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Having considered the authorities, the Judge noted that external hedges entered into as a result of a breach of contract could be brought into account. However, the internal swaps being addressed here were not legally recognised as binding contracts, they were purely internal arrangements within Charterers’ organisation, and they did not affect Charterers’ profit or loss.
As such, the Judge held that the internal swaps merely transferred the risk between Charterers’ portfolios, and so did not make good any loss to Charterers. Moreover, applying Swynson v Lowick Rose (fn.3), it was clear to the Judge that benefits from the other physical transactions in question were res inter alios acta (i.e. could not affect the rights or obligations of Owners, who were not a party to those transactions), and so were not to be brought into account to reduce the loss.
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