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The recent London Arbitration 1/23 reminds us that bespoke clauses incorporated in time charters may allow owners to recover damages over and above those established in The Achilleas, [2008] UKHL 48 (which is authority for charterer’s liability for damages being otherwise limited to the difference between the contractual rate of hire and the prevailing market rate for the period of overrun). 

This case involved a head time charter and sub time charter on similar terms with the vessel having to be delivered no later than 1 July 2021 (maximum duration). A provision in the charter (cl.119) gave owners the option to refuse an offending order or to perform it “without prejudice to their right to claim damages, including consequential damages for breach of charter in case of late redelivery of the vessel”. Charterers were also obliged to pay the prevailing market rate if this was higher than the rate agreed.

Charterers had been made aware at the time of fixing that meeting the redelivery date was necessary to enable the vessel to be drydocked timeously (due to the expiry of its class certificates).

Charterers had sent owners several approximate re-delivery notices on a “good faith and best available information not considering any unforeseen circumstances” basis. The vessel was re-delivered late on 14th July 2021 after which she sailed to the drydock and arrived there on 22nd July 2021.  

As a result of the late delivery, owners lost a repositioning fixture and sought to claim damages for the loss of the repositioning fixture and for a ballast voyage from the discharge port under the time charters to a place near where the vessel was to be drydocked.  

Charterers contended that damages should be limited to the difference between the charter and market rate of hire for the overrun period. They denied responsibility for loss of hire at the repositioning rate and bunkers consumed during that period.

The Tribunal found that charterers were made aware of owners’ drydocking commitments and the repositioning fixture (to maximise the vessels profitability by fixing employment that would position her close to the drydock) was foreseeable and avoided the wasted costs of a ballast voyage. Owners’ claim fell within cl.119 and was not limited to damages within the second limb of Hadley v Baxendale (1854) 9 Exch 341. The need for drydocking was a special circumstance which owners had brought to the charterers’ attention and the parties’ actual knowledge was distinct from the situation in The Achilleas.

Owners’ losses were therefore not too remote, nor were they unpredictable, unquantifiable, uncontrollable or disproportionate. Owners’ additional claims were therefore accepted.

Owners had, in the alternative, claimed that charterers were in breach of an implied term that the redelivery notices were to be given honestly, in good faith and on objectively reasonable grounds. Owners were unable to show this was the case and the claim in the alternative failed.

Owners’ recovery here was specific to facts, namely the bespoke clause and special knowledge attributable to charterers. The decision is not an exception to the well-established Achilleas principles. It serves as an example of where remoteness principles will not trump owners’ ability to recover more than the (usual) market measure.

Assureds should carefully consider the implications of any bespoke clause on owners’ entitlement to re-delivery damages at the time of fixing before agreeing to the same, particularly how this may impact upon owners’ entitlement to recover damages in addition to those losses that would ordinarily be applicable in the absence of such clauses.

The MECO Group