#6676 - The Alaskan Trader - Commercial Remedies BCL

The Alaskan Trader

Facts

On 19 October 1979 the Alaskan Trader was chartered by the respondents as disponent owners to the claimants for a period of 24 months, 15 days more or less. She was an old vessel, having been built in Sweden in 1954. She was acquired by her head owners in September 1979, only a few weeks before the date of the charter. She was delivered under the charter on 20 December 1979, and thereafter performed services on short Mediterranean voyages carrying gas oil from Haifa. On 19 October 1980, after she had been in service for nearly a year, the vessel suffered a serious engine breakdown. It was clear that the repairs would take many months. The charterers indicated that they had no further use for the vessel. The market had turned against them. At the time of the charter the market rate was $13-$14 per ton. By October 1980 it had declined to $8-$9 per ton. Nevertheless, the owners went ahead with the repairs at a cost of $800,000. Throughout the period of the repairs the vessel was, of course, off-hire. The repairs were completed on 7 April 1981. The owners thereupon informed the charterers that the vessel was again at their disposal. But the charterers declined to give the master any orders. They regarded the charterparty as having come to an end. The owners could have treated the charterers' conduct as a repudiation of the charterparty. But they did not do so. They anchored the vessel off Piraeus, where she remained with a full crew on board, ready to sail, but idle, until the time-charter expired on 5 December 1981. She was then sold for scrap.

But the principal claim related to the hire for the period from 8 April to 5 December 1981. The owners argued that they were entitled to retain the hire, since they had kept the vessel at the disposal of the charterers throughout the period.

Holding

It seems to me that the arbitrator is here distinguishing clearly between the two observations or limitations on the general principle to which Lord Reid had drawn attention in his speech. He is saying that a time charter is more analogous to a contract between master and servant than a simple debt, ie that it is a contract which calls for co-operation between both parties. He is also saying ('The charterers were also able to satisfy me ... ') that the owners had no legitimate interest in pursuing their claim for hire as distinct from damages.

Legitimate Interest point (Unreasonable and Wholly Unreasonable)

In addition to arguing that what Lord Reid had said about legitimate interest was only a quotation from counsel, and in any event obiter, arguments with which I have already dealt, counsel for the owners submitted that Lord Reid was, quite simply, wrong.

It seems to me that it would be difficult for me to take that view in the light of what was said by all three members of the Court of Appeal in The Puerto Buitrago. Whether one takes Lord Reid's language, which was adopted by Orr and Browne LJJ in The Puerto Buitrago, or Lord Denning MR's language in that case ('in all reason'), or Kerr J's language in The Odenfeld ('wholly unreasonable ... quite unrealistic, unreasonable and untenable), there comes a point at which the court will cease, on general equitable principles, to allow the innocent party to enforce his contract according to its strict legal terms.

How one defines that point is obviously a matter of some difficulty, for it involves drawing a line between conduct which is merely unreasonable (see per Lord Reid in White & Carter v McGregor [1961] 3 All ER 1178 at 1182, [1962] AC 473 at 42430, criticising the Lord President in Langford & Co Ltd v Dutch 1952 SC 15) and conduct which is wholly unreasonable (see per Kerr J in The Odenfeld [1978] 2 Lloyd's Rep 357 at 374). But however difficult it may be to define the point, that there is such a point seems to me to have been accepted both by the Court of Appeal in The Puerto Buitrago and by Kerr J in The Odenfeld.

I appreciate that the House of Lords has recently re-emphasised the importance of certainty in commercial contracts, when holding that there is no equitable jurisdiction to relieve against the consequences of the withdrawal clause in a time charter: see Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1983] 2 All ER 763, [1983] 3 WLR 203. I appreciate, too, that the importance of certainty was one of the main reasons urged by Lord Hodson in White & Carter v McGregor in upholding the innocent party's unfettered right to elect. But, for reasons already mentioned, it seems to me that this court is bound to hold that there is some fetter, if only in extreme cases; and, for want of a better way of describing that fetter, it is safest for this court to use the language of Lord Reid, which, as I have already said, was adopted by a majority of the Court of Appeal in The Puerto Buitrago.

Support for Mitigation Reasoning

I would add only two observations of my own. First, although the point is sometimes put in terms of the innocent party being obliged to accept the repudiation (it is so put by the arbitrator in the last sentence of para 31 of his award), I think it is more accurate to say that it is the court which, on equitable grounds, refuses to allow the innocent party to enforce his full contractual rights. It is, as Sachs LJ said in Decro-Wall, the range of remedies which is limited, not the right to elect. The court is not exercising a dispensing power; nor is it rewriting an improvident contract. It is simply refusing a certain kind of relief. In...