122 [Jou 4, 1942] ALL ENGLAND LAW REPORTS ANNOTATED [Vol. 2 FIBROSA SPOLKA AKCYJNA v. FAIRBAIRN LAWSON COMBE BARBOUR, LTD. (House or Lorps (Viscount Simon, L.C., Lord Atkin, Lord Russell of Killowen, Lord Macmillan, Lord Wright, Lord Roche and Lord Porter), April 16, 17, 20, 21, 23, 24, June 15, 1942.] Contract—Impossibility of performance—Frustration-~Sale of _Goods—Part- payment of price before delivery—Delivery rendered impossible by place of delivery becoming enemy-occupied territory—Right of buyers to return. of sum Paid in part-payment of price—Express provision for delay in. consequence of war. The respondents contracted in July, 1939, to deliver certain machinery to the appellants, the delivery to be c.i.f. Gdynia. On Sept. 23, 1939, idynia became enemy-occupied territory. ‘The contract provided that (a) if dispatch was hindered by any cause beyond the vendors’ reasonable control including, inter alia, war, a reasonable extension of time should be granted, and (b) one-third of the purchase price should be paid at the time when the order was given. :'The appellants in fact paid £1,000 on July 18, 1939, although one-third of the purchase price amounted to £1,600, and they had never paid the remaining £600. It was contended for the appellants that, notwithstanding the express clause in the contract, it was frustrated by the fact that Gdynia became enemy-oceupied territory and that they were entitled to the return of the advance payment of £1,000 :— Hetp : (i) the express term referred only to a temporary impossibility of performance and had no reference to the prolonged period occasioned by the outbreak of war in Sept., 1939, and the contract was frustrated. (ii) the appellants were entitled to the return of the £1,000 paid in advanco as money paid upon a consideration which had wholly failed. (iii) although the rule in Chandler v. Webster (9) had heen acted on for nearly forty years, that decision had always been treated as not binding on the House of Lords and it was open to the House to review it. Decision of the Court of Appeal ( [1941] 2 All E.R. 300) reversed, Chandler v. Webster (9) overruled. (EDITORIAL NOTE. ‘The rule in Chandler v. Webster (9) that, upon the frustration ‘of @ contract, the loss lies whore it falls has prevailed since the decision of that case in 1904, though it has been constantly and severely criticised. Tt was questioned by the respondents whether a rule so long established could be, or ought to be, disturbed by the House, but their Lordships felt no difficulty on this point. Their Lordships wero also unanimous in thinking that the rule was founded upon an erroneous view of the Jaw, though it might bo that, if the facts of that particular case wero fully known, the payment there sought to be recovered was an out-and-out payment and s0 irrecoverable in any case. If that view of the facts was the correct one, then the actual decision was right; but the proposition of law founded on it and since referred to as the rule in Chandler v. Webster (9) could not be supported. It is important to note the limitations of the decision of the House made herein. ‘The only sums recoverable are those paid for a consideration which has wholly failed. A partial failure of consideration is in- sufficiont except in the case where the contract is severable and there has been a total failure of consideration as to one or more of the sovered parts. English law does not provide for restitution and, therefore, the sum recovered in such a case is not subject to any deduction in respect of part-performance of the contract upon the part of the other party thereto. The result is not completely just in a pecuniary sense nor ideally perfoct as part of an equitable system of law. It can be made so only by legislation and the Law Revision Committee has recommended an amendment of the law in this respect. As 70 Errecr or Frustration, see HALSBURY, Hailsham Edn., Vol. 7, pp. 213, 214 5 and or Cases, see DIGEST, Vol. 12, pp. 406, 407, Nos. 3275-3283.) Cases referred to : (1) Porter v. Freudenberg, Kreglinger v. Samuel (S.) and Rosenfield, Re Merten's Patents, [1915] 1 K.B. 857 ; 2 Digest 157, 280 ; 84 L.J.K.B. 1001 ; 112 L.-T. 313. (2) Rodriguez v. Speyer Bros., [1919] A.C. 59; 2 Digest 160, 306; 88 LuJ.K.B. 147; 119 L.T. 409. (3) N. V. Gebr. van Udens Scheepvaart en Agentunr Maatachappij and Sovfracht, Re an arbitration between, (1942) 1 K.B. 222; [1941] 3 AILE.R. 419; Digest Supp.; 111 LJ.K.B. 152; 166 LT. 69.HL] FIBROSA v. FAIRBAIRN ETC., LTD. 123 (4) Bank Line, Ltd., v. Capel (A.) & Co. [1919] A.C. 435; 12 Digest 391, 3198; 88 LJ.KB. 311; 120 LT. 129. (5) Tatem, Led. v. Gamboa, [1939] 1 K.B. 132; [1938] 3 AN E.R. 135; Digest Supp 5. 108 L.JS.K.B. 34; ‘160 L.T. 159. (6) Jackson v. Union Marine Insurance Co., Lid. (1874), LR. 10 C.P. 126; 12 Digest 386, 3175; 44 Lid C.P. 27; 31 LT. 789; affg. (1873), LR. 8 C.P. 572. (1) Geipel 'v. Smith (1872), LR. 7.Q.B. 404; 12 Digest 372, 3095; 41 L.J.Q.B. 153; 26 L.T. 361. A (8) Briel Bieber & Co. v. Rio Tinto Co. Dynainit Act. v. Rio Pinto Co., Koenigs and Laurahuette Act. v. Rio Tinto Co., {1918} A 305, 3217; 87 L.J.K.B. 6315 118 LP. 181. (9) Chandler w. Webster, [1904] 1 K.B, 493; 12 Digost 407, 3282; 73 L.J.K.B. 401; 90 L.-T. 217. (10) Blakeley v. Muller & Co., [1903] 2 K.B. 760, n.; 12 Digest 406, 3276 ; 88 L.T. 90. (11) Civil Service Co-operative Society v. General Steam Navigation Co., [1903] 2 K.B. 756; 12 Digest 406, 3280; 72 L.J.K.B. 933; 89 L.T. 429, B (12) Byrne ¥. Schiller (1871), LR. 6 Exch. 319; 41 Digest 656, 4883; 40 L.J.Ex. 1775 26 L.T. 21. (13) Joseph ‘Constantine SS. Line, Ltd., v. Imperial Smelting Co., [1942] A.C. 154; [1941] 2 AM E.R. 165; Digest Supp. ; 110 L.J.K.B. 433; 165 LT. 27. (14) Cantiare San Rocco, S.A. (Shipbuilding Co.) v. Clyde Shipbuilding and Engineering Co., [1924] A.C. 226; 12 Digest 393, 3204 v.; 93 LJSP.C. 86; 130 1.7. 610; revage, [1922] 8. (15) French Marine v. Compagnie Napotitaine d’Belairage et de Chauffage par te Gaz, [1921] 2 A.C. 494; 41 Digest 367, 2740; 90 LJ-K.B, 1068; 125 LT. 833; 27 Com. Cas. 69, (16) Russcoe v. Stirk (1922), 10 Lloyd L.R. (17) Taylor v. Caldwell (1863), 3 B. & 8. 8263 Vereinigte 260;° 12 Digest 2 Digest 871, 809: L.J.Q.B. 1645 8 LT. 356. (18) Appleby v. Myers (1867), LR. 2.C.P. 651; 12 Digest 618, 5103: 36 LJ.C.P. 331 ; 16 L.-T. 669. D_ (19) Sinclair v. Brougham, [1914] A.C. 398; 2 Digest 282, 2317; 83 L.J.Ch, 465 ; (19) ig) ig M1 LT, 1. (20) Rugg v. Minett (1809), 11 East. 210; 39 Digest 503, 12/0. (21) Krell v. Henry, [1903] 2 K.B. 740; 12 Digest 608, 5037; 72 Lo.K.B. 794; 89 LT. 328. (22) Giles v. Edwards (1797), 7 Term Rep. 181; 12 Digest (23) Nockels v. Crosby (1825), 3 B. & C. 814; 9 Digest 50, 91. (24) Wilson v. Church (1879), 13 Ch.D. 1; 12 Digest 231, 1906; 41 Lit. 60; affd. sub nom. National Bolivian Navigation Co. v. Wilson (1880), 5 App. Cas. 176} 43 LT. 60. (25) Johnson v. Goslett (1857), 3 C.B.N.8. 569; 10 Digest 1102, 7733 ; 27 LS.C.P. 122 5 31 L.T.O.S. 35. (26) Ashpitel v. Sercombe (1850), 5 Exch. 147; 22 Digest 24, 49; 19 Lw.Ex, 825 14 L.T.0.8. 448. (27) Devaua vy. Conolly (1849), 8 C-B. 640; 12 Digost 233, 1925; 19 LJ.CP. 71; F 14 L.T.0.8. 546, (28) Watson’ & Co. 'v. Shankland (1871), 10 Macph. (Ct. of Sess.) 142; affd. (1873), LR. BSc. & Div. 304; 41 Digest: 664, 496011 Macph. (H.L.) 1; 20 LT. 349. , 1894. (29) Wright v. Newton (1835), 2 Cr. M. & R. 124; 12 Digest 226; 1867; sub nom. Wrighton v. Newton, i Gale 67. (30) Jones (R. #.), Lid. v. Waring and Gillow, Lid., [1926] A.C. 670; Digest Supp. s 95 LoJ.K.B, 913 135 1.7. 548. (31) Kelly v. Solari (1841), 9 M. & W. 54; 29 Digest 391, 3128; 11 LJS.Ex. 10. (82) Holmes v. Hall (1704), 6 Mod. Rep. 161; Holt. K.B. 36; 12 Digest 229, 1890. 3) Moses v. Macferlan (1760), 2 Burr. 1005; 1 Wm. Bl. 219; 12 Digest 539, 4478. (34) United Australia, Ltd. v.’ Barclays Bank, Dtd., (1941) A.C. 1; Digest Supp. ; {1940} 4 ATL E.R. 20; 109 L.J.K.B. 919. Hirji Mulji v. Cheony Yue 8.8. Co., Ltd., [1926] A.C. 497; Digest Supp. ; 95 LbPC, 1215 134 WT. 737. Royal Bank of Canad v. R., (L9L3] A.C, 2835 12 Digest 229, 1896; 82 Lal.B.C 33; 108 1.7. 129. ) Grevitle v. Da Coste: (1797), Poake, Add. Cas. 113; 40 Digest 8) Allison v. Bristol Starine Insurance Co. (1876), L App. Cas. 45115 34 LT. 809, (39) Anon. (1682), 2 Show. 283; 41 Digest 648. 4794. (40) Whincup v. Hughes (1871), LR. 6 CP. 78; 12 Digest 24 LT. 76. (41) Admiralty Comrs. v. Valverta (Owners), 1938) Digest Supp. ; 107 Lu-K.B, 99; 158 1.7 2081. 41 Digest 620, ILL; 40 LaS.C.P. 104; + [1938] 1 All FAR, 162;124 [Jury 4, 1942] ALL ENGLAND LAW REPORTS ANNOTATED [Vol. 2 (42) Lissenden v. Bosch (C.A.V.), Ltd., [1940] A.C, 412; [1940] | AU E.R. 425; Digest Supp. ; 109 L.J.K.B. 350; 162 LT. 195. (43) Ockenden v. Henly (1858), E.B. & E. 485; 40 Digest 261, 2268; 27 L.J.Q.B. 361 ; 31 L.T.O8. 179. (44) Stubbs _v. Holywell Ry. Co, (1867), L.R. 2 Exch. 311; 12 Digest 593, 4934; 36 L.J.Ex. 166; 16 1.1. 631. (45) Anglo-Egyptian Navigation Clo. v. Rennie (1875), L.R. 10 C.P. 271; 12 Digest 234, 1936; 44 L.J.C.P. 130; 32 L.'T. 467; on appeal, L.R. 10 . STI. (46) Clark v. Lindsay (1903), 88 L.'T. 198; 19 T.L.R. 202; 12 Digest 980. ‘3080. (47) Grigith v. Brymer (1903), 19 T.L.R. 434; 12 Digest 369, 3079. (48) Lumsden v. Barton & Co. (1902), 19 T.L.R. 53; 12 Digest 228, 1885. (49) Knowles v. Bovill (1870), 22 L.T. 70; 12 Digest 227, 1879. Apprat by the buyers from a decision of the Court of Appeal (MacKinnon and Luxmoore, L.JJ., and StaBxe, J.) reported [1941] 2 All E.R. 300, affirming a decision of Tucker, J., reported [1941] 1 All E.R. 464. At the suggestion of the House, a licence was obtained by the appellants from the Board of Trade allowing them to proceed with the appeal although they were a company registered in enemy-occupied territory and might, therefore, be in the position of an“alien enemy. The claim for interest on the advance payment was waived by the appellants at the hearing of the appeal. The facts are fully set out in the opinion of Viscounr Simo, L.C. Lynton Thorp, K.C., and Sebag Shaw for the appellants. Valentine Holmes and @. 0. Slade for the respondents. Viscounr Simon, L.C.: My Lords, this is the appeal of a Polish company who were plaintiffs in the action against the decision of the Court of Appeal (MacKrwwon and Luxmoore, L.JJ., and Srantx, J.), confirming the judgment of Tucker, J., at the trial in favour of the respondents. After the Court of Appeal’s judgment and before the appeal came to be argued at your Lordships’ bar, the town of Vilna, where the appellant company had carried on its business, and, indeed, the whole of Poland, under the laws of which state the appellant company was incorporated, were occupied by. our enemy Germany. ‘The question might, therefore, arise whether the appellant company should now be debarred from prosecuting its appeal: see the judgraent of the Court of Appeal delivered by Lorn Reapina, L.C.J., in Porter v. Freudenberg (1), ab pp. 868, 884; see alse Rodriguez v. Speyer Bros. (2). In order to obviate any difficulty on this head, the plaintiff company, at the suggestion of the House, applied to the Board of ‘Trade, and that department gave to the appellants’ solicitors a licence to proceed. with the appeal notwithstanding that their clients might be in the position ofan alien enemy. ‘The House was content to let the case proceed on this basis. It is not, therefore, necessary to consider, in dealing with the present appeal, whether the recont decision of the Court of Appeal in Re an arbitration between N. V. Gebr. van Udens Scheepuaart en Ayentuur Maatschappij and Sovfrackt (3), should be approved. If, as the result of the decision of the House, any payment hecomes due, to the appellants, and if they were in the position of alien enemies within the meaning of the Trading with the Enemy Act, 1939, the payment would be regulated by that Act. ‘The respondents are a limited company carrying on at Leeds the business of manufactiring toxtile machinery, and by a contract in writing dated July 12, 1939, they agreed to supply the appellants with certain flax- hackling machines as therein specified and described, at a lump-sum price of £4,800. The machines were of a special kind, and there is no suggestion that the respondents were not to manufacture them themselves, By the terms of the contract, delivery was to be in 3 to 4 months from the settlement of final details. The machines were to be packed and delivered by the respondents o,i.f. Gdynia s the services of « skilled monteur to superintend erection were to he provided by the respondents and included in the price ; and payment was to be madé by ehoque on London, one-bhird of the price (£1,600) with the order and the balance (£3,200) against shipping documents. On July 18, 1939, the appellants paid to the respondents £1,000 on account of the initial payment of £1,600 due under the contract, On Sept. 1, 1939, Germany invaded Poiand and on Sept. 3, Great Britain declared war on Germany. On Sept. 7, the appellants’ agents in this country wrote to the respondents : Owing to the outbreak of hostilities it is now evident that the delivery of the machines for Poland cannot take place. Under the circumstances we shall be obliged if you will GDd F G HL.) FIBROSA v. FATRBAIRN ETC., LTD. (Viscocnr Simon, L.C.) 125 kindly arrange to return our initial payment of £1,000 at your early convenience. To this request, the respondents replied on the nekt day refusing to return the sum and stating that : vonsiderable work has been done on these mac return of this psyment, After the war the matt On Sept. 23, by order in council made under the provisions of the Trading nthe Enomy Act, 1939, it was declared that Poland (including that part in which the port of Gdynia is situated) was enemy territory. ‘Thorn was further correspondence between the parties or their agents which failed to produce agreement, and on May 1, 1940, the appellant company issued a writ and by its statement of claim alleged that the respondents had broken the contract by refusing to deliver the machines while the appellants “ are and have at all material times been ready and willing to take delivery and pay for the machines.” The prayer of the claim was (a) for damages for breach of contract, (b) for specific. performance—an obviously hopeless claim—or, alternatively, return of the £1,000 with interest, and (c) for further or other relief, ‘The substantial defence of the respondents was that the contract had been frustrated by the German occupation of Gdynia on Sept. 23, 1939, and that. in these circumstances the appellants had no right to the return of the £1,000. Before passing to the main question involved in the appeal, T must mention another contention of the appoliants which was based on cl. 7 of the conditions of sale attached to the contract. This clause contained the provision that es and we cannot consent to the ‘an be reconsidered. ... should despatch be hindered or delayed by . . . any cause beyond our reasonable control including . .. war. . . a reasonable extension of time shell he granted, ‘The appellants argued that there could be no frustration by reason of the war which broke out during the currency of the contract because this con- lingency was expressly provided for in cl. 7 and, therefore, there was no room for an implied term such as has often been regarded as a suitable way in which io express and apply the doctrine of frustration. I entirely agree with the Court of Appeal that, in the circumstances of the present case, this is bad point, ‘The ainbit of the express condition is limited to delay in respect of which “a reasonable extension of time” might be granted. ‘That might mean a minor delay as distinguished from a prolonged and indefinite interruption of prompt contractual performance which the present war manifestly and inevitably brings about. A similar argument was unsuecessfully urged in Bank Line v. Capel (4), und in other cases, a recent instance of which is Tatem v. Gamboa (5). ‘The principle is that where supervening events, not due to the default of either party, render tho performance of a contract, indefinitely impossible, and there is no undertaking to be bound in any event, frustration ensues, even though the parties may have expressly provided for the case of a limited interrup' ‘As MacKrxwon, L.J., points out, the unsoundness of the contrary view is implicit in Jackson v. Union Marine Insurance Co., Lid. (6), for the charter- party in that case contained an exception of perils of the sea (see L.R. 8 C.P., at p. 584), but none the less the contract was held to have been terminated anc the adventure to have been frustrated by the long delay due to the stranding of the ship. ‘The situation arising from the outbreak of the presént war, so far as this country, Germany and Poland are concerned, makes applicable the well- known observation of Lus#, J., in Geipel v. Smith (7), at p. 414: .. . a state of war [in that caso the Franco-German war of 1870] must bo presumed tu be likely to continue so long, and so to disturb the commerce of merchants, as to defeat and destroy the object of a commercial adventure like this. There is a further reason for saying-that this subsidiary contention of the appellants must fail, viz., that, while this country is at war with Germany and Germany is occupying Gdynia, a British subject such as the respondents could -not lawfully make arrangements to deliver c.i.f. Gdynia and, therefore, the con- tract could not be further performed because of supervening illegality, A provision providing for a reasonable extension of time if despatch is delayed by war cannot have any application when the circumstances of the war make despatch illegal ; Ertel Bieber d Co. v. Rio Tinto Co., Ltd. (8). Counsel for the appellants admitted that, if the point with which I have already dealt was decided against him, the only other issue to be determined was whether, when this contract became frustrated, the appellants could, in