Dalwood Marine Company v Nordana Line A/S

JurisdictionEngland & Wales
JudgeMr. Justice Teare
Judgment Date21 December 2009
Neutral Citation[2009] EWHC 3394 (Comm)
CourtQueen's Bench Division (Commercial Court)
Date21 December 2009
Docket NumberCase No: 2009 FOLIO 932

[2009] EWHC 3394 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Before: Mr. Justice Teare

Case No: 2009 FOLIO 932

Between
Dalwood Marine Co.
Claimant Owners
Nordana Line A/S
Respondent Charterers

Andrew Baker QC (instructed by Mills and Co.) for the Claimant

Simon Croall QC (instructed by Bentleys Stokes and Lowless) for the Defendant

“Elbrus” C/P dated 23.1.04

Hearing dates: 8 December 2009

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

MR.JUSTICE TEARE

Mr. Justice Teare

Mr. Justice Teare:

1

This is an appeal by the Claimant Owners against an award dated 11 June 2009 made by Mr. Marshall and Mr. Baker Harber in which the tribunal decided in favour of the Respondent Charterers' claim in the sum of US$233,755.10 and dismissed the Owners' counterclaim. The appeal is brought pursuant to section 69 of the Arbitration Act 1996 with the leave of the High Court.

2

The sums awarded to the Charterers reflected the amounts due on a final balance of account. The issues for the tribunal related to whether the Charterers had wrongfully terminated the charterparty and if so whether that had caused any loss. The tribunal concluded that the Charterers had wrongfully terminated the charterparty but that the Owners had suffered no loss. On this appeal the Owners contend that the tribunal made an error of law in concluding that no loss had been proved, namely, that it had regard to earnings for the period after the date when the repudiated charter would have ended if there had been no repudiation.

The facts

3

The charterparty was on an amended NYPE 1993 form for a period of 5–7 months with an option (which was exercised) for a further 5–7 months. In late March 2005 when the vessel, ELBRUS, was at Lobito, Angola, the charter was further extended for as long as it would take to proceed to Puerto Acevedo, Argentina and then perform a voyage to Houston via Rio de Janeiro, Vitoria, Port Everglades and New Orleans. On 4 April 2005 the Charterers wrongfully terminated the charterparty. At that time the vessel was still at Lobito, Angola. But for that repudiation the vessel would have been employed under the charterparty for some 39 days until redelivery at Houston on 13 May 2005.

4

In the event the only part of that 39 days during which the vessel earned hire was 7 days from 6 May 2005 pursuant to a charterparty with Navimed.

5

It is necessary to note the following matters concerning the Navimed fixture. The Navimed fixture had been fixed for a “good hire rate” with a laycan for 1–20 May 2005. The rate was $18,100 per day as opposed to $10,800 per day under the original charterparty. The fixture contained a term that the vessel had to “freshly drydocked.” Negotiations had taken place with the yard at Setubal in Portugal but no contract or date had been agreed. Had the charterparty not been wrongfully terminated on 4 April 2005 the vessel would, on termination, have been sailed to Setubal for drydocking. There is no doubt that the vessel would have missed the laycan under the Navimed fixture. There was a possibility that Navimed would not have agreed to an extension of the cancelling date because market rates in the Mediterranean had softened.

6

On 4 April 2005 there was no available market for ELBRUS off the west coast of Africa. The Owners decided to sail the vessel to the drydock in Setubal, dry dock her and deliver her to Navimed.

7

With regard to the Owners' decision the tribunal said this, at paragraph 91:

“91. It seems to us that the Respondents acted reasonably in doing so, faced with a vessel redelivered without notice on 4 April. However, the effect of the decision was that the vessel was in drydock much earlier than she would have been had the charter with the Claimants continued, and the vessel met her laycan, and earned a high rate of hire under the Navimed fixture. In other words, the Respondents decided not to find another cargo or business, either off West Africa where there was none, or in South America which would have involved positioning the vessel, but instead decided to arrange for the drydocking immediately, thereby ensuing that the vessel did not lose her next fixture with Navimed, at a time when the rates seemed to be softening.”

8

The tribunal then said, at paragraphs 92 and 93:

“92. The Claimants have, as we have said, produced various permutations and schedules and they all show that the Respondents did not lose as result of the cancellation, but made a gain to a greater or lesser extent.

93. Accordingly, we find and hold that the Respondents have failed to prove their counterclaim and so have failed to establish a set-off against the sum agreed to be due to the Claimants.

9

The schedules to which the tribunal referred are, it seems, summarised earlier in the award at paragraphs 39–51 of the award. Thus in paragraph 40 reference is made to a calculation that the Owners would have been unable to deliver the vessel to Navimed before 13 June 2005. Had the charterparty not been prematurely terminated, the Owners would have earned US$421,200 (that is $10,800 per day from 4 April to 13 May 2005); see paragraph 41. But as a result of the premature termination the Owners were able to earn the higher rate under the Navimed charter of US$18,100 per day from 6 May to 13 June 2005. This meant that they earned US$226,000 more between 4 April and 13 June than they would have done had the charter been prematurely terminated.

10

In paragraph 48 reference was made to a later date for delivery to Navimed of 10 July 2005. It is unclear why this differed from the date of 27 May 2005 in paragraph 40. Both are referred to as the Charterers' calculations. Assuming no premature delivery the Owners would have earned US$1,095,600 from 4 April to 10 July 2005. But in fact the Owners earned US$1,176,500 from 4 April to 10 July 2005.

11

What is clear from these summaries is that in calculating whether the Owners had suffered a loss by reason of the premature redelivery of ELBRUS the Charterers compared the notional and actual earnings of the vessel during the period from 4 April (when ELBRUs' original charterparty was prematurely terminated) until the date when ELBRUS was likely to have been delivered to Navimed (had there been a contractual termination). The reason that such calculations suggested that the Owners had in fact benefited from the wrongful termination was that as a result of the premature termination the Owners were able to start earning the higher rate on the Navimed fixture earlier than would have been otherwise the case.

12

Thus it appears that the tribunal, when concluding in paragraph 92 that the Owners “did not lose as a result of the cancellation of the charterparty but made a gain to a greater or lesser extent” did not compare the notional and actual earnings of the vessel from 4 April until 13 May 2005 (the date on which the original charterparty would have ended) but compared the notional and actual earnings of the vessel from 4 April until the date when the vessel would have been delivered to NAVIMED, either 13 June or 10 July 2005.

The Owners' case

13

In essence Mr. Baker QC, on behalf of the Owners, submitted that the tribunal erred in law in so doing. He said that, as a matter of law, the tribunal ought to have assessed what the Owners lost under the charterparty for the remaining 39 days of that charterparty and deducted what the Owners in fact earned during that period. It is common ground (because ELBRUS in fact earned hire only for the tail end of that period of 39 days) that the Owners would, on such a basis, have incurred a loss at least equal to the sum otherwise due to the Charterers. If that is the correct approach in law then the award in favour of the Charterers ought to be set aside.

14

Mr. Baker relied particularly on two authorities. The first case was The Concordia C [1985] 2 Lloyd's Rep. 55. This was a decision of Bingham J. (as he then was). The case concerned a voyage charterparty which was repudiated by the charterers. The owners accepted the repudiation and fixed the vessel on a substitute voyage on 2 February. They claimed damages. Had the original charter been performed it would have ended on 16 February. Loading under the substitute voyage commenced on 13 February and discharge ended on March 10. The arbitrators calculated the daily net revenue which would have been earned under the original voyage charter and the daily ret revenue which was in fact earned under the substitute voyage charter. The difference was multiplied by the number of days that the original voyage charter would have taken (18.33 days). The resulting sum was the Owners' damages for “freight differential”. The charterers submitted that the arbitrators had erred in law by ignoring the earnings for the period from 16 February until 10 March. Those were earnings “which the Owners could not have enjoyed but for the charterers' breach.” (There was also a dispute as to the arbitrator's treatment of demurrage but that is not relevant for present purposes.)

15

Bingham J. held that the correct measure of loss was the net revenue that the owners would have earned under the original voyage charter less the net earnings under the substitute charter for the period from 13–16 February. This measure of loss put the Owners in the same financial position as if the original charter had been performed. With regard to events after 16 February Bingham J. said as follows, at p.58:

“Had the arbitrators concluded that the Marathon charter, extending after Feb.16 conferred benefits on the owners which they would not have obtained had the Rheinoel charter been performed, that would go...

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