Caselaw Digest
Caselaw Digest

Orion Shipping and Trading Ltd v Great Asia Maritime Limited

9 August 2024
[2024] EWHC 2075 (Comm)
High Court
A buyer cancelled a ship sale contract because the seller was late giving notice, due to negligence. A judge decided the contract only allowed the buyer to get money for costs directly caused by the late notice, not for losing the entire deal. The buyer lost the appeal.

Key Facts

  • •Appeal under section 69 of the Arbitration Act 1996 against a Partial Final Award.
  • •Dispute concerned cancellation of a Memorandum of Agreement (MOA) for sale of a vessel, MV "LILA LISBON".
  • •Buyers cancelled due to Sellers' failure to give Notice of Readiness by the Cancelling Date, attributed to Sellers' proven negligence.
  • •Tribunal awarded Buyers US$1,850,000 damages, reflecting loss of bargain damages under section 51 of the Sale of Goods Act 1979.
  • •Appeal focused on whether Buyers were entitled to loss of bargain damages under clause 14 of the MOA without a repudiatory breach.

Legal Principles

Whether a term is a condition, warranty, or innominate term is a matter of contractual construction; courts should not readily interpret clauses as conditions; where a breach may have varying consequences, it likely isn't a condition.

The Spar Capella, [2016] EWCA Civ. 982; [2016] 2 Lloyd’s Rep. 447 at [52]; The Arctic, [2019] EWCA Civ. 1161; [2019] 2 Lloyd’s Rep. 603 at [46]

Loss of bargain damages cannot be recovered on exercise of a contractual right of termination unless a repudiatory breach is shown and common law termination for repudiation is exercised.

Phones 4U Ltd v EE Ltd, [2018] EWHC 49 (Comm); [2018] Bus. L.R. 574; The Kos, [2012] UKSC17; [2012] 2 AC 164; The Spar Capella (supra)

Parties can expressly provide for consequences of contractual cancellation, stipulating different rights compared to termination for repudiatory breach.

Case Law discussed in sections 35

The measure of damages is the estimated loss directly and naturally resulting from the seller's breach of contract (Sale of Goods Act 1979, section 51(2)).

Sale of Goods Act 1979, section 51(2); Sharp Corp Ltd v Viterra BV, [2024] UKSC 14 at [96]

Outcomes

Appeal succeeded.

The court held that clause 14 of the MOA did not entitle Buyers to loss of bargain damages in the absence of a repudiatory breach. The court interpreted the clause as providing compensation for losses directly caused by the failure to give Notice of Readiness, not the loss of the contract itself.

Paragraphs (E) and (F) of the Award (awarding loss of bargain damages) set aside.

The Tribunal erred in concluding that Sellers were under a positive obligation to deliver by the Cancelling Date and that clause 14B encompassed loss of bargain damages. The court found the relevant trigger for damages was the failure to give Notice of Readiness, limiting recoverable losses to those directly caused by that failure.

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