TRANSFIELD SHIPPING INC OF PANAMA V MERCATOR SHIPPING INC OF MONROVIA (THE ACHILLEAS)

[2007] EWCA Civ 901, Court of Appeal, Ward, Tuckey, Rix LJJ, 06 September 2007

Charterparties – Time – Late redelivery - Measure of damages – Loss of profits – Hadley v Baxendale

The Achilleas was redelivered late under a time charterparty, following a legitimate last voyage. The question arose whether the measure of damages was to be the difference in rate between that fixture and the market rate at the relevant time, or the loss of the charterparty that the owners had fixed with other charterers following definite notice of redelivery of the vessel. There was award for owners in the arbitration, one arbitrator dissenting. Christopher Clarke J also found for owners (reported at [2007] 1 Lloyd's Rep. 19). Charterers had argued that the first limb of the Hadley v Baxendale test covered only overrun period damages, and that if loss of profits were to be awarded this would have to fall under the second limb of the rule, so that the loss would have to be within the contemplation of both parties at the time of the making of the contract. Rix LJ, with whom Ward and Tuckey LJJ agreed, held in line with the arbitration award and the judgment at first instance that damages were to be calculated according to the first limb of Hadley v Baxendale and that damages thus calculated could include loss of profits. The owners’ lost fixture at a higher charterparty rate was the appropriate measure of damages. Frequent restatement of the overrun period measure of damages had not made it the authoritative rule for the purpose of Hadley v Baxendale. Loss of profits from a new time charter fixture were not, between parties in the same business, outside the realm of reasonable expectation. There was no statement of a test or principle inconsistent with the result that damages should be awarded to the tune of the lost fixture. The refixing of the vessel after the end of the charter was a highly probable event, and charterers were aware of all this, being in the same business. They should therefore have been cautious about the danger of late redelivery and it was not right that it should fall on the owners that charterers took the risk of squeezing one last voyage out of the for them profitable charter. Unless the lost fixture was an extravagant or unusual bargain, which in this case it was not, its length posed not particular problem.