The former owners of the ‘New Flameno’ appealed from an arbitration award. A charter of the vessel had been repudiated with two years left to run. The owners chose to sell. They made a substantial profit over the price they would have received after the full term of the charter. The arbitrator set off that profit against the losses arising on the repudiation. The owners now appealed.
Held: On the facts found by the arbitrator, the application of the principles of law which he had identified did not require the owners to give credit for any benefit in realising the capital value of the vessel in October 2007, by reference to its capital value in November 2009, ‘because it was not a benefit which was legally caused by the breach.’
The search for a single general rule which determines when a wrongdoer obtains credit for a benefit received following his breach of contract or duty is elusive . . Nevertheless a number of principles emerge from the authorities considered above which I would endeavour to summarise as follows: (1) In order for a benefit to be taken into account in reducing the loss recoverable by the innocent party for a breach of contract, it is generally speaking a necessary condition that the benefit is caused by the breach: Bradburn, British Westinghouse, The Elena D’Amico, and other authorities considered above.
(2) The causation test involves taking into account all the circumstances, including the nature and effects of the breach and the nature of the benefit and loss, the manner in which they occurred and any pre-existing, intervening or collateral factors which played a part in their occurrence: The Fanis.
(3) The test is whether the breach has caused the benefit; it is not sufficient if the breach has merely provided the occasion or context for the innocent party to obtain the benefit, or merely triggered his doing so: The Elena D’Amico. Nor is it sufficient merely that the benefit would not have been obtained but for the breach: Bradburn, Lavarack v Woods, Needler v Taber.
(4) In this respect it should make no difference whether the question is approached as one of mitigation of loss, or measure of damage; although they are logically distinct approaches, the factual and legal inquiry and conclusion should be the same: Hussey v Eels.
(5) The fact that a mitigating step, by way of action or inaction, may be a reasonable and sensible business decision with a view to reducing the impact of the breach, does not of itself render it one which is sufficiently caused by the breach. A step taken by the innocent party which is a reasonable response to the breach and designed to reduce losses caused thereby may be triggered by a breach but not legally caused by the breach: The Elena D’Amico.
(6) Whilst a mitigation analysis requires a sufficient causal connection between the breach and the mitigating step, it is not sufficient merely to show in two stages that there is: (a) a causative nexus between breach and mitigating step; and (b) a causative nexus between mitigating step and benefit. The inquiry is also for a direct causative connection between breach and benefit (Palatine), in cases approached by a mitigation analysis no less than in cases adopting a measure of loss approach: Hussey v Eels, The Fanis. Accordingly, benefits flowing from a step taken in reasonable mitigation of loss are to be taken into account only if and to the extent that they are caused by the breach.
(7) Where, and to the extent that, the benefit arises from a transaction of a kind which the innocent party would have been able to undertake for his own account irrespective of the breach, that is suggestive that the breach is not sufficiently causative of the benefit: Lavarack v Woods, The Elena D’Amico.
(8) There is no requirement that the benefit must be of the same kind as the loss being claimed or mitigated: Bellingham v Dhillon, Nadreph v Willmett, Hussey v Eels, The Elbrus, cf The Yasin; but such a difference in kind may be indicative that the benefit is not legally caused by the breach: Palatine.
(9) Subject to these principles, whether a benefit is caused by a breach is a question of fact and degree which must be answered by considering all the relevant circumstances in order to form a commonsense overall judgment on the sufficiency of the causal nexus between breach and benefit: Hussey v Eels, Needler v Taber, The Fanis.
(10) Although causation between breach and benefit is generally a necessary requirement, it is not always sufficient. Considerations of justice, fairness and public policy have a role to play and may preclude a defendant from reducing his liability by reference to some types of benefits or in some circumstances even where the causation test is satisfied: Palatine, Parry v Cleaver.
(11) In particular, benefits do not fall to be taken into account, even where caused by the breach, where it would be contrary to fairness and justice for the defendant wrongdoer to be allowed to appropriate them for his benefit because they are the fruits of something the innocent party has done or acquired for his own benefit: Shearman v Folland, Parry v Cleaver and Smoker.’
Popplewell J
[2014] EWHC 1547 (Comm), [2014] 1 CLC 711, [2015] 1 All ER (Comm) 1205, [2014] 2 Lloyd’s Rep 230, 154 Con LR 183
Bailii
England and Wales
Citing:
Cited – Golden Strait Corporation v Nippon Yusen Kubishka Kaisha (‘The Golden Victory’) HL 28-Mar-2007
The claimant sought damages for repudiation of a charterparty. The charterpary had been intended to continue until 2005. The charterer repudiated the contract and that repudiation was accepted, but before the arbitrator could set his award, the Iraq . .
Cited – Bradburn v Great Western Rail Co CEC 1874
The plaintiff had received a sum of money from a private insurer to compensate him for lost income as a result of an accident caused by the negligence of the defendant.
Held: He was entitled to full damages as well as the payment from the . .
Cited – British Westinghouse Electric and Manufacturing Co v Underground Electric Railways Co (London) Limited HL 1912
The plaintiffs purchased eight steam turbines from the defendants. They later proved defective, and the plaintiffs sought damages. In the meantime they purchased replacements, more effective than the original specifications. In the result the . .
Cited – Staniforth v Lyall And Others 27-Nov-1830
Defendants chartered a ship to New Zealand, where they were to load her, or by an agent there to give Plaintiff, the owner, notice that they abandoned the adventure; in which case they were to pay him 5001. The ship went to New Zealand, but found . .
Cited – Wertheim v The Chicoutimi Pulp Company PC 18-Mar-1910
(Quebec) The buyer sought damages for late delivery of goods calculated on the difference between the market price at the place of delivery when the goods should have been delivered and the market price there when the goods were in fact delivered. . .
Cited – The Erie County Natural Gas and Fuel Company Limited and Others v Samuel S Carroll and Another PC 14-Dec-1910
(Ontario) The defendant was found to have breached its obligations to supply natural gas to the plaintiff. The plaintiff spent money on works to procure its own supply, and subsequently sold those works at a profit.
Held: Their Lordships . .
Cited – Jebsen v East and West India Dock Co CCP 25-Feb-1875
Delay caused by a charterer in discharging cargo caused the shipowner to lose passengers whom he had contracted to carry but he was able to take the same passengers in another of his vessels.
Held: The shipowners’ damages were not to be . .
Cited – Shearman v Folland CA 1950
The injured plaintiff had lived before the accident in hotels to which she paid seven guineas a week for board and lodging. After the accident she spent just over a year in nursing homes at a cost of twelve guineas a week exclusive of medical . .
Cited – Shearman v Folland CA 1950
The injured plaintiff had lived before the accident in hotels to which she paid seven guineas a week for board and lodging. After the accident she spent just over a year in nursing homes at a cost of twelve guineas a week exclusive of medical . .
Cited – Lavarack v Woods of Colchester Ltd CA 19-Jul-1966
The plaintiff had been wrongly dismissed. He came to be employed by Martindale at a lower salary, and bought shares in Martindale and Ventilation which increased in value.
Held: The new salary and the increase in the value of the Martindale . .
Cited – Parry v Cleaver HL 5-Feb-1969
PI Damages not Reduced for Own Pension
The plaintiff policeman was disabled by the negligence of the defendant and received a disablement pension. Part had been contributed by himself and part by his employer.
Held: The plaintiff’s appeal succeeded. Damages for personal injury were . .
Cited – Bellingham v Dhillon QBD 1973
The plaintiff claimed damages for personal injuries, and in particular the loss of profits from his driving school business. He lost the opportunity to lease a driving simulator which would have enabled his company to earn a continuing profit. In . .
Cited – Nadreph Ltd v Willmett and Co 1978
The landlord of commercial premises brought a claim in negligence against its solicitors for a notice to terminate the tenancy, which caused the tenant (Citroen) to vacate the premises and become entitled to statutory compensation from the landlord. . .
Cited – The Yasin 1979
Receivers claimed against shipowners under a bill of lading for loss of a cargo. The shipowners argued on a preliminary issue that the insurance proceeds paid to receivers fell to be taken into account so as to wipe out the damages claimed. They . .
Cited – Golden Strait Corporation v Nippon Yusen Kubishka Kaisha (‘The Golden Victory’) HL 28-Mar-2007
The claimant sought damages for repudiation of a charterparty. The charterpary had been intended to continue until 2005. The charterer repudiated the contract and that repudiation was accepted, but before the arbitrator could set his award, the Iraq . .
Cited – Choil Trading Sa v Sahara Energy Resources Ltd ComC 26-Feb-2010
Losses incurred from hedging undertaken in mitigation of breach of a sale contract are recoverable . .
Cited by:
Appeal from – Fulton Shipping Inc of Panama v Globalia Business Travel Sau CA 21-Dec-2015
The charter of the ship ‘New Flameno’ was repudiated two years early. The owners sold it, making rather more profit than they would have if sold after the end of the term. The court was now asked how the profit should affect the loss claim on the . .
At first Instance – Globalia Business Travel Sau of Spain v Fulton Shipping Inc of Panama SC 28-Jun-2017
The court was asked how to assess damages arising out of the repudiation of a charterparty by charterers of a cruise ship, the ‘New Flameno’. The charter ending two years early, the owners chose to sell, and in the result got a much better price . .
Lists of cited by and citing cases may be incomplete.
Damages, Transport
Updated: 28 November 2021; Ref: scu.525784
