Reardon Smith Line Ltd v Hansen-Tangen
[1976] 3 All ER 570(Judgment by: Lord Russell of Killowen)
Between: Reardon Smith Line Ltd
And: Hansen-Tangen
Judges:
Lord Wilberforce
Viscount Dilhorne
Lord Simon of Glaisdale
Lord Kilbrandon
Lord Russell of Killowen
Subject References:
SHIPPING
Charterparty
Description of vessel
Vessel not in existence at date of charterparty
Vessel identified by yard number and name of builders
Vessel built by different builders with different yard number under sub-contract
Original yard number used on export papers
Sub-contract builders a subsidiary of builders named in charterparty
Whether words identifying vessel by reference to yard number and builders part of contractual description
Whether charterers entitled to refuse to take delivery of vessel on ground it failed to comply with description
Case References:
Behn v Burness - (1863) 3 B & S 751; 2 New Rep 184; 32 LJQB 204; 8 LT 207; 9 Jur NS 620; 122 ER 281; Ex Ch, 41 Digest (Repl) 182, 220
Cargo Ships 'El-Yam' Ltd v Invoer-en Transport Onderneming 'Invotra' NV - [1958] 1 Lloyd's Rep 39
Cehave NV v Bremer Handelsgesellschaft mbH - [1975] 3 All ER 739; [1976] 1 QB 44; [1975] 3 WLR 447; [1974] 2 Lloyd's Rep 445, CA; Digest (Cont Vol D) 784, 510a
Charrington & Co Ltd v Wooder - [1914] AC 71; 84 LJKB 220; 110 LT 548, HL; 39 Digest (Repl) 499, 452
Couchman v Hill - [1947] 1 All ER 103; [1947] KB 554; [1948] LJR 295; 176 LT 278, CA; 2 Digest (Repl) 348, 333
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd - [1962] 1 All ER 474; [1962] 2 QB 26; [1962] 2 WLR 474; [1961] 2 Lloyd's Rep 478, CA; 41 Digest (Repl) 363, 1553
Hvalfangerselskapet Polaris Aktieselskap v Unilever Ltd, Hvalfangerselskapet Globus Aktieselskap v Unilever Ltd - (1933) 39 Com Cas 1, HL; 39 Digest (Repl) 490, 384
Lewis v Great Western Railway Co - (1877) 3 QBD 195; 47 LJQB 131; 37 LT 774, CA; 8(1) Digest (Reissue) 60, 350
Moore & Co and Landauer & Co, Re - [1921] 2 KB 519; [1921] All ER Rep 466; 90 LJKB 731; 125 LT 372, CA; 39 Digest (Repl) 528, 660
Prenn v Simmonds - [1971] 3 All ER 237; [1971] 1 WLR 1381; HL, 17 Digest (Reissue) 359, 1264
Schuler (L) A G v Wickman Machine Tool Sales Ltd - [1973] 2 All ER 39; [1974] AC 235; [1973] 2 WLR 683; [1973] 2 Lloyd's Rep 53, HL; Digest (Cont Vol D) 123, 3613a
Utica City National Bank, The v Gunn - (1918) 222 NY 204; 118 N E Reporter 607
Judgment date: 7 October 1976
Judgment by:
Lord Russell of Killowen
My Lords, in my opinion the question in this appeal is one of identity: was the Diana Prosperity when built the vessel identified by the sub-charter as its future subject-matter? The words, and the only words, of identification in the sub-charter are 'newbuilding motor tank vessel called Yard No. 354 at Osaka Zosen': the sub-charter of course contained a very full specification of the vessel and its equipment and fittings, but without the words quoted there was no means by which it could ever be said of any completed vessel that it was the vessel the subject of the sub-charter.
There is in my opinion one matter of certainty to be extracted from the short and somewhat obscure quoted phrase; that is that Osaka had entered into a contract for the building of a relevant tanker and on entering into that contract had allotted in its books to the vessel to be built thereunder the yard or hull number 354. Find the vessel built pursuant to such contract, and you find the vessel the subject of the sub-charter. (We were told by counsel that shipbuilders sometimes build a ship without a contract, hoping to find a purchaser for it when completed; but it was not suggested that this was conceivable in the case of a vessel of this size.)
Once it is concluded, as I conclude, that the essence of the identification of the vessel in the sub-charter lies in necessary assumption of a shipbuilding contract to which Osaka was party, there is no difficulty in identifying the Diana Prosperity as the vessel subject to the sub-charter, and it is not necessary to attribute to Reardon Smith any knowledge of a Japanese practice of 100 per cent sub-contracting whether by failure to enquire or otherwise. On 18 December 1972 (the export contract) SSK (as seller) contracted with Sculptor; the contract contained these words:
'... the Seller, sub-contracting with Osaka ... (hereinafter called "the Builder"), agrees to build, launch and complete at the shipyard of the Builder or its subcontractor (hereinafter called "the Shipyard") [the vessel therein specified]';
[the vessel therein specified] in art 1 it was provided that 'The vessel shall have the Builder's Hull No. 354'. Osaka though not a party thereto subscribed that contract: 'We ... undertake the due performance as the Builder in accordance with the terms and conditions specified in this contract.' The emphasis in the first quotation is mine.
On the same date SSK and Osaka entered into the domestic contract; that recited the export contract (calling it the original contract) and that pursuant thereto SSK had placed an order with Osaka for the construction of the vessel the subject of the original contract. Article I of the domestic contract provided that '[Osaka] shall construct the vessel in accordance with the terms of the original contract ... ' which as indicated envisaged in terms that that construction might be through a sub-contractor. Article III provided that Osaka should carry out the construction of the vessel at its Oshima yard under the supervision of SSK and Sculptor, and further that the hull number should be number 354 of Osaka, which number should be shown on all documents relating to the vessel that should at any time be submitted to SSK and Sculptor by Osaka.
The vital point, in my opinion, is that under the domestic contract, which was the Osaka contract necessarily referred to as identification in the sub-charter, Osaka was plainly entitled to sub-contract the whole construction of the vessel, and this Osaka did to Oshima when Oshima was formed. The vessel nevertheless remained the vessel identified as that which was the outcome of the proper carrying out of the domestic contract: and that vessel was the Diana Prosperity. Accordingly in my judgment, Reardon-Smith having sub-chartered a vessel identified as the product of, in the event, the domestic contract, was not entitled to refuse to accept the Diana Prosperity, and its appeal against Hansen-Tangen fails. The fall-back appeal of Hansen-Tangen under the intermediate charter becomes in those circumstances in practice irrelevant, for the latter is under no obligation to Reardon-Smith to reject the Diana Prosperity even if they were entitled to do so, and will naturally not do so, since the sub-charter was on more favourable terms to Hansen-Tangen than the intermediate charter.
Thus far, my Lords, I have construed the sub-charter in isolation, despite evidence that Reardon Smith had previously inspected the intermediate charter and that the sub-charter was intended to be 'back to back' with it. I incline to the view that this is the correct approach. But it was argued that the reference in the sub-charter to Hansen-Tangen as 'Disponent owners' indicates that the latter were themselves charterers of the vessel in question, and so, in search of identity, involved the intermediate charter in the enquiry, with the result (it was argued) that the enquiry thus extended showed that it was a term of the contracts that the vessel should be one built by Osaka, which (at least in a narrower sense) Diana Prosperity was not.
The intermediate charter dated 15 August 1972 was by Sanko 'being Owners or disponent owners to be declared on delivery' to Hansen-Tangen of 'new building motor tank vessel (see clauses 41 and 42)'. The specifications of the vessel I need not rehearse. Clause 41 provided that the charter was 'for a motor tank vessel to be built at a yard in Japan to be declared by [Sanko], together with the applicable Hull Number for the vessel within 30 June, 1973 ... ' Thus it was a matter of indifference to the intermediate charterers and entirely at the option of Sanko by what shipbuilders and at what yard in Japan the vessel was to be built. On 10 August 1973 there was an agreement in part varying the intermediate charter and also identifying the vessel under cl 41: this by Addendum No 1 provided that 'the vessel to perform this charter is to be built by Osaka Shipbuilding Co. Ltd. and known as Hull No. 354, until named ... ' It is argued that here is a contractual obligation that the vessel shall be built by Osaka; that the Diana Prosperity was built by Oshima, which alone was licensed under Japanese law to build her and that the phrase which I have quoted as the phrase of identification from the sub-charter should therefore be construed as involving a contractual obligation or requirement of description of the vessel that she be built by Osaka. I observe at once that it is strange that if that were intended by the parties to the sub-charter they should have elected to reject the wording of the amended intermediate charter in favour of the quite different language of the sub-charter. Rather does this change suggest to me, particularly in the context that Sanko was entirely free to nominate the provenance of the vessel, that 'to be built by Osaka' was to be broadly construed and in a manner which would embrace that which was already clearly envisaged under the export contract, the domestic contract and the head charter by Sculptor to Sanko. Indeed, if the reference in the sub-charter to Hansen-Tangen as disponent owners in the sub-charter is justification for construing that charter in the light of the intermediate charter, so also should be the reference in the latter to Sanko as 'owners or disponent owners' be justification for construing the intermediate charter in the light of what had gone before. On that basis the whole genesis is opened up, and Diana Prosperity is the undoubted outcome.
I have not rehearsed the details of the formation of Oshima under the inspiration of Osaka in partnership with other Japanese interests, nor the preponderant contribution by Osaka to Oshima of management and other staff, which may well justify a conclusion that in a broad sense Diana Prosperity was built by Osaka. I do not find it necessary to decide this appeal on that ground, though it may serve to underline the fact that Reardon Smith and (by way of fall-back) Hansen-Tangen seek to avoid the sub-charter and intermediate charter on very technical grounds. I prefer to decide the appeal on the grounds which I have stated, which I trust are not an over-simplification of the complicated and sometimes tortuous arguments so lucidly presented to your Lordships' House.
Accordingly I would dismiss the appeal of Reardon Smith, and the fall-back appeal of Hansen-Tangen, with the consequence that the former should pay the costs of the latter and of Sanko of these appeals.