Hawk Shipping v. Cron Navigation

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Hawk Shipping Ltd v Cron Navigation Ltd
English Commercial Court: Toulson J.: 11 July 2003
T. Raphael, instructed by Hill Taylor Dickinson, for Hawk
M. Nolan, instructed by Michael Lloyd & Co., for Cron
This appeal concerned the basis on which the arbitrator calculated the charterer's loss once he had found that the owners had wrongfully withdrawn the vessel. The owners argued that the arbitrator had based his calculation on the charterer's figure for loss of earnings without taking into account the available market for an alternative vessel.

DMC Rating Category: Confirmed

This case note is based on an Article in the November 2003 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA. DLA is an International Contributor to this website

The charterparty in this case was on an amended Baltime 1939 form for a period of 4 months, plus or minus 10 days, with options for the charterer to renew for two further periods of 3 months. The vessel was delivered on 21 July 2000 and performed a number of voyages before being withdrawn from charter by the owners on 20 October 2000.

The charterer said it would have extended the charterparty for the maximum period and claimed as loss of profits the difference between the freight it would have earned over that period and the expenses it would have incurred in earning it. The owners, however, argued that the charterers could have chartered another vessel and that the measure of damages should be the difference between the charterparty hire rate and the hire rate of the substitute vessel.

The arbitrator adopted the charterers' approach but also applied his own commercial judgment in deciding what would be a reasonable profit level over what period - $200 per day over 233 days. The total award was $72,477 plus interest and costs.

The owners wrote to the arbitrator asking about the basis of his calculation, relying on section 57(3)(a) of the Arbitration Act 1996 (which enables a party to ask the arbitrator to correct a clerical mistake or clarify or remove any ambiguity in the award). The arbitrator responded to say that there was no satisfactory evidence that a suitable replacement vessel could have been found for this cargo of ammonium nitrate. The owners could have provided evidence of the availability of alternative suitable tonnage during the arbitration but had failed to do so.

Not satisfied with this, the owners issued an application to the court under section 68, claiming there had been a serious irregularity. Not only had the arbitrator ignored their argument about the proper calculation of damages (and so overlooked a central part of their case), but the owners had been taken by surprise at the arbitrator's decision to adopt the charterer's basis of calculation and had not had proper opportunity to put in evidence of the availability of an alternative vessel.

The judge was not impressed by the owners’ arguments. As in any claim for damages for breach of contract, the loss recoverable by the charterer was the loss naturally and directly resulting from the breach. Where one party to a contract fails to perform his obligations and where there is an available market in which a substitute vessel or substitute goods or services can be obtained, the normal measure of loss will be the difference between the contract rate and the rate of obtaining a substitute. There is, however, no legal presumption that there is an available market. It is a question of fact in each case.

It was implicit from the owners' pleadings that there was an available market, but they had provided no evidence. It was for the arbitrator to determine questions of fact. With no direct evidence from either side, he had considered the matter himself and his letter explained why he was not persuaded that a suitable replacement vessel could have been located. There was nothing in the decision that approached irregularity, let alone a serious irregularity within the meaning of section 68.



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