| DAMAGES — Measure of Damages — Time charter — Late redelivery — Whether charterers liable for damages for owners' loss of profit on subsequent fixture
Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48; [2008] WLR (D) 232
HL(E): Lord Hoffmann, Lord Hope of Craighead, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe and Baroness Hale of Richmond: 9 July 2008
Charterers were not liable in damages for a shipowner's loss of profits on a subsequent fixture resulting from the late redelivery of the vessel.
The House of Lords so held in allowing an appeal by charterers, Transfield Shipping Inc, from the order of the Court of Appeal (Ward, Tuckey and Rix LJJ) [2007] 2 Lloyd's Rep 555 affirming the decision of Christopher Clarke J to uphold an arbitrators' award, by a majority, that the owners of the Achilleas, Mercator Shipping Inc, had been entitled to recover from the charterers, who had returned the vessel nine days late, their loss of profit of US$1.3 on a follow-on fixture.
LORD HOFFMANN said that liability for damages in contract had to be founded on the intention of the parties, objectively ascertained. It was in principle wrong to hold someone liable for risks for which people entering into such a contract in their particular market would not reasonably be considered to have undertaken. The general understanding in the shipping industry was that damages were not recoverable for loss of a profitable following fixture. Moreover, applying South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191, one had to decide whether the loss for which the compensation was sought was of a kind or type for which the contract-breaker ought fairly to be taken to have accepted responsibility. These parties, contracting against the background of shipping market expectations, would not have considered losses arising from the loss of the following fixture a kind or type for which the charterer was assuming responsibility.
LORD RODGER said that, in the absence of special knowledge, a party entering into a contract could only be supposed to have contemplated losses which were likely to result from the breach in question, in other words, those losses which would generally happen in the ordinary course of things if the breach occurred. Here neither party would reasonably have contemplated that an overrun of nine days would in the ordinary course of things cause the owners the kind of loss for which they had claimed damages. It was too remote to give rise to a claim for damages for breach of contract. His Lordship had not found it necessary to explore the issues concerning the South Australia case and assumption of responsibility but he was otherwise in substantial agreement with Lord Hoffmann.
LORD HOPE delivered a speech concurring with Lord Hoffmann. LORD WALKER delivered a speech concurring with Lord Hoffmann, Lord Hope and Lord Rodger. LADY HALE delivered a speech concurring in part with Lord Rodger. |
