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F.S.C. 219/1962


3PLR/1962/34 (FSC)






SIR LIONEL BRETT, F.J. (Read the Judgment of the Court)









(Owners of the Steamship or Vessel “SPETSAI PATRIOT”) (NO.2)

CONTRACT – Accord and satisfaction -A question of fact.

CONTRACT – Accord and satisfaction – Part performance – Effect.

CONTRACT – Consideration – Payment of lesser sum than is due not being consideration for a forbearance to sue for a larger sum – When not applicable.

CONTRACT- Construction of – Intention of parties – How ascertained.

INTERPRETATION OF DOCUMENTS – Agreement – Intention of the parties – Whether court to give effect to.

PRACTICE AND PROCEDURE – Action for money brought before due date – Dismissal of a proper order.

PRACTICE AND PROCEDURE – Pleading – Document referred to in a pleading – Whether court to give effect to it.



[Sam Eleanya, Agboola Omolola Oluwafolakemi, Vincent Eleanya Kalu, Eleanya Ugochi Vine]



Impey (with him Coker and Soyinka) -for the Plaintiffs.

Cole (with him Oluwola and Famakinwa) -for the Defendants.



BRETT, F.J. (Delivering the Judgment of the Court): This is an action in rem brought in the original jurisdiction of the Court as a Colonial Court of Admiralty. The Court is constituted a Colonial Court of Admiralty within the meaning of the Colonial Courts of Admiralty Act, 1890, by S.17 of the Federal Supreme Court Act, 1960, and Order II, rule 1, of the Federal Sup­reme Court Rules, 1961, lays down that in the absence of any provision in the Rules themselves the practice and procedure shall be conducted in sub­stantial conformity with that for the time being in force in England in the High Court of Justice. As regards the extent of the jurisdiction, it was held by the Judicial Committee in The Yuri Mara, (1927) A. C. 906, that the juris­diction conferred by S. 2(2) of the Colonial Courts of Admiralty Act, 1890, was that possessed by the High Court in England on the date when the Act came into operation, that is to say, the 25th July, 1890.


The plaintiffs are bankers having their principal place of business in Geneva, Switzerland. The defendants are a company registered in Costa Rica and are the owners of a ship named the “Spetsai Patriot”, which is registered in Liberia. The plaintiffs claim a total sum off 380,000 made up of a loan of £292,790 with interest and bank charges, which they allege is secured by a mortgage on the “Spetsai Patriot, made on the 22nd July, 1958, and duly re­gistered in accordance with the law of Liberia. The jurisdiction of the Court is founded on the fact that “Spetsai Patriot” was arrested in the port of Lagos under a warrant issued by this Court at the instance of the plaintiffs. Section 3 of the Admiralty Court Act, 1840 provided that:


“Whenever any ship or vessel shall be under arrest by pro­cess issuing from the High Court of Admiralty ……………….. the said Court shall have full jurisdiction to take cognizance of all claims and causes of action of any person in respect of any mortgage of such ship or vessel and to decide any suit instituted by any such person in respect of any such claims or causes of ac­tion respectively,”


and no issue has been raised as to the power of the Court to order the arrest of a foreign ship for the sole purpose of enforcing the rights of a mortgagee. The suit was commenced by the filing of a statement of Claim on the 12th July, 1962, and on the 25th July the Plaintiffs obtained judgment for the full sum claimed, in default of appearance by the Defendants. This was set aside on the application of the Defendants and the suit was heard as a con­tested case on the 18th, 19th, 22nd and 25th September.


It is conceded that the principal sum secured by the mortgage has not been repaid, and although a certain attempt was made to suggest that the mortgage had not been duly executed or registered it was not pressed. Paragraph 2 of the Statement of Defence contains an admission that a deed of mortgage was made, and it is not now open to the defendants to contend that its execution did not satisfy the requirements of Liberian Law. On the evidence, I am satisfied that it was duly registered. It has certainly not been formally cancelled, and no release or reconveyance of the ship has been car­ried out, but the question which we have to decide is whether it was open to the Plaintiffs on the 12th July, 1962, to sue for any sum secured by the mortgage, and, if so, what that sum was. The reason given by the Plaintiffs for wishing to pursue their monetary claim and procure the sale of the ship now is that the Maritime authorities of Liberia have threatened to cancel the registration of the ship for failure to comply with the safety regulations. It is clear from the evidence that the regulations have not been complied with, in­deed only the extent of the non-compliance is in any way disputed, but on the view which I take of the legal issues it is unnecessary to go into that mat­ter further.


As I have already said, paragraph 2 of the Statement of Defence admits that a deed of mortgage was executed, but it goes on to aver that the deed “was rescinded or revoked by an Agreement dated the 26th October, 1961, and made between the Plaintiffs, the Defendants, the Spetsai Island Ship­ping Company Limited, the American Trading Company, S.A., and Con­stantin A. Petroutsis.” Paragraph 3 sets out certain of the terms of the agree­ment, and paragraph 4 pleads that “since the execution of the agreement the relationship between the parties has been governed by that agreement and that its terms have been complied with”. Paragraph 7 repeats that the deed of mortgage has been rescinded and paragraph 12 begins “the Defendants will contend at the trial (a) that the agreement of the 26th October, 1961, is a novation of the mortgage deed of the 22nd July, 1958, and that it has re­voked or rescinded or replaced the said mortgage deed”. As the agreement of the 26th October, 1961, was in writing the reference to it makes it part of the pleading; Day V William Hill (Park Lane), (1949) 1 K. B. 632, and it was produced in evidence. The essential part of this pleading is the statement in paragraph 4 that since the agreement was entered into the relationship bet­ween the parties has been governed by it. This was enough to make it clear to the plaintiffs that the defendants were relying on the agreement as debarring them from enforcing the mortgage, and in my view it is open to the Court to give the agreement its true legal effect, irrespective of whether the word “novation” is used correctly in paragraph 12, or of whether the mortgage can properly be said to have been revoked.


Before considering the terms of the agreement, it will be convenient to deal with the parties to it. It is made “between, of the one part, the Banque Genevoise de Commerce et de Credit, 2, Rue Diday, at Geneva, hereinafter called Bank, the Spetsai Island Shipping Company Limited of Monrovia, Liberia, hereinafter called SISCO, and the American Trading Company S.A. of Panama, Panama, hereinafter called mortgagee, and of the other part the Compania Maritime di Isola Spetsai Limitada of Costa Rica, hereinafter called CMIS, and Constantin A. Petroutsis, hereinafter called Petroutsis.” Mr. Dubuis, who gave evidence for the plaintiffs, stated that SISCO was at that time owned by the Bank, but that the Bank had no in­terest in the American Trading Company. Mr. Petroutsis, who gave evi­dence for the defendants, is the Managing Director of CMIS and signed the agreement on their behalf.


The agreement begins with a preamble which sets out the history of var­ious transactions between the Bank and CMIS, the legal relationships bet­ween them immediately before the agreement was entered into, and the pur­pose of entering into the agreement. It is of sufficient importance for the construction of the agreement to be quoted in full. The original was in French but I quote from a certified translation into English:­




“In 1957, the BANK opened various credits for the Com­pania Maritime Linea Adriatica-Golfo Persico Ltda of San Jose, Costa-Rica, the assets and liabilities whereof were taken over in July 1958 by CMIS.


The assets of this latter Company were constituted by its fleet made up of 7 vessels and the BANK, having obtained guarantees by way of mortgages on the 6 vessels, by assignments of freight and by all insurance indemnities on the mortgaged ves­sels, agreed, in accordance with an Act of the 22nd July, 1958, to various advances so that the liabilities of CMIS towards it amounted in December 1958, according to the accounts of the Bank to a sum of about $100,000.


The SPETSAI STAR having been sold to Japan in October 1958; the s.s SPETSAI SAILOR having sunk in the Red Sea in November 1958 and the s.s. SPETSAI GLORY having run ag­round on the coast of the island of Crete in February 1959, the BANK has already collected the sale price and the insurance in­demnity for the SPETSAI SAILOR; the BANK has still to col­lect the hull insurance indemnity for the SPETSAI GLORY; in view of the freight crisis, CMIS was unable to make the payments laid down in the agreements with the BANK and, in June 1959 a contract was entered into between the BANK and CMIS govern­ing the extent of the obligations of CMIS to the BANK and the methods of payment of the debt; such contract also stipulated supplementary securities to be supplied, among them the trans­fer of the ownership of s.s. SPETSAI NAVIGATOR and SPET­SAI ISLAND to a Liberian Company of which the Bank became the proprietor, that is SISCO, under the special conditions laid down in the above-mentioned contract.


The events which followed on account of the inability of CMIS to liquidate its assets and of the measures taken by the BANK for the recovery of the debt, gave rise to disputes some of which were already the subject of litigation before the Courts of Geneva the Court of Appeal of Bologna and before the Court of First Instance of Piraeus whilst other actions are to be com­menced in accordance with the intention of the parties before the competent jurisdictions.


At all events the contracting parties with a view to a defini­tive settlement of all the accounts and litigation between them agree by these presents as follows:


There follow seven Articles of Agreement, headed by the word “Settle­ment”. Of these the first two require to be quoted in full:


“Article 1. – The parties waive the drawing up of detailed ac­counts. CMIS acknowledges that it is indebted to the BANK in the sum of three hundred thousand £ sterl­ing (300,000) as the balance of all accounts and of all claims between the BANK and SISCO of the one part and CMIS and PETROUTSIS of the other part. It is a comprehensive figure, acknowledged to be a capital sum but which bears no interest.


Article 2. – The recovery by the BANK of the above-mentioned sum is assured by the realization of the following as­sets of CMIS:


(a)     A claim against the hull insurers of the s.s. SPETSAI GLORY estimated at £ sterling 125,000 already assigned to the BANK.


(b)     A claim against the insurers or charterers of the s.s. SPETSAI GLORY etc. for expenses dis­bursed by the BANK for the account of the ship (included in the sum of £ sterling 300,000), for general average and “special charges” esti­mated at £ sterling 70,000 and for the guarantee in connection with the collision with the s.s. “LEONIDAS”.


(c)     The s.s. SPETSAI ISLAND registered in the name of SISCO which is to be sold to Japan at an estimated £ sterling 50,000.


(d)     Two maritime mortgages also as security are to be given by CMIS in favour of the AMERICAN TRADING COMPANY OF PANAMA for £ sterling 50,000 each on the s.s. SPETSAI PAT­RIOT and the s.s. SPETSAI NAVIGATOR which is to be transferred by SISCO to CMIS.”


Article 3 gives fuller details of the transfer of assets referred to in clauses (a), (b) and (c) of Article 2 and of the rights and liabilities of various parties, and Article 4 provides for the payment of certain fees by the Bank. Articles 5 and 6 require to be quoted in full. They read:­


“Article 5. – Promising good and faithful carrying out of the pre­sent settlement the parties reciprocally discharged each other for the balance of all accounts and of all claims and waive all civil or criminal procedure. CMIS and PETROUTSIS undertake to eliminate at their own expense and their liability any hindrance which may arise from sequestration and arrests ef­fected by third parties on the SPETSAI ISLAND and the SPETSAI NAVIGATOR in Greece. The BANK also shall release as soon as this settlement is signed the sequestrations or other measures taken by it on the s.s. SPETSAI PATRIOT and the s.s. SPETSAI FORTUNE in order to facilitate the placing of the said vessels at the free disposition of CMIS and of PETROUTSIS. The mortgage on the SPETSAI PATRIOT shall be limited to £ sterling 50,000 and transferred in favour of the MORTGAGEE and the mortgage on the SPETSAI FORTUNE shall be can­celled immediately upon the signing of these pre­sents.


In order to facilitate the formalities for the re­leasing of the seizures, arrests etc. the BANK this day shall hand to PETROUTSIS an express authorisation to the Italian lawyers (Office Berlinghieri) to proceed immediately to this end so that these two vessels may immediately be at the free disposal of CMIS and PETROUTSIS and shall telegraph in the same terms to such lawyers.


The seizures and arrests of s.s. SPETSAI PAT­RIOT and s.s. SPETSAI FORTUNE imposed by Andreas V alsamakis and Capt. D. Tsekouras shall be lifted and discharged solely at the expense and at the liability of C. PETROUTSIS and CMIS, the Bank having no responsibility whatsoever in this connec­tion.


In addition SISCO shall immediately restore ownership of the s.s. SPETSAI NAVIGATOR to CMIS and undertakes to carry out all the necessary formalities to fulfill this undertaking which in the case of the SPETSAI NAVIGATOR shall include putting into possession.


The BANK and the MORTGAGEE also under­take to supply a certificate regarding the s.s. SPET­SAI PATRIOT (sic) intended for the Liberian au­thorities under the terms of which this vessel shall change its name in accordance with the instructions of C. PETROUTSIS.


Article 6 – In as much as the realization of the claims for C.T.L., G/A etc. on the SPETSAI GLORY and the sale price etc. of the SPETSAI ISLAND are not envisaged be­fore a year, the mortgages in favour of the mortgagees (in accordance with art. 2(d) of these pre­sents) shall become due as one half (£ sterling 25,000 for each mortgaged vessel) on the 1st November 1962 and as to the other half on the 1st May, 1963, but only up to the amount of the balance not realized by the Bank by such date as provided in art. 2(a), (b) and (c), the intention of this contract being that the BANK shall not receive more than £ sterling 300,000.


Any payment made to the BANK arising from the sources set out in article 2(a), (b) and (c) over and above £ sterling 200,000 shall be considered as pay­ment on account of the mortgages (a half on each) and an act to this effect signed by the MORTGAGEE shall be delivered at the same time as the receipt by the BANK and the necessary registrations shall be made. Also all payments made to the MORTGAGEE by virtue of the above-mentioned mortgages shall be considered as a payment made to the BANK on account of its claim for £ sterling 300,000.”


Article 7 provides that the interpretation, validity and performance of the contract shall be governed by English law.


On the 14th November, 1961, Mr. Petroutsis addressed a letter to the Bank’s London attorney, which was produced in evidence. It may be of in­terest as showing the state of Mr. Petroutsis’s mind when he wrote it, but needless to say it cannot alter the effect of the written agreement and I do not think it necessary to consider it.


In the course of his evidence, Mr. Dubuis said that the Bank had re­ceived no benefit from the various assets referred to in Article 2 of the agree­ment. Nothing had been recovered so far from the insurers of the Spetsai Glory. The Spetsai Island had not been sold to Japan owing to the failure of CMIS to provide a letter of credit, which was a necessary condition for the release of the ship by SISCO. The various actions at law had evidently been withdrawn, and a mortgage of the Spetsai Navigator to the American Trad­ing Company had been executed, but not a mortgage of the Spetsai Patriot.


Having regard to the difference in wording between Article 2(d) of the ag­reement, which provides that CMIS shall give a mortgage for £50,000 on the Spetsai Patriot to the American Trading Company, and Article 5, which ap­parently provides that the existing mortgage shall be transferred in favour of the American Trading Company, it would perhaps be going too far to say that the agreement made it the duty of the Bank to carry out the transfer, but I would point out here that it would have been open to the bank to take that course if it attached importance to this part of the agreement, and it is not clear to me that the Bank is entitled to complain because CMIS has not done what it has never been called on to do, and what in any case CMIS could not have done until the Bank released the vessel from the existing mortgage. In dealing with the arrest of the “Spetsai Patriot Mr. Dubuis said “In having the ship arrested we had not forgotten the agreement of October 1961. We were going to lose our mortgage rights” (this refers to the threatened cancellation of the Liberian registration) “and we had to protect our interest. We consi­dered the agreement as cancelled; it had not been implemented by Petrout­sis”. Later, in reply to the Court, he said “we consider the agreement void because it was not carried out”. This may explain why no mention of the ag­reement is made in the Statement of Claim, but the consequence of the omis­sion is that the Statement of Claim fails to disclose what the real issues are. In addressing the Court on behalf of the Bank, Mr. Impey was not prepared to go quite to the length of submitting that the agreement was wholly void, and his submission on this aspect of the case was that although the agreement had been performed in part, and could not be treated as a nullity, still it was ineffective as a rescission of the mortgage, and the Bank was entitled to exer­cise its rights under the mortgage and enforce it as a security either, as Mr. Impey submitted, for the full sum referred to in the mortgage or, at the very least, for the reduced sum of £50,000.


We are not called on to determine whether the various breaches alleged against CMIS would have given the Bank a right of action for damages, nor, in view of the relief asked for, need we consider whether in face of the threat to cancel the registration of the ship it would have been open to the Bank on the 12th July to take any steps to protect the security, as opposed to obtain­ing judgment for a sum of money enforceable by the sale of the ship. We have only to consider whether on that date the agreement entitled the Bank to obtain judgment for a sum of money and enforce it by sale of the ship, and this, in my view, is a matter of the construction of the agreement, to which the question whether there have been breaches of it is irrelevant. Mr. Impey’s submissions on this may, I think, be summarised as follows –


(a)     Novation, which was pleaded, implies a contract on the same terms between one party to the original contract and a third party. The agreement of the 26th October, 1961, cannot be con­sidered a novation of the mortgage in this sense


(b)     The plea of rescission was defective in that it omitted a material averment, namely that rescission took place before a breach of the original contract. Here CMIS were in breach of the terms of the mortgage before the 26th October, 1961.


(c)     A mortgage can only be rescinded by an instrument under seal or by accord and satisfaction, and the agreement relied on was not under seal.


(d)     As regards accord and satisfaction, it was not pleaded and cannot be relied on. If, contrary to this submission, it can be relied on, there has been no actual satisfaction, and it was not intended that the promises made by CMIS should be accepted as satisfaction. I have already said that in my view the defendants sufficiently pleaded their reliance on the agreement to entitle the Court to ascertain and enforce its true effect on the mortgage, whether novation, rescission or accord and satisfaction be the correct description of it. The intention of the parties is to be gathered from the agreement to which they set their hands, and I would attach the greatest significance to the last paragraph of the preamble, in which, after setting out the previous dealings between the parties, and the litigation which was then pending, the parties say –


“At all events the contracting parties with a view to a definite settlement of all the accounts and litigation between them, agree by these presents as follows …..” There is also significance in the first sentence of Article 5 – “Promising good and faithful carrying out of the present settlement the parties reciprocally discharged each other for the balance of all accounts and of all claims and waive all civil or criminal procedure.” The natural interpretation of these passages seems to me to be that the parties intended to start afresh and to let their future relationships be governed by the agreement, not by any rights and obligations which they possessed immediately before the agreement so far as those rights or obligations might be inconsistent with the agreement. As to the consideration necessary to make such an agreement binding, the well-known principle accepted in Foakes V Beer (1884) 9 App. Cas. 605, that payment of a lesser sum than is due is no consideration for a forbearance to sue for the larger sum, does not apply to a comprehensive settlement in­volving a variety of claims on both sides. In such a case, it was emphasized more than once in the speeches in the House of Lords in Morris V Baron & Company (1918) A.C. I, to which Mr. Cole referred us, that it is a question of fact whether the new agreement without performance was taken in accord and satisfaction of the old see: per Lord Finlay, L. C., at p.13 and Lord At­kinson at p.35. Questions of fact in any case fall to be determined according to the circumstances of that case, and little assistance is to be derived from decisions on the facts of other cases. In the present case the passages which I have cited from the agreement, coupled with the waiver of accounts and the provision that the Bank shall be enabled to obtain from various sources the whole sum agreed to be due, indicate to me that it was the intention of the parties that the agreement by itself was to be taken in accord and satisfac­tion, and furthermore the defendants have carried out at least part perfor­mance in withdrawing, or procuring the withdrawal of, litigation and in executing a mortgage on the Spetsai Navigator.


In the circumstances I would hold that the agreement was a binding compromise of existing claims on each side and that although the mortgage to the Bank remains in force for the time being the Bank cannot do anything to enforce its rights under the mortgage which would be inconsistent with the terms of the agreement. Whatever breaches of the agreement CMIS may have been guilty of, I do not consider that the Bank, having taken advantage of, for example, the withdrawal of various lawsuits, can claim to treat the ag­reement as cancelled, as Mr. Dubois suggests. I find it equally impossible to accept Mr. Impey’s submission that the agreement is in force, but neverthe­less does not preclude the Bank from suing for the full amount originally sec­ured by the mortgage; the limitation of the amount so secured to a maximum of £50,000, and the detailed arrangements for its assessment and payment are an essential part of the comprehensive settlement effected by the agree­ment and no grounds have been shown for holding that while the rest of the agreement became operative at once these provisions remain inoperative. The elements of the settlement are not severable, and the parties must either be bound by the agreement as a whole or not bound by it at all, and for the reasons which I have tried to state 1 am of the opinion that they are bound by the agreement as a whole.


A number of authorities were cited to us by Mr. Impey in support of the first three heads of his argument, but they are only material if his submission that accord and satisfaction was not properly pleaded is accepted and as I do not regard the submission as well-founded I need not mention them. I would, however, refer again to the case of Morris V Baron, not so much for what was actually decided in the House of Lords as for the approach of their Lordships to the legal issues involved, which has a distinct bearing on Mr. Impey’s submissions as to the issues open on the pleadings in this case. The actual decision, as summarised in the headnote was that “A contract for the sale of goods of more than £10 in value, evidenced in writing as required by s.4 of the Sale of Goods Act, 1893, may be impliedly rescinded by a parol contract for the sale of goods, though unenforceable by reason of its non­compliance with the statute, where there is a clear intention to rescind as dis­tinguished from an intention to vary”. In the first place, although in coming to this decision a number of their Lordships referred to the doctrine of ac­cord and satisfaction, it does not appear that it was invoked in the pleadings and it is not mentioned in the summary of the submissions of counsel. Sec­ondly, I observe that Viscount Haldane, at p.17, refers to the second (and unenforceable) agreement between the same two parties as “the novation attempted to be effected by the final parol contract”, which reinforces the statement made by Lord Selborne, L.C., in Scarf V Jardine (1882), 7 App. Cas. 345, that a fresh contract between the same parties may in some cir­cumstances be a novation. Finally, it is clear that the rescission or abrogation of the original contract took place after breach of it by one party if not both. This confirms my view that in the present case the statement of Defence suf­ficiently raised the issues on which this matter turns. In case his main submis­sion failed, Mr. Impey submitted in the alternative, though he naturally did not lay much stress on the submission, that even if the agreement precluded the bank from suing for a mortgage debt of £292,790 plus interest and bank charges it remained open to the Bank to sue for a mortgage debt of £50,000, and that the Bank was entitled to judgment for that sum. It is the rights of the parties on the 12th July, 1962, that have to be considered and the claim seems to have been premature. In Article 6 of the agreement the parties rec­ognise that the realization of the assets referred to in article 2(a) (b) and (c) is likely to take not less than a year from the 26th October, 1961, and the ag­reement therefore provides that the first installment payable on the morgtgage should not fall until the 1st November, 1962. Since any sum reco­vered out of those assets in excess of £200,000 is to be regarded as payment on account of the mortgages (a half on each) the amount of the installment due on the 1st November, 1962, could not have been calculated before that date. It follows from these facts that on the 12th July, 1962, no payment was due under the mortgage and that it was not open to the Bank to sue to re­cover either £50,000 or any other sum by virtue of the mortgage. A judgment for a sum of money was the only relief claimed, and for the reasons I have given I think it must fail.


On these grounds I would dismiss the action with costs to be taxed. Since the Chief Registrar, as Admiralty Marshall, has been concerned in the matter I would remit the costs for taxation to a single Judge sitting in cham­bers. The “Spetsai patriot” should be released at once from arrest.


ADEMOLA, C.J.F.: I concur.


TAYLOR, F.J.: I concur.


BAIRAMIAN, F.J.: I concur.


Action Dismissed.


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