Precious Capitals v. Transworld Cargo

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Precious Capitals Ltd. v. Transworld Cargo Carriers S.A
New York Arbitration: Society of Maritime Arbitrators: James J. Warfield, Chairman, Manfred Arnold and Jack Berg, arbitrators: 3 November 2003

James H. Hohenstein, of Haight Gardner Holland & Knight, for Precious Capital
Tulio R. Prieto, of Cardillo & Corbett, for Transworld Cargo

In this case, New York arbitrators unanimously held that damages for repudiation of a trip time-charter were to be calculated on the basis of the minimum period of the charterparty, without reference to the intended voyage. On that basis, owners could not recover damages for the loss of opportunity to trade the vessel from the anticipated redelivery area. Further, by re-fixing the vessel under one of their existing contracts of affreightment at rates which did not reflect the market price, owners had failed to mitigate their damages.

DMC Category Rating: Confirmed

On 15 May 2000, Precious Capitals, as owners of the mv. "Tharinee Naree", chartered her to Transworld Cargo on a New York Produce Exchange form time-charter for the period of a voyage from Osaka, Japan via safe ports, for redelivery in the Tampa/Trinidad range. The intended cargo was steel products. On 21 May 2000, Transworld advised owners that their cargo interests had cancelled the steel shipment. Four days later, Transworld told owners that they would not be accepting delivery of the vessel and that owners should mitigate their damages accordingly.

Owners brought two claims to arbitration; the first, amounting to US$134,818, represented their "direct" losses, being the difference between the anticipated time-charter hire and the amounts actually earned in mitigation. The second, in the amount of US$66,000, represented owners’ potential freight losses due the charterers’ failure to redeliver the vessel in the US Gulf, where she could have found onward employment without the need of an extensive ballast voyage.

The owners argued that, since the charterers had already given voyage orders before repudiating the charterparty, all damages should be based on the specifics of that voyage, as regards both duration and redelivery. On that basis, redelivery would have been at Brownsville, Texas.

The tribunal did not accept this argument. Citing the judgment of Lord Mustill in the case of The "Rijn" [1981] 2 Ll.Rep.267, the panel found that owners’ concept had no application to a time-charter, "where the ship is at the free disposition of the charterer for any service, so long as he does not exceed the stipulated limits of cargo and of port". The tribunal held therefore, that the direct losses should be calculated on the minimum period of the charter, and by reference to the market rate, rather than the rate at which the ship had actually been employed. "Employing the vessel under owners’ existing contract of affreightment, which do not reflect the prevailing market level, does not, in the panel’s view, meet the test of mitigation", said the tribunal.

The tribunal’s finding that the damages arising from the charterers’ breach should not be based on the declared voyage was also sufficient to dispose of the second part of owners’ claim, namely the potential loss of freight consequent upon the charterers’ failure to redeliver the ship at Brownsville, Texas. "Having concluded that charterers did not have an obligation to redeliver the vessel at Brownsville and are entitled t invoke the minimum charter duration for the purpose of the damage calculations, it follows that the charterers cannot be held responsible for the positioning damages as claimed", said the panel.

Owners’ claim was accordingly reduced to US$56,287. A majority of the panel, Mr. Arnold dissenting, directed that each side should bear its own costs.


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