Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] UKPC 1 (12 April 1935)

A company chartered a trawler but was only granted three fishing licences for its fleet of five boats. It allocated the licences to its own boats, leaving the chartered one unlicensed, and then claimed the charter contract was frustrated. The court held frustration cannot be self-induced.

Facts

The respondents, Ocean Trawlers Ltd, chartered a steam trawler named the ‘St. Cuthbert’ to the appellants, Maritime National Fish Ltd. The charter was for a period of twelve months. The St. Cuthbert was fitted with an otter trawl, the use of which required a licence from the Canadian Minister of Fisheries, as stipulated by Canadian law. The appellants operated a fleet of five trawlers, including the St. Cuthbert, all requiring such a licence. They applied for five licences but were informed by the Minister that they would only be granted three. The Minister requested that the appellants name the three trawlers to which the licences should apply. The appellants named three trawlers that they owned or operated outside of the charterparty in question, thereby leaving the St. Cuthbert without a licence. Consequently, they informed the respondents that the charterparty was frustrated as it was now illegal to operate the St. Cuthbert as a trawler. The appellants ceased paying the monthly hire, and the respondents sued to recover the unpaid fees.

Issues

The central legal issue before the Judicial Committee of the Privy Council was whether the charterparty was frustrated by the failure to obtain a licence for the ‘St. Cuthbert’. Specifically, the court had to determine if a party could rely on the doctrine of frustration when the supervening event (the lack of a licence for the specific vessel) was a direct result of that party’s own choice or action.

Judgment

The appeal was dismissed. The Judicial Committee, with the judgment delivered by Lord Wright, held that the contract was not frustrated. The appellants were held liable for the hire of the trawler. The court’s reasoning was that the frustration was self-induced by the appellants themselves.

Lord Wright determined that the failure to license the St. Cuthbert was not an external event beyond the appellants’ control. Instead, it was a consequence of their own deliberate choice. When they were granted three licences for their five boats, they had the option to allocate one to the St. Cuthbert. Their decision not to do so was an act of election that caused the alleged frustration.

Lord Wright stated:

What is important is that the appellants had the power to place the licence on the St. Cuthbert. If they had done so, the case would have been different, and the charterparty might have been frustrated by the appropriation of the licence to a specific adventure which had failed.

He further explained the principle that a party cannot rely on a state of affairs they have produced themselves:

A person who has contracted to sell a specific parcel of wheat of a certain weight may be excused if the wheat is destroyed by fire; but if he has contracted to sell a certain quantity of wheat, and his own wheat is destroyed by fire, he is not excused if he can get wheat from other sources. In the same way the appellants, if they had only the one trawler, the St. Cuthbert, under charter, and had been refused a licence for her, might have contended that the charterparty was frustrated. But that is not the case here; here the appellants had a number of trawlers, and for reasons of their own they elected to licence other trawlers and not the St. Cuthbert. They cannot claim to be excused by a frustration which they have brought about by their own election.

Critically, the judgment affirmed the legal principle that frustration must be caused by a supervening event for which neither party is responsible. Lord Wright concluded:

Hence the appellants cannot rely on their own default to excuse them from liability under the contract; the events which are said to have frustrated the contract were brought about by their own choice of the three trawlers to which the three licences were to be appropriated.

Implications

Maritime National Fish Ltd v Ocean Trawlers Ltd is a foundational authority on the limits of the doctrine of frustration, specifically establishing the rule against ‘self-induced frustration’. The decision clarifies that for a contract to be frustrated, the supervening event must be external and not attributable to the fault or choice of the party seeking to be discharged from their obligations. It significantly restricts the applicability of the doctrine, ensuring it is not used as an escape route from a contract that has merely become less profitable or more difficult to perform due to a party’s own business decisions. This case reinforces the fundamental principle of contract law that a party cannot take advantage of its own wrong. It remains a crucial precedent in commercial law, particularly in situations involving government permits or licences where a party has multiple contractual commitments but limited resources or authorisations.

Verdict: The appeal was dismissed. The appellants (Maritime National Fish Ltd) were found liable for the charter hire.

Source: Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] UKPC 1 (12 April 1935)