A Paragon of virtue?

The recent Commercial Court decision of Mr Justice Blair in The ‘Paragon’ is the corollary of the favouritism for legal certainty over freedom of contract by the House of Lords’ majority in The ‘Achilleas’. But, for the charter in The ‘Paragon’ the law was not certain at the time the charter was agreed with regard to the recoverability of loss of profit on a follow-on charter because the charter was agreed before The ‘Achilleas’ went to court. In such circumstances there was more latitude for this risk to be dealt with as an element of a genuine pre-estimate for the liquidated damages clause. From that perspective there was considerably less scope to argue that the clause provided for damages that are extravagant and unconscionable and thereby an unenforceable penalty.

Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), trainee solicitor, Hill Dickinson LLP, Singapore

Those not familiar with The ‘Paragon’ [2009] EWHC 551 (Comm) are referred to the note in the previous edition of Shipping & Trade Law and the law report that is online at BAILII. The crux of Blair J’s reasoning flowed from the fact that the clause provided for a measure of damages that is (now) irrecoverable at common law. Blair J’s conclusion was supported by his assessment of the law of redelivery, which highlighted that damages are limited to the difference between the charter rate and market rate of hire for the overrun period beyond the final terminal date of a time charter. The reason the case law considered by Blair J was (implicitly) the only available measure of damages available to shipowners was due to the House of Lords’ decision in The ‘Achilleas’ [2008] 2 Lloyd’s Rep 275 excluding the legal risk of charterers having to pay damages for loss of profit on a follow-on charter following late redelivery of the chartered vessel. This was not expressly pointed out to be so or considered in The ‘Paragon’.