Italian State Railways v Mavrogordatos and Anor

[1919] 2 K.B. 305
[1917 I. 139.]

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(Judgment by: Bankes LJ (including background))

Between: Italian State Railways
And: Mavrogordatos and Anor

Court:

Judges:
Bankes LJDuke LJ
A.T. Lawrence J

Subject References:
SHIP
CHARTERPARTY
Hire payable in Advance
Default in Payment
Withdrawal of Ship
Redelivery
Apportionment of Freight

Hearing date: 19 March 1919
Judgment date: 20 March 1919

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Judgment by:
Bankes LJ (including background)

By a time charterparty the use of a ship and her master and crew were placed at the disposal of the charterers for twelve months from a certain date. The charterers agreed to pay hire monthly in advance commencing on the day of the vessel's "delivery as aforesaid" and continuing until "her redelivery" at a port in West Italy or the United Kingdom at the charterers' option. Failing punctual and regular payment of the hire the owner had liberty to withdraw the vessel from the service of the charterers without prejudice to any claim he might otherwise have against them.

On January 10, 1917, a month's hire fell due and was not paid. On the following day, while the ship was on her way to Barry under the charterers' orders, the owner wrote to the charterers withdrawing her from their service. The ship arrived at Barry on January 23.

In an action by the charterers against the owner for a declaration that the charterparty was still subsisting, the owner counterclaimed for hire of the ship from January 11 to January 23 when, as he contended, the ship was first redelivered to him:-

Held, that the charterparty not being a demise of the ship but a contract for the hire of services, the word "redelivery" could not be construed literally; that the ship was redelivered when the owner was enabled to resume control of her; and that the owner by withdrawing the ship from the service of the charterers on January 11 had prevented any further action by them in the way of redelivering her after that date.

And, the owner admitting that he could only recover hire for that part of a month during which the ship was at the service of the charterers,

Held, that he could not recover hire for the use of the ship after January 11.

Appeal from the judgment of Sankey J.

By a charterparty made in London on January 21, 1916, A. M. Mavrogordatos, owner of the Greek steamer Antonios M. Mavrogordatos guaranteed of 6450 tons total summer dead weight capacity inclusive of bunkers, agreed to let, and the State Railways of the Italian Government agreed to hire the steamer for twelve months commencing from the expiration of a former charter dated March 25, 1915, she being then tight staunch and strong and in every way fitted for the service and being maintained by the owner with a full complement of officers, seamen, engineers, and firemen, to be employed in such lawful trades between such safe ports always afloat in the United Kingdom and other specified areas as the charterers or their agents should direct.

The charterparty contained clauses to the following effect:-

2.

The owners were to provide and pay for all provisions and wages of the captain, officers, engineers, firemen, and crew, and to pay for the insurance on the vessel and for all oil tallow and waste required for the engine room and to provide and pay for the proper and efficient working of the steamer:

3.

The charterers were to provide and pay for all coal, fuel, port charges, pilotages, agencies, and all other charges and expenses whatsoever except those before stated:

5.

The charterers were to pay for the use and hire of the vessel at the rate of 28s. on her guaranteed summer dead weight as above per calendar month "commencing on the day of her delivery as aforesaid," and at the same rate for any part of a month; the hire to continue from the time specified for commencing the charter "until her redelivery within the limits and time mentioned above for delivery to owners in the same good order and condition as when accepted fair wear and tear excepted at a port in West Italy or in the United Kingdom at charterers' option:"

6.

Payment was to be made as follows:- In cash monthly in advance at the National Provincial Bank, Cardiff, to the Anglo-Levant Shipping Company, Limited, or their nominees, and, failing the punctual and regular payment of the hire or any breach of the charterparty, the owner was to be at liberty "to withdraw the vessel from the service of the charterers without prejudice to any claim they the owners may otherwise have on the charterers in pursuance of this charter:"

9.

The captain although appointed by the owner was to follow the instructions of the charterers who were to furnish him from time to time with the necessary sailing directions and he was to keep a full and correct log to be exhibited to the charterers or their agents when required:

10.

The captain was to sign bills of lading at any rate of freight the charterers or their agents might choose without prejudice to the stipulations of the charterparty, the charterers agreeing to indemnify the owner from any consequences that might arise from the captain's signature to the bills of lading or his otherwise following the charterer's instructions.

The charterparty contained the usual exceptions of act of God, perils of the sea, fire, arrests and restraint of princes, etc.

On May 10, 1916, the vessel being then at the port of Genoa was placed at the disposal of the charterers, and on the following day the first monthly payment of hire, 8879l. 10s., was made. On May 17 after she had been for 81/2 days on hire she was requisitioned by the Greek Government. It was thereupon agreed between the parties, by correspondence in August and September, 1916, that the hire of the vessel should be suspended during the time she was under requisition, the owner admitting that he held 1325l. 15s. 7d. to the credit of the second month's hire, which sum however was not admitted by the charterers.

One of the points in dispute was when the requisition ceased. The Court, agreeing with Sankey J., held that it ceased on December 18, 1916, the vessel having been on that day released to the charterers at the port of Algiers. The charterers ordered her to Barry in South Wales. A month's hire payable in advance under the charterparty fell due at the latest on January 10, 1917, that is to say 221/2 days from the time when the vessel was released to the charterers by the Greek Government; but by some mistake on the part of the charterers, who asserted cross-claims amounting to or exceeding the sum due for hire, it was not paid on that day. Thereupon the Anglo-Levant Steamship Co. as agents for the owner wrote to the charterers as follows:-

"January 11, 1917, Messrs. The Italian State Railways, Cardiff. Dear Sirs. s.s. Antonios. We are instructed by the owner of the vessel to give you notice that in consequence of your failure to pay freight in advance in the terms of the charter, the charterparty dated January 21, 1916, is hereby cancelled."

When this notice reached the charterers' agents at Cardiff the ship was in Lisbon harbour on her way to Barry, where she arrived on January 23, 1917.

The charterers brought an action against the captain and the owner of the vessel claiming a declaration that the charterparty was still subsisting. The claim was heard before Sankey J. who on February 15, 1917, gave judgment for the defendants.

The shipowner counterclaimed, amongst other items, for a sum of 7160l. 16s. 4d. in respect of hire due on January 10. From this the charterers claimed to deduct a sum of 3437l. 13s. 3d., in respect of hire of the vessel from Lisbon to Barry. The counterclaim was heard on December 20, 1918. Sankey J. held that the owner had cancelled the charterparty by the letter of January 11, 1917, and that consequently the charterers were not liable to pay this hire.

The owner appealed.

Leck K.C. and R. A. Wright K.C. for the appellant. The learned judge was wrong in holding that the letter of January 11, 1917, was a cancellation of the charterparty. It was a withdrawal of the ship under the terms of the charterparty and was "without prejudice to any claim" the owner might "otherwise have on the charterers." One claim the owner had was to have his ship redelivered to him at a port in the United Kingdom or West Italy. The hire was to continue until this was done. It could not be done until the ship reached Barry. While a ship is on a voyage ordered by the charterer, perhaps carrying the charterer's cargo, she cannot be redelivered to the owner or put at the owner's disposal. The so called cancellation can only mean that after the ship has performed her present engagements she must be delivered to the owner at one of the ports named for redelivery in the charterparty. It fallows that the respondents must pay hire up to January 23, when the ship reached Barry, either under the charterparty or as damages for not paying the month's hire promptly on January 10.

Another claim which the owner had against the charterers was a vested right on January 10 to a month's hire or to an apportioned part thereof if he should take possession of his ship before the end of the month: Wehner v. Dene Steam Shipping Co. ^[F1] He cannot be said to have taken possession of his ship while she was on the charterers' business as she was until she reached Barry. Nothing ever happened to divest this right. The withdrawal of the ship on January 11 was without prejudice thereto.

MacKinnon K.C. and A. Neilson for the respondents. Confusion is caused in a case like this by the use of such expressions as "delivery" and "redelivery" of the ship. Those phrases are relics of the time when a charterparty was a demise of the ship. At the present day a charterparty is a contract for services to be rendered by a shipowner to the charterer. The charterparty in this case is a typical example of a contract for the service of a ship, master, and crew. In certain events the owner may discontinue the services. If one of these events happens, the fact that the ship is on the high seas does not prevent the owner from discontinuing the services. If the ship is carrying cargo when the owner elects to discontinue he may be bound to perform the contract made by the charterer with the owner of the goods, just as a landlord accepting a surrender of a lease is bound by a sub-lease made by the lessee, the contract having been made by the charterer with the shipowner's authority. But as between the owner and the charterer the owner is not bound to continue rendering services to the charterer until the ship reaches a port named for "redelivery," as it is loosely called. The obligation to "redeliver" at a certain port is imposed on the charterer for the benefit of the owner. If the charterer commits such a breach of the charterparty as may lead to the forfeiture of his rights under it, he cannot insist on having the services of the ship until he "redelivers" her under the charterparty. The shipowner may there and then withdraw the ship from the charterer's service, as he did in this case by the letter of January 11. But then he cannot have hire for the use of the ship after the date of withdrawal. [They were stopped.]

Leck K.C. in reply.

Judgment of Bankes L.J. -

This vessel sailed from Algiers on December 18, 1917, under the time charterers' orders, on a voyage to Barry. She put in at Gibraltar and Lisbon, but that is immaterial; I treat her as having started on a voyage from Algiers to Barry. While she was on this voyage the day arrived on which a month's hire was payable in advance under the charterparty. That day was, according to Sankey J., January 9 at 10 P.M., or, according to the charterers, January 10. Whichever date is correct the month's hire was not paid. It is not material to consider the motive of the shipowner; it suited his purpose to do what he did. He gave notice in writing to the charterers dated January 11, 1917, in these words:-

"The charterparty dated January 21, 1916, is hereby cancelled."

It would have been more correct to say that the ship was withdrawn from the charterers' service, but his actual words were as I have stated. That notice would have reached the charterers' representatives at Cardiff a day or two after January 11. The ship was then in Lisbon harbour, but neither of the parties knew this. I treat her as being upon the high seas. The master receiving no further instructions, continued the voyage begun under the charterers' orders, and arrived at Barry on January 23. The main contention of the shipowner was that the ship was not redelivered to him by the charterers till she arrived at Barry. That is a question of general importance.

Another point was taken, which has no real bearing on the correctness of the judgment under appeal. That point was that the shipowner had a vested cause of action for the whole month's hire in advance immediately on the expiration of January 10, and could maintain an action for the whole month's hire although he subsequently withdrew the ship from the service of the charterers before the month had expired. It would be strange if the law should allow the owner to withdraw his ship on January 11 and yet claim payment of a full month's hire in advance dating from 10 P.M. on the previous day; but on this point Mr. Wright was prepared to accept the view of Channell J. in Wehner v. Dene Steam Shipping Co. ^[F2] that when properly considered the position of a shipowner in such circumstances is that the consideration is apportionable and that he cannot recover hire except for the period during which his ship is actually at the disposal of the charterer. Channell J. expressed his view in these words:-

"As the 550l. was payable in advance it seems to me that if they did take possession of the ship - supposing they had taken possession of the ship a week after - they could only have claimed to retain one week's hire out of that as a portion. The consideration either wholly or partially failed. I do not think that when the consideration for the payment which ought to be made in advance has not been given the payments can be sued for afterwards."

It is not necessary to discuss the correctness of that view. Mr. Wright does not dispute it. He accepts the position that, the owner being entitled to sue for hire in advance, the charterers may by some rule of law reduce the amount payable by a sum representing the time during which the owner deprived them of the use of the vessel, and allowance has been made on account of hire for the ship's service up to and including January 11.

But it is said that the charterparty provided that the hire should continue until the ship's redelivery, and that she cannot be said to be redelivered while on the high seas continuing the voyage commenced under the charterers' orders which have never been cancelled. One must consider the language of the charterparty in order to give that argument its true weight. It is founded on the word "redelivery." As pointed out by Mr. MacKinnon that is not an apt word to express the obligation of either party to the other under such a contract as this. It might be an appropriate word if the ship had been demised, but under a charter like the present by which the owner places the ship with her captain, officers, seamen, engineers, firemen, and crew at the disposal of the charterer for a certain period on certain terms, the only redelivery possible is to make such arrangements as will enable the owner to resume control on the expiration of the charter and, it may be, if necessary, to inform the master that he is no longer under the charterer's orders but must consider himself under the orders of the owner. That is the real meaning of the word "redelivery" in this charterparty.

Earlier in that instrument the use of the vessel which is to be conferred on the charterers is exactly described. The conferring of that use is spoken of as "delivery as aforesaid." When the use is determined and the vessel is replaced at the owner's disposal that is described as "redelivery." What is meant by replacing the vessel at the owner's disposal? As long as the charterparty continues the charterers retain the right to give to the master directions which he is bound to obey. It may be that "redelivery" of the vessel would ordinarily include giving directions to the master to look to the owner for further orders. But what happened in this case was that the owner withdrew the vessel from the service of the charterers. By so doing he necessarily withdrew from the charterers any right to give further directions to the master. If he chooses to withdraw the vessel while she is on the high seas the same result follows; he thereby withdraws from the charterers the power to give any further directions to the master; the power to give directions revests in the owner. It may be that he cannot exercise the power because he cannot get into touch with the vessel; that is a mere accident, and does not alter the conclusion that when the owner withdraws the ship from the service of the charterers there is nothing more the charterers can do in the way of redelivering the ship to the owner.

The material point of time is that moment when as a matter of law the power of giving orders to the master passes from the charterers to the owner, and that is the moment when the owner chooses to exercise the option of withdrawing the ship from the service of the charterers. It was said that this withdrawal was "without prejudice to any claim the owner may otherwise have on the charterers in pursuance of this charter." In my opinion that clause saves the rights of the owner in reference to breaches of the charterparty which may have been committed, or any right which may have already accrued; it does not place the charterers under any fresh obligation coming into force after the date when the ship has been withdrawn.

For these reasons I think the judgment of Sankey J. was right and this appeal must be dismissed.