Penney v Clyde Shipbuilding and Engineering Company
| Jurisdiction | Scotland |
| Judgment Date | 15 March 1920 |
| Docket Number | No. 41.,Case No. 279 |
| Date | 15 March 1920 |
| Court | Court of Session |
Ld. Ormidale, Lord President, Lord Mackenzie, Lord Cullen.
ContractSaleShipShipbuilding contractPassing of property.
WarTrading with the enemyEnemy propertyVesting of property in CustodianExecutory contract terminated by warUnfinished shipProperty passed to, and instalments paid by, enemy purchasersShip requisitioned and purchased by AdmiraltyRight of Custodian to equivalent of instalments paidInterestCounter claimsTrading with the Enemy Acts, 1914 (5 and 6 Geo. V. cap. 12), 1915 (5 and 6 Geo. V. cap. 79), and 1916 (5 and 6 Geo. V. cap. 105).
Scottish shipbuilders contracted to build a ship for Austrian shipowners, payment to be made by instalments at fixed stages of the construction, the property to pass to the purchasers as the work proceeded, and the ship to be ready for delivery, subject to certain rights of rejection by the purchasers, on 30th September 1914. On the declaration of war between Great Britain and Austria on 12th August 1914 the vessel was nearing completion, and the purchasers had paid instalments of the price amounting to 79,732. On 17th February 1915 the Admiralty requisitioned the ship as she then stood at the price of 86,000, but it was not till 30th July 1917 that the Admiralty paid the builders that sum, and they refused to pay any interest from the date of requisition. On 1st December 1917 the Board of Trade pronounced an order vesting the sum of 79,732, with interest from the date of receipt of the instalments, in the Custodian for Scotland under the Trading with the Enemy Amendment Act, 1914, as monies owing to or held for or on behalf of or on account of the enemy purchasers, and the Custodian brought an action against the builders for payment of this sum and interest. The builders resisted payment; and also stated two counter claims against the fund, (1) for loss caused by the ship occupying a berth in their yard after the stipulated date of delivery, and (2) for the interest which the Admiralty had refused to pay.
Held (1) that, at the date of the outbreak of war, the property in the unfinished ship had passed to the enemy purchasers notwithstanding their right of ultimate rejection; (2) that a sum of 79,732 was a surrogatum for the value of the unfinished ship held by the builders on behalf of the enemy purchasers, and accordingly fell to be paid over to the Custodian; (3) that, no right to interest having accrued to the enemy purchasers at the outbreak of war, the Custodian was entitled to interest only from the date of the interlocutor of the Court; and (4) that the counter claims stated by the defenders against the fund were irrelevant in an action at the instance of the Custodian.
On 19th April 1918 Joseph Campbell Penney, as Custodian for Scotland under the Trading with the Enemy Amendment Act, 1914* brought an action against the Clyde Shipbuilding and Engineering Company, Limited, for payment of 79,732, 16s. 4d., being monies owing to or held for or on behalf of or on account of the Royal Hungarian Sea Navigation Company Adria, Limited, of Budapest, Hungary, in terms of an agreement between the defenders and them, dated 25th July 1913, with interest at the rate of 5 per cent per annum from the date or dates on which the same was received by the defenders until payment.
The parties averred, inter alia, as follows;(Cond. 2) By agreement, dated 25th July 1913, between the defenders and The Royal
Hungarian Sea Navigation Company Adria, Limited, of Budapest, Hungary, the defenders undertook to build and complete a steamer of certain dimensions, power, and class for the Adria Company at an estimated cost of 103,000, and the Adria Company undertook to pay the price in five instalments of 20,600 eachthe first on signing the agreement, the second when the vessel was framed, the third when she was plated, the fourth when she was launched, and the last on delivery. (Ans. 2) The agreement mentioned is referred to for its terms, beyond which no admission is made. Explained that the Adria Company is a Company domiciled and carrying on business in Budapest and Fiume, and on the outbreak of war between Great Britain and Austria, on 12th August 1914, the Company became alien enemies. (Cond. 3) When the war broke out the vessel was still on the stocks, and thus only three instalments, amounting to 61,800, had become due. At that time the
Adria Company had paid 82,400, less a contra account of 2667, 3s. 8d., making a total payment to account of the vessel of 79,732, 16s. 4d. (Ans. 3) Explained that by consent of both parties the scheme of payment by instalments had been departed from, and instead the Adria Company made sundry irregular payments to account from time to time. Explained further that by the 4th of August 1914 the defenders had executed work on the vessel to a greater value than the amount paid to account by the Adria Company. (Cond. 4) In November 1914 the chairman of the defenders Company caused the vessel to be brought to the notice of the Admiralty, and on 17th February 1915 the vessel, which was still on the stocks, was requisitioned by the Admiralty. Some questions subsequently arose as to whether the Admiralty should get the benefit of the sum paid to account by the Adria Company, but on the defenders representation that the vessel was their own property, the Admiralty transacted with them as absolute owners, and paid them the whole purchase price agreed to be paid by the Adria Company, less the value of work not executed, and with the addition of the cost of alterations required by the Admiralty, and obtained delivery of the vessel altered and completed to suit Admiralty requirements. (Ans. 4) [It was admitted that the vessel was requisitioned by the Admiralty, and that the purchase price arranged with them was paid. Reference was made to the defenders' statement of facts]. (Cond. 5) The sum of 79,732, 16s. 4d. paid to the defenders by the Adria Company belongs to, and is held by the defenders for, that Company. The Adria Company is an enemy, and an Order* has been issued by
the Board of Trade, in exercise of the powers conferred upon them by the Trading with the Enemy Amendment Act 1916, and all other powers enabling them in this behalf, vesting the said money and interest thereon, and the right to receive, sue for, and recover the same, in the pursuer as custodian aforesaid. The said Order, dated 1st December 1917, is produced. (Ans. 5) Admitted that the Adria Company is an enemy. Reference is made to the Order issued by the Board of Trade dated 1st December 1917. Quoad ultra denied under reference to the defenders' statement of facts, and explained that the said sum of 79,732, 16s. 4d. was paid to the defenders on account of a current and uncompleted executory contract with an alien enemy, which was cancelled and rendered incapable of fulfilment by either party owing to the outbreak of war. Neither the said sum nor the right to recover the same vested in the pursuer.
In addition to their answers, the defenders lodged a statement of facts, in which they further averred, inter alia:(Stat. 4) In consequence of the stoppage of the work under the contract caused by the war, and the delay on the part of the Admiralty in giving notice to requisition until the 18th February 1915, the defenders were obliged to leave the unfinished vessel occupying one of the three berths in their yard for six and a half months in excess of the time required under the contract, viz., from 12th August 1914 to 18th February 1915, and were thus prevented from earning the nominal oncost charges and profit therefrom. Their whole establishment
charges were running on, while one-third of their earning capacity was taken away during that period by the fact that the Admiralty would not give definite instructions as to what they wished done with the vessel. The oncost and establishment charges and profit on a fair estimate for that period amounted to 9211, which was the actual loss sustained by the defenders from the vessel occupying her berth in the yard. (Stat. 5) On 24th April 1915 the Director of Navy Contracts wrote to the defenders that the Admiralty desired the vessel to be fitted up in accordance with drawings and details to be supplied by Admiralty officers, and that the purchase price should be arranged on the basis of her condition as regards completion on 18th February, the date on which she was requisitioned. The defenders were also asked to state what deduction from the original contract price they were prepared to allow on account of fittings not required and on account of work remaining on 18th February to be completed on the original contract, payment from that, date being made by the Admiralty on the net cost percentage basis. In reply the defenders wrote to the Director of Navy Contracts on 15th May 1915 agreeing to the proposal that the work of completion of the vessel from 18th February should be carried out on the net cost system with percentages to be agreed on; and, further, that the purchase price to be paid for the vessel should be arranged on the basis of her condition as regards completion on 18th February 1915, the. date on which she was requisitioned. They also stated (1) that they were prepared to allow a credit of 17,000 on account of fittings not required by the Admiralty and on account of work remaining to be completed on the original contract; and (2) that the original contract price was assumed to be 103,000, and that with that rebate the purchase price on the basis of her condition on 18th February was therefore 86,000. The Director of Navy Contracts replied on 20th July 1915 that the rebate of 17,000 offered on account of uncompleted work on the vessel was accepted by the Admiralty. The vessel thus became the property of the Admiralty on 18th February 1915, and was thereafter altered and completed to their requirements. (Stat. 6) From this correspondence the defenders...
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Penney v Clyde Shipbuilding and Engineering Company
...defenders could prove to represent loss sustained by them under their first counter claim. (In the Court of Session, 20th February 1919—1919 S. C. 363.) The defenders appealed to the House of Lords. The case was heard on 15th March 1920. In the course of the argument on behalf of the appell......
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...present, and his interlocutor does not appear to have been reclaimed against. In Penney v. The Clyde Shipbuilding and Engineering Co., 1919 S. C. 363, 1920 S. C. (H. L.) 68, the Clyde Shipbuilding and Engineering Co. (who are also defenders in the present action) had contracted to build a s......