Vagres Compania Maritima S.A. v Nissho-Iwai American Corporation (Karin Vatis)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SLADE,LORD JUSTICE LLOYD,LORD JUSTICE CROOM-JOHNSON |
| Judgment Date | 21 June 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0621-5 |
| Docket Number | 88/0527 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 June 1988 |
[1988] EWCA Civ J0621-5
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR. JUSTICE LEGGATT)
Royal Courts of Justice
Lord Justice Slade
Lord Justice Croom-Johnson
Lord Justice Lloyd
88/0527
MR. D. B. JOHNSON Q.C. and MR. J. H. S. COOKE (instructed by Messrs. Ince & Co.) appeared for the Appellants (Plaintiffs).
MR. V. V. VEEDER Q.C. and MR. ADAM FENTON (instructed by Messrs. Richards Butler) appeared for the Respondents (Defendants).
I will ask Lord Justice Lloyd to deliver the first judgment.
On or about 16th November 1985 the "Karin Vatis" sank, shortly after passing Suez. She was in the course of a voyage from Liverpool to India, with a cargo of shredded scrap. The charter is dated 9th October 1985 and is on Gencon form. The printed form of Gencon charter provides for the cargo to be delivered at the contractual destination on being paid freight on the delivered/intake quantity at the charter party rate of freight. But the words "on being paid freight" have been struck out from the present charter party, and the rate of freight clause has been left blank. In its place there is an addendum which provides for:
-
(i) a lump sum freight of $715,000
(ii) freight to be deemed earned as the cargo is loaded
(iii) 95 per cent of the freight to be paid within three banking days after completion of loading and
(iv) the balance of 5 per cent to be settled within 20 days after completion of discharge.
The first tranche of freight was duly paid by the charterers before the vessel sank. There is no question of the charterers seeking to recover that part of the freight. But they say that they are not obliged to pay the second tranche of freight, that is to say the balance of 5 per cent, because the time for payment never came. They concede that the debt in respect of that part of the freight became due as the cargo was loaded. But they say that they were not obliged to pay that part of the freight until 20 days after completion of discharge. The debt had accrued due before the vessel sank, but it was not yet payable.
The owners, on the other hand, say that they are entitled to 100 per cent of the freight under the terms of the clause, even though the vessel never arrived.
In due course the owners claimed arbitration. Each side appointed an arbitrator, and the two arbitrators so chosen appointed a third, Mr. Bruce Harris. It is clear from their reasons that they did not find the point an easy one. They say that their minds fluctuated in the course of the hearing and their final conclusion was reached very much on balance. In the event they accepted the charterers' argument and dismissed the owners' claim.
The judge upheld the arbitrators' award. There is now an appeal to this court.
We in this court are always reluctant to disturb the unanimous award of experienced arbitrators as to the meaning of a few ill-drawn provisions in a charter party, especially when their award has been upheld by the Commercial judge. But in this case I find myself taking a different view from the arbitrators and the judge. Before explaining why, I should first set out the clause on which the case turns verbatim. It provides as follows:
"Freight, when due, is payable at the rate of:
Lumpsum Seven Hundred Fifteen Thousand Dollars ($715,000.00) basis one load and one discharge port.
Freight payable in U.S. currency in New York. Freight deemed earned as cargo loaded. Ninety-Five (95%) Percent of freight to be paid within three (3) banking days after completion of loading and surrender of signed Bills of Lading marked: 'FREIGHT PREPAID', discountless and non-returnable, vessel and/or cargo lost or not lost. Balance of freight demurrage/despatch to be settled within twenty (20) days after completion of discharge and Owners' presentation of Laytime Statements from load/discharge ports. Charterers' privilege to deduct undisputed despatch and maximum 3.75% brokerage from ninety-five (95%) percent freight payment."
The ordinary rule, in the absence of express or implied provision to the contrary, is that freight under a voyage charter is not payable until the cargo is delivered or tendered for delivery. That rule, which is reflected in the language of the printed form of Gencon Charter Party and elsewhere, does not depend on considerations which are in any way peculiar to voyage charters. It is common to all types of contract where the consideration is entire. The shipowner promises to deliver the goods at the contractual destination. If he fails to do so he has failed to earn his contractual freight. It matters not that the vessel and cargo have been lost by an excepted peril.
Now there are many ways in which that rule can be excluded but the commonest is to provide for freight to be earned on shipment. The arbitrators in their reasons note that in the present case the clause provides for freight to be " deemed earned" on shipment, or as cargo is loaded, not "earned". They evidently attached significance to this verbal distinction. With respect, I do not think there is any difference between "earned" and "deemed earned" or "considered as earned". They all mean the same, namely that the shipowners have done all they have to do to earn their freight once the cargo has been loaded. Of course they have other contractual obligations to perform. But the failure to perform such other obligations will sound in damages. It does not affect the shipowners' accrued right to freight. This is, no doubt, what Lord Justice Mustill meant in Colonial Bank v. European Grain and Shipping Limited ("the Dominique") (1988) 3 W.L.R. 60 at page 65 when he referred to the shipowners' indefeasible right to freight. I shall return to The Dominiquelater in this judgment.
What, then, is the effect of a provision postponing the date of payment, where the freight is deemed to be earned on shipment? The judge has held that the contractual date of payment is an essential part of the owners' cause of action. Since, on the facts of the present case, the date in question can never arrive, the owners' cause of action must remain for ever incomplete. I quote from the judgment:
"No means was suggested in argument by which the requirements of (a) unloading, (b) the presentation of laytime statements, or (c) the lapse of twenty days after those events could be dispensed with. The events never happened. The balance, including the outstanding freight, never became payable. No cause of action arose in respect of the 5%."
Mr. Veeder, in support of the judge's conclusion, submitted that the completion of discharge and the other requirements mentioned by the judge were conditions precedent to the charterers' obligation to pay.
The difficulty with Mr. Veeder's argument, as he frankly conceded, is that in relation to the 5 per cent it gives no effect, or virtually no effect, to the provision that freight is deemed earned as cargo loaded. The layout of the clause, and in particular the full stop at the end of the crucial sentence, makes it clear beyond doubt that the "deemed earned" provision applies to the entire lump sum freight, not just to 95 per cent payable within three days of completion of loading. That being so, I am unwilling to give the provision no effect, or virtually no effect, in relation to the 5 per cent unless compelled by the clearest language. The provision that freight is deemed to be earned as cargo loaded is, to my mind, the paramount or controlling provision. It is well understood by commercial men. It casts the risk in relation to freight on to the charterers. It excludes the ordinary rule of construction, whereby freight is only earned and therefore only payable on delivery. The charterers' construction would mean reintroducing the ordinary rule in relation to the 5 per cent. Indeed, as Mr. Johnson pointed out, it would make owners' position worse. For, under the ordinary rule, the shipowner is entitled to freight when the goods are delivered, or tendered for delivery. If the charterers' argument is correct, they would only be entitled to freight 20 days thereafter. I am unwilling to hold that that is what these parties can have intended.
So how are the provisions to be reconciled? The answer must surely be that the concluding part of the clause is dealing with the manner of payment, not the obligation to pay. It provides a formula for ascertaining the date of payment, and for insuring that loading and discharging port demurrage or despatch, as the case may be, and the balance of freight are all settled at the same time. If instead of 20 days after completion of discharge, the parties had named a day certain for settlement of the amount due, or if they had calculated the length of the voyage and the time for discharging and had then stipulated for settlement of mutual debts, let us say, 60 days after completion of loading instead of 20 days after completion of discharge, the problem in the present case would never have arisen. The owners would have recovered the balance of freight due on the day certain, or at the expiry of the 60 days, as the case might be. Instead of taking that course, the parties have provided a formula based on the completion of discharge. I cannot believe that by so doing they were intending to introduce a speculative element into the owners' right to recover freight. They were assuming that the vessel would discharge in normal course. It might perhaps have been different (it is unnecessary to decide) if the clause had read 20 days...
To continue reading
Request your trial
-
Colonial Bank v European Grain and Shipping Ltd (Dominique)
...Appeal on a different but comparable clause in a charterparty in Vagres Compania Maritima S.A. v. Nissho-Iwai American Corporation [1988] 2 Lloyd's Rep. 330. 14 I would therefore answer question (1) by saying that the owners' right to freight accrued before the termination of the charterpar......
- Colonial Bank v European Grain and Shipping Ltd (Dominique)
-
Log-O-Mar AG v Craft Enterprises International Ltd and Others
...of the contract, Log-o-Mar was therefore entitled to such payment. 85 In support of this argument Mr Collett cited The Karin Vatis [1988] 2 Lloyd's Rep 330 and The Lefthero [1991] 2 Lloyds Rep 599. 86 In my judgment this argument is unsound. The payment of the balance of the costs of the vo......
-
Resource New Zealand Limited v Mediterranean Shipping Co S.a.
...accrued on the signing of bills of lading) and that the charterers were not entitled to set-off. 12 13 14 15 16 The Karin Vatis [1988] 2 Lloyd’s Rep 330 At 332. At 332. At 336. Bank of Boston Connecticut v European Grain & Shipping Ltd, The Dominique [1989] AC 1056, [1989] 1 Lloyd’s Law Rep......