Herne Bay Steam Boat Co v Hutton 06 Aug 1903 [1903] 2 KB 683, CA

A defendant hired a steamboat to view the Royal Naval Review for the King's coronation and for a cruise around the fleet. The review was cancelled. The court held the contract was not frustrated because a key purpose, the cruise, remained possible.

Facts

The plaintiffs, the Herne Bay Steam Boat Company, agreed to let their steamship ‘Cynthia’ to the defendant, Mr Hutton, for two days, June 28 and 29, 1902. The contract stipulated the hire was for the purpose of the defendant ‘viewing the naval review and for a day’s cruise round the fleet’. The total hire price was £250, of which the defendant paid a £50 deposit. Following the announcement of King Edward VII’s illness, the naval review, which was the centrepiece of the coronation celebrations, was cancelled on June 25. However, the fleet remained assembled at Spithead. The plaintiffs contacted the defendant to confirm the ship was ready for the hire period, but the defendant repudiated the contract, stating it was cancelled. The plaintiffs, unable to re-charter the vessel for the full fee, used it for their own excursions on the specified days, making a small profit. They subsequently sued the defendant for the outstanding balance of £200, giving credit for the profit they had made.

Issues

The central legal issue was whether the cancellation of the Royal Naval Review frustrated the contract, thereby discharging the defendant from his obligation to pay the hire fee. The court had to determine if the review was the sole foundation of the contract, or if the contract’s purpose could still be substantially fulfilled despite the cancellation.

Judgment

The Court of Appeal dismissed the defendant’s appeal, holding that the contract was not frustrated. The defendant remained liable for the hire charge, less the profits the plaintiffs had earned from using the ship themselves.

Reasoning of the Court

The judges distinguished this case from other ‘coronation cases’ like Krell v Henry, where the entire purpose of the contract was nullified. Here, the contract had a dual purpose.

Vaughan Williams L.J. found that the naval review was not the ‘sole basis of the contract’. The contract also included ‘a day’s cruise round the fleet’, and this part of the venture was still possible. He noted:

It is not sufficient to say that the happening of the naval review was the common object of both parties… I see nothing that makes this contract a conditional contract… It is a contract for the hiring of a ship for a certain voyage, and, in my opinion, the shipowner performed his part of the contract by having his ship ready for that voyage… the happening of the naval review was not the sole basis of the contract, so that there has been a total failure of consideration… The ship was in the plaintiffs’ possession, and the defendant might have had her to cruise round the fleet.

Romer L.J. emphasised that the commercial purpose was the defendant’s personal speculation, not a joint venture with the shipowner. The shipowner’s only obligation was to provide the vessel for the agreed period and purpose. The subject-matter of the contract—the hire of the ship—had not been destroyed.

In my opinion the principle of cases like Taylor v. Caldwell does not apply because in the present case the subject-matter of the contract, the hiring of the ship, has not been destroyed or become non-existent… The speculation was the defendant’s own. It was a trading speculation of his, and that it has turned out to be a failure is the defendant’s own loss.

Stirling L.J. concurred, highlighting that a substantial part of the intended contractual performance was still available to the defendant.

Here there was a trip which was to extend over two days; it was to be a trip down the river, round the fleet, and back… It is said that the review was the object of the expedition; but it is not so expressed in the contract… a great part of the object for which the ship was chartered remains.

Implications

Herne Bay v Hutton is a crucial case for defining the limits of the doctrine of frustration. It establishes that for a contract to be frustrated, the supervening event must destroy the entire foundation of the contract or render performance radically different. If a significant part of the contractual purpose remains achievable, even if it is not the main motivation for one party, the contract will not be frustrated. The case distinguishes between the failure of one party’s commercial motive and the complete destruction of the contract’s purpose. It places the risk of a commercial venture failing on the party undertaking that venture, not on the party merely providing a service or asset for it.

Verdict: The appeal was dismissed. The defendant was found liable to pay the agreed hire fee, less the profits made by the plaintiffs from their alternative use of the vessel.

Source: Herne Bay Steam Boat Co v Hutton 06 Aug 1903 [1903] 2 KB 683, CA