Commercial Court Provides Further Guidance on Remoteness of Damage in Breach of Charterparty Cases

Sylvia Shipping Co Limited v Progress Bulk Carriers Limited [2010] EWHC] 542 (Comm) (The Sylvia)

This recent decision of Mr Justice Hamblen in the Commercial Court provides further useful guidance on the measure of recoverable damages in breach of charterparty cases. The House of Lords decision in The Achilleas in 2008 resulted in much debate and discussion on remoteness of damage and whether a new test of "assumption of responsibility" for a particular type of loss had been introduced by at least a majority of their Lordships. In the Amer Energy [2009] 1 Lloyds Rep 293, Mr Justice Flaux did not consider that any new test as to recoverability of damages in contract and remoteness different to the classic rule in Hadley v Baxendale (as refined in subsequent cases) had been laid down. Mr Justice Hamblen in this case takes a similar view and indicates that the orthodox approach to remoteness of damage remains the "standard rule" and that it is only in relatively unusual cases such as The Achilleas itself where a consideration of assumption of responsibility may be required.

Background

The dispute between the parties in this case was originally dealt with by arbitration, where the arbitrators held that the owners had failed to exercise due diligence and had breached their maintenance obligations under a time charter leading to a delay in readiness of the vessel to load cargo. The resulting delay led to charterers missing the laycan for a sub-fixture which was subsequently cancelled by the sub-charterers. The charterers re-fixed the vessel but the new sub-charter was less profitable and charterers claimed the resulting loss of profit from the owners. The arbitral tribunal found that the loss of profit under the sub-charter was recoverable. The owners appealed to the court, relying inter alia on the House of Lords decision in The Achilleas to argue that the appropriate measure of recoverable damages was limited to the difference between the market and charter rates during the period of delay.

The Achilleas related to the late redelivery of a time chartered vessel following a legitimate final voyage. The follow on charter was lost as a result and owners were forced to renegotiate a substantially reduced rate of hire with the new charterers. They sought to claim damages for the difference between the original and re-negotiated rates of hire for the entire duration of the follow on charter, which was for 4-6 months. The House of Lords however held...