1957, at Liverpool and duly set out in ballast on her intended voyage to Newport Mews, Virginia, and then via the Panama Canal, calling at Cristobal, to Osaka in Japan, which she was expected to reach in about two months. On account of various delays which the learned judge has found were due to the shipowners' breaches of contract, Osaka was not reached until the 25th May, 1957, and because of very extensive repairs to her main engines and auxiliaries which had to be carried out there she was not ready to put to sea again and continue her service until 15th September.

4

In the meantime the charterers had on the 6th June, 1957, written to the shipowners cancelling the charter-party because of the delay, due, it was said, to the unseaworthiness of the vessel. On the 8th August, 1957, the shipowners intimated that the cancellation was unjustifiable and said that they would treat it as a wrongful repudiation by the charterers of the charter-party and hold them liable for damages. The vessel was offered to the charterers as available to come on hire after the repairs in early September but the charterers maintained their refusal to go a with the charter and by the 13th September, 1957, if not before, the charter-party was at an end. The refusal by the harterers has been held to have been wrongful and judgment has been entered for the plaintiffs. During the currency of the charter-party the freight market had fallen steeply with the result-that the judgment awarded them £184,743 damages.

5

There is no doubt that there were prolonged and aggravating delays due to breaches of contract by the shipowners, and at the outset of his argument learned Counsel for the appellants relied strongly on the judge's findings of fact, which he submitted the clearly showed the extent and the nature of the shipowners' breaches of contract and justified the charterers in terminating the charter-party.

6

The learned judge did not accept the charterers' allegations that the vessel's machinery was inefficient and defective and that the vessel was in that respect unseaworthy on delivery at Liverpool. Prom that finding there is no appeal, but it has been emphasised that although Mr. Justice Salmon held that the diesel engines and other machinery were in reasonably good condition on the 13th February, 1957, he found that by reason of their age the engines needed to be maintained by an experienced, competent, careful and adequate engine-room staff. It was held, however, and this has been unchallenged by the shipowners in this appeal, that the engine-room staff was incompetent and insufficient and in this respect the vessel was unseaworthy when handed over and on leaving Liverpool and throughout the voyage to Osaka where she was re-staffed so as to fulfil completely her requirements. She had on delivery five engineers, three fitters and seven greasers. The previous owners had employed seven engineers and eight ratings, and the judgment finds the complement of the engine-room staff insufficient. If they had all been competent and efficient all might have been well notwithstanding the numerical deficiency of officers, but the Chief Engineer was addicted to drink and repeatedly neglected his duties. Incompetence stands out conspicuously in the events in the engine-room which led to delays, and it is not surprising that the judgment finds that the owners were in breach of the obligations under clause 1 of the charter. The same facts and findings, he held, established a breach of the obligation under clause 3 of the charter to maintain the vessel in a thoroughly efficient state in hull and machinery. Although the learned judge recognised the difficulty of obtaining skilled officers and men for the engine-room he found that the shipowners had not exercised due diligence and that they could not escape liability under clause 13 of the charter-party.

7

The charterers' position was alleviated somewhat by the vessel becoming off hire under clause 11A from time to time and the duration of the charter-party could have been extended by the charterers under clause 32 by adding the off-hire time to the period of the charter.

8

The judgment found against the charterers' contention that the delays frustrated the commercial purpose of the contract and this contention was not pressed before us. This is not a case of frustration of contract but it was submitted that the delay due to breach of contract by the shipowners was sufficient to entitle the charterers as innocent parties, that is in no way to blame for what had happened, to have regard to their interests under the contract and that it "as just in all the circumstances that they should be held free to terminate as they did.

9

The two main issues of law arising on the findings, formulated by Mr. Ashton Roskill for the appellants, were: (l) Is the seaworthiness obligation a condition the breach of which entitles the charterers to treat the contract as repudiated? (2) Where in breach of contract a party fails to perform it, by what standard does the ensuing delay fall to be measured for the purpose of deciding whether the innocent party is entitled to treat the contract as repudiated? Is that standard (as the judgment holds) such delay as is necessary to frustrate the contract or is it, as the appellants contend, unreasonable delay, that is longer time than it would be reasonable in all the circumstances for a charterer to wait?

10

By clause 1 of the charter-party the shipowners contracted to deliver the vessel at Liverpool "she being in every way fitted for ordinary cargo service". She was not fit for ordinary cargo service when delivered because the engine-room staff was incompetent and inadequate and this became apparent as the voyage proceeded. It is commonplace language to say that the vessel was unseaworthy by reason oflhis inefficiency in the engine-room.

11

Ships have been held to be unseaworthy in a variety of ways and those who have been put to loss by reason thereof (in the absence of any protecting clause in favour of a shipowner) have been able to recover damages as for a breach of warranty. It would be unthinkable that all the relatively trivial matters which have been held to be unseaworthiness could be regarded as conditions of the contract or conditions precedent to a charterer's liability and justify in themselves a cenosLlation or refusal to perform on are part of the charterer. If, in the present case, the inadequacy and incompetence of the engine-room staff had been known to them, the charterers could have complained of the failure by the shipowners to deliver the vessel at Liverpool in accordance with clause 1 of the charter-party and could haverefused to take her in that condition. The vessel v.'as to be delivered not earlier than 1st February, 1957,and not later than 31st March, 1957, apparently. No evidence was directed to the provision "to be narrowed to twenty days within the month of January 1957", but even that clause, if invoked, would have given the shipowners a week in which to bring the ngine-room staff into suitable strength and competency for the vessel's "ordinary crgo service". If the shipowners had refused or failed so to do, their conduct and not the unseaworthiness would have amounted to a repudiation fo the charter-party and entitled the charterers to acept it and treat the contract as at an end. The time of delivery is clearly a condition of the contract and has often been held to be so. Unless a shipowerner could int hose circumstances have relied on clause 13, a charterer in addition to cancellation would be entitled to damages, if any were sufferd which would not have been so apparently in this case as the freight market had fallen about that time.

12

If what is done or not done in breach of the contractual obligation does not make the performance a totally different performance of the contract from that intended by the parties, it is not so fundamental as to undermine the whole contract. Many existing conditions of unseaworthiness can be remedied by attention or repairs, many are intended to be rectified as the voyage proceeds, so that the vessel becomes seaworthy; and, as the judgment points out, the breach of a shipowner's obligation to deliver a seaworthy vessel has not been held by itself to entitle a charterer to escape from the charter-party. The charterer may rightly terminate the engagement if the delay in remedying any breach is so long in fact, or likely to be...

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2 firm's commentaries
  • Reconsidering Repudiations of Contracts: Recent Developments
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    • JD Supra United Kingdom
    • 19 December 2013
    ...examines this grey area. The test for repudiation derives from the case of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26. The test can be summarised as the following questions: does the breach deprive the innocent party of substantially the whole benefit of the co......
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    ...innominate is open to question. First, the labelling of the Clause is immaterial following Hong Kong Fir Shipping Ltd v. Kawasaki Ltd [1962] 2 Q.B. 26. The case laid down the approach of substance over form, and the court must assess the contract holistically to ascertain the status of the ......
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