A v B

The compensatory principle does not prevent recovery of wasted expenditure together with loss of profits where the profit figure is calculated net of the relevant expenditure and there is no overlap. A tribunal may determine the loss flowing from breach without first resolving how compensation will subsequently be distributed under a related pool agreement. Section 68 of the Arbitration Act 1996 is not a route to challenge factual findings, imperfect reasoning, or delay alone. Where an available market exists and the tribunal finds that profitable fixtures would probably have been performed, damages need not be discounted for loss of chance.

The owners challenged an LMAA arbitration award concerning losses arising from breaches of an oil-major eligibility clause in a time charterparty. The tribunal declared the charterers entitled to US$3,278,169, comprising net lost voyage profits and wasted expenditure on hire and bunkers. The owners alleged serious irregularity under section 68 of the Arbitration Act 1996 and sought permission to appeal on three questions of law under section 69. The issues included double recovery, the relevance of the pool agreement, the tribunal’s treatment of evidence concerning alternative fixtures, delay, and the loss-of-chance principle.

1. The section 68 applications were dismissed. The owners had a fair opportunity to address the charterers’ case on wasted expenditure. The tribunal was entitled to determine the charterers’ financial entitlement under the charterparty and leave the subsequent treatment of pool distributions for another stage. Liability without payment could found recoverable loss. The admitted error concerning who paid for bunkers made no difference because the charterers remained liable for them.
2. The tribunal had dealt with the compensatory principle. The rule is that the claimant must be placed in the financial position it would have occupied had the contract been performed, but not in a better position. Wasted expenditure may be recovered alongside loss of profits where the latter is a net figure deducting the costs of performance and there is no overlap. The tribunal’s approach was therefore not legally erroneous.
3. The tribunal’s findings that the Shell and Valero fixtures would probably have been performed were findings of fact. Section 68 did not provide a backdoor appeal on the evidence. Imperfect reasoning, without failure to deal with an issue, was insufficient. Delay exceeding the period normally expected under the LMAA Terms did not itself constitute serious irregularity where the tribunal had addressed the major issues.
4. The section 69 applications were also dismissed. The compensatory principle was clear, but its application was not obviously wrong. The accounting position under the pool agreement was not a question the tribunal had been asked to determine. The tribunal was entitled to calculate the loss flowing from the charterparty breach before resolving the pool’s subsequent distributions.
5. There was an available market and the tribunal found that the vessel would probably have performed the profitable fixtures. On those findings, following The “Vicky 1” [2008] EWCA Civ 101, no discount for loss of chance was required. The applications were dismissed.

First-instance applications challenging an arbitration award under sections 68 and 69 of the Arbitration Act 1996. The applications were dismissed.