Omak Maritime Ltd v Mamola Challenger Shipping Co [2010] EWHC 2026 (Comm)

KEY POINTS

• If a measure taken to reduce losses effectively eliminates the damage incurred, it nullifies any claim for damages that would have otherwise been valid.
• The court recognized that the owners' decision to engage in short-term fixtures was a form of mitigation.

FACTS

• The charterers agreed to lease the vessel "MAMOLA CHALLENGER" from the owners for a period of 5 years. As per the charterparty, the owners were responsible for making specific modifications to the vessel.
• In anticipation of these modifications, the owners incurred various expenses. However, when there were doubts about whether the charterers would go through with the agreement, the owners kept the vessel at Cape Town while waiting for clarification from the charterers.
• Ultimately, the owners accepted that the charterers had effectively terminated the charter. The expenses the owners had incurred for the modifications turned out to be wasted as they provided no value or benefit to the owners.
• Following the termination of the charterparty, the owners entered into several short-term fixtures for the vessel.
• The tribunal determined that over the 5-year period that the charterparty would have been in effect, the owners earned or would earn more from these short-term fixtures compared to what they would have earned under the original charterparty. Moreover, the excess earnings from these fixtures exceeded the amount of the wasted expenditure incurred by the owners.

COMMENTARY

• The pivotal aspect of the case is the concept of mitigation of losses. By pursuing these fixtures, the owners effectively mitigated their losses and earned additional profits, which surpassed the amount of damages they would have been entitled to claim.