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.
The court held that on balance the rogue d-bars were more likely to have come from the Nordsund than from the Mega S. Given the exceptional nature of the defects, it would have been a remarkable coincidence that the Nordsund and the Mega S should both have happened to carry cargoes including a number of bundles of that unusual quality.
Log-o-Mar was therefore in repudiatory breach of its contractual obligations to Craft in treating the settlement agreement as discharged and in subsequently causing the Tiger V to sail to Jebel Ali and discharge there. Craft was entitled to judgment on its counterclaim for damages to be assessed.
*Full case details
Log-o-Mar AG (a company incorporated in Germany) vs (1) Craft Enterprises International Ltd (a company incorporated in England & Wales) (2) Croyndon Financial Ltd (a company incorporated in the British Virgin Isles) 27 July 2004, Queens Bench Division, Commercial Court, Judgment of Mr. Justice Toulson.
The decision illustrates the importance of ensuring the existence of the right to repudiate before purporting to exercise such right. Failure to do so could prove costly.