Hapag-Lloyd v Skyros: Calculation of loss (if any) caused by charterers late redelivery

Background

The awards determined the preliminary issue on assumed facts, and the same, therefore, applied to the judgment¹. Two containerships, MV Skyros and MV Agios Minas, were time chartered under separate but materially identical charterparties, to the same charterer. Before their redelivery dates, the owners had entered into MOAs with third party buyers to sell the vessels, which included a provision prohibiting the owners from entering into further charter fixtures for the vessels at the end of the subject charterparties.

In breach of the charterparties, the vessels were redelivered late (by about two days and seven days respectively). During the period of overrun, the charterers continued to pay the agreed hire rate, which was significantly lower than market rates at that time.

The owners commenced arbitration proceedings claiming substantial damages for the period of overrun, in the difference between the charter rate and the market rate. They argued that the MOAs, and any effect they may have had on the owners’ losses, should be disregarded because they were too remote to be taken into account for the purpose of calculating damages and, applying the legal doctrine of  res inter alios acta, were a matter between the owners and the third party buyers of the vessels and therefore should not affect the liability of the charterers. The charterers contended that, while they were in breach of the charterparties, only nominal damages could be awarded as their breach did not cause owners to lose the opportunity to profit from the higher market rates.

The arbitration tribunal accepted that the existence of the MOAs should be disregarded and awarded substantial damages to the owners.

The Commercial Court’s Decision

The Commercial Court disagreed with the arbitration tribunal, instead finding that the owners were entitled to nominal damages only. It reaffirmed that a claim for losses on late redelivery of a vessel is a claim in contract, and rejected the other grounds on which the owners relied as “makeweight”.  Those other grounds were:

1. Quantum meruit i.e. a claim for a reasonable sum in respect of the services supplied: This principle for restitution applies where services are rendered without any agreement as to renumeration. The Court rejected the owners’ reliance on quantum meruit on the basis that the charterparties were themselves an agreement for the hire rate and all services rendered, including during the period of overrun.
2. User damage: This applies where one party wrongfully uses another party’s property. The Court held that user damage did not apply here inter alia because the owners had not shown actual economic loss.
3. Negotiating damages: These are assessed by reference to the economic value of the right which has been breached i.e. the amount that the claimant could hypothetically negotiate from the defendant in return for releasing them from their obligations. Again, the Court held that this did not apply given that the owners in this case had not shown economic loss.

The Court went on to consider the impact of the MOAs after a detailed analysis of precedent. It held that the owners had expressly chosen not to enter the charter market at the end of the charterparties, and so had, by their own decision, lost the opportunity to capitalise on any increased market rates. The Court concluded that the principle of remoteness does not “create a right to recover damages that would not otherwise be recoverable because there had not in fact been any loss suffered”. 

Calculating losses for late redelivery, and beyond

Late redelivery

The Court confirmed the orthodox approach to calculating damages for late redelivery i.e. the difference between the charter and market rate, but emphasised that this is only the “normal measure of damage” and that each case will turn upon the particular terms of the charter and consideration of the facts. The Court made plain that there is no presumption of loss on the late redelivery of a vessel, where the rates have increased during the overrun period. 

Delayed delivery of goods and s. 53 of the Sale of Goods Act

In dealing with one of the arguments advanced by the owners, and whereas he was not grappling with this particular question in this case, the judge endorsed the broadly accepted position that “in cases of delayed delivery where the goods are accepted late, the normal measure is the difference between the market price at the time when delivery should have been made and the market price when the goods are actually delivered”.  

Court of Appeal