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[2018] Bus LR Classic Maritime Inc v Limbungan Makmur Sdn Bhd (QBD)

A Queens Bench Division

Classic Maritime Inc v Limbungan Makmur Sdn Bhd

and another
[2018] EWHC 2389 (Comm)
B 2018 July 16—18, 23, 25; Teare J
Sept 13

Contract  Construction  Force majeure clause  Shipowner entering into

contract of a›reightment with charterer for carriage of iron ore pellets 
Charterer under terms of contract having choice as to which of two load ports to
use  Dam burst preventing export of pellets from port used by charterer 
C Charterer seeking to rely on force majeure clause to excuse failure to supply
shipments  Whether charterer having made arrangements to ship from port
a›ected by dam burst  Whether alternative mode of performance  Causation
requirement imposed by force majeure clause  Whether charterer establishing
but for dam burst it would have supplied cargoes for shipment  Whether
entitled to rely on force majeure clause  Whether compensatory principle
preventing shipowner from receiving substantial damages
D
Under a contract of a›reightment between the shipowner and the charterer, the
charterer agreed to supply and load 59 shipments of iron ore pellets from Brazil to
Malaysia. The cargo was to be supplied from one of two ports. Iron ore pellets from
mining company S, were shipped through the rst port, while those from company
V were shipped through the second. S, with whom the charterer, though its a–liates,
had a long-standing commercial relationship, became the sole supplier of iron ore
E pellets shipped under the contract of a›reightment. The charterer failed to provide
cargoes for seven shipments of iron ore pellets. Five of those instances occurred after
a major dam burst which shut Ss mine and closed down all iron ore pellet exports
from the rst port. The contract of a›reightment contained a force majeure clause by
which the charterer was not responsible for any failure to deliver the cargo resulting
from accidents at the mine, providing the event directly a›ected its performance
under the contract. The shipowner did not accept that the charterer was entitled to
F rely on the clause in relation to the ve shipments that should have taken place after
the dam burst, and claimed damages for breach of contract.
On the claim
Held, allowing the claim, that under the terms of the contract of a›reightment,
the charterer had had a choice as to how to perform the contract and which load port,
and therefore which source of cargo, to use to full its obligations; that the charterer
could be regarded as having made arrangements to ship from the rst port, even
G though there had been no legally binding arrangement to do so; that after the dam
burst, V would not have agreed to supply iron ore pellets to enable the ve shipments
in question to take place; but that the clause on which the charterer relied was an
exception clause rather than a frustration clause, which imposed a but for test of
causation; that having failed to full the two shipments prior to the burst, it was
doubtful whether, but for the dam burst, the charterer would have been able and
willing to supply cargoes for shipment pursuant to the contract of a›reightment;
H that, therefore, the charterer was unable to rely on the clause to excuse its failure to
supply cargoes for the ve shipments in question; but that if the charterer had been
able and willing to perform, the dam burst would have prevented performance and
the charterer would have been excused by the clause; and that, accordingly, given
that it would not have received performance in any event, the compensatory principle
prevented the shipowner from receiving substantial damages for the failure to supply

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the ve cargoes (post, paras 58, 66, 71, 81, 82, 85, 110—111, 129, 132, 136, A
143—145, 147, 155—156).
Brightman & Co v Bunge y Born Limitada Sociedad [1924] 2 KB 619, CA and
Seabridge Shipping Ltd v Antco Shipping Ltd, The Furness Bridge [1977] 2 Lloyds
Rep 367 applied.
Bremer Handelsgesellschaft GmbH v Vanden-Avenne Izegem PV BA [1978]
2 Lloyds Rep 109, HL(E), distinguished.
B
The following cases are referred to in the judgment:
Bremer Handelsgesellschaft GmbH v Vanden-Avenne Izegem PV BA [1977]
2 Lloyds Rep 329, CA; [1978] 2 Lloyds Rep 109, HL(E)
Bremer Handelsgesellschaft GmbH v Westzucker GmbH [1981] 2 Lloyds Rep 130,
CA
Brightman & Co v Bunge y Born Limitada Sociedad [1924] 2 KB 619, CA
Bunge SA v Nidera BV (formerly Nidera Handelscompagnie BV) [2015] UKSC 43; C
[2015] Bus LR 987; [2015] 3 All ER 1082; [2015] 2 All ER (Comm) 789; [2015]
2 Lloyds Rep 469, SC(E)
CTI Group Inc v Transclear SA (The Mary Nour) [2008] EWCA Civ 856; [2008]
Bus LR 1729; [2009] 2 All ER (Comm) 25; [2008] 2 Lloyds Rep 526, CA
Continental Grain v STM Grain [1979] 2 Lloyds Rep 460
Cowden (Joseph) & Co v Corn Products Ltd (1919) 1 Ll L Rep 424; (1919) 1 Ll L Rep
533; (1920) 2 Ll L Rep 344, CA D
European Grain & Shipping v JH Rayner [1970] 2 Lloyds Rep 239
Flame SA v Glory Wealth Shipping PTE Ltd [2013] EWHC 3153 (Comm); [2014]
QB 1080; [2014] 2 WLR 1405; [2014] 1 All ER (Comm) 1043; [2013] 2 Lloyds
Rep 653
Fy›es Group Ltd v Reefer Express Lines Ltd (The Kriti Rex) [1996] 2 Lloyds Rep
171
Great Elephant Corpn v Tragura Beheer BV (The Crudesky) [2013] EWCA Civ 905; E
[2013] 2 All ER (Comm) 992; [2014] 1 Lloyds Rep 1, CA
Matheos (Owners of Steam Ship) v Louis Dreyfus & Co [1925] AC 654, HL(E)
New Zealand Shipping Co Ltd v Socit des Ateliers et Chantiers de France [1919]
AC 1, HL(E)
Seabridge Shipping Ltd v Antco Shipping Ltd, The Furness Bridge [1977] 2 Lloyds
Rep 367
Seadrill Ghana Operations Ltd v Tullow Ghana Ltd [2018] EWHC 1640; 179 Con F
LR 51, CA
Tandrin Aviation Holdings v Aero Toy Store [2010] EWHC 40 (Comm); [2010]
2 Lloyds Rep 668
Triton Navigation Ltd v Vitol SA (The Nikmary) [2003] EWCA Civ 1715; [2004]
1 All ER (Comm) 698; [2004] 1 Lloyds Rep 55, CA
Warinco v Mauthner [1978] 1 Lloyds Rep 151, CA
G
The following additional cases were cited in argument or referred to in the skeleton
arguments:
ENE Kos 1 Ltd v Petroleo Brasileiro SA (No 2) (The Kos) [2012] UKSC 17; [2012]
2 AC 164; [2012] 2 WLR 976; [2012] 4 All ER 1; [2013] 1 All ER (Comm) 32;
[2012] 2 Lloyds Rep 292, SC(E)
Geys v Socit Gnrale, London Branch [2012] UKSC 63; [2013] 1 AC 523; [2013] H
2 WLR 50; [2013] ICR 117; [2013] 1 All ER 1061, SC(E)
Hoecheong Products Co Ltd v Cargill Hong Kong Ltd [1995] 1 WLR 404; [1995]
1 Lloyds Rep 584, PC
Larrinaga and Co Ltd v Societe Franco-Americaine des Phosphates de Medulla
(1923) 14 Ll L Rep 457, HL(E)

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Teare J

A NYK Bulkship (Atlantic) NV v Cargill International SA (The Global Santosh) [2016]

UKSC 20; [2016] 1 WLR 1853; [2016] 4 All ER 298; [2016] 2 All ER (Comm)
587; [2016] 1 Lloyds Rep 629, SC(E)
Persimmon Homes Limited v Ove Arup & Partners Ltd [2017] EWCA Civ 373;
172 Con LR 1, CA
Thames Valley Power v Total Gas & Power [2005] EWHC 2208 (Comm); [2006]
1 Lloyds Rep 441
B Transocean Drilling UK Ltd v Providence Resources plc [2016] EWCA Civ 372;
[2016] 2 All ER (Comm) 606; [2016] 2 Lloyds Rep 51, CA
Van Der Zijden Wildhandel NV v Tucker & Cross Ltd [1975] 2 Lloyds Rep 240
Villeneuve v Gaillard [2011] UKPC 1, PC

CLAIM
By a claim form the claimant shipowner, Classic Maritime Inc, claimed
C damages against the rst defendant charterer, Limbungan Makmur Sdn
Bhd, and the second defendant, Lion Diversied Holdings Bhd, in respect of
seven unperformed shipments, which formed part of a much larger contract
of a›reightment. Under that contract, the charterer, Limbungan Makmur
Sdn Bhd, whose performance was guaranteed by the second defendant,
agreed to ship, and the shipowner agreed to provide tonnage to carry, iron
ore pellets from Tubarao or Ponta Ubu in Brazil to Port Kelang or Labuan in
D Malaysia. The charterer relied on a dam burst as a force majeure excusing it
from liability for failing to provide cargoes for ve of the unperformed
shipments.
The facts are stated in the judgment, post, paras 1—16, 23—47.

Richard Southern QC and Andrew Pearson (instructed by Winter Scott

E
llp) for the shipowner.
Simon Rainey QC and Andrew Leung (instructed by Hill Dickinson llp)
for the charterer.
The court took time for consideration.

13 September 2018. TEARE J handed down the following judgment.

F
1 On 5 November 2015 the Fundao dam, in the industrial complex of
Germano in Brazil where iron ore is mined, burst. According to one iron ore
expert who knows this area well the slurry went right down to the ocean,
villages were swamped and people lost their lives. The bursting of the dam
also stopped production at the iron ore mine and it is that event which has
fuelled this litigation between a shipowner and a charterer.
G 2 The shipowner, Classic Maritime Inc, a Marshall Islands company
working out of o–ces in Monaco, and the claimant in this action, entered
into a long-term contract of a›reightment (the COA) for the carriage of
iron ore pellets from Brazil to Malaysia. A Malaysian company, Limbungan
Makmur Sdn Bhd (Limbungan), was the charterer under the COA and is
the defendant in this action. Limbungan has relied upon the dam burst as a
force majeure excusing it from liability for failing to provide cargoes of iron
H
ore pellets for shipment from Brazil to Malaysia. The shipowner does not
accept that the charterer is entitled to rely upon the force majeure clause in
the COA and has claimed damages for breach of the COA.
3 In this action damages are claimed in respect of seven shipments.
Judgment has already been given in respect of two shipments which should

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have taken place between July and October 2015 (prior to the dam burst). A
This judgment therefore concerns the claim in respect of ve shipments
which should have taken place between November 2015 and June 2016
(after the dam burst). The sum claimed is about US$20m in respect of three
scheduled shipments which should have been performed at a freight rate
of US$45.50 per mt. That freight rate is to be compared with the market
freight rate in March to June 2016 which was less than US$7 per mt. The
B
other two shipments, known as index shipments (because they were to be
performed at the market rate) give rise to modest claims of just over
US$400,000. (The agreement for scheduled and index shipments arose
out of earlier litigation in this court between the shipowner and the charterer
in 2009 following the fall in freight rates driven by the collapse in the
demand for raw materials. I am told that there is a separate action in respect
of 14 further shipments which should have been performed before C
December 2017).

The charterer and its related companies

4 Limbungan, the charterer, is a wholly owned subsidiary of Lion DRI
Sdn Bhd (Lion DRI) which is, in turn, a wholly owned subsidiary of
Lion Diversied Holdings Bhd (Lion Diversied). Lion Diversied is the
D
guarantor of the charterer and is sued as second defendant. If the charterer is
liable so is Lion Diversied. There was evidence that Limbungan was a special
purpose vehicle established in order to enter into and perform the COA.
5 Lion DRI is the owner and operator of a hot briquetted iron plant in
Port Kelang in Malaysia. Its entire production was sold to a company called
Megasteel.
6 Antara Steel Mills Sdn Bhd (Antara) is the owner and operator of E
another hot briquetted iron plant in Labuan in Malaysia. It sold its
production on the open market.
7 Antara is part of the Lion Group but is not a wholly owned
subsidiary of Lion Diversied. It is ultimately owned by Lion Industries
Corporation Bhd (Lion Industries) which I understand to have some
connection with Lion Diversied. The precise connection was not in evidence
but I understood it to be in the form of some common shareholders. There F
was evidence that Lion Industries was a substantial shareholder of Lion
Diversied. A footnote to the statement of a witness, Mr Lu, who made it
clear in his oral evidence that he was unfamiliar with the detail of corporate
matters, stated that Lion Diversied and Lion Industries are both publicly
listed and that any dealings between them must be at arms length.
G
The mining companies in Brazil
8 Iron ore pellets from the Brazilian mining company, Samarco
Mineracao SA, were shipped through Ponta Ubu in Brazil and iron pellets
from another Brazilian mining company, Vale SA, were shipped through
Tubarao, also in Brazil.
9 Lion DRI had a long-term sales and purchase contract with Samarco
H
dated 11 August 2006 for the sale and purchase of 1.2 million mt of DR-grade
pellets per year between 2008 and 2018. Antara (by way of a novation) had a
long term sales and purchase contract with Samarco dated 23 November
2004 for the sale and purchase of 640,000 mt of DR-grade pellets in 2005 and
800,000 mt of DR-grade pellets per year thereafter until, by an addendum,

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A 2015. That contract expired on 31 March 2015. A replacement contract had

almost been agreed when the dam burst in November 2015. DR-grade pellets
are direct reduction pellets. They are to be contrasted with BF pellets, blast
furnace pellets. Both forms of pellets were contractual cargoes under the
COA.
10 Lion DRI also had a long-term supply contract with Vale dated
1 November 2006 which was scheduled to last, by an addendum, until 2018.
B That contract was idle, in the sense of not being used, from 2011. Antara
(by way of novation) had a long term supply contract with Vale dated
1 April 2004 which was also scheduled to last, by an addendum, until 2018.
That also appears to have been idle.

Previous shipments
C 11 The COA dated 29 June 2009 provided for 51 shipments. Between
July 2009 and July 2015 Limbungan, the charterer, made cargoes available
for 38 shipments. All but eight shipments were loaded at Ponta Ubu, the
others being loaded at Tubarao, the last shipment from Tubarao being in
July 2011.
12 From August 2011 Samarco was the sole supplier of iron ore pellets
shipped under the COA. Some shipments involved pellets bought by both
D
Antara and Lion DRI. Thus some 16 shipments were discharged at both
Port Kelang and Labuan. Two shipments involved pellets bought by Antara
and were discharged at Labuan. Three shipments involved pellets bought by
Lion DRI and were discharged at Port Kelang. From 2011 all shipments
were of Samarco pellets ex Ponta Ubu.

E Antaras COA
13 Antara also had a COA with PCL (Shipping) dated 31 January 2008
with the same loading and discharging ports as under the COA with Classic
but with a di›erent, and lower, freight rate.

The present claim

F 14 The claim in the present action arises under addendum No 1 dated
30 June 2014 to the COA with Classic dated 29 June 2009. Limbungan, the
charterer, had undertaken to ship further cargoes of iron ore pellets on
tonnage provided by Classic, the shipowner, from Tubarao or Ponta Ubu in
Brazil to Port Kelang or Labuan in Malaysia.
15 Clause 32 of the COA with Classic provided:

G Exceptions
Neither the vessel, her master or owners, nor the charterers, shippers
or receivers shall be responsible for loss of or damage to, or failure to
supply, load, discharge or deliver the cargo resulting from: act of God
b . . . oods . . . accidents at the mine or production facility . . . or any
other causes beyond the owners charterers shippers or receivers
control; always provided that such events directly a›ect the performance
H of either party under this charterparty . . .
16 This clause was described during the hearing as a force majeure
clause though that phrase is not used in it. It is in fact described as an
exceptions clause. There is no dispute that the dam burst was an accident
at the mine. The mine was operated by Samarco. When the dam burst

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Samarco suspended its operations and subsequently ceased to be an A

available source of cargo.
17 Operations at Vale were una›ected by the collapse of the dam. But it
is the case of Limbungan, the charterer, that Vale was unable or unwilling to
supply iron ore pellets to the Lion Group and so, as a result of the dam burst,
the charterer found itself unable to supply cargoes for shipment under the
COA.
B
18 By contrast, it is the case of Classic, the shipowner, that the collapse
of the dam had no causative e›ect on the charterer because the ve shipments
would not have been performed even if there had been no dam burst.
19 Notwithstanding that both counsel described the case as
straightforward the true construction of clause 32 gave rise to considerable
legal argument. But it is rst necessary to recount some of the facts relevant
to this dispute. C

The position immediately before the collapse of the dam

20 In the light of the respective cases it is necessary to review the
positions of the charterer, Lion DRI and Antara before the collapse of the
dam on 5 November 2015.
21 The role of Limbungan, the charterer, within the Lion Group (a D
phrase used to describe both the corporate groups to which I have referred),
was to load cargoes at Punta Ubu and Tubarao for Lion DRI and Antara.
Mr Dominic Lu was the senior commercial manager of Antara and was
responsible for purchasing and arranging shipments of iron ore pellets for
both Antara and Lion DRI.
22 Mr Lu gave oral evidence. He was a good witness in that when he
knew the answer to a question he answered it clearly and without hesitation. E
When he did not know he said so. When he had di–culty in remembering he
said so. When he pro›ered an opinion as to what was likely to have happened
he was anxious to emphasise that it was only an opinion and that he may be
wrong. His demeanour, listening carefully and thinking about the questions
put to him, suggested to me that he was an honest witness doing his best to
assist the court. However, he was not a decision-maker at a high level and so
F
there were some limitations to the value of his evidence. Also, as is the case
with many witness statements drafted by lawyers for use in litigation
there were some passages in Mr Lus statement which contemporaneous
documents indicated were not quite right. Although he conrmed that his
statement was true in his examination-in-chief he accepted, when cross-
examined, that there were errors in it. I nevertheless thought that he was an
honest witness when giving oral evidence. It does not follow that his G
recollection was always reliable or that his knowledge of particular matters
was complete. Further, part of his evidence concerned what would have
happened had there been no bursting of the dam. When witnesses give
evidence about hypothetical circumstances there is always a risk that their
evidence is tainted by honest but wishful or optimistic thinking. It will be
necessary to bear that in mind when considering Mr Lus evidence in this
H
regard.
23 Lion DRI had no need of iron ore pellets from the latter half of 2015.
This appears to have been the result of a lack of demand from Megasteel
who ceased production as a result of the dumping of cheap steel products by
China. Lion Diversieds annual report for 2016 referred to Lion DRIs

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A major customer . . . su›ering losses for the past several years due to
excessive dumping of steel products by foreign steel mills which has resulted
in operating intermittently depending on market conditions. Mr Lu said
that that was a reference to imports from China. Although he said in his
statement that the shutting down of Lion DRIs plant was caused both by the
shutting down of Megasteels plant and by the dam burst it is clear that the
B
dam burst was not causative of Megasteels and hence of Lion DRIs
di–culties. Mr Lu had no di–culty in accepting that nobody asked him in
2015 to get pellets for Lion DRI. Records describe Lion DRIs plant as
having been shut down from time to time in JulySeptember 2015, for
almost the whole of October 2015, for the whole of November 2015, from
time to time in December 2015 and January 2016 and for the whole of
February 2016 and thereafter. It appears to be common ground that the
C Lion DRI plant was permanently shut down in February 2016.
24 Antaras plant was also shut down for part of 2015. Records
indicate that in August and September it was shut down for maintenance
and in October it was shut down because of unfavourable market for HBI
(the briquettes produced from the iron ore pellets). The plant commenced
operation again on 7 November 2015. Mr Lu did not know but his opinion
D was that that had nothing to do with the dam burst on 5 November 2015.
25 The lack of demand by Lion DRI and Antara for iron ore pellets in
mid-2015 is also apparent from the statement of Jacob Fentz, the president
of Classic Maritime. He said that during 2015 the charterer was seeking
deferment or rescheduling of shipments. This was not only because of the
reduced demand from Lion DRI but also because of shut downs at Antaras
plant. The charterer sought reductions in the freight rate and in the amount
E of cargo to be loaded. The charterer was unable to give a denite shipping
schedule. Reference was made to the poor steel market.
26 That was the context in which the two shipments between July and
October 2015 were missed and in respect of which the shipowner has
obtained judgment against the charterer. Mr Lu said that Antara had no
requirement for a cargo at that time, therefore we defaulted. The decision
F to default was not his own but also that of Anthony Pang to whom he
reported and perhaps others to whom Mr Pang reported. He described it as
a collective decision.

Mr Lus actions after the dam collapse

27 Notwithstanding the lack of demand from Antara leading up to
G November 2015, by late 2015 Antaras demand for iron ore pellets had
recovered. Mr Lu said that Antara continued to require substantial volumes
of iron ore pellets. On 5 November 2015, just hours before the dam burst,
Mr Lu had proposed the purchase of iron ore pellets from Vales facility in
Oman. But, as seems likely, Bahrain Steel was cheaper, at least initially.
Antara purchased some 851,917 mt of iron ore pellets between December
2015 and October 2016 of which 786,425 mt were consumed by Antara.
H
Five cargoes were obtained from Bahrain Steel and six from Vales Oman
plant. Mr Lu described the Lion Group as needing up to 100,000 mt of iron
ore pellets per month. Mr Lu accepted that these were spot contracts. The
shipping contracts, which were made by Antara, were not negotiated by
Mr Lu but by Patrick Yee who worked under him.

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28 On 6 November 2015 Samarco suspended all deliveries of iron ore A

and gave notice of a force majeure on account of the dam burst. In the
evening Mr Lu spoke to Samarco by telephone. He was told that it was very
unlikely that he would get any supplies from Samarco for quite some time. It
was clear to Mr Lu at that stage that iron ore pellet cargo would be hard to
come by because the closure of Samarco would take away a very large
proportion of the worldwide sea borne trade. This view is echoed by
B
Mr Maith, the charterers expert, who said more than once that the e›ect of
the dam burst was to reduce global pellet supply by over 20%, some 25
million mt For Mr Lu the most pressing question was to know when
Samarco would resume operations. He did not receive any clear answer to
that question. It is likely that he spoke to Samarco several times. An e-mail
from Mr Lo of Samarco dated 11 November 2015 refers to a telephone
conversation and attaches Samarcos notice of a force majeure. C
29 At the same time Mr Lu was seeking iron ore pellets elsewhere on
behalf of Antara. By 12 November 2015 he had entered into a contract with
Bahrain Steel from whom both Lion DRI and Antara had bought pellets
before.
30 Mr Lu gave oral evidence that after the dam burst he also had a
number of calls with Vale. In his witness statement dated 27 January 2017
D
Mr Lu said as follows:
At the time the Samarco dam burst, none of the Lion Group companies
had an extant long term contract with Vale for the sale and purchase of
iron ore pellets ex-Tubarao. I sent Vale International numerous enquiries
and spoke to them over the phone several times to nd out whether they
had any iron ore pellets available ex-Tubarao which would enable
E
Limbungan to perform the COA. Those inquiries came to naught. I was
informed on four occasions that Vale did not have any DR-grade pellets
ex-Tubarao and on 4 February 2016 it was similarly conrmed that Vale
did not have any BF-grade pellets ex-Tubarao.
31 In his witness statement he then referred to e-mails on 23 November
2015, 4 February 2016, 26 May 2016 and 12 June 2016 when, he says, he
F
was informed by Vale that they were unable to supply DR pellets from
Tubarao. It was suggested to me by counsel that those were the four
occasions to which Mr Lu referred in his witness statement. That seems
likely.
32 The rst e-mail to note is one dated 17 November 2015 addressed by
Mr Lu to Mr Reinisch of Vale in which he said: As discussed the other day,
please let us have your both FOB and CFR price idea. Alternatively, is there G
any DR-grade cargo available ex-Tubarao?
33 That shows that there was a telephone call, possibly the week before,
between Mr Lu and Vale. Mr Lu said when cross-examined that there was at
least one call. If you ask me whether its two or three or four or ve, Ive no
answer, honestly no answer, but its at least once.
34 The reference to FOB and CFR prices is a reference to an o›er made
H
by Mr Lu on 5 November 2015 (just before the dam burst) to accept iron ore
pellets from Vales facility in Oman.
35 It was suggested to Mr Lu that the reference in the e-mail to a request
for DR pellets from Tubarao was the rst time that that request had been
made. Certainly the e-mail is open to that interpretation but Mr Lu said that

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A the e-mail could not have been the rst time. There must be some verbal
enquiry before that. It was suggested to Mr Lu that there was no such
verbal inquiry (a) because of the way the e-mail dated 17 November is
phrased and (b) because Mr Lu had obtained two cargoes for November and
December from Bahrain Steel. The suggestion has some force and Mr Lus
witness statement does not say in terms that there was a request before
17 November 2015. But in the predicament facing Mr Lu it seems to me in
B
accordance with the probabilities that he would seek to speak to Vale about
shipments from Tubarao before 17 November, notwithstanding that he had
xed shipments for November and December from Bahrain Steel.
I therefore accept that it is more likely than not that an inquiry had been
made of Vale by telephone before 17 November as to the possibility of
supplies of pellets from Tubarao.
C 36 On 23 November 2015 Mr Reinisch replied to Mr Lu by e-mail. The
e-mail commences with the phrase as per our conversations which suggests,
though not conclusively, there had been more than one conversation by
telephone. He then referred to the much valued relationship between our
companies and our strong interest to re-start a long business and mutual
partnership. He then made two o›ers to supply pellets from Oman by a
Panamax vessel, one CFR and the other FOB. The nal part of the e-mail
D
concerned Capesize vessels and implicitly referred to potential shipments
from Tubarao. However, it was prefaced as follows: kindly note the below
option number 3 is just a price indication, since we do not have RM20 pellets
availability especially after the accident and railroad stoppage in Brazil.
37 The price indication which followed stated, under the heading
Volume, No availability conrmed yet.
E 38 This e-mail was the subject of debate. It was suggested to Mr Lu that
Mr Reinisch was leaving the door open for Mr Lu to follow up if he wanted
to press for a cargo from Tubarao. Mr Lu did not accept that. He read the
e-mail as saying there was no cargo from Tubarao and that he was given the
price indication so that he could compare Oman with Tubarao. He placed
more emphasis on the statement that we do not have RM20 pellets
availability than on the phrase no availability conrmed yet as to which
F
he said I dont know what he means to be honest. Counsel suggested that
that phrase was a strong hint that Vale was looking for a long-term
contract. Mr Lu said he did not read it in that way. He added: Because all
along I chased them several times after the accident. No, no cargo for you in
Tubarao. Take it from Oman.
39 The objective meaning of this e-mail is a matter for the court to
G assess. However, it seemed to me that I should be slow to reject Mr Lus
understanding of it unless it was plainly wrong. I do not consider that his
understanding was plainly wrong. On the contrary I agree with him that the
statement we do not have RM20 pellets availability is clear and indicates
that Vale had no pellets to supply to the charterer. It would be unrealistically
hopeful and optimistic to read the phrase no availability conrmed yet as
saying that Vale might in fact be able to supply pellets to the charterer if the
H
charterer made an appropriate long-term o›er. This matter was also
debated with the charterers expert, Mr Maith. I am not sure that the
intended meaning of the e-mail was strictly a matter for expert evidence but
he was asked about it and his answer conrmed my understanding of the
e-mail. His understanding of the letter was that Vale were saying quite

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categorically that they havent got pellets of that grade. The most he was A
prepared to accept was that the phrase no availability conrmed yet
indicated that Vale had not yet decided how they were to handle the
catastrophe to the benet of Vale. It was suggested to him that Vale were
leaving the door open to see what opportunities they could generate.
Mr Maith replied that people in the steel trade are pretty blunt people and
that if Vale wished to supply to a particular customer they would make that
B
intention much clearer. He added: they wouldnt sort of put an open-
ended statement like this. If they wanted to supply to the Lion Group they
would have said under what terms and price and conditions they were
prepared to supply.
40 In 1 December 2015 Mr Lu, who had been engaged on out-station
work, apologised for his late reply and asked for the validity of the o›er to
be extended. He gave evidence that that was a reference to the o›er to C
supply cargo from Oman for shipment on a Panamax vessel. That appears
to me to be likely to be the case.
41 The next conversation between Mr Lu and Mr Reinisch appears to
have been on or shortly before 4 February 2016. On that date Mr Reinisch
e-mailed Mr Lu and said:
As explained on the phone, due to the accident of Samarco, several D
clients asked more cargo from our Tubarao port to full ll. In this way we
do not have any availability of DR-grade (also not BF-grade) from
Tubarao to either Labuan or Port Kelang.
He said there was still some cargo available from Oman. It was suggested to
Mr Lu that this e-mail had been obtained for the purpose of showing it to
Classic. Mr Lu denied that suggestion. I accept that denial. The e-mail does E
not appear to be anything other than an honest and true statement by
Mr Reinisch in response to request from Mr Lu that Vale was unable to o›er
any iron ore pellets to Mr Lu from Tubarao.
42 There appears to have been a further conversation late on
16 February 2016 though the e-mail referring to this conversation has been
so redacted that it is di–cult to be sure what it was about. It appears to have
F
concerned a comparison between prices ex-Oman and prices ex-Bahrain.
43 Between 7 and 18 April 2016 there were further exchanges
concerning the supply of pellets from Oman. An e-mail of 11 April 2016
appears to contain another price comparison for supply from Tubarao
subject to pellets availability.
44 On 4 May 2016 Mr Fentz of Classic approached Vale inquiring
about the availability of pellets from Tubarao. It is unlikely that Classic was G
interested in purchasing iron ore pellets. It is more likely that Mr Fentz
wished to obtain information from Vale which he intended to use in his
dispute with Limbungan. On 9 May 2016 Vale informed him that they were
unable to o›er any given tight availability and the need to supply material
to existing long term contracts. That was consistent with what Vale had
told Limbungan.
H
45 On 24 May 2016, after Mr Lu on behalf of Antara had purchased
two shipments of pellets from Vale ex-Oman, he asked about further
shipments and was told that Vale could not respond due to the pellet
overbooking we are facing and low/no stock in Sohar [Oman]. Mr Lu then
asked on 26 May 2016 whether there were any Capesize cargoes available

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A ex-Tubarao and was told there is not. It was suggested to Mr Lu that he

was not pressing this request because he knew what the answer was going to
be. Mr Lu replied that he still had to try his luck. He thought that there
might be some cancellations so that we can full COA. He accepted that
he had not proposed a long term contract from Tubarao but, he said, Vale
had no interest in such a contract because Vale wished to supply from Oman.
46 On 10 June 2016 Mr Lu made a further inquiry in relation to
B
quarters 3 and 4 and was told on 12 June 2016 that there was no availability
from Tubarao for quarters 3 and 4.
47 Although Mr Lus inquiries of Vale were criticised on the grounds
that he did not approach them promptly, that he never proposed a long-term
contract (which it was common ground was the only way in which a
company such as Vale would do business), that he only ever asked for DR
C pellets and did not ask about BF (blast furnace) pellets, that negotiations
were not opened at a higher level than Mr Lu, that he never sought to
explain Limbungans predicament under the COA, and that he never sought
to exploit the two long-term contracts which Antara and Lion DRI had with
Vale, the contemporaneous communications from Vale in the period from
23 November 2015 to 12 June 2016 are evidence that Vale were unable or
unwilling to supply iron ore pellets to Antara for shipment from Tubarao
D after the bursting of the mine. It was submitted that such evidence was not
reliable evidence of what Vale would have been willing to do had a concerted
e›ort been made by Mr Lu for a long-term contract with Vale. I will have to
return to this issue but Vales consistent expression of inability or
unwillingness to supply iron ore pellets from Tubarao to Mr Lu after the
dam burst appears to me to be cogent evidence that, whatever Mr Lu may
E have done di›erently, Vale would have remained unable to or unwilling to
supply Antara with iron ore pellets from Tubarao.

The issues in the case

48 There were three broad issues relating to liability which were debated
by counsel. The rst issue was described as the no relevant arrangements
F
issue. It was introduced by Richard Southern QC on behalf of the shipowner,
Classic, as a reason why Limbungans reliance on clause 32 must fail. It was,
I think, an issue of mixed law and fact. It was countered by Simon Rainey QC
on behalf of the charterer, Limbungan, by reliance on the alternative modes
of performance principle. I will explain this dispute further, below. The
second issue was the but for issue. Mr Southern said that to rely upon
clause 32 Limbungan had to show that but for the dam burst Limbungan
G would have supplied cargoes for the ve shipments in question and that it
could not. Mr Rainey did not accept that the but for test of causation had
any application but that if it applied Limbungan could prove that which it
was required to prove. This was, again, an issue of mixed law and fact. The
third issue was the Vale issue. This was a question of fact. It was common
ground that in order to rely upon clause 32 Limbungan had to show that it
could not have obtained cargoes from Vale. The issue of fact was whether
H
Limbungan could discharge that burden.
49 With regard to damages there was an issue as to whether the
shipowner was entitled to recover substantial damages and two issues of
detail concerning the assessment of substantial damages, if any were
recoverable.

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No relevant arrangements A

50 Mr Southern submitted that Limbungan, who undertook an
absolute and non-delegable obligation to provide cargo, made no
arrangements to do so. It had no arrangements with Samarco or with Vale.
All that could be said was that it hoped to perform its obligations by
receiving nominations from Lion DRI or Antara who had in the past
provided such nominations. When the time came for performance, between B
November 2015 and June 2016, there was only one supplier, Vale, and that
supplier was not willing to supply cargo to Limbungan. The bursting of the
dam was said to be not legally relevant, because, although it explains why
Limbungan could not obtain a cargo from Samarco, the reason Limbungan
could not perform its obligation was that the (now sole) supplier, Vale,
refused to supply to it. Such arrangements as Limbungan had did not enable
it to full its obligations under the COA to provide cargo. It was said to be C
irrelevant that Lion and Antara were prevented by the dam burst from
nominating cargoes under COA for carriage from Punta Ubu because
Limbungan had no relevant arrangements with them that could be a›ected
by that prevention.
51 Mr Rainey submitted that Limbungan had alternative modes of
performance available to it. It could ship either from Ponta Ubu or from D
Tubarao. Where its intention, arrangements and settled practice were to
perform its obligation by shipping out of Ponta Ubu, and where that
intention and practice were prevented by a force majeure, the dam burst,
Limbungan could rely upon the force majeure clause so long as, after the
dam burst, it had taken all reasonable steps to ship out of Tubarao instead of
Ponta Ubu. If it did so but failed to ship out of Tubarao then the force
majeure was correctly to be regarded as the cause of Limbungans failure to E
perform its obligation.
52 Both counsel relied upon a number of authorities to support their
case. I propose to address these authorities chronologically.
53 The rst is Joseph Cowden & Co v Corn Products Ltd (1919)
1 Ll L Rep 424, (1919) 1 Ll L Rep 533 and (1920) 2 Ll L Rep 344. This was a
case in which a buyer sued a seller for non-delivery of goods, pearl starch
F
from the USA, and the defence relied upon was force majeure, namely, a
prohibition on transport by rail within the USA of commercial freight, as
opposed to foodstu›s for Government: see p 346 of the latter report, per Lord
Sterndale MR. The contract had simply provided: Free from non-delivery
caused by force majeure as recognised in this country or in the United States.
The Court of Appeal held that the defence succeeded, allowing an appeal
from Bailhache J. Lord Sterndale MR described the issue as in substance one G
of fact (see p 344) although the case was something in the nature of a test case:
see p 534 of the earlier report and p 345 of the later report. The appeal was
allowed because the judge had considered that the issue with regard to the
railways was one of congestion. He did not appear to have considered the
question of prohibition; see pp 345—346 of the later report. The only passage
in the judgment of Lord Sterndale MR which can be said to concern a matter
H
of principle is where Lord Sterndale sets out a passage from the judgment of
Bailhache J. The judge had said that a defendant who wished to rely upon
force majeure had to show three matters, p 345: First of all, the defendants
must show that they had manufactured and had available for this contract
starch our in su–cient quantities to full this contract.

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A 54 Lord Sterndale MR thought that it was su–cient if the defendants

could show that they could have had it manufactured in time for shipment.
55 Bailhache J described the second and third matters in these terms,
p 345:
Secondly, they must show that they had made, or were prepared to
make, all necessary and proper arrangements with the Railway
B Companies for transporting this starch our from their manufactories or
wheat belt to the seaboard. Thirdly, they must show that they had
received in good time shipping space su–cient to cover the space that was
required to send these particular parcels of goods from the seaboard to
this country. If they can show all these things, and then if they can show
that they were prevented from sending these goods forward by some
action of the duly constituted Authorities in America, then they will show
C
a case of force majeure which will excuse them from the performance of
this contract.
56 Lord Sterndale MR did not dissent from this approach. I do not
consider that the passage does anything more than describe what the
defendant had to do in the particular case to establish that he had been
prevented by force majeure from performing his contract. The passage does
D
not require the defendant to have made all necessary arrangements for the
carriage of the starch by rail. It was su–cient that he was prepared to
make them.
57 The second case is Brightman & Co v Bunge y Born Limitada
Sociedad [1924] 2 KB 619. This was a demurrage case and concerned the
true construction of an exception from demurrage. In the course of his
E judgment Scrutton LJ referred to the absolute duty upon a charterer to
provide a cargo. An exception in relation to loading would not, in the
absence of clear words, extend to the duty to provide a cargo: see p 632. In
the present case it is accepted that the force majeure clause extended to the
obligation to provide a cargo because it expressly extended to a failure to
supply as well as to a failure to load cargo. Scrutton LJ also made clear, as
did Bankes and Atkin LJJ, that where a charterer is obliged to load a cargo of
F
wheat, maize or rye and he is prevented from loading one such cargo, he is
obliged to load a full cargo by loading one of the other products though he is
allowed a reasonable time to e›ect the change: see pp 630—631, 628 and
637.
58 In the light of this decision it was accepted by Mr Southern that
where a charterer is obliged to ship from one or two or more ports it is
G su–cient that he has made arrangements to ship from one of those ports. It
is not incumbent upon him to make alternative arrangements in advance on
the mere o›-chance that the rst chosen source may fail. If the arrangements
which the charterers has made break down as a result of an excepted peril,
the charterer will be relieved of liability provided that he acts with
reasonable promptness in obtaining cargo by alternative means.
59 In the light of this acceptance it would appear that the relevance of
H
there being arrangements in place is that if they are not in place the
charterer will or may have di–culty in establishing that the force majeure
event has prevented him from performing his obligation. It goes to the
question of causation. This is indeed accepted by Mr Southern in the very
next paragraph of his opening submission. I have therefore had di–culty in

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discerning the di›erence between Mr Southerns submissions on the A

question of alternative arrangements and the but for question.
60 The Brightman & Co case [1924] 2 KB 619 and others cases were
considered by Mocatta J in European Grain & Shipping v JH Rayner [1970]
2 Lloyds Rep 239, 244:
The general principle exemplied in these cases is not altogether easy
to dene in that if a party has a period of time within which at his option B
to perform, the principle does not seem to require that in order to escape
liability for non-performance he must show prevention by means of the
operation of the exception throughout the whole period. If he arranged
to perform at the end of his optional period or could have performed
and the inhibiting occurs, he can it would seem escape liability for
non-performance on showing that nothing he could do, or perhaps C
reasonably do, after the occurrence of the inhibiting event would have
enabled him to perform within the contract period. This shows that even
when the principle applies regard is permissible to the intentions or
arrangements made by the party seeking relief.
61 The general principle was further stated by Kerr J in Seabridge
Shipping Ltd v Antco Shipping Ltd, The Furness Bridge [1977] 2 Lloyds D
Rep 367, 375:
The general principle is clear and was accepted by both parties. If a
contract provides for alternative methods of performance, and one such
method comes to be prevented by an excepted peril, then the party
a›ected must generally perform or seek to perform by one of the
alternative methods. E
62 Later Kerr J said, at p 377:
If it is established that due to a restraint of princes no cargo could be
shipped from Libya, the country from which both parties expected the
cargo to be shipped, and that no alternative cargo could be procured from
any other contractual source, has there been a failure in performing . . .
arising or resulting from . . . restraint of princes? There appears to be no F
authority in point. I think that a reasonable and realistic businessman
would answer this question in the a–rmative. He would say that in these
circumstances the e›ective cause of the non-performance was the
restraint of princes. But for this the cargo would have been shipped, but
due to it was not.
63 Not long after the Seabridge Shipping Ltd case [1977] 2 Lloyds Rep G
367 the case of Warinco v Mauthner [1978] 1 Lloyds Rep 151 was decided
in the Court of Appeal. Megaw LJ said, at p 153:
It is clear law, based on many decided cases, that, in general, where
the seller has undertaken to supply goods shipped from one or other of a
number of ports, he cannot rely on an event included in an exceptions
H
clause, if that event happens but a›ects only one of the ports, unless, at
any rate, he can show, the burden being on him, that, despite reasonable
e›orts . . . he could not have shipped goods complying with the contract
description, and within the permitted time for shipment, from any one of
the other ports.

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A 64 These statements of the general principle which applies where there

are alternative modes of performance seem clear. Nevertheless Mr Southern
drew my attention to Fy›es Group Ltd v Reefer Express Lines Ltd (The Kriti
Rex) [1996] 2 Lloyds Rep 171, 196 where Moore-Bick J observed that an
event beyond the control of the parties cannot extend to aspects of
performance of the contract for which a party is directly or indirectly
responsible, such as an FOB buyers obligation to make arrangements
B
necessary to ensure that a ship arrived at the right time and place. I do not
understand that observation to detract in any way from the general principle
that applies where there are alternative modes of performance. Mr Southern
also referred me to Triton Navigation Ltd v Vitol SA (The Nikmary) [2004]
1 All ER (Comm) 698 as authority for the proposition that a voyage
charterer owes an absolute and non-delegable duty to provide a cargo for
C loading and that exceptions for breach of that duty must be clearly and
distinctly expressed. Again, that proposition does not detract from the
alternative modes of performance principle relied upon by Mr Rainey.
Mr Southern also referred me to CTI Group Inc v Transclear SA (The Mary
Nour) [2008] Bus LR 1729 which involved the question whether a seller of
goods could rely upon the refusal of his supplier to supply the goods as a
frustrating event. Moore-Bick LJ held, at para 23, that the seller could not:
D
The reason for that is not far to seek: it is implicit in a contract of this
kind that the seller will either supply the goods himself or (more likely)
will make arrangements, directly or indirectly, for the goods to be
supplied by others. In other words, he undertakes a personal obligation
to procure the delivery of contractual goods and thereby takes the risk of
his suppliers failure to perform. That obligation will be discharged by
E
frustration if a supervening event not contemplated by the contract
renders that performance impossible or fundamentally di›erent from
what was originally envisaged, but most events which result in the failure
of a supplier to provide the goods will not fall into that category. A few,
however, such as a prohibition of export rendering the shipment of the
goods unlawful, usually, will.
F
65 Mr Southern said that a charterers obligation to provide a cargo
was in the same category of duty. It is; but nothing in the CTI Group Inc
case [2008] Bus LR 1729 challenges the settled general principle concerning
alternative modes of performance. However, the Fy›es Group Ltd case and
the CTI Group Inc case support the proposition that if a charterer, who has
a non-delegable duty to provide a cargo, is unable to do so because his
G chosen supplier fails to supply a cargo, that event will rarely amount to a
frustrating event or to an event beyond the control of the charterer.
66 Having considered the authorities and counsels submissions I have
reached four conclusions. First, I accept Mr Raineys submission that the
general principle regarding alternative modes of performance is capable of
applying in this case to Limbungans entitlement to ship either from Ponta
Ubu or from Tubarao. If Limbungan is to be regarded as having made
H
arrangements to ship from Ponta Ubu then, following the dam burst, it
was obliged to make all reasonable e›orts to ship from Tubarao. If, despite
its e›orts to ship from Tubarao, that was not possible then the dam burst can
be regarded as the cause of Limbungans failure to supply cargoes for the ve
shipments in question. Second, my understanding is that Mr Southern does

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not challenge the alternative modes of performance principle but submits A

that it has no application to the present case because Limbungan in truth had
made no arrangements to perform by either of the routes open to it. Lion
DRI and Antara had made arrangements but Limbungan cannot properly be
regarded as having made any arrangements. Whether Limbungan is to be
regarded as having made arrangements is, it appears, the important point.
For Mr Southern accepted in his oral closing submissions that if Limbungan
B
is to be treated as having a relevant relationship because of history, then
that would answer the point. Third, my understanding of Mr Southerns
argument, in the event that, as he submitted, Limbungan had made no
relevant arrangements, is that, when Vale chose not to supply iron ore pellets
to Limbungan after the dam burst (for its own reasons, not because of the
dam burst), Limbungan was in no better position that any charterer who had
hoped to provide a cargo from a particular source but in the event that C
particular source let him down. The charterer has a non-delegable duty to
provide a cargo and its suppliers failure or refusal to do so provides it with
no defence. Fourth, the question of Limbungans arrangements is also very
much part of the causation point which is encompassed within the but for
point. If, as a matter of fact, Limbungan had made no arrangements to
provide cargo at Punta Ubu or Tubarao that circumstance may make it more
di–cult for Limbungan to establish that its failure to supply cargoes for the D
disputed ve voyages resulted from the dam burst. Thus the no relevant
arrangements point, the alternative modes of performance point and
the but for point are bound up together in a factual dispute. Before
considering that factual question it is necessary to address the second issue of
law, namely, the relevance of the but for test.
E
The but for test
67 Mr Southern submitted that the e›ect of clause 32 was to impose a
but for test of causation. Since the clause requires Limbungans failure to
supply a cargo to result from the force majeure, in this case the dam burst,
and also for that event to directly a›ect the performance of Limbungans
obligation he submitted that Limbungan was required to prove that, but for F
the dam burst, it could and would have performed the COA in accordance
with its terms.
68 Mr Rainey did not accept this submission. He submitted that whilst
clause 32 imposed a causation requirement in the sense that it had to be
shown that the dam burst rendered performance of Limbungans obligations
impossible it was not necessary for Limbungan to show that but for the dam
burst it would have performed its obligations. G
69 Once again, reference was made to several authorities. The rst was,
again, Cowden v Corn Products 1 Ll L Rep 424 and 1 Ll L Rep 533 and
2 Ll L Rep 344. The but for point was not addressed in terms. However,
Lord Sternale MR, having found that there was a prohibition on commercial
freight tra–c on the railways, said (at p 346 of the later report) that he had
not overlooked the point that the embargo occurred at a time when it would
H
not have been possible for the defendants, even if there had been no
embargo, to get their goods down in time, because they ought to have made
earlier application to the railway companies. He said that he was not
satised that that was so. If he had been satised it would appear that the
but for point would have been addressed. The most that can be said is that

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A the Lord Sternale MR did not say that the but for test was inapplicable. It
is also be observed that in argument he put the following to Mr Wright KC
who appeared for the claimants, 1 Ll L Rep 424, 426:
Does it, in fact, come to this, he must show he could have performed
his contract but for the interference of force majeure, and the question of
making arrangements only arises in this way, that if he had not made the
B arrangements, force majeure or no force majeure he could not have
performed his contract.
Mr Wright replied that he did not object to that at all: see p 426 of the earlier
report. One always has to be careful with questions asked by a judge during
argument because they do not necessarily represent the judges opinion. The
question may have only been put to test the argument. But I cannot avoid
C the impression that Lord Sterndale MR would not have seen anything amiss
with Mr Southerns submission.
70 In the Brightman & Co case [1924] 2 KB 619 the but for point was
again not addressed in terms. However, Scrutton LJ, when explaining the
alternative modes of performance principle said, at p 631: This must be on
the assumption that they had the rst kind of cargo ready for shipment but
for the excepted cause. Again, it would appear that Scrutton LJ would not
D
have been troubled by Mr Southerns submission.
71 All must depend upon the wording of the particular clause. In this
case clause 32 imports a causation requirement by the use of the words
resulting from and by the requirement that the force majeure must
directly a›ect the performance of Limbungans obligations.
72 In another case concerning force majeure, Seadrill Ghana
E Operations Ltd v Tullow Ghana Ltd (2018) 179 Con LR 51, para 69, I said
this: Questions of causation are sensitive to the legal context in which the
question arises; see ENE Kos v Petroleo Brasileiro [2012] 2 AC 164, para 12,
per Lord Sumption JSC, and, at para 76, per Lord Clarke of Stone-cum-
Ebony JSC. They are to be resolved by reference to common sense; see The
Eurus [1998] 1 Lloyds Rep 351, 361—362 per Staughton LJ and also ENE
Kos v Petroleo Brasileiro at para 74 where Lord Clarke JSC approved a
F
statement in an earlier case that causation was to be determined by a broad
common sense view of the whole position.
73 If one uses Kerr Js reasonable and realistic businessman (see the
Seabridge Shipping Ltd case [1977] 2 Lloyds Rep 367 above) I consider that
such a businessman would see the broad common sense of saying that if, but
for the dam burst, Limbungan would not have performed its obligations, its
G failure to perform cannot fairly be said to have resulted from the dam
burst and the dam burst cannot fairly be said to have directly a›ected the
performance of Limbungans obligations.
74 However, Mr Rainey submitted that this approach to the causation
requirement in clause 32 ignores a line of authority, long settled, that
establishes that it is not necessary for the party seeking to rely on force
majeure to show that it would have performed its obligations but for the
H
force majeure. It is therefore necessary to consider that line of authority.
75 The starting point is the decision of the House of Lords in Bremer
Handelsgesellschaft GmbH v Vanden-Avenne Izegem PV BA [1978]
2 Lloyds Rep 109. That case concerned Grain and Feed Trade Association
(GAFTA) contract 100 and, in particular, clause 21 which stated, in case

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of prohibition of export . . . preventing fullment, this contract or any A

unfullled portion thereof so a›ected shall be cancelled. The clause was
described by Lord Wilberforce as a contractual frustration clause; see p 112.
One of the issues which the House of Lords had to decide was a question of
causation which Lord Wilberforce described and answered at p 114 in these
terms:
The clause applies in case of prohibition of export . . . preventing B
fullment so that a question may arise of causation. Was it the
prohibition that prevented fullment or something else? This question
may be phrased more specically by asking whether the seller must prove
that he had the goods ready to ship within the contract period, and a ship
to carry them. The answer to it, in my clear opinion, is in the negative.
The occurrence of a frustrating eventin this case the prohibition of C
exportimmediately and automatically cancels the contract, or the
portion of it a›ected by the prohibition.
76 This decision was followed by Robert Go› J in Continental Grain v
STM Grain [1979] 2 Lloyds Rep 460. The case concerned the Federation of
Oils, Seeds and Fats Associations (FOSFA) 24 form of contract and in
particular clause 23 which could not be distinguished from clause 21 of D
GAFTA 100. It is clear from the judges analysis at pp 470—471 of the
decision of the House of Lords in Bremer Handelsgesellschaft GmbH v
Vanden-Avenne Izegem PV BA [1978] 2 Lloyds Rep 109 that he considered
that the clause in that case and hence the clause in the case before him did
not require the but for test to be satised. Thus he concluded, at p 471:
The test to be applied is similar to that applied in cases of frustration, E
in which a party may rely upon a frustrating event as excusing further
performance of his obligations, even though he would in fact have been
unable to perform his obligations under the contract: see Avery v Bowden
(1855) 5 E&B 714.
77 GAFTA 100, clause 21, came before the courts again in Bremer
F
Handelsgesellschaft GmbH v Westzucker GmbH [1981] 2 Lloyds Rep 130.
Donaldson LJ took the opportunity to explain, at pp 133—136 that in this
rather esoteric area of the law it had once been thought that a seller
seeking to rely upon clause 21 had to show that but for the embargo he
could and possibly would have performed the contract. However, when
Bremer Handelsgesellschaft GmbH v Vanden-Avenne Izegem PV BA
reached the Court of Appeal, [1977] 2 Lloyds Rep 329, Megaw LJ totally G
rejected the but for argument. Donaldson LJ said that the but for
argument was also rejected by the House of Lords save for Viscount
Dilhorne. He concluded by saying, at p 135:
It might be thought, and I once did think, that the result of the House
of Lords decision was, in e›ect, to rewrite clause 21 so as to eliminate the
words preventing fullment and so a›ected. But this is not so. If H
shippers or other sellers wish to take the benet of the clause, they must
still prove that the embargo would have prevented fullment of the
contract on the assumption that they would otherwise have been in a
position to full it.

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A 78 There can be no doubt, therefore, that in a case of a contractual

frustration clause which is indistinguishable from GAFTA 100, clause 21,
the but for test does not have to be satised.
79 The question which arises for decision in this case is whether the
but for test has to be satised in a force majeure or exceptions clause
which does not cancel the contract for the future, like frustration, but
provides a defence to a claim in damages for breach of the contract.
B
Mr Southern submitted that the but for test must be satised in such a
case. Mr Rainey submitted that it did not.
80 Mr Raineys argument derives support from the circumstance that
the words to be construed in a contractual frustration case are in essence the
same as the words to be construed in an exceptions clause. Thus, in the
present case the court must construe the words resulting from and
C directly a›ect. If those words appeared in a contractual frustration the
court would give them the e›ect explained by Donaldson LJ in Bremer
Handelsgesellschaft GmbH v Westzucker GmbH [1981] 2 Lloyds Rep 130.
If those words appear in an exceptions clause, as they do in clause 32 in the
present case, Mr Rainey submitted that they should be given the same e›ect.
Thus Limbungan must show that the dam burst made performance of its
D obligations impossible so that its failure to perform resulted from or was
directly a›ected by the dam burst but need not show that but for the dam
burst it would have performed its obligations.
81 I nd myself unable to accept Mr Raineys argument. There appears
to me to be an important di›erence between a contractual frustration clause
and an exceptions clause. A contractual frustration clause, like the doctrine
of frustration, is concerned with the e›ect of an event upon a contract for the
E
future. It operates to bring the contract, or what remains of it, to an end so
that thereafter the parties have no obligations to perform. An exceptions
clause is concerned with whether or not a party is exempted from liability
for a breach of contract at a time when the contract remained in existence
and was the source of contractual obligations. It is understandable that a
contractual frustration clause should be construed as not requiring
F satisfaction of the but for test because that is not required in a case of
frustration. Thus in Bremer Handelsgesellschaft GmbH v Vanden-Avenne
Izegem PV BA [1978] 2 Lloyds Rep 109, 128, Lord Salmon said:
The clause is concerned with writing into the contract what is to
occur should it be frustrated at common law. No doubt the contract
supersedes the common law but it cannot, in my view, be construed as
G taking away from the sellers what would have been their protection at
common law unless it does so in plain terms.
82 The context of an exceptions clause is di›erent. It is not concerned
with writing into a contract what is to happen in the event of a frustrating
event. It is concerned with excusing a party from liability for a breach which
has occurred. In such a context it would be a surprise that a party could be
H excused from liability where, although an event within the clause had
occurred which made performance impossible, the party would not have
performed in any event for di›erent reasons. That is why, in the Brightman
& Co case [1924] 2 KB 619, a case concerned with an exception from
liability to pay demurrage, Scrutton LJ said at p 631: This must be on the

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assumption that they had the rst kind of cargo ready for shipment but for A
the excepted cause.
83 It is also why, in the Seabridge Shipping Ltd case [1977] 2 Lloyds
Rep 367, a case concerned with an exception from liability under a voyage
charter, Kerr J said at p 377: a reasonable and realistic businessman
would . . . say that in these circumstances the e›ective cause of the
non-performance was the restraint of princes. But for this the cargo would
B
have been shipped, but due to it was not.
84 There can be few judges with greater knowledge of exemption
clauses than Scrutton LJ and Kerr J.
85 Thus, in my judgment, the words used by the parties in clause 32 of
the COA must be construed not in the context of a contractual frustration
clause but in the context of an exceptions clause. In that context, to
paraphrase Kerr J, they require Limbungan to show that but for the dam C
burst the cargo would have been supplied but due to the dam burst it was
not.
86 Mr Rainey submitted that clause 32 of the COA was both a
contractual frustration clause and an exceptions clause. This was the second
of his seven points on this part of the case in his oral closing submissions. He
said that Mr Southern did not dispute that characterisation, relying upon
D
what Mr Southern said in his oral opening submissions. However, it is clear
from Mr Southerns oral closing submissions that he did dispute that
characterisation. I do not consider that clause 32 was a contractual
frustration clause. No part of it states that the contract, or that which
remains to be performed, is cancelled.
87 Mr Rainey submitted that no case supports my approach to the
construction of clause 32 but I disagree. The Brightman & Co case [1924] E
2 KB 619 and the Seabridge Shipping Ltd case [1977] 2 Lloyds Rep 367 do.
88 Mr Rainey referred to Treitel, Frustration and Force Majeure, 3rd ed
(2014), para 12-039 in support of his submission. But the distinguished
author refers only to the cases concerning contractual frustration clauses and
does not consider the di›erent context of exception clauses. Mr Rainey also
referred to Chitty on Contracts, 32nd ed (2015), vol 1, para 15-156 but
F
again reference is there made only to the cases concerning contractual
frustration clauses.
89 Mr Rainey also submitted that the compensatory principle underlying
the assessment of damages supported his submission. If Limbungan would
have performed but for the dam burst and did not perform because of the
dam burst Classic could not obtain any damages from Limbungan.
Mr Rainey said that it is therefore inexplicable to suggest, as Classic do, that G
substantial damages can be recovered by Classic in circumstances where
Limbungan would not otherwise have performed when they could not have
recovered damages if Limbungan would otherwise have been able and
willing to perform. He submitted that this would be such an odd result that
the suggested construction of clause 32, requiring satisfaction of the but for
test, cannot be right. But, as it seems to me, in the one case there would be no
H
liability and so no damages would be recoverable and in the other case there
would be a liability and so damages would, in principle, be recoverable. The
question of what, if any, substantial damages are recoverable applying the
compensatory principle, is a separate question. I consider it appropriate not
to conate questions of construction with questions as to the recoverability of

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A loss pursuant to the compensatory principle. I shall therefore return to the

question raised as to the recoverability of substantial damages at a later stage
in this judgment.

The factual issue

90 The important factual issue therefore is whether, but for the dam
B burst, Limbungan would have supplied cargo for the ve voyages between
November 2015 and June 2016 which are the subject of the present claim.
This is bound up with the question whether Limbungan had made any
relevant arrangements.
91 I therefore return to the question of Limbungans arrangements.
Mr Southern was correct to say that Limbungan, a corporate vehicle
seemingly without assets or employees, had no contract with either Samarco
C or Vale and indeed had no contracts with either Lion DRI or Antara. It was
thus in a vulnerable position, apparently unable to perform its obligations
under the COA. However, that is not the whole picture. Limbungan was a
wholly owned subsidiary of Lion DRI and Mr Lu, an employee of Antara,
appeared to act on behalf of Limbungan, Lion DRI and Antara though not
with regard to all of the latter two companies activities. In consequence
D Limbungan was in fact able to perform 38 shipments under the COA before
the dam burst and the bulk of those shipments, some 22, were shipments
split between Lion DRI and Antara so that part of the cargo was discharged
at Port Kelang and part at Labuan. Lion DRI and Anatara paid their
respective shares of the freight. Limbungan was in fact able, by reason of its
position within the Lion group of companies, to supply cargoes, making use
of Lion DRIs and Antaras contracts with Samarco and Vale. However, it is
E clear that when those companies had no wish for iron ore pellets Limbungan
was forced to default on its obligations under the COA, as happened
between July and October 2015. Limbungan was dependent upon them for
its ability to supply cargoes.
92 Since 2011 Limbungan had supplied cargoes at Ponta Ubu from the
Samarco mine. Mr Lu gave evidence that Vale preferred to supply Lion DRI
F
and Antara only from its facility in Oman. He appears to have concluded
that from the fact that the Oman facility was a recent investment of Vales
from which Vale would expect a return, from the fact that in August 2011
Vale instructed a vessel to divert to Oman when it was en route to Tubarao
and from the fact that when he sought pellets from Vale he was o›ered
pellets from Oman, save when scheduled maintenance and a resulting
reduction in iron pellets in Oman caused it to o›er shipments from Tubarao.
G Mr Lus understanding was that Vale wished to supply Far Eastern
customers with Oman pellets and US, South American and West Indian
customers with Tubarao pellets.
93 Mr Southern said that Mr Lus evidence in this regard was
unreliable. He relied upon e-mails from Mr Lu in 2011 which indicated that
it was Limbungan, rather than Vale, which preferred to ship from Oman.
Mr Lu accepted that he preferred to accept pellets from Oman provided that
H
the quality was proven. (The rst shipment from Oman in 2011 gave rise to
a dispute as to quality.) Mr Southern also relied upon the fact that a
shipment was o›ered from Tubarao in 2011 (after the quality dispute had
arisen) which Mr Lu declined. In his oral evidence he described that as a
one-o› cargo.

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94 The context in which those e-mails were sent was eventful. The A
Oman facility had recently come on stream, one vessel was directed by Vale
to go to Oman and when the rst shipment from Oman took place there was
a quality dispute. In that context it is di–cult to know what can be safely
inferred from the correspondence at the time. It is true that there is no
document emanating from Vale stating what its position was but Mr Lu was
in a position to know what Vales preference was over the period from 2011
B
to 2015 and I accept his evidence in this regard. On 15 March 2013, after a
conversation with Mr Alqueres of Vale, he reported to Mr Pang that at
Tubarao, they only produce DRP for nearby plants in Argentina, Trinidad,
North Africa and US. That is, in essence, the same as his evidence to this
court. Since he had been discussing the matter with Vale his evidence is more
likely to be correct than wrong.
95 Thus, from 2011 Limbungan supplied cargoes for both Lion DRI C
and Antara from Samarco. (There was only one shipment from Oman in
September 2011 which gave rise to the dispute about defective quality and
one more shipment in January 2014.) It is clear that of the two alternative
methods of performance open to it under the COA Limbungan had, from
2011, chosen to use the Ponta Ubu method of performance. In that sense it
had made arrangements though it could not compel Lion DRI or Antara
D
to supply iron ore pellets from Samarco. In the light of Mocatta Js
statement in European Grain & Shipping v JH Rayner [1970] 2 Lloyds Rep
239 that it is permissible to have regard to the intentions or arrangements
made by the party seeking relief there is, in my judgment, no requirement
that the party seeking relief must itself have made legally binding
arrangements to perform by one of two or more alternative modes of
performance. E
96 However, in the months before the dam burst Lion DRI and Antara
had no demand for iron ore pellets and, inevitably, Limbungan defaulted
upon its obligations under the COA by failing to make two shipments
between July and October 2015.
97 There was evidence that in August 2015 Vale was willing to discuss a
steady supply of pellets from Brazil and from Oman but Mr Lu gave
F
evidence that that concerned a tolling arrangement by which pellets would
be provided, turned into briquettes (HBI) and Vale would purchase some of
the HBI. Mr Lu said nothing came of that arrangement because it was a
rather complicated arrangement.
98 By November 2015 Antaras demand for iron ore pellets had
resumed. Indeed on the day before the dam burst Mr Lu made an o›er to
purchase iron ore pellets from Vales Oman facility. G
99 I have asked myself whether, in the light of the two missed shipments
from Ponta Ubu and Mr Lus o›er to purchase iron ore pellets from Vales
Oman facility, Limbungan can still claim to have had, as at the date of the
dam burst, a settled intention or arrangement to ship iron ore pellets from
Ponta Ubu. Two matters suggest that it did. A new long-term contract
between Antara and Samarco was under negotiation and had almost been
H
concluded and very shortly after the dam burst Mr Lu was contacting
Samarco to nd out when supplies of iron ore pellets would resume. That
was the most pressing question. These matters suggest that on a long-term
basis Limbungans intention remained to ship through Ponta Ubu via
Samarco. However, in the short term it appears that Limbungan intended to

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A ship cargoes of iron pellets from Oman. Mr Lus proposal to Vale on

5 November 2015 makes that reasonably clear.
100 That factual context is rather di›erent from the simple no relevant
arrangements scenario postulated by Mr Southern and also rather di›erent
from the simple alternative modes of performance scenario postulated by
Mr Rainey. Neither counsel made submissions as to how the principles on
which they relied should be applied in the more complex circumstances of
B
this case.
101 I therefore turn to the related question of fact, whether Limbungan
would in fact have defaulted on the COA with Classic even in the absence of
the dam burst, the but for question. Since Limbungan is seeking to rely
upon an exceptions clause the burden lies on it to show that it is more likely
than not that it would have performed its obligations under the COA with
C Classic.
102 At the time of the dam burst, or just after, Antaras demand for iron
ore pellets had resumed. That is apparent from the cargoes it purchased
from Bahrain Steel and Vales Oman facility between November 2015 and
June 2016. For the same reason it appears to be more likely than not that
had the dam not burst Antara would have concluded a new long-term
contract with Samarco. The existing long-term contract had come to an end
D
in March 2015. However, by the time of the dam burst in November 2015,
a new contract had almost been negotiated. The outstanding detail to be
agreed concerned a penalty rate payable by Samarco. It appears to be more
likely than not that had there been no dam burst a new long-term contract
would have been nalised because Antara needed a long-term contract for its
supplies of iron ore pellets.
E 103 Antara had its own COA with PCL Shipping and the applicable
freight rate on that COA was less than the freight rate on the COA with
Classic (as the result of a rather complicated formula, based in part on the
spot rate, the details of which do not matter). There was an arrangement
internal to the Lion Group whereby Lion DRI could use Antaras COA with
PCL and Antara could use the COA with Classic. When Antara used the
COA with Classic Antara issued a debit note to Lion DRI for the di›erence
F
between the freight rate under the COA with PCL and the freight rate under
the COA with PCL. Thus Antara was compensated by Lion DRI for the
di›erence between the freight rates. As at November 2015 there were seven
or eight shipments outstanding under the COA with PCL. They were due to
be performed by August 2016. Thus the crucial question is whether Antara
would continue to use the COA with Classic when Lion DRI had no further
G demand for iron ore pellets and so no need to compensate Antara for the
di›erence between the rate under the COA with Classic and the rate under
the COA with PCL.
104 Mr Southern submitted that Antara would have continued to force
Limbungan to default on the COA with Classic. Mr Rainey submitted that
Antara would have provided cargoes for shipment under the COA with
Classic.
H
105 Mr Southern relied upon three matters. First, it was in Antaras
commercial interest not to use the COA with Classic. The rate under the
COA with Classic was $43.50 per mt whereas the rate under the COA with
PCL would have been about $23 per mt. So on each of the three scheduled
shipments there would have been a di›erence of $3.9m. In addition Antara

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would be exposed to a damages claim from PCL. Second, as stated by Mr Lu A

in his witness statement, dealings between Lion Industries which owned
Antara and Lion Diversied which owned Limbungan had to be at arms
length. Choosing to perform Limbungans obligations under the COA with
Classic would confer a benet on Limbungan at the expense of Antara.
Third, whilst that expense was recovered from Lion DRI under an internal
arrangement, that arrangement stopped once Lion DRI had no further need
B
for iron ore pellets. In any event that internal arrangement did not take
account of the further reduction in the freight rate payable under the COA
with PCL agreed by means of addendum No 9. Mr Lu accepted that that
was the case when cross-examined. He said another arrangement would
have to be worked out.
106 In his oral closing submissions Mr Southern said that the answer to
this question is revealed by the proposal on 5 November 2015, prior to the C
dam burst, to ship from Oman. They are not interested in trying to perform
the COA, they are interested, understandably, in looking after Antaras own
commercial interests.
107 Mr Rainey relied on three matters. First, the historical reality was
that Antara had regularly used the COA with Classic. Second, Mr Lu gave
evidence that PCL was a friendly party and did not raise any claim against
D
Antara. Following the submission of a force majeure notice PCL had agreed
to perform 2 Panamax shipments ex-Bahrain at the spot rate. Performing
the COA with Classic would have been, said Mr Rainey, a no-brainer for
companies belonging to the Lion Group. Mr Lu described the matter as
clear cut. Third, following the agreement of addendum No 9 with PCL a
new internal arrangement was required but that would have been worked
out had Antara loaded cargoes under the COAwith Classic. E
108 With regard to the 5 November 2015 proposal Mr Rainey said that
Mr Lu did not propose a shipment from Samarco because there was no
extant long-term contract with Samarco and that the proposal was only for a
short-term spot supply from Vale in Oman.
109 The burden of proof on this issue lies on Limbungan. Whilst I do
not doubt the sincerity of Mr Lus belief that Antara would have used the
F
COA with Classic I am left in real doubt as to whether this would have
happened. First, it is not at all clear that the decision on this matter would
have been taken by Mr Lu. Whilst he said he was party to the decision to
default on the two voyages before the dam burst it seems clear that those
above him in the corporate hierarchy took the actual decision. Yet the only
evidence was from Mr Lu. Second, it is clear that Antara preferred not to
spend more money than was necessary. Its decisions whether to buy from G
Samarco in Brazil, or from Vale in Oman or from Bahrain Steel in November
2015 appear to have been based on matters of cost. This is not surprising.
Antara is a commercial entity and concerned to increase its prots and
reduce its losses. Third, Antara and Limbungan may have been in the Lion
Group by reason of common or, as they were described to me, overlapping
shareholdings, but they were owned by companies in separate group
H
structures. Thus, if Antara were to use the COA with Classic it is to be
expected that it would require compensation for paying a higher freight rate
than it would pay under the COA with PCL. It had had such an internal
arrangement in the past. But a new one was required in the light of
addendum No 9 to the COA with PCL as Mr Lu accepted. In circumstances

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A where Lion DRI had no further need for iron ore pellets there must be real
doubt as to whether Lion DRI would have agreed to enter a further internal
arrangement. There was no evidence from Lion DRI saying that the
required compensation would have been paid by Lion DRI between
November 2015 and June 2016.
110 For these reasons I doubt whether, but for the dam burst,
Limbungan would have been able and willing to supply cargoes for shipment
B
pursuant to the Classic COA. Indeed, when one factors in the fact that
Limbungan proposed to buy from Vale in Oman rather than from Samarco
in Brazil on 5 November 2015 before the dam burst, I think it is more likely
than not that Limbungan would not have been able and willing to supply
cargoes for shipment pursuant to the Classic COA in the months between
November 2015 and June 2016. Had there been a willingness and an ability
C to perform the COA with Classic I would have expected Limbungan to have
requested a shipment from Samarco on 5 November 2015, notwithstanding
that the new long-term contract being negotiated had not been completely
agreed, in order that it would be able to perform the COA with Classic.
Mr Lus opinion was to the contrary e›ect but I think there was some
wishful, albeit honest, thinking on his part.
D 111 It must follow, having regard to my understanding of the e›ect of
clause 32 of the COA, that Limbungan is unable to rely upon that clause to
excuse its failure to supply cargoes for the ve shipments in question.

The Vale issue

112 The next factual issue is whether Limbungan took all reasonable
E
steps, following the dam burst, to ship iron ore pellets from Tubarao via
Vale. This issue gave rise to much expert evidence which, after other
possibilities had been discarded, concerned the question whether the Lion
Group, in e›ect Antara, could have obtained iron ore pellets from Vale
pursuant to a new long term contract.
113 During the course of the trial it was also suggested that cargoes of
iron ore pellets could have been obtained from Vale pursuant to existing
F long term contracts which Lion DRI and Antara had with Vale. This latter
argument was objected to by Mr Rainey on the grounds that it had been
raised far too late. It had not been pleaded, even in the re-amended reply
served just before the trial, and gave rise to a number of factual issues which
had not been investigated. I agree that this new point was raised too late and
cannot, in fairness to Limbungan, be regarded as in play. In any event
G there was evidence that the existing long term contracts had not been used
since 2011. In such circumstances it appears to me most unlikely that Vale
could have been persuaded to operate them, promptly after the dam burst, in
order to perform the ve voyages in question between November 2015 and
June 2016.
114 Mr Southern also submitted that the fact that Vale provided some
609,899 mt of iron ore pellets in the rst six months of 2016 to a US
H
company, Nucor Louisiana, which, in 2015, had taken most of its pellets
from Samarco, showed that such pellets could have been made available to
Antara in 2016. It was submitted that Limbungan could not rely upon
Vales commercial decision to make the pellets available to Nucor as
excusing Limbungans failure to supply cargoes under the COA with Classic.

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It was said that that commercial decision broke the chain of causation A
running from the force majeure, namely, the dam burst.
115 I do not accept this submission. As a result of the dam burst it was
impossible for Limbungan to perform its obligations by shipping cargoes
through Ponta Ubu via Samarco. Limbungan was then bound to take
reasonable steps to perform its obligations by shipping cargoes through
Tubarao via Vale. If, despite taking such steps, it could not do so then the
B
dam burst can properly and as a matter of common sense be regarded as
being the cause of Limbungans failure to perform; see the approach of
Kerr J in the Seabridge Shipping Ltd case [1977] 2 Lloyds Rep 367. There is
no break in the chain of causation if Vale has iron ore pellets available but
decides to supply them to another customer in preference to Limbungan.
(Of course, this reasoning assumes that, contrary to my decision,
Limbungan either did not need to satisfy the but for test or, if it did, that it C
discharged that burden.)
116 So there remains the question whether Limbungan has shown that,
following the dam burst, it was unable to ship cargoes though Tubarao via
Vale. It was common ground that if this was to be done it would be by Vale
agreeing a long-term supply contract with either Antara or Lion DRI. The
latter had no interest in doing so and so the contract would have to have
D
been with Antara. This question was the subject of extensive expert
evidence. Dr Poveromo, Classics expert, was of the opinion that had a long
term contract been proposed Vale would have agreed. He considered that
other steel producers who had sourced pellets from Samarco were able to
obtain pellets from Tubarao after the dam burst. Mr Maith, Limbungans
expert, was of the opinion that, since Vales export of pellets did not increase
until the fourth quarter of 2016, any spare capacity Vale had would have E
been allocated to existing customers of Vale. This issue led to 10 pages of
detailed closing submissions on the factual and expert evidence from
Mr Southern and to 30 pages of detailed closing submissions on the factual
and expert evidence from Mr Rainey. I shall deal with the matter as shortly
as I can.
117 The rst aspect of this matter to be considered is whether Mr Lu
F
made any attempt to negotiate a long-term supply contract with Vale
following the dam burst. It was common ground that Vale would only supply
pellets pursuant to a long term contract. It appears clear that Mr Lu made no
such attempt. He gave no evidence that he did and the contemporaneous
e-mails do not suggest that he did. Indeed, he accepted that he did not. He
simply asked, probably by telephone before 17 November 2015 and then by
e-mail dated 17 November 2015, whether there was any prospect of supplies G
of iron ore pellets from Tubarao via Vale. He was told that there was not by
e-mail on 23 November 2015. He made further requests in February 2016,
May 2016 and June 2016, on each occasion being told there was not.
118 The second aspect of the matter to be considered is whether, if
Mr Lu had attempted to negotiate a long term supply contract with Vale
following the dam burst, it is more likely than not that it would have been
H
unsuccessful.
119 The circumstances in which such a contract would have to be
negotiated were not conducive to success. In order to enable the shipments
at issue in this action to be made from Tubarao the contract would have to
have been negotiated before the end of December 2015 or possibly a little

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A later but not much. It was accepted by Dr Poveromo, Classics expert, that
Vale, to the extent that it had supplies of additional quantities of iron ore
pellets available, would have preferred existing long-term customers over a
new applicant. Although Lion DRI and Antara had had long-term contracts
with Vale which may strictly have remained legally extant those contracts
had not been used for the supply of pellets from Tubarao since 2011.
Limbungan, or rather Lion DRI and Anatara, were therefore somewhere
B
between a new applicant and an existing long-term customer. It is
signicant, as it seems to me, that in its e-mail of 23 November 2015,
although Vale referred to the much valued relationship between our
companies and our strong interest to re-start a long business and mutual
partnership Vale did not o›er to supply any pellets from Tubarao. On the
contrary Vale said in terms that it did not have RM20 pellets availability
C especially after the accident and railroad stoppage in Brazil. That remained
its position when asked again in February, May and June 2016.
120 It is however known that Vale was able to supply a new customer,
Nucor, in 2016. Thus the question is whether, if Mr Lu had suggested a long
term contract in November 2015, Vale would have preferred to supply to
Mr Lu rather than to Nucor. This appears unlikely. Nucor was a large US
consumer. Mr Lu represented the Lion Group which Dr Poveromo accepted
D
was a less attractive customer to Vale. Moreover, Vale preferred to supply
the Lion Group from its Oman facility.
121 The remaining question is whether Vale would have had su–cient
quantities of pellets to supply both Nucor and the Lion Group. It was on this
issue that Dr Poveromo and Mr Maith gave much evidence.
122 Mr Maith, the expert witness called by Limbungan, had a
E particular knowledge of iron ore mining in Brazil, having spent nine years as
vice president of Samarcos global marketing division. He expressed himself
clearly, and perhaps bluntly. He fairly accepted some matters put to him
(though becoming somewhat argumentative in the nature of an advocate as
his cross-examination progressed) but would not depart from his basic
opinion that it was not likely that Vale would have supplied iron ore pellets
to Antara. Dr Poveromo, the expert witness called by Classic, relied upon
F
gures which proved not to be robust. More signicantly, when cross-
examined it appeared that his approach to the presentation of gures in his
report lacked that degree of rigour which is to be expected of an expert
witness before this court. He was also much more argumentative than
Mr Maith.
123 It appeared to me that Mr Maith was to be preferred as an expert
G witness. Indeed, it was signicant that Mr Southerns closing submissions
made little mention of Dr Poveromos evidence, recognising that
Dr Poveromos table 1 had been subject to a degree of criticism and might
have to be disregarded entirely.
124 One element of table 1 which did survive cross-examination was
the evidence that certain existing customers of Vale in Egypt and Libya
received additional supplies from Tubarao. However, that did not assist
H
Classics case because they were existing long-term customers. These
additional supplies appeared to be made possible by supplies to Saudi Arabia
being diverted to Oman from Tubarao. This, said Mr Southern, indicated a
degree of exibility on Vales part. But that said little, if anything, about the
quantity of pellets available for new customers.

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125 Evidence from Vales published data, as explained by Mr Maith, A

was to the e›ect that production of iron ore pellets did not increase until the
fourth quarter of 2016, which period is not relevant to the particular issue in
the present case. There was also some evidence that Vale had increased its
production of DR pellets as a proportion of its overall production. Whether
this was in response to the dam burst or was a resumption of historical levels
of DR pellets production is not known. There was some historical evidence
B
that it was the latter. Also, Vales quarterly production reports suggest that
the proposals under consideration to increase production to o›set the supply
shortage resulting from the dam burst were long term proposals. For these
reasons it appears more likely than not that there was no overall increase in
production by Vale in the short period relevant to this claim. It is however
possible that Vales production of DR pellets as a proportion of its overall
production increased. C
126 In circumstances where (a) Mr Lu never sought a long-term
contract from Vale after the dam burst and (b) neither party adduced
evidence from Vale itself as to whether it would have been able and willing
to enter into such a contract with the Lion Group to supply iron ore pellets
from Tubarao (and if so on what terms) it is di–cult to be sure whether Vale
would or would not have been able and willing to enter such a contract.
D
Dr Poveromo could only say that there was a nite possibility with the
likelihood not being high.
127 Mr Southern submitted that the answer must be that the court
does not know. Mr Rainey submitted that the burden of proof lay on
Classic and that it could not show that Vale would have entered into a long
term contract with the Lion Group. If the burden lay on Limbungan then,
said Mr Rainey, on the balance of probabilities the Lion Group could not E
have secured such a contract.
128 I consider that the legal burden of proof lay on Limbungan to
establish that it could not have secured a long-term contract with Vale. That
is clear from all the authorities to which I was referred. It may be that the
evidential burden at a particular stage rested with Classic but once a long-
term contract had been identied as the only means by which Vale would do
F
business the legal burden was on Limbungan to show that it would not have
secured such a contract from Vale. I have considered the authorities referred
to by Mr Rainey at para 57 of his opening submissions, namely, Owners of
Steam Ship Matheos v Louis Dreyfus & Co [1925] AC 654, 666 and 662 and
the Seabridge Shipping Ltd case [1977] 2 Lloyds Rep 367, 377—378.
I consider that where reference is made in such authorities to the burden of
proof shifting that is a reference to the evidential burden shifting, not to the G
legal burden of proof shifting. The legal burden remains on Limbungan
throughout.
129 In my judgment the evidence addressed by the parties does not
leave me unable to reach a conclusion as to what would have happened on
the balance of probabilities. It appears to me to be more likely than not that
Vale, if it had been approached soon after the dam burst for a new long term
H
contract with the Lion Group, would not have agreed to such a contract
within the narrow period of time necessary to enable the ve shipments to
which this claim relates to be made by Limbungan.
130 I have reached that conclusion for three reasons. First, although, as
accepted by Mr Lu, Vale had a good relationship with the Lion Group, Vale

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A was likely to take time to consider how it proposed to respond to the dramatic
reduction in the supply of pellets caused by the dam burst. Whilst it
considered what to do its priority was to service the needs of its existing
long-term customers. Vale had not supplied iron ore pellets to the Lion
Group from Vale since 2011. There were, as I have already related,
discussions between Mr Lu and Vale in August 2015 and just before the dam
burst but they were not, I think, su–cient to make Vale willing to give priority
B
to the Lion Group over and above established customers. Second, Vale
preferred to supply iron pellets to the Lion Group from its Oman facility.
That was Mr Lus clear and repeated evidence. Again, the evidence that in
August 2015 Vale was willing to discuss a steady supply of pellets from Brazil
and from Oman does not persuade me that Vales long-established preference
no longer held sway. Mr Lu gave evidence that the discussions concerned a
C tolling arrangement by which pellets would be provided, turned into
briquettes (HBI) and Vale would purchase some of the HBI. Nothing came of
it because it was a rather complicated arrangement. On 23 November
2015 Mr Reinisch (of Vale) referred in his e-mail to Mr Lu to the much
valued relationship between our companies and our strong interest to re-start
a long business and mutual partnership. Yet what was proposed was the
provision of iron ore pellets from Oman, not from Tubarao. Third, only one
D new customer was identied as having received pellets from Vale in 2016 and
that was Nucor, which, it was common ground, was a much more attractive
long-term customer than the Lion Group.
131 Mr Southern submitted that the Lion Group could not rely upon its
personal characteristics in that way because, as between it and Classic, they
were not beyond the Lion Groups control. In this regard reliance was placed
E on New Zealand Shipping Co Ltd v Socit des Ateliers et Chantiers de France
[1919] AC 1, 6. I do not accept this submission. When, in the context of a
question of causation, it is necessary to investigate whether Vale would have
made a long-term contract with Limbungan in preference to Nucor there
appears to me be no reason why general characteristics of Limbungan cannot
be relevant. Were Limbungan relying upon some deliberate act of its own
di›erent considerations might apply for, as explained in the case relied upon,
F no man can take advantage of his own wrong or of an event brought about by
his own act or omission. But there is nothing of that sort in the present case.
132 I have therefore concluded that it is more likely than not Vale
would not have agreed to supply iron ore pellets to Antara (and hence
Limbungan) to enable the ve shipments in question to have taken place.

G A discrete point of construction

133 There is a further issue between the parties, namely, whether the
dam burst was beyond the control of the shippers. Classic maintains that
Samarco could have prevented the dam burst and since Samarco were the
shippers the dam burst was not beyond the control of the shippers and so
Limbungan cannot claim that the dam burst excused it from liability. This
raises not only a question of fact regarding the design, construction and
H
maintenance of the dam and whether the burst was beyond the control of
Samarco (which will, if necessary, be determined at a later hearing) but also
an anterior question of construction of clause 32, namely, whether it is
su–cient for Limbungans purposes that the dam burst was beyond its
control as charterer when supplying or loading cargoes of iron ore pellets.

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The parties require this issue of construction to be determined in this A

hearing.
134 Clause 32 seeks to protect not only the charterers but also the
shippers and receivers. The shippers and receivers are not party to the COA:
only the charterers are. What then is the purpose of extending the protection
of the clause to the shippers and receivers? The answer lies in the
circumstance that the charterer may delegate performance of (though not
B
responsibility for) its obligations under the COA to supply and load a cargo
to the shippers: see Great Elephant Corpn v Tragura Beheer BV (The
Crudesky) [2013] 2 All ER (Comm) 992, para 33. When the charterer does
so clause 32 makes clear that the charterer will not be responsible for the
shippers failure to supply or load cargo when the failure results from one of
the named events such as an accident at mine.
135 However, the design, construction and maintenance of the mine, C
including the dam, are not elements of the charterers obligations to supply
and load a cargo which were delegated to Samarco. Therefore any fault of
Samarco with regard to the design, construction and maintenance of the mine
cannot reasonably have been intended to bar the charterers ability to rely
upon clause 32: see Tandrin Aviation Holdings v Aero Toy Store [2010]
2 Lloyds Rep 668, paras 45—46 per Hamblen J. Whilst Limbungan would be
responsible for anything that went wrong in the supply and loading of cargo D
by Samarco in its capacity as shipper Limbungan would not be responsible
for anything that went wrong in the design, construction or maintenance of
the mine. I therefore decide this issue in favour of Limbungan.

Damages
136 Limbungan is unable to rely upon clause 32 of the COA because it E
cannot show that, but for the dam burst, it would have supplied and shipped
ve cargoes of iron ore pellets between December 2015 and June 2016. But
there remains the question whether Classic is entitled to recover substantial
damages from Limbungan in respect of its breach of its obligation to supply
and ship the ve cargoes.
137 Mr Rainey submitted, by reference to the compensatory principle F
which underlies the assessment of recoverable damages, that Classic could
not recover substantial damages even if Limbungan cannot rely upon
clause 32 of the COA. Although Mr Southern suggested that Mr Rainey
only relied upon the compensatory principle as an aid to construction of
clause 32 my understanding is that Mr Rainey made a further submission,
separate from his submission on the true construction of clause 32 of the
COA (which I have not accepted). G
138 Mr Rainey submitted that no substantial damages are recoverable
because, even if Limbungan had been able and willing to ship the cargoes but
for the dam burst, Classic would not have been entitled to substantial
damages because the dam burst would in fact have prevented Limbungan
from shipping any iron ore pellets.
139 Mr Southern submitted that this submission was an impermissible
H
sleight of hand, from not being ready to perform the COA when liability was
being assessed to being ready to perform when damages are being assessed.
140 This is a short point, notwithstanding its importance in the case.
141 There can be no dispute that the recoverability of substantial
damages depends upon the compensatory principle and therefore upon a

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A comparison between the position of Classic as a result of the breach and the
position it would have been in had Limbungan performed its obligations;
see, for example, Flame SA v Glory Wealth Shipping PTE Ltd [2014] QB
1080, paras 17—18 and Bunge SA v Nidera BV (formerly Nidera
Handelscompagnie BV) [2015] Bus LR 987, paras 14 and 23 per Lord
Sumption JSC.
142 To recover the sum of approximately US$20m which represents the
B
freight it would have received on the ve unperformed voyages Classic
would, it seems to me, argue as follows. Limbungan was in breach of its
duty to supply and ship cargoes of iron ore pellets; it was not able to rely
upon clause 32 to excuse that breach. The assessment of the damages
recoverable for such breach requires the court to compare the position that
Classic was in as a result of that breach with the position Classic would have
C been in had Limbungan complied with its duty to supply and ship cargoes of
iron ore pellets. Had it complied with that duty Classic would have earned
freight for each of the ve voyages and so substantial damages would be
recoverable.
143 But application of the compensatory principle in that way appears
to me to be unrealistic because it ignores the reason why, on the facts of this
case, Limbungan was in breach of its duty. It was in breach of its duty
D
because, had there been no dam burst, it was more likely than not that
Limbungan would not have been able or willing to ship the ve shipments
and so it was unable to rely upon clause 32 to excuse its breach. The realistic
comparison, and the one that reects the facts of this case, is between the
position that Classic is in with the position it would have been in had
Limbungan been able and willing, but for the dam burst, to supply and ship
E the ve cargoes.
144 If, but for the dam burst, Limbungan had been able and willing to
ship the ve cargoes, no cargoes would in fact have been shipped because of
the dam burst and the dam burst would, in that event, have excused
Limbungan from its failure to make the required shipments.
145 For that reason, and applying the compensatory principle which
determines recoverability of damages, Classic is not entitled to substantial
F
damages for Limbungans failure to supply and ship the ve cargoes,
notwithstanding that Limbungan is unable to excuse its failure by reference
to clause 32 of the COA. To award substantial damages on the facts of this
case would breach that principle. Had Limbungan been unable to rely upon
clause 32 because it could have but failed to obtain a supply of pellets from
Vale then substantial damages would have been recoverable because, had
G Limbungan performed its obligation and obtained supplies from Vale,
Classic would have earned freight. That illustrates the importance of
applying the compensatory principle by reference to the facts of the
particular case.
146 This conclusion is not an impermissible sleight of hand, from not
being ready to perform the COA when liability was being assessed to being
ready to perform when damages are being assessed. When assessing what
H
damages are recoverable it is necessary to compare Classics position with
the position it would have been in had Limbungan complied with its
obligations. It would be contrary to the compensatory principle, when
assessing damages, to ignore what Classics position would have been had
Limbungan been ready and willing to perform its obligations but for the

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dam burst. Classic cannot be put in a better position than it would have A
been in had Limbungan been able and willing, but for the dam burst, to ship
the required cargoes.
147 For these reasons I have concluded that Classic cannot recover
substantial damages.
148 In that event it is unnecessary, in the context of the ve shipments
with which I am concerned, to resolve the two points of detail which divide B
the quantum experts. I shall however do so because my decision will, I am
told, enable the parties to agree the quantum of damages in respect of the
two voyages for which Classic already has judgment.
149 The rst point is the question what quantity of cargo should it be
assumed Classic would have loaded. Limbungans expert, Ms Richards, has
used the average of all liftings between 2009 and 2016, namely, 173,718 mt.
Classics expert, Mr Robson, has used 176,000 mt being the maximum C
which Classic was permitted to ship on each voyage.
150 The relevant question is one of fact: what would have happened if
the shipments in question had been performed. Classic says that it was in its
interests to maximise its prots by maximising the cargo intake. True it was
but the experience of 2009—2015 shows that Classic did not maximise its
prots by maximising the cargo intake. D
151 In my judgment the average of all liftings is the best evidence of
what would have been shipped. It is objected by Classic that the total
number of shipments included three shipments to Labuan alone, where there
is a draft restriction. Thus the inclusion of such shipments distorts the
average gure, though Mr Leung, junior counsel for Limbungan told me that
the e›ect was marginal, about 0.3%.
E
152 Since Labuan is where Antara had its plant that is where shipments
between November 2015 and June 2016 would have gone and so it could
have been argued by Limbungan that the quantity not shipped between
those dates should be limited by the draft restriction at Labuan. But that has
not been argued because, I assume, the notional missed voyages have been
deemed to be from Tubarao to Port Kelang. The calculation of loss is
therefore very much a broad brush exercise rather than one ne tuned to a F
detailed analysis of what in fact would have happened. That being so,
I think it is appropriate to take the average rate.
153 The second point arises from the circumstance that the notional
ballast voyage to Tubarao used by the experts to calculate damages is from
Qingdao rather than from Port Kelang. The point which arises is how
should account be taken of the fact that after discharging at Port Kelang the G
vessel is more advantageously positioned than if she had discharged at
Qingdao (because the next ballast voyage was likely to be shorter).
Mr Robson has quantied the positional advantage and applied it by
assuming that the voyage started from Port Kelang, thereby giving the
correct credit mathematically by applying it at the start of the voyage.
Ms Richards does not agree with that approach because, in her view, it is not
a realistic assumption that the next ballast voyage will be shorter because the H
majority of Capesize vessels would be discharging in China. Further, she is
of the opinion that any positional advantage should not be factored in
because it is not consistent with the methodology of the claim which is not
comparing trip charters and daily rates but calculating voyage surplus from

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A voyage business. The positional advantage is, she says, already factored
into the COA rate.
154 For no doubt good reasons the parties decided not to call the
quantum experts to be cross-examined upon their respective opinions.
I found this second issue somewhat puzzling, the answer to which was
elusive, notwithstanding the submissions of Mr Southern for Classic and of
Mr Leung, junior counsel for Limbungan. In the end I was impressed by
B Mr Leungs point that Mr Robson was comparing a COA voyage which
assumed delivery and redelivery at Port Kelang with a mitigation voyage
which assumed delivery and redelivery at Qingdao. This did not appear to
be comparing like with like. Since the burden of proving damages lies on
Classic, since the e›ect of Mr Robsons mathematical credit is to increase the
return Classic would have made under the COA and since there is or might
C be a problem with Mr Robsons approach I consider that the damages
should be assessed in accordance with Ms Richards method.

Conclusion
155 Limbungan cannot rely upon clause 32 of the COA to excuse its
failure to ship cargoes between December 2015 and June 2016 because, in
circumstances where, but for the dam burst, it is more likely than not that
D Limbungan would not have shipped the cargoes pursuant to the COA with
Classic, Limbungan cannot show that its failure to supply cargoes resulted
from the dam burst or that the dam burst directly a›ected the performance
of its obligations. However, Classic is not entitled to substantial damages
from Limbungan because if Limbungan, but for the dam burst, had been
able and willing to ship the cargoes Classic would not have been able to
E recover substantial damages from Limbungan. The compensatory principle
therefore debars recovery of substantial damages.
156 There is no reason why Classic is not entitled to substantial
damages in respect of the two missed shipments before the dam burst.
I invite the parties to agree the damages recoverable in respect of those
shipments in the light of my resolution of the two points of detail regarding
the assessment of damages.
F
Claim allowed.
SARAH ADDENBROOKE, Barrister

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