Norwegian American Cruises A/S (formerly Norwegian American Lines A/S) v Paul Mundy Ltd (Vistafjord)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE O'CONNOR,LORD JUSTICE BINGHAM,LORD JUSTICE TAYLOR |
| Judgment Date | 20 April 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0420-5 |
| Docket Number | 88/0336 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 April 1988 |
[1988] EWCA Civ J0420-5
Lord Justice O'Connor
Lord Justice Bingham
and
Lord Justice Taylor
88/0336
1983 N. No. 406
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR. JUSTICE HOBHOUSE)
Royal Courts of Justice.
MR. I. KINNELL, Q.C. (instructed by Messrs. Sinclair Roche & Temperley) appeared on behalf of the Appellants.
MR. N. CHAMBERS, Q.C. and MR. J. HAINES (instructed by Messrs. Lee Lane Smith) appeared on behalf of the Respondent.
I will ask Lord Justice Bingham to give the first judgment.
There are before the court an appeal by the plaintiffs and a cross-appeal by the defendants against a decision of Mr. Justice Hobhouse in favour of the defendants given on the 4th June, 1987. The plaintiffs' claim was for £130,000 which they said had been wrongfully withheld by the defendants on account of an entitlement to commission which the plaintiffs said did not exist. The judge held that the plaintiffs were estopped by convention from denying the defendants' entitlement to commission. It is that finding which the plaintiffs challenge. The defendants support the decision of the learned judge and seek to support it on alternative grounds also, but they complain by way of cross-appeal of the order which the learned judge made for costs.
The plaintiffs were at the material time shipowners, owning about 16 cargo vessels and two cruise ships. One of the cruise ships was a large high-class cruise liner called "Vistafjord". She had something over 600 berths. The defendants, on the judge's finding, were the plaintiffs' general passenger sales agents. They had business of their own as well as business which they did for the plaintiffs. They were essentially travel agents carrying on a specialised cruise business. They had two offices in London, one of which in Pall Mall was used primarily for the plaintiffs' business.
The director who ran their business in Pall Mall was a Mr. Paul Mundy, the managing director of the defendants, and he worked in the Pall Mall office with some six other employees. There also worked there a Mr. Atkins, who was an employee of the plaintiffs and their United Kingdom representative. He worked there under and pursuant to an agency agreement made in 1975 of which the terms are as follows. It is headed "General Passenger Sales Agreement between Paul Mundy Ltd., London, and Norwegian America Line, Oslo," and the text is:
"Norwegian America Line, Oslo, herewith appoints Paul Mundy Ltd., London, general passenger sales agent for U.K. and Eire on the following terms: Paul Mundy Ltd. agrees:
1. To provide adequate accommodation and secretarial assistance for Mr. R.J. Atkins, Norwegian American Line Owners' representative in the U.K.
2. To absorb the salaries and expenses of such additional personnel as is deemed necessary to promote and handle the Norwegian America Line business.
3. To remit to Norwegian America Line deposits and balances received for all passenger bookings on the 15th and at the end of each month.
Norwegian America Line agrees:
1. To pay Paul Mundy Ltd. 15% commission (including 10% travel agent commission) on gross U.K. ticket sales, deductible on remittance of balance moneys.
2. To reimburse Paul Mundy Ltd. for Norwegian America Line expenses incurred in postage, printing, stationery, telephones, telexes and cables.
3. To make available a separate budget for advertising and sales promotion including printing of literature and the distribution of such material. This Agreement will be in effect as from October 1st, 1975, and replaces the Agreement dated July 1st, 1974.
Notice of 3 months' termination of the Agreement may be given by either party at any time."
The position under the agreement, therefore, was, as described by the judge, that Mr. Atkins, as United Kingdom representative of the plaintiffs, worked from the defendants' office, which was paid for and staffed by employees of the defendants. The remuneration of the defendants was the commission that was to be found in the agreement, and they had further compensation in the form of reimbursement for certain expenses.
The present story begins with the desire of British Leyland Cars to launch their new Metro model in 1980. For that purpose they wished to introduce agents to the new model, to give their agents an opportunity to test and drive the car, and to take advantage of the opportunity to earn the goodwill of their agents by treating them to some free entertainment. For this purpose they hit on the idea of running a series of cruises with the agents as passengers to a destination where the new model could be tested and driven.
For the purpose of chartering a vessel, British Leyland engaged brokers named Stelp & Leighton. In March 1979 these brokers made an inquiry, initially to the defendants and then to Mr. Atkins, concerning a possible charter of the vessel "Vistafjord". The period of the projected charter was the 30th August to the 26th September, 1980. Mr. Atkins referred this inquiry to his head office in Norway, and head office indicated willingness to charter the vessel for that period for a total charter hire of £1.3 million. That was for a time charter for the period which I have already mentioned on the basis that the vessel was to be delivered and re-delivered at Hamburg. From the plaintiffs' point of view the charter was a very attractive one indeed, both because it filled a gap in their cruising calendar and because the rate which they suggested was one highly advantageous to them if they could obtain it.
British Leyland, or their brokers, inspected the vessel in the Caribbean and liked it. So the matter went a stage further. At the end of April 1979 there was a lunch at Quaglino's Restaurant attended by representatives of British Leyland, the brokers and also Mr. Atkins and Mr. Mundy. At that stage the precise itinerary for the vessel to follow had not been finally decided, but it did become quite clear in the course of the lunch that British Leyland were concerned about the cost of this charter. Mr. Atkins' instruction from Norway was that £1.3 million was the price which the plaintiffs wanted, and it became apparent that unless something could be done to make the price somewhat more attractive to British Leyland, this advantageous deal might be lost. I quote the judge's finding. He says:
"Therefore ideas were cast around for to try and make the deal more palatable to British Leyland. An idea that almost certainly originated from Mr Atkins was that British Leyland would not want to use the approach and return legs for their own business and, therefore, this could be used for other business and the cost to British Leyland of the operation could be reduced proportionately."
The reference there was to the return legs to and from Hamburg on the assumption that the cruises themselves would take place from a port in the United Kingdom. In the result, the charter was used to perform nine round-trip cruises between Liverpool and the Isle of Man.
According to the judge's finding, the sub-charter idea was further developed over the ensuing months. He said:
"Mr. Atkins' idea, as he developed it between April and July, was that there should be a sub-charter back to the defendant company. This would be a sub-charter for the two legs amounting, as it turned out, to about six days in all, and it would involve, as it turned out, a time charter hire of £106,400—which is approximately a pro rata sum in relation to the total amount of the hire. Mr Mundy was naturally involved in this, but it does appear from the evidence that the prime mover was Mr Atkins and he did most of the work on it. Mr Atkins was fully aware of what it involved. The evidence before me is that, notwithstanding all this, it was accepted that the sub-charter was for the account of the defendants and, therefore, they took the risk of profit or loss."
Mr. Atkins did not tell his head office in Norway of this proposed sub-charter. The judge held with regard to the sub-charter as follows. He said:
"With regard to the sub-charter, it was expected that the price would produce a small profit for the defendants or about break-even; but it was a speculative exercise. No-one knew what in fact would be the actual outcome in terms of profit or loss on the sub-charter."
The learned judge dealt at some length with the reasons why this sub-charter was entered into. These are, I think, an important part of the background. He said:
"There were a number of reasons why this approach was adopted by Mr Atkins and Mr Mundy. The first—and I accept that it was the primary reason—was to get the British Leyland business. It was a form of making the price more palatable to British Leyland. They were genuinely concerned that the British Leyland business might be lost for price reasons, and, therefore, they thought that it was to the advantage of the plaintiffs (as indeed it was) that the British Leyland business should be obtained and retained and this was one way of enabling that to happen or at least materially increasing the chances of that happening.
A second reason—which I also accept was a genuine reason, which certainly influenced Mr Mundy and Mr Atkins as well—was that it provided a convenient and cheap method of promoting Norwegian American Line business. They contemplated that they would use these short legs as sort of sample cruises which would be sold at minimum prices in conjunction with short...
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