Re New Zealand Shipping Company and Societe des Ateliers et Chantiers de France
| Jurisdiction | UK Non-devolved |
| Judgment Date | 1917 |
| Court | House of Lords |
| Date | 1917 |
Contract - Construction - Contract to be “Void” in a certain Event - Void or Voidable.
By a contract made in 1913 a French company (called the builders) agreed to construct a steamer for a shipping company (called the purchasers) to be completed by January 30, 1915, subject to an extension of time if the construction was delayed by an unpreventable cause beyond the control of the builders; and in case the builders should be unable to deliver the steamer within, in the event of France becoming engaged in a European war, eighteen months from the date agreed by the contract for completion, “thereupon this contract shall become void and all money paid by the purchasers shall be repaid to them” with interest at 5 per cent.
On August 2, 1914, while the steamer was in course of construction, France became engaged in a European war, and had ever since continued to be so engaged; and the builders had been prevented by unpreventable causes beyond their control from completing the steamer by January 30, 1915, and had ever since been prevented by the same causes. On the expiration of the eighteen months on July 30, 1916, the question arose whether the builders were entitled to treat the contract as null and void, notwithstanding that the purchasers required the builders to complete and deliver the vessel.
Held, that the contract became void and not merely voidable at the option of the purchasers, and that as the avoidance of the contract had not been brought about by any wrongful act or default on the part of the builders, the latter were not precluded from alleging that the contract was void.
A stipulation in a contract that it shall be void in a certain event is to be construed according to its natural meaning, subject to the principle of law that a party shall not take advantage of his own wrong or, semble, of an event brought about by his own act or omission.
APPEAL from a decision of the Court of Appeal (Viscount Reading C.J., Pickford L.J., and Scrutton L.J.)F1 affirming a decision of Bailhache J. upon an award stated by an umpire in the form of a special case.
The dispute between the parties arose under a contract dated March 6, 1913, between the appellants as purchasers and the respondents as builders, whereby the respondents agreed to construct a steamer for the appellants on the terms and conditions therein mentioned.
The terms of the contract and the facts which gave rise to the dispute are fully stated in the report of the case before the Court of Appeal and in the judgment of the Lord Chancellor.
1918. March 19, 21, 26. Leck, K.C., and Simey for the appellants.
1. Upon the true construction of this contract the date of completion had not arrived at the date of the award. Clause 5 of the contract provides for an extension of the time for completion where the construction is delayed by any unpreventable cause beyond the control of the builders, and the date of completion cannot be ascertained until the extension of time provided by that clause has been exhausted.
2. Clause 12, which provides for the avoidance of the contract in certain events, is a stipulation in favour of the purchasers, the appellants, and the contract does not become automatically void on the happening of those events, but is voidable at the option of the appellants. Any other construction of the clause would enable the builders to treat the contract as void, although the event was brought about by their own default. But that is contrary to the well established principle of law that a provision for the avoidance of a contract will not be so construed as to enable one of the parties to take advantage of his own wrong: Rede v. FarrF2; Doe v. BancksF3; Hughes v. Palmer.F4
Douglas Hogg, K.C. (with him F. T. Barrington Ward and Captain Jacques Quartier, E.M.A. French Army), for the respondents (called upon as to the second point only).
In all cases where “void” has been construed as “voidable,” at the option of one of the parties, the ground for adopting that construction is that a party shall not be entitled to take advantage of his own wrong; but here the respondents have committed no wrong, and therefore there is no ground for construing the stipulation for avoidance otherwise than in its natural and ordinary meaning: Grey v. PearsonF5; Hughes v. PalmerF6; Magdalen Hospital v. Knotts.F7
Leck, K.C., replied.
The House took time for consideration.
April 25. LORD FINLAY L.C. My Lords, this is an appeal from the decision of Bailhache J. upon an award stated in the form of a Special Case for the opinion of the Court.
The appellants agreed to purchase from the respondents a steamship to be constructed for them by the respondents in terms of a contract dated March 6, 1913. The price was to be 98,450l., payable by instalments. The clauses material for the purpose of this appeal are set out in the Special Case, and are as follows: “5. The said steamer unless the construction thereof shall be delayed by fire, strike, or lock-out of workmen, or any other unpreventable cause beyond the control of the Builders (in which case a fair proportionate extension of time shall be allowed), shall be completed ready for trial by the 30th October, 1914, and delivered afloat as usual in the port of Dunkirk free of dock and other dues as soon as such trial has been completed to the satisfaction of the Purchasers or their representatives.” “7. In the event of the said vessel not being completed and ready for trial on or before 30th October, 1914, …. the Builders undertake to pay the Purchasers as liquidated damages the sum of 10l. per working day for each working day during which such delivery may be delayed beyond the 30th October, 1914, unless such delay is due to any of the causes specified in clause 5 hereof ….” “12. In case the Builders become bankrupt or insolvent or shall fail or be unable to deliver the steamer within eight months from the date agreed by this contract, thereupon this contract shall become void and all money paid by the Purchasers shall be repaid to them with interest accrued thereupon at 5 per cent., and that without it being necessary for the Purchasers to take any legal action for the recovery of this money. The Builders will hand to the Purchasers the guarantee of a Bank who will undertake to repay this money in the event of its becoming due as stated above. Except only in the event of France becoming engaged in a European war, then the above limit of eight months shall be extended equal to the duration of the said war, but in no case to exceed eighteen months in all.”
The date, January 30, 1915, was subsequently substituted in the contract for October 30, 1914, as the date by which the vessel was to be completed ready for trial.
The vessel was in course of construction when on August 2, 1914, France became engaged in the present European war. It is found as a fact in the Special Case that the builders were prevented by unpreventable causes beyond their control within the meaning of clause 5 from completing the vessel ready for trial by January 30, 1915, and had ever since been prevented by the same causes.
It was contended by the respondents — the builders — that the eighteen months mentioned in clause 12 began to run on January 30, 1915, and therefore expired on July 30, 1916, while the appellants — the building owners — contended that the eighteen months would not begin to run until the builders were in default on the expiration of the extension of time allowed by clause 5 in case of delay caused by unpreventable causes. It was further contended by the respondents, the builders, that in the events which have happened...
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