Scandinavian Trading Tanker Company A.B. v Flota Petrolera Ecuatoriana (Scraptrade)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Diplock,Lord Keith of Kinkel,Lord Scarman,Lord Roskill,Lord Bridge of Harwich
Judgment Date30 June 1983
Judgment citation (vLex)[1983] UKHL J0630-2
Date30 June 1983

[1983] UKHL J0630-2

House of Lords

Lord Diplock

Lord Keith of Kinkel

Lord Scarman

Lord Roskill

Lord Bridge of Harwich

Scandinavian Trading Tanker Co. A.B.
(Respondents)
and
Flota Petrolera Ecuatoriana
(Appellants)
Lord Diplock

My Lords,

1

In this appeal between the appellant ("the Charterers") and the respondent ("the Owners") of the tanker Scaptrade, your Lordships have heard argument upon one question only:

"Has the High Court any jurisdiction to grant relief against the exercise by a shipowner of his contractual right, under the withdrawal clause in a time charter, to withdraw the vessel from the service of the charterer upon the latter's failure to make payment of an instalment of the hire in the manner, and at a time that is not later than, that for which the withdrawal clause provides?"

2

I call this the jurisdiction point.

3

Since, at the conclusion of the argument on the jurisdiction point your Lordships were unanimously of opinion that there is no such jurisdiction, it became unnecessary to consider whether Lloyd J., who tried the case at first instance in the Commercial Court and was willing to assume that he did have jurisdiction to grant relief in his discretion, exercised that discretion in a manner that was erroneous in law when he refused to grant relief to the Charterers. I call this the discretion point.

4

The time charter concerned was on the standard printed "Shelltime 3" form with typed additions that are not material to the question that your Lordships have to decide. This form of charter party is expressed to be governed by the law of England, and to be subject to the jurisdiction of the English court. The relevant wording of the payment of hire clause, which, as is usual in most standard forms of time charter, incorporated the withdrawal clause was:

"Payment of the said hire shall be made in New York monthly in advance … In default of such payment Owners may withdraw the vessel from the service of Charterers, without prejudice to any claim Owners may otherwise have on Charterers under this charter."

5

The charter had become by extension a three-year charter. In July 1979 when it had still a year to run the freight market was rising steeply. The Charterers were unfortunate enough, through some slip-up in their own office, to fail to pay on 8th July 1979 the instalment of hire due upon that date. Four days later, on 12th July, the Owners gave notice to the Charterers withdrawing the vessel. Tender of the overdue hire was made on the following day but was refused. After negotiations had taken place, the vessel was rechartered by the Owners to the Charterers on a "without prejudice" agreement of the usual kind, the rate of hire ( i.e. charter rate or market rate) to abide the result of litigation, which in the event, came before Mr. Justice Lloyd.

6

My Lords, the jurisdiction point which your Lordships have to decide is a compact one. In order to deal with it I see no need to mention any more facts than those that I have now stated; although there were other issues that were canvassed at the trial, some of which were canvassed again in the Court of Appeal. That being so, I should like to say how helpful I have found both the typewritten summary of the propositions intended to be developed, and the chronological table of relevant events, that leading counsel for the charterers handed in at the beginning of his oral argument. This response to suggestions that have recently been made in this House has shown how useful it can be in shortening the time needed for the hearing and in concentrating the attention of your Lordships (and of counsel) upon those points that are essential to the argument that is being presented.

7

Mr. Justice Lloyd adopted the course that he had previously adopted in The Afovos [1980] 2 Lloyd's Rep. 469. He assumed that the jurisdiction point could be decided in the Charterers' favour; but on the particular facts he decided against them on the discretion point. The Charterers appealed to the Court of Appeal. The Court of Appeal, while expressing doubt as to the adequacy in law of the judge's reasons for refusing to grant relief in the circumstances of the case, if there were vested in him a discretion to grant it, decided against the Charterers on the jurisdiction point, and dismissed their appeal.

8

My Lords, the judgment of the Court of Appeal, delivered by Robert Goff L.J., on the jurisdiction point was the first direct decision by any English court, given after hearing argument, upon the question that I have set out at the beginning of this speech. For reasons admirably expressed, and which, for my part, I find convincing, the Court of Appeal held that there was no such jurisdiction. The argument that there was jurisdiction in the court to grant relief against the withdrawal of the vessel from the Charterer's service for default in punctual payment of an instalment of hire pursuant to the terms of the withdrawal clause in a time charter could, however, be supported by certain obiter dicta to be found in speeches in this House; in particular that of Lord Simon of Glaisdale in Mardorf Peach & Co. Ltd. v. Attica Sea Carriers Corporation of Liberia [1977] A.C. 850 at 873–4 ( The Laconia). Since such large sums of money may be at stake when rights to withdraw a vessel under a time charter are exercised at a time of rising freight rates (which, except where insolvency of the charterer is feared, is normally the only time when such rights are exercised), it seemed desirable to the Appeal Committee of this House that leave to appeal should be granted to the charterers, not, I must confess, with any great expectation that fuller consideration would show that on the jurisdiction point the Court of Appeal had got it wrong, but in order that a matter of such practical importance to the shipping world should, by a decision of the highest appellate court, be put beyond reach of future challenge.

9

Apart from a throw-away sentence in the speech of Lord Uthwatt in Tankexpress A/S v. Cie Financière Belge des Pet roles [1949] A.C. 76 at 100, in which he said:

"Courts of equity, indeed, in appropriate cases relieve against failure to pay on a stipulated day",

10

but did not suggest that the operation of a withdrawal clause in a time charter provided a case that was "appropriate", the origin of what I will, proleptically at this stage, describe as a beguiling heresy, which the Court of Appeal rejected in the instant case, is to be found in Lord Simon of Glaisdale's speech in The Laconia. In The Laconia itself the availability of equitable relief had not been raised in the courts below; and since it had not occurred to anyone to invite the judge to exercise a discretion to grant relief, the House had ruled that the point could not be taken in argument in the appeal.

11

I need not cite the passages in Lord Simon of Glaisdale's speech that gave encouragement to future charterers to claim equitable relief against withdrawal of the vessel under a withdrawal clause in a time charter, except to note that after referring to a possible analogy to relief against forfeiture for non-payment of rent under leases of real property he says:

"… in any case, English law develops by applying an established rule of law to new circumstances which are analogous to the circumstances in which the rule was framed."

12

Nor need I cite the passages in the speeches of Lord Wilberforce and Lord Salmon in which the analogy with leases of real property is decried.

13

A time charter, unless it is a charter by demise, with which your Lordships are not here concerned, transfers to the charterer no interest in or right to possession of the vessel; it is a contract for services to be rendered to the charterer by the shipowner through the use of the vessel by the shipowner's own servants, the master and the crew, acting in accordance with such directions as to the cargoes to be loaded and the voyages to be undertaken as by the terms of the charterparty the charterer is entitled to...

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