Log-O-Mar AG v Craft Enterprises International Ltd & Ors

Where a charterer repudiates a settlement agreement governing carriage and discharge, it cannot recover contractual payment for services or costs incurred before the repudiation unless the contract gives an independent entitlement to payment. A clause providing for payment of the balance of voyage costs after completion of discharge may make completion of the carrier’s essential obligations a condition of that entitlement. A provision treating freight as earned on loading is materially different. The court must construe the payment clause in the context of the contract and the claimant’s performance.

Log-O-Mar chartered vessels to carry steel bars for Craft and Croyndon under a settlement agreement concerning cargo previously carried on the Mega S. The agreement required the charterers to fund 75 per cent of estimated voyage costs in advance and to pay the balance within ten days after completion of discharge at Umm Qasr.

Some cargo on the replacement vessel, the Tiger V, was exceptionally brittle. Log-O-Mar treated the agreement as terminated for repudiatory breach, alleging that the defective bars came from the Mega S cargo. The court found that they came from cargo previously carried on the Nordsund, so Log-O-Mar was itself in repudiatory breach. The central further issue was whether it could nevertheless recover the unpaid balance of voyage costs.

1. Repudiatory breach. The rogue 12 mm d-bars were more likely than not to have come from the Nordsund cargo. The conclusion rested on the earlier breakage of Nordsund bars, the exceptional nature of the defect, evidence concerning the source of the Mega S cargo, missing identification tags, and uncertainties in the loading and discharge records. Log-O-Mar was therefore in repudiatory breach by treating the settlement agreement as discharged and by subsequently causing the vessel to sail to Jebel Ali and discharge there.
2. Contractual entitlement to the balance. The obligation to pay the balance of voyage costs was consideration for Log-O-Mar fulfilling its contractual obligations. The ten-day period ran from completion of the vessel’s discharging operations, and the court construed the entitlement as conditional on completion of performance of Log-O-Mar’s essential obligations.
3. That conclusion did not determine cases where the contract was discharged without fault, such as by frustration, or where the claimant substantially performed the contract. On the facts, Log-O-Mar’s repudiatory breach prevented recovery of the outstanding balance.
4. Authorities. The Karin Vatis [1988] 2 Lloyd’s Rep 330 and The Lefthero [1991] 2 Lloyds Rep 599 were distinguishable. Each concerned a freight-earned provision under which freight was earned, and became payable, on loading. Neither claimant was in repudiatory breach.
5. Log-O-Mar’s claim failed. Craft was entitled to judgment on its counterclaim, with damages to be assessed. Craft’s title to sue was established, and its damages were to be calculated on the quantities shown in the bills of lading for the ex-Mega S cargo.