The claimant appealed, including on the issue of whether the commercial purpose of the venture had been frustrated by September 27, 2011. The Court of Appeal held that the relevant test for whether the defendant’s failure to redeliver the containers amounted to repudiatory breach was in substance the same as for frustration: whether the delay was such as to render performance of the remaining obligations under the contracts radically different from those which the parties had originally undertaken. On the facts, this had occurred on February 2, 2012. The court relied both on timing and the parties’ actions. The delay by September 27, 2011 was relatively short; insufficient (without special circumstances) to justify a finding that the commercial purpose of the contracts had been frustrated. By February 2, 2012, the delay had continued for another four months. Further, the claimant’s offer to sell the containers to the defendant on February 2, 2012 was a clear indication that the commercial purpose of the contracts had been frustrated (sale would have discharged the defendant’s obligation to redeliver the containers).
The Court of Appeal also held that the legitimate interest principle did not arise. By February 2, 2012, the claimant could not elect to affirm the contract because the defendant was no longer capable of performing the contract as agreed, due to the frustration of the commercial purpose of the contracts. The court noted that the claimant had continued to press the defendant for performance beyond this date (requests for redelivery of the containers and payment of demurrage), but these were “acts in vain, unrelated to an existing contract”. Obiter, the Court suggested that had it been open to the claimant to affirm the contract, it would have been unreasonable to do so, given that the accrued demurrage exceeded the value of the containers by a considerable amount. Moore-Bick LJ also criticised the judge’s approach to good faith, distinguishing between the application of “broad concepts of fair dealing” to contractual construction and a general principle of good faith, which did not exist in English contract law. In his view, it was better for the law to develop along established lines rather than for judges to look for “some ‘general organising principle’ drawn from cases of disparate kinds.” He also pointed out that a general duty of good faith would risk undermining the terms agreed by the parties, in a similar way to an excessively liberal approach to contractual construction (noting the Supreme Court’s recent decision on that topic in Arnold v Britton).
As to damages, the Court of Appeal held that the claimant was entitled to demurrage up to February 1, 2012 and to damages for the loss of the containers (treated to have been lost on February 2, 2012), assessed as the replacement cost of the containers on that date.