Reardon Smith Line Ltd v Hansen-Tangen

[1976] 3 All ER 570

Between: Reardon Smith Line Ltd
And: Hansen-Tangen

Court:

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

Hearing date: 14-15, 19-22 July 1976
Judgment date: 7 October 1976


Hansen-Tangen v Sanko Steamship Co

In 1972 a Japanese steamship company ('Sanko') organised a programme for the construction in Japanese shipyards of some 50 tankers of about 80,000 tons each which would be placed on charter by them. Before any of the vessels was built Sanko arranged a number of charters in the Shelltime 3 form, defining the contractual terms of hire; the actual vessel covered by each of the charters was to be nominated by Sanko subsequently. One of those charters ('the intermediate charter') was between Sanko and a Norwegian partnership ('Hansen-Tangen') under which Sanko undertook to deliver to Hansen-Tangen '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'. By cl 24 the description of the vessel was set out in Form B to the charter which was a standard form giving detailed particulars about the ship, its equipment and performance. Sanko subsequently nominated to perform that charter a vessel 'to be built by Osaka Shipbuilding Co Ltd and known as Hull No 354 until named', and that nomination was incorporated in the charter by an addendum. Soon after, a sub-charter was concluded between Hansen-Tangen and an English company, identifying the vessel as the 'good Japanese flag ... Newbuilding motor tank vessel called Yard No 354 at Osaka Zosen [ie Osaka Shipbuilding Co Ltd ('Osaka')] ... described as per clause 24 hereof'. The charterparty contained a cl 24 and Form B similar to the intermediate charter. Osaka was unable to build the vessel in its own yard and subcontracted the work to a company newly created for that purpose ('Oshima') in which it held 50 per cent of the shares. Osaka provided a large part of Oshima's work force and managerial staff. The vessel to be constructed was numbered 004 in Oshima's books, but 354 in Osaka's books and in export documents.

Although the vessel when built complied fully with the physical specifications in the charters and was fit for the contemplated service, the sub-charterers refused to take delivery of it on the ground that it did not correspond with the contractual description, since it had not been built personally by Osaka and did not bear its yard number.

Held

In construing a commercial contract regard could be had to the commercial purpose of the contract and the factual background against which it had been made. The purpose of the charterparties was to make available to the charterers a medium sized tanker which was not in existence or under construction at the date of either charterparty. In the circumstances the use of the yard number 354 and the expression 'to be built by Osaka' served no purpose other than to identify the vessel and was not an essential part of the contractual description of the vessel. Accordingly, as words of identification, the words used could be given a much more liberal construction than they could as words of contractual description. On that basis they were to be construed as identifying the vessel, since the arrangements for the building of the vessel and the numbering of it before being named showed that it had always been Osaka Hull No 354, as well as Oshima 004, and it could also properly be described as having been built by Osaka since that company had planned, organised and directed the building. It followed that the charterers were not entitled to refuse delivery (see p 574 d, p 576 c and d, p 577 b to e and j to p 578 g, p 579 a to e and p 580 b and c, post).

Charrington & Co Ltd v Wooder [1914] AC 71, dictum of Cardozo J in The Utica City National Bank v Gunn (1918) 222 NY at 208, Hvalfangerselskapet Polaris Aktieselskap v Unilever Ltd (1933) 39 Com Cas 1 and dictum of Roskill LJ in Cehave NV v Bremer Handelsgesellschaft mbH [1975] 3 All ER at 756 applied.

Notes

For description of a ship in a charterparty, see 35 Halsbury's Laws (3rd Edn) 262-264, paras 403, 404, and for cases on the subject, see 41 Digest (Repl) 176, 177, 184-190.

For rescission of a contract due to misdescription, see 9 Halsbury's Laws (4th Edn) paras 543, 544.

Appeals

By an originating summons dated 13 November 1975 the plaintiffs, Reardon Smith Line Ltd ('Reardon Smith'), sought the determination of the court on the question whether on the true construction of a sub-charterparty in the Shelltime 3 form between Reardon Smith and the defendants, Yngvar Hansen-Tangen, trading as H E Hansen-Tangen ('Hansen-Tangen'), dated 12 October 1973, Reardon Smith were obliged to take delivery of the tank vessel Diana Prosperity. Hansen-Tangen joined the Sanko Steamship Co ('Sanko') as third party, Sanko having tendered the Diana Prosperity in performance of a head charterparty between Sanko and Hansen-Tangen dated 15 August 1972. On 15 March 1976 Mocatta J held that the vessel did not comply with the description in the charter, but that nevertheless Reardon Smith were not entitled to refuse to take delivery of it from Hansen-Tangen and Hansen-Tangen were not entitled to refuse to take delivery of the vessel from Sanko, their remedy being in damages. Reardon Smith and Sanko appealed. On 29 March 1976 the Court of Appeal (Lord Denning MR, Stephenson and Bridge LJJ) dismissed the appeals. Reardon Smith and Sanko appealed. The facts are set out in the opinion of Lord Wilberforce.

R A MacCrindle QC, Basil Eckersley and Alan Pardoe for Reardon Smith.

John Hobhouse QC and Michael Dean for Hansen-Tangen.

Robert S Alexander QC, Nicholas Phillips and Timothy Charlton for Sanko.

Their Lordships took time for consideration

7 October 1976. The following opinions were delivered.