the charterer newsletter - Charterers P&I Club

continued from page 4writers. There ample support is found, so it wasargued in the Court of Appeal, for thetraditional view. The traditionalists argued thatno court should depart from such an approachunless satisfied that they are clearly wrong. Itwas also argued that the rule was simple,certain and fair and above all one which wasadopted in practice by the shipping market.Contrary views. The owners of the Achilleaswhose vessel had been redelivered late saidthat the traditionalists had greatly overstatedthe position. There were in fact no Englishcases which had in fact decided as a matter ofabsolute principle the damages which shouldapply in a case like this. Whichever way thecharterers tried to argue it, the fact remained,(so owners said) that they had undoubtedlysuffered a loss of US$ 1,364,584.37 on accountof charterers breach of contract. On that basisthey were entitled to be put in the sameposition as if that breach had never occurred.Owners accepted that they were not entitledto recover in respect of any losses which eventhough they were caused by the breach weretoo remote. However, no one could ignore thefact that the arbitrators, having heard all theevidence of the parties to the contract thoughtthat those losses were not too remote.What did the judge decide and what did theEnglish Court of Appeal decide? Were damagesto be limited to approximately US$160,000 orUS$1.3 million?Having reviewed all the arguments andauthorities the Judge at first instance had nodoubt that the traditionalists were wrong. Hesaid:“To award damages in this case on the basis ofthe difference between the market rate andthe charter rate for the overrun wouldcompensate the owners for only a fraction ofthe true loss caused by the breach.” He alsosaid:“I have not come to the conclusion I havereached with any sense of regret. As LordAtkinson observed ……..it is a generalprinciple of law that in giving damages forbreach of contract the party complainingshould so far as it can be done by money beplaced in the same position as he would havebeen if the contract had been performed. Thatis a ruling principle. It is a just principle.”Did the Court of Appeal accept or reject theapproach adopted by the majority ofarbitrators and the judge at first instance? Theapproach was accepted – no overturn they said.They emphasized the importance of matterssuch as the likely business knowledge of thecharterer. They thought that a charterer of atime chartered vessel would know and if notcertainly ought to know that a new fixture wasvery likely to be entered into by the owner soas to follow as closely as possible the redeliveryof the vessel. That conclusion was reinforced bythe fact that this particular charterer was wellaware of the chartering market and should havebeen wary about the danger of late deliverygiven their background knowledge. They heldthat there was no fixed rule that damages forlate delivery of a time chartered vessel waslimited to the overrun period measure. On thatbasis the Court of Appeal decided that ownerswere entitled to the full sum of their claim plusinterest plus costs.SUMMARYThe decision in the Achilleas has been watchedand waited with great anticipation by ownersand charterers alike. It is likely to have a bigimpact on the negotiations for damagecompensation arising out of late delivery.Changes are likely to be needed to the tacticsto be adopted by charterers once late deliveryis known to be unavoidable. Of course the casecould reach the highest court in the land – theHouse of Lords, but until then the Achilleassounds a clear note of warning for charterersand their advisers.5