Golden Strait Corporation (Appellants)v.Nippon Yusen Kubishka Kaisha (Respondents)

Damages for an accepted repudiation must compensate for the contractual benefit actually lost. The ordinary breach-date rule serves that principle but does not override it.

Where an executory contract contains a right to terminate upon a specified event, and that event occurs before damages are assessed, the court may take it into account. If the contract would then have been terminated, damages cannot be recovered for the later period. An available market may fix the applicable rate at or shortly after repudiation without conclusively fixing the duration of the loss.

The owners chartered the tanker Golden Victory to the charterers until December 2005. Clause 33 permitted either party to cancel if war or hostilities broke out between specified states, including the United States, the United Kingdom and Iraq.

The charterers repudiated the charter in December 2001 and the owners accepted the repudiation. The Second Gulf War began in March 2003, before damages were assessed. The arbitrator found that the charterers would then have exercised their cancellation right and limited damages accordingly.

Langley J dismissed the owners' appeal in [2005] EWHC 161 (Comm). The Court of Appeal also dismissed their appeal in [2005] EWCA Civ 1190. The central issue was whether the subsequent war could be considered when valuing the contractual rights lost through the accepted repudiation.

1. Appeal dismissed by a majority of three to two. Lord Scott, Lord Carswell and Lord Brown held that the outbreak of the Second Gulf War could be considered. The owners could not recover damages for the period after the charter would have been cancelled under clause 33.

2. Per Lord Scott, the fundamental principle is compensatory. Damages represent the value of the contractual benefits of which the claimant was deprived, no less and no more. The breach-date rule is a general means of implementing that principle, but it must not be applied mechanistically where another date more accurately reflects the claimant's actual loss.

3. Per Lord Carswell, the presence of an available market fixed the rate at which the owners' loss was calculated at or shortly after acceptance of the repudiation. It did not necessarily fix the duration of that loss. The charter always contained a contingency which could bring it to an early end.

4. Per Lord Scott, Lord Carswell and Lord Brown, a court assessing damages need not continue to estimate the probability of a terminating event after the event has occurred. Known facts may supersede estimate and conjecture. If the event had not occurred by the assessment date, its chance of occurring could have been valued and reflected proportionately in the award. Because the war had occurred and the charterers would have cancelled, the owners had lost no contractual benefit for the later period.

5. Per Lord Brown, certainty and finality remain important in commercial law, but they do not justify extending the available-market rule so that the tribunal must ignore subsequent history affecting the duration of an executory contract. Courts and arbitrators retain procedural means to prevent a repudiating party from delaying assessment opportunistically.

6. Lord Bingham and Lord Walker dissented. They considered that, where an available market existed, the value of the lost charter should be fixed at acceptance of the repudiation, allowing only for contingencies then affecting its market value. In their view, the war was merely a possibility in December 2001, and commercial certainty required the later event to be disregarded.

1. House of Lords: By a majority of three to two, dismissed the owners' appeal in Golden Strait Corporation v Nippon Yusen Kubishka Kaisha [2007] UKHL 12 and affirmed the Court of Appeal's decision.
2. Court of Appeal: Auld and Tuckey LJJ and Lord Mance dismissed the owners' appeal in [2005] EWCA Civ 1190, reported at [2006] 1 WLR 533.
3. Commercial Court: Langley J dismissed the appeal from the second declaratory award in [2005] EWHC 161 (Comm), reported at [2005] 1 All ER (Comm) 467.
4. Earlier Commercial Court proceedings: Morison J dismissed an appeal from the arbitrator's first declaratory award, reported at [2003] 2 Lloyd's Rep 572.
5. Arbitration: The arbitrator found that the accepted repudiation occurred in December 2001. In his second declaratory award he held that the outbreak of war placed a temporal limit on damages, with none recoverable from 21 March 2003 onwards.