[HOUSE OF LORDS]

AND

Shipping - Charterparty - Time charter - Hire - Non-payment - Withdrawal of vessel - Whether charterers entitled of relief from forfeiture

Equity - Relief from forfeiture - Time charter - Withdrawal of vessel for late payment of hire - Whether doctrine of relief against forfeiture applicable to time charter

Ships' Names - Scaptrade

The respondent owners let the Scaptrade to the appellant charterers under a time charterparty, clause 8 of which provided for payment of the hire monthly in advance. The clause further provided that "in default of such payment owners may withdraw the vessel from the service of the charterers, without prejudice to any claim owners may have on charterers under this charter." When the charterers failed to pay on time the hire instalment that fell due on July 8, 1979, the owners, on July 12, sent a telex withdrawing the vessel. The owners subsequently sought a declaration in the Commercial Court that they had been entitled to withdraw the vessel from the charterers' service. The charterers, inter alia, asked for relief against forfeiture. Lloyd J., inter alia, held that, assuming that he had jurisdiction to grant relief from forfeiture, he would not, in his discretion, have done so. The Court of Appeal dismissed an appeal by the charterers, holding that the judge had had no jurisdiction to grant relief from forfeiture.

On appeal by the charterers by leave of the House of Lords:-

Held, dismissing the appeal, that the concept of equitable relief from forfeiture was inappropriate in the case of the exercise by the shipowner under a time charterparty not by demise, which was a contract for services in respect of which specific performance would not be ordered, of his contractual right to withdraw the vessel from the charterers in the event of their non-payment of the hire; that no such jurisdiction existed and, moreover, there were practical reasons of legal policy why such a jurisdiction should not be created (post, pp. 701C-D, 703D-E, 704H - 705B).

Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, H.L.(E.) considered.

Dicta of Lord Uthwatt in Tankexpress A/S v. Compagnie Financi�re Belge des PŽtroles S.A. [1949] A.C. 76, 100 H.L.(E.); Lord Simon of Glaisdale in Mardorf Peach & Co. Ltd v. Attica Sea Carriers Corporation of Liberia (The Laconia) [1977] A.C. 850, 873-874, H.L.(E.) and Lloyd J. in Afovos Shipping Co. S.A. v. R. Pagnan and F.lli (The Afovos) [1980] 2 Lloyd's Rep. 469 not applied.

Decision of the Court of Appeal [1983] Q.B. 529; [1983] 2 W.L.R. 248; [1983] 1 All E.R. 301 affirmed.

The following cases are referred to in the opinion of Lord Diplock:

Afovos Shipping Co. S.A. v. R. Pagnan and F.lli (The Afovos) [1980] 2 Lloyd's Rep. 469; [1982] 1 W.L.R. 848; [1982] 3 All E.R. 18, C.A.

A/S Awilco of Oslo v. Fulvia S.p.A. di Navigazione of Cagliari (The Chikuma) [1981] 1 W.L.R. 314; [1981] 1 All E.R. 652, H.L.(E.).

Clarke v. Price (1819) 2 Wils. 157.

Lumley v. Wagner (1852) 1 De G.M. & G. 604.

Mardorf Peach & Co. Ltd. v. Attica Sea Carriers Corporation of Liberia (The Laconia) [1977] A.C. 850; [1977] 2 W.L.R. 286; [1977] 1 All E.R. 545, H.L.(E.).

Shiloh Spinners Ltd. v. Harding [1973] A.C. 691; [1973] 2 W.L.R. 28: [1973] 1 All E.R. 90, H.L.(E.).

Stockloser v. Johnson [1954] 1 Q.B. 476; [1954] 2 W.L.R. 439; [1954] 1 All E.R. 630, C.A.

Tankexpress A/S v. Compagnie Financi�re Belge des Petroles S.A. [1949] A.C. 76; [1948] 2 All E.R. 939, H.L.(E.).

The following additional cases were cited in argument:

Barton Thompson & Co. Ltd. v. Stapling Machines Co. [1966] Ch. 499; [1966] 2 W.L.R. 1429; [1966] 2 All E.R. 222.

Gatoil Anstalt v. Omennial Ltd. (The Balder London) [1980] 2 Lloyd's Rep. 489.

Starside Properties Ltd. v. Mustapha [1974] 1 W.L.R. 816; [1974] 2 All E.R. 567, C.A.

Tradax Export S.A. v. Dorada Compania Naviera S.A. (The Lutetian) [1982] 1 Lloyd's Rep. 140.

APPEAL from the Court of Appeal.

This was an appeal by the charterers, Flota Petrolera Ecuatoriana, by leave of the House of Lords from the decision of the Court of Appeal (Sir John Donaldson M.R., May and Robert Goff L.JJ.) on November 26, 1982, dismissing their appeal from a judgment of Lloyd J. [1981] 2 Lloyd's Rep. 425 on July 3, 1981, in favour of the respondent owners, Scandinavian Trading Tanker Co. A.B. The Court of Appeal refused the charterers leave to appeal, but on January 20, 1983, the Appeal Committee of the House of Lords (Lord Diplock, Lord Roskill, and Lord Brandon of Oakbrook) allowed a petition by the charterers for leave.

The facts are set out in the opinion of Lord Diplock.

Johan Steyn Q.C. and Anthony Bompas for the charterers. It is asserted in the owners' printed case that "there is a clear balance of judicial opinion unfavourable to the application of the equitable doctrine to relieve against the consequences of hire payment clauses in time charters." However, the question before your Lordships' House only arose for decision in Afovos Shipping Co. S.A. v. R. Pagnan and F.lli (The Afovos) [1980] 2 Lloyd's Rep. 469; Gatoil Anstalt v. Omennial Ltd. (The Balder London) [1980] 2 Lloyd's Rep. 489 and Tradax Export S.A. v. Dorada Compania Naviera S.A. (The Lutetian) [1982] 1 Lloyd's Rep. 140.

Admittedly, there is no evidence of equity ever having intervened to relieve against a withdrawal under a charterparty. On the other hand,

"English law develops by applying an established rule to new circumstances which are analogous to the circumstances in which the established rule was framed" (Mardorf Peach & Co. Ltd. v. Attica Sea Carriers Corporation of Liberia (The Laconia) [1977] A.C. 850, 874E, per Lord Simon of Glaisdale). The withdrawal provision in clause 8 of the charterparty is a mechanism for securing payment of hire. Historically, the principal area in which the jurisdiction to relieve was exercised was in the case of conditions securing payment of money. Therefore, the case is prima facie one to which the equitable jurisdiction applies: see Shiloh Spinners Ltd. v. Harding [1973] A.C. 691.

The owners suggest that the following characteristics of a time charter take it outside the scope of the equitable jurisdiction: (a) save for penalties and forfeitures of money, the doctrine is limited to forfeiture of some proprietary or possessory interests in land, such as a lease; (b) no "forfeiture" is involved; (c) the obligation to pay hire promptly in advance is a "condition" of the contract; (d) the commercial nature of the contract.

As to absence of a proprietary or possessory interest, historically there was no particular distinction between forfeitures and penalties that took the form of conditions annexed to personal obligations and those that took the form of conditions annexed to interests in land. Moreover, the jurisdiction exists in the cases of the hiring of chattels and of demise charters: see Barton Thompson & Co. Ltd. v. Stapling Machine Co. [1966] Ch. 499 and Starside Properties v. Mustapha [1974] 1 W.L.R. 816, 821H. It would be odd if the jurisdiction applied to demise charters but not to time charters.

As to "forfeiture," the right of withdrawal in clause 8 of the charterparty can be categorised as a right of forfeiture within the traditional acceptance of the expression. It is a contractual right to deprive the charterers of the benefit of the services of the vessel and, therefore, has rightly in the past been described as a right of forfeiture. In any event, the question whether the doctrine applies should not simply be answered by asking in the abstract whether the withdrawal provision is to be described as a forfeiture. The correct approach is to ask whether it was inserted to secure the payment of money.

As to "condition," to say that the provision for withdrawal makes the obligation to pay on time "of the essence," or makes the term requiring punctual payment a condition, is only to state the conclusion that in no circumstances can equity relieve against the consequences of breach. In any event, if the owners' argument is sound, it will equally defeat the application of the doctrine in the case of bonds and mortgages and would have done so apart from statute in the case of leases of land.

As to the commercial nature of the contract, there is nothing in the historical development of the doctrine, or in any of the authorities, to indicate that, as a matter of jurisdiction, the doctrine can never apply to commercial transactions. Indeed, Robert Goff L.J. [1983] Q.B. 529, 538 rightly pointed out that the doctrine can apply in the case of commercial leases. No doubt the commercial nature of a bargain is an important factor in deciding whether relief should be granted in a particular case. As a matter of legal principle, it does not on its own take a case outside the jurisdiction to grant relief from forfeiture.

It is accepted that, in deciding whether the jurisdiction extends to the time charter field, it would be right to consider such a development (as Robert Goff L.J. said, at p. 539D) "on its merits, as a matter of policy." The following points are relied on: (a) If (as is submitted) the jurisdiction exists in relation to the hiring of chattels, and therefore to demise charters, there appears to be no compelling reason of policy why it cannot exist in relation to time charters. Such compartmentalisation of the law of contract is undesirable. (b) Moreover, if (as is submitted) the jurisdiction exists in relation to some commercial transactions, that characteristic of a time charter should not as a matter of policy place it outside the scope of the equitable jurisdiction. (c) It is conceded that certainty in construing contracts is the ideal at which the courts should aim. The charterers' contentions do not detract from this cardinal principle. Moreover, certainty is not the only consideration. The existence of a limited jurisdiction to relieve against forfeiture, even in commercial contracts, will enable equity to fulfil its function of tempering the rigidity of the common law. Indeed, as Lloyd J. stated in The Afovos [1980] 2 Lloyd's Rep. 469, 479, nothing could be less certain or more capricious than the way in which the clause works at present. (d) For the reasons given by Lloyd J. in The Afovos, the doctrine can be satisfactorily and sensibly applied in the time charter field. In the rare case where a without prejudice agreement is not concluded, the remedy of an interlocutory injunction would be available. If such an injunction is granted, it will, of course, always be on the basis that the charterers give a cross-undertaking in damages, backed, if necessary, by security to the satisfaction of the court. The question could be determined within a very short time.

The House should bear in mind the wider effect if the owners are right: for example, in the case of a time charter for a long period (e.g. 20 years), a demise charter; hire purchase. [Reference was made to Shiloh Spinners Ltd. v. Harding; [1973] A.C. 691, 722A-724, 725D-F, per Lord Wilberforce.]

As to the distinction in principle between land and a building or a chattel, it is odd that relief should be granted in respect of land but not in respect of a chattel (the distinction between oil in a tanker and oil in a tank ashore), for example, in the case of a single buoy mooring. The doctrine was not restricted to land historically: it extended to bonds.

As to the requirement of a possessory interest, it is admitted that there is a personal services element here, but, if there is an equity, there is no reason why it should not be protected. If one looks at the substance of he three contracts mentioned earlier (a time charter for a long period, etc.), their commercial and economic purpose is very similar, and the factor of absence of possession should not make a difference.

It is accepted that the courts do not relieve for forfeiture in the case of breach of a condition in respect of sale of goods. In the case of a lease, payment of the hire may be a condition, but the courts grant relief. That is not altering the nature of the condition but recognising an equity. The charterers do not necessarily say that the doctrine applies to a building contract case where a bond is put up six hours late, but it is only necessary for the House of Lords to say that it does apply to the three cases mentioned.

The question is as put by Lord Wilberforce in Shiloh Spinners Ltd. v. Harding, at p. 723G-H.

It is accepted that certainty in commercial contracts is desirable, but there are competing considerations. There is an equity here that the courts ought to protect. This will not have an unsettling effect on commercial transactions worldwide: there are many disputes already. The results at the moment are somewhat capricious. This jurisdiction would bring some sense and order to it.

Kenneth Rokison Q.C. and Timothy Saloman for the owners were asked to address the House on what, if any, distinction they would draw between a time charter and a demise charter and between a demise charter and a lease. Whatever the position may be under a demise charter, this jurisdiction does not extend to a time charter. Although these forms of contract may be used to secure broadly the same object, the way they do it is very different. In a demise charter, there is a transfer of possession of the vessel. It is difficult to generalise about demise charters. At one time, they were hardly ever used. Now, a bank may be the owner of the vessel. A demise charter is really used for financial purposes. It is often tailor-made, whereas time charters are invariably on well-known standard forms. It is difficult to advance submissions as to demise charters without reference to the specific charter. Under a time charter, the owners' obligations are considerable: fuelling, etc., keeping the vessel in good condition, drydocking it at their own expense, provisioning it. They have to incur considerable expenditure. It cannot, therefore, simply be stated that the right to withdraw the vessel from the charterer's service is simply security for the payment of money. It is fundamental to a time charter (and has been since 1902 and no doubt since long before that) that the hire must be paid in advance. Of course, any condition in a contract that entitles a party to bring the contract to an end may be said to be security for the performance of the contract.

Their Lordships took time for consideration.

June 30. LORD DIPLOCK. My Lords, in this appeal between the appellant ("the charterers") and the respondent ("the owners") of the tanker Scaptrade, your Lordships have heard argument upon one question only: "Has the High Court any jurisdiction to grant relief against the exercise by a shipowner of his contractual right, under the withdrawal clause in a time charter, to withdraw the vessel from the service of the charterer upon the latter's failure to make payment of an instalment of the hire in the manner and at a time that is not later than that for which the withdrawal clause provides?" I call this the jurisdiction point.

Since, at the conclusion of the argument on the jurisdiction point, your Lordships were unanimously of opinion that there is no such jurisdiction, it became unnecessary to consider whether Lloyd J., who tried the case at first instance in the Commercial Court [1981] 2 Lloyd's Rep. 425 and was willing to assume that he did have jurisdiction to grant relief in his discretion, exercised that discretion in a manner that was erroneous in law when he refused to grant relief to the charterers. I call this the discretion point.

The time charter concerned was on the standard printed "Shelltime 3" form with typed additions that are not material to the question that your Lordships have to decide. This form of charterparty is expressed to be governed by the law of England, and to be subject to the jurisdiction of the English court. The relevant wording of the payment of hire clause, which, as is usual in most standard forms of time charter, incorporated the withdrawal clause, was:

"Payment of the said hire shall be made in New York monthly in advance ... In default of such payment owners may withdraw the vessel from the service of charterers, without prejudice to any claim owners may otherwise have on charterers under this charter."

The charter had become by extension a three-year charter. In July 1979 when it had still a year to run the freight market was rising steeply. The charterers were unfortunate enough, through some slip-up in their own office, to fail to pay on July 8, 1979, the instalment of hire due upon that date. Four days later, on July 12, the owners gave notice to the charterers withdrawing the vessel. Tender of the overdue hire was made on the following day but was refused. After negotiations had taken place, the vessel was rechartered by the owners to the charterers on a "without prejudice" agreement of the usual kind, the rate of hire (i.e. charter rate or market rate) to abide the result of litigation, which in the event came before Lloyd J.

My Lords, the jurisdiction point which your Lordships have to decide is a compact one. In order to deal with it I see no need to mention any more facts than those that I have now stated; although there were other issues that were canvassed at the trial, some of which were canvassed again in the Court of Appeal. That being so, I should like to say how helpful I have found both the typewritten summary of the propositions intended to be developed and the chronological table of relevant events that leading counsel for the charterers handed in at the beginning of his oral argument. This response to suggestions that have recently been made in this House has shown how useful it can be in shortening the time needed for the hearing and in concentrating the attention of your Lordships (and of counsel) upon those points that are essential to the argument that is being presented.

Lloyd J. adopted the course that he had previously adopted in Afovos Shipping Co. S.A. v. R. Pagnan and F.lli (The Afovos) [1980] 2 Lloyd's Rep. 469. He assumed that the jurisdiction point could be decided in the charterers' favour; but on the particular facts he decided against them on the discretion point. The charterers appealed to the Court of Appeal. The Court of Appeal, while expressing doubt as to the adequacy in law of the judge's reasons for refusing to grant relief in the circumstances of the case, if there were vested in him a discretion to grant it, decided against the charterers on the jurisdiction point, and dismissed their appeal.

My Lords, the judgment of the Court of Appeal [1983] Q.B. 529, delivered by Robert Goff L.J., on the jurisdiction point was the first direct decision by any English court, given after hearing argument, upon the question that I have set out at the beginning of this speech. For reasons admirably expressed, and which, for my part, I find convincing, the Court

of Appeal held that there was no such jurisdiction. The argument that there was jurisdiction in the court to grant relief against the withdrawal of the vessel from the charterer's service for default in punctual payment of an instalment of hire pursuant to the terms of the withdrawal clause in a time charter could, however, be supported by certain obiter dicta to be found in speeches in this House; in particular that of Lord Simon of Glaisdale in Mardorf Peach & Co. Ltd. v. Attica Sea Carriers Corporation of Liberia (The Laconia) [1977] A.C. 850, 873-874. Since such large sums of money may be at stake when rights to withdraw a vessel under a time charter are exercised at a time of rising freight rates (which, except where insolvency of the charterer is feared, is normally the only time when such rights are exercised), it seemed desirable to the Appeal Committee of this House that leave to appeal should be granted to the charterers, not, I must confess, with any great expectation that fuller consideration would show that on the jurisdiction point the Court of Appeal had got it wrong, but in order that a matter of such practical importance to the shipping world should, by a decision of the highest appellate court, be put beyond reach of future challenge.

Apart from a throw-away sentence in the speech of Lord Uthwatt in Tankexpress A/S v. Compagnie Financi�re Belge des Petroles S.A. [1949] A.C. 76, 100, in which he said: "Courts of equity, indeed, in appropriate cases relieve against failure to pay on a stipulated day ..." but did not suggest that the operation of a withdrawal clause in a time charter provided a case that was "appropriate," the origin of what I will, proleptically at this stage, describe as a beguiling heresy, which the Court of Appeal rejected in the instant case, is to be found in Lord Simon of Glaisdale's speech in The Laconia [1977] A.C. 850. In The Laconia itself the availability of equitable relief had not been raised in the courts below; and since it had not occurred to anyone to invite the judge to exercise a discretion to grant relief, the House had ruled that the point could not be taken in argument in the appeal.

I need not cite the passages in Lord Simon of Glaisdale's speech that gave encouragement to future charterers to claim equitable relief against withdrawal of the vessel under a withdrawal clause in a time charter, except to note that after referring to a possible analogy to relief against forfeiture for non-payment of rent under leases of real property he says, at p. 874:

"in any case, English law develops by applying an established rule of law to new circumstances which are analogous to the circumstances in which the established rule was framed: ..."

Nor need I cite the passages in the speeches of Lord Wilberforce and Lord Salmon in which the analogy with leases of real property is decried.

A time charter, unless it is a charter by demise, with which your Lordships are not here concerned, transfers to the charterer no interest in or right to possession of the vessel; it is a contract for services to be rendered to the charterer by the shipowner through the use of the vessel by the shipowner's own servants, the master and the crew, acting in accordance with such directions as to the cargoes to be loaded and the voyages to be undertaken as by the terms of the charterparty the charterer is entitled to give to them. Being a contract for services it is thus the very prototype

of a contract of which before the fusion of law and equity a court would never grant specific performance: Clarke v. Price (1819) 2 Wils. 157; Lumley v. Wagner (1852) 1 De G.M. & G. 604. In the event of failure to render the promised services, the party to whom they were to be rendered would be left to pursue such remedies in damages for breach of contract as he might have at law. But as an unbroken line of uniform authority in this House, from Tankexpress [1949] A.C. 76 to A/S Awilco of Oslo v. Fulvia S.p.A. di Navigazione of Cagliari (The Chikuma) [1981] 1 W.L.R. 314, has held, if the withdrawal clause so provides, the shipowner is entitled to withdraw the services of the vessel from the charterer if the latter fails to pay an instalment of hire in precise compliance with the provisions of the charter. So the shipowner commits no breach of contract if he does so; and the charterer has no remedy in damages against him.

To grant an injunction restraining the shipowner from exercising his right of withdrawal of the vessel from the service of the charterer, though negative in form, is pregnant with an affirmative order to the shipowner to perform the contract; juristically it is indistinguishable from a decree for specific performance of a contract to render services; and in respect of that category of contracts, even in the event of breach, this is a remedy that English courts have always disclaimed any jurisdiction to grant. This is, in my view, sufficient reason in itself to compel rejection of the suggestion that the equitable principle of relief from forfeiture is juristically capable of extension so as to grant to the court a discretion to prevent a shipowner from exercising his strict contractual rights under a withdrawal clause in a time charter which is not a charter by demise.

My Lords, Lloyd J., who, as counsel for the charterers in The Laconia [1977] A.C. 850, had been prevented from arguing the point, was enabled to return to the charge when there came before him as judge of the Commercial Court The Afovos [1980] 2 Lloyd's Rep. 469, in which the question of jurisdiction to grant relief against the operation of a withdrawal clause was argued. That case also ultimately reached this House where it was decided on the ground that upon the true construction of a "non-technicality clause" included in a time charter in New York Produce Exchange form, the shipowner's notice of withdrawal was invalid. This made it unnecessary to refer in the speeches in this House to that part of Lloyd J.'s judgment where he had discussed the jurisdiction to grant a charterer relief from the operation of a withdrawal clause. In this House that was a question that was never reached.

In dealing with the jurisdiction point in The Afovos Lloyd J., in addition to adopting Lord Simon of Glaisdale's suggested analogy in The Laconia between re-entry on leasehold premises for non-payment of rent and withdrawal of a ship for non-payment of hire (an analogy which I reject for the reasons that I have already given), sought to extract from the speech of Lord Wilberforce in Shiloh Spinners Ltd. v. Harding [1973] A.C. 691 a more general proposition that wherever a party to a contract was by its terms given a right to terminate it for a breach which consisted only of non-payment of a sum of money and the purpose of incorporating the right of termination in the contract was to secure the payment of that sum, there was an equitable jurisdiction to grant relief against the exercise of the right of termination.

My Lords, Shiloh Spinners Ltd. v. Harding was a case about a right of re-entry upon leasehold property for breach of a covenant, not to pay money but to do things on land. It was in a passage that was tracing the history of the exercise by the Court of Chancery of its jurisdiction to relieve against forfeiture of property that Lord Wilberforce said, at p. 722:

"There has not been much difficulty as regards two heads of jurisdiction. First, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money, equity has been willing to relieve on terms that the payment is made with interest, it appropriate, and also costs. ..."

That this mainly historical statement was never meant to apply generally to contracts not involving any transfer of proprietary or possessory rights, but providing for a right to determine the contract in default of punctual payment of a sum of money payable under it, is clear enough from Lord Wilberforce's speech in The Laconia [1977] A.C. 850. Speaking of a time charter he said, at p. 870: "It must be obvious that this is a very different type of creature from a lease of land."

Moreover, in the case of a time charter it is not possible to state that the object of the insertion of a withdrawal clause, let alone the transaction itself, is essentially to secure the payment of money. Hire is payable in advance in order to provide a fund from which the shipowner can meet those expenses of rendering the promised services to the charterer that he has undertaken to bear himself under the charterparty; in particular the wages and victualling of master and crew, the insurance of the vessel and her maintenance in such a state as will enable her to continue to comply with the warranty of performance.

This, the commercial purpose of obtaining payment of hire in advance, also makes inapplicable another analogy sought to be drawn between a withdrawal clause and a penalty clause of the kind against which courts of law, as well as courts of equity, before the Judicature Acts had exercised jurisdiction to grant relief. The classic form of penalty clause is one which provides that upon breach of a primary obligation under the contract a secondary obligation shall arise on the part of the party in breach to pay to the other party a sum of money which does not represent a genuine pre-estimate of any loss likely to be sustained by him as the result of the breach of primary obligation but is substantially in excess of that sum. The classic form of relief against such a penalty clause has been to refuse to give effect to it, but to award the common law measure of damages for the breach of primary obligation instead. Lloyd J. in The Afovos [1980] 2 Lloyd's Rep. 469 attached importance to the majority judgments in Stockloser v. Johnson [1954] 1 Q.B. 476 which expressed the opinion that money already paid by one party to the other under a continuing contract prior to an event which under the terms of the contract entitled that other party to elect to rescind it and to retain the money already paid might be treated as money paid under a penalty clause, and recovered to the extent that it exceeded to an unconscionable extent the value of any consideration that had been given for it. Assuming this to be so, however, it is incapable of having any application to time charters and withdrawal notices. Moneys paid by

the charterer prior to the withdrawal notice that puts an end to the contract or services represent the agreed rate of hire for services already rendered, and not a penny more.

All the analogies that ingenuity has suggested may be discovered between a withdrawal clause in a time charter and other classes of contractual provisions in which courts have relieved parties from the rigour of contractual terms into which they have entered can in my view be shown upon juristic analysis to be false. Prima facie parties to a commercial contract bargaining on equal terms can make "time to be of the essence" of the performance of any primary obligation under the contract that they please, whether the obligation be to pay a sum of money or to do something else. When time is made of the essence of a primary obligation, failure to perform it punctually is a breach of a condition of the contract which entitles the party not in breach to elect to treat the breach as putting an end to all primary obligations under the contract that have not already been performed. In Tankexpress A/S v. Compagnie Financi�re Belge des Petroles S.A. [1949] A.C. 76 this House held that time was of the essence of the very clause with which your Lordships are now concerned where it appeared in what was the then current predecessor of the Shelltime 3 charter. As is well-known, there are available on the market a number of so-(mis)called "anti-technicality clauses," such as that considered in The Afovos, which require the shipowner to give a specified period of notice to the charterer in order to make time of the essence of payment of advance hire; but at the expiry of such notice, provided it is validly given, time does become of the essence of the payment.

My Lords, quite apart from the juristic difficulties in the way of recognising a jurisdiction in the court to grant relief against the operation of a withdrawal clause in a time charter there are practical reasons of legal policy for declining to create any such new jurisdiction out of sympathy for charterers. The freight market is notoriously volatile. If it rises rapidly during the period of a time charter, the charterer is the beneficiary of the windfall which he can realise if he wants to by subchartering at the then market rates. What withdrawal of the vessel does is to transfer the benefit of the windfall from charterer to shipowner.

The practical objections to any extension to withdrawal clauses in time charters of an equitable jurisdiction to grant relief against their exercise are so convincingly expressed by Robert Goff L.J. in the judgment of the Court of Appeal [1983] Q.B. 529, 540 - 541 in the instant case that I can do no better than to incorporate them in my own speech for ease of reference:

"Parties to such contracts should be capable of looking after themselves: at the very least, they are capable of taking advice, and the services of brokers are available, and are frequently used, when negotiating terms. The possibility that shipowners may snatch at the opportunity to withdraw ships from the service of time charterers for non-payment of hire must be very well known in the world of shipping: it must also be very well known that anti-technicality clauses are available which are effective to prevent any such occurrence. If a prospective time charterer wishes to have any such clause included

in the charter, he can bargain for it. If he finds it necessary or desirable to agree to a charter which contains no such clause, he can warn the relevant section of his office, and his bank, of the importance of securing timeous payment. But the matter does not stop there. It is of the utmost importance in commercial transactions that, if any particular event occurs which may affect the parties' respective rights under a commercial contract, they should know where they stand. The court should so far as possible desist from placing obstacles in the way of either party ascertaining his legal position, if necessary with the aid of advice from a qualified lawyer, because it may be commercially desirable for action to be taken without delay, action which may be irrevocable and which may have far-reaching consequences. It is for this reason, of course, that the English courts have time and again asserted the need for certainty in commercial transactions - for the simple reason that the parties to such transactions are entitled to know where they stand, and to act accordingly. In particular, when a shipowner becomes entitled, under the terms of his contract, to withdraw a ship from the service of a time charterer, he may well wish to act swiftly and irrevocably. True, his problem may, in any particular case, prove to be capable of solution by entering into a without prejudice agreement with the original time charterer, under which the rate of hire payable in future will be made to depend upon a decision, by arbitrators or by a court, whether he was in law entitled to determine the charter. But this is not always possible. He may wish to refix his ship elsewhere as soon as possible, to take advantage of a favourable market. It is no answer to this difficulty that the ship may have cargo aboard at the time, so that her services cannot immediately be made available to another charterer ... For one thing, the ship may not have cargo on board, and for another she can be refixed immediately under a charter to commence at the end of her laden voyage. Nor is it an answer that the parties can immediately apply to arbitrators, or to a court, for a decision, and that both maritime arbitrators and the Commercial Court in this country are prepared to act very quickly at very short notice. For, quite apart from the fact that some delay is inherent in any legal process, if the question to be decided is whether the tribunal is to grant equitable relief, investigation of the relevant circumstances, and the collection of evidence for that purpose, cannot ordinarily be carried out in a very short period of time."

For all these reasons I would dismiss this appeal. I do so with the reminder that the reasoning in my speech has been directed exclusively to time charters that are not by demise. Identical considerations would not be applicable to bareboat charters and it would in my view be unwise for your Lordships to express any views about them.

LORD KEITH OF KINKEL. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Diplock, and for the reasons given by him, with which I agree, I too would dismiss the appeal.

LORD SCARMAN. My Lords, I have had the advantage of reading in draft the speech delivered by my noble and learned friend, Lord Diplock. I agree with it, and for the reasons he gives would dismiss the appeal.

LORD ROSKILL. My Lords, I have had the advantage of reading in draft the speech delivered by my noble and learned friend, Lord Diplock. For the reasons he gives I, too, would dismiss this appeal.

LORD BRIDGE OF HARWICH. My Lords, for the reasons given in the speech of my noble and learned friend, Lord Diplock, with which I entirely agree, I would dismiss this appeal.

Solicitors: Elborne Mitchell & Co.; Sinclair Roche & Temperley.

M. G.