Flame SA v Glory Wealth Shipping Pte Ltd
GloryWealth, The
Queen\'s Bench Division (Commercial Court)
22 October 2013
Case Analysis
Where Reported [2013] EWHC 3153 (Comm); [2013] 2 Lloyd\'s Rep.653; Case DigestSubject: Arbitration Other related subjects: Shipping; Contracts;
Damages
Keywords: Arbitration awards; Cancellation; Charterers\' powers and duties; Compensatory damages; Contracts of carriage; Laytime; Repudiation
Summary: An arbitration panel had erred in failing to consider whether a disponentshipowner would have been able to perform its obligation under an affreightment contract to provide a cargo veel, notwithstanding its repudiation of the contract following the charterer\'s failure to declare laycans.However, the panel had not erred in holding that the contract only required the shipowner to nominate the cargo veels, not charter them, and in making a compensatory award of damages on that basis.
Abstract: The appellant charterer (F) appealed, under the , against an arbitration award made to the respondent
disponentshipowner (G).F also challenged the award on the grounds of serious irregularity, under .F and G had entered into a contract of affreightment for G to carry cargoes over a three-year period.F failed to declare laycans in two of the three years.The arbitration panel found that F were in repudiatory breach of the contract, and that each breach had been accepted by G.They awarded G over $5 million.F had argued that, as a result of the collapse in the freight market, G\'s financial position had deteriorated to such an extent that, had F declared the laycans, G would have been incapable of providing the required veels.F\'s position was that G were only entitled to substantial damages if it could prove that it would have been able to perform the contract.The panel held that the contract only required G to nominate the cargo veels, not charter them.The iues to be determined in relation to the s.69 appeal were whether (i) to displace the prima facie substantial measure of damages for breach of contract, F had to prove that G was already in breach when it accepted the repudiatory breaches; (ii) it had been sufficient for G to arrange for vicarious performance of its contractual obligations.
Appeal dismied, application refused.(1) An award of damages was to
compensate the victim of the breach for the lo of his contractual bargain.The object was therefore to put the innocent party in the same position he would have been in had the contract been performed.It was therefore neceary to consider whether G would have been able to perform its
contractual obligations had there been no repudiation.If G had not had the resources to provide a carrying veel, and that had not been taken into account by the panel, an award of substantial damages would put G in a better position than if the charterparty had been performed.In those circumstances, such an award would be a windfall and would breach the fundamental compensatory principle which governed the law of damages.As there had been no clear, binding decision of an appellate court in which the application of the contractual principles regarding an accepted
repudiation had led to an award of damages which put the innocent party in a better position than he would have been in had the contract been performed, the court would follow the approach to the compensatory
principle endorsed by the House of Lords in .When aeing what G would have earned had the contract been performed, the court had to aume that F had performed its obligations.The panel was therefore wrong in law on the first question, The Golden Victory,, , and applied,considered,andnot followed (see paras 17-22, 81-86 of judgment).(2) Although the panel\'s interpretation of the phrase \"disponent owner of the GloryWealth to be nominated motorship\" in the contract meant that at the time of nomination there need not be any contractual relationship between G and the veel, that was not necearily wrong.The panel said that what was important was that the cargoes would be carried safely to their destination in accordance with the contract, not the precise relationship between G and the nominated veel.F did not need to know at the time of nomination the nature of the relationship between G and the veel.If the cargo was not picked up, F would have a claim against G for failure to provide the nominated veel.Clause 25 of the contract supported the panel\'s construction as it emphasised that, while another owner could perform the carrying voyage, G remained liable to F.The panel had not
therefore erred in its construction of the contract.A \"disponent owner\" was obliged to provide the nominated veel to carry the charterers\' cargo.How it provided the veel was a matter for the disponent owner.It would
usually be by some form of charter, but there was no requirement that such a charter had to be in place at the time of the nomination.There being no second error of law, there was no cause to allow F\'s appeal by remitting the award for reconsideration (paras 87-99).(3) It was well-established that s.68 was designed as a long-stop, only available in extreme cases, and that it was concerned with the arbitrators\' conduct of the arbitration, not with the correctne of their decisions.Measured against those principles, F\'s s.68 challenge had no prospect of succe (paras 101-107).
Judge:Teare, J.
Counsel: For the appellant: Christopher Hancock QC.For the respondent: Lawrence Akka QC.
Solicitor: For the appellant: Thomas Cooper.For the respondent: Holman Fenwick Willan.
