This case concerned two main issues. The first was whether a clause in a contract of affreightment protected suppliers from liability when the material to be supplied was unavailable because of a natural disaster. The second was whether, if it did not, they were in any event liable only for nominal damages because the receivers would have suffered the same loss in any event.

By a contract of affreightment, the Defendants ("Limbungan") agreed to supply cargoes of iron ore pellets to be shipped from ports in Brazil to Malaysia in tonnage to be provided by the Claimants ("Classic") in 2015 and 2016. Halfway through the shipment period, the Fundi dam burst, terminating the mining operation from which the ore was sourced. Limbungan, relying on clause 32 of the COA, disputed liability for five shipments which should have taken place subsequently, on the ground that the dam burst rendered further performance impossible. It was found that Limbungan would never have loaded the disputed two cargoes because of lack of demand in Malaysia. Teare J held that Limbungan were in breach of contract and were not protected by Clause 32. He held however that they were liable only for nominal damages, because there never would have been any ore available for the five shipments scheduled for the period after the dam burst.

The Court of Appeal upheld Teare J on the liability question but reversed him on the damages question.

Liability. In both courts, the question of liability turned on the construction of the construction of clause 32 of the Contract of Affreightment. Limbungan contended that it was a force majeure clause, alternatively a contractual frustration clause; Classic that it was an exceptions clause and inapplicable on the facts. Limbungan argued that the clause possessed the general characteristics of a force majeure clause, but the Courts held that it was an exceptions clause. It was also held that the clause did not resemble the "contractual frustration" clauses seen in the cases arising out of the 1973 US grain embargo of which the leading case is Bremer v Vanden Avenne.

The supplier's undertaking was absolute. It was insufficient that it was impossible for Limbungan perform because one of the matters listed in the clause would have prevented it. They had to go further and show that it did actually prevent it. The phrase "resulting from" required a but-for test to be satisfied. The crucial requirement was that of causation, and there would have been no shipment even if the dam had remained intact.

Damages. Teare J awarded only nominal damages because "Classic cannot be put in a better position than it would have been in had Limbungan been able and willing, but for the dam burst, to ship the required cargoes". The Court of Appeal disagreed. It distinguished the decisions in The Golden Victory and Bunge SA v Sidera BV on the basis that those cases were concerned with anticipatory breaches of contract and not with actual breaches. This was not, however, the ratio decidendi and appears to be both obiter and dubious.

The true basis for the decision was that the contract imposed an absolute obligation on Limbungan to ship the relevant cargoes. As Males LJ said "Limbungan's obligation was not to be ready and willing to supply a cargo in each case, but actually to supply one". They took the risk of non-delivery for any reason whatever.

The case is reported at [2018] EWHC 2389 (Comm) (Teare J); [2019] EWCA Civ 1102 (CA). Simon Rainey QC and Andrew Leung were Counsel for Limbungan.

The case is considered at length by Howard and Knott, Force Majeure, Frustration and Exceptions Clauses: Damages in Hindsight [2020] LMCLQ 179.

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