118. Empresa Cubana De Fletes v Lagonisi Shipping Company Ltd (The “Georgios C”) [1971] 1 Lloyd’s Rep 7

Withdrawal – inter-bank payment – owners losing right to withdraw upon charterers’ bank issuing notice of payment

The facts

The vessel was chartered on the Baltime form.

Hire was to be paid half monthly in advance. The payment in question fell due on a Saturday, 3 October 1970 on which day the London banks were closed.

The charter provided that payment be paid to owners’ London bank.

The withdrawal clause read as follows:

“In default of payment the Owners to have the right of withdrawing the Vessel from the service of the Charterers, without noting any protest and without interference by any court or any other formality whatsoever and without prejudice any claim the Owners may otherwise have on the Charterers under the Charter….”

The charterers’ Cuban bankers instructed their correspondent in London to make payment of the hire on Friday 2 October 1970.

This instruction was only carried out on Monday 5 October 1970 by delivery of a bankers’ payment to the owners’ bank.

The owners instructed their bank to refuse payment but did not issue a notice of withdrawal until after the bankers’ payment had been delivered in a sealed envelope on Monday 5 October 1970.

The charterers contended that the owners had lost their right to withdraw upon the delivery of the envelope.

Findings

Donaldson J, interpreted the clause to mean that the right to withdraw existed only as long as there was an absence of payment.

His interpretation was confirmed by the Court of Appeal (Lord Denning MR, Phillimore and Cairns LJJ).

Commentary

The strained interpretation of the clause was prompted by the drastic nature of the remedy given to the owners. The court was aware that there had been a rise in rates.

The interpretation given to the clause was found to be wrong by the House of Lords in the Laconia.

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