The Achilleas - judgment

10 July 2008

House of Lords restricts Charterers Liability for Late Redelivery

The House of Lords has very recently handed down judgment in Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48 (The Achilleas). In that case, the time charterers caused a ship to miss the laycan for its next fixture by redelivering the ship nine days late. The Owners suffered a loss, as they were forced to renegotiate the follow on fixture on a significantly lower daily rate. The Owners argued that they were entitled to recover the difference between the expected and the actual daily rate for every day of the entire period of the follow on charter. The charterers argued that they were liable only for the difference between the rate payable under their charter and the market rate for the nine days by which they redelivered late.
The matter was referred to Arbitration in London and the Tribunal found in favour of the Owners. That decision was upheld by the High Court and the Court of Appeal. But, in what one industry observer described as the most significant case on this subject for more than forty years, the House of Lords has unanimously overturned the Court of Appeals decision.
Further industry comment and legal analysis is likely to follow but in the view of the law firm, Reed Smith, the Lordships decision may very well prove to be one of the leading cases on remoteness in contract law, providing a rule which is clear, certain and easy to calculate and apply. The prospect for disputes would be enhanced if parties were left to deal with uncapped loss of profit claims, based on unknown contracts of unknown lengths, made at unknown times.
A copy of the Reed Smith client alert on this case can be accessed by clicking here. A copy of the full text of the House of Lords judgment is attached.