Transfield Shipping Inc. v Mercator Shipping Inc. (The Achilleas)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Tuckey,Lord Justice Ward |
| Judgment Date | 06 September 2007 |
| Neutral Citation | [2007] EWCA Civ 901 |
| Docket Number | Case No: A3/2006/2651 |
| Court | Court of Appeal (Civil Division) |
| Date | 06 September 2007 |
[2007] EWCA Civ 901
Lord Justice Ward
Lord Justice Tuckey and
Lord Justice Rix
Case No: A3/2006/2651
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
MR JUSTICE CHRISTOPHER CLARKE
Mr Dominic Kendrick QC (instructed by Swinnerton Moore) for the Appellant
Mr Simon Croall (instructed by Bentleys, Stokes & Lowless) for the Respondent
Hearing date : 22 May 2007
Judgement
The issue
This appeal raises a novel point concerning damages for late redelivery of a time-chartered vessel. The issue is this: if a charterer is liable to pay damages to an owner for late redelivery of the chartered vessel, are those damages limited by the principles of remoteness to the difference between the charter rate and the market rate at the time of redelivery (if the latter is higher than the charter rate) over the length of the overrun period, that is to say from the due redelivery date until actual redelivery, or can the owner claim damages based on the loss of his next fixture?
On the facts of this case, this question means the difference, as the parties are agreed, between damages in the sum of only US $158,301.17 (the damages in relation to the overrun period) and the much larger sum of $1,364,584.37 (the damages in relation to the loss of fixture).
It is common ground that there is no binding decision of the courts specifically on this issue. The appellant charterers, however, submit that the rule for damages for late redelivery has been so often stated in terms of the overrun period that this court should now confirm that, save only in special circumstances (not to be found in this case) falling within the second limb of the principle in Hadley v. Baxendale (1854) 9 Exch 341, that rule is, and should be, the law. As such, the rule would have the necessary virtues of clarity, certainty, ease of calculation, and fairness. The respondent owners submit, on the other hand, that it is common ground that they have in fact suffered the loss of fixture damages which they claim as a result of the charterers' breach, and that that loss was caused by that breach, and that the arbitrators, and the commercial judge, were right to find that those damages fell within the first rule of Hadley v. Baxendale. Any rule of damages which in these circumstances failed to award them their actual loss would conflict with the compensatory principle, and would be arbitrary and unfair.
The facts
The owners are Mercator Shipping Inc of Monrovia. They were claimants in the arbitration, respondents to an appeal from the arbitrators' award to the commercial court, and respondents again in this court. The charterers are Transfield Shipping Inc of Panama. They were respondents in arbitration and appellants in the commercial court and again here. I shall refer to the parties as the owners and the charterers respectively.
The arbitration award dated 17 May 2006, awarding $1,364,584.17 to the owners, is that of Messrs David Farrington, Christopher Moss and Bruce Buchan. Mr Moss, while participating in the award, delivered separate, dissenting reasons.
The facts stated by the majority of Messrs Farrington and Buchan, as supplemented with the parties' consent in the judgment of Mr Justice Christopher Clarke, were as follows.
By a time charter dated 22 January 2003 the owners let their vessel, the Achilleas, to the charterers for a period of about 5 to 7 months, at a daily hire rate of $13,500. By an addendum to the charter dated 12 September 2003 the vessel was fixed in direct continuation for a further period of minimum 5 months maximum 7 months, exact period in charterers' option, at a new daily hire rate of $16,750. The extended period under the addendum began on 2 October 2003 and the latest redelivery date therefore became 2 May 2004 (at midnight). The vessel was in fact redelivered, over 8 days late, at 0815 local time on 11 May 2004.
The Achilleas is a single decker self trimming bulk carrier built in 1994 of some 69,000 dwt. The facts found by the arbitrators are so focussed that we are not even told on what time charter form the parties contracted: but from the judgment of Christopher Clarke J we learn that it was on an amended NYPE 1946 form. The charter provided for “20/15 days approximate notice of redelivery date and port, 10/5/3 days definite notice of redelivery date and port”.
On 8 April 2004 the charterers gave 20 days approximate date of redelivery between 30 April and 2 May. On 15 April they gave 15 days approximate date of redelivery between the same dates. On 20 April they gave 10 days definite notice of redelivery again between the same dates.
On 21 April 2004, and therefore, I comment, in reaction to these notices, the owners fixed the vessel for a new 4 to 6 month period charter to Cargill International SA (“Cargill”) at a daily hire rate of $39,500. It will be observed that the new hire rate was very greatly in excess of the old charter (addendum) rate of $16,750 per day. The market had soared within six months. It is common ground, however, that the Cargill charter rate was a market rate.
Under their new fixture with Cargill the owners agreed a laycan period (ie the dates before which the vessel could not be delivered and after which Cargill could cancel the fixture) of 28 April to 8 May. There is no finding as to whether the charterers were informed of the Cargill fixture: I therefore assume that they were not.
It is at this point that things began to go wrong. The arbitrators, having also mentioned charterers' 7 day definite notice of redelivery given on 23 April, again for 28 April to 2 May, state –
“Although the Charterers had given notice of redelivery, they nevertheless fixed the vessel under a subcharter to load a cargo of 66,799 tonnes of coal at Quingdao for discharge at Tobata and Oita. Loading at Quingdao was completed on 24 th April.”
It would seem that this was a last minute spot charter, but we are told nothing otherwise about its date or rate. Presumably, it must have been very tempting for the charterers to fit in one further charter at the then current market rates.
Within days of the loading of the vessel, on 26 April, the charterers indicated to owners that they were now expecting redelivery at Oita to fall back to 6 or 7 May, albeit on 27 April they gave a revised notice of redelivery for 4 or 5 May. That would have been late but would still have enabled delivery to Cargill under the new fixture within its cancellation date of 8 May.
The vessel arrived at Oita on 30 April, following discharge at Tobata, but was delayed at Oita so that she was not redelivered to her owners until early on 11 May.
By 28 April the owners had been concerned about redelivery as a result of information which they had received from agents at Oita. By 5 May they had to face up to the fact that the vessel would not be redelivered in time to meet the cancellation date of 8 May under the Cargill fixture. So on 5 May the owners agreed with Cargill that the cancellation date would be extended to 11 May and in return owners had to reduce the hire rate from $39,500 to $31,500, a drop of $8,000 per day. It is again common ground that the new rate reflected the market rate at that time.
In the event, the vessel was delivered to Cargill contemporaneously with her redelivery by the charterers, at 0815 local time on 11 May. Cargill redelivered the vessel at 1015 GMT on 18 November 2004, so that the Cargill fixture lasted 191 days 11 hours.
The owners claimed damages for the loss of the original Cargill hire rate, at $8,000 per day, over the period of the Cargill fixture, in the agreed sum of $1,364,584.37. We are not told by the arbitrators how that figure is derived. I calculate 191 days 11 hours at $8,000 per day as approximately $1,532,000: so the difference is about $167,000. The judge said that owners “gave credit for the additional sums earned under the Charterparty by reason of the late redelivery”: that might be a reference to the additional 8 days at the addendum charter rate of $16,750 per day (about $140,000), or to the total sum due for the overrun period, which I calculate would have been something over $250,000. Neither figure matches precisely, but the former is the better fit, and the final sum may be due to minor adjustments in account at the end of the charter. That inference matches the way in which the owners' claim has been advanced, for the award states that they claimed either $1,364,584.37 (“the principal claim”) or alternatively $158,301.17 (“the alternative claim”). On this appeal, the claims have been argued as true alternatives.
The judge records (at para 11 of his judgment):
“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.”
To that I would add that it was not suggested by the Charterers, so far as would appear from the arbitrators' reasons and the judge's judgment, that there was anything inappropriate or unusual in the owners refixing the vessel on 21 April, having received charterers' 10 day definite...
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