STAR POLARIS LLC V HHIC-PHIL INC

[2016] EWHC 2941 (Comm), Queen's Bench Division, Commercial Court, Sir Jeremy Cooke, 17 November 2016

Contracts - Construction - Shipbuilding - Contract a complete code between the parties - Meaning of the phrase "consequential or special losses" - Whether phrase referring to Hadley v Baxendale - Factual matrix

The vessel Star Polaris was built by the defendant yard and delivered to the claimant buyer on 14 November 2011. On 29 June 2012 the vessel suffered serious engine failure. On 2 September 2012 she was towed to a yard in South Korea for repairs. The defendant yard denied all liability for the incident. The buyer commenced arbitration against the yard contending that the engine failure was caused by the yard's breaches of contract, and claimed compensation encompassing the cost of repairs and expenses caused by the engine failure. At issue was also the diminution of value of the vessel. An interim arbitral award found that there was a causative breach by the yard, but that the failure to reduce speed in response to various alarms had been negligent and had broken the chain of causation so that not all of the buyer's losses could be recovered. The contract excluded losses for "consequential ... losses, damages or expenses" which the tribunal interpreted as referring to a cause-and-effect relationship, and not to the principles established by Hadley v Baxendale (1854) 9 Exch 341. The buyer appealed.