England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(Mr Justice Morison)

		Royal Courts of Justice Strand London WC2 Tuesday, 24th July 2001

Tuesday, 24th July 2001

1. LADY JUSTICE HALE: I will ask Longmore LJ to give the first judgment.
2. LORD JUSTICE LONGMORE: This dispute arises from a charter arrangement made by the defendants, or their associates, of the ship Cherub Serenade for pleasure trips for Israeli citizens seeking to evade the statutory restrictions on gambling and customs duties on Israeli goods. The plan was that the ship would ply in waters in the Eastern Mediterranean and the Red Sea, outside Israeli territorial waters, and passengers would thus be able to gamble to their hearts content and purchase duty free goods while enjoying all the benefits of a shipping cruise.
3. The claimants in this case agreed with Boulus-Gad Tourism and Hotels Ltd, who were the charterers of the vessel, to provide crew for the vessel apart from deck and engine room crews. The agreement was made on 7th March 2000 and the cruising started on 25th March. The charter was made at the time of growing optimism, reached as a result of the Oslo Accord in 1993. But by September 2000 that optimism had been dashed and what has been called the Al Aqsa Intifada had begun. Many cancellations of holidays occurred and the charterers took the line that because cancellations were occurring and there was no, or very reduced, immediate take up of the cruise facilities that they would have to stop, and on 27th October 2000 they gave notice to the claimant crewing agency that, with effect from 31st October, the contract had to come to an end.
4. The obligations of Boulus were guaranteed by the defendants, and the claimant crewing agency then brought an action and applied for summary judgment.
5. There were two defences. One was that under the main contract there was an arbitration clause and that no claim could be brought against the defendants as guarantors until the arbitration clause had been invoked and an award obtained. The judge held that that was not the true construction of the guarantee arrangement; and it seems to me that the judge was plainly right in so doing. Although he did not say so, he was clearly following the guidance given in Chitty on Contracts on the 28th edition at paragraph 44-959, and Mr Page, who has now appeared on this application for permission to appeal, sees the force of that. He, however, seeks to challenge the decision of the judge to give judgment, as the judge did, in the sum of $622,284.59.
6. I have concluded that it is right that Mr Page should have permission to appeal for part of that sum. The sum was divided into two, firstly, $220,565.91 in respect of sums due as at 31st October in respect of services rendered. As far as that is concerned, it seems to me that, even if Mr Page were to be right in all his arguments about clause 8(1) of the agreement and frustration, that that sum must inevitably be payable and so it would not be right to give him the permission to appeal in respect of that sum. However, in respect of the greater sum, $441,718.68, it does seem to me that he has an argument in relation to either the operation of clause 8(1) of the agreement (which is a force majeure clause) or the doctrine of frustration.
7. I do not give any encouragement to Mr Page's clients, because it seems to me as at present advised that it might well be the case that the doctrine of frustration is effectively ousted by the presence of clause 8(1) in the agreement, and, as the judge said, clause 8(1) is a clause which only relates to the payment of money and therefore is not beyond the reasonable control of the defendants within the meaning of clause 8(1). Nevertheless, there is a considerable body of evidence as to the unsafety for Israeli vessels, or vessels carrying Israeli passengers, in September and October 2000 and it does seem to me that that point is capable of ventilation and the permission to appeal should therefore be granted.
8. I would myself make it a condition of granting leave that the sum of $220,565.91, together with interest thereon, should be payable forthwith if it has not already been paid. Subject to that, I would propose that permission be granted.
9. LADY JUSTICE HALE: I agree.
Order: Application allowed in relation to $441,718.68 conditional on the payment of the sum of $220,565.91, plus interest, within 21 days. Costs to be costs in the appeal.