Waterdance Ltd v Kingston Marine Services Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Stuart-Smith |
| Judgment Date | 07 February 2014 |
| Neutral Citation | [2014] EWHC 224 (TCC) |
| Docket Number | Case No: HT-1305 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 07 February 2014 |
[2014] EWHC 224 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Stuart-smith
Case No: HT-1305
Mr Tom Whitehead (instructed by Myton Law) for the Claimants
Mr David Hart QC (instructed by Kennedys) for the Defendants
Hearing dates: 5 th, 6 th February 2014
The Joy of Ladram ["the Vessel"] was a Beam Trawler that was appropriately licensed to fish for profit. On 12 January 2007 she suffered damage to her engine. It is assumed for the purposes of this hearing that the damage was caused by negligence or breach of contract on the part of the Defendant. It is agreed by the experts that, immediately before the damage occurred, the value of the Vessel's hull and machinery was in the range £647,000 to £680,000. The damage to the Vessel would have cost £435,000 (£415,000 plus a reasonable contingency of £20,000) to repair and the repairs would have taken 15 weeks to carry out. In the event, the Claimant decommissioned the Vessel later in 2007 without having carried out the repairs. It was decommissioned pursuant to a Governmental scheme which was introduced in April 2007, the purpose of which was to reduce capacity in the trawler fleet fishing for sole in the South West by securing the permanent withdrawal of vessels from the fishing fleet. Under the scheme, the Claimant offered to decommission the Vessel in return for a grant payment of £1,119,000. The offer was accepted and the grant was duly received.
The Claimant claims damages for diminution in value and for loss of use. The Defendant contends that no damages are payable for diminution in value because the Claimant has either "avoided or mitigated any loss it may have suffered by reason of the physical damage by decommissioning the Vessel for a sum equal to that which would have been obtained irrespective of the [physical] damage." It contends that no damages are payable for loss of use because the Vessel had been fishing unprofitably in the periods before it was damaged.
In December 2013, Ramsey J ordered the trial of preliminary issues:
i) Whether the Claimant suffered any loss by diminution in value of the Vessel and/or whether the Claimant has avoided and/or mitigated any such losses;
ii) Whether, on the assumption that the vessel was loss-making at the date of the engine damage, the Claimant is as a matter of law entitled to damages for loss of use based upon the capital value of the Vessel.
Shortly before the hearing, the Defendant abandoned the argument that payment of the decommissioning grant mitigated or avoided any loss otherwise suffered by the Claimant. Before and during the hearing the Claimant indicated that if it succeeded on the first issue it would not pursue the second.
This judgment sets out my conclusions on those preliminary issues. In summary:
i) The Claimant suffered an immediate and direct loss on the occurrence of the damage to the Vessel on 10 January 2007. The measure of loss is the reasonable cost of the repairs required to put the Vessel back into the condition in which it was before the damage occurred. The Claimant's loss was not avoided or mitigated by the receipt of the grant payment of £1,119,000 or otherwise;
ii) In the light of my finding on the first issue, I do not deal with the second.
The Background Facts in a Little More Detail
In the period to January 2007, the Claimant was operating the Vessel to fish for profit, including fishing for sole in the waters of the South West of England. The Vessel's fishing licence was an essential pre-requisite to commercial fishing but was a tradable asset that was separate and distinct from its hull and machinery.
In May 2006 Defra announced its intention to introduce a decommissioning scheme as part of the long-term plan for managing stocks of sole in an area of the South West known as Area VIIe. It is apparent on the evidence that the fact of the impending scheme was well known in the fishing industry before the statutory instrument was laid before Parliament. Mr Carter, the managing director of the Claimant, knew about it from May 2006 at the latest, since he was present at meetings at which the possibility of a decommissioning scheme for those who could not survive the burden of high fuel prices was mooted. On 9 August 2006 Defra issued its consultation document, proposing criteria for the scheme which the Vessel and other vessels owned by the Claimant would be able to meet. The Claimant was one of six respondents to the consultation. The others included the South Western Fish Producer Organisation, which was the cooperative body that represented the interests of the various producers including the Claimant. The Vessel was the largest in the Beamer fleet and it seems probable that the Claimant's response (which has not survived) referred to it, as the regulatory impact assessment produced by Defra in January 2007 included a clear (but implied) reference to it.
Among the questions on which Defra consulted were "Question 3: Do you have any evidence that the EU maxima for vessels up to 25 years old is not a realistic value for vessels within that age group?" and "Question 4: Do you have any evidence about the relative value of vessels up to and over 25 years old?" The responses to Question 3 included that "Age is not a measure of catching capacity, but vessel values are related to catching capacity." The responses to Question 4 included "Vessel age does not directly relate to vessel value. Fishing opportunity and capability sets vessel value." and "£3000-£3500 per tonne removed would be the required amount to make it worthwhile for vessel owners to apply for decommissioning."
The relevant statutory instrument was the Decommissioning of Vessels Scheme 2007, which was made pursuant to s. 15(1) of the Fisheries Act of 1981. It was laid before Parliament on 8 February 2007 and the scheme came into force on 6 April 2007. The core eligibility criteria included some that had been proposed in the consultation paper: vessels had to be at least 10 metres in length, at least 10 years old, and had to have fished for at least 75 days in each of the two periods of 12 months immediately preceding the date of application. Other criteria proposed in the consultation paper were either modified or dropped from the scheme as enacted. The final regulatory impact assessment identified 58 trawlers as satisfying the criteria for the scheme and envisaged that 8–10 vessels would be decommissioned.
As introduced, the scheme made available a fund of £5 million. Vessel owners were invited to bid for grant in the region of £3,000 to £3,500 per gross registered tonne ["grt"]. Defra had obtained EU clearance for this level of grant, which was in excess of the limits imposed by the relevant EU Regulations. Applications had to be submitted by 25 May 2007. To ensure that the best value for money was achieved by the scheme, Defra assessed the benefits and costs of individual vessels and ranked them using an evaluation and ranking system that took into account the tonnage of the vessel to be removed, the effort exerted in the fishery during a reference period, and the amount of sole caught during a reference period. The process of ranking the submitted bids led to the creation by Defra of two lists: the first was a list of those to whom offers of grant would be made initially and the second was of those next in line if any of the initial offerees refused the offer, as happened. After the process of identifying to whom the grants should be paid and in what sum, grant payments were made in about August 2007.
As well as being the largest in the Beamer fleet, the Vessel was the largest of the trawlers satisfying the requirements of the scheme, which was in its favour; however, price mattered. In the event, the Claimant submitted a bid at £3,000 per grt, or £1,119,000 overall, which was accepted. The rate of £3,000 per grt was the lowest rate offered by any of the bids that were ranked in the first six, to which offers were made. The other five bids all pitched at £3,250 or £3,500 per grt. Twenty-six bids were made in all. Eight grants were made.
The Vessel made a negative contribution to gross profit in the period from April 2005 to December 2006 (an overall loss of £61,085 before depreciation and £169,170 after depreciation). This comprised two periods in the management accounts: to March 2006 (a loss of gross profit of £71,014 before depreciation and £132,858 after depreciation) and from April to December 2006 (a profit of £10,071 before depreciation but a loss of £36,312 after depreciation). Fishing is not the only enterprise undertaken by the group of which the Claimant forms a part and it is clear that the directors adopt an entrepreneurial approach to their business, constantly assessing what may be the most profitable strategy in the short and long term. It is therefore typical of the Claimant that the day after the Defra consultation paper came out, Stephanie Clark (an accountant employed by the Claimant) prepared a spreadsheet to identify what the proposed scheme would mean for the Claimant's vessels, adopting varying levels of bid. On the evidence, she may well have done this on her own initiative though it is possible that she was asked to do it by one of the directors.
Mr Carter rejected any suggestion that he had decided by 12 January 2007 to apply for a grant under the scheme to decommission the Vessel. He explained the prompt production of the spreadsheet on 10 August 2006 as being a normal step for the Claimant in looking at all options for the business. I accept that evidence and, though it is not necessary for my overall decision in the...
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