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ICLR: Appeal Cases/1935/MARITIME NATIONAL FISH, LIMITED APPELLANTS; AND OCEAN TRAWLERS,
LIMITED RESPONDENTS. ON APPEAL FROM THE SUPREME COURT OF NOVA SCOTIA. - [1935] A.C.
524

[1935] A.C. 524

MARITIME NATIONAL FISH, LIMITED APPELLANTS; AND OCEAN TRAWLERS,

[PRIVY COUNCIL.]

1935 April 12.

LORD ATKIN, LORD TOMLIN, LORD MACMILLAN, and LORD WRIGHT.

Contract - Frustration of Contract - Frustration due to act of repudiating party - Chartered trawler - Want of
Government licence.

The respondents were owners and the appellants were charterers of a steam trawler which was fitted with,
and could operate as a trawler only with, an otter trawl. By the charterparty the vessel could be used only in
the fishing industry. The charterparty was renewed for a year from October 25, 1932. At that date both parties
knew that a Canadian statute, which was applicable, made it an offence to leave a Canadian port with intent
to fish with a vessel using an otter trawl, except under licence from the Minister. In March, 1933, the
appellants applied to the Minister for licences for five trawlers which they were operating. The Minister
intimated that only three licences would be granted, and requested the appellants to name the three trawlers
in respect of which the three licences should be granted. The appellants named three trawlers, excluding the
trawler now in question, and accordingly licences were granted for those three only. The appellants
thereupon claimed that they were no longer bound by the charterparty, and to an action claiming the charter
hire pleaded that the charterparty had become impossible of performance and their obligations under it
ended:-

Held, that there had been no frustration of the charterparty, as the absence of a licence was due to the
election of the appellants, who remained liable for the hire.

Krell v. Henry [1903] 2 K. B. 740 commented on.

Judgment of the Supreme Court of Nova Scotia affirmed.

APPEAL (No. 103 of 1934) from an order of the Supreme Court of Nova Scotia En Banco (June 9,
1934) reversing an order of the Supreme Court of Nova Scotia (January 19, 1934).

The facts appear from the judgment of the Judicial Committee.

1935. March 25. C. B. Smith K.C. and Frank Gahan for the appellants.
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H. U. Willink K.C. and Mocatta for the respondents.

1935. April 12. The judgment of their Lordships was delivered by

LORD WRIGHT. The appellants were charterers of a steam trawler the St. Cuthbert which was the property
of the respondents. The charterparty, dated October 25, 1928, had originally been entered into between the
respondents and the National Fish Company, Ld., but was later by agreement taken over by the appellants. It
was for twelve calendar months, but was to continue from year to year unless terminated by three months'
notice from either party, the notice to take effect at the end of one of the years. It was expressly agreed that
the trawler should be employed in the fishing industry only; the amount of monthly hire was to be fixed on a
basis to include a percentage of the purchase price, and also operating expenses. There was an option given
to the charterers to purchase the trawler.

By letters dated July 6 and 8, 1932, exchanged between the appellants and respondents, it was agreed that
the charterparty as then existing should be renewed for one year from October 25, 1932, but at a rate of
monthly hire which was 25 per cent. lower than that previously paid: the amount so agreed came to $590.97
per month. It was also then agreed that in the event of the appellants giving notice on or before July 25 in
any year that they did not intend to renew, they should further give notice whether or not they intended to
exercise the option to purchase. In fact the appellants gave notice on January 27, 1933, that they did not
intend to renew the charter or to purchase the vessel.

When the parties entered into the new agreement in July, 1932, they were well aware of certain legislation
consisting of an amendment of the Fisheries Act (c. 73 Revised Statutes of Canada, 1927) by the addition of
s. 69A, which in substance made it a punishable offence to leave or depart from any port
[1935] A.C. 524 Page 526

in Canada with intent to fish with a vessel that uses an otter or other similar trawl for catching fish, except
under licence from the Minister: it was left to the Minister to determine the number of such vessels eligible to
be licensed, and Regulations were to be made defining the conditions in respect of licences. The date of this
amending s. 69A was June 14, 1929. Regulations were published on August 14, 1931, former Regulations
having been declared invalid in an action in which the appellants had challenged their validity.

The St. Cuthbert was a vessel which was fitted with, and could only operate as a trawler with, an otter trawl.

The appellants, in addition to the St. Cuthbert, also operated four other trawlers, all fitted with otter trawling
gear.

On March 11, 1933, the appellants applied to the Minister of Fisheries for licences for the trawlers they were
operating, and in so doing complied with all the requirements of the Regulations, but on April 5, 1933, the
Acting Minister replied that it had been decided (as had shortly before been announced in the House of
Commons) that licences were only to be granted to three of the five trawlers operated by the appellants: he
accordingly requested the appellants to advise the Department for which three of the five trawlers they
desired to have licences. The appellants thereupon gave the names of three trawlers other than the St.
Cuthbert, and for these three trawlers licences were issued, but no licence was granted for the St. Cuthbert.
In consequence, as from April 30, 1933, it was no longer lawful for the appellants to employ the St. Cuthbert
as a trawler in their business. On May, 1 1933, the appellants gave notice that the St. Cuthbert was available
for re-delivery to the respondents; they claimed that they were no longer bound by the charter.
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On June 19, 1933, the respondents commenced their action claiming $590.97 as being hire due under the
charter for the month ending May 25, 1933: it is agreed that if that claim is justified, hire at the same rate is
also recoverable for June, July, August, September and October, 1933.
[1935] A.C. 524 Page 527

The main defence was that through no fault, act or omission on the part of the appellants, the charterparty
contract became impossible of performance on and after April 30, 1933, and thereupon the appellants were
wholly relieved and discharged from the contract, including all obligations to pay the monthly hire which was
stipulated.

The defence succeeded before the trial judge, Doull. J. His opinion was that there had been a change in the
law, including the Regulations, which completely changed the basis on which the parties were contracting.
He thought it "not unreasonable to imply a condition to the effect that if the law prohibits the operation of this
boat as a trawler the obligation to pay hire will cease." He also thought the appellants were not bound to lay
up another boat instead of the St. Cuthbert.

It seems that the learned judge proceeded on the footing that the change of law was subsequent to the
making of the contract, whereas it was in fact anterior to the agreement of 1932, under which the trawler was
being employed at the time the licence was refused.

This judgment was unanimously reversed by the judges in the Supreme Court En Banco. The judges of that
Court rightly pointed out that the discharge of a contract by reason of the frustration of the contemplated
adventure follows automatically when the relevant event happens and does not depend on the volition or
election of either party. They held that there was in this case no discharge of the contract for one or both of
two reasons. In the first place they thought that the appellants when they renewed the charter in 1932 were
well informed of the legislation, and when they renewed the charter at a reduced rate and inserted no
protecting clause in this regard, must be deemed to have taken the risk that a licence would not be granted.
They also thought that if there was frustration of the adventure, it resulted from the deliberate act of the
appellants in selecting the three trawlers for which they desired licences to be issued.

Their Lordships are of opinion that the latter ground is sufficient to determine this appeal. Great reliance was
placed
[1935] A.C. 524 Page 528

in the able argument of Mr. Smith for the appellants on Bank Line, Ld. v. Arthur Capel & Co. (1), and in
particular on the judgment of Lord Sumner in that case. That case was in principle very different from this,
because the vessel which was chartered in that case was actually taken from the control of the shipowners
for a period such as to defeat the contemplated adventure: it was in consequence impossible during that time
for the shipowners to place the vessel at the charterers' disposal at all. In the present case the St. Cuthbert
was not requisitioned: it remained in the respondents' control, who were able and willing to place it at the
appellants' disposal: what happened was that the appellants could not employ the St. Cuthbert for trawling
with an otter trawl. No doubt it was expressed in the charterparty that the St. Cuthbert should be employed
under the charter in the fishing industry only, but the respondents did not warrant the continued availability of
the vessel for that employment nor was payment of hire made dependent on that condition. The St. Cuthbert
was available for the appellants to make such use of her as they desired and were able to make. This case is
more analogous to such a case as Krell v. Henry (2), where the contract was for the hire of a window for a
particular day: it was not expressed but it was mutually understood that the hirers wanted the window in
order to view the Coronation procession: when the procession was postponed by reason of the unexpected
illness of King Edward, it was held that the contract was avoided by that event: the person who was letting
the window was ready and willing to place it at the hirer's disposal on the agreed date; the hirer, however,
could not use it for the purpose which he desired. It was held that the contract was dissolved, because the
basis of the contract was that the procession should take place as contemplated. The correctness of that
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decision has been questioned, for instance, by Lord Finlay L.C. in Larrinaga v. Soci‚t‚ Franco-Americaine des
Phosphates (3): Lord Finlay observes: "It may be that

(1)     [1919] A. C. 435.

(2)     [1903] 2 K. B. 740.

(3)     (1922) 29 Com. Cas. 1, 7.

[1935] A.C. 524 Page 529

the parties contracted in the expectation that a particular event would happen, each taking his chance, but
that the actual happening of the event was not made the basis of the contract."

The authority is certainly not one to be extended: it is particularly difficult to apply where, as in the present
case, the possibility of the event relied on as constituting a frustration of the adventure (here the failure to
obtain a licence) was known to both parties when the contract was made, but the contract entered into was
absolute in terms so far as concerned that known possibility. It may be asked whether in such cases there is
any reason to throw the loss on those who have undertaken to place the thing or service for which the
contract provides at the other parties' disposal and are able and willing to do so. In Hirji Mulji v. Cheong Yue
Steamship Co. (1) Lord Sumner speaks of frustration as "a device, by which the rules as to absolute
contracts are reconciled with a special exception which justice demands." In a case such as the present it
may be questioned whether the Court should imply a condition resolutive of the contract (which is what is
involved in frustration) when the parties might have inserted an express condition to that effect but did not do
so, though the possibility that things might happen as they did, was present in their minds when they made
the contract.

This was one of the grounds on which the judges of the Supreme Court were prepared to decide this case.
Their Lordships do not indicate any dissent from the reasoning of the Supreme Court on this point, but they
did not consider it necessary to hear a full argument, or to express any final opinion about it, because in their
judgment the case could be properly decided on the simple conclusion that it was the act and election of the
appellants which prevented the St. Cuthbert from being licensed for fishing with an otter trawl. It is clear that
the appellants were free to select any three of the five trawlers they were operating and could, had they
willed, have selected the St. Cuthbert as one, in which event

(1)     [1926] A. C. 497, 510.

[1935] A.C. 524 Page 530

a licence would have been granted to her. It is immaterial to speculate why they preferred to put forward for
licences the three trawlers which they actually selected. Nor is it material, as between the appellants and the
respondents, that the appellants were operating other trawlers to three of which they gave the preference.
What matters is that they could have got a licence for the St. Cuthbert if they had so minded. If the case be
figured as one in which the St. Cuthbert was removed from the category of privileged trawlers, it was by the
appellants' hand that she was so removed, because it was their hand that guided the hand of the Minister in
placing the licences where he did and thereby excluding the St. Cuthbert. The essence of "frustration" is that
it should not be due to the act or election of the party. There does not appear to be any authority which has
been decided directly on this point. There is, however, a reference to the question in the speech of Lord
Sumner in Bank Line, Ld. v. Arthur Capel & Co. (1) What he says is: "One matter I mention only to get rid of
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it. When the shipowners were first applied to by the Admiralty for a ship they named three, of which the Quito
was one and intimated that she was the one they preferred to give up. I think it is now well settled that the
principle of frustration of an adventure assumes that the frustration arises without blame or fault on either
side. Reliance cannot be placed on a self-induced frustration; indeed, such conduct might give the other
party the option to treat the contract as repudiated. Nothing, however, was made of this in the courts below,
and I will not now pursue it."

A reference to the record in the House of Lords confirms Lord Sumner's view that the Court below had not
considered the point, nor had they evidence or material for its consideration. Indeed, in the war time the
Admiralty, when minded to requisition a vessel, were not likely to give effect to the preference of an owner,
but rather to the suitability of the vessel for their needs or her immediate readiness and availability. However,
the point does directly arise in the facts now before the Board, and their Lordships are of

(1)     [1919] A. C. 435, 452.

[1935] A.C. 524 Page 531

opinion that the loss of the St. Cuthbert's licence can correctly be described, quoad the appellants, as "a self
induced frustration." Lord Sumner in Hirji Mulji v. Cheong Yue Steamship Co. (1) quotes from Lord Blackburn
in Dahl v. Nelson, Donkin & Co. (2), who refers to a "frustration" as being a matter "caused by something for
which neither party was responsible": and again (3) he quotes Brett J.'s words, which postulate as one of the
conditions of frustration that it should be "without any default of either party." It would be easy, but is not
necessary, to multiply quotations to the same effect. If either of these tests is applied to this case, it cannot in
their Lordships' judgment be predicated that what is here claimed to be a frustration, that is, by reason of the
withholding of the licence, was a matter for which the appellants were not responsible or which happened
without any default on their part. In truth, it happened in consequence of their election. If it be assumed that
the performance of the contract was dependent on a licence being granted, it was that election which
prevented performance, and on that assumption it was the appellants' own default which frustrated the
adventure: the appellants cannot rely on their own default to excuse them from liability under the contract.

On this ground, without determining any other question, their Lordships are of opinion that the appeal should
be dismissed with costs.

They will humbly so advise His Majesty.

(1)     [1926] A. C. 497, 507.

(2)     (1881) 6 App. Cas. 38, 53.

(3)     [1926] A. C. 508.

Solicitors for appellants: Charles Russell & Co.

Solicitors for respondents: William A. Crump & Son.