Brimnes, the Tenax Steamship Co v Brimnes, Owners of [1974] EWCA Civ 15 (23 May 1974)

Time-charterers failed to pay hire punctually on 1st April 1970. The shipowners withdrew the vessel by telex notice. The key issue was whether withdrawal occurred before or after the late payment was received. The Court of Appeal held that the withdrawal notice preceded the payment and was therefore effective.

Facts

The plaintiffs (Tenax Steamship Company) were time-charterers of the motor vessel ‘Brimnes’ from the defendant shipowners (Reinante Transoceanica Navegacion S.W.). The charterparty required monthly hire payments to be made in advance in New York in US dollars to Morgan Guaranty Trust Company (M.G.T.) for the credit of the owners’ account. Clause 5 of the charterparty provided that ‘failing the punctual and regular payment of the hire’ the owners would be at liberty to withdraw the vessel.

The shipowners had assigned their right to receive hire payments to M.G.T. as security for a loan, with notice of assignment given to the charterers. There had been a history of late payments by the charterers, and the owners had complained about this in January and February 1970.

The hire due on 1st April 1970 was not paid on that date. On 2nd April, the charterers’ bankers (Hambros) sent a telex transfer instruction to M.G.T. New York at 04.53 New York time (10.53 BST). The owners’ agents sent a telex notice of withdrawal to the charterers. The crucial question was whether the withdrawal notice was received before or after the payment was completed.

Issues

Primary Issue

Whether the shipowners’ notice of withdrawal was effective, given the timing of the late payment and the notice.

Secondary Issues

(1) Whether the decision in the ‘Georgios C’ case applied, such that late payment before withdrawal would defeat the right to withdraw.

(2) Whether the owners had waived their right to withdraw by accepting the late payment.

(3) Whether the charterers’ conduct amounted to repudiation of the charterparty.

Judgment

Time of Payment and Withdrawal

Brandon J at first instance found that the telex notice of withdrawal was sent and received at approximately 17.45 BST, and that the payment was completed at approximately 18.07 BST. The Court of Appeal upheld these findings. Lord Justice Edmund Davies accepted that the telex withdrawal arrived at the charterers’ office before 18.00 hours and that the charterers could not rely on their staff’s failure to attend to the telex machine in normal business hours.

The ‘Georgios C’ Point

The Court distinguished the present case from the ‘Georgios C’ on the basis that the charterparty here required ‘punctual’ payment. Lord Justice Edmund Davies stated that some meaning must be attached to the word ‘punctual’ and it cannot be equated with unpunctual payment. He cited Lord Finlay in Maclaine v Gatty who said that ‘punctual payment’ emphasises the necessity of payment being made on that day, and Lord Shaw who observed that ‘my mind cannot comprehend the elasticity of punctuality’.

Waiver

The Court held that if the assignment of hire to M.G.T. was operative (as the charterers themselves had pleaded), then acceptance of payment by M.G.T. could not constitute waiver by the owners, as M.G.T. received the money as creditors in their own right, not as agents for the owners.

Repudiation

The Court rejected the owners’ cross-appeal contention that the charterers’ conduct constituted repudiation of the charterparty. The evidence did not support a finding that the charterers had evinced an intention not to be bound by the contract.

Implications

This case is significant for several reasons:

(1) It establishes that when a charterparty requires ‘punctual’ payment of hire, the right of withdrawal is not defeated by late payment tendered before the notice of withdrawal, distinguishing the ‘Georgios C’ principle.

(2) It provides guidance on when telex communications are deemed to be effectively received – a message arriving during normal business hours at a working telex machine is deemed received even if staff fail to attend to it.

(3) It clarifies that in credit transfer payments, payment is not complete upon receipt of the transfer instruction but upon the ‘decision’ being made to debit and credit the relevant accounts.

(4) Where hire has been assigned to a third party, acceptance of payment by that assignee does not necessarily constitute waiver by the shipowner of the right to withdraw.

Verdict: Appeal dismissed. The shipowners’ notice of withdrawal was effective as it preceded the late payment of hire. The owners were entitled to withdraw the vessel under Clause 5 of the charterparty for failure of punctual payment. The owners’ cross-appeal on repudiation was also dismissed.

Source: Brimnes, the Tenax Steamship Co v Brimnes, Owners of [1974] EWCA Civ 15 (23 May 1974)