Remoteness of damages in breach of charterparty cases - Sylvia Shipping Co Ltd v. Progress Bulk Carriers


Published: 28 May 2010

Remoteness of damages in breach of charterparty (C/P) cases revisited by the Commercial Court in:  Sylvia Shipping Co Ltd v. Progress Bulk Carriers Ltd [2010] EWHC 542 (Comm) (The Sylvia)

Following the House of Lords decision in the Achilleas [2008] 2 Lloyd’s Rep. 275, the topic of remoteness of damages in breach of C/P cases has been heavily debated, both due to the fact that in the Achilleas there was a split decision by the arbitrators (2-1), that the High Court and Court of Appeal, who followed the arbitrators’ majority decision, were eventually overruled by the House of Lords, and due to the fact that although all members of the House of Lords deciding the Achilleas did reach the same conclusion, they did do so for different reasons.

In the Achilleas the vessel was redelivered slightly late following which a claim for damages was raised by the owners where they did claim loss of profit during the entire period of the subsequent C/P. Eventually, the owners were merely awarded damages for the actual overlap period.

Already in the Amer Energy [2009] 1 Lloyd’s 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 the Hadley v. Baxendale had been laid down in the Achilleas.

In the new judgment, the Sylvia from 18 March 2010, Mr Justice Hamblen takes a similar view and indicates that the orthodox approach to remoteness of damages 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.

The factual position in the Sylvia was somewhat reversed compared with the Achilleas. In the Sylvia the owners had chartered the vessel to the charterers pursuant to a NYPE C/P, dated 22 February 2000. On 20 March 2004, the charterers entered into a sub voyage charter for a carriage of cargo of wheat from Baie Comeau to Casablanca with a laycan spread of 14-22 April 2004, and on 13 April 2004 the charterers declared the next load port as Baie Comeau.

Following some problems with the state of the vessel’s holds at the previous port of discharge on 19 April 2004, the vessel arrived at Baie Comeau. The holds were inspected by the Port State Control who issued a Detention Order at 15:00 hours that day, and repairs were commenced on 22 April 2004.

However, on the very same day, the new charterers cancelled the sub charter, and on 23 April 2004 the charterers entered into a substitute fixture for the vessel with yet another charterer for one time charter trip to Lomé with delivery passing Baie Comeau anchorage outbound between 29 April and 3 May 2004.

The charterers did claim the loss of hire between the first sub charter and the second sub charter for the entire duration of the first sub charter, and the charterers did succeed with their entire claim in that respect.

Upon a closer reading of the two cases the Achilleas and the Sylvia it is clear that there are material differences between the two situations, not least of all the fact that in the Sylvia it could not be said, as it could in the the Achilleas, that there was a general market expectation that charterers would not be entitled to lost profit. It is easy to see why the market expectation is as the case law has found it to be; surely it is only right that a limit is placed on the damages recoverable in circumstances where the potential loss of profit on a following time charter is completely unquantifiable as it could be for any length of time. This may be contrasted with the situation in the Sylvia where the profit lost on the sub charter was always going to have a limit because the sub charter could not extend beyond the period of the head charter.

Thus after all the Achilleas may not have changed the law dramatically on remoteness of damages in breach of C/P cases, and in the very vast majority of cases (probably except cases with very unusual facts as the Achilleas), the law as outlined in the Hadley v. Baxendale and confirmed in the Heron II [1969] 1 Ac 350 will still be applicable.