Golden Straight Corp v. NYKK
Note: this decision has been upheld by the Court of Appeal, in a judgment handed down on 18 October 2005. For a note on the Appeal judgment, click here
An appeal upon a point of law under s.69 of the Arbitration Act 1996 against the award of an Arbitrator was dismissed. The court held that the Arbitrator had been "right in his conclusion" on the quantification of damages following the wrongful termination of a timecharterparty. The issue had been whether or not an event happening subsequent to the termination could be taken into account, even when the occurrence of that event was uncertain at the time of termination
DMC’s Category Rating: Confirmed
This case note has been prepared by Hew Dundas, International Arbitrator, Mediator and Expert Determiner, who is a contributor and sub-editor to this website
The issue was of the assessment of damages for repudiation of a long-term charterparty. GSC submitted that, where there is an available market, damages are to be assessed once and for all at the date of breach at the charter rate less the market rate for the balance of the term of the charter.NYKK submitted that it was for GSC to prove that the breach had caused that loss and it could not do so if, in the events which occurred after the date of breach, the charterer would have been entitled to terminate, and would have terminated, the charter during the course of its remaining period. For example, if the charterparty had had, say, another 4 years to run when the charterer repudiated it and there had then been an available market, but the charter had contained a "War Clause" which would have entitled the charterer to cancel on the outbreak of war two years after the repudiation, does the owner's claim for charter rate less market rate run for two or four years? In the present case, the charterparty contained a clause (cl.33) giving owners and charterers the right to cancel the charter "if war or hostilities break out between any two or more of the following countries: USA, former USSR, PRC, UK, Netherlands, Liberia, Japan, Iran, Kuwait, Saudi Arabia, Qatar, Iraq…"
In his final award, the Arbitrator, Robert Gaisford, had found that: (i) there had been, at the time of repudiation (17 December 2001), an available market for the charter of vessels such as the "Golden Victory", whether in terms of a spot market or a market for period chartering; (ii) GSC in fact chose to trade the vessel on the spot market; (iii) the second Gulf war – namely the invasion of Iraq by US and UK forces in March 2003, some fourteen months after the repudiation of the charter - was "a war" within cl.33 of the charterparty such as to give either party the right to cancel it; (iv) at 17 December 2001, a reasonably well-informed person would have considered war between the United States/United Kingdom and Iraq "merely a possibility" but not "inevitable or even probable"; (v) NYKK would have cancelled the charterparty relying on cl.33 had the vessel remained on charter to the Company at the outbreak of the second Gulf war.
The shipowners submitted that:
The charterer submitted on the contrary that:
But he said that he could find no compelling or persuasive reason why the existence of an available market at the date of the breach, and a principle of mitigation founded upon it, should result in a strict rule applicable to the assessment of damages only in such cases and a rule which ignores normal considerations of actual loss and causation and is subject to a limited exception (that of the inevitability of the future event occurring) which itself does not find a parallel in any other field of the law.
Certainty in the law is, he acknowledged, a real and beneficial target, especially when major commercial decisions are to be taken on the basis of advice or knowledge of rights. But certainty, he said, is not easily achieved. For example, the charterparty in this case contained within it the commercial uncertainty of the War Clause. Why, he asked, should that uncertainty be ignored in the assessment of the loss which follows from the wrongful repudiation of that contract?
He then proceeded to consider the leading authorities, which he
identified as the "Mihalis Angelos" and the "Elena
D’Amico" – see above – North Sea Energy Holdings v. PTT 
1 Lloyd’s Rep. 483 and B.S.& N. Ltd v. Micado Shipping Ltd. (the
"Seaflower" )  2 Lloyd’s Rep. 37. He concluded
The judge accordingly dismissed the appeal.
Concluding, GSC has s.69-appealed Mr Gaisford twice and lost twice!
These Case Notes have been prepared with care, but neither the Editor nor the International and other Contributors can guarantee that they are free from error, nor that they contain every pertinent point. Reliance should not therefore be placed upon them without independent verification. The Editor and the International and other Contributors disclaim all liability for any loss of whatsoever nature and howsoever arising as a result of others acting or refraining from acting in reliance on the contents of this website and the information to which it gives access. The Editor claims copyright in the content of the website.