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

Facts

The appellants (the shipowners, Tenax Steamship Co) chartered their vessel, ‘The Brimnes’, to the respondents (the charterers) under a time charterparty. The agreement required the charterers to pay hire in advance. The charterers were persistently late with their payments. A clause in the charterparty entitled the shipowners to withdraw the vessel from service ‘in default of payment’. Frustrated by another late payment, the shipowners instructed their bank to refuse the payment if it arrived and sent a notice of withdrawal by Telex to the charterers. The Telex message was sent and printed on the charterers’ machine in London at 17:45 on Tuesday, 2nd April 1970. However, the staff at the charterers’ office had already left for the day, and the message was not read until the following morning. Earlier on the same day, the charterers had arranged for the payment to be made, but due to banking system processes, the funds were not credited to the shipowners’ account until sometime after the Telex was sent.

Issues

The Court of Appeal was required to determine two primary legal issues:

1. When is a notice of withdrawal, communicated by an instantaneous method such as Telex, legally effective? Is it upon dispatch, upon receipt by the recipient’s machine, or upon being read by the recipient?
2. Were the charterers in ‘default of payment’ at the moment the notice of withdrawal became effective, thereby validating the shipowners’ action?

Judgment

The Court of Appeal, allowing the appeal from the High Court, held that the withdrawal of the vessel was valid. The judges were unanimous in their conclusion but provided complementary reasoning on the central issue of communication.

When is a notice effective?

The court established a crucial principle for instantaneous communications in commercial contexts, departing from the ‘postal rule’ applicable to non-instantaneous methods. The core finding was that a notice sent by Telex is effective when it is received on the recipient’s machine, provided this occurs within ordinary business hours.

Lord Denning M.R. articulated the general principle of receipt:

The simple case is of a communication which is virtually instantaneous, such as a telephone or telex. A notice of withdrawal is an act of the owner which has to be communicated to the charterer. The communication is not effective until it is received by the charterer.

He then addressed the practicalities of business communication, placing the onus on the recipient to manage their own systems:

If a notice arrives at the address of the person to be notified, it is of no effect unless it comes to his knowledge or he has had a reasonable opportunity of acquiring knowledge of it… In this case the charterers’ office was open. The staff had simply gone home. They had not informed the owners that their telex machine would not be manned after a particular time… I think the notice of withdrawal was given at 17.45 hours on 2nd April, 1970, when it was recorded on the charterers’ telex machine in their office. It was their own fault that they did not get it on the day it arrived.

Edmund Davies L.J. concurred, emphasising that the sender should not be penalised for the recipient’s internal office arrangements:

But the conclusion I have reached is that the notice of withdrawal was sent during what were, on the evidence, ordinary business hours, and that it was received on the charterers’ telex machine at 17.45. It was not the shipowners’ fault that the charterers’ staff had gone home for the night… I think the principle which is relevant is this: if a notice is sent by a mode of communication which is instantaneous… the notice is duly given at the moment it is received.

Were the charterers in default?

The court determined that the charterers were indeed in default when the notice was served at 17:45. The payment had been initiated by the charterers’ bank earlier, but the transfer was not complete, and the shipowners’ bank had not yet made the irrevocable decision to credit the shipowners’ account. Therefore, the payment was not considered legally ‘made’ until after the effective time of the withdrawal notice. As the charterers were in default, the shipowners were entitled to exercise their contractual right to withdraw the vessel.

Implications

The decision in The Brimnes is a landmark case in English contract law. Its primary importance lies in the formulation of the ‘receipt rule’ for instantaneous forms of communication. This principle dictates that acceptance of an offer, or the giving of a notice, is effective when it is received by the offeree/recipient, not when it is sent. The case critically clarified that ‘received’ in a commercial context means when the message arrives on the recipient’s communication equipment during normal business hours, regardless of whether it has been read. A business is expected to have appropriate measures in place to monitor its communications. This ruling has had profound and lasting influence, forming the basis for how communications by fax, and more recently email and other digital methods, are treated in law. It provides commercial certainty by allocating risk sensibly: the sender is responsible for ensuring the message is sent correctly, and the recipient is responsible for arranging prompt attention to messages that arrive at their place of business during working hours.

Verdict: Appeal allowed; the shipowners’ withdrawal of the vessel was held to be valid.

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