SIB International S.R.L. v Metallgesellschaft Corporation (Noel Bay)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAUGHTON,LORD JUSTICE STOCKER,LORD JUSTICE BALCOMBE |
| Judgment Date | 09 December 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J1209-11 |
| Docket Number | 88/1079 |
| Court | Court of Appeal (Civil Division) |
| Date | 09 December 1988 |
[1988] EWCA Civ J1209-11
Lord Justice Balcombe
Lord Justice Stocker
and
Lord Justice Staughton
88/1079
1987 S. No. 4032
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR. JUSTICE PHILLIPS)
Royal Courts of Justice.
MR. J. COOKE (instructed by Messrs. William A. Crump) appeared on behalf of the Appellants.
MR. P. WALKER (instructed by Messrs. Shaw & Croft) appeared on behalf of the Respondents.
In 1987 the plaintiffs, SIB International SRL, were time-chartered owners of the m.t. NOEL BAY. I shall call them "the owners". By a charterparty dated the 8th May, 1987 they chartered the vessel to the defendants, Metallgesellschaft Corporation ("the charterers") for the carriage of a part cargo of clean, unleaded gasoil from a port or ports on the west coast of Italy (including Italian islands) to a wide range of European ports. On the 1st June, 1987 the charterers purported to withdraw from the charterparty, saying that they considered it cancelled. The owners on the 3rd June treated that conduct as a wrongful repudiation and accepted it as such.
On the 2nd July the owners issued a writ claiming damages from the charterers. It became apparent that liability was not disputed, and that the only issue was as to damages. That was tried by Mr. Justice Phillips, and on the 19th April he gave judgment for the owners for $35,543.72 and interest. From that judgment the owners now appeal. They say in their notice of appeal that they should have been awarded $68,216.66. It is a refreshing change to have a case on such recent facts before this court.
The charterparty
This provided for laydays not to commence before the 20th May, and for a cancelling date of the 24th May if the vessel were not ready by then; but those dates were extended by agreement. There were the following further terms:
"H. Total laytime in running hours 72
I. Demurrage per day: US dollars 8,500 per day or pro rata.
4. (a) Prior to the Vessel's readiness to sail from the last previous port of call or on signing this Charter if the Vessel has already failed, Charterer shall nominate the port(s) of loading or port(s) of discharge, as the case may be, or order the Vessel to one of the following destinations for wireless orders naming such port(s):
Quoin Island
Land's End
Gibraltar
Suez
Aruba
If the Vessel is ordered to one of such destinations for orders, Charterer shall thereafter nominate the actual loading or discharge port(s) by wireless as soon as practicable.
(b) After loading or discharging port(s) have been nominated, Charterer may change such port(s) and/or vary their rotation consistent with Part 1 and bills of lading, if any, and Owner shall issue instructions necessary to give effect to such change. If such change is made, or a destination for wireless orders is given, any time by which the steaming time to the port(s) to which the Vessel is finally ordered exceeds that which would have been taken if the Vessel had been ordered to proceed to such port(s) in the first instance shall count as laytime or, if the Vessel is on demurrage, as time on demurrage…
6. Upon arrival at customary anchorages at each port of loading or discharge, the Master shall give the Charterer notice by letter, telegraph, wireless or telephone that the Vessel is ready to load or discharge cargo, berth or no berth, and laytime or, if the Vessel is on demurrage, time on demurrage shall commence upon the expiration of six (6) hours after receipt of such notice…
8. Charterer shall pay demurrage per running hour and pro rata for a part thereof at the rate specified in Part 1(1) for all time that laytime therein specified is exceeded by the time taken to load and discharge cargo and the time which, under the provisions of this Charter, counts as laytime or time on demurrage."
Freight was payable at a percentage over Worldscale, which of course makes provision for voyages from any of a great many loading ports to any of a great many discharging ports.
Further facts
The vessel finished her previous employment at Malta, on the 29th May at 1712 hours when she cleared outwards. That was the latest time for the charterers to give orders for a loading port pursuant to clause 4(a), or for one of the other destinations mentioned in that clause. But they did not do so.
On the same day at 1824 hours she anchored off Malta awaiting instructions for a loading port. On the 30th May at 1124 hours she sailed for Augusta (which is in Sicily). On the same day at 1742 hours she arrived at Augusta roads and waited there. On the 1st June, as already mentioned, the charterers gave notice that they withdrew from the charterparty. And on the 3rd June the owners accepted that conduct as a repudiation, and concluded a substitute charter for the carriage of a cargo from Tuapse (on the eastern shore of the Black Sea) to Banias in Syria. The vessel arrived at Tuapse pursuant to that charterparty on the 7th June, and completed discharge at Banias on the 17th June.
The principles involved
At first sight the owners' claim for damages fell to be assessed on well-settled principles, albeit with a good deal of tiresome attention to detail. The owners are entitled to be placed in the same position, financially, as they would have enjoyed if the contract had not been broken. That involves a comparison of the money they would have earned, less expenses, on the contract voyage with the money they in fact earned, less expenses, on the substitute voyage. Fixed items, such as insurance, crew wages and repairs, which can more or less accurately be described as overheads for this purpose, may be disregarded since they are the same on both sides of the account. But one problem that almost invariably arises, and does in this case, is that the substitute voyage lasts for longer than the voyage under the original charterparty. The solution commonly adopted is to take a proportion of the profits on the substitute voyage to set off against the profits lost on the original voyage; otherwise one would be involved in calculations to the end of the ship's working life.
Another problem is that the vessel may have been better—or worse—placed for future employment at the end of one voyage than at the end of the other. That is commonly a factor which is said to be relevant. But there is nothing to suggest that it has any importance in this case.
A third difficulty arises where the charterer—the guilty party—had an option as to the way in which he could require the original contract to be performed. In such a case it is established law that, at any rate if the option has not already been exercised at the date of the breach, the charterer must be assumed to have exercised the option in a way most favourable to himself. Here the calculation of the profit that would have been made on the original voyage is based on the assumption that the charterers would have ordered the vessel to load at Augusta, and to discharge at Lavera in the South of France. There has been no dispute about that; both sides agree that the calculation must be based on that assumption.
There is one unusual feature of this case, which gives rise to the main issue in dispute. It is that, when repudiation was accepted on the 3rd June, the charterers had already been in breach for five days by failing to give loading port orders. In consequence the vessel had been idle for the greater part of the period; all that she had accomplished was the short voyage from Malta to Augusta, in two stages occupying some seven and a half hours in all. It is the treatment of that period of idleness which causes the greatest problem.
The rival calculations
The owners' claim is in four parts. Part A considers a notional voyage starting on the 3rd June (when repudiation was accepted) from Augusta with cargo to Lavera. It would have taken 6.17 days, ending on the 9th June; the freight payable would have been $90,350, and the expenses (other than fixed expenses which I have described as overheads) $54,806; the profit $35,543.
Part B is controversial. It alleges that, in meal or in malt, the owners would have earned $27,766 by way of demurrage on that voyage, because 72 hours would have been consumed in loading and discharging in addition to the period of over four and a half days spent waiting for orders. The precise formulation of this claim, and in particular whether it is meal (demurrage as such) or malt (damages in the like amount) will need careful attention later.
Part C claims the expenses of the voyage from Augusta to Tuapse, in the sum of $17,444. This sum is said to have been spent by the owners in mitigation of their loss, in order to take up substitute employment.
Part D allows credit for a proportion of the profit earned on the substitute voyage. The calculation starts on arrival of the vessel at Tuapse, and ends on discharge at Banias. The figures are:
| Duration of voyage | 9.77 days |
| Freight | $125,019 |
| Expenses | 56,618 |
| Profit | $68,480, or $7,000 per day. |
There is a minor error in that calculation, of no consequence. The proportion which would have been earned up to the 9th June, when the notional voyage to Lavera would have ended, is $12,538. For that the owners give credit.
The charterers' calculation accepts, at any rate in this court, part A of the owners' claim—the profit of $35,543 that would have been made on the notional voyage from Augusta to Lavera. Before the judge the charterers argued that...
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