20/12/2024

Commercial Court clarifies law of damages for late redelivery of vessel

On 13 December 2024, Mr Justice Bright handed down judgment in the case of Hapag-Lloyd AG v. Skyros Maritime Corporation and Agios Minas Shipping Company [2024] EWHC 3139 (Comm). The appeal under s.69 Arbitration Act 1996 concerned the correct approach to damages for late redelivery of a vessel but will be of interest more generally in the law of damages and in particular in the sale of goods context.

The case concerned two containerships which had been time-chartered to Hapag-Lloyd. Both vessels were due to be redelivered at the end of May 2021, but in fact were redelivered two and seven days late (in the case of the Skyros and the Agios Minas respectively). Hapag-Lloyd paid charterparty hire up to actual redelivery, by which date the market had risen sharply. Owners claimed damages for late redelivery on the usual measure under The Achilleas [2009] 1 AC 61, namely the difference between charterparty and market rates. However, prior to redelivery, Owners had entered into sale contracts (MOAs) to sell the vessels to buyers. It was a term of these contracts that Owners would not perform any further voyages with the vessels after redelivery under their Hapag-Lloyd charters.

In the arbitration below, Owners succeeded in their claim (on a preliminary issue) for the difference on the basis of: (i) quantum meruit; (ii) user damages; (iii) res inter alios acta / remoteness; and (iv) negotiating damages. Hapag-Lloyd appealed.

In the Commercial Court, Mr Justice Bright allowed Hapag Lloyd’s appeal, concluding that:

1. Quantum meruit: Notwithstanding dicta of Lord Denning MR to the contrary, no claim could lie in quantum meruit in circumstances where Owners remain entitled to charterparty hire until redelivery: [27]-[34].

2. User damages: User damages were not available following the judgment of Lord Reed in One Step (Support) Ltd v Morris-Garner [2018] UKSC 20: [35]-[42].

3. Negotiating damages: Negotiating damages were not available on the basis that the obligation to make timely redelivery could be said to create or protect a valuable asset: [43]-[46].

4. The Achilleas: Notwithstanding the dicta of Lord Hoffmann, the case was in fact not concerned with res inter alios acta but with remoteness: [51]-[71].

5. Res Inter Alios Acta / Sale of Goods: The MOA could not be disregarded as res inter alios acta pursuant to the line of cases in Rodocanachi v Milburn [1886] 18 QBD 67, Wertheim v. Chicoutimi Pulp Company [1911] AC 301, Williams Bros v Agius Ltd [1914] AC 510 and Slater v Hoyle & Smith Ltd [1920] 2 KB 11.

Of particular interest to shipping and commodities practitioners will be the analysis of the judge that the res inter alios acta rule does not apply where either: (i) the onward contract is for the same specific goods as those delivered under the main contract (so that the claimant was not free to buy/sell on the market) or (ii) when the main contract was concluded, it was contemplated that the onward contract would be satisfied with goods to be delivered under the main contract: [85]-[123].

Mr Justice Bright granted Owners permission to appeal on user damages and res inter alios acta.

A full copy of the judgment is available here.

Julian Kenny KC and James Lamming acted for the Owners in the s.69 appeal and in the arbitration below, instructed by Michael Volikas and Sophie Henniker-Major of Wikborg Rein LLP.