When a time charterer hands back a vessel earlier than the contracted date, you may be forgiven for thinking that this is a huge inconvenience for an unsuspecting owner who now feels that he has to re-charter the vessel as soon as possible.

This, however, does not seem to be the case per the recent English High Court decision of Glory Wealth Shipping Pte Ltd v Korea Line Corporation (The ‘Wren’) [2011] EWHC 1819 (Comm). In this case, a vessel was returned early, but at the time of redelivery it was impossible to calculate a market rate for leasing the vessel for the remaining period of charter. The owners held on to the vessel until the end of the charter period, failing to re-charter it despite a subsequent revival in the market. The question arose: how to quantify the damages? Should it be the remaining hire owed under the charter, or a lessor figure to account for the fact the owner did not mitigate his losses and re-charter the vessel when the market picked up? Surprisingly, the tribunal concluded the former. On appeal, however, Steel J in the High Court decided in favour of the latter. Steel J then referred the case back to the tribunal to calculate the exact figure, i.e. the remaining charter hire minus the mitigation figure.

In the tough economic climate of the last few years, mitigation seems more important than ever and the English Courts have made it clear that commercial parties are not to be able to make a profit on the default of another party when the default could be lessened by the claimant.

By

Anna Zeitlin