On 13 December 2024, Mr Justice Bright handed down judgment in the case of Hapag-Lloyd AG v. Skyros Maritime Corporation and Agios Minas Shipping Company [2024] EWHC 3139 (Comm), two related arbitration appeals concerned with the assessment of damages upon late redelivery of containerships under time charters.
The main issue in the appeals concerned the res inter alios acta rule and its exceptions, including the long vexed question of how, if at all, to reconcile the leading cases of Slater v. Hoyle & Smith [1920] 2 KB 11 (CA) and Wertheim v. Chicoutimi Pulp Co [1911] AC 301 (PC).
The appeals arose from two time charters, by which vessels were to be redelivered at the end of May 2021. Both ships were delivered late: by two days for Skyros and seven days for Agios Minas. However, prior to redelivery, the owners had sold both vessels pursuant to sale contracts (MOAs) in which the owners agreed not to enter into any further charter fixtures before each sale was completed. The owners therefore could not and would not have traded the vessels in the market even if they had been redelivered on time by charterers.
Despite this, the owners claimed damages or a reasonable sum assessed at the market rate on grounds of quantum meruit, user damages, and negotiating damages. On a preliminary issue, the arbitral tribunal decided that owners were entitled to recover substantial damages or a reasonable sum on each one of these grounds. The charterers appealed, pursuant to s. 69 Arbitration Act 1996.
In the Commercial Court, Mr Justice Bright has allowed charterer’s appeals and concluded that owners could recover no more than nominal damages. In doing so:
(a) The Court reaffirmed the ‘orthodox’ usual measure of damages for late redelivery of a time chartered ship as the difference between the charter rate and the market rate for the vessel during the period of overrun (at [22]-[25]).
(b) The Court rejected owners’ claim to recover a quantum meruit based on an implied contract, as the express charters governed the full period in which the vessels were providing services to charters (at [27]-[34]).
(c) The Court rejected owners’ case that damages for late redelivery of a time chartered vessel compensate for a ‘loss of user’ by the owner of his ship during the overrun period (at [35]-[42]) or that negotiating damages could be awarded where, on conventional principles, no loss has been suffered (at [43]-[46]).
(d) The Court carefully considered, but distinguished, the House of Lords’ decision in The Achilleas [2008] UKHL 48, finding it to be concerned with remoteness and not res inter alios acta (at [50]-[71]).
(e) The Court declined to follow the long-standing, but controversial, Privy Council decision in Wertheim that a distinct res inter alios acta rule applies in cases of late performance that permits the court to take account of an onward contract when assessing damages (at [84]).
(f) The Court followed the Court of Appeal’s decision in Slater v. Hoyle & Smith, ruling that the res inter alios acta rule does not apply where either: (i) an onward contract is for the same specific goods as those delivered under the main contract; or (ii) the intended use of the same goods was known to, or at least contemplated, by the parties when the main contract was agreed (at [110]-[123]).
(g) On that basis, the MOAs were onward contracts for the same specific goods (i.e. the ships) and were to be taken into account when assessing damages, such that the owners suffered no recoverable loss caused by the late redelivery of their vessels (at [124]-[132]).
The decision provides welcome guidance as to the scope of the res inter alios acta rule and its application and exceptions. It is likely to be received with interest by commercial parties dealing with chains of contracts for the sale of goods or supply of services.
Bright J. has granted permission to appeal on points relating to user damages, remoteness, and res inter alios acta.
A full copy of the judgment is available here.
Steven Berry KC and Adam Board acted for the charterers, Hapag-Lloyd AG. They were instructed by Ingolf Kaiser and Ryan Hunter of MFB.
