Voyage Charterparty
Freight. Deduction from freight. The Dominique.
Authorities discussed on Deduction from freight. General Principles and Deduction from freight. Set off pages, all dealt with non-repudiatory breaches and the rule stated in The Aries restricting equitable intervention was formulated by Lord Simon of Glaisdale in the following words:
the equity of the bill had to impeach the title to the legal demand: per Lord Cottenham LC in Rawson v Samuel (1841) Cr & Ph 161 at 178, 179. The title to a claim for freight is not impeached by short delivery of cargo - unless, of course, the latter amounts to repudiation of the contract of carriage.
The question whether claim in respect of a repudiation of contract of carriage is capable of impeaching the title was brought up before the House of Lords in Colonial Bank (Now Bank of Boston Connecticut) v European Grain & Shipping Ltd. (The Dominique) [1989] 1 Lloyd’s Rep 431. This case evolved repudiatory breach of charterparty by the owners who were either unwilling or unable to continue laden voyage after their vessel was arrested by creditor. Charterers incurred considerable expenses arranging discharging of their goods and transportation them by another vessel. Charterparty freight was never paid by the charterers and it was claimed by the owners.
In the House of Lords the charterers accepted that an ordinary cross-claim in respect of loss of or damage to cargo amounting to no more than a breach of warranty, could not give rise to a defence by way of equitable set-off; but they contended that, where there was a repudiation of the charter-party by the owners, accepted by them, a defence by way of equitable set-off became available to them.
Lord Brandon giving the only reasoned judgment in the House of Lords stated three reasons for holding that "the rule against deduction" is equally applicable to both non-repudiatory and repudiatory breaches at pp.441-442:
The first reason is that a repudiatory breach of a charter-party by an owner does not necessarily cause more damage to a charterer than a non-repudiatory breach; it may cause less. There is, therefore, no justification based on quantum of damage for applying the rule against deduction to the latter breach but not to the former. The second reason is that the application of the rule against deduction only works to the ultimate disadvantage of a charterer when the owner’s financial situation makes it impossible for a counterclaim to be enforced against him. That risk, however, exists whether the breach is repudiatory or non-repudiatory. The third reason lies in the manner in which the legislation [Law Reform (Frustrated Contracts) Act, 1943] has treated the premature termination of a voyage charter-party by frustration…
…The legislature must have had a reason for this exclusion [voyage charterparties from application of Law Reform (Frustrated Contracts) Act, 1943] and the only reason which it seems to me that it could have had is an unwillingness to create a situation in which, following the frustration of contracts of this kind, advance freight already due could, if paid, be recovered back in whole or in part, or, if not paid, cease to be payable in whole or in part. In other words the legislature was preserving, in the context of the premature termination of such contracts by frustration, the indefeasibility of an accrued right to advance freight.
EMV2000, EMV2005, BPVOY4 and Shellvoy5 forms of charterparties have incorporated clauses which expressly provide for the charterers’ right to deduct from freight an amount equal to FOB loading port value of non-delivered cargo.
But unlike the inexplicable shortage of the cargo in The Olympic Brilliance, the right to deduct vested by these charter forms concerns only that non-delivered cargo which remains on board upon completion of discharge operation and only if its volume can be properly ascertained. Such clauses usually called ROB (Retaining On Board) Clause.
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