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

Why then did the Judge reach a different conclusion? At [45 ii)-iii)] she said this:

“ii)

As a matter of construction, the provision for compensation “to the Buyers for their loss and for all expenses … if [the Sellers’] failure is due to proven negligence and whether or not the Buyers cancel this Agreement” can only refer to the failure identified in the opening words of clause 14B, namely the failure to give Notice of Readiness or to be ready to complete a legal transfer by the Cancelling Date.

iii)

It follows that the loss and expenses recoverable under clause 14B must be caused by that specific failure. Prima facie, therefore, this is a reference to accrued losses and expenses which have crystallised at the point of cancellation and not to prospective losses and expenses caused by the cancellation. This suggests that the losses and expenses ought to be the same where the Buyers cancel and where they do not. It is not immediately obvious that in circumstances where the right to terminate is at the option of the buyers, the clause creates a significantly enlarged right to claim loss of bargain damages in the event that they decide to cancel.”

I agree with what she says in [45 ii)], namely that the “failure” referred to in Clause 14(B) must be Sellers’ failure to give Notice of Readiness or be ready to validly complete a legal transfer. This seems to me simply another way of saying that the relevant failure is the failure of Sellers to be ready to complete the contract. In order to complete the contract Sellers need to transfer both physical possession and legal ownership to the Buyers. The scheme of Saleform 2012 is that by Clause 5(b) (at line 83) Sellers are to give Notice of Readiness “when the Vessel is at the place of delivery and physically ready for delivery”; by Clause 3 actual delivery is then to take place not later than three Banking Days afterwards against payment of the balance of the Purchase Price and any other sums due from Buyers to Sellers on delivery; and by Clause 8 (closing) Sellers are to provide the documents specified in exchange for payment of the Purchase Price (and for Buyers’ documents). So when Clause 14 refers to the failure of Sellers to give Notice of Readiness or be ready to validly complete a legal transfer, it simply means that Sellers are either physically or legally not ready to complete the sale. As the Judge points out at [46] this is confirmed by Clause 5(d) which refers to any claim for damages the Buyers may have under Clause 14 “for the Vessel not being ready by the original Cancelling Date”.

Where I have more difficulty is with [45 iii)]. I agree that the losses for which Buyers can claim are those caused by Sellers’ (negligent) failure to be ready; but I do not see why that means that they have to be crystallised at the point of cancellation. As a matter of fact the losses that Buyers suffer depends on what actually happens. If, for example, Sellers propose a new Cancelling Date under Clause 5(c) and Buyers accept the new date, they have obviously not lost the contract and cannot claim for loss of bargain; but they can (and in this case Great Asia duly did for Orion’s first default) claim for loss of profits for the period of delay. By contrast if Buyers refuse to accept the new Cancelling Date and opt to cancel the contract, they cannot claim loss of profits as the contract has come to an end. But if they have suffered a loss of bargain, it is not obvious to me why they cannot claim that that is a loss that they have suffered. It is still caused (certainly at any rate in a “but for” sense) by Sellers’ culpable failure to be ready in time: if Sellers had been ready, Buyers would not have been able to cancel.

It may be that the Judge was making a different point, which is that if Buyers cancel, the loss of the contract, although factually caused by Sellers’ lack of readiness, is not legally caused by it. That would be to regard Buyers’ decision to cancel as something that broke the chain of causation (a new intervening cause). I could understand such reasoning in principle; but that is not (or not explicitly, at any rate) the reasoning applied by the Judge. And if that were the basis for the Judge’s decision, one would have expected more discussion of the principles which apply when considering whether an innocent party’s reaction to a default by the other party does or does not count as a new intervening act.

Nor do I understand why the Judge says that the damages ought to be the same whether Buyers cancel or not. As I have sought to explain, the losses actually suffered by Buyers will depend on what happens, including whether they cancel or not. In general when assessing damages the Court (or arbitral tribunal) will take account of what has actually happened by the time of assessment; this is an aspect of the compensatory principle as explained by the House of Lords in the well-known case of The Golden Victory [2007] UKHL 12, [2007] 2 AC 353. Nor is it necessarily the case that damages for loss of bargain will be a “significantly enlarged right” as the Judge refers to at the end of [45 iii)]. In the present case for example the damages awarded under Clause 14(B) for loss of profits for Sellers’ first default were some $1.65m (see paragraph 23(1) above), whereas the damages for loss of bargain awarded for Sellers’ second default were not much more at $1.85m. And of course the market might not have risen by as much as it did. Suppose the market had remained flat and the market price as at October 2021 had been the same as the contract price at $15m. If Buyers had cancelled they could not have claimed for loss of bargain as they would have suffered none. In those circumstances the damages payable by Sellers would have been very much less if Buyers had cancelled than if they had kept the contract on foot and claimed for loss of profits for the period of delay.

At [46] the Judge says:

“It seems to me that this construction is confirmed by clause 5(d) which makes clear that the buyers’ potential claim for damages under clause 14 is “for the Vessel not being ready by the original Cancelling Date” (emphasis added), not for damages for loss of bargain. This makes sense in circumstances where cancellation does not automatically result from the mere fact that the vessel is not ready but depends on the buyers’ election.”

I agree that, as Clause 5(d) says, Buyers’ claim for damages is for the Vessel not being ready by the Cancelling Date. But I do not think that necessarily excludes damages for loss of bargain. As I have said above, one of the consequences of the Vessel not being ready by the Cancelling Date is that Buyers have a right to cancel, and if they exercise that right they do lose their bargain. The question is whether that loss comes within the clause. I do not think that can be answered simply by saying that the damages are for the vessel not being ready. Dr MacMahon puts the point well in his case comment (at 31):

“The judge’s construction is based on her answer to an unanswerable question: was the loss of bargain caused by the late delivery or by the cancellation?”

This is footnoted:

“If an answer to this question must be provided it would probably be “both”, given that the sellers were at fault.”

That seems to me right, especially given that the scheme of the contract is that Sellers are given a contractual window in which to get themselves ready, failing which Buyers are given a right to cancel. If they do cancel, I do not see why that was not caused by the failure to meet the window, at any rate where that failure was due to Sellers’ breach of contract: see the discussion of The Solholt [1983] 1 Ll Rep 605 at paragraph 147 below.

At [47] the Judge reaches her provisional conclusion:

“Thus far, therefore, my provisional view is that clause 14 does not on its natural and ordinary meaning give rise to a right to claim loss of bargain damages where cancellation takes place in accordance with the clause, absent an accepted repudiatory or renunciatory breach.”

At [48] she considers what damages Buyers would be able to recover on that view if they do cancel. This was a point that had troubled the Tribunal who said (Award at [163]):

“The starting point is that compensation will be recoverable where the contract has been cancelled (and also if the MOA is kept alive). If compensation is not recoverable for the consequences of cancellation (including loss of bargain) it would be unclear what compensation means. Sellers failed to put forward a satisfactory alternative explanation since it cannot have been intended to be limited solely to reliance losses.”

The Judge said that this seemed to her an illusory concern, saying:

“On the construction above, the recoverable damages under clause 14B include expenses incurred by the buyers in making arrangements to crew the vessel, carrying out inspections, legal costs and preparing for delivery generally. They will also encompass any loss of profits that could potentially have been made between the date when the vessel should have been delivered but for the sellers’ negligence and the date of cancellation.”

Mr Lewis submitted that this was not really an answer to the point. He pointed out that such expenses were themselves only a loss if Buyers cancelled the contract. That may not be entirely true as if delivery is delayed some expenses may have to be duplicated. But I agree that most expenses, such as the costs of inspections, or the legal costs of considering Sellers’ draft documents (and preparing Buyers’ documents), are only wasted if the contract is called off. So on the Judge’s view the losses recoverable under Clause 14 do include losses which only arise because of the cancellation. That might be thought to cast some doubt on whether it is really the case that they do not include the most obvious loss arising from the cancellation, namely the loss of bargain if the market has risen. Quite apart from that, Clause 14(b) expressly provides for compensation for “all expenses” in any event, so one would expect compensation for loss to have been intended to cover something else.

As to the suggestion that Buyers who cancel would be able to recover damages for loss of profits between the Cancelling Date and the actual cancellation, Mr Lewis submitted that they would be likely to be minimal, as Buyers who wished to cancel would be well advised to do so promptly to avoid any suggestion that they had lost their right to do so by waiver or affirmation. That seems to me a point well made. Mr Wright did not suggest Mr Lewis was wrong about it; he said that if that was so, it simply reflects the extent of losses suffered by Buyers. I agree but that does not seem to me to provide an answer. Those who drafted Saleform 2012 and expressly included a right to compensation for loss whether or not Buyers elected to cancel presumably envisaged that it would be a right of some significance rather than one that, in the case of cancellation, simply duplicated compensation for expenses and added a claim for what were likely to be only trivial amounts.

Overall therefore I agree with the Tribunal that it is not obvious what loss was intended to be compensated under Clause 14(B) (in the case of Buyers electing to cancel) if it did not include loss of bargain, and that this is a reason for doubting whether the clause was really intended not to extend to such loss.

At [49]-[50] the Judge considered the drafting history of Clause 14, but concluded at [51] that it would be unsafe to draw any conclusions from it, and that she would therefore proceed on the basis of the wording as it stood, as to which her provisional conclusion was as set out at [47]. At [52]-[53] she continued:

“52.

As it seemed to me, the most powerful argument against that provisional conclusion was Buyers’ argument that the situation contemplated by clause 14 is to be equated with non-delivery and that clause 14B therefore permits recovery of the normal market measure stipulated in section 51(3) of the Sale of Goods Act. It was not controversial that section 51(3) reflects the ordinary compensatory principle: see Sharp Corp Ltd v Viterra BV, [2024] UKSC 14 at [96]. Nonetheless, it should not be forgotten that while section 51(3) sets out a default rule, the overriding principle is that set out in section 51(2), namely that the measure of damages is “the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract”. In other words, the starting point must be to identify the particular breach or trigger in respect of which damages are recoverable.

53.

In my judgment, for the reasons already given, the relevant trigger is the failure to give Notice of Readiness by the Cancelling Date and it is only losses caused by that specific failure which are recoverable under clause 14B, not losses caused by the loss of the contract more generally. On that basis (and a fortiori if there was no positive obligation to give Notice of Readiness by the Cancelling Date) this is not equivalent to a case of non-delivery at all. It is simply a failure to tender Notice of Readiness by a particular date, which leaves open the possibility that notice may be given at a later date. I do not accept that Buyers’ unilateral decision to terminate pursuant to a cancellation right can transform the case as a matter of law into one of non-delivery.”

Mr Lewis took issue with this passage. He submitted that a negligent contractual failure to be ready by the Cancelling Date is in substance equivalent to non-delivery, and that if Buyers cancel as a result, there will always in fact be no delivery. The normal measure of damages for non-delivery (namely the difference between market price and contract price as set out in s. 51(3) of the Sale of Goods Act 1979) should therefore apply. Mr Wright submitted that the Judge was right. Missing a deadline is a case of delay in delivery not non-delivery. Being late does not by itself cause a loss of bargain.

This is I think a central point in the case, and I will say at once that I have not found it entirely straightforward.

I agree that the damages payable under Clause 14(B) are compensation for the loss caused by the failure of Sellers to be ready by the Cancelling Date. I agree that one cannot simply equate failure of Sellers to be ready in time with a case of non-delivery, as if Buyers choose not to cancel the contract it remains on foot and Sellers may be able to deliver later. The key question it seems to me is whether if Buyers do cancel, with the result as Mr Lewis says that there will never be delivery, this is to be equated with a case of non-delivery.

I do not think it matters that the “trigger”, to use the Judge’s word, is expressed to be Sellers’ failure to give Notice of Readiness or failure to be ready to complete a legal transfer. As I have said above (see paragraph 79), this is just another way of saying that the relevant failure is the failure of Sellers to be ready to complete the contract, either physically or legally. So I think the same questions would arise if Clause 14 had simply read “if Sellers are not ready to deliver by the Cancelling Date”. No doubt Clause 14 refers to Sellers not giving Notice of Readiness because there will usually be less room for argument over it than if one had to investigate whether they were in fact ready.

So the question can be expressed more simply as follows. Sellers are (as I have held under Ground 1) under an obligation to use reasonable or due diligence to deliver by the Cancelling Date. In breach of that obligation Sellers are not in a position to deliver by the Cancelling Date. If Buyers cancel, is that a case of non-delivery, or to be equated with a case of non-delivery?

In considering this question I think it is helpful to consider the corresponding right given to Sellers under Clause 13 to cancel the contract in the event of non-performance by Buyers. Buyers’ essential obligations are twofold: to lodge a deposit under Clause 2 (within three Banking Days after the Agreement has been signed and the Deposit Holder has confirmed that the account has been opened); and to pay the balance of the Purchase Price under Clause 3 (within three Banking Days after Sellers have given Notice of Readiness). Neither Clause 2 nor Clause 3 expressly makes time of the essence for these payments, but Clause 13 provides that if either payment is not made in accordance with Clause 2 or 3 (as the case may be), Sellers have the right to cancel the Agreement and claim compensation for their losses.

Does this include damages for loss of bargain? I think the answer to this is Yes. In The Griffon, this Court was concerned with Clause 13 of the 1993 revision of the Norwegian Saleform, which was in almost identical terms to Clause 13 in Saleform 2012 (there are some very minor and immaterial drafting differences). Buyers had failed to pay the deposit and Sellers had cancelled. The actual question was whether Sellers had an accrued right to payment of the deposit (to which the answer was Yes), but what is of interest for present purpose is what Tomlinson LJ (with whom McFarlane LJ and Sir Brian Leveson agreed) said at [10]:

“The right to cancel given by limb 1 of clause 13 is not dependent upon proof that failure to pay the deposit on time is repudiatory in nature. Indeed, until the decision of this court in Samarenko v Dawn Hill House Ltd [2013] Ch 36, it would not have been clear that a failure to pay the deposit on time is, without more, repudiatory of the buyers’ obligations. Limb 1 of clause 13 therefore confers upon sellers a valuable contractual remedy over and above the remedy which they already enjoy at common law, the availability of which latter remedy is however attended by uncertainty. That uncertainty was greater before the decision of this court in Samarenko, and thus at the time when limb 1 was introduced. Whatever the position now, a contractual remedy of termination which has no need to characterise the defaulting buyers’ conduct as repudiatory is a valuable addition to sellers’ armoury. The circumstances out of which buyers’ repudiation must be spelled are not always clear cut. A contractual right of termination exercisable upon the happening or non-happening of an event usually brooks of less argument. The express entitlement to compensation together with interest for losses and expenses is also at the least a valuable clarification of a right to which the sellers were in any event entitled at law, which is henceforth made available as an express term of the contract.”

This passage makes two points that are relevant. First, Tomlinson LJ saw Sellers’ right to cancel conferred by Clause 13 as acting in parallel with their common law right to terminate by accepting a repudiation by Buyers; it fulfils the same function, enabling Sellers to call the contract off if Buyers do not perform, but with the benefit of certainty and predictability in place of the uncertainty inherent in the common law position.

Second, it seems clear from the last sentence of the passage that Tomlinson LJ considered that Sellers would be entitled to claim for the same losses under Clause 13 as they would have been able to had they terminated for repudiatory breach (that is, including loss of bargain). The Court admittedly did not need to decide this as (i) it was accepted by Buyers, following Samarenko, that failure to pay the deposit was in fact repudiatory, so Sellers did not need to rely on the Clause 13 rights; and (ii) in any event Sellers’ losses calculated on the conventional measure of the difference between contract and market price were only $275,000, very much less than the amount of the deposit of over $2m (see the judgment of Teare J at first instance at [2] and [3], as set out by Tomlinson LJ in his judgment at [3]), and since the conclusion of the Court was that Sellers could claim the amount of the deposit, there was no question of loss of bargain damages being awarded as well. Nevertheless the significant point is that Tomlinson LJ evidently considered that Clause 13 conferred an express contractual right to claim the same sums. Given what he had just said about the advantage of Clause 13 being a valuable remedy because of its greater certainty than the common law one, it seems to me that he must have considered that Clause 13 conferred that right whether or not Buyers’ conduct would have fallen to be classified as repudiatory. Certainly there is no suggestion that it is only because non-payment of the deposit was in fact repudiatory that Clause 13 was to be understood as conferring an entitlement to compensation for losses including loss of bargain measured on the conventional basis.

Now of course it does not necessarily follow that the same is true of Clause 14(B). But I think the structure of Saleform 2012 leads one to expect that Clauses 13 and 14 will operate in a similar fashion. Clauses 13 and 14 are closely parallel. Delivery and payment are of course the basic duties of a seller and a buyer respectively under a contract for the sale of goods (see ss. 27 and 28 of the Sale of Goods Act 1979), and Clauses 13 and 14 deal with the consequences of non-payment and non-delivery accordingly. And I think one can assume that Saleform 2012 is not intended to be a one-sided form of contract favouring one party over the other, but to operate even-handedly as between Sellers and Buyers; it would not have commended itself to the industry otherwise. In the case of non-payment Clause 13, headed “Buyers’ default”, confers on Sellers, where it applies, both a right to cancel and a right to claim compensation for their losses and all expenses incurred; in the case of non-delivery Clause 14, headed “Sellers’ default”, similarly confers on Buyers, where it applies, a right to cancel and (provided Sellers are in breach of their due diligence obligations) a right to claim compensation for their loss and all expenses. Now they are admittedly not exactly parallel, as Clause 13 contains no equivalent to the requirement in Clause 14(B) that the default be due to proven negligence; but where there is proven negligence (and hence as I have held under Ground 1 a breach of contract by Sellers) the rights to compensation are expressed in similar terms. One would expect them therefore to have a similar operation.

If this is right, then what Tomlinson LJ says in The Griffon about Clause 13 should also apply to Clause 14. So just as with Clause 13, the benefit of Clause 14 to Buyers is that the ability to call the contract off because Sellers have not given Notice of Readiness by the Cancelling Date “brooks no argument”, unlike the need to characterise Sellers’ conduct as repudiatory, where “the circumstances out of which … repudiation must be spelled are not always clear cut”.

And just as Clause 13 confers on Sellers the right, if they cancel, to claim compensation for their loss including loss of bargain, so I think one would expect Clause 14(B) to confer on Buyers the right, if they cancel and can prove that the non-delivery was due to Sellers’ negligence or lack of due diligence, to claim compensation for their loss including loss of bargain.

Reverting to the question I posed at paragraph 96 above (where Sellers are not in a position to deliver by the Cancelling Date as a result of a breach of their obligation to use reasonable or due diligence, and Buyers cancel, is that a case of non-delivery, or to be equated with a case of non-delivery?), these considerations strongly suggest to my mind that the answer is Yes.

I will have to consider below whether the further arguments raised on this appeal by Mr Wright lead to a different conclusion, but subject to those arguments, I think therefore the better view is that in a case where Sellers have, in breach of contract, failed to exercise due diligence to be ready to deliver by the Cancelling Date, and Buyers have as a result exercised their right to cancel, Buyers can recover compensation under Clause 14(B) for their loss including loss of bargain where the market has risen such the market price at the time of cancellation exceeds the contract price.

The remainder of the Judge’s Judgment is taken up with consideration of certain authorities, which she concludes do not affect her preferred analysis (at [54]-[55]); and with whether her analysis produces an uncommercial result (at [56]-[58]). I will come back to these points below.