147. London and Overseas Freighters Ltd v Timber Shipping Company S.A. (The “London Explorer”) [1970] 2 Lloyd’s Rep 207

Redelivery – overrun on legitimate last voyage – hire to be paid at agreed rate despite market having fallen

The facts

The vessel was let on the American Government Form. The charterparty contained the following provision:

“…[Clause 4]… hire to continue until the hour of the day of her re-delivery (emphasis supplied) in like good order and condition, ordinary wear and tear excepted, to the Owners (unless lost) at Montreal/Galveston range, port Charterers’ option unless otherwise mutually agreed…”

The vessel was redelivered almost four months late due to labour strikes at both ports of discharge, New Orleans and Houston.

The charterers (represented by Robert Goff QC) argued that they were in breach of contract and therefore liable to pay damages based on the market rate.

Findings

The arbitrators appointed by the parties found in favour of the owners on the main point relating to the claim by the owners for full hire.

Mocatta J in the Commercial Court confirmed the arbitrators’ award on this point, holding that upon a proper construction of the contract, the charterers were obliged to pay the agreed hire right up to the time of redelivery.

In the Court of Appeal (Salmon, Edmund Davies and Phillimore LJJ) all three judges agreed with Mocatta J on the main point.

All three indicated that even if they had not reached their conclusion based on the plain meaning of the words themselves, there was an implied agreement by the parties to pay hire until the very time of redelivery.

In the House of Lords (Lords Reid, Morris of Borth-Y-Gest, Guest, Donovan and Cross of Chelsea – speeches by Lords Reid and Morris) the finding on the main point was confirmed.

Both Lords indicated that there was no basis for finding an implied agreement as per the Court of Appeal.

Commentary

The judgement of Mocatta J includes an analysis of time charters, referred to by him as “gross charters”. He points out that “letting” and “hiring” derive from the terminology used in demise charters from which time charters developed. These terms are inapposite to modern time charters where the relationship between the parties is more complex.

A secondary point on which there was much disagreement between all the judges was one of the arbitrators’ power to award interest at a rate different to the statutory rate binding on the ordinary courts. Mocatta J interpreted the statutory power given to the arbitrators to award interest on their awards as being one of a veto i.e. if nothing was said by them interest would run at the ordinary statutory rate applying in the ordinary courts. They had no power to award interest at a higher rate. Edmund Davies LJ in the Court of Appeal agreed with Mocatta J but he was overruled by the majority consisting of Salmon and Phillimore LJJ. The majority of the panel in the House of Lords restored the decision of Mocatta J with only Lord Reid agreeing with the Court of Appeal.

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