Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 76
CA115/00	OPINION OF LORD MENZIES in the cause TOR CORPORATE A.S Pursuer; Against SINOPEC GROUP STAR PETROLEUM COMPANY LIMITED Defender; ­­­­­­­­­­­­­­­­­________________

Pursuer: Johnston QC et M Ross; Tods Murray LLP

Defender: Dean of Faculty QC et McBrearty; Simpson & Marwick, WS

22 June 2010

Introduction

[1] The defender is the owner of the semi submersible drilling rig Kan Tan IV. On 14 June 1999 the defender entered into a Management Agreement with the pursuer whereby the pursuer undertook to act as the exclusive manager of the rig and the defender undertook to pay to the pursuer certain sums of money. On 30 March 2000 the defender repudiated the agreement, and on 24 May 2000 the pursuer accepted that repudiation, and on or about the same day the pursuer raised these proceedings, in which it seeks payment of a sum claimed to be due in terms of the contract, and various sums by way of damages for breach of contract. In due course these proceedings were sisted for arbitration, in terms of Clause 9(a) of the Management Agreement. After a proof lasting some ten weeks the panel of arbiters found that the defender repudiated and breached its contract with the pursuer, and that the contract came to an end when the repudiation was accepted no later than 24 May 2000. In terms of Clause 9(d) of the Management Agreement that decision was stated to be final and binding upon the parties.

[2] The matter came before me for debate on the defender's first plea-in-law, in standard terms directed to the relevancy and specification of the pursuer's pleadings. In the Note of Arguments lodged for the defender, it appeared that the defender sought to have certain of the pursuer's averments excluded from probation. However, in the course of the debate it was agreed on behalf of both parties that the case should be put out By Order for discussion shortly after the issuing of this opinion. Each party helpfully lodged a Note of Arguments (No 35 and 37 of process) which I do not repeat here at length, but which (taken together with the submissions made at the bar) I have taken into account when reaching my decision.

The relevant terms of the Management Agreement

[3] Clause 1 of the Management Agreement provided inter alia as follows:

"The term of this Agreement shall continue and shall not be terminated except as follows...

(D) If the Manager or the Owner commits a material breach of this Agreement and has not so remedied such breach within three months of receipt of written notice by the Owner or the Manager, as the case may be, requiring the breaching party to remedy the same;

(E) If the Owner is not satisfied with his co-operation with the Manager and/or the manner in which the Manager is executing his duties and obligations as stipulated by this Agreement and has advised the Manager of his dissatisfaction in writing and the Manager has not taken the necessary steps to rectify the situation within one month, then the Owner may terminate this Agreement by providing three months written notice...

For the avoidance of doubt the Agreement cannot be terminated solely with the intent to award the management of the Vessel to another contractor."

Clause 2 provided inter alia:

"The Owner hereby appoints, and the Manager hereby accepts such appointment, as exclusive Manager of the Vessel for worldwide operations under the terms and conditions set forth in this Agreement. The Manager shall on behalf of the Owner and at the Owner's risk and expense manage, maintain and repair the Vessel in accordance with sound drilling rig management and general operation practice, efficiently and economically, to the best of its professional ability in regard to performance, safety, shipshape appearance, and will arrange technical supervision, classification etc in order to keep the Vessel in a seaworthy and fully operational condition and with valid certificates. The Manager shall keep the Owner fully advised of any significant issues concerning the Vessel and its operation..."

Clause 3.4(b) provided as follows:

"The Manager shall provide for technical supervision, repairs, classification, customary maintenance, upgrade and conversion and in all other respects use its best endeavour so that, at all times, the Vessel is kept duly operational and seaworthy, and maintains its certificates, regulatory compliance as applicable and permissions for maritime and drilling operations."

Submissions for the defender

[4] The Dean of Faculty began by drawing my attention to what he described as the most material findings in the arbitration, which he emphasised were binding on the parties and could not be reopened. These were as follows:-

(1) The defender's sole purpose in and after November 1999 was to change the manager of the rig and to remove the pursuer from that role, albeit that this was contrary to the provisions of clause 1 of the Management Agreement, and that the mechanism which it selected was not effective (finding 41 in paragraph 2.1.1).

(2) The defender did send a letter purporting to be a notice of determination under clause 1(E) of the Management Agreement, but this was not valid as it was not preceded by a valid notice of dissatisfaction (findings 44, 48 and 49 of paragraph 2.1.1).

(3) The defender's actions amounted to a repudiation of the contract. This was an anticipatory breach in which the defender announced its intention not to perform its obligations.

(4) The pursuer accepted that repudiation on 24 May 2000 (finding (768)).

(5) The rig was never 'fully operational and ready for contract assignment' during the pursuer's period of management. Indeed, the pursuer was in breach of many of its contractual obligations (findings 15 to 21 of paragraph 3.3.1). The defender therefore sought to terminate the agreement on the wrong ground not knowing that it had good grounds to do so because of the pursuer's material breach of the agreement. The defender could not have known that the pursuer was in material breach before 30 October 2000, because the pursuer was in breach of its obligation to '... keep the owner fully advised of any significant issues concerning the Vessels and its operation.' (findings 19 - 22 of paragraph 3.3.1).

[5] It was submitted that the pursuer had failed to establish on the balance of probabilities that they could have avoided termination of the contract by reason of their material breaches by curing those breaches within three months. Once it was established that the pursuer was in material breach, and that the defender had evinced a desire to remove the pursuer as manager of the rig, the onus was on the pursuer to establish that it could have avoided the consequence of its own material breach by remedying it within three months. This was a matter which was explored in evidence in the course of the arbitration; the pursuer maintained that they could have remedied within three months, and the defender maintained that they could not have done so.  The arbiters' determination of this issue was to be found in finding 23 of paragraph 3.3.1, namely:

"The Tribunal makes no finding as to whether or not Tor could have cured its breach within three months in the absence of sufficient evidence on the point".

The defender's position was that this was a finding, and it could not competently be revisited. The pursuer offered to prove before the tribunal that it could have remedied any material breaches within three months. It failed to do so, and it could not competently reopen this issue in the present proceedings.

[6] The pursuer's averment at the last sentence of Article 5 of condescendence, to the effect that the pursuer does not accept the arbiters' findings as to material breach of Clauses 2 and 3.4, was clearly irrelevant, because the arbiters' findings were final and binding on the parties. The arbiters made clear findings that the pursuer was in material breach (1) of its repairing and maintenance obligation and (2) of its reporting obligation. Were it not for the latter of these breaches, the defender would have known about the former breach and would have founded on it by giving written notice in terms of Clause 1(D). Whether the pursuer could have prevented termination by remedying the repair and maintenance breaches within three months was an issue of fact for the arbiters. By their finding 23 (quoted above) the arbiters found that there was an absence of sufficient evidence on this point. The pursuer had led evidence on this point before the arbiters, but failed to prove that it could have remedied its own material breach within three months. The onus of proving this rested with the pursuer. The arbiters found that the pursuer was in material breach of its repair and maintenance obligation; in order to avoid the result of that breach, namely termination under Clause 1(D), the onus rested on the pursuer to prove the positive case that it could remedy this breach within three months. It was properly open to the arbiters to reach the conclusion that they could not be satisfied one way or the other on this point - Rhesa Shipping v Edmunds [1985] 1 WLR 948 (particularly at 951 A/F and 955 D). The arbiters in this case had taken the third alternative identified by Lord Brandon of Oakbrook, namely that the pursuer had failed to discharge the burden of proof which lay on it. Once the pursuer was found to be in material breach, the onus was on it to show, on the balance of probabilities, that this breach could be remedied within three months. Moreover, the question of whether the pursuer was or was not able to remedy within three months was peculiarly a matter within its own knowledge - the pursuer was the manager of the rig at the time and was responsible for its maintenance and repair. The burden of proving this positive must rest with the pursuer; to place the burden of proof on the defender would be to give the defender a formidable obstacle in proving a negative, in circumstances in which it was not the manager of the rig and was not responsible for its repair and maintenance.

[7] It was submitted that the pursuer's averments beginning with the words "explained and averred" in line 14 of page 14 of the Adjusted Record (41 of process) and ending with the word "achieved" in line 3 of page 15 were irrelevant, as these issues were the subject of evidence in the arbitration (see paragraph 3.3.2.5.3, (319 et seq)). It had been never been argued by the pursuer that the arbiters had exceeded their jurisdiction in considering this issue. No such argument had been advanced in the arbitration itself, nor in the judicial review proceedings which followed. The pursuer is now trying to revisit an issue which was before the arbiters.

[8] On the question of where the burden of proof lies, I was referred to Dickson The Law of Evidence (third edition) paragraph 26; Walker and Walker, The Law of Evidence in Scotland (third edition) paragraphs 2.2.2 - 2.2.4; and Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Limited [1942] AC 154 (particularly at 174/5, 177 and 194). It was submitted that the defender in the present case did not fall within any of the exceptions to the general rule that the burden of proof rests on the party who alleges the affirmative. Moreover, where a chain of causation has begun, the burden of showing that it has been broken lies on the party alleging this - SS "Baron Vernon" v SS "Metagama" 1928 SC (HL) 21. In the present case there is a material breach of contract by the pursuer which has as its natural consequence the right of the defender to terminate the contract. In order to breach this chain of causation, the pursuer must discharge the burden of proving that the breach could be remedied within the specified timetable. The Dean of Faculty accepted that no clear and concise rule could be stated as to where the onus of proof lies in every case, but in the present case it was relevant to consider whether, if the defender had given notice to the pursuer of the pursuer's material breach, and there was no evidence at all that anything had happened thereafter, could the contract be properly terminated after three months? The general law provides that a material breach of contract by one party entitles the other party to determine the contract. It is open to parties to contract for an exception to that remedy, but the party seeking to rely on that exception must plead it and prove it. The Minute of Agreement in the present case provided for one exception, namely remediation within three months, and the burden of proving that this would have been achieved rests with the pursuer. Another contract might contain fifty exceptions; it would be quite unreasonable to place the burden of negativing each of these on the party relying on the general rule.

[9] It follows from the above that the pursuer had the onus of proving, in the circumstances found by the arbiters, that it would have continued to enjoy the benefit of the contract notwithstanding its material breach of it. The defender's purpose was to remove the pursuer as manager; the pursuer was in material breach, which would have enabled the defender to achieve this purpose; the defender did not rely on the material breach because it was unaware that it had occurred; this lack of knowledge arose because of a separate material breach by the pursuer, namely breach of the obligation to report. In these circumstances the pursuer cannot rely on the defender's failure to give a notice of intention to terminate under Clause 1(D), because that failure arose as a result of the pursuer's own breach. It is a principle of law that no one can take advantage of the existence of a state of things which he himself produced; a man shall not be permitted to take advantage of his own wrong - New Zealand Shipping Company Limited v Société des Ateliers et Chantiers de France [1919]AC 1; McBryde on Contract (second edition) 20-21.

[10] The pursuer has not chosen to plead its case on the basis of a lost chance. The sum sought in the second conclusion relates to a bonus payment which would only have arisen in September 2002, and the sum sought in the fourth conclusion relates to sums allegedly payable in terms of the contract between September 2002 and December 2011. The averments in support of these conclusions are to be found in Article 5 of Condescendence, from which it is clear that the pursuer is not relying on the loss of a prospect or a chance - rather the pursuer offers to prove that the vessel would have remained under the pursuer's management, drilling contracts for the rig would have been entered into, and that the pursuer would have earned the sum fourth concluded for in the period between September 2002 and December 2011. These averments cannot be relevant standing the pursuer's inability to prove to the arbiters that it could have remedied its own material breach and thereby avoided termination. In support of this proposition I was referred to the Mihalis Angelos [1971] 1 QB 164 (particularly the opinions of Lord Denning MR at 196/7 and Edmund Davies LJ at 201/3) and Golden Strait Corporation v Nippon Yusen Kubishika Kaisha ("the Golden Victory") [2007] UKHL 12, [2007] 2 AC 353. Applying the principles for calculation of damages consequent upon a repudiatory breach stated in these cases to the circumstances of the present case, it is clear that the defender would have availed itself of any opportunity to terminate the contract, and if it had known that the pursuer was in material breach it would have relied on that material breach. It was therefore clearly predictable at the date of termination that there would be a supervening event cutting off damages. The benefit which the pursuer lost as a result of the termination of the contract was only the benefit under a contract of which they were in material breach. There is no foundation for any claim for damages for the period between September 2002 and December 2011, because it was clearly predictable at the date of termination that the defender would have terminated the contract in reliance on the pursuer's material breach. For the pursuer to make relevant averments of loss attributable to the period from 1 September 2002 to 31 December 2011 against the background of the arbiters' findings, it must offer to prove that it would have been manager of the rig during that period. It is not enough for it to make the bald averment in the third sentence of Article 5 of Condescendence that "but for the defender's said breach of contract the vessel would have remained under the pursuer's management"; this is inconsistent with the arbiters' findings. Nothing would be gained by granting a proof before answer, because at any such proof the court would be left with the arbiters' findings of fact. The Dean of Faculty moved me to sustain the defender's first plea-in-law in the principal action and to refuse to admit the pursuer's second and fourth conclusions to probation, but suggested that the matter should be put out By Order following a determination of the issues raised.

Submissions for the pursuer

[11] Senior counsel for the pursuer submitted that the onus of proof rested with the defender. It is the defender which seeks to rely on Clause 1(D), and to do so it must bring itself within that clause. As it is the defender which puts forward the proposition, it is for the defender to establish it. The general principle that the person who asserts the affirmative must prove it is not in dispute, but the question arises as to what the affirmative is in the present case. The authorities referred to for the defender dealt with quite different issues. The Joseph Constantine case concerned frustration of a contract consequent on an explosion on a ship, and the observations of the court in that case fell to be read in that context. In the present circumstances, Clause 1 of the Minute of Agreement sets out a number of specified grounds on which the contract might be terminated; if a party wishes to rely on one of these grounds, it is for that party to prove that the grounds exist. As stated in paragraph 12 of the Note of Argument for the pursuer, three facts need to be established if the argument for the defender is to succeed - (1) there must have been a material breach by the pursuer, (2) if the defender had known about the condition of the vessel it would have served a valid notice, and (3) if such a notice had been served, the pursuer would not have been able to remedy the defect timeously. Each of these elements arises from Clause 1(D), and if the defender seeks to limit damages consequent on its repudiation of the contract it must establish each of these elements. To take the example of a contract with fifty exceptions to a general rule, the defender in such a case would require to negate each exception. The notice specifying a breach of contract in terms of Clause 1(D) must specify the particular elements of the breach which required to be remedied. This sets the parameters for a later assessment as to whether a remedy has been effected within three months or not. In the arbitration proceedings, both parties led a lot of evidence about non-operational or defective equipment, so placing the onus on the defender is not an intolerable burden; all that is required is for the defender to establish that there was some material or significant aspect of the state of the rig which could not have been remedied within the three month period. Clause 1(D) is a single express term of the contract, and it would be extraordinary if the burden of proving any element of it rested on anyone other than the party relying on it to terminate the contract.

[12] Turning to the arbiters' finding 23, the defender's position is that the pursuer had the chance before the arbiters to prove that it could have remedied the breach within three months, but it failed to prove this, and the defender relies on finding 23 in this regard and maintains that the onus was on the pursuer to prove this in the arbitration or not at all. This argument should be rejected, (a) because the onus does not, and did not, rest on the pursuer, and (b) because finding 23 is not a finding that the pursuer has failed to prove anything. It was necessary to bear in mind the context; before the arbiters the defender was not seeking an order that it was entitled to terminate under Clause 1(D), but was rather seeking a finding that the pursuer was in material breach. This is clear from paragraph (230) on page 60 of the arbiters' Note of Reasons. This is why order No. 20 was framed as it was - the arbiters found in respect of the counterclaim that the claimant was in material breach of contract. The defender made various claims before the arbiters about failures on the part of the pursuer; failures in maintenance were found to be established in part, failures in marketing were rejected, and failures in regular accounting were rejected or found not to be material. However, the issue of Clause 1(D) was not canvassed before the arbiters. It was clear from findings 18 and 20 at page 62 of the Note of Reasons that the arbiters understood that there was a difference between establishing material breach on the part of the pursuer and being entitled to terminate in terms of Clause 1(D); however, this difference was not material for the arbiters' purposes, because they were only being asked to decide whether there had been a material breach. The question whether the defender could invoke Clause 1(D) was not referred to the arbiters.

[13] Senior counsel accepted that the arbiters referred to Clause 1(D) (and he accepted that the reference to Clause 2(d) in part 1 of finding (768) was an error and should be read as referring to Clause 1(D)), and he did not challenge their entitlement to make such reference; however, finding 23 at page 62 was not made in the context of a consideration as to whether Clause 1(D) was made out or not, because they had no need to carry out such an exercise. References by the arbiters to Clause 1(D) are in the context of their considering whether the pursuer was in material breach. Senior counsel submitted that there was no determination by the arbiters as to whether the pursuer could have remedied any material breach within three months, and there was no need for such a determination because this was not an issue was addressed to them for a decision. Claim 3 in the counterclaim was just that the pursuer was in material breach; it did not extend to the argument that the pursuer could not have remedied that breach within three months.

[14] Senior counsel drew attention to what he regarded as an illogicality in the defender's Note of Argument; in paragraph 3.3 it is stated that it is inevitable that the defender would have served a notice under Clause 1(D) by 14 March 2000, yet in paragraph 3.7 they assert that if 14 March 2000 is not to be regarded as the correct date, such a notice would have been served by 30 October 2000. Whichever date is chosen, the material which the defender has produced is inadequate to show that the contract would have been terminated three months after either date.

[15] Neither the Mihalis Angelos nor the Golden Victory was directly in point, and each was concerned with very different circumstances from the present case. In the former, it was an established fact that the vessel was not going to be ready to load; there was therefore an element of inevitability or "predestination" which could not be said to apply in the present case. There is no finding by the arbiters in the present case of an event which would bring the matter to an end. There are accordingly two areas of dispute between the parties: (1) whether the onus of proof rested with the pursuer or the defender, and (2) even with a finding that the defender wished to remove the pursuer as manager of the rig and a finding that the pursuer was in material breach, the question remained whether Clause 1(D) could be invoked to terminate the contract. The question is whether on the facts found by the arbiters, the contingency that Clause 1(D) could be invoked and the contract terminated by the defender is sufficiently realistic that it has to be taken into account when valuing the pursuer's contractual rights. In the context of the discussion in the Golden Victory (and in particular the spectrum between inevitability and mere possibility considered by Lord Walker of Gestingthorpe at paragraph 46 of that case) senior counsel submitted that such a contingency in the present case fell to be categorised as a mere possibility carrying little or no weight in commercial terms. There is no finding as to whether (or when) the defender could have terminated the contract under Clause 1(D), and there is not the same inevitability about such a contingency as there is about war or the failure of a ship to arrive, because of the mechanism of the three month period for remedying a breach.

[16] The New Zealand Shipping case was so far removed from present circumstances as to be irrelevant. The pursuer was not seeking to terminate the contract by its own wrong, nor was it trying to obtain an advantage by its own wrong, but was merely responding to the defender's new case in relation to Clause 1(D). The pursuer's argument amounted to no more than that if the defender wished to establish the date of termination under Clause 1(D) they must bring themselves within it.

[17] In conclusion, senior counsel observed that these proceedings are about quantifying damages for a breach of contract. The position of the defender is that the contract would have been definitely terminated under Clause 1(D) by one date or another. That assertion is not supported by the evidence, so damages ought to be assessed without regard to any restriction, and should not be cut off at May 2000. Senior counsel accepted that it was appropriate for the court to issue a decision on the question of principle and thereafter put the case out By Order to enable amendment to be made if required.

Discussion

[18] There are several issues raised in the Notes of Argument and submissions for the parties. I propose to consider first where the burden of proof lies, second what the effect of finding 23 in paragraph (231) of the arbiters' Note of Reasons is, and finally certain factors relating to the assessment of damages.

[19] Both senior counsel accepted that there is no easily formulated rule as to the burden of proof which may be said to apply to all cases. There are different principles which may apply, more or less forcefully, to different circumstances. As is observed in Dickson on Evidence (at paragraph 26) "the leading rule is that the burden of proof lies upon the party who alleges the affirmative. Ei qui affirmat, non ei qui negat, incumbit probatio. This was not disputed by senior counsel for the pursuer, but, as he observed, the difficulty frequently lies in deciding which party is truly alleging the affirmative. He submitted that if the defender is to rely on Clause 1(D), it must bring itself within it. While recognising that the arbiters made a finding that the pursuer was in breach of its repair and maintenance obligation, no finding was made that had the defender known about the condition of the vessel it would have served a valid notice, nor that the pursuer would not have been able to remedy the defect timeously.

[20] Although attractive, I am not persuaded that this argument is sound. The remedy which the law generally provides for material breach of contract is to entitle the other party to terminate the contract. This entitlement may be modified or restricted by agreement. In the present case there is the restrictive mechanism provided by Clause 1(D), which requires written notice and a three month period within which remedial steps may be taken. The burden of proving that the contractual exception applies and that it would have had the effect of averting the normal remedy of entitlement to terminate must rest on the party asserting this - i.e. the pursuer. The arbiters have found that the pursuer was in material breach of its repair and maintenance obligation, and that the defender had as its underlying purpose at the material time the removal of the pursuer from the role of manager of the rig. Against this established factual background I consider that it is incumbent on the pursuer to prove that it could have taken the necessary steps to remedy the breach within the required timescale and so avoid termination. Such a conclusion is consistent with the principles enunciated by the House of Lords in the Joseph Constantine Steamship Line case, and is also consistent with the "breach of chain of causation" reasoning adopted by Viscount Haldane in the "Baron Vernon".

[21] I am fortified in this conclusion by the consideration that the facts relating to this issue are peculiarly within the pursuer's knowledge. The pursuer was the manager of the rig at the material time, and was charged with its repair and maintenance. It was in a much better position to lead evidence as to what was necessary to place the rig in a proper seaworthy condition, and within what timescale this could have been achieved. By contrast, the defender was unaware of the actual condition of the rig. It had not inspected it, and it had been provided with reports from the pursuer which gave a misleading picture of its condition.

[22] Senior counsel for the pursuer drew my attention to paragraph (230) of the Note of Reasons, where the order sought by the defender was "Tor was in material breach on contract", and suggested that it was important to note that the defender was not seeking an order that it was entitled to terminate under Clause 1(D), which was not an issue canvassed before the arbiters. However, it is clear that the arbiters did consider whether a remedy under Clause 1(D) was open to the defender, what the requisites were for such a remedy, and whether there was sufficient evidence as to whether or not the pursuer could have cured its breach within three months. This is apparent from, for example, the discussion at paragraph (326), the first finding in paragraph (768), and the recital of the evidence of some of the witnesses.

[23] In light of all the circumstances of this case, I am satisfied that the burden of proving that the pursuer could have remedied its breach of the obligation to repair and maintain within a three month period rested with the pursuer.

[24] I now turn to the effect of finding 23 in paragraph (231) of the arbiters' Note of Reasons. The defender categorises this as a finding in fact, at least to the extent that the arbiters found that there was an absence of sufficient evidence such that they could make no finding as to whether or not the pursuer could have cured its breach within three months. As the burden of proving this point rested with the pursuer, and as the arbiters' award was agreed to be final and binding upon the parties, the pursuer had failed to avail itself of the opportunity to discharge the burden of proof, and the matter was now closed and could not be revisited. As discussed above, the pursuer submitted that the burden of proof did not rest on it, and in any event finding 23 was not a finding that the pursuer had failed to prove anything.

[25] Applying the normal meaning of the language used in finding 23, and looking to the Note of Reasons as a whole, I consider that the arbiters have applied their minds to the question whether the pursuer could have cured its breach timeously. They were unable to answer that question because there was not sufficient evidence on the point. I have already decided that the burden of leading evidence on that point rested with the pursuer. It appears that the arbiters heard evidence on this point, and submissions about it. Having done so, they opted for what Lord Brandon of Oakbrook described in Rhesa Shipping (at page 955D) as the "third alternative". They were entitled to reach this view, and no challenge has been mounted to their jurisdiction or power to do so. I do not consider that it is now open to the pursuer to seek to lead evidence before this court in an attempt to prove that it could have remedied the breach within three months.

[26] I now turn to consider parties' submissions about a variety of factors which may affect the assessment of damages. In doing so, the principle that a man shall not be permitted to take advantage of his own wrong (referred to in the New Zealand Shipping Company case and in McBryde on Contract) needs to be borne in mind. Senior counsel for the pursuer was correct in observing that the facts of the New Zealand Shipping Company case were far removed from the present circumstances but it does not follow that the principle is irrelevant in this case. In its fourth conclusion the pursuer seeks payment of more than $61,000,000 by way of damages for the period September 2002 to December 2011. However, on the basis of the arbiters' findings, it appears that the defender only purported to invoke the Clause 1(E) procedure because it was unaware that the Clause 1(D) procedure was open to it; this state of affairs arose because of the pursuer's breach of its repair and maintenance obligation, and its further breach of its obligation to provide the defender with accurate reports of the vessel's condition. It would be a surprising result if the pursuer was able to recover damages for the period 2002 to 2011 because, by its breach of its reporting obligation, the defender was unaware of its material breach of its repair and maintenance obligation.

[27] Once the arbiters had found (a) that it was the defender's underlying purpose to remove the pursuer from its role as manager of the rig, and (b) that the pursuer was in material breach of its repair and maintenance obligation, it may perhaps be thought to be likely that the defender would rely on such material breach as soon as it became aware of it, using the mechanism of Clause 1(D) in order to seek termination of the contract. I say no more about this at this stage, because the defender makes averments in this regard which are denied by the pursuer. It may therefore be necessary for evidence to be led in this respect. This evidence may have an effect on the proper assessment of the valuation of the damages to which the pursuer may be entitled. It is not appropriate for me to express any concluded views on these matters at this stage. However, in deference to the arguments which were advanced before me about the various dicta in the Mihalis Angelos and Golden Victory cases, it may assist if I give some indication of how the court might approach evidence to the effect that the defender would indeed have initiated the Clause 1(D) procedure in reliance on the pursuer's material breach as soon as it became aware of that breach. Lord Walker of Gestingthorpe at paragraph 46 of the Golden Victory case suggested a spectrum of later events ranging from inevitable (in the sense of being predictable with confidence equal, or closely approximating, to 100%), and a mere possibility carrying little or no weight in commercial terms. While I accept that the defender's successful invoking of the Clause 1(D) provisions to achieve termination of the contract may fall short of what Megaw LJ described as a "predestined event" in the Mihalis Angelos and so perhaps falls short of Lord Walker of Gestingthorpe's categorisation of inevitability, it appears to me to be towards that end of the spectrum, and far more than "a mere possibility".

[28] As observed by the Dean of Faculty, the pursuer has chosen to plead its case on a "but for" basis, not on the basis of the loss of an opportunity or chance. For the reasons which I have given above, I consider that many of the averments relating to loss of profits between September 2002 and December 2011, which provide the basis for the fourth conclusion, are irrelevant. Were it not for the agreement between the parties that the case should be put out By Order shortly after the issuing of this opinion, I should have been minded to sustain the defender's first plea-in-law in the principal action, to refuse the fourth conclusion, and to exclude from probation certain averments in Article 5 of Condescendence. However, in light of parties' agreement, the case will be put out By Order in early course, once parties have had the opportunity to consider this Opinion.