ARTICLE
10 January 2025

Sharp v Viterra: Supreme Court Elevates Mitigation To A Fundamental Principle Of Damages And Confirms Limits On S. 69 Appeals

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Quadrant Chambers

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In Sharp Corp Ltd v Viterra BV [2024], the UK Supreme Court affirmed the principles of mitigation and compensation in damages law, highlighting their equal importance. It ruled that the appropriate market for assessing damages is where it is reasonable for the seller to resell the goods. The Court also clarified the limits of the Court of Appeal's powers under s. 69 of the Arbitration Act 1996, emphasizing that errors of fact cannot be revisited and that the Court can only review legal questions
United Kingdom Litigation, Mediation & Arbitration

Sharp Corp Ltd v Viterra BV [2024] UKSC 14

In its judgment in Sharp Corp Ltd v Viterra BV [2024] 1 Lloyd's Rep. 568, the Supreme Court declared the ‘principle of mitigation' to be as fundamental as the compensatory principle in the law of damages and provided authoritative guidance on the limits within which the English Court can act on an appeal under s. 69 of the Arbitration Act 1996.

The dispute arose out of two C&F contracts for the sale of lentils and peas. The sellers shipped the goods, but the buyers failed to pay for them. The sellers landed the goods and customs cleared them before terminating the contract and re-selling in the local market. The damages issue was whether the sellers' loss should be assessed by reference to a hypothetical re-sale in the local market, or on a C&F basis.

The fundamental mitigation and compensatory principles

The Supreme Court first declared the compensatory principle and the principle of mitigation to be the two “fundamental principles of the law of damages”. This marks a departure from Bunge v Nidera and The Golden Victory, where the focus was almost exclusively the compensatory principle. 

Lord Hamblen (giving the judgment of the Court) explained that in many cases these two fundamental principles work together, with reasonable steps taken in mitigation fixing the measure of compensatory damages. He explained that, in the case of a buyer's default, the appropriate market to determine the value of the unaccepted goods was the market where “it is reasonable for the seller to dispose of the goods”. On the facts, “the obvious market in which to sell the goods, and in which it would clearly be reasonable to do so, is the ex warehouse Mundra market”.

The Supreme Court has thus elevated mitigation to a fundamental principle of the law of damages and brought much needed clarity and consistency of principle to the quantification of damages, not only in sale of goods cases but in the law more generally.

Limits on the Court's review under s. 69 of the Act

The Supreme Court held that the Court of Appeal had exceeded the bounds of s. 69 in finding that the sale contracts had been amended and that this was relevant to the damages assessment. In doing so, the Supreme Court helpfully summarised the requirements of s. 69:

  • The Court may amend the question of law for which permission has been granted, provided that the substance of the question remains the same.
  • The question of law must have been “fairly and squarely before the arbitration tribunal for determination”.
  • The Court has no jurisdiction in relation to errors of fact and no power to make its own findings of fact.
  • The court can infer that the tribunal has implicitly made a finding of fact only if that inference “inevitably follows” from the tribunal's express findings.

Read the full article  here.

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