Ali Reza-Delta Transport Company Ltd v United Arab Shipping Company

JurisdictionEngland & Wales
JudgeLORD JUSTICE PETER GIBSON,Lord Justice Tuckey,LORD JUSTICE TUCKEY,MR JUSTICE NELSON
Judgment Date02 May 2003
Neutral Citation[2003] EWCA Civ 684
CourtCourt of Appeal (Civil Division)
Date02 May 2003
Docket NumberB3/2003/0120

[2003] EWCA Civ 684

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT

CENTRAL LONDON CIVIL JUST CENTRE (MERCANTILE LIST)

(HIS HONOUR JUDGE BRIAN KNIGHT QC)

Before:

Lord Justice Peter Gibson

Lord Justice Tuckey

Mr Justice Nelson

B3/2003/0120

Ali Reza-Delta Transport Co Ltd
Claimant/Appellant
and
United Arab Shipping Co Sag
Defendant/Respondent

MR CHIRAG KARIA (instructed by Messrs Jackson Parton, London, E1 8AA) appeared on behalf of the Appellant

MR RICKY DIWAN (instructed by Messrs Hill Taylor Dickinson, London, EC3A 7HX) appeared on behalf of the Respondent

LORD JUSTICE PETER GIBSON
1

Lord Justice Tuckey will give the first judgment.

LORD JUSTICE TUCKEY
2

On 20 August 1996 a container of gas lighters exploded in the port of Damman, Saudi Arabia, destroying handling equipment belonging to the claimants. His Honour Judge Brian Knight QC, in the Central London County Court (Mercantile list), found the defendant carriers liable for the damage to the claimant's equipment, but held that they were only entitled to recover its market value. On this appeal the claimants contend that the judge should have awarded the cost of its replacement but, say, that in any event, he incorrectly assessed its market value.

3

At the time of the explosion the claimants were the container terminal operators in the port. The container had been shipped to Damman from where it was to be taken by rail to Riyadh on the terms of a combined transport bill of lading issued by the defendants. It exploded whilst it was being moved by a straddle carrier and loaded onto a trailer drawn by a dock truck. The carrier and the truck were damaged beyond repair. The trailer was also damaged and the cost of repairing it was agreed at US$800.

4

The claimants were insured against the loss. After investigation by local cargo surveyors underwriters paid the insured values of the carrier, US$200,000, and the truck, $26,600. Their subrogated claim in these proceedings was limited to these amounts. By their defence the defendants put the claimant to proof of their loss.

5

In support of their claim, the claimants relied on an expert in dock handling equipment, Mr John Gibbons. We have his report and a transcript of his evidence at the trial, to which I will have to refer in more detail. In summary he said that the sums claimed for the carrier and the truck were reasonable. The claim was advanced on the basis that these amounts were recoverable as the cost of replacing the damaged equipment, alternatively, as its market value at the time of the loss. The defendants denied that the claimant was entitled to recover replacement cost, because they had evidence to establish that they had replaced the carrier or the truck or that they had ever intended to do so. When the defendants' solicitors asked about this, they were informed by the claimants' solicitors in September 2002 that it had not been possible to discover whether or not the equipment had been replaced before the claimants had ceased to operate the terminal in 1997, at which time a new company had taken over. There was also no evidence of the financial effect, if any, of the loss of the equipment on the claimants' business.

6

The defendants said that it was not reasonable for the claimants' loss to be measured on the basis of replacement cost, and the claim put in that way should be rejected, as it was in the similar case of The Maersk Colombo [2001] 2 Lloyd's Rep 275. They accepted that they had to pay the market value, but contended that this was no more than US$100,000 for the carrier and US$15,000 for the truck —sums referred to in Mr Gibbons' report.

7

The trial, which took three days, was mainly concerned with the issue of liability. The judge held the defendants liable under the terms of the port rules which imposed strict liability under Saudi law upon users of the terminal for all damage arising from their use of its facilities.

8

The judge dealt with quantum quite shortly. He had ruled that this was governed by English law. After summarising the parties' submissions and referring to The Maersk Colombo, he said:

"In the absence of evidence that the Claimants have or will replace the equipment, I cannot see that it would be reasonable for me to award a sum in excess of the market value of the items of equipment. Accordingly I award damages of $115,800."

9

It is apparent how the judge came to award this amount from an earlier passage in his judgment where he said:

"[Mr Gibbons'] evidence was that the price of a replacement straddle carrier and dock truck/tugmaster would be US$100,000 and US$15,000 respectively. (Damage to the trailer was assessed at $800 and is not in issue)."

10

So it is clear that the judge accepted the defendants' submissions on quantum. The claimants say he was wrong to do so. They were entitled to recover the replacement cost of the equipment but, if market value was to be the measure of their loss, they were entitled to the value of the equipment in Saudi Arabia. The sums which the judge awarded were what it would cost to buy the equipment second-hand in Europe. There was no market for the equipment in Saudi Arabia. So it is submitted that the judge was bound to award replacement value. The claimants say that the market value of the equipment in Saudi Arabia equated to the replacement value because it had to take account of transporting the equipment there from Europe and tropicalising it in Saudi Arabia.

11

The defendants say that the judge was right to reject the claim for replacement value for the reasons he gave. They submit that Mr Gibbons' evidence was that the equipment would have had a re-sale value in Saudi Arabia of the sums awarded by the judge, so the judge's award of those sums as the market value of the equipment is not open to criticism.

12

We have only heard argument on the market value issue for reasons which will become apparent. Before considering this issue, I should refer to The Maersk Colombo since, although that case was concerned mainly with replacement value, it also assists on market value. In that case the claimants operated the container terminal in Southampton. One of their cranes was struck and damaged beyond repair by the defendants' vessel. The crane was not replaced because before the casualty the claimants had ordered two new cranes. Loss of use of the damaged crane before the new cranes were delivered had caused some inconvenience, but no measurable financial loss. Nevertheless, the claimants asked for the replacement loss of the damaged crane (£2.395 million) being the agreed cost of buying, modifying and transporting a second-hand crane from the United States. The judge, however, only awarded the agreed resale value of the crane in Southampton (£665,000). This court upheld his decision. Clarke LJ (with whom Thorpe LJ and Holland J agreed) did so on the basis that, unless compelled by authority to do so, the cost of reinstatement by reference to transportation and modification costs, which had not and would never be incurred and which it would be unreasonable to incur, could not fairly be regarded as caused by the defendants' tort (see paragraph 23). In the following 56 paragraphs of his judgment Clarke LJ reviewed the authorities on this subject and concluded that they did not compel him to reach any other conclusion. In the course of this review, Clarke LJ accepted the following propositions, suggested by Holland J, as being appropriate to a case of this kind (see paragraphs 71 and 72):

"(1) On proof of the tortious destruction of a chattel, the owner is prima facie entitled to damages reflecting the market value of the chattel 'as is'.

(2) He is so entitled whether or not he intends to obtain a replacement.

(3)...

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