Orion Shipping and Trading Ltd v Great Asia Maritime Limited

A contractual cancellation right does not ordinarily carry loss of bargain damages. Such damages require an accepted repudiatory or renunciatory breach unless the contract expressly provides otherwise.

Under the SALEFORM 2012 wording considered, failure to tender notice of readiness by the cancelling date was not a breach of a positive delivery obligation. Clause 14 conferred a right to cancel and allowed compensation for loss and expenses caused by the negligent failure to tender notice of readiness. It did not permit recovery of prospective loss of bargain caused by cancellation.

The claimant sellers appealed under section 69 of the Arbitration Act 1996 against a partial final award concerning the sale of a Capesize bulk carrier. The buyers had cancelled under clause 14 of an amended Norwegian Saleform 2012 memorandum of agreement after the vessel was not ready by the extended cancelling date.

The tribunal found that the sellers’ failure was due to proven negligence, but was not repudiatory. It nevertheless awarded the buyers loss of bargain damages measured by the difference between the market and contract prices. The central issue was whether clause 14 entitled the buyers to recover those damages without an accepted repudiatory breach.

1. Appeal allowed. The award of loss of bargain damages was set aside.
2. Clause 5 of the memorandum of agreement did not impose a positive obligation to deliver, tender notice of readiness, or be ready to complete legal transfer by the cancelling date. It provided for notice of readiness when the vessel was at the place of delivery and physically ready, while clause 14 gave the buyers an option to cancel if the relevant state of readiness had not been achieved by the cancelling date.
3. The cancellation right was independent of breach or negligence. The heading “Sellers’ default” did not create a positive delivery obligation. The extension regime also supported that construction. The reasoning in The Griffon, [2014] 1 Lloyd’s Rep. 471, supported treating the contractual cancellation right as a remedy independent of repudiation.
4. Even if clause 5 imposed a positive obligation, it would not be a condition. Classification depended on construction of the contract as a whole. There was no clear wording making the obligation a condition, and the possible consequences of delay ranged from trivial to grave. The approach in The Spar Capella, [2016] EWCA Civ 982, was applied. The first-instance judgment in that case, [2015] EWHC 718 (Comm), was explained as not establishing a freestanding counterfactual test.
5. Loss of bargain damages were not recoverable merely because the buyers exercised a contractual cancellation right. Clause 14B could expressly confer additional damages, but its wording had to be construed against the common-law position. “Due compensation” meant appropriate compensation subject to causation, remoteness and mitigation. The recoverable loss was caused by the specific negligent failure to tender notice of readiness by the cancelling date, and included accrued losses, wasted expenses and lost profits during the period of delay, but not prospective loss caused by losing the bargain.
6. Section 51(3) of the Sale of Goods Act 1979 did not alter the result. Section 51(2) required identification of the particular breach or trigger causing the recoverable loss. This was not a case of non-delivery under a positive delivery obligation.
7. The Tribunal had therefore erred in treating the sellers as being under a positive delivery obligation and in construing clause 14B as covering the consequences of cancellation, including loss of bargain damages.

• Arbitration tribunal: awarded the buyers loss of bargain damages under clause 14 following cancellation under clause 14 of the memorandum of agreement.
• High Court (Commercial Court): on an appeal under section 69 of the Arbitration Act 1996, answered the reformulated question of law in the negative and set aside the relevant damages paragraphs of the award.