President of India v Lips Maritime Corporation (Lips)
| Jurisdiction | England & Wales |
| Judge | Lord Keith of Kinkel,Lord Fraser of Tullybelton,Lord Brandon of Oakbrook,Lord Griffiths,Lord Mackay of Clashfern |
| Judgment Date | 29 July 1987 |
| Judgment citation (vLex) | [1987] UKHL J0729-1 |
| Date | 29 July 1987 |
| Court | House of Lords |
[1987] UKHL J0729-1
House of Lords
Lord Keith of Kinkel
Lord Fraser of Tullybelton
Lord Brandon of Oakbrook
Lord Griffiths
Lord Mackay of Clashfern
My Lords,
I have had the opportunity of reading the speech to be delivered by my noble and learned friend Lord Brandon of Oakbrook. I agree with it and for the reasons he gives would allow the appeal.
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Mackay of Clashfern, and I share his difficulty in departing from the umpire's holding to the effect that the charterer was contractually bound to pay the demurrage by 11 December 1980. But I agree with my noble and learned friend that it would be inappropriate either to remit the case to the umpire or to decide the appeal upon a legal basis which is unsound. In these circumstances I agree that the appeal should be allowed and should be disposed of in the way proposed by my noble and learned friend Lord Brandon of Oakbrook.
My Lords,
This is an appeal by leave of your Lordships' House from an order of the Court of Appeal (Neill and Nicholls L.JJ. and Sir Roualeyn Cumming-Bruce) made on 31 October 1986. By that order the court allowed an appeal from an order of Staughton J. made in the Commercial Court on 4 April 1985, by which he had varied an award of 22 February 1983 made in arbitration proceedings in London by an umpire, Mr. Frank Rehder.
The appellant ("the charterer") was the charterer of the m.v. LIPS ("the ship") owned by the respondents ("the owners") under a voyage charterparty dated 1 July 1980 ("the charter"). Pursuant to the charter the ship loaded a cargo of di-ammonium phosphate at Donaldsville, Louisiana, and carried it to India. There she discharged part of the cargo, for lightening purposes, at Visakhapatnam, and the remainder of it at Calcutta. After the completion of the voyage disputes arose concerning, among other things, the amount of the charterer's liability to the owners in respect of demurrage. It is with the way in which the umpire dealt with the owners' claim in respect of demurrage that the proceedings in the courts below and the present appeal is concerned.
The charter provided, so far as material, as follows. By clause 9, that if the ship should be detained beyond the lay days demurrage should be paid at the rate of U.S. $6,000 per day and pro rata, and despatch money for all working time saved at half the demurrage rate per working day and pro rata. By clause 13, that the owners should have a lien on the cargo for demurrage. By clause 15, that general average should be settled in London. By clause 17, that any dispute arising under the charter should be settled by arbitration in London. By clause 18, that the freight should be paid in London in British sterling: 90 per cent. within seven days of submission of the necessary freight bill and the balance after completion of settlement of demurrage/despatch. By clause 19, that freight should be calculated at various rates in U.S. dollars per ton of cargo depending on the charterer's choice of ports for loading and discharge. By clause 28, how lay time should be calculated and that lay time for loading and discharging should be reversible.
Clause 30 of the charter further provided:
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"(A) Freight … is payable in British external sterling … in London … at the mean exchange rate ruling on bill(s) of lading date.
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(B) The mean exchange rate ruling on bill of lading date will also apply to other related payments/settlements including demurrage/despatch settlements under this charterparty and will apply in all cases where payments/settlements are effected in currency other than the currency in which the rates of freight and demurrage/despatch are indicated in the charterparty.
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(C) In cases where there is more than one bill of lading in respect of a shipment the mean exchange rate as above will be applicable to the calculation of freight under each bill of lading. For the purpose of demurrage/despatch and other related payments, the exchange rate applicable will be the simple average of the mean exchange rates adopted for freight calculations.
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(D) Demurrage/despatch and any other payments under this charterparty shall also be made in British external sterling."
By his award the umpire decided as follows. (1) That the ship had been on demurrage for 28 days 1 hour and 47 minutes of which only 24 days and 47 minutes had been admitted and paid for by the charterer, leaving 4 days and 1 hour still to be paid for by him. (2) That the amount of demurrage payable in respect of this period of 4 days and 1 hour, calculated at the prescribed rate of $6,000 per day and pro rata, was $24,250. (3) That the rate of exchange on the date of the bills of lading was $1.54 = £1.00. (4) That the charterer was under an obligation to settle and pay for demurrage within two months of the completion of discharge. (5) That the owners were entitled to recover, as damages for late payment of the outstanding demurrage, the loss suffered by them by reason of sterling having depreciated from a rate of $2.37 = £1.00 at the bills of lading date to $1.54 = £1.00 at the date of the award. (6) That, in order to give effect to this right of recovery, the sum of $24,250 referred to earlier should be converted into sterling, not at the rate of $2.37 = £1.00 prevailing at the bills of lading date, but at the rate of $1.54 = £1.00 prevailing at the date of the award, producing a sum payable by the charter of £15,746.75 to which interest should be added.
While the above represents a summary of what the umpire decided, I think that I should set out in full two passages from the reasons for his award given by him. Paragraph 4.2 of the reasons reads:
"On the date of the bills of lading the rate of exchange was about $2.37 = £1.00. At the present time it is about $1.54 = £1.00. Thus, if, as charterers contended, conversion of the amount awarded is made at the rate as at the bill of lading date, owners will suffer a considerable loss. Charterers were in breach in not making payment at the proper time, and the damages for that breach is the difference between the respective rates of exchange, and I have awarded accordingly."
Paragraph 8.2 of the reasons reads:
"The demurrage should have been settled and paid within two months of the completion of discharge, i.e. by 11 December 1980. …"
It was common ground between the parties before your Lordships that the sum of £15,746.75 awarded by the umpire in respect of demurrage, though not so expressly described in the award, must be regarded as comprising two separate elements: first, $24,250 converted at $2.37 = £1.00, which comes to £10,232.07 ("the demurrage element"), and, secondly, the difference between $24,250 converted at $1.54 = £1.00 and at $2.37 = £1.00, which comes to £5,514.68 ("the damages element").
The charterer's case before your Lordships was that the umpire was wrong in law in deciding that demurrage should have been settled and paid for two months after completion of discharge, and, on that ground, in adding the damages element to the demurrage element. It was, however, also common ground that, assuming that the umpire was right in law about these two matters, he should have calculated the damages element by reference to the rate of exchange prevailing two months after completion of discharge, i.e. 11 December 1980, rather than the rate of exchange prevailing on the bills of lading date. The rate of exchange prevailing on 11 December 1980 was $2.32 = £1.00. If that rate is taken, the damages element is reduced from £5,514.68 to £5,294.16, and the total of both elements from £15,746.75 to £15,526.23.
My Lords, by order dated 15 July 1983 Hobhouse J. gave the charterer leave to appeal on a question of law which was, in effect, whether the umpire was right in law, in dealing with the owners' claim in respect of demurrage, to add the damages element to the demurrage element.
On 26 July 1984 the appeal came before Lloyd J., whose judgment is reported [1985] 2 Lloyd's Rep. 180. He took the view that the principle laid down by your Lordships' House in President of India v. La Pintada Compania Navigacion S.A. [1985] A.C. 104; [1984] 3 W.L.R. 10 in relation to claims to recover interest as damages for late payment applied equally in relation to claims to recover currency exchange losses as damages for late payment. That principle was that interest could be recovered as damages for late payment if it was special damage which could be brought within the second part of the rule in Hadley v. Baxendale (1854) 9 Exch. 341, but not if it was general damage which could only be brought within the first part of that rule. Lloyd J., being of that opinion and considering also that the umpire's reasons for his award left it in doubt whether he regarded the owners' currency exchange loss as coming within the first or second part of the rule in Hadley v. Baxendale, by order dated 30 July 1984 allowed the appeal to the extent of remitting the award to the umpire in order that he should reconsider the matter and resolve that doubt.
As a result of the remission the umpire made a further award dated 23 November 1984. In it he set out a series of further findings of fact on the basis of which he said that, in his view, the currency exchange loss suffered by the owners was special damage coming within the second part of the rule in Hadley v. Baxendale. Paragraph 15 of his further award reads:
"The provisions of clause 30 apply, for better or for worse, where the contract is correctly performed; but they do not apply to a breach. I have already found that charterers were in breach in not making payment timeously."
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