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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Bank Line Ltd v Arthur Capel & Co [1918] UKHL 1 (12 December 1918) URL: http://www.bailii.org/uk/cases/UKHL/1918/1.html Cite as: [1919] AC 435, [1918] UKHL 1 |
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HOUSE OF LORDS
| BANK LINE, LIMITED. |
APPELLANTS |
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| - v - |
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| ARTHUR CAPEL AND COMPANY |
RESPONDENTS |
The House took time for consideration.
Dec. 12, 1918.
The case was tried by Rowlatt J., who held in favour of the defendants that the requisition had put an end to the contract.
On appeal the majority of the Court of Appeal (Pickford and Warrington L.JJ.) reversed this decision. Scrutton L.J. dissented, and expressed his agreement with the conclusion arrived at by Rowlatt J.
The Bank Line, Limited, have now appealed to this House, and ask that the judgment of Rowlatt J. should be restored.
The charter is dated February 16, 1915, and was entered into between the appellants, owners of the Quito , and the respondents, the charterers. By the first clause the owners agreed to let, and the charterers to hire, the steamer for a term of twelve calendar months from the time the vessel should be delivered and placed at the disposal of the charterers ready to load at a coal port in the United Kingdom as ordered by charterers to be employed in trade between safe ports and places within the limits of the United Kingdom, France, the Bay of Biscay, Portugal, Spain, and the Mediterranean not east of Sicily during the war.
By the fifth clause the charterers were to pay as hire 2919 & L per calendar month, commencing from the time the steamer was placed at their disposal. By the fourteenth clause it was provided that throughout the charter losses or damages, whether in respect of goods carried or to be carried, or in other respects, should be absolutely excepted if they arose from certain causes enumerated, among which were the act of God, perils of the sea, and arrests and restraint of princes, rulers, and peoples.
The two most important clauses for the purposes of the present appeal are the twenty-sixth and the thirty-first, which run as follows:-
26. "That the steamer shall be delivered under this charter not before April 1, 1915, and should the steamer not have been delivered latest on the 30th day of April, 1915, charterers to have the option of cancelling this charter."That should it be proved that the steamer, through unforeseen circumstances, cannot be delivered by the cancelling date, charterers, if required, shall within forty-eight hours after receiving notice thereof declare whether they cancel or will take delivery of the steamer."
31. "Charterers to have option of cancelling this charterparty should steamer be commandeered by Government during this charter."
The vessel was not ready by the cancelling date (April 30, 1915), but the respondents did not exercise their option of cancelling, nor were they invited to say whether they would cancel or not. The Quito went into dry dock at Hull to prepare for entering upon service under the charterparty, and while there she was, on May 11, requisitioned by the British Government. Efforts were made by the charterers and owners to get her released, but without success. On May 17 the charterers wrote that they had informed the owners that they would take the steamer on her original charter on the same conditions for twelve months, if tendered to the charterers any time within the next three months, but no agreement was arrived at as to this suggestion. The efforts to get the vessel released ceased early in June, 1915, and there was no further communication between the parties on the subject until September 3, 1915. On this last day the charterers, who had heard that the owners were selling the Quito , having got the Government to release her, called upon them to deliver the steamer under the charter. The owners replied on the same day that in their view the charter had long since become inoperative, as the owners were prevented from tendering the steamer within the exceptions in the charter, and added that the request that the owners should tender the steamer seemed to ask them to enter into an entirely new agreement, and not such as was contemplated by the charter of February 16.
The facts were that in July, 1915, the appellants had received from third parties an offer to purchase the Quito which on August 11 they accepted, subject to their being able to procure her release from the requisition. On August 17 the Government intimated that they would release the Quito provided the owners replaced her by another vessel of theirs - the Mansuri - which was free of engagements, and on
September 2 this was carried out and the Quito was released.
The appellants contend that they were not liable in the action, on the ground that they were entitled to treat the charterparty as at an end owing to the requisition by the Government, and the detention under it, as this amounted to a frustration of the adventure by circumstances beyond the appellants' control. The respondents urged that on the construction of the charterparty all application of the doctrine of frustration was excluded, and denied that there was in fact any frustration of the adventure. Rowlatt J. and Scrutton L.J. held that the charterparty was at an end, the adventure having been frustrated; while Pickford L.J. and Warrington L.J. held that the charterparty was still in existence, and awarded the plaintiffs damages on a scale which worked out at 31,000 l.
The doctrine that a contract may be put an end to by a vital change of circumstances has been repeatedly discussed in your Lordships' House, and most recently in the case of the Metropolitan Water Board v. Dick, Kerr & Co.(1), in which a great number of cases were reviewed. I do not propose to repeat what has been said in these cases on the law of the subject, which is well settled, and proceed at once to consider the application of the doctrine to the circumstances of the present case.
The first question that falls to be determined is whether, as contended by the respondents, the doctrine of frustration of the adventure as terminating the contract is excluded by the terms of the charterparty. The clauses relied on as having this effect are clauses 26 and 31. In my opinion neither of these clauses can have the effect of preventing the termination of the charterparty by the requisition in the present case and the detention under it.
The twenty-sixth clause provides that if the steamship should not have been delivered by the end of April, 1915, the charterers were to have the option of cancelling the charter. This option would apply, if there were any delay
beyond April 30, and if the delay was through unforeseen circumstances (in other words, if it was not due to the default of the owners) it was provided by the second paragraph that the charterers might be called on to declare within forty-eight hours whether they cancelled or would take delivery of the steamship. It was urged for the respondents that this clause meant that only the charterers could cancel in case of non-delivery, and that however long the owners might have been prevented from delivering by unforeseen circumstances beyond their control, they were bound to hold the vessel at the disposal of the charterers. I cannot read this clause as having any such effect. The charter was to be for twelve months from delivery, which the owners were to make by the end of April unless prevented by unforeseen circumstances, in which case-the charterers had the option of cancelling, however short the delay. If, owing to unforeseen circumstances, it became impossible for the owners to deliver under the charterparty until many months after the end of April, the whole character of the adventure would be changed. A charter for twelve months from April is clearly very different from a charter for twelve months from September. In such a case the adventure contemplated by the charter is entirely frustrated, and the owner, when required to enter into a charter so different from that for which he had contracted, is entitled to say "non hæc in foedera veni." In other words, the owner is entitled to say that the contract is at an end on the doctrine of the frustration of the adventure as explained in Tamplin Steamship Co. v. Anglo-Mexican Petroleum Products Co.(1) It would be quite unreasonable to construe clause 26 as meaning that the owners are in such a case to hold the vessel at the disposal of the charterers for an unlimited period.
In the Tamplin Steamship Co. Case(1) the House of Lords was divided three to two, Lord Loreburn, Lord Parker, and Lord Buckmaster L.C. (who concurred with Lord Parker's judgment) forming the majority, while Lord Haldane and Lord Atkinson dissented. But it will be found that the
principles of law enunciated by Lord Loreburn and by the two dissentients are identical; the difference between them being as to the application of these principles to the particular circumstances of the case. The concurrence of Lord Parker and of Lord Buckmaster L.C. with Lord Loreburn was to some extent rested on the ground that a clause in the charter providing for the case of restraint of princes would exclude the doctrine of frustration of the adventure as terminating the contract. This proposition should not, in my opinion, be regarded as forming part of the judgment of the House, and the judgment of Lord Parker when scrutinized will be found to treat this as only one of the circumstances which led him to the conclusion that in the case of the time charter which was in question the doctrine of frustration was excluded
Clause 31 cannot be relied on on behalf of the respondents any more than clause 26. Clause 31 merely means that in case of the vessel being commandeered, the charterers might cancel at once without having to show that the detention was likely to last so long as to put an end to the contract within the meaning of the authorities.
The second question must, therefore, be determined - namely, did the requisition of the vessel and the detention under it constitute a change of circumstances such as to entitle the owners to treat the charter as at an end? As events show, the release of the vessel could he procured by providing another instead, but there was no obligation on the owners to do this for the purpose of carrying out the charter. It was only after they had entered into the contract to sell the Quito conditionally on procuring her release that the owners provided a substitute to enable them to carry out their contract of sale. The entering into the contract of sale was an act showing that the owners treated the contract of charter as at an end. Were they justified in this? In my opinion they were. They had concurred with the charterers in endeavouring to procure the release by the Admiralty of the vessel. These efforts failed, and were not continued after June 8. On September 3 the charterers learned of the release which had been obtained by the substitution of the
Mansuri in order to carry out the sale of the Quito , and demanded delivery. In my opinion the owners were entitled to reply as they did, that the contract had come to an end as the detention had lasted so long that if the vessel were delivered in September it would be on a contract differing most materially from that provided for by the original charter.
For these reasons I agree with the conclusion arrived at by Rowlatt J. and Scrutton L.J., and think that the appeal should be allowed with costs here and below.
My Lords, I do not think that there is anything in the charterparty which excludes the doctrine of frustration if the circumstances proved at the trial amount in law to so much. As to the meaning of the principle I have reconsidered what was said by Lord Atkinson and myself in Tamplin Steamship Co. v. Anglo-Mexican Petroleum Products Co.(1)I see no reason to depart from what he and I agreed in stating to be the principle, and I do not think that Lord Loreburn said anything really different. Whether, in accordance with the modern tendency, the question is treated as one of construction, and an exception is formulated as implied, or whether, as appears to have been the real ground of the
judgments in Baily v. De Crespigny(1), the question is regarded rather as one of a common mistake, consisting in the present instance in the assumption that the steamer was one which could be made available, does not matter. What is clear is that where people enter into a contract which is dependent for the possibility of its performance on the continued availability of the subject-matter, and that availability comes to an unforeseen end by reason of circumstances over which its owner had no control, the owner is not bound unless it is quite plain that he has contracted to be so. And such cases as Geipel v. Smith(2) and Jackson v. Union Marine Insurance Co.(3) show that the application of the principle to a charterparty is not excluded by the circumstances that the contract contains an express exemption clause covering what is matter not fundamental in the same sense, loss or damage from restraint of princes.
The second question is whether in this case what happened amounted to a complete frustration of the adventure. The contract, which was dated February 16, 1915, was for the use of the steamer for twelve months, not from any particular date, but from the time when she should be delivered to and placed at the disposal of the charterers at a coal port to be designated by them. Under clause 26, already referred to, the delivery was to take place not before April 1, and if it did not take place at latest on the 30th of that month the charterers were to have the right to cancel the charterparty. By clause 31 the charterers were expressly given the option to cancel if the steamer should be commandeered by the Government during the charter. I think that this shows that such commandeering was contemplated by the parties as an event which would not necessarily put an end to the basis of their contract, but might merely delay or interrupt the employment of the vessel.
In April the steamer was on a voyage from New York to Rotterdam, and was delayed beyond April 30, the date at which the charterers had an option to cancel. It was not
until May 7 that she reached Hull, the port designated by the charterers under the contract, and she had to be dry docked for repairs until May 17. On the 10th of that month the Admiralty intimated that they would requisition one out of several ships belonging to the appellants. The latter indicated that the Quito , the steamer in question, was most readily available, but that she was under charter to the respondents. The Admiralty thereupon, on May 11, requisitioned her. The respondents then urged the Admiralty to release the Quito , on the ground that she was to be used for supplying France with coal, and the appellants appear to have supported the application. Both parties seem to have contemplated that the requisition might not prove a prolonged one, and that the charterparty might still be capable of being put into operation.
My Lords, I have read the correspondence between the parties which followed on the requisition. In accordance with a well-known rule of construction which lays down that a series of letters must be read as an entirety when it is desired to ascertain whether there was a final consensus, it is not right to pause over phrases subsequently superseded, with a view to picking out an agreement while the matter is continuing in the stage of negotiation. Reading the letters with this rule in mind, I think that their outcome, taken in conjunction with the oral evidence, was that although on May 17, 1915, Mr. Scott, as representing the respondents, writes to his brokers that he had informed the appellants that he would only take the steamer on her original charter on the same conditions for twelve months, if she was tendered at any time within the next three months, nothing came of the suggestion. It is clear that in the subsequent correspondence the parties had in their minds that the requisition had not so far put an end to the charter. Mr. Niven, who represented the appellants, appears from his evidence, given in cross-examination, to have thought that he could have got the Quito released at any time by offering the Admiralty another steamer. In the end, in August, he succeeded in this, but he did not make a definite attempt until he found that he could sell the Quito to a stranger. I agree with the opinion of Pickford L.J. that the parties never did take the view that the requisition had either been so long, or would necessarily be so long, as to put an end to the charter. It must be borne in mind that the term was twelve months, not from a definite date, but from the date when the steamer was delivered to the charterers, and that they intended to use her for the carriage of coal across the Channel, a use which they could put her to at any period that was likely to call for it. It appears that the owners never asked the charterers to say whether they would cancel under the clause in the charterparty, or would take delivery of the steamer after release by the Admiralty. Nor did they intimate that the charter was in their opinion at an end, but they left the charterers to await advice from them as to the prospect of the vessel being released. When, on September 2, the Quito was released by the Admiralty to her owners, who had nearly a month previously sold her to an outside purchaser, the release was, it is quite true, obtained only for the purpose of the sale, and on condition of substituting another steamer to go under requisition. The appellant owners were not bound to offer such a substitution in order to carry out their bargain with the respondent charterers, but I think the character of the new transaction is relevant to the question whether at this period, or earlier, the appellants considered the requisition to be a necessarily enduring one. If not, I think that, under the terms of the charterparty, it was for the respondents to decide whether the transaction was one which they would wholly abandon or go on with it.
My Lords, whether frustration has taken place is always a question which depends on the circumstances to which the principle is to be applied, rather than upon abstract considerations. I think that this is illustrated by what was decided in this House in the recent case of Metropolitan Water Board v. Dick, Kerr & Co.(1) and in the other authorities then examined. On the facts before us I am unable to come
to the conclusion that the appellants have succeeded in showing that the steamer was in point of fact, or was contemplated as being, under permanent requisition of such a character as to make the terms of the charterparty wholly inapplicable. She was required by the charterers for a cross-Channel coal traffic, in which she could apparently have been employed at any date, and although the charter was a time charter, the date of its commencement was not precise. The use to which the vessel was to be put was not in point of fact a use of such a nature that it was frustrated by what happened, and I do not think that the parties at any time came to the conclusion that the prospect of such use was gone. There was therefore, in my opinion, no frustration in fact; and, having regard to the nature of the contract, no frustration in law either. I agree with the conclusions arrived at by Pickford and Warrington L.JJ., and I think that the appeal ought to fail.
But it was a general requisition, that is to say, the ship might under it be put into the service of the Government for years, and remain in it until to-day. In those circumstances the parties, nonplussed as to the effect of the action of the Crown upon their own business arrangements with regard to the ship, would naturally be desirous to pause for a little before definitely treating the contract of affreightment as at an end. In my opinion this was exactly what they did. They agreed to wait for three months. That three months expired on August 11. By that time the vessel had not been released, and on that date it appears to me that both parties were free from their temporary arrangement and that their rights are to be determined on the footing that the transfer of the ship to the service of the Government was for an indefinite period.
In those circumstances I will venture to cite Horlock v. Beal.(1) In that case the disablement (from carrying on a contract of service by the seamen) arose from the declaration of war and the consequent detention of the ship in a foreign port. But it was strongly contended that this did not release the parties from their contract, because nobody could predict whether the interruption would be for anything more than such a short period as might allow the contract to be resumed.
On that topic - the topic of frustration - if I may quote my own address, I said that(2) "stoppage and loss, having arisen from a declaration of war, must be considered to have been caused for a period of indefinite duration, and so to have effected a solution of the contract arrangements for and dependent upon the completion or further continuance of the adventure." And I added: "I do not think that any other rule would be in accord with law, or would work. When a ship is put under detention by a declaration of war, I cannot see room for a condition of affairs which would leave parties in suspense, and feeling that they are bound if the war be short but free if the war be long." The majority of the House took this view. The case had reference to a contract of service during the performance of a contract of affreightment; a fortiori, the same doctrine would apply to that contract itself. And I cite it because it appears to me that the rule or principle there set forth applies in identical terms as well to the case of a declaration of war as to the requisition of the
ship by reason of the exigencies of war, and for an indefinite time, as in the present case.
In the recent cases, my Lords, I have observed that several learned judges have expressed an opinion to the effect that notwithstanding the indefinite suspense to which I have referred, yet nevertheless the contract shall continue binding unless both of the parties shall consent to the contrary. I can give no assent to such a doctrine. There may be many cases in which it would be greatly to the advantage of one party that he should have an indefinite, and it may be a prolonged, hold over the other till performance shall become possible. In my opinion it would be contrary to all sound principle to overlay the effect of the suspense referred to by the necessity of having a consent on both sides to cancellation. No such consent appears to me to be required. I desire further to add that the fact that the contract of affreightment is a voyage charter or a time charter makes no difference in the application of the principle, and that I attach my special assent to the judgment of my noble and learned friend Lord Sumner upon that topic.
With these observations I beg to express my entire concurrence in the opinion and judgment just delivered from the Woolsack.
From the time when the Quito was requisitioned her owners never were in a position to put her at the charterers' disposal for any purpose until after they had sold her. By finding a substitute for her they might possibly have induced the Admiralty to set her free, for such things had been done; but it was uncertain if such an attempt would succeed, and mere importunity proved unavailing. They had not contracted to make this special effort for the benefit of the charterers. It is true that, when they did so for their own benefit, they succeeded, and having got possession of her, they might have been bound to place her at the charterers' disposal under the charter, if that still subsisted, the sale notwithstanding; but the question is whether the charter had previously come to an end by frustration. If it had, they were not bound to give the charterers a first chance of a new contract.
What then was the nature of the charter? It was not in form an April to April charter, but it was sufficiently so in substance. If the ship had been placed at the disposal of the charterers when released by the Admiralty, she would virtually have been in their hands for a September to September hiring. The mere change in the initial month of the actual hiring is not quite the point, for this is not the old comparison of a summer with a winter voyage. In either case she would have been on hire for each month of the twelve, and the exact cycle of the seasons would make little difference to her. What is important is this. During all the months of the Quito's service for the Admiralty the charterers would not in the least know when, if ever, they would have her on their hands. They could not tell whether they might suddenly have to find employment for her, or whether they must make provision for the current necessities of their trade without counting upon her at all. In one respect they would be at an indubitable disadvantage. The postponement of the beginning of her hire at any rate brought nearer the end of the war, after which the charterers would have to pay war rates for the ship and only have the use of her in peace employment. In the latter respect the owners' position also would be one of indecision, for their business is one that requires that they should look ahead, and in doing so they could not tell when, if at all, they were to have the Quito once more on offer. These uncertainties in commerce are very serious. Scrutton L.J. asked himself if the September to September employment would be in substance the same employment as that from April to April. I agree with him that it would not; and I think that the uncertainties of the intervening period in time of war both emphasize the difference between the two and add to the gravity of the lapse of time taken by itself.
We find the parties themselves apparently impressed with the idea that any long suspense was intolerable, and that, if the ship could not be promptly released, the engagement must be considered as at an end. Their communications with one another ceased early in June; apparently each was waiting to see if something would turn up. So I read their correspondence. The charterers' agent actually spoke to the owners' representative in the sense that, if the Quito was to be released, he would be prepared to consider a new charter, and although the brokers deprecated what he had done, it was not so much that they differed from him in thinking that the old charter was dead as that they thought it better not to say so except without prejudice. The owners left the matter there, but presently they sold the Quito . They did so without communication with the charterers. It is more reasonable to refer that they also thought the old charter was dissolved than that, thinking it to be alive, they hoped to escape disputes with the charterers by trying to keep secret what they were doing.
One matter I mention only to get rid of it. When the shipowners were first applied to by the Admiralty for a ship they named three, of which the Quito was one, and intimated that she was the one they preferred to give up. I think it is now well settled that the principle of frustration of an adventure assumes that the frustration arises without blame or fault on either side. Reliance cannot be placed on a self-induced frustration; indeed, such conduct might give the other party the option to treat the contract as repudiated. Nothing, however, was made of this in the courts below, and I will not now pursue it.
What then is the legal bearing of these facts? The charter is a time charter, and the principle of frustration was originally decided on a voyage charter. For some time it was thought that the frustration rule had no application to time charters, upon the ground that, if the shipowner's object is to receive chartered hire, as probably it is, he does not care how much the charterer's adventures are frustrated so long as he is able to pay. This was the view both of Bailhache J. in the case of the Auldmuir's charter (Admiral Shipping Co. v. Weidner, Hopkins & Co.(1)), and of Sankey J.
in that of the Dunolly (Scottish Navigation Co. v. Souter & Co.(1)); and though the Court of Appeal reversed their decisions(2) some colour was given to their view by the fact that the references in those charters to a "Baltic round" were treated as giving them the characteristics of a voyage charter although they were charters for time. Sankey J. in terms said that the principle "is confined to cases where it can be inferred from the charter itself that it is a contract for a definite voyage, or a definite object contemplated at first by both parties." His notion was that both must have had a common interest in an adventure and one and the same object in view when contracting. "The only object which both must have known each had in view" and "the object of common contemplation" are the expressions of Bailhache J. Atkin J. expresses the same opinion in Lloyd Royal Belge Société Anonyme v. Stathatos.(3) This way of looking at the contract fixes attention on its subjective aspect and asks what was actually in two hard bargainers' minds. Objectively the question is what does the law impute to them as fair dealers and deem to have been their meaning, which, as we constantly see in questions of construction, may be a very different thing. Again Bailhache J. says(4): "It seems to me impossible to apply the doctrine of frustration to a case where one of the parties to the contract is fulfilling his part of the contract according to its terms," either in the owner's case by letting the charterer have the ship and leaving him to find a use for her or in the charterer's by paying his hire punctually. To this I think Swinfen Eady L.J.(5) gives the sufficient answer. "It is the further performance of the contract by one party which formed the consideration for the payment by the other, which has become impossible, and this effects a dissolution of the contract." Lawrence J. also says that in a time charter the owner's object is not only to get hire but to afford the services, which the
charterer pays for, although money is their common motive. Lord Parker of Waddington in Tamplin's Case(1) drew attention to the difficulties attending on the adaptation of the doctrine to a time charter of long duration, which all must recognize, but did not express the opinion that it was inapplicable to time charters as such, and it is now settled that, although the doctrine may have to be somewhat specially applied, time charters do not fall outside the rule. Scottish Navigation Co. v. Souter & Co.(2); Admiral Shipping Co. v. Weidner, Hopkins & Co.(3); Anglo-Northern Trading Co. v. Emlyn. Jones and Williams(4); Countess of Warwick Steamship Co. v. Le Nickel Société Anonyme(5); and finally Metropolitan Water Board v. Dick, Kerr & Co.(6) are the authorities for this.
All these are cases of delay arising out of the exigencies of the present war; and the length of the delay was especially dwelt on in the particular circumstances of Tamplin's Case.(7)Bailhache J. says(8) that the main thing to be considered is the probable length of the total deprivation of the use of the chartered ship compared with the unexpired duration of the charterparty, and I agree in the importance of this feature, though it may not be the main and certainly is not the only matter to be considered. The probabilities as to the length of the deprivation and not the certainty arrived at after the event are also material. The question must be considered at the trial as it had to be considered by the parties, when they came to know of the cause and the probabilities of the delay and had to decide what to do. On this the judgments in the above cases substantially agree. Rights ought not to be left in suspense or to hang on the chances of subsequent events. The contract binds or it does not bind, and the law ought to be that the parties can gather their fate then and there. What happens afterwards may assist in showing what the probabilities really were, if they had been reasonably forecasted, but when
the causes of frustration have operated so long or under such circumstances as to raise a presumption of inordinate delay, the time has arrived at which the fate of the contract falls to be decided. That fate is dissolution or continuance and, if the charter ought to be held to be dissolved, it cannot be revived without a new contract. The parties are free.
Again, it does not seem to be in itself a matter of crucial importance whether the performance of the charter has begun or not. The charter in Jackson's Case(1) has often been wrongly referred to as purely executory (e.g., per Lord Watson in Dahl v. Nelson, Donkin & Co.(2)), but the ship was on her way to load and had begun the chartered voyage, which did not begin merely at the port of loading. Blackburn J.'s remarks in Geipel v. Smith(3) raised a doubt which was also present to the mind of Lord Parker of Waddington in Tamplin's Case(4), but I think that Bensaude v. Thames and Mersey Marine Insurance Co.(5) disposes of it. See Embiricos v. Sydney Reid & Co.(6) Of course it may be very material in considering the prospect of delay to know whether the ship is light or loaded. If loaded, delay is likely to be longer and more serious; but on the other hand, the prospect of ultimate fruition from the adventure, which is at any rate begun, is thus increased. The present charter I treat as wholly executory, for although the charterers had definitely named Hull as the loading port, the hiring was not to commence till the Quito was placed at their disposal there, which never took place.
The theory of dissolution of a contract by the frustration of its commercial object rests on an implication, which arises from the presumed common intention of the parties. "Where the contract makes provision" (that is, full and complete provision, so intended) "for a given contingency it is not for the Court to import into the contract some other and different provision for the same contingency called by a different name": Bailhache J.(7) This is a matter of
construction according to the usual rule. A contingency may be provided for, but not in such terms as to show that the provision is meant to be all the provision for it. A contingency may be provided for, but in such a way as shows that it is provided for only for the purpose of dealing with one of its effects and not with all. In the present case three clauses are relied on as express provisions for the event and consequences of an Admiralty requisition delaying or preventing the placing of the Quito at the charterers' disposal, Nos. 14, 26, and 31. When the Admiralty requisitioned her she became subject to a restraint of princes, one of the causes mentioned in clause 14, which says "throughout this charter losses or damages, whether in respect of goods carried or to be carried or in other respects arising or occasioned by the following causes, shall be absolutely excepted." In the first place, I think this claim is not for "loss or damage" within that clause, but in the second the meaning of such an ordinary clause of exception is well settled. It excuses breaches of the contract caused by matters which fall within its terms; it suspends the liability to pay hire without finally determining it; but relief from the liability to pay damages or hire and complete discharge from further obligation to perform the contract are different things. "Restraint of princes throughout this charterparty always excepted" and "the contract to be no longer binding if a restraint of princes frustrates its commercial object" are neither in my opinion mutually inconsistent clauses nor such that the expression of the first intimates an intention that restraint of princes is not to be dealt with further and otherwise, so as to preclude any implication on the subject.
The same may be said of clause 31. It means that, if the Admiralty should requisition the ship, the charter may be forthwith cancelled by the charterers, without waiting to see or having to show that its object is thereby frustrated. This is a separate provision from that which the appellants seek to imply, and is not inconsistent with it. As to clause 26, the cancelling clause, I am unable to accept the construction of it, which makes it mean that after April 30 and until the ship is delivered for the chartered service, however long the interval may be, the charterers can at any moment spring on the shipowners a cancellation of the contract, and can hold them bound so long as they choose to hold their own tongues. The shipowners' option given by the second part of the clause was expressly devised to prevent a much less arbitrary use of the right to cancel, and I cannot believe that the clause, if understood as the respondents read it, could ever have become the subject of a consensus ad idem. After all, it is a stipulation in the charterers' favour, and cannot be given so extreme a meaning, unless that meaning is clearly expressed. The parties never meant that the shipowners should remain indefinitely at the charterers' mercy.
The principle of frustration is rendered difficult by some uncertainty as to the tests to be used. In what terms ought the circumstances to be defined, which lead to the dissolution of the contract, and who is to apply them, the judge or the jury? There has been an unfortunate diversity in the terms used in different cases. The expression "frustrate the commercial object of the contract" is taken from Jackson v. Union Marine Insurance Co.(1) In Poussard v. Spiers(2)Blackburn J., transferring the rule in Jackson's Case(1) from a steamship to a prime donna, says that if the delay "is so great as to go to the root of the matter, it frees the charterer from his obligation to furnish a cargo." In Bensaude's Case(3)Lord Esher M.R. speaks of delay "so long as to render the adventure which the charterparty was intended to cover absolutely nugatory." In the same case in your Lordships' House each noble and learned Lord in turn employed a new and different expression for the same well-recognized thing. Lord Halsbury speaks of an "impossibility of prosecuting the voyage within the time within which it was necessary to prosecute it"; Lord Watson of "such delay in the prosecution of her voyage as entitled the charterer to determine the adventure" (which, surely wrongly, treats the case like
Mersey Steel and Iron Co. v. Naylor, Benzon & Co.(1) as a case of the determination of a contract depending on the choice of one party instead of resulting automatically from the event); while Lord Herschell says "so that the adventure cannot be completed within the time contemplated," which would make mere unexpected delay sufficient. In Bush v. Whitehaven Trustees(2) Lord Lindley, then a member of the Court of Appeal, relies on "delay so great as not to be fairly within the terms of the contract at all; that is to say, that the delay was so great that the contract cannot apply to the state of things to which the contractor and the defendants had imagined that it did." It would not be difficult to find other passages in more recent cases where the events which cause dissolution of the contract are diversely described. "An interruption may be so long as to destroy the identity of the work or service, when resumed, with the work or service when interrupted." Per Lord Dunedin.(3) "An interruption so great and long as to make it unreasonable to require the parties to go on" is Lord Atkinson's phrase.(4)The fact that delay occurs, the duration of which at the outset is uncertain, obviously is not enough to dissolve the contract: Braemount S.S. Co. v. Weir & Co.(5) For the time being the performance of the contract must have become altogether impossible, for the consequence is dissolution of the contract altogether, and in this I agree with what Bailhache J. says in the Anglo-Northern Trading Co.'s Case.(6)
Delay even of considerable length and of wholly uncertain duration is an incident of maritime adventure, which is clearly within the contemplation of the parties, such as delay caused by ice or neaping, so much so as to be often the subject of express provision. Delays such as these may very seriously affect the commercial object of the adventure, for the ship's expenses and over-head charges are running on and, even with the benefit of Protecting and Indemnity Club policies, the margin of profit is quickly run off. None the less this
is not frustration; the delay is ordinary in character, and in most cases the charterer is getting the use of the chartered ship, even though it is unprofitable to him. I think also that the doctrine is one which ought not to be extended, though to cases that really fall within the decided rule it must be applied as a matter of course even under novel circumstances. The matter is the more important because of the part which a jury may be called on to play in deciding the question. Ultimately the frustration of an adventure depends on the facts of each case, but it is no easy matter so to direct a jury as that they will neither ask themselves what the actual parties thought of at the date of the contract nor dispose of the case by saying that it would be unreasonable to find a verdict for the claimant nor be governed only by their action of what is fair between man and man nor be left in impenetrable doubt as to what the legal direction means. Lord Watson says in Dahl v. Nelson; Donkin & Co.(1) that "there may be many possibilities within the contemplation of the contract of charterparty which were not actually present to the minds of the parties at the time of making it, and, when one or other of these possibilities becomes a fact, the meaning of the contract must be taken to be, not what the parties did intend (for they had neither thought nor intention regarding it), but that which the parties, as fair and reasonable men, would presumably have agreed upon if, having such possibility in view, they had made express provision as to their several rights and liabilities in the event of its occurrence." This is an authoritative explanation of the legal theory on which the doctrine rests, but to use it as a direction to a jury is to tell them to do as they like. The phrase "goes to the root of the contract," like most metaphors, is not nearly so clear as it seems. In Jackson's Case(2) the jury was asked whether the time necessary for getting the ship off and repairing her so as to be a cargo-carrying ship was so long as to put an end in a commercial sense to the commercial speculation entered upon by the shipowner and the
charterers, and in Bush v. Whitehaven Trustees(1) whether the conditions of the contract were so completely changed in consequence of the defendant's inability to hand over the site of the work, as required, as to make the special provisions of the contract inapplicable. The danger in each case so put is that the jury will think that the contract is as wax in their hands. A. T. Lawrence J. puts the matter very usefully thus in the Scottish Navigation Co.'s Case.(2): "No such condition should be implied when it is possible to hold that reasonable men could have contemplated the circumstances as they exist and yet have entered into the bargain expressed in the document." For my own part I incline to prefer the expression already quoted from my noble and learned friend Lord Dunedin, and substantially adopted by Scrutton L.J. in the Court of Appeal.
My Lords, applying these considerations I am of opinion that the requisitioning of the Quito destroyed the identity of the chartered service and made the charter as a matter of business a totally different thing. It hung up the performance for a time, which was wholly indefinite and probably long. The return of the ship depended on considerations beyond the ken or control of either party. Both thought its result was to terminate their contractual relation by the middle of June and, as they must have known much more about it than I do, there is no reason why I should not think so too. I should allow the appeal.
may be any date not before April 1 subject to the right of the charterers to refuse her and to cancel the charter if she is tendered after April 30. During a reasonable time the owners owed to the charterers the contractual duty of tendering the vessel. If they were for reasons beyond their control unable to tender her within a reasonable time their contractual duty in this respect would cease. During May and June no doubt they owed this duty. It does not follow that they owed it in September. The question to be answered I think is this. Did this contractual duty still rest upon the owners in September?
As regards art. 31, it seems to me that the words "during this charter" mean "during the subsistence of this contract" and not "during the time the vessel is employed under this contract"; but nothing turns upon the article, for even if the facts would have justified the charterers in cancelling the charter by reason of the commandeering of the vessel they did not exercise their option in this respect.
The principle of Jackson v. Union Marine Insurance Co.(1) as reviewed in Horlock v. Beal(2) and Tamplin Steamship Co. v. Anglo-Mexican Petroleum Products Co.(3)I understand to be that there may under the circumstances of any particular case be added to a contract by implication - so long as the addition is not inconsistent with any expressed term of the contract - a term that a delay for which neither party is responsible so great and so long as to make it unreasonable to require the contracting parties to go on with an adventure shall entitle either of them, at least while the contract is executory, to consider it as at an end. If in the present case such a delay had occurred the owners were entitled to consider the whole contract including art. 26 as at an end, and in such case their contractual duty under art. 26 to tender the vessel no longer existed.
My Lords, I doubt whether down to June 9, when the correspondence between the parties fell into silence, the owners' duty in this respect had lapsed. The interview of
May 14 and the letters of May 17 no doubt support an inference that the charterers' view was that a delay of more than three months from that date would so affect the adventure that they would not be bound. However this may be, the facts are that the parties were not able to obtain the release of the vessel at that time and the matter drops into silence until September 3. Was the owner still bound to tender the vessel at that date? Or if the contract had not given the charterers an option to cancel could the owners have compelled them to take her at that date? I think not.
A term cannot be implied which is inconsistent with a express term of the contract; but it is no objection that it enlarges or adds to the express terms; every implied term does that. The express terms of this contract relevant in this respect are only arts. 26 and 31. They are terms which entitle the charterers to cancel in certain events. There is no inconsistency in an implied term which entitles either party to treat the contract as at an end if the date of commencement of the contractual year is by reasons beyond their control postponed beyond a reasonable time. Upon the question of fact I agree that before September that reasonable time had expired and there no longer rested upon the owners the contractual duty to tender her. This I think is what Lord Justice Scrutton intended by his judgment to convey - and if so understood I agree with him. The appeal I think succeeds.
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