Posted: 04/12/2025
Skyros Maritime Corporation & Agios Minas Shipping Co v Hapag-Lloyd AG [2025] EWCA Civ 1529
The Court of Appeal has delivered an important judgment, reinstating an arbitral award (albeit on different grounds) in favour of shipowners and clarifying the principles governing damages for late redelivery of vessels.
Two container vessels, Skyros and Agios Minas, were chartered to Hapag-Lloyd under NYPE charterparties. Both were redelivered late by two and seven days respectively and by that time the owners had already agreed to sell the vessels and could not re-charter them. In fact, under the terms of the MOAs for the sale of the vessels, the owners had agreed not to enter into any further charter fixtures before delivering the vessels to the buyers.
Arbitrators awarded damages based on the difference between the market rate and the charter rate during the overrun period. The Commercial Court overturned this, limiting damages to nominal sums on the basis that the owners would not have re chartered the ships.
The Court of Appeal, with Lord Justice Males giving the leading judgment, overturned the first instance decision.
Lord Justice Males noted:
Despite the particular context, Lord Justice Males’s dicta appear to have wider reaching consequences and might seem to challenge the well established compensatory principle of English law. At first glance, the judgment looks as if it undermines the principle because the owners received damages even though they had already sold the vessels and could not in fact re charter them. However, the Court of Appeal was careful to show that the principle is not shaken and is simply applied and confirmed.
This is not the first judgment to give that impression. For example, in The Doric Valour [2024] EWCA Civ 1312 (where Lord Justice Males also gave the leading judgment), a bill of lading holder was entitled to recover damages based on the difference between the sound arrived value and the actual value of damaged cargo despite the fact that it had received the full price for which it had sold the goods.
As a result, the bill of lading holder recovered damages for a loss which it had not in fact suffered because its arrangements with its buyer were treated as collateral, ie as independent of the contractual arrangement between the bill of lading holder and the defendant shipowner.
The court cited with approval a textbook extract dividing the assessment of damages into two stages:
Res inter alios acta operates at stage A, excluding from the assessment aspects of the claimant’s actual financial position that are collateral and arise independently of the circumstances giving rise to the loss. This applies regardless of whether disregarding such matters increases or decreases the loss determined by law.
Remoteness operates at stage B, requiring examination of what was reasonably within the contemplation of the parties.
The compensatory principle requires damages to reflect the position the claimant would have been in had the contract been performed. However, certain matters such as the sale of the vessels in this case are simply not the wrongdoer’s concern. These collateral matters lie outside the nexus of the breach and must be disregarded, regardless of how this affects the claimant’s recovery.
As Lord Justice Males observed (referring to Lord Rodger’s dicta in The Achilleas [2008] UKHL 48): 'This passage recognises that the normal measure may either over- or under-compensate the owner in some cases. However, that is not a reason for departing from it.'
In short, the decision does not undermine the compensatory principle. Instead, it clarifies that compensatory damages are assessed by reference to contractual entitlements and market conditions not by scrutinising collateral dealings, an approach which preserves commercial certainty and predictability.
This is an important decision with potentially wider implications for the assessment of damages in charterparty and carriage of goods contracts, where issues of quantification may be revisited under this clarified approach.
Claimants now have a more straightforward task in quantifying damages by reference to ordinary measures. Disclosure of collateral arrangements may no longer limit entitlement to damages, since such arrangements are disregarded. Instead, claimants may rely on expert evidence as to the state of the market at the time of loss without waiting for disclosure of actual dealings that might have improved or worsened their net financial position.
This approach may cut both ways, sometimes favouring claimants and sometimes not, but it assists in more informed decision making when handling claims. Remoteness and the compensatory principle remain intact and operate in the normal way to prevent overcompensation when inappropriate.
Lord Justice Males noted:
'In my opinion this is a beneficial outcome which promotes certainty in commercial dealings, and enables accounts to be closed and disputes settled with a minimum of complication and expense. If it were otherwise, a charterer could never know the extent of its liability without investigating what the owner had arranged for the future use of the vessel, and there would be an incentive to take every case to an arbitration in the hope that something would turn up on disclosure.
'If it is said that on the facts of the present case this results in something of a windfall for the owner, I would respond, with Lord Justice Scrutton in Slater v Hoyle & Smith Ltd [1920] 2 KB 11, 25, that 'the rules of English law do not always give exact indemnity'; and with Lord Justice Greer in The London Corporation [1935] P 70, 78 (a case of damage to a ship in which the owner recovered the full cost of repair despite having sold the vessel to be broken up), that it is 'desirable that there should be a measure of damage which can be easily and definitely found'.'
It remains to be seen whether this is the final word on the matter or whether the point will be addressed further.
© 2025 Penningtons Manches Cooper LLP.
All rights reserved.
Website design by Frontmedia / Dynamic Pear
Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.
Return to news headlines 