New Zealand Shipping Co Ltd v Soci&eacute

Lorp Fiyuay L.C. My Lords, this is an appeal
from the decision of Bailhache J. upon an award stated in the
form of a Special Case for the opinion of the Court.

The appellants agreed to purchase from the respondents a
steamship to be constructed for them by the respondents in
terms of a contract dated March 6, 1913. The price was to be
98,4501., payable by instalments. The clauses material for
the purpose of this appeal are set out in the Special Case, and
are as follows: '' 5. The said steamer unless the construction
thereof shall be delayed by fire, strike, or lock-out of workmen,
or any other unpreventable cause beyond the control of the

(1) (1817) 6 M. & S. 121. (4) (1857) 6 H. L. ©. 61, 106.
(2) (1821) 4 B. & Al. 401. (5) 19 C. B. (N. 8.) 393, 405.
(3) (1865) 19 C. B. (N. S.) 393. (6) (1879) 4 App. Cas. 324, 332.

3 B 2

H.L. (E.)

ZEALAND
SHIPPING
CoMPANY
v.
Socmrkr
DES
ATELIERS
ET
CHANTIERS

FRANCE.

3

4

HL. (E.)
1918

comer
NEw
ZEALAND
SHIPPING
CoMPANY
v
Socrern
DES
ATELIERS
ET
CHANTIERS
DE
FRANCE.

Lord Finlay
LC,

HOUSE OF LORDS [1919}

Builders (in which case a fair proportionate extension of time
shall be allowed), shall be completed ready for trial by the
30th October, 1914, and delivered afloat as usual in the port
of Dunkirk free of dock and other dues as soon as such trial
has been completed to the satisfaction of the Purchasers or
their representatives." '' 7. In the event of the said vessel
not being completed and ready for trial on or before 30th
October, 1914, . . . . the Builders undertake to pay the
Purchasers as liquidated damages the sum of 10/. per working
day for each working day during which such delivery may be
delayed beyond the 30th October, 1914, unless such delay is
due to any of the causes specified in clause 5 hereof... . ."
"12. In case the Builders become bankrupt or insolvent or
shall fail or be unable to deliver the steamer within eight
months from the date agreed by this contract, thereupon this
contract shall become void and all money paid by the Pur-
chasers shall be repaid to them with interest accrued thereupon
at 5 per cent., and that without it being necessary for the
Purchasers to take any legal action for the recovery of this
money. The Builders will hand to the Purchasers the guar-
antee of a Bank who will undertake to repay this money in
the event of its becoming due as stated above. Except only
in the event of France becoming engaged in a European war,
then the above limit of eight months shall be extended equal
to the duration of the said war, but in no case to exceed
eighteen months in all."

The date, January 30, 1915, was subsequently substituted
in the contract for October 30, 1914, as the date by which the
vessel was to be completed ready for trial.

The vessel was in course of construction when on August 2,
1914, France became engaged in the present European war.
It is found as a fact in the Special Case that the builders were
prevented by unpreventable causes beyond their control
within the meaning of clause 5 from completing the vessel ready
for trial by January 30, 1915, and had ever since been pre-
vented by the same causes.

It was contended by the respondents—the builders—that
the eighteen months mentioned in clause 12 began to run on

A, C. AND PRIVY COUNCIL.

January 30, 1915, and therefore expired on July 30, 1916, while
the appellants—the building owners—contended that the
eighteen months would not begin to run until the builders
were in default on the expiration of the extension of time
allowed by clause 5 in case of delay caused by unpreventable
causes. It was further contended by the respondents, the
builders, that in the events which have happened the contract
became void on July 30, 1916, while the appellants—the
building owners—contended that on the true construction of
clause 12 it was voidable at their option only.

The umpire decided by his award that the eighteen months
expired on July 30, 1916, and that the builders in the events
which have happened are entitled to treat the contract as null
and void. The questions for the opinion of the Court are
whether his decision on these two points was right. Bailhache J.
held that the umpire was right upon both points, and the Court
of Appeal took the same view. I agree with the Courts below
in thinking that the umpire was right on both points.

The first point appears to me to be very clear. The words
"' the date agreed by this contract " in clause 12—or, as in the
French version, "la date de livraison fixée par ce contrat ''—
denote, in my opinion, January 30, 1915. That is the only
date specified for completion in the contract. It is true that
an extension of time beyond that date is provided for by
clause 5 in the case of delay due to fire, strikes, or lock-outs of
workmen, or any other preventable cause beyond the control
of the builders, in which case a fair proportionate extension of
time was to be allowed. But neither in the English nor in the
French version do the words of clause 12 appear to be apt to
denote the expiration of the extension to be allowed in respect
of such unavoidable delay. Clause 5 fixes no date for the
expiration of the extension, but provides that the extension
is to end when the cause of delay ceases to operate. The date
mentioned in clause 12 as that from which the eight months
or eighteen months were to run is obviously that specified in
clause 5—namely, January 30, 1915.

- Upon the second point I also agree with the umpire and with
the Courts below. It appears upon the facts found on the

a3

Heb. (EA
1918

——
NEw
ZEALAND
SHIPPING
CoMPANY
v.
Soormrs:
DES
ATELIERS
Er
CHANTIERS
DE
FRANCE.

Lord Finla y
L.C,

6

fa, (E,)
1918

Sse
NEw
ZEALAND
SHIPPING
ComPANY
Vs
Socreré

Lord Finlay
L.C,

HOUSE OF LORDS [1919]

Special Case that the builder was in no degree responsible for

_ the delay which took place in completion, and that it was due

entirely to causes beyond his control covered by clause 5 in the
contract. Under these circumstances I think that the builder
is entitled to say that under clause 12 the contract became
void when the eighteen months expired. Clause 12 deals with
four different cases : (a) Bankruptcy of the builder. (6) Insol-
vency of the builder. (c) Failure of the builder to deliver.
(d) Inability of the builder to deliver. It seems to me clear
that the builder could not say that the contract was void in
consequence of his own bankruptcy or insolvency, as for this
he would be as between himself and the building owners
responsible, even if the bankruptcy or insolvency were entirely
due to unavoidable misfortune. Nor could the builder claim
a right to treat the contract as void in case of his failure to
deliver—the word used in the French version is " refus "'—
and a breach of contract, whether by actual refusal or omission
to perform, cannot confer any right upon the person in default.
The fourth case provided for inability—in the French the word
used is "impossibilité "'—and might be due to failure on the
part of the builder to proceed with the construction with due
diligence, in which case the builder could not claim release
from the contract under this clause. On the other hand, the
inability may have been the result of causes beyond the control
of the builder, for which he is not, under the terms of the
contract, to be held liable.

It is a principle of law that no one can in such case take
advantage of the existence of a state of things which he himself
produced. This is illustrated by the case of Roberts v. Wyatt. (1)
There the plaintiff had purchased an estate, and it was provided
in the contract that the vendors should make out a good title,
and on or before December 21, 1808, on receiving from the
plaintiff the purchase-money, execute a legal conveyance of
the fee-simple. There was a proviso that " in case the vendors
could not deduce a good and marketable title, such as the
purchaser or his counsel should approve, or if the purchaser
should not pay the purchase money on the appointed day,

(1) (1810) 2 Taunt. 268, 276.

A, C. AND PRIVY COUNCIL.

the agreement should be utterly void.' An abstract was sent H.L. (E.)

to the plaintiff by the defendant, who was the vendors' solicitor.
The abstract was sent back to the defendant for the purpose
of having the title cleared up. The defendant said that the
objections to the title could not be met, and refused to return
the abstract, asserting that the contract was void under the
proviso. Sir James Mansfield, Chief Justice, in the course
of his judgment said: '' Something has been argued on
the construction of the proviso that in case the vendor could
not make a title, the contract should be void. But in order to
adapt that defence to the present case, the argument must be,
that if the defendant says he cannot answer the objections, it
shall be absolutely void at the choice of either party. But
that is not so: the meaning is, that if the seller cannot make a
good title by the time mentioned, the contract shall be void as
against him, and the plaintiff has a right to be off his bargain.
So, e contra, if the plaintiff does not pay the money, the de-
fendant may avoid the contract ; but the plaintiff cannot say,
I am not ready with my money, therefore I will avoid the
contract ; nor can the seller say, my title is not good, therefore
I shall be off. And the word is, 'if they cannot make,' so
it must appear by sufficient proof that they cannot make a
title.' Lord Ellenborough in Rede v. Farr (1) applied the
same principle to a case in which it was alleged that a lease
became void by the failure of the lessee to pay the rent. I
may quote the following sentences from his judgment :
"Tn this case, as to this proviso, it would be contrary to an
universal principle of law, that a party shall never take advan-
tage of his own wrong, if we were to hold that a lease, which
in terms is a lease for twelve years, should be a lease determin-
able at the will and pleasure of the lessee ; and that a lessee by
not paying his rent should be at liberty to say that the lease
is void. On this principle, even if it were not borne out so
strongly as it is by the current of authorities, it would be
sufficient to hold that the lease was only void as against the
lessee, not against the lessor. In Co. Litt. 206b it islaid down:
'If a man make a feoffment in fee, upon condition that the

(1) (1817) 6 M. & S, 121, 124,

1918
——_
NEw
ZEALAND

SHIPPING
ComPany

i

SHIPPING
COMPANY
v.
SocrbeTe
DES
ATELIERS
ET
CHANTIERS
DE
FRANCE.

Lord Finlay
LC,

HOUSE OF LORDS [1919]

feoffee shall re-infeoff him before such a day, and before the
day the feoffor disseise the feoffee, and hold him out by force
until the day be past, the state of the feoffee is absolute ; for
the feoffor is the cause wherefore the condition cannot be per-
formed, and therefore shall never take advantage for non-
performance thereof. And so it is if A. be bound to B. that
J. S. shall marry Jane G. before such a day, and before the day
B. marry with Jane, he shall never take advantage of the bond,
for that he himself is the mean that the condition could not
be performed. And this is regularly true in all cases,' If that
be a principle of law, that a party shall not take advantage of
his own wrong, then a lessee shall not avail himself of his own
act to vacate his lease." If it had been the case here that
the builder was—to use Lord Coke's language—' himself the
mean "' that the vessel was not completed within the eighteen
months, he could not say that the contract had thereby become
void. But, as the umpire has found, the non-completion was
not in any way brought about by the builder, but was the
result of causes for which under the contract he is not
responsible.

Questions of this sort have often arisen in case of provisions
that a lease should be void on non-payment of rent or non-
performance of covenants by the lessee. It has always been
held that the lessee could not take advantage of his own act
or default to avoid the lease, and the expression generally
employed has been that such proviso makes the lease voidable
by the lessor, or void at the option of the lessor. The decisions
on the point are uniform, and are really illustrations of the
very old principle laid down by Lord Coke (Co, Litt. 206b)
that a man shall not be allowed to take advantage of a
condition which he himself brought about. In the present
case the builder was in no way responsible for the non-com-
pletion within eighteen months, and there is no reason why
clause 12 should not be interpreted according to the natural
meaning of the words so as to render the contract void.

For these reasons I agree with the decision of the Court of
Appeal, and think that this appeal should be dismissed with
costs.

Ae AND PRIVY COUNOLL

Lorp Atkinson. My Lords, I cannot but think that the
contest in this case is upon the main point very much a contest
about names.

It is undoubtedly competent for the two parties to a contract
to stipulate by a clause in it that the contract shall be void
upon the happening of an event over which neither of the parties
shall have any control, cannot bring about, prevent or retard.
For instance, they may stipulate that if rain should fall on
the thirtieth day after the date of the contract, the contract
should be void. Then if rain did fall on that day the contract
would be put an end to by this event, whether the parties so
desire or not. Of course, they might during the currency of
the contract rescind it and enter into a new one, or on its
avoidance immediately enter into a new contract. But if the
stipulation be that the contract shall be void on the happening
of an event which one or either of them can by his own act or
omission bring about, then the party, who by his own act or
omission brings that event about, cannot be permitted either
to insist upon the stipulation himself or to compel the other
party, who is blameless, to insist upon it, because to permit
the blameable party to do either would be to permit him to
take advantage of his own wrong, in the one case directly,
and in the other case indirectly in a roundabout way, but in
either way putting an end to the contract.

The application to contracts such as these of the principle
that a man shall not be permitted to take advantage of his own
wrong thus necessarily leaves to the blameless party an option
whether he will or will not insist on the stipulation that the
contract shall be void on the happening of the named event.
To deprive him of that option would be but to effectuate the
purpose of the blameable party. When this option is left to
the blameless party, it is said that the contract is voidable,
but that is only another way of saying that the blameable party
cannot himself have the contract made void, cannot force the
other party to do so, and cannot deprive the latter of his right
to do so. Of course, the parties may expressly or impliedly
stipulate that the contract shall be voidable at the option of
either party to it. I am not dealing with such a case as that.

H. L. (E.)

ZEALAND
SHIPPING
CoMPANY
wy
Soccer:
DES
ATELIERS
ET
CHANTIERS
DE
FRANCE.

9

v.
Socrere
DES
ATELIERS
ET
CHANTIERS

Lord Atkinson.

HOUSE OF LORDS {1919}

It may well be that the question whether the particular event
upon the happening of which the contract is to be void was
brought about by the act or omission of either party to it may
involve a determination of a question of fact.

On the first point I think that the words " date agreed by
this contract"' in article 12 of the agreement meant originally
for all practical purposes October 30, 1914, and now by the
addition which has been made to the contract means July 30,
1916, when the further eighteen months given for the comple-
tion of it expired. I do not think that it can mean the ter-
mination of the further period allowed as a fair proportionate
extension for completion under article 5 of the agreement.
That is a quite indefinite period. The parties might disagree
as to its duration, and, if so, the dispute would be a matter for
arbitration within the thirteenth article of the agreement,
since it would be a dispute '" touching the completion of the
steamer" and the construction or meaning of the contract.
This delay might be much prolonged.

Under article 12 several of the events, the happening
of any one of which is to render the contract void, are
clearly events for which the builders are responsible, or
over which they have control—namely, the event of their
bankruptcy, the event of their insolvency, or the event
of their refusal (refus) to deliver the steamer, the event
of their inability (impossibilité) to deliver her, might be
the result of the neglect of the builders to begin to build
her soon enough, or to keep a sufficient staff at work upon
her. In such a case the event, the happening of which is
to make the contract void, would be brought about by their
act or omission, and they could not avail themselves of it.
But the umpire has found as a fact that the builders were
prevented by unavoidable causes beyond their control from
completing the vessel ready for trial on January 30,1915. The
two parties therefore are equally blameless. By the act or omis-
sion of neither has the event been brought about on the happen-
ing of which the contract was to become void. The principle
that a man shall not take advantage of his own wrong does
not apply, and the contract becomes null and void absolutely,

'A, C. AND PRIVY COUNCIL.

as its words in their natural meaning provide that it should.
In my opinion the order appealed from was right, and this
appeal should be dismissed with costs here and below.

_ Lorp SHaw or Dunrermurne. My Lords, by contract and
supplementary agreement of parties the respondents undertook
to build a steamship for the appellants and to have her ready
for trial by January 30, 1915. By the fifth clause of the
contract it was agreed that if the stipulation as to time for
completion could not be complied with, by reason of causes
beyond the control of the builders, the time should be extended
in proportion to the delay so caused. By the twelfth clause of
the contract it was provided as follows: '' In case the Builders
become bankrupt or insolvent or shall fail or be unable to
deliver the steamer '—these words in the French version are
"ou de leur refus ou impossibilité de livrer le vapeur ''—
"' within eight months from the date agreed by this contract,
thereupon this contract shall become void and all money paid
by the Purchasers shall be repaid to them with interest." In
this clause the following interpolation was inserted : '' Except
only [in the French version '' cependant"'] in the event of
France becoming engaged in a European war, then the above
limit of eight months shall be extended equal to the duration
of the said war, but in no case to exceed eighteen months in all."
As to the running of time under these clauses, it appears to me
to be clear that both the eight months and the eighteen months
ran from a fixed point—namely, January 30, 1915—and I am
further of opinion that, with reference to the extended period
of eighteen months, the contract has definitely stated that
period as the maximum of prolongation. By reason, however,
of the outbreak of the European war the building of the ship
has been still further delayed, and the ship is still incomplete.
A state of affairs has accordingly arisen for which neither party
is responsible which is covered by clause 12 of the contract.
"Thereupon," says clause 12, " this contract shall become void."

The arbitrator decided " that the builders in the events which
have happened are entitled to treat the contract as null and
void (except for the repayment with interest of 5 per cent. of

1k

H.L. (E.)
1918

Sa
NEw
ZEALAND
SHIPPING
CoMPANY
v.
Socrere
DES
ATELIERS

FRANCE.

12 HOUSE OF LORDS (1919]

H.L. (E.) all moneys already paidZto the builders by the purchasers)."
1918 In myopinion this judgment was right, and has been properly

: New upheld by the Courts below.
asin The attack upon these judgments was centred upon this, that

or ANY the terms employed—namely, that the contract '' shall become
Sout void ''—must be taken to mean that the contract was void-
eee tek able only at the instance of the building owner. According to

Se eee the agreement that owner might say: '' Although the stipu-
Bees lated time for delivery is and may be long exceeded, I am
RANCE,

a ore willing to suffer the delay ; and I do not choose to found upon

Dunfermline, the stipulation : accordingly you the builder must—along with

~~ us—remain bound, so long™as I choose." The answer to the

whole of this is clearly put by Bailhache J.—that the stipula-

tion as to the contract becoming '" void "' is a stipulation in

favour of both parties. This is subject only to this, that the

conduct or situation of the party treating the contract

as void shall not have been the means whereby the event

which gives rise to the condition has been brought about.

What I have ventured last to express appears to me to be

sound in principle and to be a better and broader expression

of the principle than a reference to either a party's own wrong

or a party's own default, for without either definite wrong or

default the action, or even the situation, of one of the parties

may be sufficient to produce the condition. I prefer more

than any other as an expression of the principle that which

occurs in Coke upon Littleton (1), and is quoted with approval

by Lord Ellenborough in Rede v. Farr (2), " for that he himself

is the mean that the condition could never be performed."

As to authority, I refer in particular to Lord Ellenborough's

judgment in Rede v. Farr (3), to Doe v. Bancks (4), and to
Hughes v. Palmer. (5)

When a contract describes an event or events which may hap-

pen, and declares that on the occurrence of any of these the con-

tract shall become void, the results may be tabulated thus: (1.)

Such a contract may be declared void, as said, at the instance

(1) 206b. (3) 6M. & S. 121.
(2) 6 M. & 8. 125. (4) 4B. & Al. 401,
(5) 19C. B. (N.S.) 393,

A. C. AND PRIVY COUNCIL.

of that party who has not by his own wrong or default brought
about the event, or, in Coke's words, has not been " the mean
that the condition could never be performed." (2.) Therefore,
such a contract is voidable (a) sometimes by one party—for
instance, a builder who has not been able to proceed on account
of the default of the building owner, say, by failure to pay the
stipulated instalments of price, and (b) sometimes by the other
party—for instance, the building owner, where the bank-
ruptcy of the builder has prevented timeous completion or
delivery. (3.) And such contracts are voidable by both or
either when the impossibility to complete or deliver was some-
thing for which neither was responsible. Each party is inno-
cent, neitWer is in default : the conduct of neither has brought
about the event, and in such a case the contract is interpreted
with even and equal justice to both sides ; and the law does
not allow one party only to avoid while the other is held bound.
If both parties go on, that is another and their own affair.
But either can claim that the contract is void, and then both
are free. In my opinion, such an overruling and equally
applicable case was brought about by the present European
war, an event by reason of which the respondents are entitled
to treat this shipbuilding contract as void. I agree that the
appeal should be disallowed.

Lorp Wrensury. My Lords, article 5 of this contract
provides that the steamer shall be completed for trial by a
calendar date—which, as varied, is January 30, 1915—
" unless"? something happens which has happened. In the
event, therefore, that calendar date is not fixed for completion.
The article goes on to provide that in the event named " a fair
proportionate extension of time shall be allowed." It is not
provided in express terms that—but upon a true construction
I think that it results that—in the event the completion is to be
achieved by the expiration of that extended time.

The question then is as to the meaning of article 12. That
article is not artistic. There is, in fact, no date for delivery
fixed by the contract. The calendar date is a date for com-

pletion ; delivery is to follow. But nothing really turns upon

13

H. L. (E.)
1918

NEw
ZEALAND
SHIPPING
CoMPANY

uv
Socrers:
DES
ATELIERS
ET
CHANTIERS

Lord Shaw of
Dunfermline,

i4

H.L. (E.)
1918

-—~
NEw
ZEALAND
SHIPPING
'COMPANY
UV.
Socrere
DES
ATELIERS

ord Wrenbury.

HOUSE OF LORDS [1919]

this difference. By calendar date I subsequently mean the
date after the calendar date when, having regard to article 5,
delivery is to be made.

The appellant says that "' the date agreed by this contract "'
in article 12 is, in the event which has happened, not the
calendar date but the expiration of the "fair proportionate
extension of time."" Iam not of this opinion. If this were so,
there would be eight months—or eighteen months, as the case
may be—from the expiration of the "fair proportionate
extension of time." Article 12 has, I think, explained article 5
by naming a period at the expiration of which both the fair
proportionate extension of time and also a further allowance
before the contract " shall become void "' will have elapsed.
For this purpose " the date agreed by this contract' is the
calendar date from which the former commences to ryn—that
is to say, the calendar date—namely, January 30, 1915. Upon
this point in my judgment the decision under appeal is right.

The next question is as to the meaning of " shall become
void" in article 12. Does this include "'shall be voidable at
the option of the builder"? In my opinion it does. The
article begins by naming certain events, four in number :
In case the builders shall (1.) become bankrupt or (2.) insolvent,
or (3.) shall fail, or (4.) be unable to deliver. Of these the first
three are events which may be said to be the fault of the builder ;
the fourth is not or may not be his fault at all. He may be
unable from an unpreventable cause beyond his control. If
the word " void "' is to be read "' voidable,"' it results in the
fourth case that upon principles well settled the meaning is that
the contract is to be voidable at the option of the builder ; for
an event is named in which, through no fault of his own, a
contract expressed to be voidable has become impossible or
commercially impossible. If the contract be voidable at the
builder's option he has by defending this case elected to avoid
it, and this appeal must fail. If, on the other hand, the word
means " void " and not " voidable," it equally results that the
appeal fails. Whether the word be read " void" or be read
"voidable," therefore, the appeal fails, unless the appellant
can maintain that it means voidable at the option of the build-

A, ¢. AND PRIVY COUNCIL. 15

ing owner, but not at the option of the builder. He has argued H.L. (E.)
that this is the effect. In my opinion thisis not so. Therule 1918
is that in a contract '"' void"' is to be read " voidable," if the | Nnw
result of reading it as " void" would be to enable a party to {EA™ANP
avail himself of his own wrong to defeat his contract. It may Company
be stated either in the form that if one party is in default it is Souceae

" void as against him," or that if one party is in default it is ,,>"*

ATELIERS
"* yvoidable at the option of the other party."' The two amount ae
to the same thing. But the contract is not "void" infavour vr

of or " voidable at the option of" the party in default. He See

ae . . ° ye ce pet Ore Wrenbury.
cannot say that it is void, and has no option of avoiding it in 2

his own wrong. Here the contract is, in my opinion, voidable
at the option of either party provided always that he is not
seeking to avoid it in his own wrong. The contingency of war
lasting more than eighteen months is a contingency not within
the control of either party. The contract is void as against
each, or, if you like so to express it, is voidable at the option
of either, if the contingency occurs.

I notice that the award found that the eighteen months
expired on July 30, 1916. This is not strictly accurate. But
nothing turns upon the fact that an allowance should have
been made for time for trial trip.

The appeal must in my judgment be dismissed with costs.

Order of the Court of Appeal affirmed and appeal
dismissed with costs.

Lords' Journals, April 25, 1918.