It was unnecessary for Macdonald, J., to state the facts in detail, but it appears that the plaintiff charterers agreed to carry the defendants’ lumber from Vancouver Island to the east coast of the United States. On 29 August 1985, with 15 voyages still to go, the defendants purported to terminate the performances of the contract on the ground that the plaintiffs had repudiated their obligations. The plaintiffs claimed that this was a wrongful termination, whereas the defendants said that it was justified by the plaintiffs’ words and conduct. The plaintiffs had announced, on 12 August, that an application was being made to a Japanese court in circumstances involving, according to Macdonald, J., “an element of insolvency”2 on the part of the plaintiffs. In the result, a number of the plaintiffs’ ships were arrested, including the two vessels then engaged in carrying the defendants’ lumber. The Sanko Iris was arrested by stevedores while carrying the defendants’ cargo and, on 15 August, they were informed that the owners had withdrawn the vessel from the plaintiffs. However, sensible arrangements were made—freight was held in trust—and the voyage was completed with only 12 days’ delay. So far as the Sanko Venus was concerned, problems were caused by stevedores who refused to complete loading unless their charges were paid in advance. Although not obliged by their contract to do so, the defendants offered to provide advance funds in trust to cover loading and discharge costs as well as other charges if the plaintiffs would guarantee that the vessel would not be delayed. It was not until 19 August, when an interim receiver was appointed, that the plaintiffs were in a position to give such assurances. Before that date (on 16 August), the defendants decided to charter another vessel.

On these facts, Macdonald, J. (initially at least) treated the validity of the defendants’ termination as turning on whether it was to be judged in the light of knowledge on 29 August or in the light of later events. On the latter approach, his Honour said, the defendants would fail because Sanko were able, under the guidance of the trustees who replaced the interim receiver, to carry on their business satisfactorily. In order to decide which approach was correct in law, Macdonald, J., turned for guidance to one of the classic decisions on discharge, Universal Cargo Carriers Corp. v. Citati.3

Somewhat surprisingly, his Honour found the guidance confusing. Devlin, J., had contrasted two ways of proving anticipatory breach: repudiation and inability. In relation to the former, Devlin, J., said that the criterion was the words and conduct of the party alleged to have repudiated. Obviously, and as his Lordship held,