Miranos v. VOC Steel
In this case the judge granted leave to appeal on a point of law under s.69 of the Arbitration Act and then heard the appeal. He held that the arbitrator had erred in holding that the word "guarantee" in relation to the duration of a time charterparty amounted to a guarantee of a minimum lump sum remuneration, whether any actual damage was suffered by early redelivery or not. On the contrary, this was a case where the ordinary rule for the calculation of damages for early redelivery applied – namely, the difference between the charter rate and the market rate for the vessel for the period of the early redelivery or, if there was no market rate, the normal and direct loss suffered by the owners. The award was remitted to the arbitrator for him to determine damages on these principles
DMC Category Rating: Confirmed
The owners claimed payment of hire at the charter rate for the full 35 days of the guaranteed period. The charterers agreed to pay only the difference between the charter rate and the vessel's actual earnings for the period of the shortfall. The claim went to arbitration.
In his award, the arbitrator considered that the word "guarantee" in relation to duration involved a different obligation from the obligation to re-deliver on a specified day. He held that the guarantee amounted to a guarantee of a minimum lump sum remuneration in respect of the time charter trip, regardless whether or not any actual damage was suffered by reason on the early re-delivery. The voyage which followed was not, he said, taken in mitigation of the early re-delivery because it was going to be performed in any event. Consequently, he awarded in owners’ favour.
In the appeal, owners, as respondents, accepted that they had to give credit for any additional benefits they had enjoyed by reason of the breach, and those benefits might include additional hire they had earned by reason of the breach. Where, however, the innocent party would have earned the sum in question with or without the breach, it could not be said that it had earned that sum by reason of the breach. Thus, if earnings on the subsequent charter were (as here) exactly the same, with or without the breach, no part of those earning could be taken into account in mitigation of damages. The only benefit to owners was that they had received the freight for the subsequent fixture one and a half days earlier than they would have done had the vessel been redelivered on time.
The effect of the early re-delivery was to make the vessel available to owners for a period of one and a half days. Not only did the owners earn their money on the next voyage one and a half days earlier than they otherwise would have done, they also had one and a half days more to use the vessel than they otherwise would have done. In such circumstances, the "prima facie measure of damages for early re-delivery is applicable here. The use of the word "guarantee" in the charter was to distinguish it from others where estimates of duration are given…It does not impact in any way on the measure of damages if the obligation is broken". The owners had to give credit for any benefits arising to them. The usual measure of damages for early re-delivery was applicable.
The arbitrator had also misdirected himself on the issue of mitigation, when he had considered that what mattered was whether or not the succeeding voyage had been concluded as a result of the early re-delivery.
The simple equation for measuring damages to which owners were
entitled was the comparison between the charter rate and the available market
rate for the one and a half days or, if there was no market rate the normal and
direct loss the owners suffered. The award was remitted to the arbitrator for
him to make a finding as to the owners’ loss on that basis.
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