In the case of Parbulk AS v Kristen Marine SA - [2010] EWHC 900 (Comm), the claimant was entitled to summary judgment on its claim for its "proven expenses including, but not limited to, legal costs and breakage cost with the Buyer's lenders" following the cancellation of memorandums of agreement for the purchase of four vessels.

The applicant (P) applied for summary judgment against the respondents (K) pursuant to guarantees of the liability of four special purpose vehicles under four memoranda of agreement. K decided to restructure the financing of the acquisition of four bulk carriers from a Chinese shipyard by means of a sale and leaseback transaction with P. The special purpose vehicles (SPVs), of which the second respondent was the holding company, became party by novation to the four shipbuilding contracts with the shipyard. The SPVs entered into four memoranda of agreement to sell the four vessels to P and P entered into four bareboat charters to charter the four vessels back to the SPVs, for a minimum period of five years, with options for a further five years, containing rights for the SPVs to have first refusal to purchase the vessels and options for the SPVs to buy back the vessels. P financed the transaction by borrowing from a French bank. The charter income payable by the SPVs to P under the charters was fixed, but the loan agreement provided for interest to be payable on a floating basis. Accordingly, the bank required P to hedge the interest rate fluctuation risk for the loans for a period of at least three years by entering into a swap agreement with the bank on ISDA terms. There was substantial delay by the shipyard under the shipbuilding contracts and P exercised its right to cancel the memoranda of agreement. Thereafter P claimed, pursuant to clause 14 of the memoranda, its "proven expenses including, but not limited to, legal costs and breakage cost with the Buyer's lenders". It claimed the costs of terminating the swap transactions of some US$14 million and other out of pocket expenses. K argued that the swap costs claimed were arguably not "proven expenses" nor "breakage cost with the Buyer's lenders".

The application was granted.

(1) Clause 14 did not constitute an indemnity clause, and P had to establish that the losses and expenses were foreseeable and reasonably incurred. It was reasonably foreseeable that P would enter into a swap agreement which fixed the interest rate exposure in respect of the loan. K knew of and had available to them the loan agreement containing the hedging obligations, which they only had to ask for if indeed they did not have a copy, and were contractually obliged to confirm that they had acquainted themselves with its terms. When that was taken together with the express provision of the charter which further put them on notice, P's entry into the hedging arrangements was reasonably foreseeable, and hence not too remote. Compliance with the hedging obligations could not be characterised even arguably as unreasonable.

(2) The swap losses were "breakage cost" in respect of the financing arrangements by P, being the sums that P had to pay out to the bank as a consequence of the early termination of those arrangements. The use of the word "with" in the phrase "breakage cost with the Buyer's Lenders" was wide enough to cover arrangements of an ancillary kind such as a swap transaction, and was not limited to the breakage cost of the loan made by the bank to P. If that was wrong, the swap costs were sufficiently close to the example given as to be eiusdem generis, and thus fell within the definition of "proven expenses".

(3) Thus, all the issues of liability were resolved in favour of P. K were ordered to pay P US$14,335,647 in relation to the swap costs and US$721,312 as expenses, but certain further issues in respect of the amount of the swap costs and expenses were left open.