Transfield Shipping Inc. v Mercator Shipping Inc. (The Achilleas)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 01 December 2006 |
| Neutral Citation | [2006] EWHC 3030 (Comm) |
| Docket Number | Case No: 2006 FOLIO 570 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 01 December 2006 |
[2006] EWHC 3030 (Comm)
Mr Justice Christopher Clarke
Case No: 2006 FOLIO 570
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Dominic Kendrick QC (instructed by Swinnerton Moore) for the Claimant
Mr Simon Croall (instructed by Bentley Stokes & Lowless) for the Defendant
Hearing date: 20th October 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an appeal under section 69 of the Arbitration Act 1996 to set aside an Award made on 17 th May 2006. The Award, which was by a majority (Mr David Farrington and Mr Bruce Buchan, Mr Christopher Moss dissenting), determined that the appellants, Mercator Shipping Inc of Monrovia, the owners of the m.v. "Achilleas" (hereafter "the Owners") were entitled to recover US $1,364,584.37 by way of damages for late redelivery of the vessel under a charterparty. The question raised by this appeal is whether loss of earnings under a subsequent fixture is recoverable under the first limb of the rule in Hadley v Baxendale [1854] 9 Exch 24, although, as will become apparent, the resolution of the appeal does not appear to me to depend upon whether or not the case can be pigeon holed into that category. The appeal, as Aikens J observed when giving leave, raises an issue of general public importance in the shipping industry.
The facts
The "Achilleas" is a single decker self trimming bulk carrier built in 1994. On 22 nd January 2003 she was chartered to Transfield Shipping Inc, the respondents (hereafter "the Charterers") on an amended NYPE 1946 form (hereafter "the Charterparty") for a time charter period of "about 5 to about 7 months (exact period at Charterers' option, about means +/—fifteen (15) days". The daily hire was $13,500 and the Charterers were to give the Owners "20/15 days approximate notice of redelivery date and port, 10/5/3 days definite notice of redelivery date and port".
By an Addendum to the Charterparty dated 12 th September 2003 the vessel was fixed, in direct continuation of the Charterparty for a further period of "minimum five (5) months, maximum seven (7) months, exact period in Charterers' option" at a new hire rate of $16,750 per day. The extended period under the Addendum began on 2nd October 2003 and accordingly the maximum duration of the extended period expired on 2 nd May 2004.
Notices of redelivery
On 8 th April 2004 the Charterers gave 20 days notice of redelivery between 30 th April and 2 nd May. On 15 th April they gave 15 days notice of redelivery between 30 th April and 2 nd May 1. On 20 th April they gave 10 days notice of redelivery between the same dates.
The subsequent fixture
On or about 21 st April the Owners fixed a period charter (about 4–6 months) with Cargill International SA ("Cargill") at a rate of $39,500 per day. I call this the "Cargill charter". The laycan was from 28 th April to 8 th May 2004.
On 23 rd April the Charterers gave 7 days notice of redelivery between 30 th April and 2 nd May, intention Oita.
The Charterers' final subcharter
On a date that the Award does not record the Charterers fixed the vessel under a subcharter to load a cargo of 66,799 tonnes of coal at Quingdao for discharge at Tobata and Oita in Japan.
On 24 th April loading of the coal at Quingdao was complete. On 26 th April the Charterers indicated that discharge at Oita was not expected to be completed until 6 th or 7 th May. On 27 th April Charterers gave a revised notice of redelivery on 4 th/5 th May. On 30 th April, following discharge at Tobata, the vessel arrived at Oita where she was delayed. Charterers gave a revised notice for redelivery of 8 th/9 th May 2. In the event the vessel was not redelivered until 0815 local time on 11 th May.
By 5 th May the Owners had recognised that the vessel would be redelivered late. They therefore sought an extension of the cancelling date under the Cargill charter. On that date it was agreed between the Owners and Cargill that the cancelling date would be extended from 8 th to 11 th May but that the daily rate of hire would be reduced from $39,500 to $31,500.
The vessel was delivered by the Owners to Cargill at 0815 local time on 11 th May i.e. at the same time as her redelivery by the Charterers. The Cargill charter continued until 0815 hours on 18 th November 2004 – a period of 191 days and 11 hours.
The claim
The Owners claimed damages at the rate of $8,000 per day, being the difference between the $39,500 rate originally agreed with Cargill and the revised rate of $31,500 for the period of the Cargill charter, against which they gave credit for the additional sums earned under the Charterparty by reason of the late redelivery. It was agreed that the rates negotiated under the Cargill charter and the variation thereto were market rates. It was not suggested by the Charterers that the Cargill charter was in any way unusual or peculiar in its terms or length. Nor was it suggested that the Owners had allowed an unusually short gap between the date for redelivery under the Charterparty and the cancelling date under the Cargill charter.
In the alternative the Owners claimed damages of $158,301.17 being the difference between the market rate of hire and the Charterparty rate during the period from midnight on 2 nd May to 0815 on 11 th May.
The majority arbitrators have made an Award in the Owners' favour, calculated on the former basis. The Charterers contend that the Award should have been calculated on the latter basis, which is the award that the minority arbitrator would have made.
The facts agreed or found
It was not in dispute before the arbitrators that the Owners net loss of $1,364,584.37 was caused by the Charterers' breach of charter in failing to redeliver the vessel by 2 nd May. The majority arbitrators recorded that the following facts were agreed or found:
"8 …As Mr Males [Counsel for the Charterers] agreed in exchanges with members of the Tribunal, the "not unlikely" results arising from
the late redelivery of a vessel were not numerous, but would include missing dates for (a) a subsequent fixture, (b) a dry docking and (c) a sale of the vessel
We consider that in today's market with its ease of communication and much higher emphasis of maintaining a vessel in almost continuous employment those "not unlikely results" are known, recognised and accepted hazards of late redelivery. They were not very unusual. To the contrary, they were the kind of results which the parties would have had in mind. Although the issue in this reference was not concerned with a particular market at a particular port, nevertheless the parties were actively engaged in the shipping market. It was not in dispute that the market rates for tonnage goes [sic] up and down, sometimes quite rapidly, and that such variations are market knowledge. …..We consider on the facts that the type or kind of loss suffered by the Owners i.e. the need to adjust the relevant dates for the subsequent employment of the vessel through the revised Cargill terms, was within the contemplation of the parties as a not unlikely result of the breach. The fact that the extent of the loss was greater than anticipated is not relevant: see Hill v Ashington Piggeries Hill v Ashington Piggeries (1969) 3 All ER 1496 (Davies L.J. at p 1524F)
No attempt was made by Mr Males to persuade us that the Charterers had little or no knowledge of the not unlikely results if a vessel was redelivered late, in breach of charterparty. Nor did he seek to persuade us that the Charterers had little or no market knowledge, including that of movements in rates for the type of vessel in question.
….The types of losses [referred to in paragraph 8] are certainly readily identifiable to those who have even a minimum of experience in the shipping industry. It might well be that the precise amount of the loss can be seriously affected by market factors (as happens to be the case in this matter where the rate for the particular type of vessel dropped sharply during the relevant period) but the type of loss was readily identifiable.
18 Mr Males submitted that it was necessary to ask whether there was anything in the particular circumstances to suggest that the charterers would or should have understood that they were "assuming responsibility" for the risk of the loss of a particular follow on fixture concluded by the owners. The use of the words "assuming responsibility" was used in the context of the discussion in paragraphs 26–055 in Chitty on Contracts 29 th Ed. We consider that the point does not actually assist the Charterers. We believe that Mr Croall [Counsel for the Owners] is correct when he said that what mattered was that the type of loss claimed was foreseeable; there was no need to show the foreseeability of precise figures. The length of the follow on fixture was irrelevant, we consider, in terms of remoteness but the length might have some effect in terms of quantum if it was an extravagant or unusual bargain. As a result of the agreement between the parties on quantum we were not, unfortunately, taken to the expert evidence. We were not, therefore, called upon to decide whether in terms of remoteness a trip charter should be considered differently from, say a period charter. Further the Charterers did not submit or otherwise argue that the original Cargill fixture was an extravagant or unusual bargain. Thus we are not able to make any finding on whether the original Cargill fixture or the revised Cargill terms amounted to such a bargain.
We...
To continue reading
Request your trial
-
Sylvia Shipping Company Ltd v Progress Bulk Bonding Ltd
......-charter made by the Charterers with Conagra Trade Group Inc (“Conagra”) was cancelled when the vessel missed the ... reliance upon the House of Lords decision in The Achilleas [2009] 1 AC 61 , that the recoverable damages were limited ...However, South Australia and Transfield Shipping are authority that there may be cases where the ......
-
John Grimes Partnership Ltd v Gubbins
...is whether that loss was too remote. The Judge set out extensively passages from the judgment of Lord Hoffmann in Transfield Shipping Inc-v-Mercator Shipping Inc, more conveniently referred to as The Achilleas 2008 UKHL 48; (2009) 1 AC 61, and he referred to the classic decision on remote......
-
Out of the Box Pte Ltd v Wanin Industries Pte Ltd
...... on assumption of responsibility in Transfield Shipping Inc v Mercator Shipping Inc [2009] ......
-
Borealis AB v Geogas Trading SA
...foreseeable”? Thirdly, because if and to the extent that, with respect, the speeches of Lords Hoffmann and Hope in Transfield Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48; [2009] 1 AC 61 have added “assumption of responsibility” as an additional requirement of the remoteness ......
-
Comparative and normative analysis of damages under the SGA and the CESL.
...51(2); Boys v. Chaplin, [1971] A.C. 356 (H.L.) 372 (Eng.); Transfield Shipping Inc. of Panama v. Mercator Shipping Inc. of Monrovia, [2006] EWHC (Comm) 3030, [2006] Q.B.1069, 1096 (36.) Bridge, supra note 21, at 462. (37.) See Hadley, 9 Ex. at 346. (38.) Id. at 342. (39.) See SGA, supra not......
-
The Achilleas: Custom and Practice or Foreseeability?
...orthodox application of the standard test for remoteness of damage and was upheld by Christopher Clarke J in the Commercial Court66[2007] 1 Lloyd's Rep 19. and by a unanimous Court of Appeal77[2007] 2 Lloyd's Rep 555. which included Tuckey and Rix LJJ, two very experienced commercial judges......