In our client alert “Does a shipowner have to sell its ship in order to mitigate its loss?” in November 2016, we discussed the controversial Court of Appeal decision in The New Flamenco.
On 28 June 2017 the eagerly anticipated UK Supreme Court judgment in The New Flamenco was handed down, reversing the decision of the Court of Appeal. The Supreme Court held that the shipowner did not have to sell its ship to mitigate the loss of the charterers’ repudiatory breach. The Supreme Court agreed with the High Court decision of Popplewell J that the benefit brought into account must be caused by the breach of the charterparty. There must be a sufficiently close link between the two.
A brief recap of the facts
By a charterparty on an NYPE form and subsequent addenda, the cruise ship, The New Flamenco was time chartered for a period of over five years from 2004. The Charterers redelivered the vessel in October 2007 but the Owners’ position was that the earliest redelivery date under the charterparty was in November 2009. The Owners treated the Charterers as being in anticipatory repudiatory breach and accepted such repudiation as terminating the charterparty. In late October 2007, the Owners entered into an MOA for the sale of the vessel for US$23,765,000.