Golden strait corpn v nippon yusen kubishika kaisha 2007 ukhl

Assessment

golden strait corpn v nippon yusen kubishika kaisha 2007 ukhl.Describe how and why Lord Bingham and Lord Walker dissented from the majority decision.

House of Lords Session 2006 07
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Judgments Golden Strait Corporation (Appellants) v. Nippon Yusen Kubishka Kaisha (Respondents)

HOUSE OF LORDS
SESSION 2006-07

[2007] UKHL 12

on appeal from: [2005[ EWCA Civ 1190

OPINIONS

OF THE LORDS OF APPEAL

FOR JUDGMENT IN THE CAUSE

Golden Strait Corporation (Appellants)

v.
Nippon Yusen Kubishka Kaisha (Respondents)

Appellate Committee

Lord Bingham of Cornhill

Lord Scott of Foscote

Lord Walker of Gestingthorpe

Lord Carswell

Lord Brown of Eaton-under-Heywood

Counsel

Appellants:

Nicholas Hamblen QC

David Allen

(Instructed by Reed Smith Richards Butler LLP)
Respondents:

Timothy Young QC

Henry Byam-Cook

(Instructed by More Fisher Brown)

Hearing dates:

14 and 15 February 2007

ON
WEDNESDAY 28 MARCH 2007

HOUSE OF LORDS
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
Golden Strait Corporation (Appellants) v. Nippon Yusen Kubishka Kaisha (Respondents)
[2007] UKHL 12
LORD BINGHAM OF CORNHILL

My Lords,

1. The issue in this appeal concerns the assessment of damages for loss of charter hire recoverable by a shipowner where a charterer repudiates a time charter of a vessel during its currency and he accepts that repudiation, there being an available market in which the shipowner can, at or shortly after the date of acceptance of repudiation, charter out the vessel for the balance of the charter term. The dispute between the parties turns on the date at which the quantification of damages is to be made. The shipowners contend that the quantification should be made when, the repudiation having been made and accepted, they charter out (or may reasonably be expected to charter out) the vessel. Events occurring later, not affecting the value of the contractual right which the owner has lost at that time, are irrelevant. The charterers contend that the quantification should be made as of the date on which the damages actually fall to be assessed, taking account of any event which has by then occurred which affects the value of what the owners lost as a result of his repudiation. The maritime arbitrator who was the original decision-maker in this case (Mr Robert Gaisford) would have preferred to accept the owners contention, but felt constrained by first instance authority to accept the charterers. His decision was upheld by Langley J in the Commercial Court ([2005] EWHC 161 (Comm), [2005] 1 All ER (Comm) 467) and by Auld and Tuckey LJJ and Lord Mance in the Court of Appeal ([2005] EWCA Civ 1190, [2006] 1 WLR 533). A majority of my noble and learned friends also agree with that decision. I have the misfortune to differ. I give my reasons for doing so, unauthoritative though they must be, since in my respectful opinion the existing decision undermines the quality of certainty which is a traditional strength and major selling point of English commercial law, and involves an unfortunate departure from principle.

The facts

2. By a time charterparty on an amended Shelltime 4 form dated 10 July 1998 Golden Strait Corporation, a Liberian company, as owners chartered their tanker Golden Victory to Nippon Yusen Kubishika Kaisha of Tokyo as charterers for a period of 7 years with one month more or less in charterers option. The charterparty provided for payment of a minimum guaranteed base charter hire rate per day, increasing over the 7 years of the charter, but subject to a specified reduction if market rates should fall to a certain level. The owners were also to receive a share of operating profits earned by the charterers during the term of the charter above the base charter rate. The charterparty provided (in clause 33) that both owners and charterers should have the right to cancel the charter if war or hostilities were to break out between any two or more of a number of countries including the United States, the United Kingdom and Iraq. The charter was subject to English law and jurisdiction and there was an arbitration clause.

3. On 14 December 2001 the charterers repudiated the charter by redelivering the vessel to the owners. The owners accepted the repudiation three days later, on 17 December, when the charter had nearly four years to run. The owners claimed damages. The charterers did not accept the claim. The matter was referred to arbitration and the arbitrator was asked to decide whether (and if so when) the charterers had repudiated the charter, whether (and if so when) the owners had accepted the repudiation, and what was the earliest date on which the vessel could be redelivered under the charter. By an Interim Declaratory Award dated 16 September 2002 the arbitrator resolved the first two issues in the owners favour, as summarised above. He found 6 December 2005 to be the earliest date for contractual redelivery of the vessel. This date was significant as the terminal date of the owners claim for damages.

4. The charterers sought unsuccessfully to challenge this Award on appeal, and negotiations then followed for redelivery of the vessel to the charterers on the same terms (so far as material) as before, with settlement of damages for the period between the accepted repudiation and the redelivery. The charterers made an offer to that effect on 7 February 2003. At that stage the owners, according to evidence recited by the arbitrator in the Reasons for his Second Declaratory Arbitration Award (para 8), had received legal advice that if they proceeded to arbitration of their damages claim the arbitrator would ignore a later event of war and the charterers option to cancel and would award the owners damages for the entire four year period between 17 December 2001 and 6 December 2005. The owners consultant considered that an event 15 months after the repudiation was irrelevant and that (para 10) It would be sheer stupidity and not mitigation for us to enter into a charter well below the current market with a clause which entitled the charterer to cancel if there was a war, which seemed to be about to happen”. The owners rejected the charterers offer.

5. The matter then returned to the arbitrator, who was asked to decide three further questions. The first was whether the owners had failed to mitigate their loss by not accepting the charterers offer of 7 February 2003 to take the vessel back on charter on the same terms as before. In his Second Declaratory Arbitration Award dated 27 October 2004 he held that they had not. There is no appeal against this ruling. The second issue was that which gives rise to this appeal. It was whether the events (described as the outbreak of the Second Gulf War) in March 2003 placed a temporal limit on the damages recoverable by the owners for the charterers repudiation of the charterparty such that no damages were recoverable for the period from 21 March 2003 onwards. This issue the arbitrator reluctantly decided in the charterers favour. The owners say that he was wrong to do so. The third issue was not explored in the reference and is irrelevant for present purposes.

6. In his reasons for deciding the first of these issues as he did, the arbitrator correctly summarised the law on mitigation of damage where there is an available market, as it was agreed, and the arbitrator found, was the case here.

7. In his reasons for deciding the second issue as he did, the arbitrator concluded that the Second Gulf War, which effectively began on 20 March 2003, fell within clause 33, as it plainly did. He then considered the likelihood