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Dillemma facing SC: Globalia

Dillemma facing SC: Globalia

Postby Peter and Luke » Wed Feb 08, 2017 8:45 pm

Hi All

I have been following the case before the SC: https://www.supremecourt.uk/cases/uksc-2016-0026.html

The case is all about what kind of loss can be brought into account for the purposes of engaging the mitigation of damage rules and in particular the Robinson v Harman compensatory principle that an aggrieved party should be put so far as possible into the position that they would have been in had there been no breach of contract.

Charterers redelivered ship a year early (a repudiation). Owners in mitigation sought to find a substitute charter but finding no available market and not wanting to incur costs they sold their ship (at the top of a falling market). Had they sold a year later (in other words at the date had there been no breach) they would have been worse off by $16 million. The Charterers applying British Westinghouse, sought to bring this "benefit" into account in the assessment of damages and in doing so contended that making a profit in mitigation had the effect of wiping out the damages for the loss of the hire.

Now, here`s the thing. If the Charterers win there is the real problem in respect of the 1st limb of Hadley v Baxendale. Surely, no way could it be said that the Charterers contemplated when they entered the charterparty that in breach of that contract they would be responsbible for the Owners loss due to the adverse delta in market-price between the date of the sale of the ship and the market price of the ship a year later (i.e. the converse of the position which occurred in this case i.e. if the Owners sold at the bottom of a rising market). Counsel for the Charterers conceded that they indeed would be so liable!! (That, I would love to see argued out in Court?!)

If the Owners win, then how would that square with the compensatory principle??

My guess here is that the Owners will win. The sale of the ship was not an act of mitigating the loss because the loss was the loss of the hire...having tried to mitigate that loss they could not do so and at that point British Westinghouse stops applying. What follows after - the sale of the ship - was a independent transaction and lies outside of its principles thereby leaving both it and Robinson v Harman still in tact! If that is not correct and the Charterers win then I will be interested to see how the SC deals with the problem of remoteness (because on these facts it appears obvious that such a loss would not be recoverable if the positions were reversed).
Peter and Luke
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Joined: Wed Jun 08, 2016 9:27 am

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