Glory Wealth Shipping Pte Ltd v North China Shipping Ltd & Anor

Damages for wrongful repudiation of a time charter are ordinarily assessed by comparing the contractual rate with the prevailing market rate for the unexpired period. Actual earnings may inform the market assessment, including by conversion into time-charter equivalents, but they do not necessarily make every later fixture an item of recoverable or avoided loss.

Early redelivery under a head charter affects the assessment only where the evidence establishes that it was caused by, or sufficiently connected with, the repudiation. A speculative or independently motivated redelivery does not establish mitigation or avoided loss.

Sub-charterers appealed under the Arbitration Act 1996 against an arbitration award requiring them to pay damages for wrongful early redelivery of a vessel under a time charter.

The tribunal assessed damages by reference to the contractual hire which would have been earned during the remaining minimum period, less the vessel’s actual or estimated earnings during that period. The sub-charterers argued that the disponent owners’ early redelivery of the vessel under the head charter had saved hire and should reduce the damages.

The central issue was whether that redelivery and the resulting saving had to be taken into account when assessing the loss.

1. The appeal was dismissed. The tribunal had adopted a conventional and appropriate approach to the assessment of damages.

2. The normal measure for premature wrongful repudiation of a time charter, where an available market exists, is the difference between the contractual rate for the remaining charter period and the market rate for a substitute vessel for that period. This principle was stated in The Elena D’Amico [1980] 1 Lloyds Rep. 75.

3. The tribunal’s use of actual fixtures and estimated earnings did not change the legal measure. The fixtures provided evidence of earnings during their currency, while expert evidence supplied the necessary assessment for the balance of the charter period. The relevant question was the earnings which the vessel could have generated throughout that period, not whether every earning arose for the respondents’ account.

4. The saving said to arise from early redelivery under the head charter was not established as loss avoided. The arbitrators made no finding as to the basis of the redelivery or that termination of the head charter was sufficiently closely connected with the repudiation to require the resulting saving to be brought into account. The early redelivery was properly treated as an independent speculation.

5. Andrew Weir & Co v Dobell [1916] 1 KB 722 did not assist because that case involved an entitlement to cancel the head charter and no residue of the head charter remained to be preserved. The general compensatory principle stated in Wertheim v Chicoutimi Pulp Co [1921] A.C. 301 did not establish that the head-charter redelivery would have occurred had the sub-charter been performed.

1. High Court (Commercial Court): leave to appeal was granted by Hamblen J on 18 February 2010. Mr Justice David Steel dismissed the appeal against the arbitration award.