Case No: 2009 FOLIO 59
Neutral Citation Number: [2010] EWHC 903 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 28/04/2010

Before :

MR JUSTICE DAVID STEEL
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Between :

	Zodiac Maritime Agencies Limited	Claimant	
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	Fortescue Metals Group Limited	Defendant	

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Andrew Baker QC & Malcolm Jarvis (instructed by Ince & Co.) for the Claimant
David Allen QC & Michael Collett (instructed by Clyde & Co.) for the Defendant

Hearing dates: 23rd, 24th and 25th March 2010
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Judgment
Mr Justice David Steel : 
1.	The dispute before the Court arises out of the termination of a Consecutive Voyage Charterparty dated 5 December 2007 (“the CVC”) between the Claimant (“Zodiac”) as owners and the Defendant (“FMG”) as charterers. 
2.	FMG is an Australian iron ore producer established in 2003. Its mines are in the Pilbara region of north west Australia and it ships the ore from its terminal (Herb Elliott Port) at Port Hedland, Australia.  
3.	Zodiac manages a large fleet of Capesize and other vessels.
4.	The CVC was a contract for 5 years for Western Australia/China consecutive voyages on mv “Kildare” (“the vessel”), a Capesize bulk carrier of 211,321 mt deadweight (on 18.32 m SSW). The contractual cargo was iron ore concentrates in bulk to be loaded at Port Hedland for carriage to China, although FMG had an option to load coal or iron ore for other discharge ports within India/Japan range.
5.	It is common ground that the CVC came to an end in January 2009. The only remaining issue between the parties on liability is whether FMG repudiated the CVC by its communications and conduct between 23 November 2008 and 2 January 2009. This is because FMG very close to trial abandoned its primary defences of frustration and force majeure.  If FMG did not repudiate the CVC as contended, Zodiac accepts that its purported acceptance of a repudiation on 9 January 2009 was itself repudiatory, being accepted as such by FMG on 12 and/or 13 January 2009. 
6.	In January 2009 the CVC had almost 4½ years to run. By its Amended Particulars of Claim, Zodiac claims demurrage of US$749,137.50 (to which there is now no defence) and damages of up to US$105 million. FMG contends that the quantum of Zodiac’s damages claim is substantially overstated.
Repudiation - the facts
7.	The Vessel tendered NOR for the first consecutive voyage under the CVC on 24 May 2008 and completed five consecutive voyages thereafter.
8.	Prior to completion of loading a cargo for the sixth voyage, and following a meeting between Mr. Saxon, chartering manager of FMG and Mr. Shirreff, of Zodiac’s Shanghai office, on 20 November 2008, Mr. Saxon (together with his colleague Mr Hodgins, head of shipping) sent an e-mail to Mr Shirreff advising him that under the “current circumstances” FMG would not be able to honour their freight commitments to Zodiac under the Charterparty from 1 December 2008. 
9.	In that e-mail, FMG stated that this was due to their customers’ cancellation of all of their freight agreements with FMG.  It repeated a request made at the meeting that Zodiac agree a reduction in the Charterparty freight rate (from US$16 pmt to US$6 pmt) with effect from 1 December 2008 together with its extension from 5 to 10 years. Mr. Saxon concluded that e-mail:
“It is unfortunate that we find ourselves in this position, however as discussed, we are effectively fighting for our survival. 
We obviously hope for an imminent return to a more viable freight market and realistic outlook from China and to this end can assure Zodiac of our support on any additional opportunities going forward.
We would greatly appreciate your support, understanding and urgent assistance.”
10.	On 25 November 2008, Zodiac’s legal department responded to FMG’s e-mail of 23 November 2008 stating that FMG’s proposals were “totally unacceptable” and that “a change in market conditions is not a permissible excuse for failing to perform a contractual obligation under English law”.
11.	The Vessel completed loading FMG’s cargo for the sixth consecutive voyage to China on 26 November 2008 and sailed from Port Hedland on the same day.
12.	On 2 December 2008, Mr Andrew Forrest, the Chief Executive Officer of FMG, telephoned Capt Rami Zingher, the Managing Director of Zodiac. There is a dispute as to what was said in the course of that call. Zodiac says that Mr Forrest advised that FMG was terminating the CVC because FMG was no longer in a financial position to honour its obligations under the CVC. It is FMG’s case that Mr Forrest only said that, due to unforeseen circumstances, FMG had no choice but to temporarily suspend or delay the CVC.
13.	The following day Captain Zingher sent an e-mail to Mr Forrest in which he stated:
“We refer to our telephone conversation of 2 December 2008 in which you stated that due to their financial position FMG are terminating the contract and would not be performing any future obligations under the contract. 
We are considering our position, including the right to treat your advices to us as a repudiation of the contract. We do require certainty and finality in this matter and call upon you to provide an immediate and unequivocal response confirming your position in writing.”
14.	On 4 December 2008, Mr. Forrest sent a fax to Zodiac stating as follows :
“We refer to the FMG Charter Party (2007) Contract between Zodiac ... and [FMG] dated 5 December 2007. 
Due to events beyond the control of [FMG], including but not limited to complete refusal by our customers at the direction of their authorities to continue CFR shipments, [FMG] hereby gives Zodiac ... notice that at this time, it must exercise its right to suspend or delay the performance of its obligations under the Contract from the date of this letter. 
Pursuant to clause 32 of part II of the Contract, neither Zodiac ... nor [FMG] is responsible for any loss, damage, delay or failure to continue to perform under the Contract as a result of these unforeseen circumstances. However, we invite you to discuss the situation with us with the object of minimising losses.”
15.	Capt Michael, of Zodiac’s legal department, responded to that fax by e-mail to Mr. Forrest on 5 December 2008 stating, inter alia, that FMG had no right to terminate or “suspend or delay” performance of the Charterparty and that clause 32 applied only for the purposes of laytime and demurrage. In that e-mail, Capt Michael asked FMG to specify the clause upon which it relied and whether FMG required the Vessel to proceed to Australia upon completion of discharge in China. 
16.	On 5 December 2008, FMG made an announcement to the Australian Securities Exchange  that it had:
“... exercised suspension of all of its long term CFR shipping Contracts of Affreightment and Consecutive Voyage Contracts on the basis of unforeseen circumstances. 
The changed arrangements as a result of these suspensions, should not affect [FMG’s] marketing program in regards to volumes of product shipped, just the split between CFR and FOB sales terms. To date approximately 2/3rd of [FMG’s] sales have been on CFR terms but this is likely to reduce to around 1/3rd of sales. CFR sales are where [FMG] supplies the produce on a landed basis into China whereas FOB sales are where the customer arranges its own freight from Port Hedland to China. 
The changed arrangements are in direct response to market conditions demanding greater FOB sales.”
17.	By letter dated 10 December 2008, HWL Ebsworth (Zodiac’s Australian lawyers) wrote to FMG on behalf of Zodiac requesting FMG to state, inter alia, the period for which FMG intended to suspend its performance of the Charterparty, the precise cause for the suspension, when that cause would abate and whether the suspension was tied to any particular event or market development. 
18.	FMG replied by faxes of 15 December 2008 stating:
“As we have already informed you, we are not presently in a position to load the M/V Kildare due to circumstances beyond our control. Our position has not changed since our previous communications to you. 
In the event that circumstances change we will endeavour to load cargoes in accordance with our contractual obligations. ...”
and
“You will be aware from our open correspondence to you that we are not presently in a position to load cargoes on the M/V Kildare or indeed on any vessels you present. 
The global economic meltdown has had a potentially catastrophic effect on our business to the extent that our customers are unable to perform their original contractual obligations. 
This situation has arisen wholly without fault on our part and despite our due diligence. The performance of our contracts is now a radically different obligation to that which we contracted to perform. It is more than a mere economic alteration and significantly changes the nature of our rights and obligations. 
Presently, we are merely delaying performance pursuant to our contractual rights but we are also now investigating, as a matter of urgency, whether the contracts are truly frustrated.”
19.	Capt. Michael of Zodiac replied by e-mail on 17 December 2008 asking FMG to specify the grounds upon which FMG considered it had a right to suspend or delay shipment and the “circumstances” relied upon said to be beyond FMG’s control. Zodiac also pointed out that FMG had no right to refuse to load the Vessel under the Charterparty. By a further e-mail of the same date, Capt Michael informed Mr. Forrest that the Vessel was proceeding back to Australia to load the next cargo under the Charterparty and that her ETA at Port Hedland was 1 January 2009. 
20.	On 17 December 2008 the Vessel completed discharge of its cargo of iron ore under the sixth consecutive voyage under the Charterparty at Caofeidian, China, and sailed from Caofeidian bound for Port Hedland, Australia, in order to load a cargo for a seventh consecutive voyage under the CVC. 
21.	However, on 23 December 2008, Zodiac was informed by Sea Corporation Pty Ltd, FMG’s port agents at Port Hedland, that FMG had advised it that the Vessel would not be loading at FMG’s terminal at Port Hedland. By e-mail dated 23 December 2008, Zodiac requested FMG to confirm whether that was correct and, if so, whether the Vessel was to load at some other berth at Port Hedland and, if FMG maintained that it was delaying or suspending its obligations, when FMG would resume loading at Port Hedland. 
22.	On 26 December 2008 Zodiac was informed by Sea Corporation Pty Ltd that the pre-arrival documentation for the seventh voyage could not be processed because FMG had informed Sea Corp. that it did not intend to load a cargo at Port Hedland. 
23.	By e-mail dated 27 December 2008 from Zodiac to FMG  and by fax dated 30 December 2008 from Zodiac’s London solicitors, Ince & Co, to FMG’s London solicitors, Clyde & Co, Zodiac requested FMG to clarify its intentions with regard to performance of the Charterparty and asked, inter alia, when FMG intended to resume loading at Port Hedland. 
24.	The Vessel arrived at Port Hedland on 29 December 2008 and tendered NOR at 04:43 (UTC) on 29 December 2008. Laytime commenced at 16:43 (UTC) on 29 December 2008. On the basis of a load rate of 80,000 metric tonnes per weather working day, laytime expired at 07:22 (UTC) on 1 January 2009. 
25.	By fax dated 2 January 2009, Clyde & Co replied stating that FMG had already informed Zodiac of its position which had not changed. That fax also reserved FMG’s right to rely on clause 32A of the Charterparty with regard to demurrage. 
26.	FMG failed to load any cargo at Port Hedland within the laytime or at all. The Vessel went on demurrage at 07:22 (UTC) on 1 January 2009 and remained on demurrage thereafter. 
27.	On 9 January 2009, Zodiac accepted FMG’s communications and conduct as a repudiation of the Charterparty thereby terminating it with effect from 9 January 2009. 
28.	On 12 January 2009, FMG contended that Zodiac’s termination of the Charterparty was itself a repudiation of the Charterparty which FMG accepted. 
2 December telephone call
29.	The claimants relied on the entirety of the communications from FMG between 23 November 2008 and 2 January 2009 as evidencing a clear intention on FMG’s part not to be bound by the terms of the charterparty.  In this regard the only issue of primary fact between the parties related to the content of the telephone call between Mr. Forrest and Captain Zingher on 2 December 2008.  As already intimated:
a)	It was Zodiac’s case that Mr. Forrest informed Captain Zingher that FMG was terminating the Charterparty because FMG was no longer in a financial position to honour their obligations under it.
b)	It was FMG’s case that Mr. Forrest merely said that due to unforeseen circumstances FMG had no choice but to temporarily suspend or delay the Charterparty.
The resolution of this issue does not determine the question whether FMG was in repudiatory breach but nonetheless provides an important background to the written exchanges.
30.	Both Captain Zingher and Mr. Forrest gave evidence at the trial although in rather different circumstances. Captain Zingher appeared in the witness box and was cross-examined in the usual way. The basis of his evidence in chief was a witness statement he had made on 3 December 2008 (i.e. a day after the conversation). This had been prepared in support of CPR Part 8 proceedings that were issued that day in which Zodiac sought a declaration that FMG was in breach of the charterparty on the basis of the content of the witness statement. This claim was not in the event pursued given the dispute of fact that thereafter emerged.
31.	It was Captain Zingher’s evidence that:
a)	Mr. Forrest told him that FMG was terminating the Charterparty because they were no longer in a financial position to honour their obligations.
b)	Mr. Forrest said that he was telephoning out of courtesy but written confirmation would follow.
c)	Captain Zingher asked about compensation and Mr. Forrest said that he had no proposals.
32.	Captain Zingher’s statement had been annexed as an exhibit to a statement of Captain Michael dated 4 November 2009 prepared for the present proceedings. Captain Michael’s statement was served in January 2010.  In the body of the statement there was a paragraph which recited Captain Zingher’s report to him about the content of the conversation.
33.	In their pre-trial checklist dated 11 March 2010, FMG disclosed that they were not intending to call any witnesses of fact. At that stage there were three statements that had been served by FMG. Two, those of Mr. Tapp and Mr. Liu were primarily directed at the then pleaded defences of force-majeure and frustration. The third, from Mr. Saxon, FMG’s chartering manager, was directed to the circumstances in which FMG had claimed to “suspend” the charterparty and FMG’s then case that the charterparty had been frustrated.
34.	On 15 March 2010 Messrs. Clyde & Co. gave notice that their clients were no longer going to pursue the defence of force-majeure and frustration. However, attached to the e-mail giving such notice were two additional statements together with Civil Evidence Act notices.  One was from Mr. Forrest and the other from Mr. Scrimshaw (FMG’s executive director for transportation). These were both dated 12 March 2010. The e-mail also gave confirmation that Captain Michael was not required to attend as a witness.
35.	Messrs. Ince & Co. objected to the admission of the additional statements. In response Clyde & Co. contended that it had not been appreciated that Zodiac was going to rely on the statement of Captain Zingher.  On 16 March, Messrs. Ince & Co. developed their complaint about the late service of the statements of Mr. Forrest and Mr Scrimshaw. This e-mail concluded with the observation:
“Finally turning to our client’s witnesses at trial, your clients having agreed Captain Michael’s evidence, our clients will be calling Mr. Greatorex and Captain Zingher.”
36.	Captain Zingher had indeed been one of the witnesses referred to in Zodiac’s Case Management Information Sheet as due to give oral evidence but he was not referred to in Zodiac’s pre-trial check list.  Against that background, on the first day of the trial (23 March 2010) FMG made an application to call Mr. Forrest to give oral evidence by video link. This was opposed by Zodiac but, subject to suitable arrangements being made, I granted the application.
37.	Unhappily on the morning of 24 March 2010 there were technical difficulties and it did not prove possible to establish a video connection with Mr. Forrest’s office in Perth, Australia. I was then asked to allow the evidence of Mr. Forrest to be given by conference telephone call. This was also opposed but I felt in all the circumstances this was the only sensible option despite the limitations involved.
38.	It was Mr. Forrest’s evidence as follows:
a)	Despite reservations on the part of Mr. Huston, general counsel of FMG, Mr Forrest wanted to give advance oral notice of a letter setting out FMG’s intentions.
b)	A similar call was made to a number of other shipowners.
c)	With the assistance of an aide memoire from Mr. Huston as to what should be said in these conversations, he told Captain Zingher that the Charter was being temporarily suspended due to unforeseen circumstances.
39.	The witness statement of Mr. Scrimshaw stated that he was present in the room during the telephone call and confirmed that Mr. Forrest did not advise that FMG was terminating the contract but only suspending it temporarily.
40.	As I have indicated, both Captain Zingher and Mr. Forrest were cross-examined, the one in court and the other over the telephone. Allowing for the fact that, by definition, it was not possible to have regard to the demeanour of Mr. Forrest, I should say that, as a matter of pure impression, I was not left with the view that the evidence of one was to be preferred to the other.
41.	But impressions are not a secure basis for determining issues of fact when two witnesses have completely contradictory accounts. In such circumstances I respectfully endorse the observations of Lord Justice Robert Goff in The Ocean Frost [1985] Lloyds Rep 1 at p.57 to the effect that “where there is a conflict of evidence ….. reference to the objective facts and the documents, to the witnesses’ motives and to the overall probabilities can be of very great assistance to a judge in ascertaining the truth”.
42.	It is first necessary to consider the background to the telephone conversation. FMG was a shipper of iron ore from Western Australia to China. Its Chinese customers almost without exception purchased on CFR terms. In the wake of the fall in the spot price of steel in October 2008 these customers refused to accept shipments under the freight contracts with FMG. They advised that these contracts had to be suspended and prayed in aid force majeure clauses.
43.	As already noted Mr. Saxon, the chartering manager of FMG, met with Mr. Shirreff of Zodiac in late November and thereafter sent the e-mail dated 23 November 2008. This confirmed the “absolute change in circumstances” which reflected “100% cancellation of our freight agreements by all our customers”.  Accordingly it was stated that “under the ‘current circumstances’ we are unable to honour our freight commitments as from 1st December 2008”.  The e-mail went on to propose a substantial reduction of freight rates together with an extension of charterparty to 10 years. It went on: “failing your response we unfortunately do not see any other way forward” since “we are effectively fighting for our survival”.
44.	On any view this e-mail appears to present the acceptance of the offered proposal (or some similar counter proposal) as the only way forward failing which the charterparty could and would not be performed.  It is fair to conclude that this was the view that Mr Hodgkins and Mr Saxon had formed in consultation with their colleagues.  In his evidence Mr. Forrest asserted that the authors had no authority to send this e-mail (despite Mr Saxon having earlier been tendered as a witness on this aspect of the case). This was the first that any such assertion of lack of authority had been advanced.  It was not even contained in Mr Forrest’s statement made on 12 March 2010. 
45.	Zodiac’s response on 25 November 2008 made it plain that any negotiations were without prejudice to the existing terms of the charterparty to which Zodiac proposed to hold FMG.  Zodiac asserted correctly that a change in market conditions was not a justification for failure to perform the charterparty (let alone without liability for loss and damages as later contended in the 4 December letter).  
46.	It was against this background that the telephone conversation took place a week later.  I have come to the conclusion that the evidence of Captain Zingher as to the content of that conversation has to be preferred:
a)	Whilst taken in isolation perhaps not repudiatory, the e-mail of the 23 November 2008 is wholly consistent with an apparent intention on the part of FMG not to perform the charterparty unless more favourable terms could be agreed.  This is the context in which the conversation took place.
b)	Captain Zingher’s statement relating to the conversation could scarcely be more contemporaneous. In contrast Mr. Forrest’s statement was not prepared for over a year later.
c)	Captain Zingher’s statement was corroborated by his e-mail of 3 December 2008 in precisely the same terms.
d)	If the statement of Captain Michael on the topic together with the annexure of Captain Zingher’s statement was to be challenged I see no reason why statements from Mr. Forrest (and indeed anyone listening to the conversation at the Australian end: see below) were not prepared a long time earlier.
e)	It is true that Mr. Forrest wrote on 4 December to assert that FMG was exercising its right to suspend or delay “performance”; but
i)	Although Mr. Forrest said in evidence that Captain Zingher had put “words in his mouth” no mention is made of this serious allegation then or later.
ii)	When Captain Zingher’s version of the conversation was repeated in Captain Michael’s e-mail of 5 December 2008, there was still no challenge in FMG’s response.
f)	In Mr. Forrest’s version of the conversation FMG were purporting to exercise a contractual right to “suspend or delay” the charterparty. No such right existed and I am sure Captain Zingher would have said so immediately if such had been suggested.
g)	It is also of note that FMG’s pleaded case in response to Zodiac’s version of the telephone conversation specifically denied that FMG’s stance was occasioned by its financial position but did not forward an affirmative case that Mr Forrest had made it clear that FMG were merely suspending and not terminating the charterparty.
h)	There are further difficulties about Mr. Forrest’s account :
i)	Three people are said to have listened to his end of the conversation.
ii)	A statement has been provided by Mr. Scrimshaw but he was not called.
iii)	In his oral evidence Mr. Forrest claimed for the first time that Mr. Scrimshaw had kept a note of the conversation.  Not only is it not available but Mr. Scrimshaw makes no mention of it.
iv)	It was Mr. Huston who was on Mr. Forrest’s version supervising the call by a written memorandum but there is no statement from him nor is his memorandum available.
v)	The third person present was Mr. Hodgins. Yet he was co-author of the “unauthorised” e-mail of 23 November to significantly different effect.
47.	As already stated this conclusion does not determine the issue whether FMG was in repudiatory breach but, in my judgment, any fair and objective reading of the entirety of the exchanges between the parties (including the telephone conversation) is only consistent with FMG evincing a clear intention not to bound by the charterparty:
a)	The 23 November email was expressed in the form of a call for a doubling of the period of the charterparty together with a 75% reduction in hire failing which there was no “other way forward”.
b)	 In the telephone conversation on 2 December FMG, through Mr. Forrest, made it plain that FMG’s financial position  rendered it necessary to terminate the contract and that FMG would not be performing any future obligations under the contract.  I also accept that Mr. Forrest made it plain that he had no proposals for compensation.
c)	When asked to confirm the position in writing, FMG prayed in aid a purported right to suspend or delay performance, yet at no stage indicated on what basis there was any such right (although it was wrongly suggested that clause 32 furnished a defence to any claim for loss and damage).
d)	Persistent requests by Zodiac and their lawyers thereafter for confirmation as to whether FMG would or would not perform the contract merely elicited the response that FMG would “endeavour” to comply with its contractual obligations “in the event that circumstances changed”. 
e)	Thereafter, FMG claimed to be “investigating” whether the contracts were frustrated but otherwise did not reply to any messages from Zodiac let alone give instructions for loading at Port Hedland for the seventh voyage.
48.	FMG sought to contend that their stance reflected a genuine but mistaken view of the contractual terms and in this regard relied upon Woodar Investment Development Ltd v. Wimpey Construction UK [1980] 1 WLR 277 to the effect that a party who took action relying simply on the terms of the contract and not manifesting by his conduct an ulterior intention to abandon it was not to be treated as repudiating it.  I am unable to accept that this principle has any application when considering the circumstances of the present case:
a)	FMG never did purport to identify or rely on any contractual provision entitling it to rescind the contract.
b)	A claim was advanced of an entitlement to suspend performance yet no such provision was ever identified.
c)	There was no indication as to how long the suspension would last or even any indication of the circumstances which would lead to reactivation of the charterparty.
d)	The only provision referred to was clause 32 which merely contained an exclusion from laytime/demurrage for time lost as a result of various causes.
e)	Mr. Forrest never suggested that he understood (or ever had been advised) that clause 32 of the charterparty entitled FMG to terminate the contract: indeed the only advice he claimed to have received from general counsel to FMG was not to assert that FMG was terminating the charterparty.
f)	FMG simply contended that the charterparty had terminated, not as a consequence of the exercise of any contractual right to terminate, but as a result of frustration (a proposition that was later wholly abandoned on the eve of the trial).
g)	In contrast to Woodar, there was no understanding that, in the event that the court decided in Zodiac’s favour, FMG would undertake performance.  To the contrary the Part 8 proceedings issued by Zodiac were challenged on the basis that there was a dispute of fact in regard to the 2 December telephone conversation and no alternative application was made by FMG.
49.	The special facts of Woodar were identified in the detailed analysis of the decision by Christopher Clarke J in Dalkia Utilities Services Plc v. Celtech International Ltd [2006] 1 Lloyd's Report 599 at paragraph 149.  Again, none of these specific factors are present in  the present proceedings.  In short, even if FMG was under an honest misapprehension as to the legal position, that affords no excuse from the consequences of its repudiatory breach: Federal Commerce and Navigation Co. Ltd v. Molena Alpha [1978] QB 927, [1979] AC 757.  In any event, I am far from persuaded that FMG had any genuine belief in the legitimacy of their reliance on the terms of the contract as justifying suspension let alone termination.  It was obviously a bad point, it was never expressly advanced and it was never even pleaded.
50.	By reason of the matters identified earlier (taken with the fact that FMG continued to ship iron ore on other vessels), I remain persuaded that FMG objectively evinced an intention not be bound and must thus be treated as purporting to have renounced the charterparty.  This was, it is to be noted, also the unchallenged view of Captain Michael, a view which was in my judgment entirely reasonable
Quantum
51.	I turn now to the issue of quantum.  The issues were as follows:
a)	For how many days would the vessel have been trading during the remainder of the Charterparty?
b)	What daily income would Zodiac have earned during the remainder of the charterparty?
c)	Was there an available market on which the vessel could have been fixed until May 2013 on or shortly after 9 January 2009, alternatively on or shortly before 26 June 2009, alternatively at some later date and, if so, what was then the market rate for a fixture on the same or similar terms (save as to rate) as the charterparty?
d)	If, and during any period for which, there was no available market, for what income must Zodiac give credit?
e)	What discount rate is to be applied, to the extent required, to allow for accelerated receipt?
52.	In considering the quantum issues, the court has had the benefit of oral evidence from three witnesses: one witness of fact and two expert witnesses:
a)	Mr. Martin Greatorex who was an in-house broker at Zodiac and was responsible for obtaining spot market cargoes for capesize vessels managed by Zodiac.
b)	Mr. Peter Kerr-Dineen, an expert shipbroker instructed by Zodiac, presently chairman of Howe Robinson & Co.
c)	Mrs. Jean Richards, an expert consultant instructed by FMG, presently a director of Quantum Shipping.
I am grateful to all of them for the extensive assistance they have furnished in resolving the issues.
Issue (a)
53.	The non-trading period during the balance of the charterparty was variously put forward as follows:
a)	15 days per annum by Mrs. Richards.
b)	10 days per annum by Mr. Kerr-Dineen.
c)	5 days per annum by Mr Greatorex.
54.	The assessment is not one that can be accomplished with great precision.  It is difficult enough to allow for heavy weather, dry docking, breakdown and port delays for a period of a year ahead, let alone nearly 4 ½ years.  In their closing submissions, FMG were content to accept Mr. Kerr-Dineen’s estimate.  I regard this as a realistic concession, albeit leaving open, in my judgment, a potential allowance for the risk of a catastrophic interference with trading (e.g. total loss) a topic to which I will return.  In the result, I find that the vessel would have otherwise traded for 1596 – (10 x 4.37) = 1552.3 days.
Issue (b)
55.	There is no issue between the parties.  The appropriate rate is US$89,875.00 per day.
Issue (c)
56.	The starting point here is the meaning of an “available market”.  The authorities were reviewed by Webster J. in Shearson Lehman Hutton Inc. v Maclaine Watson & Co Ltd. [1990] 1 Lloyds Rep. 441.  He summarised the position as follows:
“What, in the light of these decisions, is the meaning of "available market"? … Approached in this way, the answer seems to me to be: that if the seller actually offers the goods for sale there is no available market unless there is one actual buyer on that day at a fair price; and that if there is no actual offer for sale, but only a notional or hypothetical sale for the purposes of s. 50(3), there is no available market unless on that day there are in the market sufficient traders potentially in touch with each other to evidence a market in which the actual or notional seller could if he wished sell the goods; see Lord Justice Sellers in A.B.D. (Metals & Waste) and Charter v. Sullivan sup.”
I adopt that approach and turn to the evidence in the present case on the highly fact sensitive issue relating to the existence or otherwise of an available market at or shortly after the time the contract terminated in January 2009.
57.	If it existed the relevant market must have been for a 4 ½ year consecutive voyage/time charter on equivalent terms (other than freight/hire) for the carriage of bulk cargo including iron ore and coal.  One question that arises is whether the requirement for equivalent terms includes broadly the same trading limits (i.e. Western Australia/China) or whether fixtures for the Brazil/China route would be material.  In my judgment, in order to categorise the replacement fixture as a market substitute, the trading limits should broadly correspond with the existing fixture: see The Golden Victory [2007] 2 AC 353.  Of course, if seeking to mitigate his loss, an owner might seek to charter his vessel for service on different routes, but such would not be by way of replacement on any relevant available market.
58.	There was nonetheless a marked difference of view between the experts as to whether there was an available market.  Mrs. Richards maintains that there was no demand from charterers to charter for about 4 ½ years on the prescribed charter route and thus no available market, leaving the owner to go onto the spot market.  Mr. Kerr-Dineen maintained that the owners’ decision to take spot fixtures was a discrete and significant speculation where there was available time charter/ CVC fixtures for the balance of the charter period at about US23,500 per day net.
59.	On balance I prefer the view of Mrs. Richards:
a)	There were no reported fixtures in this category as from September 2009.
b)	Neither expert was aware of any unreported fixtures in the relevant period.
c)	Zodiac marketed the vessel in January 2009 and there were no approaches for long term business.
d)	Indeed it was Zodiac’s pleaded case in February 2009 that there was no available market:  Zodiac was exceptionally well placed to assess the market and to endorse that plea by a statement of truth.
e)	The view of Mr. Kerr-Dineen was largely based upon his assessment of demand for period charters by Vale: even leaving aside that this by definition related to a different route, the only fixture relied upon was one 14 year charter.
f)	His suggestion that January saw a change in the momentum of the market is not borne out by the evidence of Mr Greatorex to the effect that even by March the rise in the spot rate did not bring about any long term business available for the vessel at a rate or with a charterer acceptable to Zodiac.
60.	I was fully persuaded by Mrs. Richard’s analysis of the absence of any demand for period charters in the region of 4 years.  The market rate had been at record levels (US$160,000 per day) as recently as August 2008.  A rate of US$24,000 or so following the collapse might have been acceptable in the short term (say up to 1 or even 2 years), but for any longer period a far higher rate would be demanded.  Yet any such higher rate would not have attracted any charterers: indeed they would have pressed for a lower rate.  Unlike the second hand ship sale and purchase market there was a third dimension in the form of the length of the charter period. In short it was in this context there was no match of supply and demand. 
61.	Her view was usefully summarised during the course of her cross-examination as follows:
“Q.  Does it boil down to this, Mrs Richards.  Again we may be at the point where we are perhaps straying towards what we mean as a matter of definition here which may be really for the lawyers and for his Lordship rather than for and you Mr Kerr-Dineen, but your evidence is based on an understanding that for there to be a market for, let me say again for the sake of my example, five years, for there to be a market for five-year business there needs to be fixing activity for five-year business, whereas Mr Kerr-Dineen is saying that if market conditions are such that you could have fixed for five years if you had really wanted to do five years, then that is sufficient.  Does it boil down to that that is the difference between you?

A.  No it doesn't.  It is slightly more complicated than that. Because in terms of determining whether there is a market or not you have to determine whether there is an appetite to do a certain class of business at a certain point in time.  The appetite is improved by actual reported fixtures.  But if you look at the risk profile of the way that the market was going forward there were a lot of factors that suggested that the risk profile of four years as of 2009 was too high for anybody to want to make that commitment for that particular period of fixture. So I've taken into account not only that I couldn't find anybody doing it, but I couldn't rationally argue for a charterer who would want to do it.  Certainly I couldn't argue for an owner equally who would want to commit that far forward at such low rates.  So the two things come together, (a) no transactions, but (b) no logical reason why either owners or charterers would actually go for that particular period at that time.”
In short, in her view the fact that charterers would only have been willing to contract for the relevant period at a rate which no owner would accept demonstrates the absence of any available market.  I agree.
62.	The next issue is the significance or otherwise of the later emergence of a period charter market sufficient to absorb any remaining balance of the charterparty period.  For instance it was common ground that at least in February 2010 there was an available market for a 3 to 3 ½ year charter:-
a)	It was Zodiac’s case that damages should thereafter be assessed by reference to that available market rate up to May 2013.
b)	FMG submitted that the later emergence of an available market was only relevant if a reasonable owner would be bound by way of mitigation to fix on that market.
63.	The decision in The Elena d’Amico [1980] 1 Lloyd’s Rep. 75 was to the effect that the normal measure of recovery in cases of premature termination of a charterparty is the difference between the contractual rate for the balance of the charter period and the market rate.  But where there is no market at the time of termination, this measure does not and cannot arise.  It is common ground that the spot fixtures entered into by Zodiac at that stage could not be the outcome of an independent decision since no alternative form of mitigation was available.  
64.	As explained Zodiac submits however that, where a market emerges at some later date on which a term charter covering the residual balance of the period could be fixed, damages for that remaining period should be assessed on the same basis since any alternative employment would constitute independent speculation.
65.	The fact that a term market thereafter emerges for the (yet shorter) outstanding balance of the charter period does not in my judgment import with it the proposition that a decision not to take advantage of that market at that later stage becomes a business decision independent of the wrongful termination.  The rationale is that acceptance of the market rate at the date of breach is deemed to constitute reasonable mitigation:
 “42. The rationale is that in such a situation that measure represents the loss which may fairly and reasonably be considered as arising naturally, i.e. according to the usual course of things, from the breach of contract (Hadley v. Baxendale, (1854) 9 Exch. 341 at p. 354). It is fair and reasonable because it reflects the wrong for which the guilty party has been responsible and the resulting financial disadvantage to the innocent party at the time of the breach. The guilty party has been responsible for depriving the innocent party of the benefit of performance under the original contract (and the innocent party is simultaneously released from his own unperformed obligations). The availability of a substitute market enables a market valuation to be made of what the innocent party has lost, and a line thereby to be drawn under the transaction. Norden v. Andre [2003] 1 Lloyd’s Rep. 287”.
66.	 By this mechanism subsequent market movements are removed from the equation.  It is simply a matter of chance when the vessel completes any spot voyages after the termination date.  Indeed they may overrun the emergence of an available market.  In short I see no basis for requiring the owner to go back into the term market at the end of every spot voyage or for that matter to disregard short time charters in case the market for longer charters emerges in the meantime.  
Issue (d)
67.	I turn now to consider the actual earnings of the vessel since termination.  First, there were two spot voyages: voyage 1-9 January 2009 to 3 April 2009, loading at Tubarao and discharging at Rizhao-China:  voyage 2-3 April 2009 to 25 July 2009, loading at Sepetiba and discharging at Caofeidian-China.  
68.	Thereafter, the vessel was employed under an earlier term charter with Guofeng.  This employment arose in the following way.  Zodiac had entered into the Guofeng charter on 15 November 2007.  The charter was in respect of a vessel called Brilliant Jewel.  It was a 7 ½ year CVC from Brazil to China.  In September 2008, Zodiac substituted Brilliant Jewel with Silver Jewel, a VLCC which Zodiac intended to convert into a VLOC.  In the event Zodiac cancelled the conversion at the end of 2008 given the uncertain market.
69.	After the present vessel became available in January 2009, Zodiac commenced negotiations with Guofeng to substitute the vessel for Silver Jewel.  The negotiations succeeded in March 2009 together with a new 14 year CVC for Silver Jewel.  In June, Guofeng agreed to a further amendment to remove Zodiac’s option to revert to a VLOC to perform under the Guofeng charter after December 2011.  In the event, on 26 June 2009, Zodiac nominated the vessel to perform its first voyage under the Guofeng charter.  This commenced on 25 July 2009.  A second voyage commenced in November 2009.  I conclude that it is probable that the vessel will continue to perform under the Guofeng charter until after the expiry date of the original charter.
70.	The question that thus arises is whether the earnings from the Guofeng charter should be taken into account in assessing Zodiac’s loss or whether the relevant earnings would be those available on the market.  Zodiac maintains that FMG’s breach did not cause the negotiation and subsequent nomination of the vessel to perform the Guofeng charter.  Such was said to an independent and unrelated act in regard to a charter entered into before the breach.  FMG submits that the decision to employ the vessel under the Guofeng charter was “part of a continuous dealing with the situation in which [Zodiac] found itself”: see British Westinghouse v. Underground Electric Railway [1912] AC 673.
71.	I agree with FMG.  A helpful analysis of the proper approach is to be found in The Fanis [1994] 1 Lloyd’s Rep. 633 at 636-637 per Mance LJ:
“The general issue is in my view appropriately stated as being whether any profit or loss arose out of or was sufficiently closely connected with the breach to require to be brought into account in assessing damages. Resolution of that issue involves taking into account all the circumstances, including the nature and effects of the breach and the nature of the profit or loss, the manner in which it occurred and any intervening or collateral factors which played a part in its occurrence, in order to form a commonsense overall judgment on the sufficiency of the causal nexus between breach and profit or loss.”
72.	As a matter of common sense the cause of the renegotiation was the termination.   Indeed Mr Greatorex’s evidence was to that effect.
Issue (e)
73.	There remains the question of the appropriate discount for accelerated receipt of income.  In part there is no dispute that an allowance reflecting the 3 year yield in US Treasury bonds must be made.  This amounts to about 1.5%.  FMG contends that a further allowance must be made for the risk free “investment” thereby created in contrast to the shipping market.  Of course some allowance has been made in that respect in regard to downtime.  But in my judgment a further discount must be made to reflect what I have earlier categorised as more catastrophic contingencies such as total loss, bankruptcy and so on.  I assess this at a further 1.5%
Conclusion
74.	I do not understand that there is any significant residual issue as to the figures save in respect of bunkers on which topic I find that any errors in the bunker accounts as regards MDO on the Vale voyages cancel each other out and that there is no established over-consumption of IFO on the Guofeng voyages.  In the result I hope that the parties can agree the quantum of the claim in the light of my findings.  As I understand it, it is in the region of US$80 - 85 million.