Globalia Business Travel S.A.U. (formerly TravelPlan S.A.U.) of Spain v Fulton Shipping Inc of Panama [2017] UKSC 43

Executive summary

In a recent shipping case, the Supreme Court considered whether a claimant ship owner who terminated a contract for the hire of a vessel following the charterer's repudiatory breach of contract was obliged to account for the profit that it made on the sale of its vessel when pursuing its claim for damages against the charterer. The Court found that capital profit from the sale need not be taken into account when assessing the loss in revenue occasioned by the breach of contract.


A vessel, the New Flamenco, was chartered by Globalia Business Travel SAU ("Globalia") the vessel was subsequently acquired by Fulton Shipping Inc ("Fulton") who became the owners for the purposes of that charter. In August 2005 the parties extended the charter for a further two years expiring on 28 October 2007. At a meeting some time later, Globalia and Fulton reached an oral agreement to further extend the charter by another two years, expiring on 2 November 2009.

Subsequently Globalia disputed having made the agreement to extend the charter further, and maintained that they were entitled to redeliver the vessel on 28 October 2007. Fulton treated Globalia as being in anticipatory repudiatory breach of contract, and on 17 August 2007 accepted the breach as terminating the charter. The vessel was then redelivered on 28 October 2007.

Shortly before the redelivery Fulton entered into an agreement for the sale of the vessel for US$23,765,000. The charter was governed by English law and provided for London as the seat of the arbitration. Fulton commenced an arbitration on 11 September 2007. Fulton's claim for damages was calculated based on the net loss of profit which would have been earned during the additional two year extension to the carter, giving credit for the costs and expenses of operating the vessel for the two years which had been saved as a result of the sale. Fulton claimed €7,558,375.

Globalia denied liability. A hearing took place in May 2013. At that time, following the financial crisis of 2008, it was apparent that there was a significant difference between the value of the vessel when it was sold in October 2007 and its value in November 2009 when it would have been redelivered to the owners had there been no breach of the charter. The arbitrator found that the value of the vessel in November 2009 was US$7,000,000.

Globalia argued that account had to be taken, and credit given, for the difference between the amount for which the vessel had been sold in October 2007 (US$23m) and its value in November 2009 (US$7m), which wiped out Fulton's claim. Fulton argued that this was legally irrelevant and should not be taken into account. There were two issues for the arbitrator to decide:

  1. Whether Fulton had been entitled to terminate the charter; and

  2. Whether they should give any credit for any benefit they had received by selling the vessel when they did.

On the first issue the arbitrator found that the further two year extension had been agreed orally and that the charter had been validly terminated by Fulton in response to Globalia's repudiatory breach. The arbitrator did not make findings of quantum on Fulton's claim but decided that Globalia were entitled to a credit of €11,251,677, being the equivalent price difference (expressed in Euros) for the benefit that Fulton had by selling the vessel in October 2007 for more than it was worth at the end of the charter period in November 2009. That credit extinguished the loss of profit claim.

Fulton appealed to the High Court pursuant to Section 69 of the Arbitration Act 1996 on a question of law, which was expressed as follows:

"… are the charterers entitled to have taken into account as diminishing the loss of earnings/hire sustained by the owner as a result of the accepted repudiation 'a benefit' said to consist of avoidance of a drop in the capital value of the vessel… if the vessel had been retained until after performance of the charterparty it would have had a lower capital value … through market decline in ship sale values in that period?"

The Judge in the High Court determined that on the facts found by the arbitrator the law did not require Fulton to give credit for any benefit in selling the vessel in October 2007 by reference to its capital value in 2009 "because it was not a benefit which was legally caused by the breach". Globalia appealed to the Court of Appeal which allowed the appeal. Fulton then appealed to the Supreme Court.


The Supreme Court reversed the decision of the Court of Appeal. The repudiation of the contract resulted in a prospective loss of income for a period of two years. But there was nothing about that termination of the charter which made it necessary to sell the vessel at that time or at all.Indeed, the vessel could have been sold during the charter. There was no causal link between the termination of the charter and the sale. The Court found that while there is no requirement that the benefit (in this case on the capital value) must be of the same kind as the loss being claimed or mitigated (here the loss of revenue on a charter) but such a difference in kind may be indicative that the benefit is not legally caused by the breach.

As a result, if the market value had risen between 2007 and 2009 Fulton would not have been able to claim that difference from Globalia, and the same analysis applies where there has been a diminution in the value of the asset. The Court noted that this analysis would be the same even if Fulton's commercial reasons for selling the vessel had been that there had been no work for it. All that would mean is that the premature termination; "is the occasion for selling the vessel. It is not the legal cause of it". For the same reasons the sale of the ship was not itself a successful act of mitigation. As the true measure of loss consequent upon the repudiation was the prospective loss of income for two years, if there had been a secondary rental market for the vessel, the Fulton would have been required (in order to mitigate its loss) to re-lease the vessel and claim any shortfall in the price obtained from the sum that it would otherwise have earned.


While this case concerned a charter of a vessel, it may have implications in a construction context where a party's conduct in a building contract may be the occasion for decisions around holding or disposing of assets in a development. The decision in this case would have to be kept in mind in assessing the risks and benefits of such a disposal.