Hyundai Shipbuilding & Heavy Industries Company Ltd v Pournaras
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STEPHENSON,LORD JUSTICE ROSKILL |
| Judgment Date | 17 May 1978 |
| Judgment citation (vLex) | [1978] EWCA Civ J0517-3 |
| Docket Number | 1976 H.NO.4827 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 May 1978 |
[1978] EWCA Civ J0517-3
Lord Justice Stephenson
and
Lord Justice Roskill
In The Supreme Court of Judicature
Court of Appeal
On Appeal from High Court of Justice
Queen's Bench Division
Mr Justice Donaldson
MR MICHAEL THOMAS, Q.C. and MR GILES CALDIN (instructed by Messrs. Constant & Constant) appeared on behalf of the Appellants (Defendants).
MR STEPHEN TOMLINSON (instructed by Messrs. Norton, Rose, Botterell & Roche) appeared on behalf of the Respondents (Plaintiffs).
I will ask Lord Justice Roskill to give the first judgment.
These are two appeals from decisions of Mr. Justice Donaldson sitting in chambers as commercial judge on the 29th November of last year. They are in two Order XIV proceedings. The first is in an action brought by a South Korean shipbuilding company described in the it as Hyundai Shipbuilding & Heavy Industries Company, Limited, but we are told that they are I now called Hyundai Heavy Industries Company, Limited, against a Liberian ship-owning company called Bouboulina Shipping S.A., which has, apparently, its principal place of business in Piraeus in Greece, The second action is brought by the same plaintiffs against a lady named Jenny Pournaras, described in the writ as a married woman. Both those actions are brought on what are. described as letters of guarantee given by those two defendants, appellants in this court, in respect of shipbuilding contracts entered into between two different Liberian ship-owning companies, one called Hibernian and the other called Freeport, for the construction for each of those two companies of two 24,000 ton deadweight ships. Those contracts, four in number - two for each of those two companies - replaced two earlier contracts for 75,000 ton ships that had been entered into as long ago as the 24th November, 1974.
It is, of course. notorious, and has been notorious for some years, that there are in this world too many ships chasing too few cargoes; it is equally notorious that all too many ships have, immediately they come from the builder's yard, been unable to find any remunerative employment. That being the state of the market, it is not surprising that those who in more optimistic days entered into contracts for the sale and deliveryof ships to be constructed by yards all over the world should seek, if they can, to escape from the bonds either of the shipbuilding contracts they originally made or from the contracts of guarantee which were entered into collaterally with the shipbuilding contracts as part of the transaction with the shipbuilders concerned. We have had a number of these cases in this court on appeal from the Commercial Court, and no doubt the judges of the Commercial Court have had even more. The yards have found that there has been default on the contracts sometimes, as here, before any construction has taken place, or after only minimal construction has taken place, or alter construction is complete. There have been a number of actions on guarantees. brought/ These one-ship Liberian companies are not, if I may put it this way without offence, notorious for the size of their assets, apart from the ship which they are going to acquire, and accordingly yards make a practice of requiring collateral guarantees sometimes from the principal shareholders in the company, sometimes from others as part of the contractual arrangements for constructing the ships.
It is obvious, reading between the lines of the story in this case, that after the original contracts for the 75,000 ton ships had been entered into on the 24th November, 1974, no-one wanted those ships. Therefore, although preliminary payments (which we were told totalled no less than £ 1,237.598) had been made on account of the purchase price of those two ships, arrangements were made for the cancellation of those two contracts and for the four fresh contracts which I have already mentioned for these four 24,000 ton deadweight ships to be entered into on the 10th October, 1975. Those contracts provided for four different delivery dates: one for delivery on15th March, 1977, one for the 15th April, 1977, one for the 30th May, 1977 and one for the 30th June, 1977.
The yard numbers of those ships were 2325, 2326, 2327 and 2328, and the letters of guarantee with which we are concerned in these cases were four in number. Mrs. Pournaras signed letters in identical terms for 2325 and 2327 - though those particular letters seem to have been undated - whilst the other appellants, Bouboulina Shipping Company, S.A. signed identical guarantees on the 10th October, 1975 for yard numbers 2326 and 2328.
It is not, I think, necessary to go through the building contracts in any detail. It is sufficient, in order to make the points in this case, if I go straight to the guarantees, and I take the guarantee signed by Mrs. Pournaras, which will be found under letter "M" in the bundle. Now it is upon these four guarantees - two against Mrs. Pournaras and two against Bouboulina Shipping - that these present actions were brought. The plaintiffs sought judgment there under for the amounts claimed under Order XIV, saying that there was no defence to these claims. The learned Judge, Mr. Justice Donaldson, so held. He saw no useful purpose in not dealing with this matter, where all the facts were agreed (save perhaps one), under Order XIV rather than giving leave to defend and then dealing with the matter as a trial, perhaps a few days later. Accordingly, he dealt with the matter there and then and he gave judgment for the plaintiffs under Order XIV; it is against those judgments against these two defendants on these four guarantees that the present appeals are brought.
The sums claimed in these two actions are a little complicated. I mentioned that under the original two contracts for the two 75,000 ton ships there had been a payment on account ofthe purchase price far nearly one-and-a-quarter million United States Dollars. Under the later agreements those two advance payments totalling one-and-a-quarter million Dollars were to be applied to the first instalments under each of these four contracts. The shipbuilding contracts for these four ships provided for five instalments, and those provisions will be found in clause 10(b) of each contract. It is to be observed that the first instalment was to be of the contract price, amounting to £ 357.500, and that instalment should be paid "within 7 days of the receipt by the buyer of cabled advice from the builder that the export licence of the vessel has been issued by the Korean Government". The second instalment, which was for a further 2.59b, was to be paid on the 30th April, 1976, and the remaining instalments were to be paid, as to the third on the 31st July, 1976, the fourth on the 15th November, 1976, and the fifth and last, amounting to 67.% of the contract price in the circumstances for which clause 10(b)(v) makes provision, We are concerned here with the first instalments in both appeals, we are also concerned with the second instalment in one of the four cases.
As it happens, the amount of the original first instalment: paid was not sufficient to discharge the whole of the first instalments payable under each of these four contracts; accordingly when the date for that payment passed and no further sums were paid the buyers, the two companies, were in default, and when the second instalment became due and was not paid in the one case, then the company concerned also became in default on the second instalment.
It has not been disputed on behalf of the appellants that each of those instalments became due on the dates specified, nor has it been disputed that there were defaults in paymentby the buyers.
As a result of those payments not being duly made, the respondents ultimately treated the four contracts as repudiated and accepted the repudiation. It is common ground that these four contracts came to an end on the 21st October, 1976. Accordingly, and no doubt because there were no, or no readily available, assets of the two companies against which any judgment obtained could be enforced by the respondents, they proceeded to sue on these two guarantees. A number of defences have been sought to be raised. In order to make those defences clear it is necessary to read one of these letters of guarantee.
The letter is addressed to Hyundai Shipbuilding & Heavy Industries Company, Limited; it is headed "Letter of Guarantee": "Dear Sirs, in consideration of your entering into the shipbuilding contract, its present and future form, relating to your hull number 2325 (the contract.) with" and then these words are written in "Bouboulina Shipping ("the buyer'), the undersigned hereby irrevocably and unconditionally guarantees the payment in accordance with the terms of the contract of all sums due or to become due by the buyer to you under the contract, and in case the buyer is in default of any such payment the undersigned will forthwith make the payment in default on behalf of the buyer.
"The liability of the undersigned under this guarantee shall cease upon delivery of the vessel, or upon the previous assignment (with your consent) by the buyer to a third party to this contract upon terms that the assignee shall adopt to the exclusion of the buyer all rights and obligations of the buyer towards you under the contract.
"This guarantee shall be governed by and construed in all respects in accordance with the law of England".
The first of the four points which has been taken by Mr. Thomas on behalf of the appellants is this: it is said that on its true construction that guarantee does no more than create an obligation...
To continue reading
Request your trial
-
The "Century Dawn"
... ... v Lep Air Services Ltd [1973] AC 331, Hyundai Shipbuilding and Heavy Industries Co Ltd v ... ...
-
PH Grace Pte Ltd and Others v American Express International Banking Corp
... ... how the Court of Appeal in England in Hyundai Shipbuilding & Heavy Industries Co v Pournaras ... ensure for the benefit of any banking company with which the Bank may become amalgamated and to ... ...
- Perwira Habib Bank Malaysia Bhd v Syarikat Johor Tenggara Sdn Bhd
- MBF Finance Bhd v Yong Yet Miaw and Another
-
Restitution and Disgorgement
...Homes Ltd , above note 84. 88 Hyundai Heavy Industries , above note 85; Hyundai Shipbuilding & Heavy Industries Co Ltd v Pournaras , [1978] 2 Lloyd’s Rep 502 (CA). THE LAW OF CONTR ACTS 1162 guarantors argued that they ought to be able to defend the claim on the basis of the Dies principle.......
-
Restitution and Disgorgement
...Hyundai Heavy Industries Co. Ltd. v. Papadopoulos , above note 80; Hyundai Shipbuilding & Heavy Industries Co. Ltd. v. Pournaras , [1978] 2 Lloyd’s Rep. 502 (C.A.). THE LAW OF CONTR ACTS 982 the guarantors argued that they ought to be able to defend the claim on the basis of the Dies princi......