Star Reefers Pool Inc v JFC Group Co Ltd

A guarantor undertaking performance of a charterparty is liable for the guaranteed party’s contractual defaults. A charterer may terminate for repudiatory breach only where the owner’s breaches, assessed cumulatively and prospectively, deprive the charterer of substantially the whole benefit of the remaining charter. Periods of off-hire caused without the owner’s fault do not ordinarily justify termination.

Where a charterparty is wrongfully repudiated and an available market exists, damages are assessed by reference to that market. The owner’s actual trading may be irrelevant where it has traded for its own account. Contractual orders concerning cargo may also make the charterer responsible for resulting loss and expense.

The claimant chartered three reefer vessels to Kalistad Ltd under two 36-month charterparties. The defendant guaranteed Kalistad’s performance. After disputes concerning vessel performance, cargo, detention, off-hire events and unpaid charges, Kalistad purported to terminate both charterparties on 15 September 2010. The claimant accepted the repudiation and pursued the defendant under the guarantees.

Burton J had previously granted summary judgment on the validity and binding effect of the guarantees. The underlying charterparty disputes were also the subject of arbitration. The defendant did not appear at the trial, having unsuccessfully challenged the jurisdiction. The principal issues were whether Kalistad was entitled to terminate, what sums were recoverable, and how damages for early termination should be assessed.

1. Guarantees. The guarantees covered performance of the identified charterparties. The defendant was liable for sums due from Kalistad under those charterparties.
2. Repudiation. Applying the approach in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, the relevant question was whether the past breaches and likely future consequences deprived the charterer of substantially the whole benefit of the remaining charter. The inquiry concerned the future use of the vessels, the extent of any loss of benefit, and whether the off-hire periods resulted from the owner’s breach. The off-hire periods were limited and included events for which the claimant was not responsible. They did not justify termination, whether vessels were considered individually or cumulatively.
3. Cargo and detention. Kalistad’s instructions caused the defective cargo to be loaded and carried. Under clause 9, Kalistad was responsible for the consequences of those instructions. The claimant was not otherwise obliged to procure its P&I club to provide security or intervene for cargo problems attributable to the charterer.
4. Damages. The claimant recovered unpaid hire, port and pilotage charges, losses arising from detention, costs relating to containers left aboard, and the cost of returning a vessel to the contractual redelivery range. The container losses were recoverable both for breach of the redelivery obligation and as loss flowing from the repudiation; see The Kos [2010] 2 Lloyd’s Rep 409.
5. For loss of earnings, the existence of an available market required the loss to be assessed by reference to the market, or by deeming the claimant to have entered it. Actual spot-market earnings did not reduce the damages where the claimant had traded for its own account. The principle was consistent with Jamal v Moola Dawood [1916] 1 AC 175 and The Elena d’Amico [1980] 1 Lloyd’s Rep 75. The Golden Victory [2007] UKHL 12; [2007] AC 353 concerned a different component of contractual loss and did not alter that approach.
6. Judgment was entered for the claimant for US$16,245,099.69 and interest. The defendant was ordered to pay the claimant’s costs on the standard basis.

The judgment itself was a first-instance trial on the merits. Burton J had previously granted summary judgment on the validity and binding effect of the guarantees. The defendant had unsuccessfully challenged the jurisdiction and did not appear at trial.