W J Tatem Ltd v Gamboa

 

[1939] 1 KB 132

King's Bench

 

Tatem chartered the steamship Molton to Gamboa, who was an agent of the Republican Government of Spain, for thirty days from 1 July I937 in order to help evacuate the 'civil population from North Spain'. The hire rate was £250 per day 'until her redelivery to the owners'. On 1 July I937, the Molton was duly delivered to Gamboa at Santander. On 14 July she was seized by a Nationalist ship off Santander, taken to Bilbao, and kept in custody there until 7 September when she was released. She was redelivered to Tatem on 11 September. Gamboa had paid in advance the agreed hire up to 31 July. On 18 August Gamboa wrote to Tatem declining to have any further concern with the ship. Tatem then commenced proceedings claiming payment of hire at the rate of £250 a day from 1 August until 11 September. Gamboa denied liability on the ground that the adventure had been frustrated by the seizure of the ship.

 

Goddard J

 

It is said on behalf of the defendant that so soon as this ship was seized there was a frustration of the contract and that the contract became impossible of performance as from that date, and, therefore, that all rights and liabilities under the contract ceased. He admits that he cannot reclaim any part of the hire he paid in advance, but contends that he is not liable to pay any further additional hire, that is to say, for the time during which the ship was in the hands of the insurgents. Sir Robert Aske, on the other hand, has argued very strongly that the enterprise in this case cannot be said to have been frustrated, because both sides must be taken to have contemplated when they made this contract that the ship might be seized - indeed, that the risk of seizure was plain and obvious to everybody - and that it must be taken that that was one of the risks which the ship was running...

 

I will assume that the parties contemplated that the ship might be seized and detained as she was. It is difficult to reconcile all the judgments and speeches which have been made on this difficult subject of frustration, which was very little discussed in the books before the war... Viscount Finlay said... in Larrinaga & Co., Ltd v Societe Franco Americaine des Phosphates de M'©dulla, Paris: "When certain risks are foreseen the contract may contain conditions providing that in certain events the obligation shall cease to exist. But even when there is no express condition in the contract, it may be clear that the parties contracted on the basis of the continued existence of a certain state of facts, and it is with reference to cases alleged to be of this kind that the doctrine of 'frustration' is most frequently invoked. If the contract be one which for its performance depends on the continued existence of certain buildings or other premises, it is an implied condition that the premises should continue to be in existence, and their total destruction by fire without fault on the part of those who have entered into the contract will be a good defence. Such a contract does not as a matter of law imply a warranty that the buildings or other property shall continue to exist."

 

Sir Robert Aske meets this point by saying there cannot be frustration where the circumstances must have been contemplated by the parties. By "circumstances" I mean circumstances which are afterwards relied on as frustrating the contract. It is true that in many of the cases there is found the expression "unforeseen circumstances," and it is argued that "unforeseen circumstances" must mean circumstances which could not have been foreseen. But it seems to me, with respect, that, if the true doctrine be that laid down by Lord Haldane, frustration depends on the absolute disappearance of the contract; or, if the true basis be, as Lord Finlay put it, "the continued existence of a certain state of facts," it makes very little difference whether the circumstances are foreseen or not. If the foundation of the contract goes, it goes whether or not the parties have made a provision for it. The parties may make provision about what is to happen in the event of this destruction taking place, but if the true foundation of the doctrine is that once the subject-matter of the contract is destroyed, or the existence of a certain state of facts has come to an end, the contract is at an end, that result follows whether or not the event causing it was contemplated by the parties. It seems to me, therefore, that when one uses the expression "unforeseen circumstances" in relation to the frustration of the performance of a contract one is really dealing with circumstances which are unprovided for, circumstances for which (and in the case of a written contract one only has to look at the document) the contract makes no provision.

 

In support of that I think I need only further refer to the words of Lord Haldane in the Tamplin case... I regard the learned Lord as saying there that, unless the contrary intention is made plain, the law imposes this doctrine of frustration in the events which have been described. If the foundation of the contract goes, either by the destruction of the subject-matter or by reason of such long interruption or delay that the performance is really in effect that of a different contract, and the parties have not provided what in that event is to happen, the performance of the contract is to be regarded as frustrated.

 

To the same effect, I think, are the cases which deal with this doctrine in relation to the requisitioning of ships. When the war had proceeded but a very short time the Admiralty Requisitioning Board was set up. Ships were requisitioned freely, and I suppose it is not putting it too high to say that no shipowner knew when his ship would be requisitioned. Accordingly, one finds, for instance, in Bank Line, Ltd v Arthur Capel & Co that the charterparty actually prodded for requisition. It provided that the charterers were to have the option of cancelling the charterparty should the steamer be commandeered by the Government during the charter, and yet for reasons which appear in the speeches in the House of Lords it was held that it did not prevent the doctrine of frustration of performance applying. It seems to me that the parties must have had before them the possibility, or the probability if you will, of requisition every bit as much as the parties had of seizure in this case. I think, therefore, that that case and other cases... show in effect that, although the parties may have had or must be deemed to have had the matter in contemplation, the doctrine of frustration is not prevented from applying.

 

To apply the doctrine as I understand it to this case, what do we find ? we find that there is a charter for a month only, a charter at a very high rate of freight. Although it is a time charter, the limits in which it is to trade are very narrow - from the northern ports in the hands of the Republican Government of Spain to ports in France - and the specific purpose of the charter is made plain. It is the evacuation of the civil population from north Spain. It must be obvious, therefore, that the foundation of that contract was destroyed as soon as the insurgent war vessel had seized the ship, which it did after it had performed one voyage and when the period of the charter had but half expired. No more could be done with the ship. The owners were unable to leave it under the control of the charterer. The charterer was unable to make use of it or to return it to the owners. The charterer had paid his month's hire, and that he not only cannot get back but does not seek to get back. In my opinion, the performance of the charter was frustrated from the time of the seizure, and consequently the reasoning of the cases to which I have referred applies...