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"The MTM Hong Kong" – Louis Dreyfus Commodities Suisse SA v. MT Maritime Management BV

In an appeal under s.69 of the Arbitration Act 1996, Males J reviewed the authorities on damages for repudiation of a voyage charter and gave guidance concerning recoverability of loss suffered by reason of the vessel being redelivered to an owner in the wrong location or when a substitute fixture is completed at a discharge port remote from the discharge port under the contract voyage.

Following charterers’ repudiation of the voyage charter in question, the arbitrators awarded the owners damages based on the difference between the vessel’s actual and hypothetical earnings up to the end of substitute employment which terminated some time after the contract voyage would have terminated.  The usual measure of damages for repudiation of a voyage charter, established by a line of authorities beginning with Smith v. M’Guire (1858) 3 H& N 554, is the difference between the vessel’s actual and hypothetical earnings up to the date when the repudiated charter would have ended.  However, the Judge found that the arbitrators had intended to compensate the owners for losses suffered by reason of the vessel being delayed in returning to an area of more profitable employment (in consequence of the owners’ attempts reasonably to mitigate their losses), which was a different kind of loss from the lost profit under the repudiated charter compensated by the usual measure of damages.

The Judge found that there was no error of law in the award of damages for this distinct loss, but cautioned that a claim for loss of employment after the date when the contract voyage would have been concluded will not always succeed.  There were particular factors which were important to the owners’ success (and which would not necessarily be present in other cases), namely: that the owners acted reasonably in directing the vessel to an area where the available employment was less lucrative (and where, in the event, they were unable to obtain any employment for some time); that there was no suggestion in the arbitration that the losses were too remote; that it was possible to predict the vessel’s immediate future employment if the contract had been performed; and that employment would have taken the vessel back to the same location at about the same time as completion of the actual substitute fixture.

This is the first case in which the Commercial Court has ruled on a claim for loss suffered by reason of the vessel not being returned to the owners at the time and place at which it would have been had the voyage charter been performed.

Michael Collett QC appeared for the appellants (instructed by Bentleys, Stokes & Lowless)  

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