President of India v Lips Maritime Corporation (Lips)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NEILL,LORD JUSTICE NICHOLLS |
| Judgment Date | 31 October 1986 |
| Judgment citation (vLex) | [1986] EWCA Civ J1031-3 |
| Docket Number | 86/0981 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 October 1986 |
[1986] EWCA Civ J1031-3
Lord Justice Neill
Lord Justice Nicholls
and
Sir Roualeyn Cumming-Bruce
86/0981
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT (MR. JUSTICE STAUGHTON)
Royal Courts of Justice.
MR. S. GEE (instructed by Messrs Richards, Butler & Co.,) appeared on behalf of the Appellants (Claimants).
MR. R. BUCKLEY Q.C. and MR. R.A. GLENNIE (instructed by Messrs Zaiwalla & Co.) appeared on behalf of the Respondents (Respondents).
This case has an unusual history, and though the sum at stake is quite small, the point at issue is of importance.
The appeal is brought pursuant to the leave of Staughton J. granted on the 3rd April, when he gave leave under section 1(7)(a) of the Arbitration Act 1979 to appeal both from his own decision of that date and from the earlier decision of Lloyd J. (as he then was) dated 30th July 1984. At the same time Staughton J. certified that the question of law to which his decision related was one of general public importance.
The question of law was not formulated, however, in the order of the court and I shall have to examine the ambit of the question a little later.
On the 1st July 1980, the President of India (whom I shall call "the charterer") chartered the m.v. LIPS, owned by the LIPS MARITIME CORPORATION (whom I shall call "the owner") to carry a cargo of diammonium phosphate from Mississippi ports to India.
The charterparty provided in clauses 19 and 9 respectively that freight and demurrage were to be calculated in US dollars. By clause 18, however, it was provided that freight should be paid in London in British sterling. By clause 30 it was provided that demurrage should be paid in British external sterling at the mean exchange rate ruling on the date of the bill of lading.
The charterparty also contained an arbitration clause providing for the reference of any dispute to two arbitrators in London, each party appointing an arbitrator, and the arbitrators in the event of disagreement appointing an umpire, the arbitrators to be commercial men.
The vessel completed loading at Donaldsonville on the 8th July 1980. She discharged at Visakhapatnam and at Calcutta, discharge being completed on the 11th October 1980 after some considerable delay.
The parties were unable to agree, however, as to the period of time for which demurrage was payable and the dispute was referred to arbitration.
On the 22nd February 1983 the umpire, who had entered on the reference when the two arbitrators nominated by the parties had failed to reach agreement, published the final award. He awarded the owners the sum of £19,896.14 which included interest amounting to £4,658,28.
The umpire found that the vessel was on demurrage for 28 days 1 hour 47 minutes of which 24 days 0 hours 47 minutes had been admitted and paid for by the charterer. He therefore awarded damages at the agreed rate of $6,000 a day for a period of four days and 1 hour. This calculation resulted in a figure of $24,250 which the umpire converted into sterling at the rate of exchange prevailing at the date of his award (1.54 dollars = £1) thus producing a starting sum, from which certain commission fell to be deducted, of £15,746.75.
Before the umpire it was argued on behalf of the owner that the award should be made in US dollars. On behalf of the charterer it was argued that if the award was in sterling the conversion rate should be the rate at the date of the bills of lading (2.37 = £1).
The umpire rejected both these arguments in paragraph 4 of his reasons: " In what currency should the claim be awarded?
Exchange rate losses.
4.1 The currency of account was United States dollars (see clause 19 in respect of freight and clause 9 in respect of demurrage); the currency of payment was British sterling (see clauses 18 and 30). Accordingly, it is in my view correct that the calculations under this Award should be made in United States dollars which must then be converted to British sterling and the Award made in the latter currency.
"4.2 On the date of the Bills of Lading the rate of exchange was about $2.37 = £1. At the present time it is about $1.54 = £1. 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."
The charterer was dissatisfied with the decision of the umpire and sought leave to appeal. The relevant part of the notice of motion dated the 14th March 1983 sought an order: "That the said award be varied (a) so as to provide in paragraph 4 of the reasons attached thereto that the correct conversion rate to be adopted is $2.37 = £1 and to state that the Charterers (Applicants) are not liable by way of damages or otherwise for all or any part of the difference between that rate of exchange and the rate of exchange prevailing at the time of the Award."
On the 15th July 1983, Hobhouse J. granted leave to appeal the award in respect of paragraph 3(a) of the motion. It is to be observed that in the notice of motion the grounds of the application and of the intended appeal were stated so far as material to be as follows: "(A) As to the exchange rate point, that the umpire was wrong in law (i) in holding that the appropriate conversion rate was $1.54 = £1 rather than $2.37 = £1; (ii) that the umpire in so holding disregarded the express terms of clause 30 of the charterparty; (iii) that the umpire was wrong in law in holding that the applicants were liable in damages for the difference between the two exchange rates; and/or (iv) even if the umpire was right in principle in holding that the applicants were liable in damages, the damages awarded should not have been based on the difference between the exchange rates (at) the date of the bill of lading and at the time of the award which should have been based on the difference between such rates at the time when demurrage ought to have been paid and at the time of the award."
On the 26th July 1984 the appeal came before Lloyd J. On the 30th July the judge remitted the Final Award to the umpire for further consideration of paragraph 4.2 of the reasons. In his reserved judgment delivered on the 30th July the judge said this: "I am bound to say that when I first read (paragraph 4.2), it seemed to me inevitable that I should have to allow this appeal. For there is no better established rule of English common law than the rule that a creditor cannot, in the absence of some express or implied agreement recover damages for late payment of a debt: see Page v. Newman (1829) 9 B & C 378; The London, Chatham and Dover Railway Company v. The South Eastern Railway Company (1893) AC 429 and The President of India v. La Pintada Compania Navigacion SA (1984) 3 WLR 10.
"But the rule, so stated, is not without exceptions. It forbids the recovery of general damages for late payment of a debt, but not special damages: see Trans Trust SPRL v. Danubian Trading Co Ltd (1952) 2 QB 297 per Denning L.J. at p306, and Wadsworth v. Lydall (1981) 1 WLR 598.
"In that case (the latter) Brightman L.J. said: 'If a plaintiff pleads and can prove that he suffered special damage as a result of the defendant's failure to perform his obligation under a contract, and such damage is not too remote on the principle of Hadley v. Baxendale (1854) 9 Exch 341, I can see no logical reason why such special damage should be irrecoverable merely because the obligation on which the defendant defaulted was an obligation to pay money and not some other type of obligation.'
That decision was expressly approved by the House of Lords in the President of India (case). The effect of that approval has been, as Lord Brandon observed, to reduce considerably the scope of The London, Chatham and Dover Railway Company case as previously understood.
"The difference between general damages and special damages in this connection is the difference between damages recoverable under the first part of the rule in Hadley v. Baxendale i.e. damages foreseeable as flowing naturally and probably from the breach of contract in the ordinary course of events; and damages recoverable under the second branch of that rule, i.e. damages foreseeable in the particular circumstances of the case because of special matters known to both parties at the time of making the contract.
"It is not clear from paragraph 4.2 of the Award….. whether the Umpire regarded the damages which he has awarded as coming within the first or second branch of the rule. This is not altogether surprising since he had made his award and composed his reasons before the decision of the House of Lords in the President of India case. If, as I suspect, the Umpire regarded the case as coming within the first branch of the rule, i.e. general damages foreseeable as flowing naturally and probably from the late payment, then, on the authority of the President of India case, his conclusion was wrong in law. On that view, the claimants would be limited to recovering simple interest under s.19(a) of the Arbitration Act, 1950, by virtue of s. 15 of the Administration of Justice Act, 1982.
"But if, on the other hand, the Umpire thought that the case could be brought within the second branch of the rule in Hadley v. Baxendale, i.e. special damages foreseeable...
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