Withdrawal – late payment before decision to withdraw not precluding entitlement to withdraw.
The vessel was time chartered on the NYPE form which contained the usual withdrawal clause, giving the owners the right to withdraw on failure of punctual payment of hire.
The hire was required to be paid into the owners’ London bank account. The charter-party required the instalment to be paid on a Sunday. As the London banks do not operate on a Sunday this meant that payment had to be received by 3pm on the preceding Friday.
The charterers did not pay on Friday and on the following Monday, the owners notified charterers that they were contemplating withdrawing the vessel.
The owners’ London bank was a member of an inter-bank currency settlement scheme in terms of which an instruction preceded an actual credit being passed in favour of the payee customer.
After an instruction/notification was given to the owners’ London bank by the charterers’ bank, but before the owners’ account was credited, the owners withdrew their vessel.
The two arbitrators, Cedric Barclay and Richard A Clyde decided in favour of the owners but stated a special case for the court.
Donaldson J in the Commercial Court upheld the arbitrators’ award.
Donaldson J held that if the charterers had succeeded in achieving unconditional payment prior to withdrawal of the vessel, the owners would have been precluded from doing so on the authority of Georgios C.
Lord Denning MR and Lawton LJ found that the inter-bank transfer was equivalent to a cash payment and that, therefore, the owners were precluded from withdrawing on the same authority.
Bridge LJ held that even if the inter-bank transfer could be viewed as a cash payment, the owners were nevertheless not precluded from refusing payment because nothing could alter the fact that payment was late.
The House of Lords (Lords Wilberforce, Simon of Glaisdale, Salmon, Fraser of Tullybalton and Russell of Killowen – main speech given by Lord Wilberforce) agreed with Bridge LJ and upheld the appeal. The House expressly overruled the Georgios C where the default provision in a Baltime charter was held to preclude the owners from withdrawing where the charterers tendered payment before notice of withdrawal was issued.
Lord Denning MR remarked that even if the right to withdraw could be viewed as forfeiture, equity would not intervene in commercial arrangements of this nature where certainty was of the essence.
Lord Simon of Glaisdale was of the opinion that in extreme cases, which this was not, equity could be employed to protect the charterer from an unconscionable withdrawal.
Lord Simon was on the same panel which, a few months after this case, decided that equity was not a separate source of law at all – United Scientific Holdings.
This content is restricted to site members. If you are an existing user, please login. New users may register below.