Ralli Brothers v Compania Naviera Sota y Aznar
| Jurisdiction | England & Wales |
| Judgment Date | 26 March 1920 |
| Date | 26 March 1920 |
| Court | Court of Appeal |
Shipping - Charterparty - Freight - Foreign Law - Conflict of Laws - Mutual Inability of Charterers and Shipowners - Liability of Charterers.
An English firm in July, 1918, chartered a Spanish steamship from the owners, who were a Spanish firm, to carry a cargo of jute from Calcutta to Barcelona at a freight of 50l. per ton, one half to be paid to the owners in London on the vessel sailing from Calcutta and the balance to be paid at Barcelona by the receivers of the cargo, as to one half on arrival of the steamship and the remainder concurrently with the discharge. The freight payable at Barcelona was to be paid in cash or approved bills at charterers' option at the current rate of exchange for bankers' short bills on London. The charterparty, which was made in London, was in English and on the charterers' own form, and the charterers' liability to pay freight was thereby preserved. The charterparty also contained an arbitration clause under which disputes were to be decided by commercial men in London. The steamship sailed from Calcutta and half of the freight was duly paid. She arrived at Barcelona on December 28, 1918, and a sum of money was paid in sterling by the receivers of the cargo. By a decree of the Spanish Commission of Supplies, dated July 2, 1918, confirmed by a Royal Proclamation of September 14, 1918, the freight on jute was not to exceed 875 pesetas per ton. Owing to alterations in the rate of exchange the freight reserved by the charterparty was, at the date of the arrival of the steamship at Barcelona, largely in excess of 875 pesetas per ton. The receivers of the cargo at Barcelona tendered the balance of the freight at the rate of 875 pesetas per ton but refused to pay the balance of the freight reserved by the charterparty. The Spanish owners thereupon claimed to recover the balance of the freight from the charterers in England, notwithstanding that it exceeded the freight limited by Spanish law:—
Held, that the charterparty was an English contract to be construed according to English law, but that as that part of the contract dealing with the obligation of the charterers with regard to the payment of the balance of the freight had to be performed in Spain, and as by the law of Spain the payment of freight above 875 pesetas per ton was illegal, that part of the contract which required the payment of freight in excess of 875 pesetas per ton was invalid and could not be enforced against the charterers.
APPEAL by the shipowners from a decision of Bailhache J.F1
The facts are fully stated in the report of the case in the Court below and may be sufficiently gathered from the above headnote.
R. A. Wright K.C. and Claughton Scott for the shipowners.
Neilson K.C. and Clement Davies for the charterers.
The arguments were substantially the same as those used in the Court below. The following additional authorities were cited: Shepard v. De BernalesF2; Scott v. Lord EburyF3; Castle v. PlayfordF4; Ertel Bieber & Co. v. Rio Tinto Co.F5; Weir & Co. v. Girvin & Co.F6; Rouquette v. OvermannF7; Tapley v. MartensF8; Robinson v. BlandF9; Scrutton on Charterparties, 9th ed., p. 212 n.(h); Dicey on Conflict of Laws, 2nd ed., pp. 553, 563, 564; Foote's Private International Jurisprudence, 4th ed., pp. 358, 367, 424.
March 26. LORD STERNDALE M.R. read the following judgment: This appeal from a judgment of Bailhache J. on an award stated by a commercial umpire, raises a difficult question as to the rights of the parties to a charterparty when the performance of the charter, or part of it, is prevented by the law of the country in which the performance was to take place.
The particular question in this case is as to the amount of freight payable by the charterers to the shipowners. The charter was one for the carriage of a cargo of jute from Calcutta to Spain; the clauses as to freight were as follow: Clause 1. “That the said steamer shall with all possible speed proceed under steam to Calcutta …. and shall there load, in the customary manner at any safe place always afloat, as ordered by charterers or their agents a full and complete cargo of jute, which the said charterers bind themselves to ship, not exceeding what she can reasonably stow and carry over and above her tackle …. and being so loaded shall therewith proceed with all possible speed, under steam, via the Cape of Good Hope to Barcelona, Valencia, Alicante, Cadiz, Pasajes, or Bilbao as ordered on signing final bills of lading, or so near thereto as she may safely get, and there deliver the same, always afloat, on being paid freight at the rate of 50l. per ton of 5 bales of jute.” Clause 18: “Cash at the port of loading, for the expenses of which charterers are to be in no way responsible, not exceeding 2500l. to be advanced the master, if required by him, at the current rate of exchange for three months' documentary bills. Said advance to be a first charge against the total freight earned, and the master to so endorse on the bill of lading the amount advanced, which is to be deducted from freight due under clause 30.” Then clause 25 is: “The freight, except as provided for under clause 30, to be paid at port of discharge on the unloading and right delivery of the cargo; by cash or approved bills (at charterers' option) at the current rate of exchange for bankers' short bills on London.” And clause 30 is: “On receipt of telegraphic advice of steamer's sailing from Calcutta charterers undertake to pay in London to owners or their agents in cash without discount, one half of the total freight earned less any disbursements under clause 18. Such payment to be a first charge against the total freight earned and the master to so endorse on the bill of lading the amount advanced, which is to be deducted from freight due on the vessel's arrival at discharging port. The balance of the freight to be paid at the port of discharge by the receivers of the cargo, one half on the arrival of the vessel and the remainder concurrent with discharge.” There was also an exception clause, containing amongst other exceptions, that of restraint of princes. There was no cessor clause, although clause 30 provided that the balance of freight was to be collected from the receivers of the cargo, the charterers still remained liable in case of non-payment by the receivers. The charter was on the charterers' usual form and was made in London between the charterers and a firm of Sotar & Aznar by telegraphic authority and as agents for the owners, a Spanish company called the Compañia Naviera Sota y Aznar. I have no doubt that it was an English charter and governed by English law.
The umpire has found as a fact that in September, 1918, there came into force in Spain a decree having the force of law fixing the maximum freights payable on jute imported into Spain at 875 pesetas per ton. It appears from the documents produced to us that persons infringing this decree made themselves liable to penalties, the result being, in my opinion, that it became illegal in Spain to pay or receive a higher freight than the maximum fixed by the decree. Messrs. Ralli Bros. had sold the cargo to a firm of Godo & Co. at a price not stated as “c.i.f.,” but the invoice shows that the second half of the freight was to be paid as part of the contract price per ton. We have however nothing to do with the rights existing between the charterers and Godo & Co. When the vessel arrived the receivers tendered freight to the amount which they considered correct at the rate of 875 pesetas a ton, but the shipowners refused to deliver the cargo except upon payment of the charter rate of 50l. a ton. Certain litigation, which it is not necessary to discuss, took place in Spain, and eventually the rights of the shipowners and charterers upon the contract have to be decided upon the case stated by the umpire.
The most important question is as to the obligation imposed upon the charterers in respect of the payment of freight. It is contended by the shipowners that it is an absolute obligation to pay 50l. per ton, and that the subsequent clauses as to payment in Spain are only instructions not altering that obligation. They therefore contend that that part of the contract may be performed in England and that the charterers are therefore liable. I am not sure that, if this were the obligation, the contention would be right. The shipowners are a Spanish company and a debtor must seek his creditor and pay him in his own country. Sota & Aznar, the firm in London, are not the creditors, and have so signed the charter as to prevent their having rights or liabilities under it.
But I do not think that this contention correctly states the charterers' obligation. I think the clauses as to place of payment constitute part of the obligation to pay, and are not merely instructions. The contract and obligation therefore are to pay on delivery in Spain in cash, that is, Spanish currency, or approved bills at the charterers' option. The simultaneous acts of delivery and payment are both to be performed in Spain, and the shipowners are a Spanish company. As I have shown, it was illegal in Spain to pay or receive more freight for imported jute than 875 pesetas a ton, and therefore the performance of the contract was illegal by the law of the place of its performance. In my opinion the law is correctly stated by Professor Dicey in his work on the Conflicts of Laws, 2nd ed., at p. 553, where he says: “A contract …. is, in general, invalid in so far as …. the performance of it is unlawful by the law of the country where the contract is to be performed ……”
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