The Supreme Court is poised to determine a case which could see a sea change in the way damages are assessed for breach of contract.
Gateley Plc’s Nick Walser is advising the claimant.
Judgment is awaited from the UK Supreme Court in a case which is likely to have an important impact on how damages are assessed for breach of contract under English law.
Gateley Plc’s shipping team is advising Fulton Shipping Inc, the former owner of the cruise ship New Flamenco, on a long-running dispute resulting from the repudiation of a two-year charter agreement in 2007 by a Spanish charterer, Globalia Business Travel.
In an arbitration award issued in 2013, Globalia was found to have wrongfully repudiated the contract. However, Fulton was not awarded any damages.
Shortly after Globalia walked away from the charter in 2007, the ship was sold, and the arbitrator found that if Fulton had kept the ship for two more years (the period for which it should have been chartered to Globalia) its value would have dropped by around US$16 million due to the global financial crash of 2008-9. He therefore decided that Globalia should receive the benefit of the early sale under the legal principle of ‘mitigation of damages’ and this cancelled out the €7.5 million of lost profits claimed by Fulton.
On appeal to the Commercial Court in 2014 this was overturned, but Globalia then appealed to the Court of Appeal, which found in their favour.
Earlier this year Fulton, assisted by Gateley, succeeded in obtaining permission to appeal to the UK’s highest court, and the appeal was finally heard at the end of November.
Gateley engaged Steven Gee QC as leading counsel on behalf of Fulton, and in his opening submissions to the five Supreme Court Justices, Mr Gee offered the following succinct summary of Fulton’s position:
“The charterers want part of the ship to offset against the damages.
“They can’t have it, because it’s not their ship. It’s my ship, I paid for it, and its value belongs to me.”
This encapsulates, in simple terms, Fulton’s main legal argument, based on past case law, that the principle of mitigation of damages does not require a claimant to give credit for a benefit which arises from the claimant’s prior investment of his own money.
Here, Globalia’s breach caused Fulton to lose profits of €7.5 million, and that loss was not mitigated by Fulton’s decision to convert a capital asset into cash at a particular point in time.
This case gives the Supreme Court an opportunity to review the principles underlying the rules of mitigation of damages in English law generally, and its significance is not confined to shipping contracts.
Further details of the case can be found on the Supreme Court website: https://www.supremecourt.uk/cases/uksc-2016-0026.html
The Court’s decision is likely to be published in early 2017. We’ll be back with a full report then …
For further information, please contact:
Nick Walser, partner in Gateley Plc’s shipping team, Tel: +44 (0) 207 653 1621 Email: Nicholas.firstname.lastname@example.org