SK Shipping (S) Pte Ltd v Petroexport Ltd

A party may accept an anticipatory repudiation where the other party’s words and conduct, viewed cumulatively and in context, clearly and absolutely evince an intention not to perform. Individual acts may be equivocal when considered separately but renunciatory when considered together. The assessment is made at the time of termination and includes the history of the contractual relationship and surrounding circumstances. A refusal to perform the contract unless a substantially different contract is agreed may amount to renunciation. Impossibility as an anticipatory breach requires proof that performance has become wholly and finally impossible before the contractual date. The duty to mitigate arises only after breach, and a claimant need act only reasonably in mitigating its loss.

The claimant shipowner chartered its vessel to the defendant on an Asbatankvoy voyage charterparty to load petroleum products at Karachi and discharge in the Far East. Before the laydays expired, the defendant encountered difficulties with its cargo suppliers and buyers. It proposed alternative time-charter arrangements and sent communications which the claimant treated as indicating that the defendant would not perform the original charterparty.

The claimant terminated the charterparty on 29 August 2008 and claimed damages. The defendant alleged wrongful termination and counterclaimed. The issues were whether the defendant had renounced the charterparty, whether performance had become impossible, whether the claimant had failed to mitigate its loss, and whether the defendant had suffered recoverable loss.

1. Renunciation. The claimant was entitled to terminate. Applying Universal Cargo Carriers v Citati [1957] 2 QB 401 and The Hermosa [1982] 1 Lloyd’s Rep 570, the question was whether, at the time of termination, the defendant’s words and conduct evinced an intention not to perform which a reasonable person in the claimant’s position would regard as clear, unequivocal and absolute.

2. The court was required to assess the totality of the relevant communications and conduct in their contractual context. Matters which were not independently renunciatory could form part of the background. The defendant’s failure to provide a clear assurance of performance, its proposal to perform only a different time charter, its apology for the current circumstances, and its attempt to secure a mutual cancellation collectively demonstrated renunciation. A statement that a party will perform only a different contract may be as renunciatory as an express refusal to perform: The Nanfri [1979] AC 757.

3. The court also found that the claimant’s relevant representative subjectively believed that the defendant intended not to perform. The court considered that both objective and subjective elements were relevant, although it was unnecessary finally to decide that issue because the subjective element was established on the facts.

4. Impossibility. The alternative case failed. Anticipatory impossibility required the defendant to have become wholly and finally disabled from finding and loading cargo before delay frustrated the venture. The evidence did not establish this. At least the PRL cargo could probably have been loaded after the necessary letter of credit was provided.

5. Mitigation and quantum. The duty to mitigate arose only after breach. The claimant acted reasonably in seeking another fixture rather than re-approaching a charterer in which it had lost confidence. The costs of diverting the vessel to Jamnagar to obtain fresh water were recoverable. Judgment was entered for the claimant in the sum of US$702,297. The counterclaim failed.