Glory Wealth Shipping Pte Ltd. v Korea Line Corporation

Where a time charter is repudiated and no market exists for the unexpired period at termination, damages are assessed by reference to the owner’s actual loss, subject to ordinary mitigation principles. A market which revives later does not, by itself, supply the measure of damages by reference to a deemed replacement charter. The later market may be relevant to mitigation and, where damages are assessed before the charter expires, to calculating future loss. The available-market measure remains the normal approach where an equivalent market exists at termination.

The charterers repudiated a minimum 36-month time charter after the market for period charters had collapsed. An arbitral tribunal awarded the owners damages on a hybrid basis: actual trading losses until July 2009, followed by market-based damages after finding that a fragile two-year market had then revived.

Burton J granted leave to appeal under section 69 of the Arbitration Act 1996. The issue was whether damages could be assessed by combining actual losses with market-based losses calculated by reference to a market which did not exist at termination but emerged later.

1. The appeal was allowed. The tribunal had approached the issue as one of legal principle, and its market-based assessment from July 2009 could therefore be reviewed as an error of law.

2. The normal measure stated in Koch Marine Inc v D’Amica Societa di Navigazione Arl (The Elena D’Amico) [1980] 1 Lloyd’s Rep 75 applies where an available market exists at termination. It ordinarily assumes reasonable mitigation by obtaining a substitute charter for the balance of the contractual period.

3. That principle is not an absolute rule. Where no relevant market exists at termination, the underlying question is the loss caused by the breach and the conduct which should reasonably be presumed for mitigation. The court approved the approach stated in The Griparion [1994] 1 Lloyd’s Rep 533.

4. The later emergence of a market for the then unexpired period does not itself make the owner’s decision not to enter that market an independent business decision. Nor does it itself provide the correct measure of damages. Actual loss remains the basis of assessment, subject to the usual mitigation rules. The revival may be relevant to whether the owner failed unreasonably to mitigate and to the calculation of future loss where assessment occurs before expiry.

5. The alternative argument based on The Golden Victory [2007] 2 AC 353 did not alter the result. That case concerned an available market at termination and did not decide the present situation.

6. The award was remitted to the tribunal to assess the owners’ actual losses accruing up to 21 June 2011. Any argument that recovery was time-barred was for the tribunal, not the court on the section 69 appeal.

• Arbitral tribunal: awarded the owners damages of US$15,698,591.45 for the balance of the charter period on a hybrid actual-loss and market-based approach.
• High Court (Commercial Court): on a section 69 appeal, allowed the appeal and remitted the award for reassessment of actual losses.