Supreme Court (Lord Neuberger PSC, Lord Mance, Lord Clarke, Lord Sumption and Lord Hodge JJSC)  UKSC 43 – 28 June 2017
The Supreme Court has recently ruled that in calculating damages for the repudiation of a charterparty, shipowners were not obliged to give credit to charterers for sale proceeds made by a sale in opportune market conditions. Reversing the decision of the Court of Appeal, the highest court held that damages owed by charterers for the repudiation of the charterparty should be calculated without taking into account that benefit.
i-law.com studies this key judgment, with commentary put together by our expert writers and contributors. Our varied publications, including Lloyd’s Law Reports, Lloyd’s Maritime and Commercial Law Quarterly and Shipping & Trade Law, provide breadth of discussion and analysis.
The following insights on the Supreme Court decision are featured on i-law.com:
“Contracts - Breach - Repudiation of charterparty - Damages - Mitigation - Shipowners selling vessel upon repudiation of charterparty by charterers - Vessel subsequently losing market value - Whether owners obliged to account for benefit of early sale in calculation of damages”
“Most damages issues arose from the default rules which the law devised to give effect to the principle of compensation, while recognising that there might be special facts which showed that the default rules would not have that effect in particular cases. On the facts of the present case the fall in value of the vessel was irrelevant because the owners’ interest in the capital value of the vessel had nothing to do with the interest injured by the charterers’ repudiation of the charterparty.”
“If the question at hand is difficult to fathom, it might be considered in this way: the normal measure of loss would be the difference between the hire payable under the charterparty and the hire achieved on a substitute charterparty, or failing that, the market rate. If the owners had accepted a lower hire rate in the spot market, or indeed a higher rate, that would in the ordinary way have been taken into account in the assessment of damages. Here, because the owners sold the vessel, they had no need for a substitute charterparty and it might be considered a logical step to take into account the sales proceeds in place of the substitute hire.”
Charterparty (Time) – Repudiation - Damages – Time-charterers redelivering vessel early – Owners selling vessel upon repudiation for a greater sum than the value of the vessel at contractual date for redelivery – Whether owners bound to give credit for difference in capital values.
Analysis from earlier in the litigation:
Lloyd's Maritime and Commercial Law Quarterly
"Choice, benefits and the basis of the market rule" (Court of Appeal)
Andrew Dyson, Assistant Professor in Private Law, LSE
"Mitigated loss or collateral benefit?" (Court of Appeal)
David McLauchlan, Professor of Law, Victoria University of Wellington; Professorial Fellow, The University of Melbourne; Honorary Professor, TC Beirne School of Law, The University of Queensland.
"Mitigation, causation and policy" (Commercial Court)
Paul Todd, Professor of Commercial and Maritime Law, University of Southampton.
 1 Lloyd's Rep 383 (Court of Appeal)
 2 Lloyd's Rep 230 (Commercial Court)
Lloyd's Maritime Law Newsletter
(2016) 942 LMLN 1 (Court of Appeal)
(2014) 900 LMLN 2 (Commercial Court)
Shipping & Trade Law
(2014) 14 STL 5 4 (Commercial Court)
The scope of this analysis encompasses the common law jurisdictions of England and Wales as well as Singapore, Australia and Hong Kong.
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