CA-2024-002194 - [2025] EWCA Civ 1210

I have reached this conclusion on the basis of the arguments I have considered above. But it is supported by some subsidiary points relied on by Mr Lewis.

The first consists of previous authorities. It is accepted that none of them are directly in point. The most pertinent however is The Solholt [1981] 2 Ll Rep 574 in which Staughton J was concerned with a contract for the sale of a ship made on the Norwegian Saleform in May 1979 (and hence the 1966 revision). Clause 17 provided:

“17.

Vessel to be delivered at a safe port UK/Cont-Gibraltar-Bergen range in Sellers’ option with 31^st August 1979 cancelling in Buyers’ option. Sellers shall keep Buyers duly posted of vessel’s movements and give Buyers 3/2/1 weeks notice of estimated delivery date.”

As with Saleform 2012, Clauses 13 and 14 provided for the consequences of Buyers’ and Sellers’ defaults respectively, but in rather different terms from the 2012 version as follows:

“13.

Should the Purchase Money not be paid as aforesaid, the Sellers have the right to cancel the contract, in which case the amount deposited shall be forfeited to the Sellers. If the deposit does not cover the Sellers’ loss, they shall be entitled to claim further compensation for any loss and for all expenses together with interest at the rate of 5% per annum.

…

14.

If default is made by the Sellers in the execution of a legal transfer or in the delivery of the vessel with everything belonging to her in the manner and within the time herein specified, and the default shall have arisen from events for which the Sellers are responsible, the Buyers shall have the right to cancel this contract and the deposit in full shall be returned to the Buyers together with interest thereon at the rate of 5% per annum. The Sellers shall, in addition, make due compensation for any loss caused to the Buyers by non-fulfilment of this contract.”

Sellers took on a final voyage with cargo from the East coast of America to Seaforth near Liverpool which they expected to be completed in time to meet the deadline of 31 August, but in the event they missed that by a few days and Buyers cancelled. Staughton J held that Buyers were prima facie entitled to damages for loss of bargain (the market price on 31 August being $5½m as against a contract price of $5m) but that they had in fact failed to mitigate as they could still have bought the ship for $5m and the claim for damages therefore failed.

For present purposes what is of interest is Staughton J’s conclusion that Clause 14 entitled Buyers to loss of bargain damages. Three points were argued by Mr Pollock for Sellers. The first was that Clause 14 only entitled Buyers to damages if Sellers had committed a repudiatory breach. Staughton J rejected that: the plain wording of Clause 14 gave a right to cancel and claim compensation if the vessel were not delivered within the time specified (at 579 cols 1-2). Interestingly he also said (at 579 col 1):

“Clause 13, dealing with breach of contract by the buyers, is a severe clause. It provides for forfeiture of the deposit plus any additional loss plus 5 per cent. interest. It is not then surprising if cl. 14 is equally stringent in the case of default by the seller.”

That is similar to the point I have made above that one would expect Clauses 13 and 14 in Saleform 2012 to have a similar operation where they apply.

Mr Pollock’s second point was that the failure to deliver by 31 August did not arise from events for which Sellers were responsible; Staughton J held that it did. Mr Pollock’s third point was that Clause 14 only provided for loss arising from the default, namely compensation for the three days that Sellers were late, and not for the loss of bargain. That too was rejected by Staughton J who said (at 579 col 2):

“The clause itself contemplates that the buyers may cancel and therefore that the contract will be wholly unperformed, so far as its main object is concerned, that is to say, transfer of the property in the vessel. It is that loss which is, in my judgment, plainly provided for in the words, “loss caused to the Buyers by non-fulfilment of this contract”.”

The Buyers appealed on the mitigation point: The Solholt [1983] 1 Ll Rep 605. There was no cross-appeal on Staughton J’s conclusion that Clause 14 prima facie entitled Buyers to compensation for loss of bargain. So this question was not argued before this Court. But Sir John Donaldson MR, giving the judgment of the Court, did not suggest that there was any doubt about it. He recorded (at 607 col 2) the argument of Mr Sumption for Buyers that:

“The sellers were in breach of contract in failing to deliver the vessel by the due date… It is trite law that in deciding whether or not to exercise a right to cancel the contract in such circumstances, the buyer need have no regard to the fact that in the absence of cancellation he would suffer no loss. If he cancels, the loss will be attributable to the sellers’ breach of contract and not to the cancellation.”

That was accepted by Sir John Donaldson (at 608 col 1) as follows:

“As we have already accepted as trite law, the buyers had an unfettered right in the circumstances of this case to affirm the original contract of sale or to cancel it… They decided to cancel and in consequence they suffered a loss of U.S. $500,000. As a matter of causation, this loss, unless avoidable by some reasonable further action, was directly attributable to the sellers’ breach of contract.”

The Judge considered that this and other authorities did not affect her analysis. Of The Solholt she said this (at [54 i)]:

“The Solholt (supra): This was a decision on the NSF 1966 wording which, as set out in paragraph 49 above was very different. On this wording, it is unsurprising that Mr Justice Staughton held at 579R that: “The clause itself contemplates that the buyers may cancel and therefore that the contract will be wholly unperformed, so far as its main object is concerned, that is to say, transfer of the property in the vessel. It is that loss which is, in my judgment, plainly provided for in the words, ‘loss caused to the buyers by non-fulfilment of this contract.’” Moreover, as appears from the headnote, there was in that case a positive obligation on the sellers to deliver no later than 31 August. Accordingly, the Court of Appeal’s acceptance that the loss caused by the buyers’ cancellation was directly attributable to the sellers’ breach of contract was almost inevitable given the finding that the sellers were in breach of that obligation.”

She makes two points here to distinguish the 1966 revision of Saleform from the 2012 revision. The first is that the then wording of Clause 14 referred to “loss caused to the buyers by non-fulfilment of this contract”. I agree that this is plainly more explicit wording than Clause 14 in the 2012 revision which refers simply to “their loss”. But it still seems odd if Buyers could recover for their loss on the 1966 wording, but could not on the 2012 version because the latter uses what one would have thought were more general and less restrictive words than the former. If loss of bargain was in 1966 within the words “loss caused to the buyers by non-fulfilment of this contract”, one would expect that in 2012 it would be within the words “loss caused to the buyers” or “their loss” as “loss caused to buyers by X” is on the face of it a subset of “loss caused to buyers”.

A further point is made by Dr MacMahon in his article which is that Courts interpreting industry-standard contracts should see themselves as engaged in a dialogue with drafters, citing Lord Hoffmann in Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266 at 274D:

“It is also important to have regard to the course of earlier judicial authority and practice on the construction of similar contracts. The evolution of standard forms is often the result of interaction between the draftsmen and the courts and the efforts of the draftsman cannot be properly understood without reference to the meaning which the judges have given to the language used by his predecessors.”

Mr Wright countered with reference to The Rewa [2012] EWCA Civ 153, [2012] 1 Ll Rep 510 at [30] where Aikens LJ said:

“As already noted, Mr Kenny wished us to look at the previous version of the standard NSF terms and to look at the BIMCO drafting committee’s commentary as aids to construction. Whilst there may be occasions when this has to be done in order to assist in solving a problem of an ambiguous wording, I would generally discourage such exercises in “the archaeology of the forms”. In most cases it makes the task of interpretation of contractual wording unnecessarily over elaborate and it can add to the expense and time taken in litigating what should be short points of construction.”

This guidance points in a rather different direction from that given by Lord Hoffmann, but as can be seen it is not absolute. Nor do I think Aikens LJ had in mind a case, as Lord Hoffmann did, where a previous iteration of a standard form had been the subject of judicial decision. I think there is some force in the point that where the Courts have interpreted the 1966 revision of Clause 14 as conferring on Buyers a right to loss of bargain damages if they cancel, that is a relevant consideration when construing the 2012 revision (the wording of which appears from the Judgment to date in part from the 1987 revision and in part from that in 1993). Those drafting the successive revisions to the clause can be assumed to have been aware of the decision in The Solholt. If they had thought that the result was not what they wanted and that Buyers should not be able to claim loss of bargain damages under Clause 14, it is I think very surprising that they did not say so in terms, rather than leaving this to be teased out of the sort of considerations relied on by the Judge and advanced by Mr Wright. Of course it is always possible to say that an ambiguous clause could have been drafted more clearly, and such an argument usually carries little weight; but this is a more specific point that when a clause has been given a particular meaning by the Courts, and is being revised anyway, then one would expect a clear statement in the revised drafting if it was desired to move away from the construction placed on the existing wording by judicial decision. In those circumstances I think the point made by Dr MacMahon is a valid one, and does lend quite strong support to Mr Lewis’s construction.

The second distinction which the Judge made on The Solholt is that there Sellers were under a positive obligation to deliver by the cancelling date. I agree that the decision seems to have proceeded on that assumption, although so far as one can tell from the reports there does not seem to have been anything more definite in the contract than Clause 17 which referred to “Vessel to be delivered … with 31^st August 1979 cancelling in Buyers’ option” and Clause 14 which referred to “If default is made by the Sellers … in the delivery of the vessel … within the time herein specified”, which do not seem very different from Clauses 5 and 14 in the 2012 revision. Be that as it may, the Judge accepted that since there was a breach by Sellers, this Court’s acceptance that the loss caused by Buyers’ cancellation was directly attributable to Sellers’ breach of contract was “almost inevitable”. That I think does lend support to Mr Lewis’s submission that in the present case where Sellers were (as I have found under Ground 1) in breach of their obligation to use reasonable or due diligence to be ready by the Cancelling Date, the loss caused by Buyers’ cancellation is similarly to be attributed to Sellers’ breach of contract: see paragraph 84 above.

In summary, therefore, although The Solholt is a decision on an earlier version of the Norwegian Saleform which used different wording, I consider that it is indeed supportive of the construction which Mr Lewis advanced and which I have accepted.

The other cases do not take matters much further but they point in the same direction. The Al Tawfiq [1984] 2 Ll Rep 598 was another case of a sale of a ship on the Norwegian Saleform, this time made in 1983, and the wording of Clause 14 was similar to that considered in The Solholt. Lloyd J cited what the arbitrators had said which included the statement that “Clause 14 provides that if the delivery date is missed for reasons for which the Sellers are responsible then if the Buyers cancel they can claim damages for the loss of the bargain unless the delay was frustrating.” He upheld their decision and did not cast any doubt on what they had said, but that is unsurprising given the decision in The Solholt.

In Parbulk v Kristen Marine [2010] EWHC 900 (Comm), [2011] 1 Ll Rep 220 Burton J was concerned with contracts which contained a Clause 14 whose fourth sentence was the same as Clause 14(B) as in Saleform 2012. At [23] he said of this sentence:

“It is also necessary for the buyers to prove negligence by the sellers. If such negligence is proved, then a wider measure of damage can be recovered, eg loss of profit…”

But so far as one can tell it does not appear that there was any argument on the point.

Mr Lewis also referred to The Ile aux Moines [1974] 1 Ll Rep 263 and [1974] 2 Ll Rep 502, where Mocatta J assumed that damages for loss of bargain were recoverable for failure to deliver a ship, but the terms of the contract are not set out and I do not think any assistance can be derived from it.