STOCZNIA GDYNIA SA V GEARBULK HOLDINGS LTD

[2009] EWCA Civ 75, Court of Appeal (Civil Division), Lord Justice Ward, Lady Justice Smith and Lord Justice Moore-Bick, 13 February 2009

Contract – Termination – Shipbuilding contract – Whether rights of termination excluded by contract – Whether claim for damages excluded by contract – Whether the termination of the contract pursuant to and in reliance upon the contractual termination provisions precluded the buyer from subsequently claiming to have terminated at common law

The claimant yard undertook pursuant to a contract with the defendant buyer to construct six bulk carriers, three of which were never delivered. The first of the three ships was never finished and the construction of the two others never progressed beyond the design stage. The yard was in poor financial condition and possibly insolvent. The purchaser terminated the first two contracts by notice in accordance with Article 10 of the contracts, requesting a refund of the pre-delivery instalment with interest. It then wrote to the yard again, notifying it of its acceptance of the repudiation of the third contract, reserving its right both to damages for repudiation and to a refund of the pre-delivery instalment. This was the appeal of the judgment of Mr Justice Burton [2008] EWHC 944 (Comm). The three issues of law were (i) whether Article 10 was a contractual code excluding all rights of termination in respect of the events that occurred; (ii) whether the exclusion clause in Article 10 of the contract excluded any claim for damages in respect of what had occurred; (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 under the refund guarantee) precluded the buyer from subsequently claiming to have terminated at common law. The Court of Appeal held in favour of Gearbulk on all three counts, to the effect that it had not by virtue of the contract waived the opportunity to terminate under common law; the terms of the contract were not such as to clearly and expressly exclude the right to damages; and termination pursuant to contractual provisions, coupled with recovery of the advance payments as stipulated by the contract did not preclude additional damages for loss of a bargain.