123. Tropwood A.G. of Zug v Jade Enterprises Ltd (The “Tropwind”) [1981] 1 Lloyd’s Rep 45; [1982] 1 Lloyd’s Rep 232

Withdrawal – construction of final payment clause – charterers’ right to deduct hire and related expenses

The facts

The vessel was chartered on the NYPE form for 12 months, the redelivery date being 8 January 1974.

On 22 November 1973 the vessel was ordered from Tobata in Japan to Paradip, India but then re-directed to Belikeri, India. At Belikeri the vessel was to load a cargo of ore for Pohang, South Korea.

The vessel was sub-sub-chartered for the final voyage. Owners contracted with the sub-charterers to pay for bunkers in return for a share of the profits.

On 8 December 1973, when the last payment of hire fell due, the vessel arrived at Belikeri to commence loading.

Clause 56 of the charter read as follows:

“56. Should the vessel be on her voyage to the port of re-delivery at the time when payment hire is due, said payment shall be made for such length of time as Owners or their Agents and Charterers or their Agents may agree upon as the established time necessary to complete the voyage. Bunkers to be taken over by the vessel and estimated disbursements for Owners’ account before re-delivery and difference shall be refunded by owners or paid by charterers as the case may be.”

The charterers estimated the final voyage to be completed on 4 January 1974 and paid hire up to that time deducting a sum for the cost of bunkers at re-delivery.

The owners protested and put the charterers on terms to make full payment by 13 December 1974. The charterers failed to make such payment and the owners gave formal notice of withdrawal.

The charterers obtained an injunction restraining the owners from withdrawing the vessel. The vessel continued to load at Belikeri until 25 December 1973 and then proceeded to Pohang where the cargo was discharged and the vessel re-delivered to the owners on 15 January 1974.

The owners claimed for the difference between the agreed rate and the current market rate from the time of withdrawal to the date of re-delivery.

Arbitrators, John Potter and Donald Davies and umpire, Kingsley, held in favour of the charterers that the owners were not entitled to withdraw the vessel. They stated a special case for the Commercial Court.

The questions of law were:

1. whether the owners were entitled to withdraw the vessel on 14 December 1973;
2. whether such withdrawal did in fact take place; and
3. on what basis the owners were to be remunerated for the voyage between Belikeri and Pohang which terminated on 15 January 1974.

Findings

Before Robert Goff J it was conceded that deductions for hire and disbursements were justified by reference to clauses in the charterparty other than 56, quoted above.

The difficulty was in the deduction for estimated remaining bunkers to be taken over by the owners at the conclusion of the charter. Robert Goff J held that the second sentence of clause 56 was meaningless. It could not, therefore, justify the deduction made in this respect by the charterers.

This finding would dispose of the first question of law but Robert Goff J expressed the view that the meaning of the phrase in clause 56, “voyage to the port of re-delivery” was intended to refer to the final leg of the voyage and did not extend to the time when the vessel was loading at Belikeri. Because clause 56 did not apply charterers were not entitled to make a deduction for bunkers.

Notice of withdrawal was accordingly valid and the voyage from Belikeri to Pohang was under a new contract at the prevailing market rate.

The Court of Appeal (Lord Denning MR, Dunn and Fox LJJ – main judgement given by Lord Denning MR) held that the notice of withdrawal was invalid and agreed with the arbitrators’ decision.

Lord Denning MR held that the meaning of clause 56 could be discerned and did not require rectification. The final voyage included the ballast approach to and loading at Belikeri.

Commentary

Agreement between the parties regarding the estimated length of time left for the charter was crucial to the working of clause 56

The effect of bad grammar, rectification, trade usage, the nature of time charters and the effect of the Law Reform (Frustrated Contracts) Act 1943 are topics which are discussed. Robert Goff  J held that the Act applied to time charters and charters by demise but not to voyage charters and bills of lading.

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