Golden Strait Corp v. NYKK (House of Lords)
In upholding the decisions of the Arbitrator, Commercial Court and Court of Appeal, the House of Lords, by a majority, confirmed that in quantifying the damages recoverable for wrongful repudiation of a long-term time charter, a tribunal was right to take into account an event occurring subsequently to the termination, even when the occurrence of that event was uncertain at the time of termination.
DMC Category Rating: Developed
Case note contributed by Jim Leighton, BSc (Hons), LLB, LLM (Maritime Law), Claims Consultant and International Contributor to DMC’s CaseNotes
The background to the dispute was neatly summarised by Lord Bingham:
"The dispute between the parties turns on the date at which the quantification of damages is to be made. The shipowners contend that the quantification should be made when, the repudiation having been made and accepted, they charter out (or may reasonably be expected to charter out) the vessel. Events occurring later, not affecting the value of the contractual right which the owner has lost at that time, are irrelevant. The charterers contend that the quantification should be made as of the date on which the damages actually fall to be assessed, taking account of any event which has by then occurred which affects the value of what the owners lost as a result of his repudiation. The maritime arbitrator who was the original decision-maker in this case (Mr Robert Gaisford) would have preferred to accept the owners' contention, but felt constrained by first instance authority to accept the charterers'. His decision was upheld by Langley J in the Commercial Court … and by Auld and Tuckey LJJ and Lord Mance in the Court of Appeal..."
Further background details are available in the Court of Appeal decision case note by following the hyperlink Golden Straight Corp v. NYKK
It was common ground that:
A single issue was formulated by the parties for determination by the House of Lords:
"Where damages for an accepted repudiation of a contract are claimed, in what circumstances can the party in breach rely on subsequent events to show that the contractual rights which have been lost would have been rendered either less valuable or valueless?"
Given that the Iraq war was not probable at the date of repudiation, the shipowners primarily relied on a passage from Megaw LJ’s judgment in The "Mihalos Angelos"  1 QB 164, p.210, to justify its approach to limiting the quantification of damages to the information (including probable future events) known as at the date of repudiation. That passage reads:
Lords Scott, Carswell and Brown dismissed the shipowner’s appeal. Lords Bingham and Walker would have allowed the appeal.
Lord Carswell noted that Megaw LJ’s judgment in The "Mihalos Angelos" was given in the context of it being completely certain, or ‘predestined’, that the contingency on which the charterer was entitled to cancel the contract would occur. As a result Megaw LJ’s judgment was correct but had to be read as limited to that context. Also, in The "Mihalos Angelos", neither Lord Denning MR nor Edmund Davies LJ had gone so far as to tie the consideration of subsequent events to those which could be seen at the date of repudiation as certain to happen. As a result it was doubtful that Megaw LJ intended to enunciate a general rule limiting consideration of subsequent events to those predestined to happen, seen from the date of acceptance of repudiation.
The reading of Megaw LJ’s judgment in The "Mihalos Angelos" in the way favoured by the shipowner had also been rejected in The "Seaflower"  2 Lloyd’s Rep 37, 44, by Timothy Walker J, where there was some similarity to the facts of The "Mihalos Angelos". [For the facts of The "Seaflower" case, as summarised by Lord Bingham at para.19, see footnote] In The "Seaflower" it was not inevitable or predestined that the shipowner would be unable to satisfy the condition subsequent at the date of repudiation (although it was highly likely), but failure to comply with the condition subsequent did later become inevitable. The result of the judgment in The "Seaflower" was, therefore, that a supervening event was capable of limiting the measure of damages.
In applying the principle of The "Seaflower", Lord Carswell agreed with the statement of Lord Mance in the Court of Appeal in this case, that "considerations of certainty and finality … yield to the greater importance of achieving an accurate assessment of the damages based on the loss actually incurred".
But, on the authority of the House of Lords decision in the case of Bwllfa and Merthyr Dares Steam Collieries (1891) Ltd v. Pontypridd Waterworks Co  AC 426, this principle did not apply in cases where, by the time at which the assessment of damages had to be made, it was already known whether or not the contingency had occurred. It was wrong, in these circumstances, to ignore the facts as they had turned out. Lord Carswell quoted Lord McNaughten in the Bwllfa Colliery case to the effect:
"Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can calculate? With the light before him, why should he shut his eyes and grope in the dark?"
Lord Carswell concurred also with the example given by Lord Brown to illustrate the bizarre result of the shipowners’ approach. Lord Brown said that (on the minority’s view) the inescapable logic was that where war was probable at the time of breach but had not happened when quantification took place "the damages award would have had to reflect a risk which never in fact eventuated - a conclusion in the circumstances, greatly to the owner's disadvantage".
Further, Lord Brown held that the shipowners’ argument sought to extend the effect of the "available market" rule "well beyond its proper scope" and to do so "at the plain expense of Lord Blackburn's fundamental principle: to restore the injured party to the same position he would have been in but for the breach, not substantially to improve upon it." The present situation did not warrant an exception to this fundamental principle.
The judgment of Lord Scott made the same point. He noted that:
While assessing damages at the date of the breach could usually achieve that result it did not always do so. It followed that where an award gave a greater or lesser sum of damages for the benefit of the bargain lost it would fail to provide a just result.
Lord Scott highlighted that a just result was achieved here because
The shipowners here sought to justify, on the grounds of commercial certainty, a simplified approach to the quantification of damages, by which events occurring after the breach occurred were to be ignored. But the way that the law has developed, particularly through the complexities of personal injury cases, indicates that the courts prefer a more realistic approach for determining the injured party’s true loss.
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