This was an appeal from an arbitration award, pursuant to sections 68 and 69 of the Arbitration Act 1996. The case concerned a contract of affreightment (the COA) dated 19 August 2008 by which the “disponent owners of the Glory Wealth to be nominated motorship” bound themselves to carry 6 cargoes of coal in bulk in each of the following three years. The dispute arose when charterers (the Apellant) failed to declare laycans for the 5th and 6th shipments of 2009 and thereafter all of them in 2010. Such conduct was accepted by the disponent owners as a charterers’ repudiatory breach and hence terminated the contract and claimed for damages.
The panel of arbitrators found that the charterers were effectively in repudiatory breach of contract and that the disponent owners had properly exercised their right to terminate the same. Consequently owners were awarded substantial damages for the loss of revenue, calculated as the difference between the COA rate and the market rate, which resulted in a great sum due to the severe fall experienced by the freight market following the collapse of Lehman Brothers in September 2008.
In reaching that decision the arbitration panel rejected two submissions made on behalf of the charterers, which have given rise to the two questions of law before Mr. Justice Teare:
1. Whether, in application of the compensatory principle, when assessing damages the inability of the innocent party to perform its obligations under the contract has to be taken into account, and who bears the burden to prove such contingency. The charterers submitted before the panel that had they declared any of the laycans, the disponent owners would not have been able to perform their obligations under the COA due to their deteriorated financial position, and thus were only entitled to nominal damages. The panel however rejected such submission on the facts of the case.
2. Whether the words “disponent owners of the Glory Wealth to be nominated motorship” carried an obligation on the owners to have a contractual control over the nominated ship, or if those words just meant that the owners had to nominate a vessel to carry the cargo. The panel held –against the charterers’ submission– that those words only required from the owners to have disposal over the nominated ship by whatever means.
In the appeal before the Commercial Court, Teare J upheld the arbitration award in the following