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Lloyd's Maritime and Commercial Law Quarterly

MITIGATION AND CAUSATION OF BENEFITS

Fulton v Globalia (The New Flamenco)

David McLauchlan*

Andrew Summers

This article examines mitigation and the causation of benefits in the assessment of damages for breach of contract, following the UK Supreme Court’s decision in The New Flamenco. It clarifies the meaning and scope of “speculation” reasoning, according to which a benefit (or harm) is said to be ignored in the assessment of damages where it derived from a “commercial risk” undertaken by the claimant. The authors argue that speculation reasoning properly applies where the claimant made a choice not to take steps that would have put it as nearly as possible in the same position as if the contract had been performed. They conclude that the correctness of the decision in The New Flamenco thus turns on whether the shipowners had such a choice, for example, to rehire the vessel under a series of shorter charters, instead of putting it up for sale.

1. Introduction

In Fulton Shipping Inc of Panama v Globalia Business Travel SAU (The New Flamenco) 1 the Supreme Court considered the circumstances in which benefits received by the claimant, arising from steps that the claimant would not have taken but for the defendant’s breach of contract, must be taken into account in the assessment of damages. The result of the appeal was eagerly awaited by many observers, not least by the present authors, because, in earlier issues of this Quarterly,2 we had expressed different views concerning the outcome in the Court of Appeal. As it transpired, however, the single judgment delivered by Lord Clarke3 came as something of a let-down because it contains only seven paragraphs of discussion and no citation of authority apart from the cases referred to in reciting the lower courts’ reasoning. Our aim in this article is to supplement the Supreme Court’s own short reasoning with a fuller analysis of how its approach differed from the Court of Appeal,4 whose decision the Court reversed in favour of the decision and reasoning of Popplewell J in the High Court.5
The essential facts were as follows. The respondent charterers repudiated a two-year time charter of a small cruise ship, the New Flamenco. At the time there was no substitute

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