(Anticipatory Breach) – contract of affreightment repudiated by charterers – decision on burden of proof and obligation on “owners” to supply vessels
The Facts
The contract was to provide a vessel (or vessels) to carry 6 cargoes of coal in bulk in each of 3 successive years.
The charterers failed to declare laycans for the last 2 shipments of the first year and for all 6 shipments in the second year.
The “owners” accepted the repudiation and claimed substantial damages.
Charterers contended that the burden of proof lay upon the “owners” as the party obliged to supply the vessels that they would have been in a financial position to do so. Charterers also contended that the contract obliged the “owners” to prove that contracts were in place entitling them to the necessary possession of the vessels.
Findings
An arbitration panel found in favour of the “owners”.
Two questions of law were framed for decision by the Commercial Court.
Question 1: “Whether, pursuant to the Mihalis Angelos, the Simona and Gill and Duffus SA v Berger & Co Inc, in order to displace the prima facie substantial measure of damages for breach of contract, the “contract-breaker” must prove that at the time when the innocent party accepted the repudiatory breaches, the said innocent party was already in breach. The tribunal found it was not open to the “contract-breaker” to allege that the innocent party still bore the burden of proving its loss on the balance of probabilities if it had accepted the repudiatory breach of the “contract-breaker”.
Question 2: “Whether, in order to fulfill contractual obligations under a COA it is sufficient for the vessel “owner” to arrange for vicarious performance of its contractual obligations (i.e. by procuring vessels over which it had no contractual control), or whether contractual control by an owner or disponent owner over a nominated vessel was an essential characteristic of a contractual nomination”.
The panel rejected the contention that the onus was on the “owners” to prove that they would have been able to perform their obligations in respect of the uncompleted contract. By necessary implication, they found that the onus was on the charterers as the repudiating party.
n any event, the panel found that the “owners” would have been able to provide vessels.
The panel also found that the “owners” were not required to prove that they had acquired contractual rights to the intended vessels.
Teare J held as follows: “The innocent party is claiming damages and therefore the burden lies on that party to prove its loss. That requires it to show that, had there been no repudiation, the innocent party would have been able to perform his obligations under the contract”. The panel was therefore wrong on the incidence of the onus.
Nevertheless, because they had found that the “owners” would have been able to provide the vessels, it did not matter that they were wrong on the question of onus.
Teare J also found that it was not possible to disturb the arbitrators’ finding that “owners” were not required to prove existing contractual rights to the intended vessels. The award was therefore upheld.
Commentary
Teare J’s finding on the incidence of the onus is a brutum fulmen both because it is wrong and also because, on the facts found by the arbitrators, it was unnecessary to decide.
At least two second tier appellate court decisions (Gill & Duffus and the Simona) have made it clear that the innocent party who accepts an unlawful repudiation is absolved from further performance. It can hardly be said then that such party still bears the onus to prove that he would have been able to perform in due course.
That the onus should be on the guilty party to prove that the innocent party would not have been able to perform in any event, if such be the facts, is consonant with the principle that it is for the guilty party to prove that the innocent party has not mitigated his damages.
This in no way detracts from the “compensatory principle” emphasised in the judgement.
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