Orion Shipping and Trading LLC v Great Asia Maritime Ltd

Under Norwegian Saleform 2012, Clause 5 implies an obligation on sellers to use reasonable or due diligence to be ready to deliver by the Cancelling Date, although it does not impose an absolute delivery obligation. Clause 14(A) gives buyers a fault-free right to cancel. Where the sellers’ failure to be ready is due to proven negligence, Clause 14(B) gives buyers an express right to compensation whether or not they cancel or accept a new Cancelling Date. The words due compensation and their loss include loss of bargain caused by cancellation where the market price exceeds the contract price. General principles concerning contractual termination for non-repudiatory breach do not displace the express contractual remedy.

Orion agreed to sell a vessel to Great Asia under Norwegian Saleform 2012. The vessel was not ready by the extended Cancelling Date. Great Asia cancelled under Clause 14 and commenced arbitration.

The arbitral tribunal found that Orion’s failure was due to proven negligence and awarded Great Asia damages for loss of bargain, measured by the difference between the market and contract prices. On Orion’s appeal under the Arbitration Act 1996, Dias J allowed the appeal and held that Clause 14 did not permit loss of bargain damages: [2024] EWHC 2075 (Comm). Great Asia appealed. The central issue was whether Clause 14(B) entitled a buyer who lawfully cancelled to recover loss of bargain damages without an accepted repudiatory breach.

Appeal allowed. The Court answered the question of law in the affirmative and restored the arbitral tribunal’s Award.

1. On an appeal under section 69 of the Arbitration Act 1996, the Court proceeded on the facts found in the Award. The bespoke Laden Voyage clause was disregarded because the question concerned the standard form of Saleform 2012. Clause 5, read with the contractual structure and heading, imposed an implied obligation on sellers to exercise reasonable or due diligence to deliver by the Cancelling Date. It did not impose an absolute obligation. The approach in The Democritos [1976] 2 Ll Rep 149 was a close analogy.
2. Clause 14(A) gave buyers a right to cancel if the vessel was not ready by the Cancelling Date, whether or not the sellers were in breach. Clause 14(B) operated where the failure was due to proven negligence, meaning failure to comply with the obligation to use reasonable or due diligence. The right to compensation subsisted whether or not the buyers cancelled and whether or not they accepted a proposed new Cancelling Date.
3. Due compensation meant proper or appropriate compensation, not merely accrued sums. Clause 14(B) conferred an express contractual obligation to compensate buyers for their loss. The natural and ordinary meaning of loss included loss of bargain. Where sellers’ negligent failure to be ready caused buyers to cancel and lose the benefit of the contract, the resulting loss was recoverable if the market price exceeded the contract price.
4. The Financings principle, derived from Financings Ltd v Baldock [1963] 2 QB 104, did not determine the construction of Clause 14(B). That principle concerned different forms of longer-term contract and was subject to express contractual provision. Clauses 13 and 14 were intended to operate in a broadly parallel and commercially balanced manner. The Solholt [1981] 2 Ll Rep 574 and [1983] 1 Ll Rep 605, together with Stocznia Gdynia SA v Gearbulk Holdings Ltd [2009] EWCA Civ 75, supported treating loss following cancellation as attributable to the sellers’ breach.
5. Great Asia therefore succeeded on both grounds. Ground 1 was well founded because an implied due-diligence obligation existed. Ground 2 was well founded because Clause 14(B) covered loss of bargain damages. The Award was restored.

1. Court of Appeal (Civil Division): Allowed Great Asia’s appeal, answered the question of law Yes and restored the arbitral tribunal’s Award.
2. Commercial Court: On Orion’s appeal under the Arbitration Act 1996, Dias J allowed the appeal and set aside the relevant parts of the Award: [2024] EWHC 2075 (Comm).