Maritime misadventure: the case of the nominal damages

Where two vessels were returned late by a charterer, only nominal damages were recoverable, since even if the vessels had been returned on time, the owners could not have chartered them out owing to obligations under contracts with a third party. The owners had therefore suffered no actual loss.

Background - late return

Under the terms of two charterparties, Hapag-Lloyd was to redeliver by the end of May 2021 two vessels it had chartered. The vessels were returned late, and Hapag-Lloyd paid the hire rate for the overrun period. The owners claimed the difference between the hire rate and the higher market rate for this period.

Before redelivery, the owners entered into memorandums of understanding with a third party for the sale of the vessels, under which the owners agreed not to enter any further charterparties following redelivery.

An arbitral tribunal awarded the owners damages based on quantum meruit, user damages, and negotiating damages. The tribunal found the MOAs too remote to have an impact on damages and that the principle that a contract cannot affect the rights of a non-party applied (for those who like Latin: res inter alios acta). Hapag-Lloyd appealed. 

High Court - nominal damages only

The court disagreed with the tribunal and awarded the owners only nominal damages. 

As quantum meruit is relevant where services are rendered without any agreement as to remuneration, it could not apply in this case as hire was earned and paid under the terms of the charterparties during the overrun period.

User damages, relevant where a person has wrongfully used another’s property but not caused any pecuniary loss, were also not applicable as there was no wrongful use. The owners were never deprived of possession (the vessel captains were owner-appointed) and the use of the vessels beyond the redelivery date occurred within the charterparty terms – hire was paid at the contractually agreed rate.

Negotiating damages, which are based on a sum the owners could hypothetically have negotiated to compensate for late delivery, would only be available where a contractual obligation created or protected a valuable asset. Because the MOAs precluded the owners from further letting the ships, timely redelivery had no economic value, so no such asset existed.

The court also dismissed arguments the MOAs should have no bearing being too remote. The MOAs were contracts for the same specific goods as those under the charterparties, and because it was the MOAs, not late redelivery, which prevented the owners from going to market, they had suffered no recoverable loss.

[Ed.: The case is a reminder of the fundamentals. You need to be able to show loss. It's surprising the owner succeeded before the arbitration tribunal.]

Judgment: Hapag-Lloyd v Skyros Maritime