4.3 Addressing The Great Creation
The Great Creation held that proper performance of the notice obligation may look different in one instance than another depending on the facts of each case. For the case before the court, it was held that damages ought to be premised on a later redelivery, rather than earlier notice. We will here examine whether the argument has merit when transferred to a Norwegian law context.
The short notice was precipitated by unforeseen delays and disrupted plans. At the time of proper notice in relation to the redelivery that occurred, the charterer had no intention of redelivering about 20 days later as required. Had they given notice at that time, the court reasoned, it would not be given bona fide and on reasonable grounds as required by implied terms.(1) [2015] Lloyd’s rep. 315 (321, para 29). Cooke J thus rejected that damages could be premised on such earlier given notice:
To posit a “non-breach” situation on the basis that a notice should have been given at a time when it, in itself, would be wrongful and represent a breach or anticipatory breach, would appear contrary to principle.(2) Ibid. (321, para 30).
A first observation is that the good faith duty works in the interest of the owner,(3) In The Zenovia, it was invoked by the court as an effective bar against a hypothesized practice wherein an abusive charterer keeps issuing new notices only to keep their options open, cf. [2009] 2 Lloyd’s rep 139 (para 22). yet in The Great Creation the charterer was able to rely on that duty as a shield against the owner’s claim.(4) It was the owner that asked for damages to be premised on earlier notice. The effect of the argument is that the owner’s right to have notices issued in good faith limits the owner’s rights in damages. This is a paradox that invites us to question the validity of the argument.
As a point of departure, it is not so, that it can never be relevant whether a required act under the contract appeared reasonable for the debitor at the time. If the obligation in question is merely one of best effort, then the creditor’s right is limited to that best effort, and he cannot claim more in damages. There is, however, not much to indicate that the The Great Creation construes the notice obligation as one of effort. And if it did, it seems the correct result would be to excuse the charterer for the missing notice time prior to the time when he could reasonably be expected to notify.(5) This is not a logical necessity. One could interpret the required effort to include keeping the vessel on hire only to comply with the obligation, but if one considers the obligation a subjective one, it would at least merit a discussion of when, if ever, the charterer may be excused.
If the argument put forward by the Judge is correct in a Norwegian law context, it could cause issue whenever there is an outcome obligation, since the duty of loyalty is generally applicable in Norwegian law of contract. Occasionally, what was realistically required to avoid breach of an outcome obligation would have appeared irrational and irresponsible and therefore represent a breach or anticipatory breach of subjective obligations at the time. This is perhaps most poignant in the hidden defect-cases. Consider a vendor that realistically would have had to destroy the contracted goods to discover a hidden defect. An example is the famous bamboo stakes case, cf. rt. 2004 p. 675, wherein a vendor shipped fungus-infected bamboo stakes that ended up destroying a large number of cucumbers. The infection was not visible – it was a hidden defect, and its detection would have required costly and timely investigations. The vendor had no reason at the time to suspect infection. It could be argued, that to initiate investigations with risks of delays in their shipment would represent erratic behaviour absent a reasonable basis for suspicion. None of this can matter.(6) That is, of course, not to say that it cannot matter in the basis of liability-stage of analysis. The buyer had a right to receive non-infected stakes, and the buyer was under no obligation to show in a claim for damages that there was a realistic, alternative path to compliance that did not subjectively appear erratic.
We can recall the rationale for using non-breach scenarios and the difference approach. We held in the introduction that their use must correspond with the purpose of damages, which is to provide compensation for breach of a contractual norm. In the short notice situation, there is an infringement of the owner’s right to information prior to redelivery. The difference method’s scope of inquiry is limited to exploring the consequences of that breach. If there are limitations in the range of contractual positions that the owner can recover, then those limitations must follow from an interpretation of the right. As the damages are not premised on breaches of good faith duties, those norms simply fall outside the scope of inquiry. For that reason, the argument brought forward in The Great Creation is not an example to follow for Norwegian arbiters.(7)Internal critique of The Great Creation is beyond the scope of this thesis.