The Achilleas
| The Achilleas | |
|---|---|
 |
|
| Court | House of Lords |
| Full case name | Transfield Shipping Inc v Mercator Shipping Inc |
| Decided | 9 July 2008 |
| Citation(s) | [2008] UKHL 48, [2008] 3 WLR 345, [2008] 4 All ER 159, [2008] 2 All ER (Comm) 753, [2008] 2 Lloyd's Rep 275 |
| Transcript(s) | Full House of Lords judgment |
| Case history | |
| Prior action(s) | [2006] EWHC 3030 (Comm) [2007] EWCA Civ 901 |
| Court membership | |
| Judge(s) sitting | Lord Hoffmann; Lord Hope of Craighead; Lord Rodger of Earlsferry; Lord Walker of Gestingthorpe; Baroness Hale of Richmond |
The Achilleas or Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48 is an English contract law case, concerning remoteness of damage.
Transfield Shipping was a charterer. It hired use of Mercator's ship, The Achilleas. Transfield was meant to have the ship for five to seven months, and return it no later than midnight, May 2, 2004. Mercator contracted to let the ship to another charterer (Cargill International SA) on May 8, 2004 at $39,500 a day for four to six months. But Transfield did not return the ship until May 11. With two weeks to go they got a job to carry coals from Qingdao, China across the Yellow Sea to Tobata and Oita, Japan. Since it was returned late, the new charterer, Cargill, agreed to take the ship, but only at $31,500 a day, since the freight market had fallen sharply.
The question was how much Transfield should pay to Mercator for returning the ship late. Transfield argued they should only pay an amount reflecting the difference between the first contract rate and the market rate for daily hire during the delay, at the market rate prevailing then. This would make $158,301.17. Mercator argued Transfield should pay the amount they had lost on the new chartering contract because of the late return, which adding up the cost over the months would be $1,364,584.37.
The arbitrators of the case, by a majority, decided in favour of Mercator. They held that the loss from getting a lower price on the next chartering contract was within the first rule in Hadley v Baxendale as arising "naturally, i.e. according to the usual course of things, from such breach of contract itself". It fell within that rule because it was damage "of a kind which the [charterer], when he made the contract, ought to have realised was not unlikely to result from a breach of contract [by delay in redelivery]".
The dissenting arbitrator, however, concluded that a reasonable person in Transfield's position would not have understood he was assuming liability for the risk of the type of loss that occurred. The shipping market's general understanding was that liability was restricted to the difference between the market rate and the charter rate for the period of lateness and
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