Maestro Bulk Ltd v Cosco Bulk Carrier Co Ltd

Where a time charter requires notices before redelivery, damages for short-notice redelivery depend on the proper characterisation of the breach and the lawful counterfactual. The counterfactual must reflect proper performance, not a notice which would itself have been dishonest or unreasonable. Ordinarily, the loss is the hire which would have been payable during the missing notice period, less earnings obtained in reasonable mitigation. A claim based on the difference between a hypothetical follow-on fixture and a prompt replacement fixture will generally be too unpredictable, unquantifiable and disproportionate to fall within the parties’ contemplation. Exceptional facts may justify a different measure, but the evidence must establish the relevant market rates and loss.

The charterers appealed under section 69 of the Arbitration Act 1996 against a final arbitration award concerning the redelivery of the vessel Great Creation under a time charter. The charter required approximate and definite notices before redelivery. The charterers gave short notice and redelivered on 19 April 2010.

The arbitrators assessed damages by reference to a hypothetical follow-on voyage which would have been arranged had earlier notice been given. The central issues were the characterisation of the breach, the proper no-breach counterfactual, causation, remoteness and the effect of the owners’ mitigation fixture.

1. Appeal allowed in part. The award was varied. Damages for the failure to give contractual redelivery notices were reduced to 12 days’ net hire, namely US$216,450, and the total sum due to the owners was reduced to US$23,704.49.
2. The breach occurred when the vessel was redelivered on short notice, but its proper characterisation depended on the facts. A lawful no-breach counterfactual could not assume that the charterers had given a notice on 31 March when they had no intention, and no reasonable grounds, to redeliver on 19 April. That notice would itself have been uncontractual. Proper performance required the charterers to give the approximate notice on 13 April and keep the vessel on hire until the notice period expired, on the arbitrators’ findings, on 1 May.
3. The prima facie measure was therefore the hire payable from actual redelivery on 19 April until 1 May. Earnings obtained in reasonable mitigation were to be credited when the market rate was available. The owners’ prompt fixture, entered into at an undervalue and preceded by a ballast voyage, did not justify extending the damages period or using the differential between that fixture and a hypothetical follow-on voyage as the measure of loss.
4. Applying the remoteness principles discussed in The Achilleas [2008] 2 Lloyd’s Rep 275 and The Sylvia [2010] 2 Lloyd’s Rep 81, the loss of earnings on an unpredictable hypothetical follow-on fixture, potentially lasting beyond the current charter and the notice period, was not ordinarily within the parties’ contemplation when the charter was made. The ordinary notice-period measure was analogous to the late-redelivery position in The Achilleas.
5. The court left open the possibility that, on special facts and with sufficient evidence of the full market rate and the prompt rate, damages might extend beyond the missing notice period. That possibility was not available on the facts or findings in this case.

1. Arbitration: A final arbitration award dated 7 March 2014 assessed damages for short-notice redelivery at US$306,639.58.
2. High Court (Commercial Court): On an appeal under section 69 of the Arbitration Act 1996, the court held that the arbitrators had erred in law and varied the award.