On Friday, the English Commercial Court decided a contract damages case that may be destined for an appeal or two: Hapag-Lloyd v Skyros [2024] EWHC 3139 (Comm). It's an attempt by a victim of breach to recover market-based damages despite having in fact suffered no loss.
The case is about two vessels—the Skyros and the Agios Minas—chartered under time charterparties. The charterparties specified deadlines for the vessels to be redelivered. Yes, you guessed it (you’re getting good at this!), the vessels were returned late; 2 days late in the case of the Skyros and about 7 days late for the Agios Minas.
For cases like this there is a usual measure of damages. Typically, what the owners have lost is the the opportunity to charter the ship to someone else. Compensation means putting the owners in the position they would have been in if they had been able to earn the market rate. Here, the charterers had already paid hire for the extra days at the contract rate. But the market rate was higher. So the charterer in this case would have to pay the difference between market and contract rates for the overrun period.
This measure was applied in one the most contentious decisions on contract damages in English law, The Achilleas (2008). In that case, the owners tried to ratchet up the damages because, in fact, they had lost out on the ability to earn hire on a higher-than-market onward charterparty. Their actual loss was greater than the market loss. The House of Lords, however, applied the usual measure of damages, saying variously that the higher amount was too remote or that the charterer hadn't assumed responsibility for that loss.
This case raises the opposite issue—what if the actual loss is less? In fact, the owners weren't chartering the ships on redelivery. They had decided to sell the vessels and would have simply delivered them to the buyers when they got the vessels back. The late returns don't seem to have affected the sales contracts. The charterers thus said “in reality, the owners haven’t suffered any loss, so we shouldn’t have to pay more than nominal damages”.
The arbitrators concluded that the charterers would be liable for substantial damages in these circumstances.
The High Court, however, disagreed. The owners didn't suffer a loss and there was nothing in the case law to require the court to compensate the loss of the market rate.
That might seem easy, but there are cases involving breaches of carriage and sales contracts where market-based damages have been awarded despite actual loss being lower. I don't have room in the post but maybe we can get into this in the comments.
This whole area of law needs rationalisation; the judge encourages an appeal. If that happens, the Court of Appeal may benefit from writings by my colleagues Michael Bridge (whose work the judge wished had been cited to him) and Andy Summers, whose brand-new book Mitigation in the Law of Damages has arrived just in time for Christmas.
