TRANSFIELD SHIPPING INC V MERCATOR SHIPPING INC (THE ACHILLEAS)

[2008] UKHL 48, House of Lords, Lord Hoffmann, Lord Hope of Craighead, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, Baroness Hale of Richmond, 9 July 2008

Charterparty (Time) – Damages for late redelivery – Charterers ordered legitimate last voyage - Owners missed a fixture as a result of late redelivery – Whether owners entitled to damages for loss of profits under subsequent fixture – Remoteness of damage – Hadley v Baxendale

As a result of charterers’ late redelivery in a precipitously falling market, owners of Achilleas had to renegotiate the subsequent fixture at a lower rate of hire and claimed the difference between the original rate and the renegotiated rate for the intended duration of the charterparty from the charterers. Reversing the Court of Appeal decision, the House of Lords held that the appeal would be allowed. Although the event itself (late redelivery) would not have been unforeseeable to charterers, they would also know that bar in exceptional circumstances, the owners would be able to turn to the market to make up for a lost fixture. The type of loss was not such that it should be borne by charterers. In five separate speeches, their Lordships reasoned each in their individual way to arrive at the same conclusion. Lord Hoffman emphasised the expectations of the parties to the contract against the background of the particular market and thought that while the type of loss was within reason, the size of the loss was completely unforeseeable. Lord Hope thought that the concept of remoteness provided the most appropriate definition of the type of loss. Lord Rodger elaborated on the nature of the loss to discern its type. Lord Walker emphasised the level of probability of the loss over its type. Baroness Hale dissented on the outcome but preferred the opinion of Lord Rodger over the others and thought that the applicability of the result should be limited to the shipping market.