In Lakatamia v Nobu Su (2014), the Commercial Court found the shipowner Nobu Su personally liable along with his co-defendants, companies in the TMT group, for failing to repurchase forward freight agreements (FFAs) that had been sold to Lakatamia Shipping Co Ltd on a short-term basis. While the finding of personal liability in damages of nearly USD 38 million turned on the unusual circumstances surrounding the formation of the agreement, the judgment has wider relevance in respect of the measure of loss resulting from a buyer’s non-performance.


In July 2008, an oral agreement was made to temporarily transfer FFA positions of 600,000 MT/month from one of Mr. Su’s TMT companies, to Lakatamia, which was controlled by Polys Haji-Ioannou. It was agreed that the positions would to be bought back one month later at a premium of one World scale point above the original sale price, yielding Lakatamia USD 1.8 million in profit for effectively providing the TMT company with a short term bridging loan. In the event the FFAs were not all repurchased and, as the market price crashed, Lakatamia the claimants incurred substantial losses when they eventually settled the outstanding positions.

The contractual parties

Cooke J rejected Mr. Su’s argument that the agreement was solely between the corporate entities. He found that Mr. Su and Mr. Haji-Ioannou had made an overarching personal contract, and bound their respective companies via a subsequent ancillary agreement evidenced in writing. The telephone negotiations revealed the deal’s personal nature. There was no mention of corporate parties, and Cooke J concluded that Mr. Haji-Ioannou entered the agreement believing he was performing a private favour for Mr. Su, who had given his word that he would buy back the positions.

The cover sheet to a faxed guarantee corroborated this by explaining that the guarantee was for FFA trades agreed between the companies’ principals, thereby revealing the personal nature of the agreement between the two individuals. The guarantee itself restated the terms of sale and repurchase but referred to Lakatamia as purchaser and “Messrs. TMT”, rather than the specific TMT company that held the FFAs, as seller. This demonstrated Mr. Su’s intent for all the TMT companies he controlled to be bound to Lakatamia by the same terms of the oral agreement, giving rise to the ancillary agreement between the companies to effect the overarching personal deal.

The correct measure of loss

The defendants argued that the conventional measure of loss following a buyer’s refusal to perform should apply as per s.50(3) Sale of Goods Act 1979, namely the difference between the contractual price of the buy-back and the market value of the positions at breach when the repurchase should have occurred. They also submitted that by maintaining the positions until settlement, Lakatamia did not mitigate their loss.

Cooke J reasoned that the defendants’ conduct rendered inappropriate the s.50(3) prima facie rule, which remains subject to the overriding compensatory principle of putting the innocent party in the position it would have enjoyed had the contract been performed. Whenever pressed by  Mr. Haji-Ioannou, rather than renouncing the buy-back agreement, the defendants gave reassurances that all the positions would be repurchased. Indeed, they continually sought to buy back tranches of FFAs and to propose alternative means of compensation.

Neither did the defendants’ actions suggest that Lakatamia should mitigate its loss. Instead, they repeatedly agreed revised repayment schedules that obliged Lakatamia to obtain their permission before selling to third parties. These representations encouraged Lakatamia not to close the positions by going to the market, but instead to give the defendants time to buy back the outstanding positions and make up any shortfalls. Lakatamia was, therefore, entitled to recover the total loss incurred in settling the remaining positions in 2009, after giving credit for additional cash payments and charterparty discounts agreed with the TMT group.


The case offers a salutary reminder of how specific circumstances surrounding the formation of a disputed contract can be considered by the courts. Ordinarily, an owner or director neither agrees to be jointly liable with his corporate entity nor guarantees the latter’s performance, yet here the personal liability of Mr. Su arose from the unorthodox method in which the buy-back contract was made and recorded.

Most importantly, the judgment demonstrates the courts’ willingness to scrutinise the parties’ conduct when measuring loss and mitigation. The prima facie rule in s.50(3) Sale of Goods Act 1979 rests on it being open to  the seller to enter the market following breach. However, if the buyer constantly and insistently represents that he will complete the purchase, encouraging the seller not to dispose of the goods in the market, the measure of damages may not be based on the market price at the date of breach. Further, if the buyer confirms he intends to complete the purchase and tries to control any potential sales to third parties, the seller, in giving the buyer time to complete and refraining from going to the market, may not have failed to mitigate his loss.