Dalwood Marine Co v Nordana Line A/S

Damages for wrongful premature termination of a time charter are ordinarily assessed by valuing the hire lost during the remaining contractual period, less earnings from substitute employment during that period. That is only a prima facie measure. Where mitigation produces an additional benefit because the vessel is available earlier or is better positioned for future employment, the tribunal may take that benefit into account, even if valuing it requires consideration of later earnings. Whether the benefit exists and its monetary value are questions of fact. On an appeal under section 69 of the Arbitration Act 1996, the court cannot substitute its own factual assessment for that of the tribunal.

The Owners appealed under section 69 of the Arbitration Act 1996 against an arbitral award concerning the wrongful termination of the charterparty of the vessel Elbrus. The tribunal found that the Charterers had wrongfully terminated the charter but concluded that the Owners had suffered no loss because mitigation enabled the vessel to enter dry dock earlier and earn under a more lucrative Navimed fixture.

The Owners argued that damages had to be confined to the 39 days remaining under the original charterparty and that earnings after the notional redelivery date were irrelevant. The central issue was whether the tribunal had made an error of law by taking account of post-redelivery earnings when assessing the benefit obtained through mitigation.

The appeal was dismissed. The tribunal had not demonstrated an error of law by taking account of the vessel’s actual and notional earnings beyond the date on which the original charterparty would have ended.

1. The compensatory principle required the Owners to be placed, so far as money could do so, in the position they would have occupied had the charterparty been performed. The contractual right lost was the right to receive hire from 4 April to 13 May 2005. Prima facie, damages were therefore the hire which would have been earned during that period less hire actually earned from alternative employment during the same period.

2. The prima facie measure reflected the Owners’ duty to mitigate and avoided the practical difficulty of calculating benefits over the vessel’s entire working life. It did not impose an absolute rule excluding later earnings. Consistently with The Concordia C and The Noel Bay, an additional benefit obtained through mitigation could be taken into account where the substitute employment put the vessel in a better position than it would otherwise have occupied.

3. Here, the tribunal was entitled to find that the Owners obtained the benefit of earning the higher Navimed rate earlier than would otherwise have been possible. The benefit was connected with the Owners’ reasonable decision to proceed immediately to dry dock and preserve the Navimed fixture. The value of that benefit could properly be assessed by reference to earnings after the notional redelivery date.

4. The court read the award as a whole and in a fair and reasonable manner, applying the approach identified in Pace Shipping v Churchgate Nigeria. The tribunal’s findings were findings of fact. On a section 69 appeal, the court had to accept them and could not substitute its own view of the benefit or its value.

5. The taking into account of later earnings therefore did not establish an error of law. The award in favour of the Charterers stood and the appeal was dismissed.

• Arbitral tribunal: found that the Charterers had wrongfully terminated the charterparty but that the Owners had suffered no loss; it awarded the Charterers US$233,755.10 and dismissed the Owners’ counterclaim.
• High Court (Commercial Court): heard the Owners’ appeal under section 69 of the Arbitration Act 1996 and dismissed it.