SSRN Id2593089

Uncertainty in the assessment of damages under English
commercial law
Maastricht University
Faculty of Law
LL.M. in Globalization and Law /2013-2014/
Corporate and Commercial Law specialization
Mariya Pelovska
Student ID: I6067946
Electronic copy available at: http://ssrn.com/abstract=2593089
Table of Contents
Introduction ................................................................................................................2
Chapter I - The rules on assessment of damages the status quo before The
Golden Victory.............................................................................................................4
1. The Compensatory principle .............................................................................5
2. The breach date rule ..........................................................................................6
3. Deviations from the breach date rule existing before The Golden Victory ...8
4. Interim conclusion about the rules on the assessment of damages before The
Golden Victory .......................................................................................................12
Chapter II - The Golden Victory and its impact ....................................................13
1. The facts of the case .........................................................................................13
2. The arguments invoked by the parties and relevant commentaries ............14
2.1 The parties arguments .................................................................................14
2.2 Commentary on the arguments .....................................................................16
3. Evaluation of the judgment of The Golden Victory in the context of the preexisting rules on the assessment of damages and its potential future
implications ...........................................................................................................21
Chapter III - The assessment of damages revisited status quo after The Golden
Victory........................................................................................................................23
1. The facts of The Glory Wealth and the question raised .................................24
2. The arguments presented, the outcome of the case and the authorities
discussed with relevant commentaries ...............................................................26
2.1. The arguments presented and the outcome of the case26
2.2. The authorities discussed with relevant commentaries27
3. The decisive point - The Golden Victory.....31
Conclusion ................................................................................................................34
Bibliography: ............................................................................................................37
Electronic copy available at: http://ssrn.com/abstract=2593089
Introduction
Commercial contracts form a specific category of contracts under English law
due to the nature of the parties involved, namely parties who are in business for the
purposes of trade.1 The most distinctive feature of such parties is their willingness to
undertake higher risks in order to negotiate more commercially beneficial contract
terms and make higher profits out of a particular transaction. It can be therefore said
that from an economic perspective, contracts are purely a matter of risk allocation2,
such being particularly high in commercial context.
When contractual risks materialize or breaches are committed, the question
becomes one of enforcement of the contract, termination and damages. Unfortunately,
very often one or even both parties3 do not live up to their contractual obligations. It
is at that moment, depending on the nature of the breach and its gravity i.e. if such
is of a repudiatory character when the innocent party is entitled to terminate the
contract and ask damages for the harmful results of the termination4. Commercial
contracts by their very nature involve big financial interest which is why in case of
breaches and subsequent claim for damages the following questions become essential:
(i) what amount of damages can be claimed; (ii) what is the method for calculation of
that amount and (iii) what is the relevant moment by which the assessment of the
amount shall be made. In short, when it comes to damages, it is all about commercial
certainty and predictability of the applicable legal rules that give answer to the
aforementioned questions. It is of utmost importance for the innocent party to be able
to rely on such rules in order to predict with finality the compensation that can be
awarded.
Joseph Chitty (1776-1841); Hugh G. Beale; Andrew S. Burrows, Chitty on contracts, 31st edition,
Sweet & Maxwell, London, 2012, para 1-093.
2
Qi Zhou in Damages for repudiation: An ex ante perspective on the Golden Victory Case, The Sydney
Law Review, 2010, 32: 579-93.
3
Chitty on contracts, para 2-015; Edwin Peel; Gunter Heinz Treitel, The law of contract, 13th ed. / by
Edwin Peel, Sweet & Maxwell, London, 2011, para 18-087, 18-088.
4
Andrew Tettenborn, Graham Virgo, Malcolm Clarke, Neil Andrews, Contractual Duties:
Performance, Breach, Termination and Remedies, Sweet and Maxwell, London, 2011, para 13-014.
The principle of certainty and predictability in commercial transactions can be

considered as one of the most valuable foundations of common law5. Its importance
has been regularly reiterated by English courts since the famous judgment of Lord
Mansfield CJ (as he then was) in Vallejo v Wheeler [1774]6 where the learned judge
stated that in all mercantile transactions the great object should be certainty and
speculators in trade should know what ground to go upon.
Such certainty was in general present with regards to the rules on assessment
of damages. When there is an available market by the time of termination, the breach
date rule applies7. According to that rule, damages for wrongful repudiation of a
contract, shall be assessed as a difference between the contract rate and the available
market price by the moment of the breach, excluding any subsequent events. However,
the controversial judgment in the case of Golden Strait Corporation v Nippon Yusen
Kubishka Kaisha (The Golden Victory)8 provoked active discussions in the court itself
and literature alike. The majority of the judges in the House of Lords opined that at
the time when the damages are calculated, contractually stipulated events which occur
after the breach date but before the final delivery of the arbitration award, ought to be
taken into account in the assessment. The rationale behind this ruling was the
supremacy of the compensatory principle, namely not to put the innocent party in a
better position than as if the contract had been performed. However, there were two
strong dissenting opinions, delivered by the only two judges with commercial
background, who expressed their concerns that considering events future to
termination in the assessment of damages undermines the fundamental principle of
commercial certainty in English Law.
Rex Ahdar, Contract doctrine, predictability and the nebulous exception, Cambridge Law Journal
2014, 73(1), 39-60.
6
Vallejo and Another v Wheeler, [1774] 1 Cowper 143 98 E.R. 1012; Scandinavian Trading Tanker
Co AB v Flota Petrolera Ecuatoriana (The Scaptrade) [1983] QB 529, 540541, [1983] 2 AC 694,
703704; Homburg Houtimport BV v Agrosin Private Ltd [2003] UKHL 12, [2004] 1 AC 715 , 738;
Jindal Iron and Steel Co Ltd v Islamic Solidarity Shipping Co Jordan Inc (The Jordan II) [2004]
UKHL 49, [2005] 1 WLR 1363.
7
Koch Marine Inc v DAmica Societa di Navigazione A.R.L. (The Elena DAmico)[1980], Queens
Bench Division (Commercial Court), 1 Lloyds Rep. 75, 87-90.
8
Golden Strait Corporation v Nippon Yusen Kubishka Kaisha (The Golden Victory) [2007], House of
Lords, 2 W.L.R. 691.
The new approach taken by the court in The Golden Victory was not only
confirmed but has been even extended through the very recent case of The Glory
Wealth [2013]9. The court (so far only first instance) held that a possible future
inability (after the contract was repudiated and terminated) of the innocent party to
perform its obligations is a contingency that shall be taken into account in the
calculation of damages. This conclusion of the judge left open again the door for
discussions about the dangers posed to the smooth operation of the fundamental
principle of commercial certainty. That principle, it was held again, should yield to
the superior compensatory principle in order to avoid unfair overcompensation.
Against the background of the recent controversial legal development in
English case law on the assessment of damages, the aim of the present paper is to
examine: whether the judgment in The Golden Victory and its application in
subsequent case law indeed brought uncertainty to the rules on assessment of damages
and if so, whether this can be justified by the more idealistic intention to create
absolute justice.
In order to answer this question, the paper is systematically structured in the
following three chapters: (I) the lex lata on the assessment of damages before The
Golden Victory; (II) a commentary on The Golden Victory; (III) application of the rule
established by the Golden Victory in subsequent case law.
Chapter I
The rules on assessment of damages the status quo before The
Golden Victory
In order to correctly understand the new approach in the assessment of
damages introduced by The Golden Victory and to answer the question whether the
latter posed threats to the valuable common law principle of certainty in commercial
context, first the relevant rules established and applied before shall be examined.
Flame SA v Glory Wealth Shipping Pte Ltd Glory Wealth (The Glory Wealth) [2013], Queen's Bench
Division (Commercial Court), EWHC 3153 (Comm).
Those encompass more specifically two important rules, which are particularly
relevant for the assessment of damages, namely the fundamental compensatory
principle and the so-called breach date rule.
1. The Compensatory principle

As already pointed out in the introduction, although contracts are made to be
performed, frequently they become subject to discharge due to a breach committed by
one of the parties. According to the nature of the breach, i.e. if such is of repudiatory
character, the innocent party is faced with two possible options, which depend entirely
on its discretion: (i) to bring the contract to an end and subsequently be released from
performing its obligations10 or (ii) to affirm the contract and insist on specific
performance by the other party11. If the innocent party elects to terminate the contract,
it is established by case law that such termination requires no particular form12. A
clear and unequivocal intention to bring the contract to an end is sufficient.13
Acceptance of the repudiation by the innocent party terminates the contract with
immediate effect14.
As a matter of well-established principle, the legal consequence of the
accepted repudiation is that the innocent party is vested with the right to claim
damages from the party in default.15 This is a secondary obligation of the latter, which
survives termination16. If the contract contains specific clauses that stipulate the
10
Chitty on contracts, para 24-001.

Treitel, The law of contract, para 18-005; A. Tettenborn, G. Virgo, M. Clarke, N. Andrews,
Contractual Duties: Performance, Breach, Termination and Remedies, para 14-001; Photo Production
Ltd v Securicor Transport Ltd [1980] A.C. 827, Fermometal SARL v Mediterranean Shipping Co SA
(The Simona) [1989], House of Lords, A.C. 788 at 800.
12
Chitty on contracts, para 24-001; Treitel, The law of contract, para 18-009; A. Tettenborn, G. Virgo,
M. Clarke, N. Andrews, Contractual Duties: Performance, Breach, Termination and Remedies, para
14-037.
13
Treitel, The law of contract, para 18-009; Vitol SA v Norelf Ltd [1996] A.C. 800, 811A per Lord
Steyn (An act of acceptance of a repudiation requires no particular form: a communication does not
have to be couched in the language of acceptance. It is sufficient that the communication or conduct
clearly and unequivocally conveys to the repudiating party that [the] aggrieved party is treating the
contract as at an end).
14
A. Tettenborn, G. Virgo, M. Clarke, N. Andrews, Contractual Duties: Performance, Breach,
Termination and Remedies, par.14-002; Norwest Holst v Harrison [1985] ICR 668,683.
15
Lord Bingham of Cornhill in par. 8 of The Golden Victory, House of Lords.
16
Treitel, The law of contract, para 18-015; Chitty on contracts, para 24-050.
11
amount of damages payable in case of specific breaches, i.e. the so-called liquidated
damages clauses17, the latter also remain applicable after termination, serving as a
measure of the innocent partys loss.18 In case the contract does not provide for such
liquidated damages, the general compensatory principle applies.
The claim for damages as a remedy aims to compensate the innocent party for
the loss of its contractual bargain19, meaning to put it so far as money can do it []
in the same situation [] as if the contract had been performed20. Said in other words,
when examining a claim for damages, the court in order to determine their amount,
shall compare the position of the innocent party after the breach with the hypothetical
position in which it would have been, had the contract not been repudiated21. The
overall position of the injured party shall be considered22, taking into consideration
that the aim of the compensatory principle is not to put the innocent party in a position
better than as if the contract had been duly performed.23
2. The breach date rule

The compensatory principle, briefly explained in the previous section, does
not however give an answer to the question what is the relevant moment by which the
amount of damages shall be determined.24 To a certain extent the answer to that
question can be found in the so called breach date rule, also referred to in literature
as the available market price rule. The relevant moment by which damages shall be
assessed is important due to the fact that it is also the factor, which defines their exact
quantum.
Harvey McGregor, McGregor on Damages, 18th ed., Sweet & Maxwell, London, 2009, para 1002 (3).
18
19
Treitel, The law of contract, para 20-022.
20
Robinson v Harman [1848] 1 Exch 850 at 855 per Parke B.; Livingstone v. Rawyards Coal C [1880]
5 App Case 25 per Lord Blackburn.
21
Termination and Remedies, par.21-006.
22
Treitel, The law of contract, para 20-006.
23
Ibid, para 20-006.
24
17
The general rule is that the amount of damages shall be assessed by the date
of the breach25, subject to the important qualification that there should be an available
market26 for the lost performance by that date27. When there is not an available market,
the rule by necessity is excluded and the claimant must prove his actual loss28. The
breach date rule would also not be applicable in case after the breach occurred the
innocent party preferred to treat the contract as in force and resort to another remedy
such as asking for specific performance. In case the latter fails and the contract is
subsequently terminated, the damages would be calculated not by the date of the initial
breach but by the date when the specific performance became impossible29.
Furthermore, when the innocent party did not know about the breach, the damages are
calculated by the moment when it should have reasonably become aware of it and was
able to undertake relevant mitigation steps30.
The breach date rule has been statutorily stipulated for a long time with regards
to sales of goods contracts31 and is operating best in such context because there is
usually an available market for commodities. The rule is closely related with the duty
of mitigation of the innocent party32. The latter is encouraged to resort to the market
and conclude a substitute contract as soon as reasonably possible. The rationale for
that is of simple commercial fairness33 and more specifically that any loss, resulting
from fluctuations in the relevant market, subsequent to the date of breach, is not caused
25
Chitty on contracts, para 26-086; Treitel, The law of contract, para 20-072; A. Tettenborn, G. Virgo,
M. Clarke, N. Andrews, Contractual Duties: Performance, Breach, Termination and Remedies, para
21-086; Miliangos v George Frank (Textiles) Ltd [1976] A.C. 443, 468; Johnson v Agnew [1980] A.C.
367, 400.
26
The definition of available market is not subject to discussion in the present paper. However it was
explained by the court in The Arpad [1934] P. 189, Charter v. Sullivan [1957] 2 Q.B. 117, Shearson
Lehman Hutton v. Maclaine Watson (No.2) [1990] 1 Lloyds Rep. 441 and Petrotrade v. Stinnes Handel
[1995] 1 Lloyds Rep. 142.
27
Chris Nicoll in The "available market" rule and period charters: Golden Strait Corporation v Nippon
Yusen Kubishika Kaisha, Journal of Business Law 2008, 1, 91-95.
28
Termination and Remedies, para 21-089; Glory Wealth Shipping Pte Ltd v Korea Line Corp [2011]
EWHC 1819 (Comm).
29
Johnson v Agnew, House of Lords, [1980] A.C. 367.
30
Chitty on contracts, para 26-086; Vand den Huck v R.Martens & Co Ltd [1920] 1 K.B. 850.
31
Ss. 51 (3) of the Sale of Goods Act 1893, repealed by the Sale of Goods Act 1979, where the sections
introducing the breach date rule have been preserved as ss. 50 (3), 51 (3).
32
33
by the breach itself, but by the injured partys failure to mitigate its losses34. Therefore,
an important feature of the breach date rule is that in principle any events following
the date of the breach are not taken into consideration when the amount of damages is
calculated.
The available market price rules application, although statutorily provided
only with regards to sales of goods transactions, has been extended through case law
to charterparty contracts as well35. The leading case in that regard is The Elena
DAmico [1980]36 where Robert Goff J (as he then was), considered that a normal
measure for damages in cases of premature wrongful repudiation of a time charter
when there is an available market (emphasis added) for substitute hire of the vessel
by the time of termination, should be the difference between the contract rate for the
period of the charterparty and the market rate by the date of the breach (emphasis
added) for the chartering in of a substitute vessel for that period37. The learned judge
based his conclusion on previous case law38 and ss. 51 (3) of the Sale of Goods Act
1893. The case has not been appealed and it is an absolute authority on the application
of the available market price rule to charterparty contracts.
3. Deviations from the breach date rule existing before

The Golden Victory
As already pointed out in the previous section, important corollary of the
available market price rule is that events following the date of the breach are in general
excluded when the assessment of damages is made. However, usually there are
exceptions to each rule and the situation is not different when it comes to the breach
date rule. Even before the controversial judgment of The Golden Victory, discussed in
34
Treitel, The law of contract, para 20-072; Andrew W Baker Q.C., LMAA Spring Seminar 2 May
2012, Owners Damages for Repudiation by Charterers (No Available Market), available at:
http://www.lmaa.org.uk/uploads/documents/Owners'%20Damages%20for%20Repudiation%20by%2
0Charterers.pdf, at par. 14.
35
36
The Elena DAmico [1980], Queens Bench Division (Commercial Court).
37
Ibid, p.87.
38
Snia Societa di Navigazione Industriale et Commercio v Suzuki & Co [1924] Court of Appeal, 18
Lloyds Rep. 333.
more detail in the next Chapter, certain deviations were already present in case law.
Several of these authorities were referred to by the court in The Golden Victory and
therefore deserve briefly to be exposed in the present section. According to Langley J
in the Queens Bench, Lord Mance in the Court of Appeal (with whom the rest
concurred) and the majority of the judges in the House of Lords, in specific
circumstances deviations from the breach date rule are necessary in order to reflect
the actual losses suffered by the injured party39.
The relevant authorities, discussed by the court in The Golden Victory where
deviations from the breach date rule, namely that events subsequent to the date of the
breach were considered when the amount of damages was calculated, can be divided
as follows: (i) the famous Bwllfa principle; (ii) personal injuries cases; and lastly (iii)
other commercial cases.
(i) The Bwllfa principle40 concerned a situation where owners of coal mines,
agreed not to operate their mines during water repairs period against statutory
compensation promised by the waterworks company. Subsequently, compensation
was sought by the owners of the coal mines and the question was whether the coal
should be valued as at the beginning of the repairs period or at its value during the
currency of the period. Arbitration was delayed and the work period was finished by
the time of the award. Therefore, when assessing the compensation due, the arbitrator
took into account the actual rise in the prices during the relevant period. This approach
was later confirmed by the court who held that when the arbitrator, respectively the
judge possesses information about events that have already occurred and that
influence the amount of the compensation, such shall not be ignored41. However, it is
important The Bwllfa case to be distinguished from typical commercial transactions.
Firstly, it concerned statutory compensation under specific legal act and secondly it
was explicitly stated by the court that the case is different from one of sale of goods
39
Treitel, The law of contract, para 20-072; Johnson v Agnew, House of Lords, [1980] A.C. 367.
Bwllfa and Merthyr Dare Steam Collieries Ltd v Pontypridd Waterworks Co [1903] A.C. 426.
41
Lord Macnaghten in Bwllfa and Merthyr Dare Steam Collieries Ltd v Pontypridd Waterworks Co
[1903] A.C. 426: Why should he listen to conjecture on a matter which has become an accomplished
fact? Why should he guess when he can calculate? With the light before him, why should he shut his
eyes and grope in the dark?
40
or property transfer. It is therefore doubtful to what extent it can be relied on when the
situation concerns a pure commercial transaction such as charter of a vessel over a
period of time.
(ii) Great attention in The Golden Victory was also put on previous series of
tort cases related with personal injuries42. However, as correctly pointed out by Lord
Walker in The Golden Victory43, personal injuries cases are in a slightly different
category than commercial disputes on the assessment of damages for wrongful
repudiation. The former require by necessity future developments to be taken into
account in the assessment of damages due to the unpredictable character of the
injuries44. Therefore, final calculation of the compensation shall be based on updated
medical evidence.
(iii) Lastly, several commercial cases, more specifically related with
charterparty disputes, were discussed by the court. Two of them deserve to be briefly
presented here, namely The Mihalis Angelos45 and The Seaflower46.
In The Mihalis Angelos the situation involved voyage charterparty with a
cancellation clause in favour of the charterers, giving them the right to terminate the
contract if the ship is not ready to load by a specific date. Three days earlier before
the cancelling date, the ship was still discharging cargo from her previous voyage in
Hong Kong and it was physically impossible for her to be at the loading port by the
cancelling date. Therefore, the charterers decided to cancel the contract earlier. It was
held in subsequent arbitration that this premature termination by the charterers
amounted to repudiation of the contract, giving the owners the right to claim damages.
However, the arbitrators awarded only nominal damages to the owners due to the fact
that the contract in any case would have been legally terminated by the charterers three
days later, therefore the owners would have suffered no loss. Most discussions
42
The Golden Victory, House of Lords.

Lord Walker in Par. 41 of The Golden Victory, House of Lords.
44
Ibid, Par. 41.
45
Maredelanto Compania Naviera S.A. v Bergbau-Handel G.m.b.H. (The Mihalis Angelos) [1971] 1
QB 164.
46
BS&N Ltd (BVI) v Micado Shipping Ltd (Malta) (The Seaflower), Court of Appeal (Civil Division)
[2000], [2001] 1 All E.R. (Comm) 240.
43
10
provoked the judgment of Megaw LJ according to whom events future to termination

should be taken into account when damages are calculated if they were predestined47
to happen.
Two important comments should be made about The Mihalis Angelos the
referred future event, namely that the ship would not be able to reach the loading port
by the cancelling date, was already certain beyond any doubt at the time when the
breach (the premature cancellation) was committed48 and secondly a distinction
should be made between cases of anticipatory breach like The Mihalis Angelos and
cases of actual repudiation49. In that regard, it was explained by Lord Justice Edmund
Davies that a different test applies when it comes to the assessment of damages in
anticipatory breach cases, namely: What would the position of the parties have been
if the defendant had not wrongly announced his refusal to fulfil his part of the contract
when the time for performance arrived?50. It is therefore the nature of the breach,
such being of anticipatory character, which requires events between the renunciation
and the stipulated time for performance to be taken into account.
Finally, in The Seaflower51 the charterers who repudiated an eleven-month
charter after two months, claimed that damages asked by the owners should be limited
to the 4th month of the charter due to the fact that by that time the charterers would
have been legally entitled to terminate the contract, based on the occurrence of a
specific event, stipulated in a cancellation clause. Timothy Walker J held that the
charter would inevitably come to an end on the 4th month of its term and limited
accordingly the owners damages. The situation very much resembles the one in The
Mihalis Angelos and again the same conclusion can be made the judge did not
actually take into account future events when assessed the quantum of damages, the
termination of the charter two months later was inevitable and that was known by the
47
The Mihalis Angelos [1971] 1 QB 164, at pp 209-210.

Termination and Remedies, para 21-096; Betul Milliner, History revisited, July 2007, available at:
http://www.newlawjournal.co.uk/nlj/content/history-revisited
49
Gunter Heinz Treitel, Assessment of damages for wrongful repudiation in Law Quarterly Review
2007, 123 (Jan), 9-18, p. 10.
50
Lord Justice Edmund Davies in Par. 53 of The Mihalis Angelos [1971] 1 QB 164.
51
The Seaflower [2000], Court of Appeal (Civil Division), [2001] 1 All E.R. (Comm) 240.
48
11
date of the breach, he just used evidence for future events only to fortify his
conclusion52.
4. Interim conclusion about the rules on the assessment of damages

before The Golden Victory
In summary, the status quo of the legal rules on the assessment of damages,
existing before The Golden Victory, can be characterized by predominantly clear
operation of the two well-established rules examined above: the compensatory
principle, aiming to put the innocent party in the position as if the contract had been
performed, and the breach date rule, applicable when there is an available market by
the date of the breach. The former reflects the purpose of the damages as a remedy
and the latter defines the method and the relevant moment by which their assessment
shall be made. Taken together, it can be said that they have managed to meet the
expectations of parties to any kind of disputes, especially commercial ones, leading to
clear and predictable results.
However, certain exceptions to the important corollary of the breach date rule,
that events following the date of the breach shall not be considered in the calculation
of damages, have already found place in case law. Nevertheless, after their detailed
examination in the previous section, it can be concluded that part of those exceptions
concerned very specific situations such as statutory compensation and personal
injuries cases which shall be distinguished from and cannot serve as an authority to
decide purely commercial disputes. The other part, comprising of the commercial case
law discussed above, shall also be considered very narrowly and with precaution. It is
extremely important to point out the nature of the future events that were taken into
account in the measurement of the damages in those cases they were absolutely
inevitable to happen and this was already certain by the date of the breach. This was
the only reason which justified their consideration into the calculation of damages.
52
Lord Bingham of Cornhill in Par 19 of The Golden Victory, House of Lords.
12
Chapter II
The Golden Victory and its impact
It was asserted that time charters usually have not been subject to extensive
interest for English courts and academia53. However, The Golden Victory is obviously
an exception that provoked active disputes both in the court and literature. Having
examined the existing state of the law on the assessment of damages before The
Golden Victory, the present chapter focuses on the judgment in The Golden Victory
and analyses the new approach introduced by it and more specifically its potential
threats to the operation of the principle of commercial certainty. In order to achieve
that, the structure of the chapter comprises of: (i) brief exposure of the facts of the
case, (ii) the arguments of the parties accompanied by relevant comments and lastly
(iii) an evaluation of the judgment in the context of the existing rules on the assessment
of damages and its potential future implications.
1. The facts of the case

On 10th July 1998 a time charter was entered into between the owners of the
vessel Golden Victory Golden Strait Corporation (GSC) and the charterers Nippon Yusen Kubishika Kaisha (NYKK). The charter was concluded for a 7-years
term, which should have expired on 6th December 2005 the earliest54. However, the
charterers repudiated the contract on 14th December 2001 by redelivering the vessel
to the owners. The latter accepted the repudiation on 17th December 2001, bringing
the contract to an end. Therefore, on the date of termination, the owners have lost a
charter with four years remaining of its initial term. In accordance with the
compensatory principle, as a result of the charterers repudiation, the owners claimed
damages the amount of which was however declined by the charterers. The dispute
was brought to arbitration and among other questions concerned the assessment of
damages. The problematic point was related with a specific clause in the charter giving
Michael Mustill, The Golden Victory - some reflections in La w Quarterly Review 2008, 124 (Oct),
569-585, at p.569
54
The Golden Victory, Queen's Bench Division (Commercial Court), 15 February 2005, [2005] EWHC
161 (Comm), par. 3.
53
13
right to each of the parties to cancel the contract in case war or hostilities break out
between a number of countries amongst which US, UK and Iraq. By the time the
arbitration award was delivered, the latter rather delayed - almost three years after the
termination of the contract, such war between US, UK and Iraq had indeed become a
fact the so called Second Gulf War had commenced on 20th March 2003. The
charterers argued that the damages payable to the owners shall not encompass the
whole four remaining years of the initial term of the charter but should be limited to
the period as of termination of the contract until the outbreak of the war when the
charterers would have been entitled to cancel the charter.
The arbitrator although being of the opinion that the Second Gulf War, which
according to experts opinion was a mere possibility55 by the time when the contract
was terminated, shall not affect the assessment of damages, decided at the end in
favour of the charterers, limiting the period for which the owners are entitled to
compensation until March 2003 when the war broke out56. The award was subject to
appeal on point of law and subsequently reached the highest court instance the House
of Lords.
2. The arguments invoked by the parties and relevant commentaries

2.1 The parties arguments
In general, The Golden Victory can be defined as a collision between two
fundamental principles of English commercial law57, already examined in the
introduction and the previous chapter, namely the principle of legal certainty in the
context of commercial disputes and the compensatory principle. The former was relied
on by the owners and defended by the minority of the judges and the latter was invoked
by the charterers and supported by the majority.
55
The Golden Victory, House of Lords, [2007] 2 W.L.R. 691, par.7.

The arbitrator felt constrained to decide the case in favour of the charterers based on the judgment
in The Seaflower.
57
G. Treitel in Assessment of damages for wrongful repudiation, p.10.
56
14
The case provoked serious contentions between the parties, which derived
from the two different points of law presented. The situation was one where by the
time the charter was wrongfully repudiated and brought to an end, there was an
available market for substitute fixtures for the vessel whether on the spot market or on
the market for time chartering58. It was therefore the breach date rule or the
available market price rule, which according to well-established case law should
have been applied59 by ignoring any events subsequent to the date of the breach in the
calculation of damages.
In light of that, it was the owners claim that the charterers shall pay damages
calculated as the difference between the hire-rate under the charter and the market
price by the time of the breach for the remaining four years of the repudiated contract,
or that the applicable formula was: (C M) x P (where C is the rate under the
repudiated charter, M is the available market rate and P is the repudiated period)60.
The owners pointed out that the assessment of damages for wrongful repudiation
should have been done in strict compliance with the breach date rule by ignoring any
events following the date of the breach61. Their major argument was that this rule
promotes certainty, finality and ease of settlement, which was later endorsed by the
two of the learned judges in the House of Lords who dissented62.
In response, the charterers alleged that the breach date rule is not an absolute
rule and can be deviated from in case its application leads to unjust results 63. It was
asserted and that was endorsed by the majority in the House of Lords that the
application of the breach date rule shall be more flexible64 in order to fulfil the major
58
This was found by the arbitrator and was pointed out by Langley J in par. 9 of his judgment in the
first instance - The Golden Victory, Queen's Bench Division (Commercial Court).
59
M. Mustill, The Golden Victory - some reflections, p.571; The Elena DAmico)[1980], Queens
Bench Division (Commercial Court); Dampskibsselskabet Norden A/S v Andre & Cie SA, Queen's
Bench Division (Commercial Court), [2003] 1 Lloyd's Rep. 287; Lord Carswell in par.58 of The Golden
Victory, House of Lords.
60
Andrew W Baker Q.C., LMAA Spring Seminar 2 May 2012 in Owners Damages for Repudiation
by Charterers (No Available Market), available at:
http://www.lmaa.org.uk/uploads/documents/Owners'%20Damages%20for%20Repudiation%20by%2
0Charterers.pdf, par.6
61
H. McGregor, McGregor on Damages, para. 1-026.
62
Lord Bingham of Cornhill and Lord Walker of Gestingthorpe.
63
The charterers referred to Johnson v Agnew [1980] AC 367.
64
Lord Scott at par. 32 of The Golden Victory, House of Lords.
15
purpose of damages to reflect realities (emphasis added) as far as possible65.The

charterers claimed that the Second Gulf War was an event which would have entitled
them to lawfully terminate the contract in March 2003, therefore any losses suffered
by the owners after that date, should not be covered by the charterers because this
would put the owners in a better position than if the charter had not been repudiated.
This argument of the charterers was adopted in the reasoning of the majority in the
House of Lords and decided the outcome of the case. It was held that the lodestar is
that damages should represent the value of the contractual benefits from which the
claimant had been deprived by the breach of contract, no less but also no more
66
(emphasis added). The fundamental purpose of a claim for damages as a remedy is

compensatory67 - to put the injured party in the position as if the contract was
fulfilled68. Overcompensation should be avoided69, especially in circumstances when
by the time of assessment subsequent events indeed showed that the owners would
have lost their contractual rights70.
2.2 Commentary on the arguments
The power of the owners argument is beyond doubt. As already pointed out
in the introduction, one of the strongest points of English law has always been the
legal certainty in commercial context. It was however expressed by Lord Scott from
the majority that there is not such principle as commercial certainty under English
law, the latter being only a desideratum71. Moreover, the level of abstraction of such
general certainty consideration was too high to take prevalence over the
compensatory principle72. It shall be indeed admitted that commercial certainty per se
65
J W Cater, Elisabeth Peden, Damages Following Termination for Repudiation: Taking Account of
Later Events in Journal of Contract Law (Australia), July 2008, p.13.
66
67
Qi Zhou in Damages for repudiation: An ex ante perspective on the Golden Victory Case, The Sydney
Law Review, 2010, 32: 579-93.
68
Robinson v Harman, Court of Exchequer, 18 January 1848, [1843-60] All E.R. Rep. 383; 154 E.R.
363; (1848) 1 Ex. 850.
69
Qiao Liu in The date forassessing damages for loss of prospective performance under a contract,
Lloyd's Maritime and Commercial Law Quarterly, 2007, 3 (Aug), 273-278.
70
71
Ibid, par. 38.
72
Jonathan Morgan, A victory for "justice" over commercial certainty in Cambridge Law Journal 2007,
66 (2), 263-265 at p. 264.
16
cannot decide the outcome of a particular dispute but it can rather serve as a guidance
to the judges in the way they apply the relevant rules of law in order those to lead to
certain and predictable results.
Certainty and predictability serving as such underlying guidance mechanisms
are of utmost importance for merchants due to the fact that clear and consistent legal
rules encourage businessmen to take higher risks and this way promote trade. It also
defines the parties ex ante and ex post to the conclusion of a particular contract
behaviour, meaning that at each moment they should know where they stand and act
accordingly73. To elaborate on that, it is important, especially in commercial
transactions, where the financial interest is bigger, before entering into a specific
contract, the parties to be aware of what exactly they can expect as a legal protection
under the applicable law in case of breaches. If the law is clear, consistent and
predictable, then parties can rely on it without concerns. If on the contrary it is not then they may be encouraged to include in the contract detailed individually
negotiated provisions, which would govern the consequences in case something goes
wrong74. In the area of remedies for breach of contract, this would be the insertion of
liquidated damages clauses75. If for example, GSK and NYKK have included such
provision, determining the amount of damages payable to the owners in case of breach
by the charterers, neither the war clause, nor the fact that the risk of such war indeed
materialized, would have been of any relevance. Such clause would be a clear
expression of the party autonomy principle and as such - subject to enforcement.
Indeed that would have saved the owners valuable time and resources for the conduct
of protracted arbitration procedures and subsequent appeals before the court, which
outcome in the end turned out to be not in their favour.
Legal certainty can also be crucial for parties ex post actions. The injured
party has to act rapidly after the breach is committed in order not to be considered
affirming the contract. Prompt decisions at that particular moment are of utmost
73
Robert Goff L.JJ in Scandinavian Trading Tanker Co. A.B. v Flota Petrolera Ecuatoriana (The
Scaptrade), Court of Appeal [1982], 1 Lloyd's Rep. 146.
74
75
Qi Zhou in Damages for repudiation: An ex ante perspective on the Golden Victory Case.
17
importance76. But in order for such decisions to be made, the innocent party shall be
able to assess all possible risks that future developments may bring77. Following the
breach, and threatened by the likely application of uncertain legal rules, such as the
possible effect of hypothetical future events on the quantum of damages, the injured
party would want to urge resolution of the dispute by all means possible in order to
avoid exposing itself to the risk of such contingencies becoming reality within the
time proceedings are going on.
Having stated the importance of legal certainty, it is submitted that the
charterers argument, endorsed in the reasoning of the majority, brings potential
uncertainty in the applicable legal rules. Such uncertainty derives from the following:
the owners right to claim compensation for the loss of their contractual bargain
accrued on the date of the breach which was 17th December 2001; the date of
acceptance of repudiation was clear and there was an available market for substitute
fixtures at that date. Therefore all the requirements for the application of the already
familiar formula (C M) x P78 were present on 17th December 2001. However, the
amount of damages already accrued which could have been calculated on the footing
of the market rate by the date of the breach, was amended due to subsequent events.
This beyond doubt creates uncertainty due to the fact that rights already accrued were
this way subject to change79. On the contrary, it was expressed in literature that what
the owners claimed should be defined as loss of profit damages which has not been
incurred on 17th December 2011 when the acceptance of the repudiation took place
but later on and for that reason events which took place up to that date shall be taken
into account and the quantum of damages shall be reduced respectively80. However,
this cannot be supported. As it was pointed out above, the available market price rule
should have been applied, crystalizing the amount of damages as a difference between
76
Paul David, Damages for breach of contract. The difficulty of applying the principles to real cases,
available at: http://www.pauldavid.co.nz/publications/damagesforbreachofcontract.asp, par. 18.
77
M. Mustill, The Golden Victory - some reflections, p. 585.
78
See Chapter II, section 1 above, footnote 53.
79
Termination and Remedies, para 21-094; Siko Harder, The exculpation of repudiating parties by a right
to terminate the contract in Journal of Business Law, 2009, 7, 679-696, p. 689.
80
Ibid, p. 689.
18
the rate under the repudiated contract and the market rate by the date of the breach
(emphasis added) for the remaining period of the contract.
With regards to the point made by the owners about finality and
encouragement of settlement, the present author agrees that for the assessment of
damages, taking into account events which were a mere possibility by the date of the
breach, indeed endangers the promotion of fast and definite resolution of commercial
disputes81. The party in default may, acting in bad faith, refuse to settle promptly after
the claim for damages is made and attempt to delay as much as possible subsequent
arbitration and/or court proceedings expecting that in the meantime contractual risks
will materialize and reduce its liability82. In the case at hand, arbitration was delayed
for three years after the date of breach and if it had been completed earlier, the
outcome would have been totally different. This leads to the conclusion that the final
result was dependent only on how soon after the breach arbitration was determined83.
This definitely cannot be considered as a certain and fair rule because the outcome
will always depend on the behaviour of the party in default, namely whether the latter
is willing to cooperate in order fast settlement to be achieved or it will intentionally
delay resolution of the dispute in order to eventually decrease its liability. An effective
operation of legal rules is one that cannot be influenced by actions of any of the parties,
one that guarantees equal protection and does not put the outcome of the dispute under
the control of either of the parties.
Another important question was left without a clear answer in the majoritys
reasoning, namely whether in order to decrease the amount of damages payable, it is
required that absent the repudiation, the repudiating party would in fact have exercised
the right to terminate, stipulated in the cancellation clause and who bears the burden
of proving what the repudiating party would have done84. In that regard, concerns have
been expressed in literature85 as to whether in March 2003 the charterers would have
81

J. Morgan, A victory for "justice" over commercial certainty, p. 264.
83
Brian Coote, Breach, anticipatory breach, or the breach anticipated? in Law Quarterly Review 2007,
123 (Oct), 503-511, at p. 503; Treitel, The law of contract, para 20-080.
84
S. Harder, The exculpation of repudiating parties by a right to terminate the contract, p. 692.
85
G. Treitel, Assessment of damages for wrongful repudiation, p. 15.
82
19
indeed used the war clause in the charter to terminate the latter or whether they would
have used it for genuine purposes. There was not exact information available in the
arbitration report as to where exactly the charterers intended to use the vessel until the
end of the charters term and whether the outbreak of the Second Gulf War would
have indeed disinterested them from the charter86. The cancellation clause stipulated
an option for each of the parties to terminate the contract in case such war occurs, it
did not however obliged any of the parties to make use of it.
It has been asserted that the cancellation clause was a risk allocation
mechanism, which allocated the risk of price increase to the charterers and the
opposite the risk of price decrease to the owners87. The present author however does
not consider this to be the risk allocation implied in the clause but rather the total or
partial impossibility to conduct business in the region that such war would have
created to either of the parties. In that regard, the charterers may have used the war
clause not because the war would have obstructed their business but in order to avoid
the non-beneficial fluctuations on the market and avail themselves from the bad
bargain they have made88. According to the reasoning of the majority in The Golden
Victory the prospective cancelling of the contract by the charterers even for that reason
by using the war clause, would still be an event reducing the amount of damages
payable to the owners89. Moreover, the cancellation clause may have perfectly served
as a cover for the non-willingness of one of the parties to further perform the
contract90. Such use of the clause would still have been considered as a contingency
decreasing the amount of damages.
It appears from the outcome of The Golden Victory that it does not matter
whether it can be 100% proved that had the contract remained in force, the charterers
would have terminated it for sure at the outbreak of the War and if indeed they would
86
Ibid, p. 15.
88
G. Treitel, Assessment of damages for wrongful repudiation, p. 16.
89
Ibid, p. 15.
90
87
20
have terminated it, what would be the real reasons standing behind that. This can
definitely not be considered as bringing certainty and predictability.
In response to the owners argument, supported by the minority of the judges
in the House of Lords, the charterers invoked and that was accepted by the majority,
the supremacy of the compensatory principle and its aim to avoid overcompensation.
It is hard to deny the simple logic standing behind that reasoning when events
affecting the quantum of damages are already a fact by the time an arbitration award
or a court judgment are delivered, more just and realistic results can be achieved if
those events are taken into account. This corresponds to the rationale of the damages
as a remedy for breach of contract, namely to reflect reality as much as possible. If
reality indeed shows that the loss of the innocent party is smaller than what it would
be if the well-established breach date rule is strictly applied, then it can be justified
such events to be considered in the assessment of damages. Speculations on the basis
of probabilities by the time when the arbitration award was delivered would have been
an artificial approach when real information about what happened in reality was
present. Even though the majority itself realized the risk of the repudiating party trying
to delay the assessment of damages in order to see whether a suspensive condition
becomes into operation91, it was held that this is a problem that courts should deal
with. The higher importance should be given to the compensatory principle and the
aim to achieve absolute justice.
3. Evaluation of the judgment of The Golden Victory in the context of the

pre-existing rules on the assessment of damages and its potential future
implications
In conclusion, the battle between commercial certainty and fair and just
compensation, vigorously discussed in The Golden Victory, left some questions
without an answer and made it difficult to say whether the victory of justice over
certainty is indeed a golden one. Both parties, supported by the different fractions
91
Lord Carswell in Par. 67 of The Golden Victory, House of Lords.
21
between the judges, presented motives which are beyond doubt reasonable: on the one
hand - the importance of legal certainty in commercial context which shall reflect
businessmens expectations, ensure protection of their rights and lead to predictable
results and on the other hand - fair and just compensation which shall mirror reality
as much as possible.
In general, this two fundamental principles do not necessarily exclude each
other but can rather be reconciled. For the sake of legal certainty, the innocent party
shall be able to calculate the amount of damages that can claim already when the
breach occurs. When there is an available market by that date, this is achieved by the
breach date rule. Taking into account events known by that date to be inevitable to
happen like in The Mihalis Angelos and The Seaflower, although deviating from the
breach date rule, do not bring uncertainty but rather contribute to the achievement of
more predictable and just results.
The Golden Victory, however, goes a bit further in that respect because at the
time when the breach occurred the parties could not foresee that the contract would
inevitably come to an end. The event was at the date of the breach only a 'mere
possibility' which however became reality by the time of the assessment of damages.
Due to the fact that such event materialized before delivery of final award, taking it
into consideration in the assessment of the damages, can be reasonably justified
because otherwise awarding full compensation to the innocent party would be in
absolute contradiction to the compensatory principle. Moreover, although not with
absolute certainty, the parties could have foreseen to a certain extent the occurrence
of the event stipulated in the cancellation clause92. In that regard, it is submitted that
when an event embodied in such risk allocation clause, reflecting the parties
contractual autonomy, indeed materialized by the moment damages are assessed, it
can be justified that the risk shall still be borne by the relevant party and not be
disregarded only because the contract was terminated.
92
According to Langley LJ the uncertainty was intrinsic to the charter and the owners never had the
guarantee that the contract would last until the end of its 7-years term, par. 13 of The Golden Victory,
Queen's Bench Division (Commercial Court).
22
It can therefore be said that the reasoning of the majority in The Golden Victory
itself is neither wrong, nor illogical. The problem that it causes however concerns the
fact that the court failed to formulate a clear criteria with regards to the question in
what exact circumstances events following the breach can affect the assessment of
damages. There is uncertainty in two aspects for future similar cases: (i) should any
other type of events, which are not stipulated in contractual cancellation clauses, also
be taken into account for the calculation of damages and (ii) what exact degree of
probability to materialize the event has to possess by the time of the breach in order
to be considered.
As already pointed out, the preceding case law such as The Mihalis Angelos
and The Seaflower spoke about predestined and inevitable events, The Golden
Victory obviously purported to extend this to events being a mere possibility. Would
that be however the final limit or also completely hypothetical by the date of the
breach events can also affect the calculation of damages? There was obviously a
tendency getting established which may lead to less certainty and predictability and
The Golden Victory with its lack of concrete criteria left the door open to abuses.
Whether this concerns were justified by subsequent case law is examined in
the next chapter.
Chapter III
The assessment of damages revisited status quo after
The Golden Victory
The questions posed and the concerns expressed with regards to in what
situations the reasoning of The Golden Victory will be applied in future cases and
whether the fears of legal uncertainty in commercial disputes are indeed justified, have
recently found an occasion to be reconsidered. The very recent case of Flame SA v
Glory Wealth Shipping Pte Ltd (The Glory Wealth) [2013]93 raised again a question
93
Flame SA v Glory Wealth Shipping Pte Ltd (The Glory Wealth) [2013] EWHC 3153 (Comm); [2013]
2 Lloyd's Rep.653 (QBD (Comm)).
23
of importance to the general law of contract, in particular, the assessment of damages

for breach of contract94. The court applied The Golden Victory and went even further
deciding that for calculating the quantum of damages a hypothetical future inability
(after the contract is repudiated and terminated) of the innocent party to perform its
obligations shall be taken into account. This was justified by the supremacy of the
fundamental compensatory principle, namely that the damages should represent the
value of the contractual benefits of which the claimant had been deprived by the
breach of contract, not less but also not more95. The present Chapter consists of the
following sections: 1) The facts of the case and the question raised; 2) The arguments
of the parties, the outcome of the case and the authorities discussed with relevant
commentaries and 3) The Golden Victory the decisive point in The Glory Wealth.
1. The facts of The Glory Wealth and the question raised

Contract of affreightment (the COA) dated 19 August 2008 was concluded
between Glory Wealth Shipping PTE Ltd (the disponent owners of the Glory Wealth
to be nominated motorship) and Flame SA (the charterers). The contract was for the
carriage of six cargoes of coal in bulk in each of the years 2009, 2010 and 2011. The
charterers failed to declare laycans for two of the shipments in 2009 and all the six
shipments in 2010. The owners started arbitration proceedings in which the arbitration
panel found that the charterers refusals to declare laycans represented an actual
repudiatory breach, which was accepted by the owners, vesting them with the right to
terminate the contract and claim damages. In order to assess the exact quantum of
damages, the arbitration panel applied the available market price rule and declared
that the owners were entitled to damages in the amount of almost 5.5 million US $,
representing the difference between the COA rate and the market rates by the date of
the breach. The case is one of the many which arose in relation with the 2008 financial
crash96. The sum awarded was so large because due to the collapse of Lehman
94
Mr. Justice Teare in par. 1 of The Glory Wealth.

Lord Scott in par.36 of The Golden Victory, House of Lords.
96
Charles Weller in 2013- Legal revolution or evolution, LMAA Spring seminar, 1 May 2014,
available at: http://www.lmaa.org.uk/uploads/documents/The%20Griffon%20%20Charles%20Weller.pdf
95
24
Brothers the freight market, which had started to experience slow decline, suffered a
sudden collapse97. The Charterers claimed that as a result of the tremendous market
fluctuations in that period, the disponent owners financial situation was so
deteriorated that had the charterers declared the laycans, the owners would not have
been able to provide the vessels to perform the voyages, they would have committed
repudiatory breach of the COA, giving the charterers the right to terminate the
contract. Therefore, only nominal damages should be awarded to the owners. In order
to be entitled to substantial damages, they should prove that by the time for agreed
performance they would have been able to fulfil their part of the contractual bargain.
This suggestion, however, was not accepted by the tribunal and substantial damages
in the aforementioned amount were awarded to the owners. It was held that once the
repudiation is accepted by the innocent party, the latter does not bear the burden of
proving its loss on the balance of probabilities.
The decision of the arbitration panel gave rise to an appeal on point of law on
the grounds of Section 68 of the Arbitration Act 1996. The exact issue to be solved by
the court was formulated as whether in order for the prima facie rule on substantial
measure of damages to be disregarded, the party in default must prove that by the time
of acceptance of the repudiation, the innocent party was already in breach or even a
probable future breach, that might lead to termination would also be an event relevant
to decrease the quantum of damages claimed. Formulated differently, the question
referred to the court was, whether a hypothetical future inability of the innocent party
to fulfil its part of the contractual bargain by the time when contractual performance
is due, can be considered when the amount of damages is measured.
In short, although the two cases have less in common when it comes to their
factual background, it is observed that the question brought before the court in The
Glory Wealth resembles the issue discussed in The Golden Victory, namely whether
and in what exact circumstances future contingencies can affect the quantum of
damages accrued.
97
Par. 3 of The Glory Wealth.
25
2. The arguments of the parties, the outcome of the case and the
authorities discussed with relevant commentaries
2.1. The arguments of the parties and the outcome of the case
The owners major argument was based on the opinion expressed by the
authoritative academic lawyer Sir Gunter Treitel according to whom once the
repudiation is accepted by the innocent party, the latter is released from further
performance of its contractual obligations, meaning that failure to perform on the
contractual due date cannot longer constitute a breach98.
However, the charterers made an interesting distinction, which was later
endorsed by the judge - that although future breach of the innocent party cannot release
the contract-breaker entirely from his liability to pay damages, it is an event that
should be taken into account in the assessment of their quantum99.
The answer given to the aforementioned question posed before the court was
that since there was no previous authority binding on the judge, the latter applied the
fundamental compensatory principle, vigorously proclaimed in The Golden Victory.
Mr. Justice Teare, in agreement with the owners arguments, pointed out that in the
process of calculating the amount of damages a hypothetical exercise shall be
performed, which consists of an assessment what would have happened, had the
contract not been repudiated100. It was held that the innocent party bears the burden of
proving on the balance of probabilities that had the contract not been repudiated, it
would have been able to fulfil its part of the contractual bargain. If it cannot prove that
with certainty, it would be considered that it would not have been able to comply with
its obligations, the latter amounting to repudiation and giving the charterers the right
to terminate the COA. That would be a contingency which would affect the
assessment of damages and respectively decrease their amount.
98
Treitel, The law of contract, para 20-082; Gill & Duffus v Berger [1984] AC 382.
Par. 10 of The Glory Wealth.
100
Ibid, Par. 85.
99
26
In order to reach this conclusion, Mr. Justice Teare discussed extensively

several authorities supporting owners or charters submissions but as already
mentioned in the previous paragraph, he found none of them of particular help for him
to reach final decision. However, some of the authorities deserve to be discussed here
as they stipulate important matters of principle, which although not directly, give
partially an answer to the issue brought before the court and should not have been
disregarded so easily by the judge.
2.2. The authorities discussed and relevant commentaries
The authorities, examined by the court in The Glory Wealth, can be classified
in the following categories: (i) sale-purchase agreements, (ii) other commercial,
including charterparties disputes and (iii) The Golden Victory, which turned out to be
the one determining the outcome of the case.
Starting with the sale-purchase case law discussed in The Glory Wealth101, it
should be pointed out that the majority of the cases observed by the court concerned
situations where by the time of repudiation (emphasis added) by the buyer and its
acceptance by the seller, the latter was already in breach of the contract himself by
shipping non-conforming to the contractual stipulations goods102. However, even then
it was repetitively pointed out by the court that a buyer cannot justify his refusal of
an offer to deliver goods under the contract, by proving that if he had not refused, the
goods when delivered would not have been in accordance with the contract.103 From
the sales of goods case law also becomes clear that the innocent party is not obliged
to prove that it would have been able to perform the contract in accordance with its
101
Flame SA v Glory Wealth Shipping Pte Ltd [2013] EWHC 3153 (Comm); [2013] 2 Lloyd's Rep.653
(QBD (Comm)), para 24 to 47, namely Braithwaite v Foreign Hardwood Co. Ltd. [1905] 2 KB 543,
Taylor v Oakes, Roncoroni and Co. [1922] 27 Comm Cas 262, British and Benningtons Ltd. v NW
Cachar Tea Co. [1923] AC 48, Brett v Schneideman Bros Ltd. [1923] NZLR 938, Continental
Contractors v Medway Oil and Storage Company [1925] 23 Lloyd's List Law Reports 124, YP Barley
Producers Ltd. V Robertson (EC) Pty Ltd. [1927] VLR 194, Esmail v Rosenthal & Sons Ltd. [1964] 2
Lloyd's Reports 447.
102
Gill & Duffus v Berger [1984] AC 382; Francis Reynolds, The Golden Victory A Misguided
Decision (2008) 38 Hong Kong Law Journal 333 at p. 343.
103
Bankes LJ in Taylor v Oakes, Roncoroni and Co. [1922] 27 Comm Cas 262.
27
terms104. It is important to be noticed that some of the cases required the claimant to
prove readiness and willingness to perform its part of the contract but in order to
establish its cause of action105 and not in relation with the assessment of damages like
it was suggested by the charterers in The Glory Wealth.
It was also held in the discussed sale-purchase authorities that the damages
shall be calculated on the footing that the innocent party had complied with its
contractual obligations, even if in reality it turned out that it did not106. There were,
however, several cases which supported the argument that even though the possible
future repudiatory breach of the seller cannot release the buyer from his liability to
pay damages, it is a factor that shall be considered when their amount is measured107.
It can be therefore said that there was not an absolute consistency and clear answer as
to whether non-performance of the innocent party after accepted repudiation would
affect the assessment of damages108.
After thoroughly examining the sale-purchase case law, it was Mr. Justice
Teares conclusion that none of the cases concerned a situation where there was a
threat the claimant to be overcompensated, like in The Glory Wealth, therefore they
did not constitute relevant authority for him to decide the case109.
The present author respectfully disagrees with this conclusion of the learned
judge even though the situations in the discussed sale - purchase authorities did not
particularly concern an issue about the innocent party receiving a compensation higher
than as if the contract had not been repudiated, they stipulate two important matters
104
Mr. Justice Teare in Par. 66 of The Glory Wealth; North Sea Energy Holdings NV v Petroleum
Authority of Thailand [1997] 2 Lloyd's Reports 418.
105
Braithwaite v Foreign Hardwood Co. Ltd. [1905] 2 KB 543, British and Benningtons Ltd. v NW
Cachar Tea Co. [1923] AC 48.
106
Collins MR in Braithwaite v Foreign Hardwood Co. Ltd. [1905] 2 KB 543, endorsed by Scrutton
LJ Continental Contractors v Medway Oil and Storage Company [1925] 23 Lloyd's List Law Reports
124.
107
McArthur J in YP Barley Producers Ltd. V Robertson (EC) Pty Ltd. [1927] VLR 194; Salmon LJ in
Esmail v Rosenthal & Sons Ltd. [1964] 2 Lloyd's Reports 447.
108
Ishfaq Ahmed, Repudiatory Breach, Damages and the Ability to Perform - The Glory Wealth,
available at: http://www.stonechambers.com/news-pages/13.01.14--article--repudiatory-breach-damages-and-the-ability-to-perform---the-glory-wealth---ishfaq-ahmed.asp; Hew R. Dundas, Serious
irregularity and the law of damages revisited in Arbitration 2014, 80(1), 106-112, p. 108
109
Mr. Justice Teare in Par. 47 of The Glory Wealth.
28
of principle110 namely that: (i) once repudiation is accepted by the innocent party, it
prevents the guilty party from relying on subsequent events in order to avoid
liability111 and (ii) that damages should be assessed assuming that the innocent party
would have performed its obligations in accordance with the contract112.
In the next place, charterparty disputes such as The Mihalis Angelos113 and The
Simona114 were observed by the judge in The Glory Wealth. The owners argument
was based on Lord Dennings words in The Mihalis Angelos that in the assessment of
damages you must take into account all contingencies which might have reduced or
extinguished the loss115.
It is however important The Mihalis Angelos to be distinguished from The
Glory Wealth in two major aspects. Firstly, the former is a case about anticipatory
breach and the important difference between anticipatory breach and actual
repudiation cases was already explained when The Mihalis Angelos was examined in
in Chapter I above116. Secondly, The Mihalis Angelos concerned a situation where an
event, stipulated in a contractual cancellation clause (the non - arrival of the vessel at
the loading port by a certain date), was predestined117 to happen by the time of
acceptance of the repudiatory breach. The occurrence of the event was inevitable in
contrast with The Glory Wealth, where based on general economic data about the
current market, suggestion was made that the owners financial situation would have
aggravated so much that they would not have been able to fulfil their obligations by
the time of performance, stipulated in the contract.
Robert Walker, Golden Victory a pyrrhic one? , available at:

http://thomascooper.wellstudio.co.uk/golden-victory-a-pyrrhic-one/
111
F. Reynolds, The Golden Victory A Misguided Decision (2008) 38 Hong Kong Law Journal 333
at p. 343.
112
Mr. Justice Teare in Par. 73 of The Glory Wealth; Chiemgauer Membran und Zeltbau GMBH v The
New Millenium Experience Company Limited, 15 December 2000 (unreported).
113
Maredelanto Compania Naviera S.A. v Bergbau-Handel G.m.b.H. (The Mihalis Angelos) [1971]
1 QB 164.
114
Fercometal Sarl v MSC Mediterranean Shipping Co SA (The Simona) [1988], House of Lords,
[1988] 2 Lloyd's Rep. 199.
115
Lord Denning in Par. 49 of The Mihalis Angelos.
116
See p.11.
117
Lord Justice Megaw in Par.58 of The Mihalis Angelos [1971] 1 QB 164.
110
29
Two points have to be made here. Firstly, the allegation about the owners
future inability to perform is false and unsupported the owners only obligation
under the COA was to provide vessels for the voyages but how exactly, was left on
their own discretion. They were not obliged to perform the voyages themselves, they
could have used subcontractors for example118. It cannot be therefore absolutely
certain that the owners would not have been able to perform their contractual
obligations, in contrary as a statement of fact, the tribunal found that they would
have been able to fulfil their obligations.
Furthermore, had the owners indeed repudiated the COA, there is no
guarantee that the charterers would have accepted the repudiation subsequent
performance may have not been absolutely valueless and impossible119. This is
something that cannot be proved beyond doubt. Therefore, the outcome in The Glory
Wealth makes no difference between a situation of accepted and such of not accepted
repudiation120 when it comes to the assessment of damages, undermining again the
predictability and certainty with regards to that issue.
Secondly, it was Mr. Justice Teares opinion that not only contractually
stipulated events as it was the case so far in The Mihalis Angelos, The Seaflower and
The Golden Victory121 but also purely hypothetical future repudiatory breach by the
time of contractual performance is due and subsequent termination under common
law122 is a contingency which shall be considered in the calculation of damages. This
conclusion of the learned judge, however, justifies exactly the concerns about
uncertainty which have been expressed with regards to The Golden Victory, namely
that not only events provided in contractual risk allocation clauses through the explicit
will of the parties but any other type of events, including completely unforeseeable
118
This was confirmed by the conclusion of Mr. Justice Teare on the second question of law, raised in
The Glory Wealth par. 97-99 of The Glory Wealth.
119
Termination and Remedies, para 14-013.
120
I. Ahmed in Repudiatory Breach, Damages and the Ability to Perform - The Glory Wealth, available
at: http://www.stonechambers.com/news-pages/13.01.14--article--repudiatory-breach--damages-andthe-ability-to-perform---the-glory-wealth---ishfaq-ahmed.asp, par. 19.
121
The non-arrival on time of the ship at the loading port in The Mihalis Angelos; the obtaining of a
special approval in The Seaflower, the outbreak of the Second Gulf War in The Golden Victory.
122
Mr. Justice Teare in Par. 52 of The Glory Wealth.
30
ones by the time of conclusion of the contract may lead to deviations from the breach
date rule and be considered in the assessment of damages123.
Afterwards the judge focused on The Simona where the charterers purported
to terminate the contract before the cancellation date, which by itself constituted a
repudiatory breach. The latter however was not accepted by the owners and the
contract remained in force. Later on, when notice for readiness was given by the
owners, the charterers refused to accept it and started loading on another vessel. When
arbitration was commenced, the charterers claimed that in any case the owners would
not have been able to start loading on the date given in the notice for readiness and the
charterers were therefore not liable for deadfreight. In that regard, the arbitrators
decided that the burden lied on the charterers to prove that the owners would not have
been ready to load on time. However this finding was later reversed by Legatt J in the
High Court who held that the burden of proving their ability to load on time lied on
the owners.
However, The Simona is a case that shall be distinguished from The Glory
Wealth as it concerned repudiation which was not accepted. The non-acceptance of
the charterers repudiation by the owners left the contract in force and preserved the
charterers right to cancel the contract based on the cancellation clause 124. This right
was exercised at the cancellation date, rendering them non-responsible for the
deadfreight claimed by the owners. This is what led Sur Gunter Treitel125 to the
conclusion that if the repudiation was accepted by the owners, the outcome would
have been the opposite the shipowners succeeding in full with their claims.
3. The decisive point The Golden Victory

Finally, the decisive point turn out to be The Golden Victory and the
importance of the compensatory principle proclaimed by it. The case was relied on by
the charterers in The Glory Wealth who alleged that had the contract remained in force,
123
B. Coote, Breach, anticipatory breach, or the breach anticipated?, p. 510; see also p. 24 of the
present paper.
124
Lord Ackner in The Simona [1989], House of Lords.
125
Michael J Bridge, Benjamins Sale of Goods, 8th edition, Sweet & Maxwell Ltd, London, 2010, para
19-170.
31
the charterers would have been entitled to terminate it on the grounds that the owners
due to their financial deterioration would not have been able to perform their
obligations at the due date. This was an event which should have been considered in
the assessment of damages, respectively reducing their quantum.
Here again it is important and it was distinguished by Mr. Justice Teare as
well, that like The Mihalis Angelos and The Seaflower, The Golden Victory concerned
a situation where a contractually stipulated event materialized after termination but
before the final award was delivered and was hence taken into account in the
assessment of damages126. The learned judge however reiterated his opinion that there
is no actual difference between an event in a contractual cancellation clause and
hypothetical future repudiation under common law, they were both contingencies
which shall be put on the same footing as events which might influence the calculation
of the damages claimed.
This way, The Glory Wealth clearly extends the application of the reasoning
of The Golden Victory, creating more uncertainty and unpredictability, increasing the
incentives for the guilty party to delay fast resolution of disputes and rely on any kind
of events following termination in order to decrease the amount of damages
payable127. Not only contractually stipulated events and not only events that are
inevitable or such that have already occurred would be relevant according to The
Glory Wealth. Like it was already submitted in the analysis of The Golden Victory in
Chapter II above, taking into account for the assessment of damages events stipulated
in contractual risk allocation clauses can be considered reasonable as such clauses
reflect parties contractual autonomy and when contractual risks materialize even after
termination it can be justified those to be borne by the relevant party. On the contrary,
considering a purely hypothetical and unforeseeable repudiatory breach brings
126
Charles Weller in 2013- Legal revolution or evolution, LMAA Spring seminar, 1 May 2014,
available at: http://www.lmaa.org.uk/uploads/documents/The%20Griffon%20%20Charles%20Weller.pdf.
127
Mateusz Bek, Pyrrhic victory: undoing the law on damages in Shipping and Trade Law 2013, Dec,
4-6.
32
unclarity in the rules on the assessment of damages and makes future similar disputes
more open to speculations by the guilty party128.
It was considered by the learned judge in The Glory Wealth that utmost
importance should be given to the compensatory principle, the application of which
leads to fair and just compensation the innocent party shall not be awarded more
than it would have received had the contract been performed. Is it enough, however,
to rely on the compensatory principle, proclaimed in The Golden Victory but isolated
from the facts of the latter, clearly disregarding other questions of principle established
in case law129?
As it was already said in the commentary of The Golden Victory itself, it is
beyond doubt the rationale standing behind the compensatory principle, namely that
the compensation is a reward for real, not hypothetical loss130. It should however
not be disregarded the nature of the dispute at hand, such being of purely commercial
character. It was already pointed out the importance of the fact that merchants
undertake higher risks and in that regard they need and expect absolute legal certainty
and predictability in case of disputes. The two important rules extracted from the salepurchase case law, namely that: (i) once repudiation is accepted by the innocent party,
it prevents the guilty party from relying on subsequent events in order to avoid
liability131 and that (ii) damages should be assessed assuming that the innocent party
would have performed its obligations in accordance with the contract132, reflect such
predictability for commercial parties. However those were completely disregarded by
the judge in The Glory Wealth. Asking the innocent party to prove on the balance of
probabilities (emphasis added) its future ability to perform its part of the contractual
bargain, is definitely not a rule which would bring certainty or predictability but rather
one that leaves the door open to abuses.
128
C. Weller, 2013- Legal revolution or evolution, LMAA Spring seminar, 1 May 2014, available at:
http://www.lmaa.org.uk/uploads/documents/The%20Griffon%20-%20Charles%20Weller.pdf, p. 11.
129
M. Bek in Pyrrhic victory: undoing the law on damages.
130
Termination and Remedies, para 21-008.
131
F. Reynolds, The Golden Victory A Misguided Decision, p. 343.
132
Mr. Justice Teare in Par. 73 of The Glory Wealth; Chiemgauer Membran und Zeltbau GMBH v The
New Millenium Experience Company Limited, 15 December 2000 (unreported).
33
What it can be observed in The Glory Wealth is the court going too far in the
isolated application of the compensatory principle and misinterpreting The Golden
Victory. Taking into account an event that is neither contractually stipulated by the
parties, nor inevitable to happen by the date of the breach, nor has it materialized by
the time the arbitration award was delivered, i.e. it is an absolutely unforeseeable,
already seriously jeopardizes legal certainty and it is something that cannot be justified
by the supremacy of the compensatory principle and the idealistic aim to achieve
absolute justice standing behind it.
Conclusion
In conclusion, it can be said that examining the law on the assessment of
damages, existing before The Golden Victory, the judgment in The Golden Victory
itself and finally its impact on subsequent case law, certainly shows interesting but at
the same time alarming developments.
The law on the assessment of damages before The Golden Victory can be
defined as such where consistent application of well-established legal rules led to clear
and predictable although not always absolutely just results. The full operation of
the breach date rule, when there was an available market, allowed the innocent party
to calculate the claimable quantum of damages already at the moment when the breach
occurred. This beyond doubt reflects the needs of business people for certain and
predictable legal rules. The very few exceptions from the breach date rule concerned
specific situations where events, stipulated in contractual cancellation clauses,
affected the assessment of damages but only because of their predestined and
inevitable character.
It was The Golden Victory that extended the potential situations in which the
full operation of the breach date rule can be disregarded also to events whose
occurrence was a mere possibility by the date of the breach. This created potential
dangers to legal certainty in commercial disputes and to ease of settlement, in the sense
that the innocent party cannot estimate with absolute certainty and finality the
quantum of damages at the moment when the breach takes place. This poses the
34
injured party into a situation where it has to fear that by the date when final arbitration
award or court judgment is delivered, events stipulated in contractual clauses will
materialize and decrease the amount of damages payable by the guilty party. It also
creates incentives for the breaching party to delay the proceedings as long as possible,
hoping that such events will occur.
On the other side however, when such contractual risks have materialized by
the date of final award/court judgment, it corresponds to the true aim of damages as a
remedy for breach of contract to take them into account, for the sake of achieving the
award of fair and realistic compensation. Hence, it can be admitted that based on the
facts of The Golden Victory the sacrifice of complete certainty was justified by the
award of fair compensation.
What can no longer be justified, however, is the misinterpretation of the
reasoning of The Golden Victory in subsequent case law, namely The Glory Wealth,
for several reasons:
Firstly, asking the innocent party to prove on the balance of probabilities
(emphasis added) a future ability to fulfil its contractual obligations is in clear
contradiction with pre-existing and well-established legal rules, namely that: (i) once
the repudiation is accepted, future inability of the innocent party to perform its part of
the bargain can no longer constitute a breach and (ii) that damages shall be assessed
assuming that the innocent party would have fulfilled its contractual obligations. The
new approach would definitely lead to less clear results, it would hinder and delay the
innocent party from receiving its compensation due to the fact that future ability or
inability to perform can be very difficult to prove.
Secondly, posing events, stipulated in contractual risk allocation clauses on the
same footing with hypothetical repudiation and termination under common law is
hardly reasonable. The former reflects an agreement inserted by the parties own will
and it is in this sense justifiable when such risks materialize before final award of
damages, to be considered even though the contract is terminated. The latter however
is completely unforeseeable and taking it into account in the calculation of damages
definitely does not lead to certainty and predictability.
35
Lastly, diminishing the threshold for the degree of probability to happen of the
future contingencies from predestined and inevitable through mere possibility
to ones proved only on the balance of probabilities shows an evolution that goes
too far with its last manifestation in The Glory Wealth and the general idealistic goal
to achieve absolute justice can no longer be an excuse for the total ignorance of legal
certainty in commercial context.
Businessman can only hope that the decision in The Glory Wealth will be
reconsidered by the higher instances of the court and the rules on the assessment of
damages will be put again into reasonable bounds, preserving the desirable balance
between commercial certainty and absolute justice.
36
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42

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Uncertainty in the assessment of damages under English

Electronic copy available at: http://ssrn.com/abstract=2593089

Electronic copy available at: http://ssrn.com/abstract=2593089

The principle of certainty and predictability in commercial transactions can be

1. The Compensatory principle

Chitty on contracts, para 24-001.

2. The breach date rule

3. Deviations from the breach date rule existing before

The Golden Victory, House of Lords.

provoked the judgment of Megaw LJ according to whom events future to termination

The Mihalis Angelos [1971] 1 QB 164, at pp 209-210.

4. Interim conclusion about the rules on the assessment of damages

Lord Bingham of Cornhill in Par 19 of The Golden Victory, House of Lords.

1. The facts of the case

2. The arguments invoked by the parties and relevant commentaries

The Golden Victory, House of Lords, [2007] 2 W.L.R. 691, par.7.

purpose of damages to reflect realities (emphasis added) as far as possible65.The

(emphasis added). The fundamental purpose of a claim for damages as a remedy is

Lord Bingham of Cornhill in par. 23 of The Golden Victory, House of Lords.

3. Evaluation of the judgment of The Golden Victory in the context of the

Lord Carswell in Par. 67 of The Golden Victory, House of Lords.

of importance to the general law of contract, in particular, the assessment of damages

1. The facts of The Glory Wealth and the question raised

Mr. Justice Teare in par. 1 of The Glory Wealth.

Par. 3 of The Glory Wealth.

In order to reach this conclusion, Mr. Justice Teare discussed extensively

Robert Walker, Golden Victory a pyrrhic one? , available at:

3. The decisive point The Golden Victory

Taylor v Oakes, Roncoroni and Co. [1922] 27 Comm Case 262

Books and Articles

Francis Reynolds, The Golden Victory A Misguided Decision (2008) 38 Hong

Joseph Chitty (1776-1841); Hugh G. Beale; Andrew S. Burrows, Chitty on contracts,

Rex Ahdar, Contract doctrine, predictability and the nebulous exception in

http://www.lmaa.org.uk/uploads/documents/The%20Griffon%20%20Charles%20Weller.pdf , last date visited 28.08.2014

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