QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
Stocznia Gdynia SA |
Claimant |
|
- and - |
||
Gearbulk Holdings Ltd |
Defendant |
____________________
Mr S Boyd QC and Mr V Flynn QC (instructed by Ince & Co) for the Defendant
Hearing dates: 23, 24 April 2008
____________________
Crown Copyright ©
Mr Justice Burton :
"2.1 Object of the Contract
In consideration of the mutual covenants herein contained:
- The Vessel shall be designed, built, launched, equipped, completed, outfitted and tested on behalf of the Seller by the Seller's Yard.
- The Vessel shall be delivered to the Purchaser by the Seller free and clear of any liens, charges, claims or mortgages or other debts and encumbrances whatsoever and with clean class and other regulatory certificates.
- The Purchaser agrees to buy, accept, pay for and take delivery of the Vessel where so completed and duly tendered for delivery.
3.1 Time and Place
The Seller shall deliver the Vessel to the Purchaser safely afloat at a berth at the seller's Yard on 3rd March 2003 (subject to any permitted extension thereof pursuant to this Contract, the "Delivery Date").
5.2 Unless otherwise agreed upon between the Parties the Contract Price shall be paid by the Purchaser to Seller in five (5) instalments in the manner set out below [i.e. in Article 5.3(a) (e)]
5.10 Refund Guarantee
(a) The instalments of the Contract Price paid by the Purchaser prior to delivery of the Vessel (being those specified in Articles 5.3(a), (b), (c) and (d)) shall be in the nature of advances to the Seller. In the event that the Purchaser shall exercise its right to terminate this Contract pursuant to any of the provisions hereof, the Seller shall forthwith refund to the Purchaser the aggregate amount of such instalments (to the extent paid by the Purchaser at the time of termination) together with interest thereon at the rate of 1 month LIBOR per annum.
(b) It is a fundamental term of this Contract that the Seller's obligation to make such refund of any of the pre-delivery instalments, with interest, shall be secured under and pursuant to the Refund Guarantee issued in favour of the Purchaser. [An agreed form of which was annexed to the contract as Exhibit E, to be issued by ABN Amro Bank.]
10. DELAY IN DELIVERY AND DEFICIENCIES: SELLER'S DEFAULT
The Contract Price of the Vessel shall be adjusted by way of reduction in the event of any of the contingencies set out in this Article. Such adjustment shall be effected by way of reduction of the amount of the delivery instalment of the Contract Price referred to at (e) in Article 5.3 hereof (it being understood by the Parties that any such reduction of the Contract Price shall [be] by way of liquidated damages and not by way of penalties).
The Purchaser shall not be entitled to claim any other compensation and the Seller shall not be liable for any other compensation for damages sustained by reason of events set out in this Article and/or direct consequences of such events other than liquidated damages specified in this Article.
In case the total amount of liquidated damages claimed by the Purchaser under this Article exceeds five per cent (5%) of the Contract Price, the Purchaser's right to liquidated damages shall be limited to such amount equal to and not exceeding five (5) per cent of the Contract Price as specified in Article 4.1 of this Contract.
10.1 Delay in Delivery
(a) In the event that delivery of the Vessel should be delayed beyond the Delivery Date, the Contract Price shall be reduced as follows
(b) If the delay in delivery of the Vessel shall comprise a period of more than one hundred and fifty (150) days beyond the Delivery Date then the Purchaser may, at its option, terminate this Contract.
(c) Without any prejudice to, and separately from, the foregoing, the Purchaser shall also be entitled, at its option, to terminate this Contract in the event that, for any reason whatsoever, the Vessel shall not have been delivered to the Purchaser hereunder on or prior to 15 August 2003 ["the drop-dead date"]
10.2 Deficiency in Speed
(b) If a deficiency in actual speed of the Vessel exceeds two-tenths of one knot below the Guaranteed Speed of the Vessel, the Contract Price shall be reduced as follows
10.3 Fuel Consumption
(a) if the fuel consumption of the Vessel's main engine exceeds 177.45 grams per kW hour, the contract price shall be reduced
10.4 Deadweight
(b) the contract price shall be reduced by the sum of $1,000 for each full metric ton of deficiency in excess of 900 metric tons
10.6 Seller's Default
The Purchaser shall also be entitled, but not bound, to declare the Seller in default and terminate the contract:
(a) if there is a major breach by the Seller of its obligation hereunder to proceed with the construction of the Vessel, such that, in the reasonable opinion of the Purchaser (supported by the opinion of the Classification Society), the Vessel cannot be completed and delivered to the Purchaser on or before the date specified in Article 10(1)(c) hereof [the drop-dead date]
...
Upon the occurrence of any such event of default the Seller shall be entitled to terminate this Contract with the consequences hereinafter provided.
10.7 Effect of Termination
Upon termination of this Contract by the Purchaser in accordance with the provisions of Article 10 or any other provision of this Contract expressly entitling the Purchaser to terminate this Contract, the Seller shall forthwith repay to the Purchaser all sums previously paid to the Seller under this Contract, together with interest accrued thereon calculated at the rate of 1 month LIBOR per annum from the respective date(s) of payment of such sums until date of refund plus the original cost (invoice value) of the Purchaser's Furnished Equipment if any delivered to the Seller.
It is however further expressly understood and agreed upon by the Parties hereto that, if the Purchaser terminates this Contract under this Article, the Purchaser shall not be entitled to any liquidated damages under Article 10.1, 10.2, 10.3 or 10.4 hereof."
"4.6. The financial problems at the Yard had a very serious effect on the performance of the contracts for the construction of the three vessels, Hulls 24, 25 and 26. In addition the construction of Hull 23 was also greatly delayed. Work on Hull 24 ceased in January 2003 and work on Hulls 25 and 26 never progressed beyond the design stage.
6.5 The Yard was unable and indeed unwilling to comply with their terms. At the respective dates of termination the Yard was quite unable to deliver a vessel on the contractual terms. The expiry of the Refund Guarantees was a further indication that the contracts as signed had come to an end."
"Dear Sir
The provisions of Article 3.1 of the above Contract provide that the Delivery Date of the Vessel was 3 March 2003. The provisions of Article 10.1(b) provide that if delivery of the Vessel is delayed beyond the Delivery Date by more than 150 days then we will be entitled to terminate the Contract. 150 days from 3 March 2003 was 1 August 2003. Accordingly from that date we have been entitled to terminate the Building Contract pursuant to the provisions of Article 10.1(b).
Further, the provisions of Article 10.1(c) provide that, in the event that the Vessel is not delivered by you to us on or prior to 15 August 2003 then we will be entitled to terminate the Contract. The Vessel was not delivered to us on or before that date and accordingly from that date we also have been entitled to terminate the Building Contract pursuant to the provisions of this Article.
We hereby give you notice that we hereby exercise our rights of termination under both of Article 10.1(b) and 10.1(c) and call upon you, in accordance with the provisions of Article 5.10 to repay to us immediately the predelivery instalment that we have paid to you in respect of this Vessel in the amount of US$1,323,400 together with interest thereon calculated at the rate of 1 month LIBOR per annum, US$ 127,519.47."
The letter attached a schedule of the interest due on the repayment of the instalments, calculated at the contractual rate.
"Dear Sir
We refer to your communication of 23 November 2004 in which you advised that ABN Amro Bank have refused to extend the validity of their Refund Guarantee relating to the above newbuilding.
Consequently we now find ourselves, in respect of [Hull 26], in exactly the same position as we have previously found ourselves in respect of [Hulls 24 and 25] in an impossible and completely unacceptable situation. We want and need this newbuilding just as we wanted and needed the two earlier vessels.
You have made no attempt whatsoever to comply with your contractual obligations under any of these three contracts. Indeed, in reality, you have behaved as if you had no obligations at all towards us under these contracts. We are in no doubt that your conduct under each of the contracts amounts to a repudiatory breach of the most flagrant nature imaginable.
As with [Hulls 24 and 25], so now with [Hull 26], you have done nothing, in reliance upon and in the knowledge that we would ultimately have to take steps to terminate the contract in order to protect our position in respect of the paid pre-delivery instalments under the terms of the Refund Guarantee. Your behaviour in respect of these three contracts has not only caused us very considerable losses, it is wholly unacceptable to us.
As with the two previous newbuildings, as we have made absolutely clear to you throughout, we do not want to terminate the contract, we want and wanted our ships. As with the two earlier ships, we are nonetheless, because of your conduct, left with no choice but to terminate.
Accordingly, we hereby put you on notice that we consider you to be and to have been in repudiatory breach of your obligations under each of the three contracts, which repudiation we hereby accept against full reservations of all our rights including, but not limited to, our entitlement to claim damages at large.
In respect of [Hull 26] the provisions of Article 3.1 of the Contract provide that the Delivery Date of the Vessel was 31 March 2004. The provisions of Article 10.1(b) provide that if delivery of the Vessel is delayed beyond the Delivery Date by more than 150 days then we would be entitled to terminate the Contract. 150 days from 31 March 2004 was 28 August 2004. Accordingly, from that date we have been entitled to terminate the Building Contract pursuant to the provisions of Article 10.1(b).
Further, the provisions of Article 10.1(c) provide that, in the event that the Vessel is not delivered by you to us on or prior to 12 September 2004 then we would be entitled to terminate the Contract. The Vessel was not delivered to us on or before that date and accordingly from that date we have also been entitled to terminate the Building Contract pursuant to the provisions of this Article.
We hereby give you notice that we hereby exercise our rights of termination under both Article 10.1(b) and 10.1(c) and call upon you, in accordance with the provisions of Article 5.10, to repay to us immediately the pre-delivery instalment that we have paid to you in respect of this Vessel in an amount of US$1,337,500 together with interest thereon calculated at the rate of one month LIBOR per annum.
For the avoidance of doubt, as in the case of the termination notice given by us in respect of [Hulls 24 and 25], this exercise of our rights of termination is made without prejudice to our rights to claim damages from you by reason of your repudiatory conduct."
"9.1. I can state my conclusions in relation to each of the three contracts as follows:
1. The contract was repudiated by the Yard.
2. The terms of the contract did not preclude Gearbulk from relying on that repudiation.
3. The provisions in Article 10 did not apply to the repudiation of the contract by the Yard.
4. By relying on the contractual provisions in Article 10 to recover instalments paid Gearbulk did not affirm the contract.
5. Neither did Gearbulk affirm the contract by any action taken or not taken before the letter of termination.
6. Gearbulk is entitled to claim damages at common law for the repudiatory breach of contract by the Yard."
i) Whether Article 10 is a contractual code which excludes all rights of termination in respect of the events that occurred here ("the first issue").
ii) Whether the exclusion clause in Article 10 of the contract excludes any claim for damages in respect of what has occurred ("the second issue").
iii) Whether the termination of the contracts pursuant to and in reliance upon the contractual termination provisions (coupled with the claim in each case made upon ABN Amro Bank under the refund guarantee) precludes the buyer from subsequently claiming to have terminated at common law ("the third issue").
The First Issue
"In construing such a contract one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption."
and see to similar effect the words of Lord Goff in Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574 AC.
i) Remedies, including the right of termination, in respect of non-delivery are clearly covered by Article 10, notwithstanding the absence of reference to non-delivery in the headings, and despite the fact that the heading of Article 10 as a whole is "Delay in Delivery " because of the express dealing with the right of termination in respect of late delivery in Articles 10.1(b), 10.1(c) and 10.6. Once there has been delay in delivery by reference to those clauses, then there has been no delivery by those dates, such that by virtue of the exercise of the right of termination the vessel is never delivered, and there is thus non-delivery.
ii) Article 10.6 plainly contemplates that the reason for delay can be a "major breach", i.e. a repudiatory breach, and, provided that the necessary opinion of the Classification Society (in this case DNV) can be obtained, that can be exercised at any time prior to the drop-dead date, provided that it can be shown that the vessel will not be ready by the drop-dead date.
iii) There is no express reservation of the right to terminate at common law. Although Mr Dunning accepts that such is not necessary, given that the exercise is to decide, by reference to clear words, whether the presumption that there should be such rights has been ousted, nevertheless he refers to examples of cases in which the presence or absence of such reservation has been influential. In Hyundai Heavy Industries Co v Papadopolous [1982] Lloyds Rep 1 HL there was an express preservation of such rights (see p3). In Lockland Builders Ltd v John Kim Rickwood [1995] 77 BLR 42 CA, Russell LJ at 46 attached significance to the absence of such words as "without prejudice to other rights and remedies" in a relevant clause.
"My own view returning to the facts of the instant case is that Clause 2 and the common law rights to accept a repudiatory breach can exist side by side, but only in circumstances where the contractor displays a clear intention not to be bound by his contract, for example, by walking off the site long before completion or failing to comply with plans in a very fundamental way But such cases are far removed from the instant one."
Hirst LJ at 50 said:
" this clause 2 did impliedly preclude Mr Rickwood from terminating the contract on the facts of the present case, otherwise than by the exercise of his rights under Clause 2 since the complaints made fell squarely within the scope of Clause 2, i.e. complaints as to the quality of materials and workmanship. However Clause 2 would not have done so in relation to breaches outside the ambit of Clause 2, e.g. by Mr Ryan walking off the site when the works were still substantially incomplete."
i) As the learned Arbitrator said at paragraph 7.16(c) of his Award, Article 10.6 is concerned solely with an optional right to terminate in respect of a delay before 15 August 2003. I agree with the Arbitrator that it does not found an argument for exclusion of any right to terminate by accepting a repudiation.
ii) Most significant, in my judgment, is the wording of the very clause, Article 10.7, upon which Mr Dunning placed greatest reliance. This clause was said to be the lynchpin of the case that Article 10 ousted any other right to terminate. However:
a) It could easily have so provided, but instead limited itself in the second paragraph to ousting the Purchaser's right to the liquidated damages otherwise payable under the earlier clauses of Article 10 where the vessel was delivered late or defective, in the event of a termination under Article 10. It did not, as it could have done, limit or exempt a right to claim damages at common law.
b) As to the first paragraph, this made clear that the benefits for the Purchaser, such as they were, but in particular the right to a refund which, by Article 5.10, would then be recoverable under the Refund Guarantee from a third party bank, were only available "upon termination of this contract by the Purchaser in accordance with the provisions of this Article 10 or any other provision of this Contract expressly entitling the Purchaser to terminate this contract." The use of the word "expressly" is perhaps significant in the sense of suggesting that there were or might be available an implied right to terminate for a repudiatory breach of one of those provisions. But in any event, once again, the provision did not specify that it stood in lieu of any right at common law, but simply underlined that it only arose in the context of following the Article 10 route.
The Second Issue
"The Purchaser shall not be entitled to claim any other compensation and the Seller shall not be liable for any other compensation for damages sustained by reason of events set out in this Article and/or direct or indirect consequences of such events other than liquidated damages specified in this Article."
"The general rule should be applied that if a party, otherwise liable, is to exclude or limit his liability or to rely on an exemption, he must do so in clear words; unclear words do not suffice; any ambiguity or lack of clarity must be resolved against that party."
But Mr Dunning points out that that dictum of Lord Hobhouse was expressly in the context of his spelling out what he called a "basic rule of construction of contracts of carriage", which is what were in issue in both Homburg and Dairy Containers.
"It is certainly true that English law has traditionally taken a restrictive approach to the construction of exemption clauses and clauses limiting liability for breaches of contract and other wrongful acts. However, in recent years, it has been increasingly willing to recognise that the parties to commercial contracts are entitled to apportion the risk of losses as they see fit and that provisions which limit or exude liability must be construed in the same way as other terms."
However Mr Boyd points out that Moore-Bick LJ expressly cross-refers, as the foundation, or at any rate, as an exemplar, for such proposition, to Photo Production, when in fact, in that case, it would appear that at any rate Lord Wilberforce, as set out in paragraph 20 above, with whom Lord Keith and, notwithstanding his dicta, Lord Scarman, expressly agreed, was not of the view that the "cardinal rule of construction" had changed.
i) The starting point is that, in the event of delayed delivery, the Purchaser is entitled to what is called liquidated damages, by reference only to a deduction, graduated according to the degree of delay, of up to 5% of the contract price, in accordance with Clause 10.1(a). If however the contract is terminated in accordance with Article 10 or (as Mr Dunning submits is the effect of the clause relied upon) in the event of acceptance of repudiation, the Purchaser does not receive any liquidated damages (not least because it never has to pay the reduced purchase price). So far as Article 10 is concerned, on termination by virtue of Clause 10.7 the Purchaser loses the right to such liquidated damages, but becomes entitled to the return of such monies as it has already paid, together with the benefit of the refund guarantee under Article 5.10.
ii) Thus, in the event of acceptance by the Purchaser of a vessel delivered late, the Purchaser obtains compensation for its loss up to a maximum of 5% of the purchase price. If however the vessel is rejected, upon a termination by the Purchaser, in accordance with Article 10 (or, on the case for Mr Dunning, by an acceptance of repudiation) the Purchaser receives no compensation at all in respect of non-delivery. If this is unfair on the Purchaser (which Mr Dunning submits it may not be, if in fact the market has fallen) then there are corresponding unfairnesses to the Yard if, for example, the vessel was very nearly, but not quite, ready at the time when the right to terminate was exercised, yet (at any rate under Article 10.7) the Purchaser could recover back all monies that it had paid and not accept the vessel.
The Third Issue
i) It is quite apparent from the terms of the letters in relation to the first two contracts that those letters on their face purported to terminate in accordance with the provisions of Article 10, and made no mention of repudiation or acceptance of repudiation. On the basis of the authorities to which I shall refer, that is not determinative, and possibly not even relevant. Thus there is and was no need to consider the state of mind of those drafting or sending the letters at the time they were sent. Provided that in law the Purchaser is entitled subsequently to establish, by virtue of facts in place at the time, that it was in a position to accept repudiation, then it may, in accordance with the authorities to which I shall refer below, be entitled to say, retrospectively, that its action amounted to an acceptance of repudiation. It is in relation to that that the words of Rix LJ in Stocznia Gdanska S.A. v Latvian Shipping Co & Others [2002] 2 Lloyds Rep 436 CA ("Stocznia CA") at paragraph 88 have resonance:
"Where contractual and common law rights overlap, it would be too harsh a doctrine to regard the use of a contractual mechanism of termination as unequivocally ousting the common law mechanism, at any rate against the background of an express reservation of rights."
ii) The other aspect is that the conduct of the Purchaser was obviously totally commercially understandable, namely that it should, whether belatedly and retrospectively or otherwise, attempt to seek to take the full benefit available under the contract of the refund guarantee (particularly in the context that the solvency of the Yard must inevitably have been in doubt) and still attempt to claim damages against the Yard for repudiatory breach. The question is not whether that conduct was commercially understandable, and a natural reaction to the conduct of a contract-breaker by the innocent party, but whether the Purchaser was entitled, as Mr Dunning would no doubt describe it, to 'have its cake and eat it'.
The Facts
"In connection with the shipbuilding contract dated ... hereinafter called "Contract") made between the Seller and the Purchaser for the construction of one bulk carrier, the Purchaser shall make four advance payments to the Seller prior to the delivery of vessel. In certain circumstances in accordance with the terms of the Contract, the Purchaser shall become entitled to be refunded with such advance payments and that entitlement is to be secured by a bank guarantee.
Now we, ABN AMRO BANK V.V. Amsterdam hereby irrevocably and unconditionally undertakes to pay the Purchaser at their account with CHASE MANHATTAN BANK ..., on their first written demand irrespective of the validity and the legal effects of the above mentioned contract and waiving all rights of objection and defense arising there from any amount up to: USD 1,323,400.00 plus 1 month libor per annum as quoted by London at 11.00 hours London time upon receipt of the Purchaser's duly signed request for payment and the Purchaser's written confirmation stating that the Seller has failed to fulfil their obligation in conformity with the terms of the above mentioned contract and that, as result thereof the Purchaser is entitled to claim reimbursement of their advance payment plus interest as aforesaid. The interest will accrue from the date of receipt of the advance payment in the Seller's account and shall not be compounded."
"The Yard has failed to fulfil their obligations under the Contract with respect to delivery of the vessel and as a result thereof Gearbulk is entitled to claim reimbursement under the Guarantee of the pre-delivery instalment, plus interest.
Please therefore accept this letter as our written demand for refund of the pre-delivery instalment in the amount of USD 1,357,500.00 plus interest thereon calculated in accordance with the provisions of the Guarantee."
The Law
"It is said that in the way the yard chose to bring these contracts to an end, it affirmed the contract by operating the contractual termination provisions and did not accept the conduct as repudiatory and terminated the contract. But can it really be said that a party has made an irrevocable election to affirm the contract when he terminates the contract not by rescinding it on the basis of accepting the conduct of the guilty party as entitling him to do so, but wrongly relies upon a contractual right to rescind? I do not think so. A party entitled to terminate for breach can effectively terminate, even if he relies on grounds not open to him."
"177. [The purchasers] contended that if the yard was entitled to accept their conduct as a repudiation, then they had not done so as the rescission notices were invalid and had been intended to achieve a different result. The notices, if effective, would have triggered rights under cl.5 of the contract; they could not therefore be used for the wholly different purpose of terminating the contract and claiming damages at common law.
178. They relied on Johnson v Milling (1886) 16 QBD 460, United Dominions Trust (Commercial) Ltd v Ennis [1968] 1 QB 54 and Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361. None of these was helpful; in the first two cases, the point in issue in this case did not arise and the third case dealt with the converse situation, namely that a letter purporting to accept a repudiation could not operate as a notice to terminate under a contractual provision.
179. It is clear that no particular form or formality is required for the acceptance of a repudiation. Although the letters referred to the termination under cl. 5 of the contract, they made it clear that the yard considered the contract at an end and neither party was under an obligation of any further performance. If the yard had a right to terminate for repudiation, the fact that they did not set that out does not in my view make any difference, as it is well established that a party terminating a contract can rely on grounds other than those he gives. The important matter is that the letters unequivocally stated that the contractual obligations were at an end. I therefore conclude that there was an acceptance by the yard."
"It is established law that, where one party to a contract has repudiated it, the other may validly accept that repudiation by bringing the contract to an end, even if he gives a wrong reason for doing so or no reason at all."
"I do not think that the use of a contractual mechanism for terminating the contracts is inconsistent with reliance on repudiatory conduct for effecting a common law acceptance of an anticipatory breach."
"143. The same conduct may be such as to give rise to a contractual right to terminate and a common law entitlement to accept a repudiatory breach In such a case, the innocent party can exercise either his contractual or his common law right of termination. Prima facie he can rely on both. He is not disentitled to rely on the latter on the ground that recourse to the former constitutes an affirmation of the contract since in both cases he is electing to terminate the contract for the future (i.e. to bring to an end the primary obligations of the parties remaining unperformed) in accordance with rights that are either given to him expressly by contract or arise in his favour by implication of law. If he can rely on both there is no reason in principle why, if he terminates the contract without stating the basis on which he does so, he cannot be treated as doing so under any clause which entitles him to do and in accordance with his rights at common law Even if he refers to a particular clause upon which he relies, that would not inevitably mean that he was only relying on that clause. If that were so, an innocent party who, in the face of a repudiatory breach, terminated the contract by reference to a clause which was in fact inapplicable, might, on that account, find himself disentitled to terminate at all.
144. The fact that service of a contractual notice of termination is not inconsistent with the acceptance of a repudiation does not, however, mean that in all cases such a notice amounts to such an acceptance. If a notice makes explicit reference to a particular contractual clause, and nothing else, that may, in context, show that the giver of the notice was not intending to accept the repudiation and was only relying on the contractual clause; for instance if the claim made under the notice of termination is inconsistent with, and not simply less than, that which arises on acceptance of a repudiation: United Dominions Trust (Commercial) Ltd v Ennis [1968] 1 QB 54, 65, 68. In the present case markedly different consequences would arise according to whether or not there was a termination under Clause 14.4 or an acceptance of repudiation. ... The same notice cannot operate to produce two so diametrically opposing consequences. In those circumstances it should take effect in, and only in, accordance with its express terms, namely as a termination under Clause 14.4."
"There remains the alternative claim for repudiation. It is said that Mr Ennis repudiated the contract. I very much doubt myself whether his letters and his conduct should be considered as repudiation. He was simply asking for the agreement to be terminated. He was not repudiating it. But even if it be treated as a repudiation, it is clear that the repudiation was never accepted by the finance company. After receiving his letter, they treated the contract as being still continuing. They claimed under the minimum payment clause, which is a thing they could not possibly have done if there had been an acceptance of repudiation. By so doing, they elected to treat it as continuing. The county court judge said they accepted the repudiation in November 1963, when they amended their pleadings. That was far too late. They had already evinced their intention to treat the agreement as continuing. I do not think they can rely on the alleged repudiation. "
Harman LJ added at 68C-D:
"There clearly was no acceptance on the other side. The plaintiffs elected not to accept repudiation; they elected to treat the agreement as binding and to sue him under it and not to sue him for damages for its breach. Therefore they cannot rely on repudiation."
Salmon LJ agreed with both judgments.
i) Mr Dunning places considerable emphasis, and in my judgment rightly, upon the fact that this was not simply a claim for interest, but a claim, and a recovery, of interest expressly in accordance with the contractual provision for one month LIBOR per annum.
ii) Conclusive in my judgment is the fact that the Purchaser enforced a provision in the contract which was very significant to it. The Purchaser did not simply make a claim, and obtain recovery, against the Yard. It enforced the contractual provisions under Clauses 10.7 and 5.10, which enabled it to obtain a secured sum, and one sought and obtained against a third party, the guarantor, by virtue of an entitlement only available under the contract.
"If one applies those recent statements of the law to the facts of the present case it seems to me to be clear that the letter of termination dated 7 November 2003, though it referred only to the exercise of the contractual rights, was also effective as an acceptance of the repudiation of the contract by the Yard. This is not a case where the consequences of the acceptance of the repudiation were diametrically opposed to or inconsistent with the results of an exercise of the right under Article 10."
"The letter of termination (in respect of the third contract) relied on a repudiatory breach as well as on the contractual rights, but for the reasons I have given the reliance on the contractual rights did not amount to an affirmation of the contract."