Commercial Court Confirms Principle In White And Carter Applies To A Time Charterparty

Isabella Shipowner SA v. Shagang Shipping Co Ltd (Aquafaith) [2012] EWHC 1077 (Comm)

In a judgment handed down on 27 April 2012, Mr Justice Cooke has held that, in circumstances where the time charterers were in repudiatory breach of charterparty in purporting to redeliver the vessel early, the owners were entitled to refuse early redelivery, affirm the charterparty and hold the charterers liable for hire for the balance of the minimum period of the charterparty. The judge rejected the argument that the owners were bound to accept early redelivery and sue instead for damages.

The background facts

The vessel was chartered by the owners to the charterers on an amended NYPE form for a duration of 59 to 61 months. The charterparty contained an express warranty that the vessel would not be redelivered before the minimum period of 59 months. Nonetheless, the charterers sought to redeliver the vessel just over three months before the earliest permissible date for redelivery. There was no dispute that this constituted a repudiatory breach of the charterparty. The parties disagreed, however, as to what the owners were required by law to do as a result and whether they could elect to keep the charterparty alive even where the charterers had indicated that they were no longer prepared to perform.

The matter went to arbitration and the sole arbitrator held that the owners were required to take redelivery of the vessel, trade the vessel on the spot market by way of mitigation and claim damages in respect of their loss. The owners appealed to the court under section 69 of the Arbitration Act 1996. Mr Justice Cooke allowed the appeal and varied the arbitration award accordingly. He has also refused the charterers leave to appeal so the matter can go no further on appeal.

The Commercial Court decision

The relevant issue of law turned on the following principle as enunciated in the House of Lords decision in White and Carter (Councils) Limited v. McGregor [1962] AC 413, namely: if one party to a contract repudiates it, the innocent party has the option of either accepting that repudiation and suing for damages for breach of contract, or refusing to accept the repudiation and affirming the continuation of the contract. If the innocent party can then complete the contract himself, without the need for any action on the part of the contract breaker, he will be in a position to sue for the agreed price. In that case, Lord Reid stated that where it could be...