Globalia Business Travel Ltd v Fulton Shipping Inc [2017] UK...

Facts

• The dispute concerned a charterparty agreement between Globalia Business Travel Ltd (charterers) and Fulton Shipping Inc (owners).
• The charterers repudiated the agreement prematurely, which the owners accepted as wrongful termination.
• Rather than seeking an immediate replacement charter, the owners sold the vessel.
• The vessel’s market value at the time of breach was significantly lower than the eventual sale price.
• The charterers contended that the owners’ profit from the sale (the difference between market value at breach and the sale price) should be deducted from damages.

Issues

1. Whether the benefit obtained from the sale of the vessel by the owners should be offset against the damages owed by the charterers for repudiating the contract.
2. Whether there must be a direct causal link between the breach and any benefit received for it to affect the damages calculation.
3. Whether the actions taken by the owners constituted steps in mitigation directly relating to the loss caused by the breach.

Decision

• The Supreme Court held that the benefit from the sale of the vessel was not causally connected to the charterers’ breach.
• The sale was an independent business decision by the owners, unrelated to mitigating damage from the breach.
• No obligation existed for the owners to sell the vessel; the transaction was motivated by their commercial considerations.
• Only benefits directly resulting from actions taken to mitigate losses from the breach may be deducted from damages.
• The profit from the vessel’s sale was not deductible in the calculation of damages.

Legal Principles

• The principle of mitigation requires claimants to take reasonable steps to minimize losses following a breach.
• Only benefits arising as a direct consequence of mitigation efforts should reduce the recoverable damages.
• A direct causal link, not a mere "but-for" connection, must be established between the mitigation step and the benefit.
• Benefits from actions not directly taken to mitigate loss (i.e., incidental or independent business decisions) are not deducted from damages.
• Distinction is drawn between incidental benefits (which are not deductible) and avoided losses directly linked to mitigation (which are deductible).

Conclusion

The Supreme Court clarified that, in the assessment of damages for breach of contract, only benefits that arise directly from steps taken in mitigation of loss may be deducted from recoverable damages. Profits resulting from independent business decisions, unconnected to mitigation, should not be set off. The decision reinforces the need for a factual, causal connection between mitigation efforts and any resulting benefits to ensure fairness in contractual damage awards.