Maestro Bulk v Cosco Bulk Carrier - The Great Creation
Maestro Bulk Ltd v Cosco Bulk Carrier Ltd, the “Great Creation”
English High Court; Cooke J;  EWHC 3978 (Comm), 15 December 2014
Charles Priday (instructed by Winter Scott) for Maestro Bulk Ltd, Claimants / Charterers
Andrew Baker QC (instructed by Holman Fenwick Willan) for Cosco Bulk Carrier Ltd, Defendants / Owners
TIME CHARTERPARTY: UNTIMELY REDELIVERY NOTICES: “BELOW MARKET” FOLLOW-ON FIXTURE: HOW DAMAGES TO BE CALCULATED: MITIGATION
Damages for untimely redelivery notices are prima facie calculated by reference to the period between (a) the actual redelivery date, and (b) the notional redelivery date had redelivery occurred after all contractually required notices had been properly given, starting from the date of the notice actually given.
A claim for the difference between the market hire rate and the lower hire rate of the follow-on fixture (the untimely notice of redelivery having deprived owners of the full contractual notice period in which to find a follow-on fixture), for the full duration of the follow-on fixture, was rejected.
This note has been contributed by Justin Gan Boon Eng, LLB (Hons) NUS, Advocate & Solicitor, Singapore (non-practising); Solicitor, Hong Kong
The “Great Creation” (“Vessel”) was chartered under an amended NYPE form, with redelivery required between 29 March to 14 May 2010. Charterers were to give “20/15/10/7 days approximate and 5/3/2/1 days definite notice” of redelivery.
Following unexpected events, on 13 April 2010, Charterers gave a purported approximate 20-day notice. The next day, purported approximate 15/10/7 notices were given. On 16 April 2010, 3/2/1 definite notices were given and redelivery of the Vessel was tendered on 19 April 2010, at Pasadena.
On 21 April 2010 Owners fixed the Vessel for a time charter trip from Guyana, under which the Vessel was delivered on 30 April 2010. That involved a 9-day ballast voyage to Guyana, and was (indisputably) fixed below the market rate.
In arbitration, Owners succeeded in a claim for damages based on their earnings on a notional lost voyage that they would have fixed if contractual notices had been given from 31 March onwards (for the 19 April redelivery), with credit given for Owners’ 21 April fixture on a pro-rata basis to take account of the ballast voyage.
Separately, the Tribunal found that “approximate” notice meant a 2-day margin. So a 20-day approximate notice could be given 18 days before actual redelivery.
Charterers obtained leave to appeal the Tribunal’s approach to damages as a question of law and were ultimately successful.
On the appeal, it was common ground that:
i) The giving of valid redelivery notices is not a condition precedent to an effective redelivery.
ii) The giving of a notice does not preclude the charterers from changing their minds and cancelling any such notice.
iii) There is only an actual breach of any notice provision on actual redelivery (although there may be an anticipatory breach on the giving of notices) and therefore the owners' losses as the result of any breach are to be assessed as of the date of redelivery.
iv) In consequence, the owners can be under no duty to mitigate loss before the date of breach.
v) Any notices relating to redelivery must be honestly given and on reasonable grounds.
Charterers argued that the Tribunal’s approach did not reflect the position Owners would have been in had there been no breach of the notice provision:
(a) As of 31 March, Charterers did not intend, and did not know, that the Vessel would be redelivered on 19 April. Notice given on 31 March would therefore not be bona fide or based on reasonable grounds.
(b) Instead, Charterers should have kept the Vessel on hire for the period of approximately 20 days (i.e. 18 days) from 13 April, while giving contractual notices. Owners’ damages should therefore be hire payable up to 1 May, with appropriate credit given for the 21 April fixture.
Mr Justice Cooke reasoned, from first principles that:
(a) Damages are intended to put an innocent party in the position it would have been had there been no breach. To say that the “no breach” position involved another breach of contract (see (b) below), instead of proper performance of the contract, would be contrary to principle.
(b) Here, notice given on 31 March would not be bona fide or based on reasonable grounds as Charterers did not at that time intend to redeliver the Vessel on or around 19 April – had such notice been given it would itself have breached the charter.
(c) The “no breach” position would be that of the Charterers giving the full range of contractual notices, starting on 13 April, when Charterers first decided to redeliver the Vessel, and paying hire in line with those notices.
(d) The prima facie measure of loss was therefore hire from 19 April – 1 May.
In the circumstances of this case, the judge did not require Owners to give credit for their earnings between the period 21 April and 1 May under the subsequent fixture, as nine days of that period were spent in the ballast voyage, in respect of which Owners earned nothing.
Owners had also argued that, because of the short un-contractual notices, the hire rate achieved on the subsequent fixture was “below market”, that is, if Owners had had the full notice period in which to fix the Vessel’s next employment, Owners could have obtained a higher hire rate. Owners argued that Charterers should therefore pay the difference between the “below market” rate obtained and the higher market rate, for the duration of the subsequent fixture.
Justice Cooke rejected Owners’ claim for damages beyond 1 May as being too remote, citing The Achilleas (Fn.1) and The Sylvia (Fn.2) . At the time of contracting, the parties would not have contemplated liability for a “below market” rate in a follow-on fixture, for the entire duration of that unknown follow-on fixture.
Fn.1  2 Lloyds Rep 81;  EWHC 542 (Comm)
Fn.2  2 Lloyds Rep 315;  EWHC 3994 (Comm)