120. Afovos Shipping Co. S.S. v R Pagnan and Filii (The “Afovos”) [1980] 2 Lloyd’s Rep 469; [1982] 1 Lloyd’s Rep 562; [1983] 1 Lloyd’s Rep 335

Withdrawal – anti-technicality clause strictly construed against owners

The facts

The vessel was time chartered on the NYPE form.

Hire was to be paid semi-monthly in advance.

More than a year into the charter, the charterers instructed an Italian bank to make payment to the owners’ London bankers.

The charterers gave their instructions in good time but the telex to the London bank went astray because the London bank had allowed an incorrect telex number to appear for a considerable time in an international directory.

The payment of hire was due on 14 June 1979 which meant that the charterers had until midnight on that day to effect payment.

The anti-technicality clause (clause 31) read as follows:

“When hire is due and not received the Owners, before exercising the option of withdrawing the vessel from the Charter-Party, will give the Charterers forty eight hours notice, Saturdays, Sundays and holidays excluded, and will not withdraw the vessel if hire is paid within these forty eight hours.”

On June the 14th the owners’ agent sent a telex which read as follows:

“Owners have instructed us that in case we do not receive the hire which is due today, to give charterers notice as per cl.31 of the charterparty for withdrawal of the vessel from their service.”

The owners claimed a declaration that they were entitled to withdraw the vessel.

The charterers took four points:

1. that the notice of withdrawal was premature;

2. that the owners’ bank, acting as agent, was negligent in allowing an incorrect telex number to appear in a well known international directory;

3. that the owners were estopped from withdrawing the vessel due to certain correspondence – a letter was written by the owners on an assumption that hire only had been remitted by the charterers containing a request for certain arrear amounts;

4. that the withdrawal was a forfeiture calling for intervention on equitable grounds.

Findings

The Commercial Court (Lloyd J) held in favour of the owners.

With regard to the first point: as hire was due on the day on which the notice of withdrawal was given, he found that it would be straining the language of clause to insist that the notice could only be given once the time for payment had expired i.e. midnight on 14 June 1979.

With regard to the second point, he held that the causal negligence was that of the Italian bankers by not checking that the telex had reached the correct destination.

With regard to the third point, he found that there was no unequivocal representation by the owners which had been relied on by the charterers.

With regard to the fourth point, although recognising the possibility of equitable relief, he found that in commercial transactions such as the present it was not warranted.

The Court of Appeal (Denning MR, Griffiths and Kerr LJJ) rejected the notice of withdrawal on three grounds:

1. It was premature.
2. The charterers were not given the benefit of a full 48 hour notice period; and
3. The notice was conditional which made it defective on the authority of Mihalis Angelos.

The House of Lords (main speech given by Lord Hailsham of Saint Marylebone) agreed with the Court of Appeal on the first two points.

Commentary

An additional fact – mentioned only in the speech of Lord Hailsham – was that final notice of withdrawal was given prior to the expiry of the full 48 hours after midnight on 14 June.

But for this fact, the outcome of the case would have been questionable.

On the accepted basis that the time for payment would expire on midnight on 14 June, the charterers only had to be given 48 hours grace thereafter in order to give practical effect to the ani-technicality clause.

The artificial rigidity applied by the Court of Appeal and the House of Lords may be attributed to the perceived unfairness of the mischance in effecting timeous payment – the considerable sum of US$212m was at stake.

Lord Diplock added a short commentary on the questions of anticipatory repudiation and fundamental breach, holding that only anticipatory repudiation by the charterers which this was not, could justify withdrawal of the vessel. This reasoning was based on ordinary principles of contract and not on the interpretation of the anti-technicality clause itself.

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