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Monday, 25 January 16
SHOULD A DEFAULTING PARTY BE ENTITLED TO AN INNOCENT PARTY'S SAVING, FOLLOWING THEIR BREACH OF CONTRACT? - THE NEW FLAMENCO REVISITED
 KNOWLEDGE TO ELEVATE
This case was addressed by the club in our of January 2015, when the High Court decision became available. The background facts to the case are set out in detail in our earlier article, but to summarise briefly, the New Flamenco was time chartered to the charterer from February 2004 to November 2009. In breach of the charterparty terms, the charterer redelivered the ship two years early, in October 2007. Since there was no available charter market for a substitute fixture, the owner took the commercial decision to sell the ship in 2007. The owner subsequently commenced arbitration proceedings, claiming for the net loss of profit that they would have earned during the remaining two years of the charter. Later it became apparent, however, that due to the global financial crisis in late 2008 there was a significant difference in the value of the ship between late 2007 and late 2009 and the owner may well have benefitted from the early redelivery. Indeed, the sale price achieved by the owner was some $16.8m more than the value of the ship in November 2009. The owner’s claim for damages amounted to €7.6m, so if this benefit were to be taken into account then the owner’s claim would disappear in its entirety.
The London tribunal found that the sale was directly caused by the charterer’s early redelivery and, seeing no reason why capital savings should not be taken into account in considering the owner’s losses, the tribunal held that the charterer was entitled to the benefit. Whilst perhaps viewed as unfair by some, it should be remembered that it is normal practice when there is a breach of charter (voyage or time) for the court to take into account any income made on a mitigation voyage, and deduct this from the claim under the (wrongfully terminated) charter. So, why treat capital savings differently from savings in income?
Nevertheless, the High Court (on appeal from the tribunal) reversed this decision. The High Court held on the one hand that there was no need to treat savings in income differently from capital savings; however, on the other, the High Court held that there was no direct causal link between, here, the breach of time charter and the benefits obtained in the commercial sale of the ship. Instead, the High Court held that whilst the early redelivery may have ‘triggered’ the owner’s sale, the capital savings obtained by the owner arose from its own commercial decision to sell the ship. The charterer appealed this decision to the English Court of Appeal.
Court of Appeal decision
The Court of Appeal has, in its recent decision, unanimously overturned the High Court decision. In so doing, the owner’s claim for damages has failed in its entirety. In giving judgment, the Court of Appeal referred to the leading authority on mitigation British Westinghouse[2], confirming the important principle that where a measure taken by a claimant, in mitigation of loss and arising out of the consequences of a defendant’s breach in the ordinary course of business, results in a benefit to the claimant, that benefit is normally to be brought into account in assessing the claimant’s loss unless the measure is wholly independent of the relationship of the claimant and defendant.
Importantly, the Court of Appeal found that there was no available market for this ship upon its early redelivery and, in these circumstances, it was not easy to see why the benefit (if any) an owner obtained from selling the ship in question should not be brought into the calculation of permitted damages, especially when the benefit obtained from fixing the same ship on the spot market would have been taken into account. The absence of the available market was important as, if there had been an available market to re-fix the ship, then the owner’s decision in this case to instead sell the ship could arguably be said to have been independent of the contractual relationship between the parties and, therefore, should not be taken into account.
Conclusion
The overriding principle under English law, governing damages for breach of contract, is the compensatory principle i.e. the law attempts to put the injured party back in the position they would have been in had the contract been properly performed. Therefore, the usual measure of damages available to an owner when a charterer walks away from a contract is the amount of freight or hire which would have been earned, less running expenses, (the profit) less what the ship actually earned during that same period (the voyage(s) made in mitigation). The New Flamenco is not deviating from the compensatory principle. Indeed in this case the owner was compensated for his actual losses following the contract breach, which just happened to be none on this occasion.
However, each case will, as ever, turn on its particular facts which always need to be carefully considered. In the New Flamenco the important factor was the absence of an available market to re-charter the ship when it was redelivered to the owner early.
Source: The Standard Club
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Friday, 18 December 15
CHINA GROWTH SHOCK TO HIT ENERGY, SHIPPING, STEEL MOST - FITCH
Energy, shipping and steel would be the hardest-hit sectors in Asia-Pacific (APAC) in the event of a sharp slowdown in Chinese growth, says Fitch R ...
Friday, 18 December 15
WEEKLY U.S. COAL PRODUCTION REMAINS FLAT ACROSS ALL BASINS
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 16.1 million shor ...
Thursday, 17 December 15
THE LOW DEMAND AND EXCESS COAL OUTPUT, KEEP THE FOB INDONESIA COAL SWAPS UNDER PRESSURE
COALspot.com: Indonesian coal swap for delivery Q1 2016 rose month on month and decline slightly week over week. For the week ended December 11, 20 ...
Thursday, 17 December 15
GLADSTONE PORT COAL RECORD LOOMING, EXPORTS UP 12% - GLADSTONE OBSERVER
COAL exports from Gladstone's port have taken a leap, with more than seven million tonnes leaving the wharves in November.
That increase i ...
Wednesday, 16 December 15
FOB RICHARDS BAY COAL SWAP SLUMP 5.5% FROM LAST MONTH
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q1’ 2016 decline month over month and week over week.
The Q1’ 2016 &nbs ...
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- Global Business Power Corporation, Philippines
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- Ministry of Finance - Indonesia
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- Africa Commodities Group - South Africa
- Samtan Co., Ltd - South Korea
- Central Electricity Authority - India
- Bayan Resources Tbk. - Indonesia
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- Australian Coal Association
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- Jaiprakash Power Ventures ltd
- Indian Energy Exchange, India
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- Goldman Sachs - Singapore
- The University of Queensland
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- Manunggal Multi Energi - Indonesia
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Merrill Lynch Commodities Europe
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- IHS Mccloskey Coal Group - USA
- Mjunction Services Limited - India
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- Globalindo Alam Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
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- Krishnapatnam Port Company Ltd. - India
- India Bulls Power Limited - India
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- Uttam Galva Steels Limited - India
- White Energy Company Limited
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
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- Borneo Indobara - Indonesia
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- London Commodity Brokers - England
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- Indogreen Group - Indonesia
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- Therma Luzon, Inc, Philippines
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- Independent Power Producers Association of India
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Bukit Baiduri Energy - Indonesia
- Indonesian Coal Mining Association
- The Treasury - Australian Government
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- GAC Shipping (India) Pvt Ltd
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- Lanco Infratech Ltd - India
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- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Commonwealth Bank - Australia
- Malabar Cements Ltd - India
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- Kaltim Prima Coal - Indonesia
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- Wood Mackenzie - Singapore
- Parliament of New Zealand
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Semirara Mining Corp, Philippines
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- CNBM International Corporation - China
- Mercuria Energy - Indonesia
- Minerals Council of Australia
- Renaissance Capital - South Africa
- New Zealand Coal & Carbon
- Indian Oil Corporation Limited
- Electricity Generating Authority of Thailand
- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Maharashtra Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Thiess Contractors Indonesia
- Attock Cement Pakistan Limited
- Thai Mozambique Logistica
- Edison Trading Spa - Italy
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- Romanian Commodities Exchange
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- PowerSource Philippines DevCo
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- Metalloyd Limited - United Kingdom
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