Pan Ocean Shipping Company Ltd v Creditcorp Ltd (Trident Beauty)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Keith,Kinkel, Lord Goff,Chieveley,Lord Lowry,Lord Slynn,Hadley,Lord Woolf |
| Judgment Date | 27 January 1994 |
| Date | 27 January 1994 |
| Court | House of Lords |
Shipping - Charterparty - Time charter - Hire - Hire payable in advance - Assignment of receivables by shipowner - Vessel off-hire - Payment of hire in advance by charterers to assignee - Failure of vessel to comply with charterers' orders - Charterers treating charter as repudiated and claiming return of hire - Whether advance payment of hire repayable - Ships' Names - Trident Beauty
By a time charter dated 19 April 1991 the appellants chartered a vessel from T. as disponent owners for a single time charter voyage at the rate of U.S.$6,400 a day, payable 15 days in advance commencing on the day of the vessel's delivery. In order to finance its operations T. had arranged credit facilities from the respondents, who had entered into the facility arrangement on behalf of a group of investors. As part of the arrangement on the same date as the time charter was entered into, T. assigned to the investors its right to the receivables, including the sums payable for the charter of the vessel. The vessel was delivered under the charterparty on 1 May 1991, and the appellants duly made two payments in advance on 3 May and 17 May. On 21 May the respondents notified the appellants in writing of the assignment and required all payments due to T. to be paid directly to them. On 31 May the appellants made the third payment in advance to the respondents to cover the period from that date to 15 June. The vessel, however, had been off-hire since 27 May awaiting repairs, and remained off-hire during the whole of the third period. By clause 18 of the charterparty all overpaid hire was to be returned at once. On 12 June the appellants were notified that the vessel had been withdrawn from T. by the head owners. Although the repairs were by then completed the vessel was unable to proceed because T. had failed to pay for the repairs. On 10 July 1991 the appellants accepted T.'s conduct as a repudiation of the charterparty and the charter came to an end. On the appellants' claim to recover the advance payment made on 31 May on the grounds that it was money paid for a consideration that wholly failed, the judge held that the respondents as assignees of the right to receive hire payments were liable to repay the whole of the third advance payment as one which had not been earned. The Court of Appeal allowed the respondents' appeal.
On appeal by the appellants:—
Held, dismissing the appeal, that there was no obligation upon an assignee who had received a payment in advance to make a repayment because of the non-performance of an event for which he had no responsibility; and that, accordingly, in the circumstances the assignment to the respondent did not impose upon them any obligation, additional to the contractual obligation imposed upon T., to repay unearned hire on the ground of failure of consideration (post, pp. 163A–C, 166A–B, H, 167A, 170H–171A).
The following cases are referred to in their Lordships' opinions:
Aiken v. Short (
Barclays Bank Ltd. v. W. J. Simms Son & Cooke (Southern) Ltd. [
Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [
French Marine v. Compagnie Napolitaine d'Eclairage et de Chauffage par le Gaz [
Stewart (C.A.) & Co. v. Phs. Van Ommeren (London) Ltd. [
Tito v. Waddell (No. 2) [
Tonnelier v. Smith (
The following additional cases were cited in argument:
Chamber Colliery Co. Ltd. v. Twyerould [
Newfoundland (Government of) v. Newfoundland Railway Co. (
APPEAL from the Court of Appeal.
This was an appeal by leave dated 1 July 1993 of the House of Lords (Lord Jauncey of Tullichettle, Lord Browne-Wilkinson and Lord Mustill) by the appellants, Pan Ocean Shipping Co. Ltd., from the judgment dated 25 January 1993 of the Court of Appeal (Neill, Beldam and Kennedy L.JJ.) allowing an appeal by the respondents, Creditcorp Ltd., from the judgment dated 11 December 1991 of Judge Diamond Q.C. sitting as a judge of the Queen's Bench Division in favour of the appellants. The judge in Order 14A proceedings had ordered the repayments of an advance payment of a hire under a time charterparty on the ground that it had not been earned.
The facts are stated in the opinion of Lord Woolf.
Jonathan Hirst Q.C. and Tom Adam for the appellants.
Angus Glennie Q.C. and Karen Maxwell for the respondents.
Their Lordships took time for consideration.
27 January 1994. LORD KEITH OF KINKEL. My Lords, for the reasons given in the speech to be delivered by my noble and learned friend, Lord Woolf, which I have read in draft and with which I agree, I would dismiss this appeal.
LORD GOFF OF CHIEVELEY. My Lords, I have had the opportunity of reading in draft the speech of my noble and learned friend, Lord Woolf. I agree with him that the appeal should be dismissed, substantially for the reasons he has given. Even so, I wish to express in my own words the reasons for which I have reached the same conclusion.
Since my noble and learned friend has set out the relevant facts, it is unnecessary for me to repeat them. Here the appellant company, Pan Ocean Shipping Co. Ltd. (“Pan Ocean”), is seeking to recover from the respondent company, Creditcorp Ltd. (“Creditcorp”), an instalment of time charter hire paid by Pan Ocean as time charterer of the vessel Trident Beauty (“the vessel”) to Creditcorp as assignee from the disponent owner of the vessel, Trident Shipping Co. Ltd. (“Trident”), of receivables due under the charterparty, such assignment having been made as part of an arrangement under which Creditcorp, on behalf of a group of investors, made finance available to Trident. Pan Ocean is not seeking to recover the hire instalment from Trident, because it does not consider Trident worth suing. Instead, it seeks to recover the money from Creditcorp on the ground of total failure of consideration, since the vessel was off-hire for the whole of the period in respect of which the relevant hire instalment was paid. In an unreserved judgment the judge held that Pan Ocean was entitled to succeed in its claim. His decision was however unanimously reversed by the Court of Appeal.
To consider the question whether Pan Ocean is entitled to recover the money from Creditcorp on this ground, it is necessary first to turn to the time charter which governed the relationship between Trident and Pan Ocean. Under the charter the hire was, as normal, payable in advance — here 15 days in advance. Provision was made, also as normal, for the vessel to be off-hire in certain specified circumstances. This is to be found in the usual off-hire clause, clause 15 in the printed form. In addition, other circumstances were specified in some of the additional typed clauses, under which the vessel would or might be off hire (see clauses 37, 56, 61, 74 and 79). In another typed clause (clause 59), there was provision for the hire to be reduced pro rata in certain circumstances. I should also record that, again as normal, the charter contained an arbitration clause (clause 17 of the printed form), providing for any dispute to be referred to arbitration in the manner there prescribed.
Now, given the circumstances that the charter hire was payable in advance and that the vessel might be off hire under one or other of the relevant clauses during a period in respect of which hire had been paid, it was inevitable that, from time to time, there might have to be an adjustment of the hire so paid. Such adjustments are a normal feature of the administration of time charters. The usual practice is, I understand, for an adjustment to be made when the next instalment of hire falls due, by making a deduction from such instalment in respect of hire previously paid in advance which has not been earned; in the present charter, provision is to be found to that effect in clause 29(f), one of the additional typed clauses. If the relevant period is the last hire period under the charter, such a deduction may not be possible. Any overpayment will then have to be repaid by the shipowner, and no doubt this will normally be taken care of in the final account drawn up at the end of the charter period.
Sometimes, the event which gives rise to the charterer being deprived of the services of the vessel, in whole or in part, which in its turn renders the...
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