Damages for renunciation under sub-time charter.

In Spar Shipping the shipowner recovered damages for a renunciation of the time charterer who shows that they do not intend to make full payments of hire in future. A similar claim may succeed where it is the disponent shipowner who is in this position and has withdrawn from the sub-time charter and is now seeking to recover damages for the unexpired balance of the charter. In London Arbitration 29/16 the tribunal awarded the disponent owner damages and rejected the charterer’s argument based on impossibility of performance, in that the head owners had also withdrawn the vessel under the head charter due to the disponent owner’s inability to pay hire.

The tribunal had first to consider whether the disponent owners would have been able to perform the charter, had the sub-charterers paid their hire. The tribunal had to consider the position not as it was at the moment of withdrawal, but as it would have been had charterers not defaulted. On that basis, disponent owners would have been able to perform the charter. Second, the tribunal had to consider the measure of damages. They would start by looking at the hire lost during the remainder of the charter period and credit would then be given for hire earned under alternative fixture/s. The owners had instead offered to give credit for the savings incurred in termination of the head charter which equated to the credit given by head owners in computing disponent owners’ liability for renunciation of the head charter. This was correct.