Equitable set-off – not available as a defence to a claim for freight
The vessel was let on a voyage charter form.
The vessel was to proceed to a port or ports in the Arabian Gulf to load petroleum for the European market.
The Hague Rules applied.
On outturn a shortage to the value of US$30 000 was found which the charterers’ deducted from the freight paid to the owners.
After the one year time bar period in article VIII of the Hague Rules, the owners instituted their claim for freight in the sum of US$30 000.
The charterers set up in defence their claim against the owners for short delivery.
In the first instance, Donaldson J (judgement unreported) gave summary judgement for the owners under RSC O.14.
The Court of Appeal (Lord Denning MR, Scarman and Goff LJJ) held that they were bound by the Brede but gave leave to appeal to the House of Lords.
Lord Wilberforce (on the woolsack) held that the juridical nature of the time bar in article VIII of the Hague Rules was such that it extinguished the charterers’ claim after one year and that the charterers, accordingly, had no defence to offer.
The juridical nature of the time bar in article VIII was contrasted with that in other statutes which bar the remedy, leaving the claim itself in existence.
This argument, Lord Wilberforce held was a complete answer to the charterers’ defence.
In case he was wrong on his “primary argument” he dealt with the charterers’ contention that the rule of abatement or equitable set-off as found in other areas of the law e.g. Mondel v Steel should apply in this situation as well.
Lord Wilberforce’s reply to this argument was that the rule laid down in Dakin v Oxley had stood for more than 100 years and could not be disturbed.
Lord Simon of Glaisdale and Lord Salmon delivered concurring judgements while Lords Dilhorne and Edmund-Davies simply agreed with Lord Wilberforce.
Lord Simon’s speech traces the development of the common law defence of abatement and equitable set-off prior and subsequent to the passing of the Judicature Act 1873 which brought about the fusion between law and equity.
Lord Simon held that equity itself was against the charterers in so far as they had freely chosen to be bound by the Hague Rules.
Lord Salmon based his decision squarely on the binding effect of precedent and thought that were equitable set-off to apply, this could stand as a defence notwithstanding the time bar in the Hague Rules which was aimed at the prosecution of a claim by the cargo owner and did not address the issue of a defence of set off.
Lord Simon makes the valid observation that general rules should, on normal juristic principles, be extended by analogy.
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