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Zodiac Maritime Agencies Ltd v Fortescue Metals Group Ltd (The Kildare)

Subject: Shipping Other related subjects: Damages

Keywords: Available market; Measure of damages; Repudiation; Shipping; Time charterparties

Summary: The court found that a charterer, having repudiated a five-year consecutive-voyage charterparty for the carriage of iron ore from Australia to China, was liable to the shipowner in damages in the region of $80 million.

Abstract: The claimant shipowner (Z) claimed demurrage and damages arising out of the termination of a consecutive-voyage charterparty entered into with the defendant charterer (F). The charterparty was a five-year consecutive-voyage contract for a vessel for the purpose of carrying iron ore from Australia to China. It had come to an end in January 2009 with almost four and a half years to run. On November 20, 2008, F had indicated that it would not be able to honour its freight commitments and on January 1, 2009, when it failed to load cargo for what should have been the vessel's seventh voyage, the vessel went on demurrage. Essentially, F's position was that because its customers had cancelled their freight agreements with it, it had no choice but to suspend or delay the performance of its obligations under the charterparty. Between November 23, 2009 and January 12, 2009 there were a number of communications between the parties about the situation. On January 9, Z accepted F's communications and conduct as a repudiation of the charterparty, thereby terminating it with effect from that date. F contended that Z's termination of the charterparty was itself a repudiation, which, on January 12, it accepted. The only issue of primary fact was whether, in a telephone conversation between the parties on December 2, 2008, F had said, as Z asserted, that it was terminating the charterparty, or whether it had said that it was merely exercising a contractual right to suspend or delay the performance of its obligations under it. The issues for determination were (i) whether F had repudiated the charterparty between November 23, 2008 and January 12, 2009; (ii) the proper quantum of damages.

Michael Collett acted for the Defendant (led by David Allen QC) instructed by Clyde & Co