125. Astra Amo Compania Naviera S.A. v Elf Union S.A. and First National City Bank (The “Zographia M”) [1976] 2 Lloyd’s Rep 382

Withdrawal – bank transfer constituting payment before credit passed in owners’ favour – owners not entitled to withdraw

The facts

The vessel was let on the Shelltime 3 form for 2 years.

Midway through the charter market rates rose appreciably making it opportune for owners to withdraw.

The payment clause read as follows:

“Hire will be paid in US dollars to: First National City Bank – City Bank House – 336 The Strand – London WC2. Account Astro Amo Compania Naviera S.A. (Dollar call deposit account number 774685)”

Although the charter commenced on the third of the first month, the charterers’ established course of conduct was to pay by the first of each month.

The charterers’ French bank sent a telex to the New York branch of the owners’ London bank instructing same to credit their London branch for the account of the owners with the sum of monthly hire less a substantial deduction, value the last day of the month.

The New York branch cabled the advice to its London branch which arrived after banking hours on the last of the month which was a Friday.

On the Monday morning, being the 3rd of the month, the owners were informed by their London branch that no hire had been received and a notice of withdrawal was issued.

Although the cable from the New York branch had arrived on the preceding Friday, the owners’ account at the London branch was only credited with the sum paid in on the afternoon of the following Monday i.e. after the notice of withdrawal had been given.

The vessel was withdrawn from the service and the owners instituted action for damages against the charterers. The owners joined their own bank as second defendants, alleging that the bank had been negligent in not informing them of the timely receipt of the cable from their New York branch.

Findings

Ackner J in the Commercial Court found in favour of the charterers and the bank.

On the authority of the Georgios C (which had not at that stage been overruled by the Laconia), he held that payment had taken place before the notice of withdrawal had been issued and that withdrawal was therefore impermissible.

He interpreted the payment clause to require payment to be made to the owners’ bank for the owners’ account rather than payment directly into the owners’ account. For this purpose, he regarded the cable from the New York on the preceding Friday to constitute payment in terms of the charter as soon as it had been verified on the following Monday morning.

Further questions decided by the court were:

1. Did the actions of the London bank in processing the telex from New York amount to waiver? The court decided that the conduct of the bank was not a conscious affirmation of a contract by an agent acting for a principal;

2. If payment was due on the Saturday, could it be made on the following working day the banks being closed over weekends? The court decided where an impediment existed for payment on the last day, payment would have to take place before the the impediment occurred i.e. in this case on the Friday.

3. Was the bank was liable to the owners? As the owners could have withdrawn their cancellation but did not they were the authors of their own loss.

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