Parbulk AS v Kristen Marine SA & Anor

A contractual provision allowing cancellation for delayed delivery may also provide the agreed remedy for expenses, where its wording and commercial context show that result. Recovery under such a clause requires proof that the claimed costs fall within its language and were properly incurred. A claim is not necessarily an indemnity merely because it provides for expenses. If it is not an indemnity, remoteness and reasonable incurrence may remain arguable issues. Summary judgment may determine liability while leaving disputed calculation, proof, causation and reasonableness for trial or assessment.

The claimant entered into an en bloc sale-and-leaseback transaction involving four vessels. The defendants guaranteed the obligations of the vessel-owning special purpose vehicles under four memoranda of agreement. The claimant cancelled the agreements after the shipyards failed to give notice of readiness by the contractual cancellation date.

The claimant sought expenses under the cancellation clause, principally interest-rate swap termination costs and other transaction expenses. The defendants argued that the clause did not cover those losses, that they were too remote or unreasonable, and that the amounts were insufficiently proved. The application was for summary judgment on liability and quantified sums.

1. Construction. The cancellation remedy in sentence (3) of the clause applied to both forms of cancellation described in sentences (1) and (2). Reading it as applying only after notice of readiness would leave the first cancellation right without an expressed consequence and would be commercially implausible.
2. Nature of the clause. The reasoning in The Eurus [1998] 1 Lloyd’s 351 showed that a true indemnity could permit recovery of loss attributable to the specified cause without applying ordinary remoteness principles. This clause was not clearly such an indemnity. It was therefore at least arguable that foreseeability and reasonable incurrence remained relevant.
3. Swap costs. The defendants had sufficient contractual notice that the claimant would finance the purchase and enter into hedging arrangements. The loan agreement required a swap agreement with the bank and evidence that the interest exposure had been fixed. The swap losses were reasonably foreseeable, and compliance with those hedging obligations was not arguably unreasonable. The expression “breakage cost with the Buyers’ Lenders” covered the losses. Alternatively, they were proven expenses of a sufficiently similar kind.
4. Other expenses. The claimant could recover proven expenses relating to entering into and performing the transaction, insofar as they were wasted. The two Calyon fees were recoverable. Other establishment, operating and financial costs required further examination, including their allocation, proof, causation and reasonableness.
5. Disposition. Liability was determined for the claimant. Quantum of the swap costs and most other expenses remained open. Judgment was entered for US$14,335,647 and US$721,312, with the remaining quantum issues left for determination.

Not an appeal. The judgment records no prior appellate decision.