Golden Strait Corporation v Nippon Yusen Kubishika Kaisha "The Golden Victory"

Damages for repudiation of a long-term charterparty are governed by the compensatory principle. The usual date-of-breach measure, based on an available market, is a prima facie rule derived from mitigation and does not displace proof of actual loss and causation. Where the contract would, on the balance of probabilities, have ended earlier under a contractual termination provision, damages must reflect that event. No special requirement of predestination or inevitability applies. Certainty and crystallisation do not justify awarding more than the value of the contractual rights actually lost.

Golden Strait Corporation appealed under section 69 of the Arbitration Act 1996 against an award concerning damages following Nippon Yusen Kubishika Kaisha’s repudiation of a seven-year charterparty. The charterparty contained a war clause permitting cancellation on the outbreak of war between specified countries.

The arbitrator found that the repudiation occurred on 14 December 2001, was accepted on 17 December 2001, and that the second Gulf war in March 2003 triggered the war clause. The charterers would have cancelled had the charterparty continued. The central issue was whether damages were limited to the period before that later cancellation event, or were fixed at the date of repudiation for the remaining charter term.

1. Appeal dismissed. The arbitrator was correct to limit damages to the period before the outbreak of the second Gulf war.
2. The governing principle is compensatory. The innocent party is entitled to be placed, so far as money can do so, in the position it would have occupied if the contract had been performed. The normal date-of-breach rule must yield where a later assessment more accurately reflects the loss: Johnson v Agnew [1980] AC 367; County Personnel v Alan R Pulver [1987] 1 WLR 916; Smith New Court v Scrimgeour Vickers [1997] AC 254.
3. Where an available market exists, the difference between the contract rate and the market rate for a substitute vessel is the usual measure. It is a prima facie rule arising from mitigation, not an inflexible rule governing the amount of actual loss. A claimant cannot recover loss which would not in fact have been suffered.
4. The court must consider contractual contingencies which would have reduced or extinguished the loss. The war clause formed part of the value of the charterparty which was lost. The evidence established on ordinary causation principles that the charterparty would have ended when the war began and that the charterers would have exercised their cancellation right.
5. The broader reasoning in The Mihalis Angelos supports taking account of contractual events affecting loss, but its references to predestination, certainty and inevitability do not establish a universal heightened test. The approach in The Seaflower was accepted, subject to the same qualification.

• Arbitration: The sole arbitrator determined that the charterers had repudiated the charterparty and that the second Gulf war limited recoverable damages.
• High Court (Commercial Court): Langley J dismissed the section 69 appeal and upheld the arbitrator’s conclusion.