Lloyd's Maritime and Commercial Law Quarterly
LOSS OF PROFIT CAUSED BY THE TOTAL LOSS OF A SHIP: ITS RELATIONSHIP TO VALUE AND INTEREST
John Knott*
The cry of gulls, and the deep sea swell And the profit and loss.**
1. Introduction
A point of difficulty often occurring with claims arising from the loss by collision of a commercially operated ship is the extent to which an owner, in addition to recovering the value of his vessel, should receive compensation for any loss of profits. Behind some objections to claims for loss of profits are the ideas that such a loss is too remote or uncertain; or that it is extinguished by the shipowner’s failure to mitigate his loss by securing an immediate replacement; or that interest is a sufficient compensation; or that the valuation of his vessel automatically includes a full allowance for loss of profits. Claims for loss of profits can give rise to complex issues, the keys to the solution of which are scattered throughout the reported cases of the last 150 years. Even now, defendants sometimes seek to blot out such claims with stray drops of ink falling from the pens of 19th century judges. And the 60-year-old decision of the House of Lords in The Edison,1 casting its shadow over the whole battlefield, hovers like an enormous crow, its far-reaching wings obscuring the light.
This article traces some of the historical developments, in English law, of claims for loss of profits arising from the total loss of a commercially operated ship. Some observations are then made on the time and place as at which a ship’s value is determined for the purpose of a compensatory award. Finally, a summary is given of the main conclusions.2
2. Early cases: Dr Lushington’s rule
Almost 150 years ago Dr Lushington, then Judge of the Court of Admiralty, in explaining the rights of a shipowner whose vessel had been damaged in a collision,
* Admiralty Claims Manager, Holman, Fenwick & Willan, London.
** T. S. Eliot, Death by Water.
1. Liesbosch Dredger v. S.S. Edison [1933] A.C. 449; 45 Ll.L.Rep. 123.
2. In addition to the usual modern authorities, see, among earlier texts which contain useful information and perceptive comments, and which are in varying degrees still valid today: Ogus, The Law of Damages (London, 1973); Street, Principles of the Law of Damages (London, 1962); Hardy Ivamy, “Damages for Total Loss of Profit-Earning Vessels” [1960] J.B.L. 322; and Roscoe, The Measure of Damages in Actions of Maritime Collisions, 3rd edn. (London, 1929) (hereafter “Roscoe”). (Where “Street” is mentioned in what follows, this refers to Principles of the Law of Damages, and not to Street on Torts.)
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