I've just noticed Priyanka Shipping Ltd v Glory Bulk Carriers Pte Ltd [2019] EWHC 2804 (Comm), an English High Court decision struggling to apply Lord Reed’s restatement of the law of negotiating damages (Wrotham Park damages) for breach of contract in Morris-Garner.

 

It is a useful fact pattern: A sale contract of a bulk carrier vessel specified that the vessel had to be demolished (and not traded). This was due to the seller’s policy of scrapping older vessels to reduce the oversupply of tonnage in the market which was depressing charter rates. The buyer nevertheless traded the vessel. The negative covenant was enforced by injunction, and the question arose as to what damages should be awarded for the pre-injunction breaches of contract. Negotiating damages were claimed for the value of the contractual right to restrain or permit trading up to the date of the injunction, but no other measure of or basis for damages was advanced.

 

The judge (David Edwards QC sitting as a High Court Judge) refused negotiating damages on the basis that the seller here no longer had a proprietary interest in the vessel after the sale, which surely misapplied Lord Reed’s (bizarre but fairly clear) requirement that the claimant have a contract right to control the defendant’s use of its property. On this reading of Lord Reed, the judge was unable coherently to explain Experience Hendrix (see para 198(iii)). To my eye, this case is a fairly clear case for negotiating damages applying Lord Reed’s reasoning in Morris-Garner (with which I do not agree).

 

For me, this is a case in which damages should probably have been awarded for non-pecuniary loss if anything (had they been sought; they were not). (There was no likely pecuniary loss, unlike Experience Hendrix, because the seller did not own other vessels plus scrapping one would not materially impact charter rates anyway.) The buyer should reasonably have understood that the seller valued the buyer scrapping the vessel, and therefore implicitly assumed responsibility to compensate the seller for that non-pecuniary loss towards which the promise was always oriented. It does not so much matter whether the reason for this was to protect a third party’s interest (in charter rates) or for a whim. (Cf cases where someone promises to have a safety measure in place that is never called upon; or the City of New Orleans fire service case; or ParkingEye where the carpark operator gets the customer to promise to leave within two hours because the third party landowner wants good customer turnover to feed the retail centre, etc)

 

Adam Kramer

 

 

 

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