Ali Reza-Delta Transport Co Ltd. v United Arab Shipping Co SAG

For tortious destruction of a chattel, damages are prima facie measured by its market or resale value in its existing condition, regardless of whether the owner intends replacement. The valuation is evidence-based and has no standard measure applicable to every case. It is made at the time and place of destruction. Where specialist equipment is destroyed in Saudi Arabia, its local value may reflect the substantial costs of transport, importation and adaptation for local conditions. The value of equivalent equipment in Europe is not necessarily the correct measure. The absence of an available local market does not automatically make market value identical to replacement cost.

A container of gas lighters exploded in the port of Damman, Saudi Arabia, destroying handling equipment operated by the claimant terminal operator. The defendants were found liable under Saudi port rules imposing strict liability, and the claim was treated as one for tortious destruction with damages assessed under English law. The trial judge awarded US$115,800, using second-hand European prices and rejecting replacement cost in the absence of evidence that the equipment had been or would be replaced. The claimant appealed, seeking replacement cost or the equipment’s value in Saudi Arabia. The central issue was the proper assessment of market value at the place of destruction.

The appeal was allowed and the damages award was increased from US$115,800 to US$227,400.

1. The court accepted the guidance in The Maersk Colombo [2001] 2 Lloyd's Rep 275. For the tortious destruction of a chattel, the owner is prima facie entitled to its market or resale value in its existing condition. That entitlement does not depend on an intention to obtain a replacement. Market value must be assessed on the evidence, since no standard measure applies in every case.
2. The relevant valuation was the value at the time and place of destruction, namely Saudi Arabia. The European second-hand prices relied on by the defendants did not represent the Saudi value of the equipment.
3. The evidence showed that the Saudi value had to reflect the costs of transporting and importing the equipment and adapting it to local conditions, including tropicalisation. Those considerations remained relevant despite the age of the equipment. The expert’s evidence supported US$200,000 for the straddle carrier and US$26,600 for the truck. The court substituted their total, US$227,400.
4. It was unnecessary to decide whether replacement or reinstatement cost could independently be recovered, or whether the absence of an available Saudi market necessarily made market value equal to replacement value. The court indicated that this did not follow from the authorities and reaffirmed the absence of a standard measure.
5. Lord Justice Peter Gibson agreed with Lord Justice Tuckey and referred to The Baltic Surveyor [2002] 1 Lloyd's Rep 623, where a fact-specific assessment of the financial value of a second-hand chattel was suggested. Mr Justice Nelson also agreed. The appeal was allowed with costs. The successful party was awarded indemnity costs below, with enhanced interest at three per cent over prime rate from 21 August 2001 until payment, together with interest on the judgment until payment.

• Court of Appeal (Civil Division): [2003] EWCA Civ 684. Appeal allowed; the damages award was substituted and costs orders were made.
• High Court, Central London Civil Justice Centre (Mercantile List), His Honour Judge Brian Knight QC: defendants held liable, but damages were assessed at US$115,800 by reference to market value based on second-hand European prices.