Skyros Maritime Corporation & Anor v Hapag-Lloyd AG

On late redelivery of a vessel under a time charter, the ordinary measure of damages remains the difference between the market rate and the charter rate for the overrun period where the market rate is higher. The entitlement does not depend on whether the owner would actually have fixed the vessel after timely redelivery. The owner’s arrangements for later employment, including a prior commitment to sell, are collateral matters and are disregarded in assessing loss. This approach may produce more or less than exact indemnity, but it promotes a certain and readily ascertainable measure. User damages do not provide a necessary alternative where the ordinary contractual measure applies; extending that doctrine to late redelivery would be novel and unwarranted.

The owners of two container vessels appealed under section 69 of the Arbitration Act 1996 against the decision of Mr Justice Bright in the Commercial Court, reported at [2024] EWHC 3139 (Comm). The vessels had been redelivered several days late under materially identical time charterparties, while the owners were committed under memoranda of agreement to sell them and would not have chartered them out after timely redelivery.

The arbitrators awarded substantial damages in principle, based on quantum meruit, user damages or negotiating damages. The Commercial Court rejected those bases and held that only nominal damages were recoverable. The appeal concerned user damages and whether the sale arrangements had to be taken into account in assessing damages. The issues concerning quantum meruit and negotiating damages were not pursued.

Lord Justice Males gave the leading judgment. Lady Justice Andrews and Lord Justice Coulson agreed. The appeal was unanimously allowed.

1. Ordinary measure. Late redelivery under a time charter is a breach. The established measure, where the market rate exceeds the charter rate, is the difference between the two rates for the overrun period. The rule applies whether or not the owner would or could have entered the market after timely redelivery. The court followed the longstanding maritime authorities, including The Peonia [1991] 1 Lloyd’s Rep 100, and applied the reasoning in The Achilleas [2008] UKHL 48; [2009] 1 AC 61.
2. Collateral matters. The distinction between remoteness and res inter alios acta is material. Remoteness concerns whether an identified loss is recoverable under the reasonable-contemplation principle. The collateral principle operates when identifying the claimant’s loss in the compensatory comparison. Arrangements made independently of the breach, including the owners’ sale commitments, must therefore be disregarded. The fact that the resulting measure may over-compensate or under-compensate in an individual case does not justify abandoning a settled and readily ascertainable rule. The Doric Valour [2024] EWCA Civ 1312 and The London Corporation [1935] P 70 supported that conclusion.
3. User damages. The discussion of user damages was expressly unnecessary to the primary conclusion. The court accepted that the reasoning in One Step (Support) Ltd v Morris-Garner [2018] UKSC 20; [2019] AC 649 concerns compensation for unlawful use of property and interference with a valuable right to control its use. It declined to extend that doctrine to late redelivery under a time charter. The owner retains possession, and the use is either contractually authorised or accepted in return for hire, so the case is not truly comparable with an invasion of property rights.
4. The arbitrators’ award was restored. The matter was remitted to them to assess damages for the overrun period by reference to the difference between the market rate and the charter rate. The relevant market rate remained to be determined.

• Court of Appeal (Civil Division) — The appeal was unanimously allowed. The arbitrators’ award was restored and the matter was remitted for assessment of damages.
• High Court, Commercial Court — Mr Justice Bright allowed the charterer’s appeals and held that the owners were limited to nominal damages: [2024] EWHC 3139 (Comm) .
• Arbitration — The LMAA arbitrators held that the owners were entitled in principle to substantial recovery for late redelivery.