Fulton Shipping Inc. of Panama (Respondents/Owners) v Globalia Business Travel S.A.U. (Formerly Travelplan S.A.U.) (Appellants/Charterers)
Jurisdiction | England & Wales |
Judge | Lord Justice Longmore,Lord Justice Christopher Clarke,Lord Justice Sales |
Judgment Date | 21 December 2015 |
Neutral Citation | [2015] EWCA Civ 1299 |
Docket Number | Case No: A3/2014/1863 |
Court | Court of Appeal (Civil Division) |
Date | 21 December 2015 |
[2015] EWCA Civ 1299
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE POPPLEWELL
Royal Courts of Justice
Strand, London, WC2A 2LL
The Right Honourable Lord Justice Longmore
The Right Honourable Lord Justice Christopher Clarke
and
The Right Honourable Lord Justice Sales
Case No: A3/2014/1863
Mr Simon Croall QC & Mr Peter Ferrer (instructed by Clyde & Co LLP) for the Appellants
Mr Steven Gee QC & Mr Tom Whitehead (instructed by Gateley Plc) for the Respondents
Hearing dates: 17 th & 18 th November 2015
Introduction
This is a case about measure of damages for early redelivery under a time charterparty when the charter still had two years to run. There was no available chartering market on redelivery in 2007 and the owners decided to sell the vessel. The price obtained was $23,765,000. If the vessel had been sold when the charter was due to come to an end in November 2009, her value would have been $7,000,000, a fall in value of $16,765,000. The question in this appeal is whether that difference constitutes a benefit which, on principles of mitigation and avoidance of loss, should be brought into account in the owners' claim for the charterers' breach of contract by making an early redelivery. A very well respected maritime arbitrator has held that it should. Popplewell J [2015] 1 All E R Comm 1205 has held that it should not but gave permission to appeal to this court. I gratefully adopt the judge's account of the facts.
The Facts
The "NEW FLAMENCO" ("the Vessel") was a small cruise ship built in Genoa in 1972. By a time charterparty on the NYPE form dated 13 th February 2004 she was chartered by her then owners to the defendants, a division of Spain's leading tourist group ("the Charterers"). At that time the Vessel was managed by the claimants ("the Owners"). The Owners bought the Vessel on 4 th March 2005 and entered into a novation agreement dated 23 rd March 2005 under which they assumed the rights and liabilities of the owners under the charterparty.
In August 2005 the Owners and the Charterers concluded an agreement extending the charter for two years to 28 th October 2007, with an option for a third year. The option was never exercised. The extension was recorded in Addendum A.
At a meeting on 8 th June 2007, the Owners and Charterers reached an oral agreement in terms subsequently recorded in Addendum B. The agreed terms extended the charterparty for a further two years so as to expire on 2 nd November 2009.
The Charterers disputed having made the agreement recorded by Addendum B and refused to sign it. They maintained an entitlement to redeliver the Vessel on 28 th October 2007 in accordance with Addendum A. The Owners treated the Charterers as in anticipatory repudiatory breach and on 17 th August 2007 accepted the breach as terminating the charterparty.
The Vessel was redelivered on 28 th October 2007. Shortly before that date, the Owners entered into a Memorandum of Agreement for sale of the Vessel for US$23,765,000.
The charterparty was governed by English law and provided for London arbitration. The Owners commenced arbitration and a sole arbitrator was appointed on 4 th March 2008. Claim submissions were served only on 23 rd November 2011 and the hearing took place in May 2013. By the time of the hearing it was apparent that there was a significant difference in the value of the Vessel between October 2007, when the Owners sold it, and November 2009, when the Vessel would have been redelivered to Owners had the Charterers not been in breach of the charterparty. The collapse of Lehmann Brothers in September 2008 and the financial crisis had occurred in the meantime. The value of the Vessel when she would have been redelivered in accordance with Addendum B in November 2009 was, as the arbitrator subsequently found, US$7,000,000.
The Owners advanced their claim for damages calculated by reference to the net loss of profits which they alleged that they would have earned during the additional two year extension. Such profits were set out in a detailed schedule identifying the revenue which would have been earned under the charterparty, and giving credit for the costs and expenses which would have been incurred in operating the Vessel in providing the charterparty service for those two years, but which had been saved as a result of the sale of the Vessel. The amount claimed was €7,558,375. Ironically the Owners were, at this stage, prepared to give credit for what they called the "reduction in the re-sale value" of the vessel (said to be "for depreciation") between November 2007 and 2009 of $5,145,000.
The Charterers argued that the Owners were bound to bring into account and give credit for the whole difference between the amount for which the Vessel had been sold in October 2007 (US$23,765,000) and her value in November 2009 (subsequently found by the arbitrator to be US$7,000,000). The Owners wished, however, to argue that the difference in value was legally irrelevant and did not fall to be taken into account. Because there was no agreement between the parties on the accounting figures in relation to the net profits which would have been earned for the two year period under the charter, the arbitrator made no findings on the quantum of the Owners' claim and left the figures to be agreed by the parties or referred back to him in the absence of agreement. But he declared that the Charterers were entitled to a credit of €11,251,677 (being the equivalent of US$16,765,000) in respect of the benefit that accrued to the Owners by selling the Vessel when worth more in October 2007 than it was at the end of the charter period in November 2009. This was more than the Owners' loss of profit claim and would result in the Owners recovering no damages for the Charterers' repudiation.
Towards the end of the arbitration hearing the Owners had made an application to amend their submissions by deleting the conceded credit. That application was refused by the arbitrator but he allowed the point of principle (that no credit needed to be given) to be argued holding that, if the Owners were successful on the point, the amount of the conceded credit would have, nevertheless, to be brought into account. That remained the position before Popplewell J.
The Award and the Judgment
The arbitrator found that the sale of the Vessel by the Owners in October 2007 was caused by the Charterers' breach and was in reasonable mitigation of damage. The relevant findings were expressed in the following terms:-
"3: It was common ground between the parties that when the Charterers declared that they did not accept that a binding agreement for a two year extension had been agreed and that they were not going to perform it, there was no suitable timecharter employment for the vessel. The Owners therefore sold the Vessel in October 2007…
23: …the Charterers [had] accepted that there was no charterparty employment for the vessel at the time in question and that her sale was reasonable…
60: It was common ground that when the "NEW FLAMENCO" was redelivered to the Owners on 28 th October 2007, it would not have been possible for the Owners to conclude an alternative substitute two year time charterparty. The need to sell the vessel was clearly caused by the breach. It was common ground that the sale price achieved was reasonable…
62: I was advised by counsel for the parties that there was no directly applicable authority on the point. That is perhaps not surprising because it would not be very often that the premature termination of a time charterparty would cause the sale of a vessel…
70: As I have already commented, in this case it was clear that the necessity for the sale had been brought about by the refusal to perform the two year extension.
72: …here, there was a benefit arising out of actions taken by the claimant to mitigate the loss that would otherwise have been suffered…"
The arbitrator (before whom the parties may perhaps have advanced less sophisticated arguments than those presented to the judge and to us) expressed his conclusions comparatively shortly in the light of the facts which he had found. He reminded himself of the well known principle laid down by Parke B in Robinson v Harman (1848) 1 Exch. 850 that a party who sustains loss by reason of a breach of contract is to be placed, so far as money can do it, in the same position as if the contract had been performed. He referred to The Elena D' Amico [1980] 1 Lloyd's Rep 75 for the correct approach where there was an available market and to The Kildare [2011] 2 Lloyd's Rep 360 and The Wren [2011] 2 Lloyd's Rep 370 for the approach where there was no available market namely, that the loss was to be determined by reference to the actual trading of the vessel. He rejected the Owners' argument that before a benefit could be taken into account it had, as a matter of law, to be of the same nature as the claim (a decision with which in due course Popplewell J was to agree). The arbitrator then concluded:-
"73. I could see no reason, both in applying general principles and on the facts of this case, why the benefit that accrued to the Owners by the sale of the vessel should not be brought into account. Normally vessels will not reasonably need to be sold and would not be sold following the premature termination of a charterparty so that any movement in the capital...
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