Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE MEGAW |
| Judgment Date | 01 July 1970 |
| Judgment citation (vLex) | [1970] EWCA Civ J0701-1 |
| Date | 01 July 1970 |
| Court | Court of Appeal (Civil Division) |
In the Matter of The Arbitration Act, 1950
and
In the Matter of An Arbitration
[1970] EWCA Civ J0701-1
The Master of The Rolls
(Lord Penning),
Lord Justice Edmund Daves,
and
Lord Justice Megaw.
In The Supreme Court of Judicature
Court of Appeal
From: Mr Justice Mocatta (Q.B.D. (Commercial List), London).
MR M.J. MUSTILL, Q.C. and MR M. SAVILLE (instructed by Messrs. Hill, Dickinson & Co.) appeared on behalf of the Appellants (Respondents).
MR R. GOFF, Q.C. and MR B. DAVENPORT (instructed by Messrs. Richards, Butler & Co.) appeared on behalf of the Respondents (Claimants).
The material facts are these. On 25th May, 1965, the shipowners let the steamer Mihalis Angelos to the charterers for a voyage from Haiphong, in North Viatnam, to Hamburg or other port in Europe. In the charterparty theshipowners said that she was "expected ready to load under this charter about 1st July, 1965". The vessel was to proceed to Haiphong and then load a cargo of apatite and carry it to Europe. There was a cancelling clause in case the vessel was not ready to load by 20th July, 1965.
The owners were quite wrong in saying she was "expected to load on 1st July" at Haiphong. They had no reasonable grounds for any such expectation. On 25th May, 1965, the date of the charter, the Minelis Angelos was in the Pacific on her way to Hong Kong. She was not expecting to reach Hong Kong until 25th or 26th June. She would need fourteen days to discharge, thus taking it to 9th or 10th July. She had to have a special survey of two days. That took it to 11th or 12th July. She would take need days from Hong Kong to Haiphong. So she could not reasonably be expected to arrive at Haiphong until 13th or 14th July. Yet the shipowners, quite wrongly, said she was expected to arrive on 1st July.
In point of fact, she made up time across the Pacific, and arrived at Hong Kong on 23rd June: but the discharge at Hong Kong was unexpectedly prolonged. She did not complete it until 23rd July. Meanwhile, however, the charterers had their own troubles. They discovered there was no apatite ore available at Haiphong. They thought it was due to the War in North Vietnam. It was said that the Americans had bombed the railway line to the port, On 17th July, 1965, the charterers cancelled the contract as a case of force majeure. The shipowners accepted this information as a repudiation of the contract. They did not charter the vessel to anyone else. Instead, they sold her on 29th July as she lay in Hong Kong.
The Arbitrators found that if the ship, after discharge at Hong Kong, had proceeded to Haiphong, the charterers would, beyond doubt, have cancelled the charter on the ground that the ship had missed her cancelling date. So the owners, in fact, lost nothing. But they claimed damages on the footing thatthey lost the charter on 17th July aid were entitled to £4,000 damages. The Arbitrators rejected the claim, but the Judge allowed it.
The first point arises on the clause by which the charterers said that the vessel was "expected to arrive ready to load about lot July, 1965". The charterers said that this was a condition of the contract: and that it was broken because the owners had no reasonable grounds for any such expectation. The Arbitrators found that "on 25th May, 1965, the owners could not reasonably have estimated that the Mihalls Angelos could or would arrive at Haiphong about 1st July. 1965".
The charterers did not take this point on 17th July, 1965, when they cancelled the charter. They put it on the ground of force majeure. But the owners admit that, if this point is a good one, the charterers can rely on it. The fact that a contracting party gives a bad reason for determining it does not prevent him from afterwards relying on a good one when he discovers it: see ( British & Beningtons v. Cachar 1923 A.C.,48 at 71-2) by Lord Sumner.
The contest resolved itself simply into this: Was the "expected ready to load" clause a condition, such that for breach of it the charterers could throw up the charter? Or was it a mere warranty such as to give rise to damages if it was broken, but not to a right to cancel, seeing that cancellation was expressly dealt with in the cancelling clause?
Sir Frederick Pollock divided the terms of a contract into two categories: Conditions and Warranties. The difffarence between them was this: If the promisor broke a condition in any respect, however slight, it gave the other party a right to be quit of his future obligations and to sue for damages: unless he by his conduct waived the condition, in which case he was bound to perform his future obligations but could sue for the damage he suffered. If the promisor broke a warranty in any respect, however serious, the otherparty was not quit of his future obligations. He had to perform them. His only remedy was to sue for damages.
This division was adopted by Sir Mackenzie Chalmers when he drafted the Sale of Goods Act, and by Parliament when it passed it. It was staged by Lord Justice Fletcher Moulton, in his celebrated dissenting judgment in ( Wallis v. Pratt 1910, 2 K.B., 1003, at 1012), which was adopted in its entirety by the House of Lords in 1911 A.C., 394.
It would be a mistake, however, to look upon that division as exhaustive. There are many terms of many contracts which cannot be fitted into either category. In such cases the Courts, for nigh on 200 years, have not asked themselves: Was the term a condition or warranty? But rather: Was the breach such as to go to the root of the contract? If it was, then the other party is entitled, at his election, to treat himself as discharged from any further performance. That is made clear by the judgment of Lord Mansfield in Boone Y. Eyre (1777, 1 H.B1., 273); and by the speech of Lord Blackburn in ( Mersey v. Naylor 1834, 9 A.C., 434, at 443-4); and the notes to ( Cutter v. Powell 2 Smith's Leading Cases, at 16-18). The case of ( Hongkong Fir Shipping Co. v. Kawasaki Kisen Kaisha 1962, 2 Q.B., 26) is a useful reminder of this large category.
Although this large category exists, there is still remaining a considerable body of law by which certain stipulations have been classified as "conditions" so that any failure to perform, however slight, entitles the other to treat himself as discharged. Thus a statement in a charter-party on 19th October, 1860, that the ship is "now in the port of Amsterdam" was held to be a "condition". On that date she was just outside Amsterdam and could not get in owing to strong gales. But she got in a day or two later when the gales abated. The Court of Exchequer Chamber held that the charterer was entitled to call off the charter: see ( Behn v. Burness 1863, 3 B. & S., 751), overruling the Court of Exchequer (1862, 1 B. & S., 877).
The question in this case is whether the statement by the owner: "expected ready to load under this charter about 1st July, 1965" is likewise a "condition". The meaning of such a clause is settled by a decision of this Court. It is an assurance by the owner that he honestly expects that the vessel will be ready to load on that date and that his expectation is based on reasonable grounds: see ( Sanday v. Kieighley Maxted & Co. 1922, 27 Commercial Cases, 296). The clause with that meaning has been held in this Court to be a "condition" which, if not fulfilled, entitled the other party to treat himself as discharged: see ( Finnish Government v. Ford 1921, 6 Lloyds List Reports, 188). Those were Sale of Goods cases. But I think the clause should receive the same interpretation in charterparty cases. It seems to me that, if the owner of a ship or his agent states in a charter that she is "expected ready to load about 1st July, 1965" he is making a representation as to his own state of mind; that is, of what he himself pects: and, what is more, he puts it in the contract as a term of it, binding himself to its truth. If he or his agent breaks that term by making the statement without any honest belief in its truth or without any reasonable grounds for it, he must take the consequences. It is at lowest a misrepresentation which entitles the other party to rescind: and at highest a breach of contract which goes to the root of the matter. The charterer, nho is misled by the statement is entitled, on discovering its falsity, to throw up the charter. It may, therefore, properly be described as a "condition".
I am confirmed in this view by the illustration given by Lord Justice Scrutton himself in all the editions of his work on charterparties: "A ship was chartered 'expected to be at X about the 15th December… shall with all convenient speed sail to X! The ship was in fact then on such a voyage that she could not complete it and be at X by 15th December. Submitted that the charterer was entitled to throw up the charter".
I do not regard the case of Associated Portland Cement Manufacturers v. Houlder Bros, ( 1917, 22 Comm. Cas., 279) as any authority to the contrary. The facts are too shortly reported for any guidance to be got from it.
I hold, therefore, that on 17th July, 1965, the charterers were entitled to cancel the contract on the ground that the owners had broken the "expected ready to load" clause.
In case I am wrong, however, I go on to consider the charterers' second points. They say that they were entitled to cancel on that day under the cancelling clause, which reads:
"(11) Should the vessel not be ready to load (whether in berth or not) on or before 20 July '65 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 charterers said that on 17th July, 1965, it was plain...
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