Maestro Bulk Ltd (Claimant (Charterers) v Cosco Bulk Carrier Company Ltd (Defendant (Owners)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 15 December 2014 |
| Neutral Citation | [2014] EWHC 3978 (Comm) |
| Docket Number | Case No: 2014 FOLIO 402 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 15 December 2014 |
[2014] EWHC 3978 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN AN ARBITRATION CLAIM
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Cooke
Case No: 2014 FOLIO 402
Charles Priday (instructed by Winter Scott) for the Claimants/Charterers
Andrew Baker QC (instructed by Holman Fenwick Willan) for the Defendants/Owners
Hearing dates: 24th and 25th November 2014
Introduction
The claimant charterers appeal, with the permission of Popplewell J, against a Final Arbitration Award dated 7th March 2014 under section 69 of the Arbitration Act 1996. The question of law arising out of the award is as follows:
"Where a time charter party provides for charterers to give notice of redelivery, what is the correct approach to damages when redelivery takes place with insufficient notice(s)?"
The dispute arose between the claimant charterers and the defendants who were disponent owners of the vessel Great Creation under a charter party on amended NYPE form dated 16th November 2009. The charter was for a period of minimum 4 and maximum 5 months, plus 15 days in charterers' option at a daily rate of US$18,500 per day gross. A number of disputes arose between the parties on the balance of the final hire account but the only issue with which this Court is concerned is the question of law set out above.
The charterers failed to redeliver in accordance with the notice provisions of clause 60 of the charter which provided as follows:
"On redelivery charterers to tender 20/15/10/7 days approximate and 5/3/2/1 days definite notice."
The arbitrators determined that the margin allowed for an "approximate" notice amounted to 2 days. In the case of a 20 day notice, that represented a 10% margin whilst a 2 day margin on a 7 day approximate notice tied in with a 5 day definite notice. That finding is not and could not be the subject of any appeal.
The following was common ground between the parties, based on their understanding of the authorities:
i) The giving of valid redelivery notices is not a condition precedent to an effective redelivery.
ii) The giving of a notice does not preclude the charterers from changing their minds and cancelling any such notice.
iii) There is only an actual breach of any notice provision on actual redelivery (although there may be an anticipatory breach on the giving of notices) and therefore the owners' losses as the result of any breach are to be assessed as of the date of redelivery.
iv) In consequence, the owners can be under no duty to mitigate loss before the date of breach.
v) Any notices relating to redelivery must be honestly given and on reasonable grounds.
The primary facts as found by the arbitrators
The vessel was delivered into the charterers' service on 29th November 2009. The earliest date for redelivery was therefore 29th March 2010 and the latest date 14th May 2010. In February 2010 the charterers fixed the vessel for a voyage from Casablanca to Pasadena with a cargo of phosrock. They expected this voyage to take about 24 days, leaving the ship "open" on or about 20th March 2010. They therefore hoped to employ the vessel on a further carrying voyage before the latest date for redelivery to the owners.
Unfortunately, there were delays at both the load and discharge ports, and despite their attempts to persuade the owners to extend the charter (the owners had her on time charter from the registered owners until July 2010), the latter were unwilling to extend, save at a daily rate nearly twice the current rate of hire.
On 9th April 2010, an incident occurred involving a laden tanker, the Zouzou which, whilst transiting the Houston Ship Canal, passed close to the Great Creation which was discharging at the time. At this stage approximately 21,000 metric tonnes of phosrock had been discharged with a further 7,000 metric tonnes approximately remaining to be discharged from the vessel. The incident however resulted in the unloader serving the Great Creation being damaged and out of use until 16th April 2010.
In these circumstances, it was on 13th April 2010 that the charterers decided that it was impossible to fix a further laden voyage during the currency of their charter (with the latest date for redelivery 14th May 2010) and that they would therefore have to redeliver the vessel in Pasadena.
On 13th April the charterers therefore served what purported to be an approximate 20 day notice of redelivery. On 14th April, charterers tendered 15/10/7 approximate notices of redelivery and on 16th April served 3/2/1 definite notices.
Discharge of the phosrock resumed on 16th April and was completed on 19th April 2010, at which point the charterers tendered redelivery of the vessel to the owners. The voyage had lasted 55 days instead of the expected 24.
On 21st April 2010, the owners fixed the vessel to Oldendorff GmbH & Co KG for a time charter trip from New Amsterdam, Guyana with redelivery Mediterranean/Black Sea at a daily rate of US$22,000 per day (gross). The charter party laycan was 28th April-1st May 2010 and, in the event, the vessel was delivered into that service on 30th April 2010, eleven days after redelivery from the charter with which the Court is concerned and without any ballast bonus.
The arbitrators found as a fact that there was no failure by the owners to mitigate their loss. It was common ground, on the evidence before the arbitrators, that efforts to find new employment for a vessel coming open in the US Gulf would normally start approximately 3 weeks before she was expected to become available, which tied in with the requirement for 20 days approximate notice of redelivery and was in fact the approach of the charterers when they were looking for new business for the Great Creation for a final voyage from Pasadena, before the delay occurred. There was, on the evidence as found by the arbitrators, very little cargo available on a spot basis since cargoes were booked 2–3 weeks in advance. An owner, whose ship has became open unexpectedly, faced a dilemma. He could either try for a cargo at the going rate but at some time in the future or he could accept a more prompt cargo at a lower rate. The owners here acted reasonably in taking the only fixture that was reasonably on offer as at 21st April 2010.
The experts agreed that the Oldendorff fixture was one that was fixed at below market rates at the time for fixtures out of the US Gulf, even without taking into account the need for a 9 day ballast voyage before delivery into the subsequent charter. If account was taken of the 9 day ballast voyage, it had the effect of reducing the actual charter party rate of $22,000 per day to an effective rate of $13,485 per day.
At paragraphs 90–99 of the Reasons, the arbitrators referred to the expert evidence and the Baltic Handy Size Index for the relevant route from the US Gulf to NW/Europe/Mediterranean/Black Sea in the period 20th March–24th May 2010. They set out the applicable rate for this vessel, with the usual time available for fixing, for delivery on the following dates, as follows:
i) $30,100 on 20th March,
ii) $27,200 on 9th April,
iii) $25,769 on 13th April,
iv) $25, 927 on 19th April,
v) $29,300 on 24th May.
The issues
The charterers contended before the arbitrators that what the owners lost by the failure to give correct redelivery notices was hire payable at the existing charter rate for approximately 20 days beyond the date of notice that was actually given – i.e. 20 days after 13th April 2010, namely up to 3rd May 2010, less any hire actually earned in this period by owners in mitigation of their losses. The owners' case was that the loss they suffered was the loss of the opportunity to enter into a charter at a significantly higher rate than the one they actually negotiated, having been given effectively 6 days notice of redelivery instead of the 20 days approximate notice (equivalent to 18 days) to which they were entitled. The owners produced six alternative calculations of their losses, of which Version 1 was their primary case.
The ordinary measure of damages for early redelivery is the difference between the charter rate and the market rate, if lower, for the remainder of the charter period during which the charterer was obliged to pay hire (see Wilford on Time Charters at paragraphs 4.37–4.42). Similarly, on the basis of the decision of the House of Lords in The Achilleas [2008] 2 Lloyd's Rep 275, the ordinary measure of damages for late redelivery is the difference between the charter rate and the market rate, if the latter is higher, for the length of time for which the charterer has retained the vessel beyond the charter period. In the present case that would produce no loss to the owners because the market rate was higher in April 2010 than the charter rate and, subject to any difficulties in fixing, the owners would expect to benefit from an early redelivery. A claim that the notice given on 13th April was not honest or made on reasonable grounds and therefore amounted to breach of charter would for the same reasons and subject to the same proviso not be expected to produce any loss.
The owners' claim was for the earnings on a notional lost voyage that they would have conducted if contractual notices had been given from 31st March onwards in respect of the redelivery which actually occurred on 19th April. The lost voyage was said to run from 19th April–17th May, with credit to be given for the pro-rated daily earnings in that period which were actually achieved on a voyage which, with its non-earning ballasting positioning leg, ran from 21st April–28th May.
The fundamental issue identified by owners as determinative of the dispute was...
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