Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (The Golden Victory) [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | THE HON. MR JUSTICE LANGLEY |
| Judgment Date | 15 February 2005 |
| Neutral Citation | [2005] EWHC 161 (Comm) |
| Docket Number | Case No: 2004 FOLIO 993 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 15 February 2005 |
[2005] EWHC 161 (Comm)
Queen's Bench Division (Commercial Court).
Langley J.
N Hamblen QC and D Allen (instructed by Richards Butler) for the claimant.
T Young QC and H Byam-Cook (instructed by More Fisher Brown) for the defendant/respondent.
The following cases were referred to in the judgment:
Aitchison v Gordon Durham & Co Ltd (unreported, 30 June 1995, CA).
Baker v WilloughbyUNK [1969] 2 All ER 549.
BS & N Ltd v Micado Shipping Ltd (The Seaflower) (No. 2) [2000] CLC 802.
Bwyllfa and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks CoELR [1903] AC 426.
County Personnel (Employment Agency) Ltd v Alan R Pulver & CoWLR [1987] 1 WLR 916.
Curwen v JamesWLR [1963] 1 WLR 748.
Dampskibsselskabet Norden A/S v Andre & Cie SAUNK [2003] EWHC 84 (Comm).
Johnson v AgnewELR [1980] AC 367.
Koch Marine Inc v d'Amica Societa di Navigazione ARL (The Elena d'Amico)UNK [1980] 1 Ll Rep 75.
Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos)ELR [1971] 1 QB 164.
Melachrino v NickollELR [1919] 1 KB 693.
North Sea Energy Holdings NV v Petroleum Authority of ThailandUNK [1997] 2 Ll Rep 418; [1999] 1 Ll Rep 483 (CA).
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996] CLC 1958; [1997] AC 254.
Woodstock Shipping Co v Kyma Compania Naviera SA (The Wave)UNK [1981] 1 Ll Rep 521.
Shipping — Charterparty — Repudiation — Damages — Compensatory rule for assessment of damages — Charterparty for seven year period — Charterer re-delivered vessel in repudiatory breach when charter had period of just less than four years to run — Charter contained war clause and second Gulf war broke out 14 months after repudiation — Charterer would have cancelled relying on war clause — Damages not to be assessed once and for all at date of breach at charter rate less market rate for balance of term of charter — Arbitrator right to find that outbreak of second Gulf war placed temporal limit on damages recoverable by owners.
This was an appeal by shipowners (GSC) against an arbitration award in favour of the respondent charterers (NYKK) raising the issue of the assessment of damages for repudiation of a long-term charterparty.
The charterparty was for a period of seven years with one month more or less in NYKK's option. In an interim award the arbitrator decided that the earliest date on which the vessel could be redelivered was 6 December 2005. Clause 33 of the charterparty provided that both owners and charterers would have the right to cancel the charter if war or hostilities broke out between any two or more of the following countries: USA, former USSR, PRC, UK, Netherlands, Liberia, Japan, Iran, Kuwait, Saudi Arabia, Qatar, Iraq. The interim award also determined that NYKK in repudiatory breach of the charterparty redelivered the vessel to GSC in December 2001 and that GSC accepted that breach as terminating the charter.
The relevant preliminary issue on quantum addressed in the award under appeal was whether the outbreak of the second Gulf War in March 2003 placed a temporal limit on the recoverability of damages by the owners for the charterers' repudiation of the charterparty. The arbitrator found that no damages were recoverable for the period after the outbreak of the second Gulf War because NYKK would have cancelled the charterparty relying on clause 33 had the vessel remained on charter at the outbreak of the second Gulf War.
Held, dismissing the appeal:
The arbitrator was right in his conclusion which accorded with the basic compensatory rule for the assessment of damages in that had the charterparty not been repudiated but been performed it would have come to an end upon the outbreak of the second Gulf War. There was no sound reason why the ordinary principles requiring a claimant to prove his loss and that it was caused by the impugned conduct of the defendant should not apply in this case nor why the normal approach to assessment of loss derived from the normal approach to mitigation should dictate another result. There was no sound reason why there should be an exception to the rule limited only to a case where at the time of repudiation the loss was “predestined” to end at a date earlier than the expiry of the charter period. The charterparty itself contained the uncertainty of the war clause. (Koch Marine Inc v d'Amica Societa di Navigazione ARL (The Elena d'Amico)UNK[1980] 1 Ll Rep 75andMaredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos)ELR[1971] 1 QB 164considered; BS & N Ltd v Micado Shipping Ltd (The Seaflower) (No. 2)[2000] CLC 802applied.)
Langley J:
1. This is an appeal by Golden Strait Corporation (GSC) Owners of the “Golden Victory” and the Claimant in an Arbitration to which Nippon Yusen Kubishika Kaisha (NYKK) was the Respondent. The appeal is against an Award dated 27 October 2004 made by Mr Robert Gaisford as sole arbitrator. The arbitration arose out of a Charterparty (and related agreements) dated 17 July 1998. NYKK were the Charterers. The appeal is on a point of law under Section 69 of the Arbitration Act 1996. The parties agreed that an appeal to this court could be brought on any point of law arising out of the Award and therefore GSC did not require permission to appeal: Section 69(2)(a) of the Arbitration Act 1996.
2. The issue is one of the assessment of damages for repudiation of a long-term charterparty. GSC submits that where there is an available market damages are to be assessed once and for all at the date of breach at the charter rate less the market rate for the balance of the term of the charter. NYKK submits that it is for GSC to prove that the breach has caused that loss and it cannot do so if in the events which occurred after the date of breach the charterer would have been entitled to and would have terminated the charter during the course of its remaining period. To put the matter squarely: if the charterparty has, say, another 4 years to run when the charterer repudiates it and there is then an available market, but the charter contains a “War Clause” which would have entitled the charterer to cancel on the outbreak of war 2 years after the repudiation, does the owner's claim for charter rate less market rate run for 2 or 4 years?
3. The Charterparty was for a period of 7 years with 1 month more or less in NYKK's option. In an Interim Award dated 12 September 2002 the Arbitrator decided that the earliest date on which the vessel could be redelivered was 6 December 2005.
4. Clause 33 of the Charterparty provided:
“if war or hostilities break out between any two or more of the following countries: USA, former USSR, PRC, UK, Netherlands, Liberia, Japan, Iran, Kuwait, Saudi Arabia, Qatar, Iraq, both Owners and Charterers shall have the right to cancel this charter…”
5. The references to the countries of Liberia through to Iraq were added as a typed variation. The Special Clauses included (Clause 69) an option for NYKK to cancel if the vessel was off-hire for 30 days. The charter rate included a profit commission.
6. The Interim Award also determined that NYKK in repudiatory breach of the Charterparty redelivered the vessel to GSC on 14 December 2001 and that GSC accepted that breach as terminating the charter in a letter dated 17 December 2001.
7. The relevant preliminary issue on quantum addressed in the Award under appeal was:
“Did the events (described as the outbreak of the second Gulf War) in March 2003 place a temporal limit on the recoverability of damages by the Owners for the Charterers' repudiation of the Charterparty and, if so, what limit?”
8. Following an oral hearing in September 2004, the Arbitrator found that the second Gulf war did place a temporal limit on the damages recoverable by GSC in that no damages were recoverable after that date. The actual dates (as found) were: the Charterparty came to an end on acceptance by GSC of NYKK's repudiatory breach on 17 December 2001; it then had a period of just less than 4 years to run; the second Gulf war began in March 2003, some 14 months after the repudiation and some 32 months before the period of the Charterparty would have expired.
9. The Arbitrator found that:
(i) There was, at the time of repudiation, an available market for the chartering in of vessels such as The Golden Victory whether in terms of a spot market or a market for period chartering;
(ii) GSC in fact chose to trade the vessel on the spot market;
(iii) The second Gulf war was “a war” within clause 33 of the Charterparty such as to give either party the right to cancel it;
(iv) At 17 December 2001, a reasonably well-informed person would have considered war between the United States/United Kingdom and Iraq “merely a possibility” but not “inevitable or even probable”;
(v) NYKK would have cancelled the Charterparty relying on Clause 33 had the vessel remained on charter to the Company at the outbreak of the second Gulf war.
10. The same counsel who appeared before this Court conducted the Arbitration. The submissions were plainly very similar to those I heard. Mr Hamblen QC, for GSC, says (rightly) that he won the argument but lost the case. The Arbitrator preferred Mr Hamblen's submissions to the effect that in law the second Gulf war was irrelevant to GSC's claim which was to be assessed at the difference between the charter rate and the (lower) market rate for the whole of the remaining 4 year period of the Charterparty. But the Arbitrator said he was constrained by the decision of Timothy...
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