DMC Category Rating: Confirmed

Facts
The appellant charterers, Miranos, appealed under the Arbitration Act 1996 s.69 against an arbitration award in which the arbitrator held that the owners, VOC Steel, were entitled to hire for the guaranteed duration of a time charter after the vessel's early re-delivery. The charter was on an amended New York Produce Exchange form for the period of a voyage from the US Gulf to the Eastern Mediterranean, the charterers guaranteeing a minimum 35 days' duration. In the event, the vessel's employment lasted only 33 days, 12 hours and 31 minutes, some 35.5 hours short of the guaranteed period. Immediately after redelivery, the vessel sailed on the ballast leg of her next employment, some one and a half days earlier than would otherwise have been the case. That employment had been fixed before it had been known that she would be re-delivered early.

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.

Judgment
The judge held that the arbitrator erred in holding that the guarantee amounted to a guarantee of a minimum lump sum remuneration, whether any actual damage was suffered or not. The guarantee of minimum duration could not amount to a guarantee of remuneration. The only guarantee was of duration. If one and a half days had been taken up in off-hire and the voyage had lasted 35 days, there would have been no breach of the guarantee even though 35 days' hire was not paid. The breach of the guarantee was the same as a breach of warranty that the charter voyage would be of a certain length and the relief to be granted in respect of such a breach was damages.

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.

The appeal was accordingly allowed.