Withdrawal – definition of requirement that hire be paid in “cash”
The vessel was let on the NYPE form for 58/62 calendar months with the option to renew.
The option to renew was exercised.
The charterparty provided that payment of hire was to be made in cash failing which the owners would be at liberty to withdraw the vessel from the service of the charterers.
The 81st instalment of hire fell due on 22 January 1976.
The charterers instructed their Norwegian bank to transfer the funds to the owners’ Italian bank. The appropriate instructions were given on 21 January 1976.
All previous instalments of hire had been paid punctually.
The funds were transferred to the owners’ bank account on the due date i.e. 22 January 1976.
Although the credit transfer was irrevocable on 22 January 1976, interest began to accrue only 4 days later i.e. on 26 January 1976.
On 23 January 1976, the owners instructed their bank to refuse payment of the hire instalment and the following day on 24 January 1976, the owners withdrew their vessel from the service of the charterers.
The reason why interest was only to accrue from 26 January 1976 was because the telefax from the Italian correspondent of the charterers’ Norwegian bank to the owners’ bank in Italy was to pay into the owners account the sum for hire with the rider that cover for the payment would only be provided on 26 January 1976.
Robert, Goff J, relying on the Brimnes, held that “cash” payment denoted immediate access to the funds including the right to earn interest. As the right to earn interest was delayed, even by as little as three days, the requirement of a cash payment was not satisfied and the owners were at liberty to withdraw their vessel. In his finding he disagreed with an experienced London arbitrator, Mr Donald Davies.
Goff J would not allow the charterers to take the point of general equitable relief against forfeiture, a point which had not been raised before the arbitrator. In the Court of Appeal, Lord Denning MR viewed the question of interest as a mere bank charge (he worked it out to be between £70 and £100) and on this basis he disagreed with the Commercial Court. In short concurring and separate judgements, Waller and Dunn LJJ agreed with Lord Denning MR.
The House of Lords (Lords Diplock, Simon of Glaisdale, Edmund-Davies, Scarman and Bridge of Harwich – judgement by Lord Bridge) restored the decision of Robert Goff J.
Lord Denning MR and Waller LJJ in the Court of Appeal pointed out that for six and a half years the charter arrangement ran smoothly until new owners took over. The old owners were English while the new owners were Italian.
Lord Denning referred to a quotation by Lord Mansfield in Hamilton v Mendes:
“The daily negotiations and property of merchants ought not to depend on subtleties and niceties; but upon …. the dictates of common sense, drawn from the truth of the case.”
Although the result seems unfair because of the consistent punctual payments over a period of six and a half years and the trivial nature of the default, the charterers could notionally have recourse to persons responsible for the instruction which delayed the full availability of the funds.
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