HHJ Chambers QC :
- As set out below, this case has proceeded in the absence of the Defendant.
- As is customary, this judgment was forwarded in draft form to the Claimant and to the Defendant. The Claimant was instructed to notify the Court of any typographical and other obvious errors prior to a handing down which was to be on Friday, 19 August 20011.
- The draft judgment raised a number of matters that it was anticipated would be dealt with at a further hearing in order to finalise my findings.
- By a letter dated 18 August 2011 Stephenson Harwood, the solicitors acting for the Claimant, asked me to delay the handing down of my judgment in order that it could be finalised in the light of a further witness statement made by Mr Jonathon Solomon as well as a further skeleton argument ("the second skeleton argument") together submissions that were to be made at the hearing due to take place on 23 August 2011.
- I agreed to the request and this judgment reflects the further evidence, skeleton argument and submissions, which include concessions on (in the context of the case) relatively minor disputes.
- By a further letter dated 25 August 2011 together with a schedule, Stephenson Harwood gave the correct figure in respect of the discount that is referred to at paragraphs 195 and 196 of this judgment which now contain that figure, namely US$13,248.
- This judgment follows a trial of this action on the merits in the voluntary absence of the Defendant, a Russian company, following an unsuccessful attempt on its part to challenge the jurisdiction of the court.
- The judgment is derived from the documents in the trial bundle, the oral and written witness evidence and the submissions of counsel. Where I have thought it useful to the reader to do so or there appears to be disagreement between the parties, I have identified the specific source of the information relied upon.
- Despite the extensive documentation with which I have been provided, including a number of relevant financial documents, I do not have a completely comprehensive paper trail. By way of example I do not have log entries in respect of various incidents. I should make it clear that I do not say this by way of criticism, however, it does mean that I have depended heavily upon the witness evidence which for the most part I have found to be detailed and convincing, especially in respect of the major aspects of the case.
- The following gave sworn evidence:
Mr John Phillips, a Commercial Operator with STAR Reefers UK Limited ("Star") who act as agents for the Claimant.
Mr Jonathan Solomon, a Chartering Manager with Star.
Mr Douglas Spooner, Star's Operations Manager.
Mr Edward Dempster, Star's Group Risk, Insurance and Claims Manager.
Mr Sean Gibbons, a partner in the firm of Stephenson Harwood, the Claimant's solicitors.
Dr Alan Legge, a post harvest consultant with CWA International Ltd of London.
Mr Nigel Thompson, a consulting engineer with Brooks Bell of Liverpool.
Mr Espen Harr, a shipbroker specialising in reefer trades, of Esmar Ltd of Oslo.
- Some of the witnesses simply confirmed their written evidence and others were asked to expand upon it.
- As originally made the claim was for US$16,556,956.48 said to be owed to the Claimant by the Defendant under two contracts of guarantee ("the guarantees") (TB/D1/71, 72). On 1 April 2011, Burton J granted the Claimant summary judgment on the issue of whether the guarantees were valid and binding.
- The guarantees are in respect of the obligations of Kalistad Ltd ("Kalistad"), a Cypriot company which is affiliated to the Defendant, under two charterparties dated respectively 4 April 2008 ("the April Charterparty") (TB/D1/16 et seq) and 15 July 2008 ("the July Charterparty") (TB/D1/42). Each charterparty was on an amended Baltime 1939 form and was for a period of 36 months plus or minus 30 days. Mutatis mutandis the terms of the two charterparties were the same.
- By the April Charterparty the Claimant chartered to Kalistad the reefer vessels M.V. ALMEDA STAR ("the Almeda Star") and the M.V. AVELONA STAR ("the Avelona Star"). By the July Charterparty the Claimant chartered to Kalistad the reefer vessel M.V. CAPE TOWN STAR ("the Cape Town Star").
- The delivery dates and the earliest redelivery dates were as follows:
|The Almeda Star
||29 December 2008 at Puerto Bolivar, Ecuador
||29 November 2011
|The Avelona Star
||29 November 2008 at Puerto Limon, Costa Rica
||30 October 2011
|The Cape Town Star
||1December 2008 at Portsmouth, UK
||1 November 2011
- The object of the charterparties was to provide for the carriage of large quantities of fruit (mainly, if not entirely, bananas) from South America to Russian and Mediterranean ports.
- Initially the charterparties were performed without complaint. Then, in a deteriorating market, relations between those concerned became strained.
- By an email dated 15 September 2010 (TB/D2/89) Mr Dmitry Kasatkin of Kalistad informed Mr Solomon that Kalistad considered that, by reason of the matters referred to in the email, the Claimant was in repudiatory breach of the charterparties and they were therefore terminated with immediate effect. The Claimant was requested to treat the email as a notice of redelivery. By an email of the same date (TB/D2/92A) Mr Kenneth Ross of the Claimant stated that, as the Defendant obviously had no intention of fulfilling its contractual obligations, the Claimant accepted the Defendant's repudiation as terminating the charterparties.
- The differences between the Claimant and Kalistad are presently the subject of arbitration. It is however the Claimant's case that the nature of the guarantees is such that there is no requirement to wait for the outcome of that arbitration before proceeding against the Defendant. If the Claimant is correct, it is the function of this case to consider what, if any, liability Kalistad is under to the Claimant in order to determine what, if any, liability the Defendant is under pursuant to the guarantees. By reason of the decision of Burton J there is no issue that is unique to the guarantees.
- Self-evidently the refusal of the Defendant to engage in this action means that there can be no counterclaim in the technical sense of the term but, insofar as the requirements of confidentiality in respect of arbitration proceedings allow, I have been told of various cross claims that Kalistad considers that it has. This judgment addresses those claims in addition to those made by the Claimant.
- In view of the variety of issues that have been raised, it seems to me that I should take the history of each vessel in turn. Once I have addressed each history, I shall consider how the overall position falls to be determined in respect of the termination of the charterparties in September 2010 and, if relevant, how damages fall to be assessed in consequence of the termination. I shall also address matters such as outstanding hire prior to the determination of the charterparties which, although calculated in respect of each vessel, are best dealt with together. However, I shall start with the nature of the guarantees.
- The guarantee in respect of the April Charterparty reads:
"We refer to the Time Charter Party dated 4th of April 2008 between Star Reefers Pool Inc and Kalistad Limited
We hereby certify that our company guarantees the performance of the Charter Party dated 04-04-2008 of m/v Almeda Star, Avelona Star or Andalucia Star for account of our Nominee, Kalistad Limited, Nicosia."
- The guarantee in respect of the July Charterparty reads:
"We refer to the Time Charter Party dated 15th of July 2008 between Star Reefers Pool Inc and Kalistad Limited.
We hereby certify that our company guarantees the performance of the charterparty dated 15-07-2008 of one vessel out of the Star Reefers m/v Polar Class, m/v Durban Star, m/v Cape Town Star in Owners' option for account of our Nominee, Kalistad Limited, Nicosia."
- The Cape Town Star was the nominated vessel under the July guarantee.
- It seems to me that the Claimant must be correct in its construction of the two guarantees. The Defendant guaranteed the performance of the charterparties and it is liable for any failure in such performance.
- I now turn to the vessels.
"TABLE OF OFF HIRE EVENTS" (TB/D1/13), Exhibit JS5 page 11 and the corrected "TABLE OF OFF HIRE EVENTS"
- Before dealing with the respective vessels, I should refer the status and use of the corrected "TABLE OF OFF HIRE EVENTS".
- During the course of this case the schedule setting out the off hire events has undergone a number of changes to reflect both the changed situation in the litigation and the correction of arithmetical errors. At the hearing on 23 August 2011 I was provided with a corrected "TABLE OF OFF HIRE EVENTS" ("the off hire schedule") and it is that which is referred to in this judgment.
The Almeda Star
- A number of complaints are made by each side in respect of the charterparty and, subject to a final miscellaneous section, I shall take them in chronological order.
Eight day delay commencing on 30 December 2008
- The events are addressed briefly in the witness statement of Mr Solomon (TB/B/2/23 paras 23 to 26). I see no reason to disbelieve him or the evidence of Mr Spooner (TB/B/3/44,45) who is and was at the relevant time Star's Operations manager.
- The position is that, pursuant to an agreement made with Kalistad on or about 19 December 2008 the vessel was due to anchor in Cristobal Roads in order to carry out essential works – renewing a crane luffing cylinder and overhaul of an auxiliary engine (TB/D1/73). The vessel was in a compulsory pilotage area and under the control of the pilot pursuant to Article 92 of The Regulations on Navigation in Panama Canal Waters 1999. While under the control of the pilot the vessel attempted to manoeuvre around the shelter point buoy and ran aground. A report was prepared by the Panama Canal Authority Board of Inspectors (TB/D1/164 et seq). No blame was attributed to the crew of the vessel or to its gear. The pilot was found solely to blame (TB/D1/173).
- In consequence of the accident, two propeller blades were deformed and straightened by cold pressing prior to the vessel's departure from Cristobal. The work was done on 6 and 7 January 2009. The Claimant issued an off hire credit note to Kalistad, dated 16 January 2009, for 8.17014 days plus bunkers consumed, totalling US$165,136.88. Out of the eight days that the vessel was off hire, five had been pre-booked with Kalistad.
- Kalistad alleges in the arbitration proceedings that all the eight days off hire were attributable to the grounding and that the grounding was the fault of the Claimant in consequence of which Kalistad is entitled to recover in respect of a liability to the Defendant under a contract of affreightment under which it is responsible for a week's delay in delivery to St Petersburg during the high season.
- In response to the allegation, Mr Spooner makes a number of points that start with the assertion that the events to which I have referred involved no liability on the part of the Claimant. He further refers to the fact that, after being loaded in Ecuador, the vessel was only ordered by Kalistad to sail at full speed five days after leaving the Canal, that the market was higher when the vessel reached St Petersburg than the previous week and that no complaint was made for two years.
- I see nothing to contradict the points made by the Claimant. I find that the vessel was off hire for eight days in the circumstances described by the witnesses and that Kalistad has no good claim in respect of the event.
Off hire – 23 January 2009
- On 23 January 2009 the vessel was off hire for 0.96875 days. Kalistad claims further expenses of US$15,709.18 associated with a missed slot for the Panama Canal. This is agreed by the Claimant (Solomon 5th statement, para 10(1)).
Off hire – 17 February 2009
- On 17 February 2009 the vessel went off hire for 1.19583 days. Kalistad claims additional expenses of US$3,308.25 due to cancellation of transit of Panama Canal. This is agreed by the Claimant (Solomon 5th statement, para 10(2)).
Shut out of 36 containers at Puerto Bolivar – 14 March 2009
- On 14 March 2009 while at Puerto Bolivar the Almeda Star suffered damage to the rotor blades in the turbocharger of the No 3 auxiliary generator. The crew were not able to repair the blades themselves and no spare blades were available locally. The incident is described in Mr Solomon's statement at TB/B/2/36/paras 72 – 77.
- Mr Solomon's evidence is that the turbocharger was inspected and maintained under an appropriate regime and that the breakdown occurred without warning.
- The vessel was off hire for 0.97 days.
- It appears that, as a result of the problem, the vessel was unable to load 36 containers before she sailed and Kalistad asserts that in consequence it lost US$458,000.
- The allegation is governed by clause 3 of the charterparty. It provides:
"The Owners shall … maintain [the Vessel] in a thoroughly efficient state in hull and machinery during service …"
- Contrary to the apparently absolute nature of the wording, the obligation is to use due diligence in discharging it, see Tynedale v Anglo-Soviet Shipping (1934) 54 Lloyd's Rep 341.
- Whatever the potential for dispute if the matter had been expanded upon by the Defendant, the evidence before me is entirely to the effect that the Claimant used due diligence in maintaining the turbocharger. I find that the Claimant is under no liability to Kalistad in respect of the incident.
Delay at Panama Canal - 19 & 20 March 2009
- On 19 March 2009 the Almeda Star was placed off hire for 0.89583 days at Cristobal after transiting the Panama Canal in order to carry out a planned repair of her main engines (TB/B/3/45 and 46). By an 'invoice' dated 2 April 2009 (TB/D1/162) the Claimant gave an off hire credit of US$19,269.01.
- No claim for expenses or for delay was made by either Kalistad or the Defendant until November 2010 when in respect of "18 March 2009" but almost certainly 19 March 2009 Kalistad alleged that, as a result of the stoppage, the vessel missed a scheduled delivery which was alleged to have been due to take place during the week commencing 30 March 2009 with damage to the Defendant for which Kalistad is responsible. The claim is for US$1,165,109 said to constitute the full loss of profit for a complete round voyage – St Petersburg – Ecuador – St Petersburg.
- Having departed the Canal on 20 March, the vessel arrived at St Petersburg on 5 April. On 4 April 2009 the vessel was ordered to proceed at 'eco-speed' (TB/D1/163).
- Quite apart from the remarkable nature and amount of the alleged damage, I can see no foundation for any claim arising from the delay.
Main Engine - Temporary Failure 10 April 2009
- The incident is addressed at paragraph 36(1) of Mr Solomon's statement (TB/B/2/26) which reads:
"On 10 April 2009, the main engine of the vessel temporarily failed. However, no delay or prejudice was caused to Kalistad as the vessel joined the morning outward convoy on that date as originally planned."
- This matter was not addressed at the hearing. The events described in paragraphs 45 to 46 above lead me to suppose that the convoy referred to was in the Neva but I have seen no log entry. If I am correct I can see nothing to criticise in the statement.
- I note that the off hire schedule includes a short off hire period of 0.06250 days for 9 April 2009 but do not know to what it relates.
Crane Failure – 4 June 2009
- A crane broke down as alleged by Kalistad but Mr Solomon asserts that the vessel was not placed off hire because no delay was caused to Kalistad (TB/B/2/para 36 (2)). The statement appears to be unexceptionable.
Hydraulic oil and boxes – 24 September 2009
- At TB/B/2/26/ para 36(3) Mr Solomon deals with Kalistad's assertion as follows:
"On 24 September 2009, there was a problem with the hydraulic system with the effect that some hydraulic oil came into contact with a small number of boxes of cargo. However, the contents of the boxes were not damaged, and no delay was caused to Kalistad, and so the vessel was not placed off hire."
- Although the inference from paragraph 10(3) of Mr Solomon's fifth statement appears to be that the reference is to the same incident, Kalistad's claim is now described as "costs in relation to idle gangs in the sum of USD2,921.30". The claim is agreed.
- The above sum was deducted from the hire but it does not appear that the vessel went off hire.
Short term loss of power supply to containers – 17 October 2009
- This is a complaint by Kalistad. At TB/B/2/26/para 36(4) Mr Solomon says that the power source was swiftly altered and the problem rectified without delay or damage to Kalistad.
- At paragraph 10(4) of his fifth statement Mr Solomon further addresses the matter as follows:
"On 17.10.2009 Charterers allege loading was stopped due to the break down of cranes 1 & 2. The Statement of Facts shows stoppage for 1 hour 5 minutes. It is now agreed that the vessel was off-hire for 32.5 minutes (0.0225 days as only 2 cranes were out of use) and credit should be given in the sum of UD881.97."
- The period is reflected in the off hire schedule.
Detention at Novorossiysk – 7 to 29 April 2010
- On 2 April 2010 drugs were discovered in the cooler room of cargo hold 3B of the Almeda Star on her arrival at Novorossiysk, Russia from Ecuador. The area was accessible to Kalistad's stevedores and crew during loading operations. Following the completion of cargo operations on 7 April 2010 the Harbour Master prevented the vessel sailing until 29 April 2010.
- No crew members were arrested or had any allegations made against them. The vessel was not placed off hire at the time and Kalistad paid full hire as provided by clause 53 of the charterparty.
- It now appears that Kalistad asserts that the vessel was off hire for 22 days during the relevant period.
- The incident is described by Mr Spooner in his statement at TB/B/3/46,47. I am unaware of anything to contradict his evidence. I find that the allegation is bad.
- The Claimant makes this claim upon the basis that its allegation as to the repudiation of the April charterparty is correct.
- Box 21 of the charterparty reads:
"21. Place or range of re-delivery (Cl.7)
DOP 1GSP North Continent including SCUK range-passing Skaw in Charterers option or Cape Passero westbound in Charterer's option ATDNSHINC."
- This claim is dealt with at paragraphs 61 to 64 of Mr Solomon's third statement (TB/B/2/33).
- Shortly put, when the charterparty was terminated on 15 September 2010, the vessel was at St. Petersburg which was outside the contractual range for redelivery. The nearest compliant point was Skaw which was 872 miles away. The cost of bunkers to make the relevant voyage is calculated at US$25,271.23 and this sum is claimed by the Claimant.
- The way that the case is put is explained at paragraphs 120 and 121 of the Claimant's skeleton argument and, in particular footnote 125. Inter alia this says that the claim is for the cost of bunkers because, "the Claimant is already claiming damages for early re-delivery (based on a hypothetical loss of profit), and so to claim the same sum for part of the same period (for re-delivery in the wrong place) would be double recovery. In these circumstances, the sensible measure must be the cost of steaming her to her contractual place of re-delivery; i.e. bunker costs".
- At paragraphs 18 to 23 of his fifth statement Mr Solomon explains how, after the termination of the charterparty, the vessel was fixed for a voyage charter that necessitated her steaming in ballast from St Petersburg to South America. The cost of the voyage was for the Claimant's account. Skaw is in Denmark and closer to South America than St Petersburg. The cost of the bunkers is therefore recoverable.
Light dues and pilotage fees
- After redelivery, the Almeda Star was arrested by the Turkish authorities on 8 November 2010 for failure to pay pilotage fees and light dues incurred whilst the vessel was on charter to Kalistad. The amount in question was US$43,635. A local lawyer had to be instructed to secure the release of the vessel and charged US$1,900. Therefore the total paid by the Claimant was US$45,535. The matter is dealt with in Mr Phillips' first statement (TB/B/1/paras 48 to 51). He is Star's Commercial Operator. His evidence is fully vouched and I accept it.
- Under clause 4 of the charterparty the relevant fees and dues were for the account of Kalistad. Its wrongful failure to pay them occasioned the expenditure described above and it is liable to the Claimant in respect of it.
Port agency charges at Puerto Bolivar
- As set out at paragraphs 32 and 33 of the fifth statement of Mr Solomon, there are port agency charges of US$4,973.95 due from Kalistad in respect of the vessel for 16 and 18-19 December 2009.
- Before proceeding further I think that it would be useful to address the question of repudiation.
- The test is that set out in the decision of the Court of Appeal in Hongkong Fir Shipping Co. Ltd. v Kawaski Kisen Kaisha Ltd  2 QB 26 and appears in the judgment of Diplock LJ in the last paragraph of page 72 which reads:
"The question which the judge had to ask himself was, as he rightly decided, whether or not at the date when the charterers purported to rescind the contract, namely, June 6, 1957, or when the shipowners purported to accept such rescission, namely, August 8, 1957, the delay which had already occurred as a result of the incompetence of the engine-room staff, and the delay which was likely to occur in repairing the engines of the vessel and the conduct of the shipowners by that date in taking steps to remedy these two matters, were, when taken together, such as to deprive the charterers of substantially the whole benefit which it was the intention of the parties that they should obtain from further use of the vessel under the charterparty."
- Certain elements of this apparently straightforward test should be noted. The first is that the test is directed at the further use of the vessel. What has occurred is used as a means of assessing what is to come. If the charterer has derived no use from the vessel over an extended period of the charter this may well (although not necessarily) indicate that there will be no material benefit for the remainder of the charter. Furthermore, on any view, whether in respect of the past or the future, one is looking to see whether what has been lost is substantially the whole benefit of the charterparty. There is also the qualitative question of whether a period of off hire has been caused by the owner's breach of the charterparty. Although it is possible that an extended period of off hire through no fault of the owner may frustrate the charterparty, in this case Kalistad seeks to make its case on the basis of periods of off hire for which it alleges that the Claimant is to blame.
- However favourably to Kalistad one may characterise the ratio in Hongkong Fir and any allied applicable criteria it seems to me that the Defendant's position as to repudiation in respect of the Almeda Star is hopeless. I shall come later to a consideration of the cumulative position under the April Charterparty and under both charterparties.
- As to the Almeda Star, the off hire schedule shows a corrected total of 20.50167 days off hire from the vessel going on hire on 29 December 2008 to the repudiation on 15 September 2010. I am unaware of any claim by Kalistad for any greater period except in respect of the detention at Novorossiysk with which I have dealt. Remarkable as these limited figures are in respect of an allegation of repudiation, even more remarkable is the fact that the last off hire event was on 19 January 2010. Kalistad continued to pay hire thereafter including for the 22 days of the vessel's detention at Novorossiysk. Leaving aside any question of waiver, it is difficult to see how (regardless of any fault by the Claimant) Kalistad could have considered that the charterparty had become commercially pointless in the circumstances that I have described. I am confident that, correctly, it did not. A fortiori is the situation after excluding periods of off hire in respect of situations for which the Claimant was not to blame.
The Avelona Star
- Although I shall adopt the same approach as for the Almeda Star, it is two major incidents at the end of the charterparty and beyond that constitute those chiefly relevant to this part of the case. The first concerns the detention of the Avelona Star in Tripoli in connection with a defective cargo of bananas and the second the continued presence of 96 40ft containers on the vessel after her redelivery in Tripoli.
- The vessel was delivered to Kalistad on 29 November 2008. Relevant incidents thereafter were as follows.
Problems with cranes – 26 December 2008
- The problems are said by Mr Solomon to have been minor and not to have caused delay therefore the vessel did not go off hire (TB/B/2/26/para 37(1)). Nevertheless in October 2009 the Claimant agreed a deduction of US$3,227.40 and this is now brought into account (Solomon 5th statement, para 11(1)). I see no reason to allow any greater amount.
Problems with cranes – 27 January 2009
- Paragraph 11(2) of Mr Solomon's fifth witness statement reads as follows:
"On 27.01.2009 Charterers allege a loss of 34.4 hours due to a problem with cranes 1 & 2. Again in paragraph 37(1) of my Third Witness Statement, I note that the problem with the cranes does not result in any time lost to Charterers. However, I note that we actually issued two credit notes for USD27,025.60 [JS5p.8 - deducted on 02.04.09.] and USD30,993.25 [JS5p.10 - deducted 20.07.09]."
- The off hire schedule shows an off hire event for 27 January 2009 of 0.71455 days as against the 34.4 hours claimed by Kalistad. This reflects the fact that two out of the vessel's four cranes were involved in the incident. I accept the claim on the basis advanced by the Claimant,
Rectification of deficiencies in lifeboats – 11 April 2009
- The deficiencies were found by the vessel's classification society. At paragraph 37(2) of his third witness statement Mr Solomon incorrectly stated the period of stoppage to be a week. He changed this to one day at paragraph 4 of his fourth statement (TB/B/9/96).
- In the circumstances now explained at paragraphs 25 and 26 of his fifth statement Mr Solomon accepts that the vessel was off hire for 1.526 days "in the amount of USD28,878.81 and fuel USD2,400, totalling USD31,278.81" which the Claimant has agreed should be deducted from the 3 August 2009 hire payment.
Alleged failure of main engine – 29 September 2009
- This is an allegation by Kalistad. Mr Solomon says that the Claimant has no record of the incident (TB/B/2/27/para 37(3)). Self evidently any such incident should appear in one or more log books. However, at paragraph 11(3) of his fifth statement Mr Solomon accepts a claim for additional expenses of US$15,834.84
Alleged breakdown of generator – 20 November 2009
- Kalistad has alleged that, on 20 November 2009 one of the generators broke down with the result that 38 containers were without power. This matter was also addressed at TB/B/2/27/para 37(3). The Claimant now agrees that the generator failed but says that Kalistad has made no monetary claim in respect of the incident (Solomon 5th statement, para 11(4)).
Off hire incident starting 24 January 2010
- On 24 January 2010 the vessel went off hire for 2.09306 days. Kalistad alleges that it suffered extra expenditure of US$8,744.38. This is agreed by the Claimant (Solomon 5th statement, para 11(5)).
Off hire – 29 January 2010
- On 29 January 2010 the vessel was off hire for 0.1916 days and Kalistad claims off hire of US$3,923.86 which is agreed by the Claimant.
Detention at Tripoli – 4 August 2010 to 20 October 2010
- This matter is dealt with at length in the witness statement of Mr Dempster who, at all material times, has been Star's Group Risk, Insurance and Claims Manager (TB/B/4/48 et seq). The statement is extensively supported by reference to the relevant documents and I see no reason to doubt its contents especially as it was supported by the expert evidence of respectively Dr Legge and Mr Thompson.
- Despite the relative complexity of some of its aspects, the main story can be swiftly told.
- As per Kalistad's instructions, the Avelona Star commenced pre-cooling procedure at noon on 14 June 2010. Between 15 and 23 June 2010 the vessel was loaded in Guayaquil, Ecuador with pallets of bananas which included those presently in question. No qualification of their condition was placed upon the bills of lading. The vessel then called at Puerto Bolivar to load 96 containers of bananas on deck and on 24 June 2010 sailed for Panama to transit the Canal. As per charterparty clauses 9, 10 and 79, her directions speed and carriage instructions were provided and then updated by shippers/Kalistad.
- The vessel bunkered at Gibraltar and proceeded to Evyap, Turkey arriving on 15 July 2010 to discharge her containers. She then continued to Poti, Georgia arriving on 17 July and departing on 22 July 2010 in order to return to Evyap where she picked up the, now empty, containers whose history forms the next part of this story. She departed on 25 July 2010 arriving at Benghazi, Libya on 27 July 2010 where she discharged cargo and sailed on 28 July 2010 arriving off Tripoli on 29 July 2010. She discharged her remaining cargo between 1 and 5 August 2010.
- Shortly after discharge commenced, the receivers, Altafadul Company, gave notice of a claim to the effect that the cargo was not in a condition that made it fit for onsale in ordinary course. Many bananas were already yellow.
- Details of the contractual position in respect of the cargo may be found in various places in the bundle but appear to come together in the "Letter of Subrogation and Assignment" (TB/D1/14) that makes its appearance at the end of the incident. The document indicates that the sale was of 156,192 boxes of "Ecuadorean Green Fresh Premium Bananas" under a contract of sale dated 14 July 2010 between Garold Projects Ltd ("Garold") and the receivers. The cargo was covered by certificates of marine insurance No. 217782 dated 23 June 2010 issued by ERGO Versicherung AG ("ERGO").
- At paragraph 16 of his statement (TB/B/4/51) Mr Dempster says that the shippers of the cargo were "Bonanza Fruit Co. S.A. Corbonanza" (the Defendant's trading name) ("Bonanza") and elsewhere appears to suggest that it was they who had sold the cargo to the receivers. However, it appears that Bonanza sold the cargo to Garold who sold to the receivers. In any event, it was not Kalistad who sold the cargo to the receivers. But the nature of the cargo as shipped is highly material to the question of how it came to be in the condition that it was on discharge.
- Whatever the precise value of the claim there could be no doubt that it was made on good grounds. There were two questions namely, who was responsible for the condition of the cargo and how should the claim be disposed of?
- Questions arose as to mitigation of loss and the disposal of the cargo but they are not relevant to the matters before me.
- An investigation was swiftly commenced. Mr Kasatkin had the conduct of Kalistad's position and that position was that, if anyone was to blame, it was the Claimant. The Claimant's position was that it had done all that it was required to do by Kalistad and that there was nothing wrong with the vessel.
- In the meantime the vessel was detained. I am not clear whether she was arrested but it is apparent that she was not free to leave the port without posting security or the claim being settled - see TB/D2/66. Obviously there was no question of posting security that only operated in the event of the Claimant of being liable. The receivers wanted security for their claim regardless of whether it was the Claimant or Kalistad that was to blame.
- The Claimant took the view that it was not liable and that it was not going to post security for Kalistad, so the vessel remained where she was and on 15 September 2010 the charterparty was terminated. Eventually, the vessel was released on 20 October 2010 after an agreement had been reached between ERGO and the receivers for the settlement of the claim for US$600,000.
- It may now be useful to make two points.
- The incident in question has raised claims by each side. Whichever side is correct is likely to have at least a claim in damages but, although each case depends upon responsibility for the condition of the cargo, the one is not the mirror image of the other.
- In its email of 15 September 2010 (TB/D2/89) Kalistad said that there had been a breach of the charterparty in that, "Your (Your P&I Club) non-intervention in relation to the arrest of AVELONA STAR in Tripoli".
- Thus Kalistad is saying (and appears to have continued to say) that there is an obligation under the charterparty to procure the P&I club (Assurenceforengen Gard of Norway) ("Gard") to do something to release the vessel and that the obligation is owed to Kalistad as charterer. It is to be noted that what Kalistad is not saying is that the cover afforded by the P&I club provides an indemnity to Kalistad against any defects in the cargo for which Kalistad may be responsible. Thus the necessary inference is that Kalistad is saying that it wanted (as charterer) the continued use of the vessel and that Kalistad should not have been under an obligation either to settle the claim or to post security in order to obtain that use.
- In the event that the Claimant was to blame for the condition of the cargo, one might see something in the complaint.
- The purpose of the charterparty was to oblige the Claimant to provide Kalistad with the use of the vessel except in the circumstances set out in its terms. If, through the Claimant's fault, the vessel was detained in Tripoli it was in breach of that obligation. (The fact that under clause 53 of the charterparty the vessel went off hire was not exhaustive of the redress that Kalistad might claim.) Under clause 3 of the charterparty the Claimant was obliged to "maintain standard P&I insurance throughout the charter". Thus the Claimant was under an obligation to maintain an environment for the discharge of its obligations which would assist in their being performed in the most efficient way as, for example, by enabling the vessel to be subject to the minimum interference with her operations by the posting of security.
- I cannot see how the obligations that I have described carried a further obligation to intervene to assist a charterer with problems in respect of a cargo that owed nothing to the fault of the owner. Charterparties are commercial bargains which involve not only hire but other costs to be defrayed by the charterer. I find it difficult to see how the obligation for which Kalistad appears to contend would operate. Does intervention simply mean the lending of 'good offices'? I think not. But even if that was the limit of the suggestion, while it might be part of the normal currency of mercantile life, I cannot see that there can be any binding obligation so to act. Not least, because even the affording of help usually carries a cost. As soon as one moves into the territory of providing security, the situation becomes impossible. Absent the charterer being a beneficiary under the insurance, such assistance could only be provided on the basis of a suitable indemnity. And for Kalistad's contention to be good, that is something that would have to be inferred from the terms of the charterparty, a concept that runs counter to every principle governing implied terms of contract. So Kalistad's position must stand or fall on whether the Claimant was responsible for the condition of the cargo.
- The Claimant's position is rather different. If it was not responsible for the condition of the cargo, it was entitled to let the vessel remain under detention and take the hire until the charterparty came to an end on 15 September 2010. Any recovery from Kalistad apart from hire would have to be shown to have been due to some actionable fault on the part of Kalistad in respect of the Claimant. Any recovery from Kalistad in respect of the period after 15 September 2010 would have to be by way of damages uniquely attributable to the fault of Kalistad.
- All this having been said, the critical question is who was responsible for the condition of the cargo.
- By an email dated 5 August 2010 (TB/D2/52) Mr Kasatkin rejected the suggestion that charterers might be to blame and said "Our surveyor is in opinion that cause of damage could be on the side of the carrier due to improper maintenance of temperature regime". The email also set out the claim made by the receivers who referred to an invoice issued by Garold on 14 July with a cargo description of "fresh hard sound green bananas". The receivers concluded by saying, "That is we expect to receive a bank guarantee to refund us the value USD 501,771.50c in compensation which have to be secured before the departure of the subject vessel from Tripoli port".
- An inspection on 5 August 2010 by ERGO's surveyor Mohammed Adumamed of Sadoui Surveyors North Africa (TB/D2/59) gave percentages of bananas in various conditions which suggested that 60 percent of the cargo was damaged and that the claim was worth US$580,837.50. Under the heading "CAUSE OF DAMAGE" appeared the words:
"According to owner's and charter's surveyor declaration who confirmed that the temperature of the cargo was maintained within the proper range during transport, it was presumably agreed that the cause of the damage is attributed to the shell (sic) life of the cargo since it was loaded on board since 15 June 2010 and therefore the cargo was stored in the ship's holds for a period of about 50 days."
- A joint survey report also dated 5 August 2010 was signed by surveyors on behalf of respectively "shipper insurance", "Charterer", "ship's owner", "ship's owner" and "on receivers behalf". At the bottom of the report appeared the words, "Possible cause of the damage: The length of time the shipment stayed on board" (TB/D2/46).
- On 6 August 2010 Mr Kasatkin sent Mr Solomon a fairly lengthy email (TB/D2/63) in which he accepted that the evidence was to the effect that the cargo was damaged in an estimated value of up to US$500,000. He referred to the fact that the Claimant had issued clean bills of lading and that there had been no letters of protest, stated that the cargo had been loaded on board in good condition and asserted that the damage had occurred during the voyage and that the Claimant was responsible for it. He concluded "The ship is considered to be off hire as owners cannot provide service immediately required. Arrest, costs, expenses shall be on owners account. All rights under the c/p are reserved. Owners shall take measures to release the ship as soon as possible".
- In fact the Master had issued his first letter of protest on 3 August 2010 in which he had set out a detailed history of the cargo including the comment that, "Nobody found out yellow bananas in the holds" (TB/D2/43).
- Mr Solomon responded on 7 August 2010 (TB/D2/65). He pointed out that the Master had issued a letter of protest on arrival in Tripoli and stated that the cargo had been carried throughout as per shipper's/charterer's instructions. Inter alia he said "You will understand from the above, why it is solely the charterer's responsibility to deal with the claim and if necessary put up security to the receivers".
- At this stage I think it relevant to point out that however things may stand in respect clean bills of lading where a cargo has been loaded in obviously bad condition, a master in issuing clean bills is not warranting the cargo. While Dr Legge gave me an absorbing account of what one should look out for in the assessment of a cargo of South American bananas, it was clear that it was his expertise that informed the description.
- On 8 August 2010 the Claimant received a document from the receivers forwarded by Kalistad's agent (TB/D2/66) which read:
"Please be informed that, if you would like to release the vessel. We request you to issue Bank Guarantee by the Total amount of shipment (1,954,266.00USD)."
- The same day Mr Dempster responded with an email (TB/D2/68) referring to earlier messages "querying the grounds upon which the vessel has been detained and the Captain's seaman's book withheld, without court order …".
- On 14 August 2010 Mr Thompson of Brookes Bell went on board the vessel with Kalistad's surveyor Mr Andrew Sime of TMC, London and ERGO's surveyor. They conducted a joint survey of the vessel's refrigeration plant and electrical generation system. These were found to be in a satisfactory condition. Messrs Thompson and Sime were provided with copies of the ship's deck, engine and refrigeration log books.
- The reports of respectively Mr Thompson and Dr Legge, who had inspected the cargo, exonerated the vessel. Nothing to the contrary appears to have been received by way of expert evidence from any interested party.
- In fact the expert evidence not only exonerates the Claimant but is to the effect that it was Kalistad that was to blame in addition to any liability of the sellers. The cargo was shipped at the end of the season when produce came from a variety of sources that did not have the consistent quality required for a voyage of the nature that the vessel was required to undertake. The instructions for the conditions in which the cargo was held (which all came from Kalistad) were not suitable for the extended preservation of the cargo and when it was finally discharged in Tripoli the consequences of this history became manifest.
- In his conclusions Dr Legge put the matter as follows:
"8.1 The cause of the problem in the cargo, in my opinion, was "inherent vice" (quality/condition at the time of packing in relation to an anticipated long voyage) present in the bananas loaded by Messrs Bonanza/JFC in Guayaquil and discharged at Tripoli, in combination with an extended loading period and significantly longer voyage duration than was possible with Ecuadorian bananas of such maturity loaded June 2010. The problems were exacerbated by poor quality packaging, very poor quality pallet bases, poor post discharge handling and subsequent failure to ensure cooling during storage in Tripoli.
8.2 I have seen no evidence to suggest that the defects found were a consequence of their carriage on MV AVELONA STAR. The presence of cartons of ripening, ripe and rotten bananas, in the cargo on discharge at Tripoli was, in my view, entirely a consequence of the failure of Bonanza staff in Ecuador to ensure that all cartons contained only normal three quarters maturity bananas, allied to the decisions made by the [Charterers] concerning the voyage, route and disports. If the voyage had discharged all of her cargo before 25 July (a voyage/loading period of 40 days) there would have been significantly less of a problem at outturn.
8.3 In my view the perverse decision of the Charterers to request a DAT of 12.3C had, I believe, little commercial consequence in Tripoli, when compared to other deterioration factors present.
8.4 I have seen no evidence in the records I have viewed from MV AVELONA STAR to show that the crew did anything other than follow diligently the written Carriage Instructions and the Shippers/Charterers subsequent messages requiring amendments to those instructions."
- I think it confirmatory of the fact that neither Kalistad nor the Defendant had a positive case to advance against the Claimant in respect of the state of the cargo that there was no reference to such a case in the email of 15 September 2010 in which Kalistad gave its reasons for terminating the charterparty (TB/D2/89).
- At paragraph 38 of his statement (TB/B/4/56) Mr Dempster refers to receiving an offer from the receivers on 23 August 2010 to settle the claim, the offer appears to have come through Kalistad's agent and is dated 12 August 2010 (TB/D2/74). It may be that its onward transmission was held up to await the outcome of the survey. In any event, a counter offer from cargo insurers was rejected. Paragraph 38 continues:
"… The Charterers had previously worked with our P&I correspondent Elias Marine and were keen to utilize their services and local contacts in negotiations between the cargo insurers ERGO, and the Libyan receivers. On Charterers' recommendation, Mr Elias was formally instructed by cargo insurers as their negotiator on 24 August, but on the strict understanding that he would need to keep STAR in the loop and that he was not conflicted out and would continue primarily to act for STAR."
- In October 2010 Elias Marine negotiated a settlement on ERGO's behalf in the sum of US$600,000 on the terms set out in an agreement between insurers and receivers that appears at TB/D1/14. Under the agreement the receivers confirmed that they were the sole beneficiaries of the certificates of marine insurance and subrogated to ERGO all their claims against the vessel and/or her owners and against the seller, Garold. The agreement further provided for the immediate release of the vessel.
- It is here relevant to comment that, whatever the absence of obligation on the part of the Claimant to involve its P&I club on behalf of Kalistad, that is what it did. Furthermore, it was Kalistad that engaged the P&I correspondent, Mr Shtewi, usually used by Gard in Libya, thereby preventing him from acting for the Claimant (TB/B/4/57/para 42(c)). However, the Claimant agreed with Kalistad that Mr Shtewi could make a court appearance on behalf of the vessel in the proceedings commenced by the receivers and Mr Shtewi did so attend on the Claimant's instruction through Elias Marine (TB/B/4/57/para 42(d). I do not know what those proceedings were.
- I now turn to the consequences of the above findings.
- The Claimant relies on clause 9 of the charterparty which provides that, "The Master shall be under the orders of the Charterers as regards employment, agency, or other arrangements. The charterers shall indemnify the Owners against all consequences or liabilities arising from the Master, officers or Agents signing Bills of Lading or other documents or otherwise complying with such orders …".
- I think that the provision is enough to render Kalistad (and therefore the Defendant) liable. Kalistad ordered the Master to load a cargo that was defective in the respects described by Dr Legge and Kalistad is responsible for the consequences of that order whether occurring before or after the termination of the charterparty.
- Paragraph 53 of Mr Dempster's statement (TB/B/4/59) reads as follows:
"As a result of the substantial cargo claim and long term arrest of the M/V Avelona Star the Claimant had to appoint: A P&I correspondent to act locally; Libyan and English lawyers to defend its position and act in relation to the Libyan court proceedings; a Libyan surveyor, a Libyan engineer and a Libyan agronomist to carry out investigations; a consulting engineering expert and a harvest/post harvest expert incurred the following costs:
(1) Correspondent, Libyan surveyor, agronomist and lawyers' fees of €40,487.40 (US$58,410.11*)
(2) Ince & Co's Legal fees of £12,226.50 (US$20,171.00*)
(3) CWA fruit expert fees of US$47,281.50
(4) Brookes Bell Engineer expert fees of US$26,197.15
The fees were reviewed by Gard and found to be reasonable."
[copies of the relevant invoices and vouchers were referred to]
[* converted into US$ at 22 August 2011]
- The expenses were all the consequence of the loading of the cargo at Kalistad's direction.
- There is also a loss of earnings claim for US$208,654.95 in respect of the period that the vessel was 'under arrest' after 15 September 2010. It seems to me that the correct approach is as follows.
- The starting point is always the figure which the innocent owner would have received from the charterer if the charterparty had been performed according to its terms. Everything else is a deduction from the initial figure and the sum to be deducted is calculated either by reference to the fact or the assumption that the owner has gone into a market available to the owner. In the present case, the Claimant could not have gone into the market because, although available to others, it was not available to the Claimant. The reason why it was not available to the Claimant was the fault of Kalistad and Kalistad is therefore unable to derive any benefit from the principle that would normally operate to diminish the sum payable by virtue of the wrongful determination of the charterparty. Therefore the Claimant is entitled to recover the full lost hire for the period of the detention after 15 September 2010.
- I hold that all the above sums are recoverable.
- The Avelona Star was on hire throughout her detention in Tripoli until the repudiation on 15 September 2010 (see clause 53 of the charterparty). The off hire schedule shows the vessel as being off hire for 17.56873 days during the currency of the charterparty. Nothing in either the pattern or the total of the off hire periods comes close to justifying the repudiation of the charterparty in respect of the Avelona Star.
- This finding taken with my finding in respect of the Almeda Star means that Kalistad wrongfully repudiated the April Charterparty by its email of 15 September 2010.
The 96 containers
- The history of this claim is set out in the first witness statement of Mr John Phillips at TB/B/1/2 et seq.
- When Kalistad repudiated the April Charterparty there were 96 empty containers on the Avelona Star which had been loaded at Evyap, Turkey on 25 July 2010 pursuant to Kalistad's instructions.
- Despite requests by Star as to how to deal with the matter, no instructions were given by Kalistad and Mr Phillips tried to find out the owner's identity. His inquiries led him to GE SeaCo with whose London Customer Service Representative, Vickie Purcell, he exchanged a series of emails on 11 and 12 October 2010 (TB/D2/101-107). Mr Phillips discovered that GE SeaCO owned at least 91 of the containers but that they were leased to a company called Whilm Management Limited ("Whilm") which was a subsidiary of the Defendant. The balance of 5 containers was marked in Ms Purcell's system as "lost/damaged" (TB/B/1/para 9). Whatever the precise meaning of that description they appear to have been under the control of Whilm and were certainly at the disposal of Kalistad.
- Despite attempts by Mr Phillips to obtain instructions as to the disposal of the containers, by an email sent on 22 October 2010 (TB/D12/111) General Counsel to GE SeaCO merely asserted title to the containers "on the attached list", stated that any "unilateral abandonment" of the containers would be in violation of the owner's rights and urged the Claimant to look to Whilm for instructions.
- On 26 October 2010 the Claimant received an email from Diana Cabanilla of Bonanza (TB/D2/116) stating that she was acting on behalf of Whilm and requesting that the containers be discharged at Casablanca which she understood to be the next port of loading. Mr Phillips immediately responded by an email (TB/D2/116) saying that Star had "been advised by agents in Casablanca that they do not have the facility to store containers". In fact the vessel was in passage for Agadir which did have suitable storage facilities but, by this time, it was too late to arrange discharge of the containers "without causing significant delay to loading operations/departure of the vessel at Agadir, which would in turn have delayed arrival at Casablanca" to which the vessel was to proceed with a cargo of fruit (TB/B/1/5/para 15). These factors raised the prospect of unacceptable losses to the Claimant. Bonanza were briefly notified to that effect by an email dated 27 October 2010 coupled with the statement that arrangements had been made to discharge the containers at New Bedford, Massachusetts, and a request for Whilm's instructions to that effect (TB/D2/121).
- It appears that Mr Phillips also had concerns as to whether Agadir was safe for any extended deposit of the containers.
- Mr Phillips further said in his statement that storage costs were much higher in Agadir than at New Bedford – paragraph 17.
- Although it does not clearly appear from Mr Phillips' witness statement, it seems that he and Ms Cabanilla continued to discuss the possibility of discharge of the containers at Agadir subject to the provision of a suitable power of attorney and agreement to various financial provisions. The Claimant's position was set out in Mr Phillips' email dated 28 October 2010 (TB/D2/123) which concluded with the paragraph:
"The vessel is due to sail today from Agadir and we will have no further opportunity to discharge the containers until vessels arrival at discharge port. Failing you're agreement to the above the containers will be taken to the next port of call ECUSA. Further freight/supplementary charges will apply."
- An invoice for US$156,755.50 in respect of allegedly accrued costs was enclosed. The claim for demurrage contained in the invoice is unsustainable and has not been pursued.
- Ms Cabanilla responded to the effect that Whilm would only pay "expenses concerned to discharging, handling, and storage of containers in Agadir". She also said that Whilm had not "got possibility to take containers in ECUSA".
- The parties having failed to reach agreement, the containers were carried to New Bedford where they were discharged into secure storage between 10 and 15 November 2010 and there remain.
- On 25 January 2011, Star issued proceedings in Massachusetts against Kalistad, Whilm and Bonanza for the non-payment of hire or freight and other costs owed for the carriage, storage, handling and discharge of the containers on the Avelona Star from Evyap to New Bedford.
- On 26 January 2011 the District Court of Massachusetts issued a warrant for the arrest and an attachment order over the containers. Whilm opposed the granting of the order and applied to set it aside.
- On 7 February 2011 there was a hearing of Whilm's application. By an order dated 15 June 2011 O'Toole DJ dismissed the application. In the finding the learned judge said, "Star Reefers has sufficiently shown that Kalistad is likely indebted to Star Reefers under the charter party and under the agreement has a lien on the ship's cargo, which includes the containers. The bill of lading gave Bonanza (shipper of the freight carried within the containers by the vessel) notice of the lien provision of the charter party. At the very least, the attachment and arrest are valid as to interests of either Kalistad or Bonanza. Neither of those parties seeks to vacate the orders".
- At this point I remind myself that the claim is against the Defendant and is concerned with Kalistad's liability to the Claimant. The various costs that I have touched upon and which are addressed in detail in Mr Phillips' first statement are said to be payable by way of being foreseeable damage arising out of the Kalistad's breach of contract. The breaches are put under two heads.
- First, it is said that there has been a breach of clause 7 of the April Charterparty. The clause provides that, "The vessel shall be re-delivered on the expiration of the Charter in the same good order as when delivered to the Charterers …". A vessel which is redelivered with 96 containers on board which were not there when the vessel was delivered is not in the same good order as when delivered. Foreseeable damage resulting from the breach is recoverable.
- Second, it is submitted that the sums constitute recoverable damage resulting from Kalistad's repudiation of the April Charterparty which was accepted by the Claimant. It seems to me that the argument must be good. The Claimant was put to loss and expense by Kalistad's breach of obligation and no part of the loss and expense would have been incurred had it not been for the repudiatory conduct and the acceptance of that repudiation (see the judgment of Longmore LJ in The Kos  2 Lloyd's Rep 409, p413 at para 16). The amount due is the same as for the breach of clause 7.
- Supported as they are by the evidence of Mr Phillips, I find that the losses set out in the Claimant's skeleton argument are all recoverable. The cost of storing the goods at New Bedford continues. The schedule of losses is as follows:
|Costs of restowing the goods at Agadir
|Costs of discharging the goods at New Bedford and initial storage costs between 15.11.10 and 14.12.10
|Costs of storing the goods at New Bedford between 15.12.10 to date – see paragraphs 27 to 31 of the fifth statement of Mr Solomon
|Freight for carriage of containers from Tripoli to Agadir
|Freight for carriage of containers from Agadir to New Bedford
Failure to pay port/agents' fees in respect of the Avelona Star
- This claim is addressed at paragraphs 39 to 47 of Mr Phillips first statement (TB/B/1). The account is straightforward and credible. I find that the balance due in respect of the Benghazi and Tripoli fees is US$38,450.02.
Failure to pay light dues/pilotage fees on the Avelona Star
- This claim is dealt with at paragraphs 52 to 58 of Mr Phillips' first statement (TB/B/1). The account is straightforward and credible. I find that the total sum of US$35,220.00 is due to the Claimant from Kalistad in respect of lawyer's fees of US$1,900 and light dues/pilotage fees of US$33,320.00 paid by the Claimant under threat of arrest of the vessel such dues and fees being for the account of Kalistad.
The Cape Town Star
- The Cape Town Star was the subject of the July Charterparty. She was delivered to Kalistad on 1 December 2008 and the charterparty was determined on 15 September 2010. Kalistad appears to make no allegation against the vessel that I have to resolve. However, at paragraph 38(1) of his third statement (TB/B/2/27) Mr Solomon refers to a series of what he calls "minor problems with cranes on board the vessel". He says that on none of these occasions was any loss or delay caused to Kalistad and the vessel was not placed off hire. This rather terse account should be read in the light of a schedule which appears at TB/D1/01 and appears to show minor incidents in respect of the vessel that involved hire reduction and port expenses albeit that she did not go off hire. There is now a developed reference to the history in paragraph 12 of Mr Solomon's fifth witness statement as follows.
Crane failure – 27 February 2009
- There is an allegation by Kalistad of crane failure on 27 February 2009. However, the Claimant has no record of this occurring (TB/B/2/27/para 38(2)). However the Claimant is prepared to agree that one crane broke down for 1.5 hours with a consequential period of off hire of 22.5 minutes (0.015625 days) (Solomon 5th statement, para 12(1)).
Crane failure – 14 June 2009
- Kalistad alleges that there was a crane failure for 8.5 hours but does not particularise the claim. The Claimant accepts that one crane broke down giving a delay of 2.125 hours (0.265575 days). There is no monetary claim. (Solomon 5th statement, para 12.2). I have no reason to doubt the evidence of Mr Solomon.
Off hire -18 July 2009
- On 18 July 2009 the vessel was off hire for 0.10417 days. Kalistad now claims shore labour of US$1,300.20 which is agreed by the Claimant (Solomon 5th statement, para 12(3)).
Crane failure – 4 September 2009
- Kalistad alleges that, due to one crane failing, only 10 out of 23 containers were loaded and that additional costs of US$21,269.43 were incurred. The Claimant accepts the claim (Solomon 5th statement, para 12(4)).
Off hire – 25 February 2010
- Paragraph 12(5) of Mr Solomon's fifth statement reads:
"As set out in my Third Witness Statement at paragraph 38(1) the incident on 25.02.2010 did not cause any delay to Charterers. Following the Reply and Counterclaim [in the arbitration], I now understand that because the vessel was moved to a container terminal to off load containers on board ... Charterers have alleged the vessel was off-hire for 0.34 days and extra expenses were incurred. The total sum claimed is USD8,621.68. This is agreed by the Claimant*."
*The off hire period appears in the off hire schedule.
Pilot fees – 16 April 2010
- On 16 April 2010 the vessel was off hire for 0.79167 days and Kalistad claims extra pilot fees of US$1,155 which are agreed by the Claimant (Solomon 5th statement, para 12(6)).
Crane failure – 21 April 2010
- Paragraph 12(7) of Mr Solomon's fifth witness statement reads:
"On 21.04.2010 due to the failure of the vessel's cranes, the cargo was discharged by the shore crane. In paragraph 38(1) of my Third Witness Statement I explain that this occasioned no loss of time to Charterers. However, Charterers allege that the vessel was off hire for 0.23 days and that they incurred extra expenses. The total sum claimed is USD15,409.92. Again the Claimant is now prepared to admit this for the sake of argument*."
*The off hire period appears in the off hire schedule.
Crane failure – 15 May 2010
- At paragraph 12(8) of his fifth statement Mr Solomon accepted a claim of US$5,250 in circumstances similar to those above. There appears to have been no off hire claim.
Crane failure – 27 July 2010
- At paragraph 12(9) of his fifth statement Mr Solomon accepts a period of 17.5 minutes off hire (0.012075 days) in respect of the breakdown of crane number 4 for 1 hour and 10 minutes however there is no monetary claim.
- The off hire schedule shows that during the charter the Cape Town Star was off hire for 5.040595 days. No case can be made to the effect that there was any entitlement to repudiate the July Charterparty whether taken by itself or in conjunction with the April Charterparty.
Failure to pay light dues/pilotage fees on the Cape Town Star
- As with the other two vessels, there was a failure by Kalistad to pay Turkish light dues which had to be paid by the Claimant in order to avoid the arrest of the vessel. The history of events is set out in paragraphs 59 to 65 of Mr Phillips' first witness statement (TB/B/1). I see no reason to doubt his evidence and find that the amount due is US$4,526.00, being US$3,676.00 in respect of light dues and US$850 in respect of legal fees.
Port agency charges at Puerto Bolivar
- As set out at paragraphs 32 and 33 of the fifth statement of Mr Solomon, there are port agency charges of US$4,316.04 due from Kalistad in respect of the vessel for 4 – 5 December 2009
Repudiation in respect of the two charterparties
- For the reasons set out above I find that on no approach (be it cumulative or in respect of each vessel) was Kalistad entitled to terminate the charterparties. I find that the two charterparties were wrongfully repudiated by Kalistad and that the said repudiation was accepted on the same day by the Claimant. I shall address the question of the recoverable damage later. Before doing so I must consider a further potential 'counterclaim' by Kalistad.
Alleged need to reroute to Mediterranean ports
- The Claimant's skeleton argument summarises the claim at paragraph 123(1) as follows:
"… the Claimant breached the Charterparties by failing to maintain the Vessels in good order and condition, as a result of which the vessels were on occasions delayed, as a result of which Kalistad was on occasions forced to 'divert' the Vessels from St Petersburg (where they were intended to go) to Mediterranean ports. It is said that this alleged breach caused Kalistad to suffer various losses …"
- The allegation is dealt with in considerable detail in Mr Solomon's first witness statement at paragraphs 66 to 71 which inter alia demonstrates a steady pattern of trade by Kalistad into the Mediterranean and refers to the total absence of documentation indicative of a rerouting from St Petersburg. Impressive as the analysis is, the most obvious point is that the off hire schedule (TB/D1/13) gives no support to Kalistad's case. I further accept Mr Solomon's analysis as negativing such a case.
Unpaid hire as at 15 September 2010
- The calculation of the net figure for unpaid hire after all necessary allowances first appears at paragraphs 51 to 58 of Mr Solomon's third witness statement at TB/B/2/31,32 as adjusted by paragraph 11 of his fourth witness statement TB/B/9/97,98. The amount is US$820,613.45. However, Mr Solomon further addresses the matter in his fifth witness statement under a variety of headings whose conclusions are reflected in various parts of this judgment. Paragraphs 9 to 14 give particulars of credit for 'minor incidents' which give a suggested credit of US$101,409.01 against the earlier figure, providing a balance of US$719,204.44. However, it is said that to this figure should be added US$33,696.56 which represents a correction in the credit for bunkers remaining on board on the basis of bunker receipts provided to the Claimant in the course of the arbitration. Thus the overall figure claimed is US$752,901.00.
- With the benefit of explanation as to the methodology I see no reason to question Mr Solomon's approach and allow the claim in the above figure.
Loss of earnings due to the repudiatory breach of the charterparties
- Relevant details are as follows:
The Avelona Star - built 1991, abt 596,000 cbft
The Almeda Star - built 1990, abt 576,000 cbft
The Cape Town Star - built 1993, abt 514,000 cbft
- In his report (TB/C1/3) Mr Harr deals with market rates for the three vessels both in the period market (12 months or longer) and the spot market. For the reasons given he says that he is "confident that, as at mid to end September 2010, and on a speculative basis, the Vessels could have been re-chartered out to some of the major operators for the remaining periods under the Charterparties at a time charter rate of about USCent 30 per cbft/30 days".
- In ordinary course the difference between the above figure and the hire under the charterparties would constitute the prima facie measure of the damage suffered. Under the April Charterparty the hire was US$0.95 per cbft per 30 days. Under the July Charterparty the hire was US$1 per cbft per 30 days until 1 December 2010 and US$0.90 per cbft per 30 days thereafter.
- However, following the termination of the April Charterparty, the Almeda Star spent 21 days in a drydocking that would have occurred in any event and no claim is made for that period.
- The claim is therefore calculated in paragraph 80 of the Claimant's skeleton argument as follows:
|Hire that would have been paid by Kalistad had the charterparties been fully performed (assuming that Kalistad would have redelivered on the earliest possible dates)
|Less hire that would have been received over the same period had the Claimant taken advantage of the available market.
|Less credit for period during which the Almeda Star was in drydocking
|Total damages payable
- The figure does not include the US$208,654.95 loss of earnings claim attributable to the detention of the Avelona Star in Tripoli after 15 September 2010. Subject to the discount of US$13,248 with which I deal at paragraphs 195 and 196 below, I see no reason to doubt the calculation. However, it seems to me that, by parity of reasoning with the allowance in respect of the drydocking, if the vessels were otherwise fully employed between the repudiation and the present date, any further periods off hire should be allowed for and when a vessel was not employed an estimate should be made.
- However, the above situation is complicated by the fact that since the repudiation the vessels have been traded on the spot market at a rather better rate of hire. If credit were to be given for those earnings the loss would be US$11,772,987.36 as at 28 April 2011 with a requirement to revise the figure to reflect actual earnings to the date of judgment.
- Mr Solomon refers to the employment on the spot market at paragraphs 46 and 47 of his third statement (TB/B/2/29) with some corrections at TB/B/9/96,97. General particulars of the earnings are shown at TB/D2/183-186.
- At paragraphs 34 to 39 of his fifth statement Mr Solomon addresses the points made at paragraph 179 above. At page 41 of exhibit JS5 is a schedule of the off hire events from 15 September 2010 to 18 August 2011including the drydocking of the Almeda Star for which credit has already been given. There are also calculations of the off hire periods estimated to occur from 18 August 2011 to earliest dates for redelivery. I accept that the figures for past off hire periods on which the projections are based do not have to include periods when any vessel was in dry dock.
- It seems to me that, while one cannot make a precise comparison between what did happen and what might have happened, the above approach accords with common sense.
- I accept the figures set out at paragraph 39 of the statement which are:
a. A deduction of US$678,838.31 in respect of off hire events occurring from 15 September 2010 to 18 August 2011; and
b. US$72,231.38 in respect of off hire events occurring from 18 August 2011 to the dates of contractual redelivery under the charterparties.
- Subject to what I have said, I see no reason to question the figures with which I have been provided. The main question in respect of this aspect of the claim is whether the Claimant is entitled to recover the higher figure as damages for the repudiation or must give credit for the increased income derived from trading the vessels on the spot market.
- The legal principle is addressed quite briefly in the skeleton argument at paragraph 82 but is developed in a four page extract from what I understand to have been the skeleton argument in another case. The Claimant's position is stated in the first paragraph of the extract which reads:
"19. Owners contend that if there was an available market, then damages should be assessed by reference to that market. What Owners in fact did with the vessel is irrelevant (see The Elena d'Amico  1 LLR 75, and Campbell Mostyn v Barnet  1 LLR 65). …"
- The submission contains a further citation of authority.
- It seems to me that what the various authorities come to is this.
- An innocent party cannot recover losses from a guilty party which are not a consequence of going into a market available at the date of breach. Where there is an available market the duty to mitigate a loss is met by going into that market or by being deemed to have gone into that market. It follows that, where a party has not gone into such a market, he has in effect traded for his own account: an account in which (for good or ill) the wrongdoer has no interest (see Jamal v Moola Dawood  1 AC 175 and The Elena d'Amico  1 Lloyd's Rep 75, Goff J at p. 87) This principle is unaffected by the decision of the House of Lords in The Golden Victory  UKHL 12;  AC 353 because that case was concerned with a different component of those that are employed in the assessment of the amount, if any, of a loss resulting from a breach of contract. There the court was concerned with the value of the right to have the charterparty performed according to its terms. In this case that value is a matter of simple calculation and the question is the value of what should be set against the first amount in order to calculate a balance that is the loss recoverable by the Claimant. Thus the present question is whether there was a market (see The Kildare  EWHC 903) and, if so, what was the market rate.
- Mr Harr says that there was a market and he has given the market rate. I accept his evidence. It follows that the Claimant's claim is good for the greater amount.
Schedule of recoverable damage
- I find that the recoverable damage is as appears in the following schedule:
|Loss of profits flowing from Kalistad's early redelivery
|Unpaid hire as at 15 September 2010
|Unpaid pilot fees, port charges and light dues
|Losses consequent on the detention of the Avelona Star at Tripoli
|Losses to date relating to the 96 containers left on board the Avelona Star
|Loss caused by the redelivery of the Almeda Star outside the contractual range
- I accept the evidence that the rate at which the claimant is able to borrow US dollars from its financiers is 2.5% above the US dollar three month LIBOR (Solomon 5th statement, para 40).
- Mr Pearce correctly sets out the applicable principles at paragraph 42 of his skeleton argument dated 22 August 2011. However the figures on page 1 of the "Schedule of Interest on Judgment debt" ("the schedule of interest") will have to be reworked to reflect what I say below in respect of the application of the discount figure. The reworked figures will be reflected in the figure for interest in the final order.
- Although referred to by Mr Pearce under his "Interest" heading, I think that the discount in question relates to "the present receipt of a future stream of income" which is calculated by reference to tables that use deemed rates of interest to calculate the lump sum that represents the discounted figure that recognises present receipt. Thus the lost income to date of judgment is calculated in gross and only the several months remaining attract the discount.
- While I think that on any view the figure of US$13,248 which appears in column K of the schedule of interest represents an acceptable discount, it should be applied by way of deduction of the capital sum due in respect of damages for early delivery and not the accrued interest on that sum.
- There will be judgment for the Claimant in the sum of US$16,245,099.69 and interest.
- The Claimant having succeeded in this action and there being no good reason to the contrary, the Defendant will pay the costs of the action on the standard basis for the period in respect of which they are claimed.