By various contracts made during the period between April 2001 and July 2001 Log-o-Mar agreed to charter five vessels (one of which was the Mega S) to Croyndon/ Craft for voyages carrying steel from Black Sea ports to Umm Qasr in southern Iraq. Disputes arose in relation to these contracts, which were subsequently settled by way of a settlement agreement. Under the terms of the settlement agreement Log-o-Mar would transport the steel d-bars that were discharged by the Mega S at Jibel Ali in Dubai to Umm Qasr. Croyndon and Craft would pay Log-o-Mar the costs of such transportation.

Log-o-Mar used the vessel Tiger V to transport the ex-Mega S cargo. In addition to loading the ex-Mega S cargo however, also loaded was a cargo of d-bars which Log-o-Mar had been carrying on another vessel, the Nordsund. Discharge of the d-bars at Umm Qasr was halted when some d-bars broke.

Log-o-Mar claimed that the defective d-bars came from the Mega S and because Croyndon/Craft were responsible for that cargo they were responsible for the subsequent refusal to take the cargo at Umm Qasr, resulting in a repudiatory breach which Log-o-Mar accepted. Log-o-Mar claimed the costs of transportation.

Croyndon/Craft claimed that the defective d-bars came from the Nordsund, the cargo from which they were not responsible, and therefore Log-o-Mar was in repudiatory breach and not entitled to transportation costs.