22/07/2026

Supreme Court dismisses appeal in clause 14 cancellation dispute over loss of bargain damages

On 22 July 2026, the Supreme Court handed down judgment in Great Asia Maritime Limited v Orion Shipping and Trading LLC (the “Lila Lisbon”) [2026] UKSC 23. By a unanimous judgment, the court held that if a Memorandum of Agreement on the Norwegian Saleform 2012 is cancelled by a buyer under clause 14 due to the seller’s “proven negligence” in not delivering the vessel by the cancelling date, the buyer is entitled to recover loss of bargain damages even though there has been no accepted repudiatory breach of contract.

David Lewis KC and Eliza Bond acted for the buyers as respondents in the Supreme Court appeal.

Background to the appeal

The full background to the Supreme Court appeal is set out in a separate post (October 2025).

In summary, the case concerned the proper construction of a Memorandum of Agreement dated 4 June 2021 on amended Norwegian Saleform 2012 (NSF 2012) wording in respect of the M/V Lila Lisbon (the Vessel). Clause 14 of that MOA provided as follows:

“14. Sellers’ default

[A] Should the Sellers fail to give Notice of Readiness in accordance with Clause 5(b) or fail to be ready to validly complete a legal transfer by the Cancelling Date the Buyers shall have the option of cancelling this Agreement. … In the event that the Buyers elect to cancel this Agreement, the Deposit together with interest earned, if any, shall be released to them immediately.

[B] Should the Sellers fail to give Notice of Readiness by the Cancelling Date or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.”

In the event, the vessel was not delivered by the original and an extended cancelling date. An LMAA tribunal comprising Ms Clare Ambrose, Mr Peter Jago and Mr Toh Kian Sing SC held that this failure to deliver was due to the sellers’ “proven negligence”. Although the sellers had not renounced the MOA by their conduct, the buyers were nevertheless entitled to loss of bargain damages.

The sellers succeeded in their s.69 appeal under the Arbitration Act 1996 before Dias J. However, the Court of Appeal unanimously overturned that first-instance decision, holding that where a seller is not ready by the cancelling date and the buyer cancels under clause 14[A], the buyer can recover damages for loss of bargain under clause 14[B] if they can prove that the seller’s lack of readiness was a result of “proven negligence”. The sellers sought and obtained permission to appeal to the Supreme Court.

The Supreme Court judgment

The Supreme Court unanimously dismissed the appeal and found in favour of the buyers.

In a judgment of Lord Hamblen and Lord Burrows (with whom Lord Briggs, Lord Stephens and Lord Doherty agreed), the court held:

• The phrase “due compensation” means appropriate compensation using the common law principles of causation, remoteness and mitigation ([24(1)]).
• In the event of cancellation, given that “loss” is general and unqualified, it is wide enough to cover loss in fact suffered by the buyers as a result of that cancellation. On the facts of the case, a loss of bargain has been factually suffered by the buyers consequent on the cancellation ([24(2)–(7)]).
• As a result, the natural and ordinary meaning of “loss” in the context of clause 14 is that it includes loss of bargain suffered by the buyers consequent on the cancellation of the contract ([25]).
• This was supported by the cases on clause 13 ([27]–[29]), section 51(3) of the Sale of Goods Act 1979 ([29]), past decisions of the courts on clause 14 ([30]–[46]), and the commercial consequences of the rival interpretations ([49]–[52]).
• Neither the ‘causation principle’ ([54]–[72]) nor the ‘clear words principle’ ([73]–[97]) relied upon by the sellers displaced the court’s “strong prima facie interpretation of clause 14” ([98]).

David Lewis KC and Eliza Bond were instructed by MFB Solicitors and Helmsman Law.