Reardon Smith Line Ltd v Yngevar Hansen-Tangen (trading as H. E. Hansen-Tangen)

CourtHouse of Lords
JudgeLord Wilberforce, Viscount Dilhorne, Lord Simon of Glaisdale, Lord Kilbrandon, Lord Russell of Killowen
Judgment Date07 Oct 1976
JurisdictionEngland & Wales

[1976] UKHL J1007-1

House of Lords

Lord Wilberforce

Viscount Dilhorne

Lord Simon of Glaisdale

Lord Kilbrandon

Lord Russell of Killowen

Reardon Smith Line Limited
(Appellants)
and
Hansen-Tangen (Trading as H. E. Hansen-Tangen)
(Respondents)
Hansen-Tangen (Trading as H. E. Hansen-Tangen)
(Appellants)
and
The Sanko Steamship Company
(Respondents)
[Conjoined Appeals]

Upon Report from the Appellate Committee, to whom was referred the Cause Reardon Smith Line Limited against Hansen-Tangen (trading as H. E. Hansen-Tangen), That the Committee had heard Counsel, as well on Wednesday the 14th, as on Thursday the 15th, Monday the 19th, Tuesday the 20th, Wednesday the 21st and Thursday the 22d, days of July last, upon the Petition and Appeal of Reardon Smith Line Limited whose registered office is situate at Greyfriars Road, Cardiff, CF1 1RT praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 29th of March 1976, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, and that the Petitioners might have the relief prayed for in the Appeal, or such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament, might seem meet; as also upon the Case of Yngvar Hansen-Tangen (trading as H. E. Hansen-Tangen), lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal of the 29th day of March 1976, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal such Costs to include the Costs ordered to be paid by the said Respondents to The Sanko Steamship Company in the Cause Hansen-Tangen (trading as H. E. Hansen-Tangen) against The Sanko Steamship Company, the amount thereof to be certified by the Clerk of the Parliaments.

Upon Report from the Appellate Committee, to whom was referred the Cause Hansen-Tangen (trading as H. E. Hansen-Tangen) against The Sanko Steamship Company, That the Committee had heard Counsel, as well on Wednesday the 14th, as on Thursday the 15th, Monday the 19th, Tuesday the 20th, Wednesday the 21st and Thursday the 22d, days of July last, upon the Petition and Appeal of Yngvar Hansen-Tangen (trading as H. E. Hansen-Tangen) of P.O. Box 22, No. 4801, Kristiansand S. in the Kingdom of Norway, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 29th of March 1976, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, and that the Petitioners might have the relief prayed for in the Appeal, or such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament, might seem meet; as also upon the Case of The Sanko Steamship Company, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal of the 29th day of March 1976, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Wilberforce

My Lords,

1

These appeals arise out of a charterparty and a sub-charterparty both relating to a medium sized new-building tanker to be constructed in Japan. By the time the tanker was ready for delivery the market had collapsed, owing to the oil crisis of 1974, so that the charterers' interest was to escape from their contracts by rejecting the vessel. The ground on which they hoped to do so was that the vessel tendered did not correspond with the contractual description.

2

Both charterparties were on the well known form Shelltime 3. The result of the appeal depends primarily upon the view taken of the sub-charterparty between the appellants in the first appeal ("Reardon Smith") and the respondents in that appeal ("Hansen-Tangen"), but, for the issue to be understood, it is necessary first to state some dates.

3

In 1972 the respondents in the second appeal ("Sanko"), a Japanese company, formed the "Sanko plan" which was a project for the construction in Japanese yards of some 50 tankers of about 80,000 tons each which would be placed on charter by Sanko. At this time the market was strong. Before any vessels were actually built or even started Sanko arranged a number of charters—called "fixtures"—defining the contractual terms of hire, the actual ships covered by each of them to be nominated later by Sanko. One such charter was that between Sanko and Hansen-Tangen (referred to in these proceedings as the "intermediate charter"). It was dated 15th August 1972. Clause 41 contained the following (emphasis supplied):

"This Charter Party, subject to what is hereinafter stated, is for a motor tank vessel to be built at a yard in Japan to be declared by Owners, (s.c. Sanko) together with the applicable Hull Number for the vessel within 30th June, 1973…."

4

Clause 42 conferred an option (not exercised) to nominate a slightly smaller vessel …"Owners to declare name of shipyard and Hull Number … at the time such option … is exercised".

5

The description of the vessel—warranted by the owners—was (as provided by Clause 24) set out in Form B which is a standard form giving very detailed particulars about the ship, its equipment and performance. It is to be assumed for the purposes of these appeals that the vessel tendered complied in all respects with these requirements, and that therefore the charterers got precisely the kind of ship they wanted of precisely the "description" stipulated.

6

On 28th March, 1973, by which time progress had been made with the plan, Sanko as charterers entered into a charterparty with a Liberian company called Sculptor as "owners" for "the good newbuilding tank vessel called Osaka Shipbuilding Co., Ltd. Hull No. 354 until named". This charterparty also contained a Form B in the same form as in the intermediate charter. Osaka Shipbuilding Co., Ltd. is a substantial and reputable Japanese shipbuilding company with a yard at Osaka, which, however, could not build ships exceeding 45,000 tons. (The vessel contracted for was of about 88,000 tons.) So at this point, as the document shows, the vessel to be taken by Sanko, and passed on by Sanko to charterers from Sanko had gained an identity, not a physical identity, since construction had not yet started, but an identity in contracts and in order books.

7

Following on this, Sanko nominated the vessel to perform the intermediate charter. This was done by an Addendum so that charterparty dated 10th August, 1973, which also altered the duration of the intermediate charter and the hire payments to be made under it. The nomination was made in the following terms:

"With reference to Clause 41 and 42 of [the intermediate charter] the vessel to perform this Charter is to be built by Osaka Shipbuilding Co. Ltd. and known as Hull No. 354, until named, and shall have a dead-weight of about 87,600 … (other details follow)".

8

Soon after this, on 12th October, 1973, the sub-charter between Hansen Tangen and Reardon Smith was signed. I set out the Preamble having underlined the words which were added to the printed form.

"It is this day agreed between H. E. Hansen-Tangen of Kristiansands, Norway (hereinafter referred to as 'Owners') being Disponent Owners of the good Japanese flag (subject to Clause 41) Newbuilding motor tank vessel called Yard No. 354 at Osaka Zosen [Zosen=shipbuilding] (hereinafter referred to as 'the vessel') described as per clause 24 hereof and Reardon Smith Line Limited of Cardiff (Sir William Reardon Smith and Sons Ltd. of Cardiff—Managers) (hereinafter referred to as 'Charterers')".

9

The charterparty contained a Clause 24 and Form B similar to the intermediate charter.

10

Parallel with these charier agreements were a number of contracts and arrangements concerning the building of the vessel. It is not necessary to specify these in detail. Osaka Shipping Co. Ltd. ["Osaka"] was, as I have mentioned, unable to build a vessel of 80,000 tons in its Osaka Yard so it set about arranging for a new yard to be built at Oshima, which is on the island of Kyushu about 300 miles from Osaka. The method chosen was for Osaka to enter into a joint venture with two companies of the powerful Sumitomo Group followed by the formation of a new company called Oshima Shipbuilding Ltd. ("Oshima") in which Osaka had a 50 per cent. interest and two Sumitomo companies the other 50 per cent. Oshima took over responsibility for building the new yard. A series of contracts was entered into by which the Liberian company Sculptor ordered the vessel from a Sumitomo company, which agreed to build it by sub-contract with Osaka; the Sumitomo company placed a ship-building contract with Osaka; and Osaka placed a shipbuilding (sub) contract with Oshima. As mentioned above it was Sculptor from whom Sanko chartered the vessel on 28th March, 1973. As regards Oshima, a large part of its work...

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