In the case of Zodiac Maritime Agencies Ltd v Fortescue Metals Group Ltd  EWHC 903 (Comm), 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.
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.
Judgment for the claimant.
(1) Z's evidence was to be preferred as to the contents of the telephone conversation. The reasons for that conclusion included the fact that contemporaneous emails from F were consistent with an apparent intention on its part not to perform the charterparty unless more favourable terms could be agreed, and the fact that F had no contractual right to suspend or delay the charterparty. Any fair and objective reading of the exchanges between the parties, including the telephone conversation, was consistent only with F evincing a clear intention not to be bound by the charterparty. The principle in Woodar Investment Development Ltd v Wimpey Construction UK Ltd  1 W.L.R. 277 that a party who took action relying simply on the terms of the contract and not manifesting by his conduct an ulterior intention to abandon it was not to be treated as repudiating it, was of no application to the instant case, none of the specific factors required for the application of the principle, identified in Dalkia Utilities Services Plc v Celtech International Ltd  EWHC 63 (Comm),  1 Lloyd's Rep. 599, being present, Woodar and Dalkia considered. Even if F was under an honest misapprehension as to the legal position, that afforded no excuse from the consequences of its repudiatory breach. F had objectively evinced an intention not be bound and had thus to be treated as purporting to have renounced the charterparty.
(2) The appropriate quantum of damages was in the region of $80 million - $85 million. The vessel would have been trading for 1552.3 days during the remainder of the charterparty, its daily income would have been $89,875, and there was no available market on which it could have been fixed from January 2009 for the remainder of the charterparty. Rather, Z was left to go to the spot market. While an available market did emerge for a three-year charter from February 2010, that was not to be considered in the equation. The fact that at a later stage a term market emerged for the outstanding balance of the charter period did not mean that a decision not to take advantage of that market at that later stage became a business decision independent of the wrongful termination. The rationale was that acceptance of the market rate at the date of breach is deemed to constitute reasonable mitigation. When the vessel completed any spot voyages after the termination date was simply a matter of chance. Such spot voyages could, indeed, overrun the emergence of an available market. In short, there was no basis for requiring an owner to go back into the term market at the end of every spot voyage or to disregard short time charters in case the market for longer charters emerged in the meantime.