The World Beauty ; Andros Springs (Owners) v World Beauty (Owners)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE WINN |
| Judgment Date | 19 March 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0319-1 |
| Date | 19 March 1969 |
| Court | Court of Appeal (Civil Division) |
[1969] EWCA Civ J0319-1
The Master of the Rolls (Lord Denning)
Lord Justice Winn and
Lord Justice Fenton Atkinson
In The Supreme Court of Judicature
Court of Appeal
Appeals by plaintiffs and defendants from Order of Lord Justice Willmer dated 27th May, 1968.
Mr. MICHAEL KERR, Q.C., and Mr. J.D.H. ROCHFORD (instructed by Messrs. Constant & Constant) appeared on behalf of the Plaintiffs.
Mr. J. FRANKLIN WILLMER, Q.C., and Mr. J.S. HOBHOUSE (instructed by Messrs. Coward, Chance & Co.) appeared on behalf of the Defendants.
On 21st April, 1958, in Suez Bay, there was a collision between two tankers, the "Andros Springs'1 and the "World Beauty". The liability has been agreed as 75% to the "World Beauty" and 25$ to the "Andros Springs". The question is the measure of damages recoverable by the owners of the "Andros Springs."
We must first go back to nine months before the collision. It was soon after the Suez affair. Freight rates wore very high. The owners took advantage of the high rates to book the Andros Springs for 8 years ahead. On 22nd July, 1957, "the Andros Springs was chartered to a French Company called Compagnie Francaise de Raffinage on a consecutive voyage charter which was to finish by 15th September, 1958. About the same time in August 1957 she was chartered to Mobil Oil on a 7-year time charter which was to commence between 1st August, 1958, and 31st October, 1958. The Mobil Oil charter was to follow immediately on the C.F.R. charter. So in 1957 the vessel was fixed ahead for 8 years, at high rates 9 months later, on 21st April, 1958, there was this collision. By that time the freight rates had fallen tremandously. They were only about one-tenth of what they were in 1957. At the time of the collision she was on a voyage from the Persian Gulf to Le Havre. Temporary repairs were done near Suez, and she then made her way to Lo Havre and thence to Rotterdam where permanant repairs were done: and the opportunity was taken to do other work too. The repairs were completed on 7th Juno, 1958. The time lost over the repairs was 37 days. The owners are clearly entitled to the cost of the repairs. The question is what is the measure of damages for the loss of use of the vessel for the 37 days. The shipowners claim in the first place loss of profit on the charter which she was then performing for C.F.R. (which was at very high rates). They claimed:-
Loss of profit on C.F.R. charter at $3, 659.48 per day for 37 days $135,400.76
Expenses during that period at $836.14 per day $30,937.18
Total: $166,337,94
That is a simple method of calculating the damages for loss of use over those 37 days. It is the basis which is often taken in Collision cases; it is the basis taken by the Registrar in this case.
But the owners of the "World Beauty" point out that the owners of the "Andros Springs" took steps to mitigate the damage: and that this must be taken into account. The steps taken by the owners of the "Andros Springs" were these: They chartered another vessel called the "Andros Thunder" and employed her as a substitute vessel to perform the C.F.R. charter. They chartered the "Andros Thunder" at the low rates prevailing in 1968 and employed her at the high rates contained in the C.F.R. charter. But the "Andros Thunder" had to be got round from Los Angeles. She did not start on the C.F.R. charter until 7th June, but thereafter she carried out the remainder of the C.F.R; charter by performing three more voyages on charter Instead of the "Andros Springs". But that meant that the "Andros Springs" herself was free from the C.F.R. charter and was available for other service. The repairs to her were completed by 7th June. She was duo to start the Mobil Oil charter in three months' time. It might have been possible to employ her as a free ship for those three months at the low rates then prevailing. But the obvious thing to do was to advance the Mobil Oil Charter, if that could be arranged. It was so arranged. The "7-year time charter with Mobil Oil was advanced by 3 months. The "Andros Springs" started on the 7-year charter (at a high rate) 100 days earlier than she would have done if there had been no collision. She was delivered to Mobil Oil on 11th July, there as if there had been no collision, she would have been on 19th October.
Those measures were reasonably and sensibly taken by the owners of the "Andros Springs" in order to mitigate the damage which would otherwise have fallen upon them in consequence of the collision: and, I think we must take them into account when calculating the damages. We cannot follow the straight and simple method ofthe Registrar, we must balance losses and gains, as Lord Haldane said in the Westinghouse Case (1912 A.C. 673) at page 691: "I think the principle which applies here is that which makes it right for the Jury or arbitrator to look at what actually happened, and to balance loss and gain. The transaction was not res inter alios acta, but one in which the person whose contract was broken (or whose ship was damaged took a reasonable and prudent course quite naturally arising out of the circumstances in which he was placed by the breach (or damage)".
We have a table of losses and gains which has been very conveniently set out by Lord Justice Willmer.
The losses due to the collision are these: If the "Andros Springs" had completed the C.F.R. charter, she would have made a net profit on that charter of:-
$542, 068.55
Add the expenses during the period of detention caused by the collision:- $ 41. 807.00
LOSSES $585,875.55
The profits made by the steps taken in mitigation are:-
The profit made by employing the "Andros Thunder" on the C.F.R. Charter for 3 voyages: $369,169.08
Plus the profit made by employing the "Andros Springs" for the Mobil Oil Charter, 3 months early: Question?
PROFITS
All these figures are accepted except for the last one against which I have put a question-mark.
The one point in controversy is how to calculate the advantage which the owners gained by reason of the "Andros Springs" taking up the 7-year Mobil Oil time charter 3 months earlier than she would have done.
Mr. Willmer says during these 3 months - 100 days - the owners of the "Andros Springs" made very high profits, because the vessel earned the big rates contained in that charter. The vessel made profits amounting to $350,705. That wiped out all the losses. Herelies on the words of Lord Hersohell in the "Argentino" ((1889) 14 A.G. 519) at page 524: "What he (the shipowner) earned, or rather what he could have earned upon any other adventure during the time he would otherwise have been engaged upon the contemplated voyage, must be set against the sum allowed him in respect of the loss of that voyage". I think that argument is mistaken. Lord Herschell had not in mind such a case as this. I agree with what Lord Justice Willmer said in the Court below: "The earning of these profits" - that is, the $350,708 in 3 months - "flowed not from measures taken in consequence of the collision, but from the fact of the charter having been negotiated months previously. Collision or no collision, these profits would have been earned in any event".
It seems to me that the only advantage that the shipowners gained was the advaresment of the Mobil Oil charter by 3 months. They should give credit for the money value of that advancement, if it can be adequately assessed. Lord Justice Willmer thought it could be calculated in this way: The owners made a profit of $350,705 in the 100 days. By the advancement they made that profit 7 years earlier than they would otherwise have done. They have had, therefore, the use of $350,705 for 7 years. That was a financial benefit to the shipowners which he measured as if the sum of $ 35705 were invested at 5% compound interest for 7 years. The total interest so gained was $142, 772. So he inserted that figure at the question mark. That made the total profits $511,941.08. Deducting those gains from the losses of $583,875, he reached a final figure of damages of $71,934.47.
I am afraid that I cannot agree with the Lord Justice on this point. It is wrong to assume, as against the plaintiffs, that they would have put this money out at interest in the bank, let it stay there with annual rests, and get compound interest on it. No business man would have dreamt of doing such a thing. Lord Justice Winn suggested a variant of that method. He said that the shipowners had received $350,705 in 1958 whereas they would otherwiseonly have received it in 1965, He thought it would be proper to take the present value of $350,705 payable 7 years hence. That comes at 5% to $249,001. So by receiving $350,705, the owners were better off by $101,704. So ho would insert that figure at the question mark. That would make the total profit $480, 873. Deducting those gains from the losses of $593,875 he would reach a final figure of $113 003 damages.
I do not like cither of those mathematical ways of calculating the value of the advancement. A businessman would hot put the $350,705 out at interest. He would use it in his business. And so using it, ho might make a profit and he might make a loss. No one can toll. It is entirely uncertain and speculative. It must be remembered too, that it is for the defendant to prove the value of the advancement. It is he who prays it in aid in mitigation of damage. He must prove, therefore, the value of it. Rejecting the mathematical calculations, I think the proper way to calculate it is to regard the "Andros Springs" as if she had been a free ship on the market for those 100 days. She may be fairly assumed to have made profits on that basis. But in calculating it, there...
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