FULTON SHIPPING INC OF PANAMA V GLOBALIA BUSINESS TRAVEL SAU (FORMERLY TRAVELPLAN SAU) OF SPAIN (THE "NEW FLAMENCO")

[2015] EWCA Civ 1299, Court of Appeal (Civil Division), Lord Justice Longmore, Lord Justice Christopher Clarke and Lord Justice Sales, 21 December 2015

Charterparty (time) - Early redelivery - Measure of damages - Shipowner claiming damages for charterers' repudiation of a time charter – Mitigation - Avoidance of loss - Compensatory principle

New Flamenco was a small cruise ship time-chartered by the claimant owners, first as managers and then for their own account, on the NYPE form from 13 February 2004 to the defendants, a tourist group. An extension meant that the charterparty was to expire on 2 November 2009. Charterers redelivered the vessel on 28 October 2007, maintaining that they were entitled to do this. Owners treated charterers as in anticipatory repudiatory breach and accepted the breach as terminating the charterparty. Shortly before that date, owners entered into a memorandum of agreement for sale of the vessel. Due to the subsequent financial crisis, there was a significant reduction in the value of the vessel from the sale date in October 2007 to the redelivery date in November 2009. The question upon appeal was whether that difference constituted a benefit which, on principles of mitigation and avoidance of loss, should be brought into account in the owners' claim for the charterers' breach of contract by making an early redelivery. The arbitrator held that it should, but Popplewell J at first instance held that it should not, also giving permission to appeal. The judge's reasoning was, among others, that the owners' decision to sell an asset acquired before breach was not caused by the breach of the charterers in delivering the vessel two years early; rather it was independent of the breach just as, in the converse case of owners' breach in The Elena D'Amico [1980] 1 Lloyd's Rep 75, the charterers' decision not to charter in substitute tonnage was independent of, in that case, the owners' breach in failing to provide the vessel.