Tehno-Impex v Gebr. Van Weelde Scheepvaartkantoor B.v
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE OLIVER,LORD JUSTICE WATKINS |
| Judgment Date | 12 March 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J0312-2 |
| Docket Number | 81/0112 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 March 1981 |
[1981] EWCA Civ J0312-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
(MR. JUSTICE PARKER)
IN THE MAT TER OF THE ARBITRATION ACT 1950
AND IN THE MATTER OF AN ARBITRATION
Royal Courts of Justice.
The Master of the Rolls
(Lord Denning)
Lord Justice Oliver and
Lord Justice Watkins
81/0112
MR. R.J.P. AIKENS (instructed by Messrs. William Crump & Son) appeared on behalf of the Claimants (Respondents).
MR. STUART BOYD and MR. JEFFREY GRUDER (instructed by Messrs. Thomas Cooper & Stibbard) appeared on behalf of the Respondents (Appellants).
This case raises a point of the first importance: To what extent are arbitrators in the City of London at liberty to award interest on sums due and unpaid? Especially those who deal with shipping matters. I emphasise shipping matters because this is a shipping case. If it had come before the courts of law, it would have come within the scope of the Admiralty jurisdiction.
THE FACTS
This case arises out of the pile-up of ships off Lagos in 1975 which we considered in Trendtex v. Bank of Nigeria (1977) Queen's Bench at pages 548–9. It led to large sums of money being payable for demurrage. In our present case Dutch shipowners agreed with Yugoslav charterers to carry 350,000 m/tons of cement in bags from Split to Lagos or Port Harcourt. It would take many shipments to take that quantity. They were to be carried between March 1975 and June 1976. Twelve voyages were performed. The rest were suspended. There were many matters in difference. There was a clause saying: "Any dispute arising out of or relating to this Charterparty shall be referred to the Arbitrator in London". The differences were referred to the arbitrator Mr. Clifford Clark, who is one of the most experienced of London maritime arbitrators. He made an interim award raising the point about interest. There were cross-claims:
The Yugoslav charterers said that they had paid too much demurrage on a vessel which had performed the twelfth voyage. They had paid $30,000 under a mistake of fact.
The Dutch shipowners said that a lot of demurrage had become payable on the vessels on the twelve voyages. The clause under which it was payable was in these words:
"Demurrage to be paid at the rate of $40 per m/ton loaded at discharging port…Demurrage at discharging port will be paid within 15 days after receiving Statement of Facts from discharging port, if vessel has maximum 15 days of demurrage. If vessel has over 15 days of demurrage at discharging port, demurrage will be paid every 15 days of demurrage incurred and final settlement of demurrage will be settled within 15 days after receiving Statement of Facts from discharging port for each vessel".
The Yugoslav charterers were very late in making payments of demurrage. The Dutch shipowners kept a schedule for every vessel showing the amount due every 15 days as required by the charter: the date when payment was received: and the days overdue. Sometimes payment was only a few weeks late: but sometimes as much as six months.
Now comes the point. The arbitrator awarded interest to the charterers on the sum of $30,000 which they had overpaid at 7 1/2 per cent from the date of payment, 1st January, 1977, to the date of his award on the 13th August, 1979. But he awarded no interest to the shipowners on the sums which were paid late by the charterers during the period from 1975 to 1976—before the arbitration was started.
The arbitrator gave his reasons in his award. He felt that he was bound by a rule of law to refuse interest to the shipowners on the late payments, but he added:
"I wish to make it clear that the rule, if it be the rule, that in the absence of a term in the contract to the contrary effect, a debtor can delay payment as long as he likes, and can avoid liability for interest by paying the principal sum at any time, is one which does not accord with justice nor commercial commonsense, especially in times of acute shortage of cash".
I have no doubt that the arbitrator made his interim award in that form because he wanted the courts to decide whether or not maritime arbitrators in the City of London can award interest on late payments. That is what has happened. The shipowners moved to set aside the award on the ground that it was bad in law on the face of it. Mr. Justice Parker refused to set it aside. The shipowners appeal to this court.
The cases can be divided into three categories: Category I are those cases where the principal sum has not been paid before the award, and the claimant claims both the payment of the principal sum and also interest on it. Category II are those cases where the principal sum has been paid after the commencement of the arbitration, but before the making of the award: late—in breach of contract—and the claimant claims interest or damages for the period during which it was outstanding. Category III are those cases where the principal sum has been paid before the commencement of the arbitration, and the claimant claims interest for the period of delay.
CATEGORY I: PRINCIPAL SUM NOT PAID BEFORE THE AWARD THE COMMON LAW COURTS
At the time when the common law courts were developing their rules about interest, sterling was a stable currency. Inflation was unknown. Interest was regarded by many with opprobrium. It was stigmatised as usury. But the commercial community viewed it with favour. Blackstone said in 1765 in his Commentaries, Book II, page 456, "that the allowance of moderate interest tends greatly to the benefit of the public, especially in a trading country, will appear from the generally acknowledged principle, that commerce cannot subsist without mutual and extensive credit".
At the same time, it must be remembered that all actions in the common law courts were tried by juries. If a creditor suffered damage by being kept out of his money, it was for the jury to assess his loss. Two of our great Chief Justices would have allowed juries to award interest as damages. Lord Mansfield in Eddowes v. Hopkins (1780) 1 Douglas at page 376; and Chief Justice Best in Arnott v. Redfern (1826) 3 Bing. at page 360. But in 1829 Lord Tenterden, C.J. ruled otherwise. He thought it very undesirable that interest should be given by juries because it "would be productive of great inconvenience". So he held that "interest is not due on money secured by a written instrument unless it appears on the face of the instrument that interest was intended to be paid or unless it be implied from the usage of trade, as in the case of mercantile instruments".
Having laid down that rule, however, he took steps in Parliament to modify it. But only in the case of trial by jury. Lord Tenterden's Act 1833 allowed a jury to award interest "upon all debts or sums certain payable at a certain time": or "otherwise" if a notice in writing were given to the debtor demanding interest. That Act did not give as much help to creditors as might be hoped. This was because of the very restrictive interpretation put by the courts on the words "a sum certain" and "a certain time" and the notice of demand. Note that Lord Tenterden both in Page v. Newman and in his statute confined his rules about interest to trial by jury: because of the "great inconvenience" it entailed. He deliberately did not apply his rules to arbitrators. Because he himself with the full King's Bench had already held in 1819 in The Badger (1819) 2 B. & A. 691 that arbitrators could award interest whenever in their discretion they thought proper. To this I will return.
In 1893 the House of Lords in the London, Chatham and Dover Railway Co. v. The South Eastern Railway Co. (1893) Appeal Cases 429 affirmed with reluctance the rule of the common law courts as stated in Page v. Newman. Lord Herschell, L.C. thought that Lord Tenterden's reasoning about "great inconvenience" was not at all satisfactory: but he felt obliged to follow it. The House did not consider the position in arbitrations. If they had done so, I feel that they would have said that Lord Tenterden's reasoning about "great inconvenience" did not apply to arbitrations. Just as Lord Tenterden himself had said in The Badger.
In 1934 the Law Reform Act allowed interest to be given on debt or damages but it did not apply to arbitrations. It was expressly confined to "any proceedings tried in any court of record". And the Act only applied where judgment was given for the principal sum. Interest was to be "included in the sum for which judgment is given". Many astute debtors have taken advantage of this. They delay for months before writ is issued. They delay for many more months till the action is about to come to trial. Then they pay the principal at the last moment before judgment. And thus get out of paying any interest.
Such unscrupulous conduct should not be allowed in commercial arbitrations. It can be done by holding that the rules in the common law courts do not apply to arbitrations.
THE CHANCERY COURTS
There were never any juries in the Chancery courts. So the rules in Page v. Newman never applied to them. We recently had occasion to consider the practice of the Chancery courts in Wallersteiner v. Moir (1975) Queen's Bench at pages 388, 406. We there held that the court in its equitable jurisdiction could award interest when it was considered equitable to do so. This is a most flexible jurisdiction. It should not be—and is not—limited by the strict rules of the common law courts or the 1934 Act.
THE ADMIRALTY COURT
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