Skyros Maritime Corporation & Anor v Hapag-Lloyd AG [2025] EWCA Civ 1529

[2025] EWCA Civ 1529Case No CA-2025-000152
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2024] EWHC 3139 (Comm)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING’S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Bright
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 28/11/2025
Before
LORD JUSTICE COULSONLORD JUSTICE MALESLADY JUSTICE ANDREWS
Between
SKYROS MARITIME CORPORATIONAppellantHAPAG-LLOYD AGRespondent‘SKYROS’ & ‘AGIOS MINAS’Respondent1) SKYROS MARITIME CORPORATION 2) AGIOS MINAS SHIPPING COMPANY Appellants/Owners- and -HAPAG-LLOYD AG‘SKYROS’ & ‘AGIOS MINAS’Respondent/Charterer
Julian Kenny KC & James Lamming (instructed by Wikborg Rein LLP) for AppellantsSteven Berry KC & Adam Board (instructed by MFB Solicitors Ltd) for RespondentHearing Hearing dates: 28 & 29 October 2025
Approved JudgmentThis judgment was handed down remotely at 10.30am on 28 November 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................
[1]When a time chartered vessel is redelivered late, but the owners are committed to selling the vessel and would not have chartered it again even if it had been redelivered on time, are they entitled to recover substantial damages assessed by reference to the market rate for the period of the overrun? In an arbitration conducted under the LMAA Rules, the arbitrators held that the owners were so entitled, but on an appeal under section 69 of the Arbitration Act 1996, a Commercial Court judge (Mr Justice Bright) disagreed. The issue now comes to this court with the permission of the judge.[2]I have concluded that the appeal should succeed. I would restore the order of the arbitrators and send the case back to them to assess the damages to which the owners are entitled.

The charterparty terms

[3]The arbitration was concerned with two New York Produce Exchange charterparties on materially identical terms, by which the owners of two container vessels, the ‘SKYROS’ and the ‘AGIOS MINAS’, chartered their vessels on long term charterparties to Hapag-Lloyd, a major German container line operator.[4]The ‘SKYROS’ charterparty, concluded on 20th February 2017, was initially for a period of minimum 11 months/maximum 13 months, with an option for the charterer to extend for a further period of minimum 11 months/maximum 13 months. The vessel was delivered to the charterer in April 2017.[5]Clause 4 provided that the charterer would ‘pay for the use and hire of the said Vessel’ at a daily rate of US $14,750 for the initial period and US $30,000 for the optional extension period, commencing at the time of delivery and continuing ‘until the hour of the day of her redelivery’.[6]During the currency of the charterparty, the charterer was entitled to employ the vessel as it wished within the specified geographical limits and subject to specified cargo restrictions. Redelivery was to be at a port in a range between Singapore and South Japan. Provision was made for a series of notices of the expected redelivery date to be given by the charterer.[7]By an addendum concluded on 12th March 2019, the charter was extended until minimum 1st March 2021, maximum 30th May 2021, the exact period to be in charterer’s option. Accordingly the latest time for redelivery was 24:00 on 30th May 2021.[8]The ‘AGIOS MINAS’ charterparty was in materially identical terms. It was concluded on 23rd March 2020, at a hire rate of US $22,000 per day, until minimum 15th March 2021, maximum 31st May 2021, with the exact period again in charterer’s option, and with redelivery either at Singapore or at a port between Hong Kong and Shanghai. Here, therefore, the latest time for redelivery was 24:00 hours on 31st May 2021.[9]Both charterparties were subject to English law and provided for arbitration in accordance with the LMAA terms current at the time when proceedings were commenced.

The facts

[10]The hearing before the arbitrators was conducted on the basis of assumed facts, summarised by the arbitrators as follows:
‘3. … By the terms of the Charterparties, the latest times when the Vessels could lawfully be redelivered were 24:00 on 30 May 2021 (Skyros) and 24:00 on 31 May 2021 (Agios Minas). Before these dates, the Owners entered into MOAs, dated 22 April 2021 and 23 March 2021, agreeing to sell the Vessels to respectively MSC Shipping SA and Maersk A/S. In breach of the Charterparties, both Vessels were redelivered late by the Charterers: Skyros by about two days and Agios Minas by about seven days. During the overrun periods, the Charterers paid hire at the rates agreed in the Charterparties. By this time, the rates which the market would have offered for the Vessels were significantly higher than the Charterparty rates. … 4. It is common ground between the parties for the purposes of the assumed facts that, even if the Vessels had been delivered timeously, the Owners would not have chartered them again after redelivery and so would not have earned any further hire. The Vessels would have been delivered to the buyers as soon as they were redelivered under the Charterparties.’
[11]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 under the MOAs. Accordingly the owners not only would not but could not have chartered the vessels out, at any rate without either breaking or renegotiating the contracts with their buyers.

The preliminary issue

[12]On the basis of these assumed facts, the parties invited the arbitrators to determine, as a preliminary issue, whether the owners were entitled to recover(i) substantial damages, compensation, remuneration or other monetary relief (as the owners alleged); or(ii) only nominal damages (as the charterer alleged).[13]The financial significance of this issue was that by May/June 2021 the market rate had risen substantially above the contract rates. The owners claimed damages or other compensation for the period of the overrun, some two days in the case of the ‘SKYROS’ and seven days in the case of the ‘AGIOS MINAS’, consisting of the difference between the market rate and the contract rate which the charterer had paid.[14]The assumed facts recorded that for the ‘SKYROS’ the short term market rate (i.e. for a fixture of around 30 to 60 days) at around the end of May or beginning of June 2021 was about US $190,000 per day, while the market rate for a fixture of about the same period as the charterparty (i.e. about 24 to 26 months) was about US $57,500 per day, in both cases net of commission. For the ‘AGIOS MINAS’, the equivalent figures were US $150,000 and US $45,000 per day respectively. The arbitrators were not asked to decide whether, if the owners were entitled to substantial damages, the applicable market rate was for a short-term fixture or a longer period fixture.[15]Perhaps needless to say, it was common ground that it would have been impossible to charter the vessels for the period of their respective overruns, which in both cases was only a few days.

Legitimate or illegitimate last voyages?

[16]It was the owners’ case that the charterer’s instructions for the last voyages before redelivery meant that the vessels could not reasonably be expected to complete the voyages in time for redelivery within the time allowed by the charterparties, in other words that they were orders for what is known as an illegitimate, as distinct from legitimate, last voyage. The distinction is explained by

Lord Justice Bingham in The Peonia [1991] 1 Lloyd’s Rep 100, 107 rhc to 108 lhc:

‘The cases and books draw a distinction between two cases which have become known as “the illegitimate last voyage” and “the legitimate last voyage”. In the former case the charterer gives orders for the employment of the vessel which cannot reasonably be expected to be performed by the final terminal date. He is therefore seeking to avail himself of the services of the vessel at a time when the owner had never agreed to render such services. It is accordingly an order which the charterer is not entitled to give (just as an order to visit a prohibited port would be) and in giving it the charterer commits a breach of contract (perhaps a repudiatory breach but that we need not decide). The owner need not comply with such an order, because he has never agreed to do so. Alternatively, he may comply with the order although not bound to do so: if he does comply, he is entitled to payment of hire at the charterparty rate until redelivery of the vessel and (provided he does not waive the charterer’s breach) to damages (being the difference between the charter rate and the market rate if the market rate is higher than the charter rate) for the period between the final terminal date and redelivery. … In this first case, the charterer’s order is illegitimate because he was not contractually entitled to give it, and the voyage (whether performed or not) is stigmatised as illegitimate because it is one the charterer could not under the charterparty lawfully require the owner to perform. In the contrasting case of the legitimate last voyage the charterer gives orders for the employment of the vessel which can reasonably be expected to be performed by the final terminal date. These are orders which the charterer is entitled to give, and so legitimate. …’
[17]However, it was not suggested before us that it is necessary to decide whether the last voyages were legitimate or illegitimate or that the resolution of this issue makes any difference to the issue which we do have to determine. That seems to me to be correct. In either case, as Lord Justice Bingham explained in The Peonia at 107 rhc a charterer is contractually obliged to redeliver the vessel by the final redelivery date and, if it fails to do so without fault on the part of the owner or some exonerating clause, commits a breach of the contract.

The arbitrators’ award

[18]The arbitrators, Sir Bernard Eder, Mr David Steward and Mr Peter Jago, described the preliminary issue as raising a novel point:
‘In essence, the question is whether substantial damages are recoverable for late redelivery of a ship under a time charterparty where there is evidence that after a timely redelivery, the owner could not or would not have chartered it out.’
[19]The charterer’s case was that an award of substantial damages in such circumstances would be contrary to the fundamental compensatory principle in contract that where a party sustains loss by reason of a breach, it is, so far as money can do it, to be placed in the same situation as if the contract had been performed (Robinson v Harman (1848) 1 Exch 850, 855, followed and applied in many cases over the last 170 years, most recently in Federal Republic of Nigeria v Process & Industrial Developments Ltd [2025] UKSC 36, [2025] 3 WLR 681, para 11). The charterer said that if the contracts had been performed by timely redelivery, the owners would not have chartered the vessels out and so would not have earned any hire at the high market rates prevailing in late May and early June 2021. Accordingly the damages should be nominal only.[20]The arbitrators held, however, that the owners were entitled to a substantial award. The primary basis for their conclusion was that the owners were entitled to a quantum meruit. Their analysis, in summary, was that there was an implied request by the charterer for services outside the scope of the charterparty (i.e. for the use of the vessel during the period of the overrun), coupled with an implied agreement to pay for those services at the current market rate; and that this was consistent with the principle of compensatory damages because it compensated the owners for providing a service outside the scope of that for which they had contracted.[21]Alternatively, if that was wrong, the arbitrators considered that the owners would be entitled to recover user damages, again consisting of the difference between the contract rate and the market rate prevailing during the overrun period. This was on the basis that such damages would compensate the owners for the loss of their right to use the vessels, which was a valuable right, whether or not the owners would actually have used them during the overrun period. The fact that the owners would not have chartered out the vessels, and would instead have sold them to their buyers, should be disregarded as being too remote or res inter alios acta.[22]Finally, if they were wrong on both quantum meruit and user damages, the arbitrators would have held that the owners were entitled in principle to negotiating damages for the period of the overrun, i.e. what would have been agreed in a hypothetical negotiation between the parties, although this would not necessarily have been the same as the prevailing market rate.

The judgment

[23]The judge considered that the owners were not entitled to a substantial recovery on any of the bases on which they had succeeded before the arbitrators.[24]He held that the quantum meruit principle could not apply because the services of the vessel had been provided pursuant to the charterparties, and hire had been earned and paid at the charterparty rate. Accordingly there was no basis for implying any request by the charterer to perform the voyage outside the scope of the charterparty, regardless of whether the last voyage was legitimate or illegitimate (see The Paragon [2009] EWCA Civ 855, [2009] 2 Lloyd’s Rep 688, para 25).[25]He rejected the claim for user damages because the owners remained in possession of their vessels at all times and did in fact use the vessels to provide the services under the charterparties which enabled them to earn hire until the time of redelivery. Although the charterer also had the use of the vessels, this use was not wrongful but was in accordance with the charterparties. Moreover, the charterer’s breach in redelivering the vessels late did not involve any invasion of the owners’ property rights.[26]Finally, the judge rejected the claim for negotiating damages measured by reference to the economic value of the owners’ rights which had been breached because, on the facts, timely redelivery was not of any economic value to the owners.[27]Having rejected the grounds on which the arbitrators had decided the preliminary issue in the owners’ favour, the judge embarked on an extended discussion of the principles applicable to the assessment of compensatory damages, including principles of remoteness and res inter alios acta. His conclusion was that the normal measure of damages for late redelivery in a case where the market rate is higher than the contract rate is the difference between the market rate and the contract rate for the period of the overrun, but that there is no scope for the recovery of such damages if the owners have not lost the opportunity to take advantage of the market rate during that period. He held that the owners had not lost that opportunity in the present case because of their commitment under the MOAs to deliver the vessels to their buyers without concluding any further fixture.[28]Accordingly the judge allowed the charterer’s appeals, holding that the owners were limited to nominal damages. He granted permission to appeal on two issues only,(1) whether the owners are entitled in principle to recover user damages; and(2) whether the owners’ contracts for the sale of the vessels must be disregarded in assessing any damages. Accordingly the issues concerning quantum meruit and negotiating damages are not before us.

Submissions on appeal

[29]For the owners Mr Julian Kenny KC submitted, in brief summary, that the owners are entitled to recover damages in accordance with the normal measure, that is to say the difference between the market rate and the contract rate for the period of the overrun, regardless of whether the owners could or would have chartered the ship on the market; and that the rationale for such damages is to compensate an owner for the value of the services of the vessel during the overrun period, of which it was deprived as a result of the charterer’s breach. Alternatively, the MOAs by which the owners agreed to sell the vessels were too remote to be taken into account in assessing the owners’ loss or should be disregarded as res inter alios acta.[30]For the charterer Mr Steven Berry KC submitted that the short answer to the appeal was that damages for late redelivery under a charterparty are to compensate the owner for loss of the opportunity to fix the vessel in the market, an opportunity which these owners did not have because of the terms on which they had sold their vessels. Accordingly the compensatory principle in Robinson v Harman and later cases means that only nominal damages could be recovered.[31]The issue of user damages was dealt with by Mr Adam Board, who submitted that damages for late redelivery are not compensation for a loss of use of the vessel; that user damages are granted to compensate for invasion of a proprietary or possessory right which deprives the owner of control of its property, but there had been no such invasion in this case; and that on the facts here, even if late redelivery could be considered as an example of wrongful use in a broad sense, timely redelivery was of no value to the owners because they were committed to delivering the vessels under the MOAs without using them to earn hire on the market.

The normal measure of damages for late redelivery

[32]It has been clear for over a century that in the event of late redelivery under a time charter where the market has risen above the contract rate since the date of the charterparty, the shipowner is entitled to recover damages in respect of the overrun period consisting of the difference between the market rate and the contract rate. The earliest case cited to us affirming that rule was Watson Steamship Co v Merryweather & Co (1913) 18 Com Cas 294, a decision of Mr Justice Atkin. Other cases in which this rule has been stated or applied include Meyer v R.F. Sanderson & Co (1916) 32 TLR 428, The Dione [1975] 1 Lloyd’s Rep 115, The Johnny [1977] 2 Lloyd’s Rep 1, The Black Falcon [1991] 1 Lloyd’s Rep 77, The Peonia [1991] 1 Lloyd’s Rep 100, The Gregos [1995] 1 Lloyd’s Rep 1 and The Paragon [2009] 2 Lloyd’s Rep 688.[33]This is a formidable line of authority, including cases decided by judges of great distinction in maritime law. Indeed, Lord Hoffmann in The Achilleas [2008] UKHL 48, [2009] 1 AC 61, para 10 was able to refer to ‘a uniform series of dicta over many years in which judges have said or assumed that the damages for late [re]delivery are the difference between the charter rate and the market rate’.[34]These statements of principle are reflected in the leading textbooks. Scrutton on Charterparties, 25th Edition (2024) refers first to the position when the last voyage is a legitimate one, and then to the position when it is illegitimate, but states the same measure of damages in both cases:
‘17-003. … The last voyage will be a legitimate one if reasonably calculated to end within the implied or agreed tolerance. If, through no fault of either side, the voyage does not finish within the tolerance, hire continues payable at the charter rate until the end of the period of express or implied tolerance, and, in the absence of an exonerating clause, the owner may recover damages for the period thereafter. In general such damages will be assessed by reference to the market rate for the period of the over-run. 17-004. If the charterer orders the vessel on a last voyage which is not calculated to end within the implied or agreed tolerance, he will be in breach. If the owner proceeds on the illegitimate voyage, hire will be payable at the charter rate up to the end of the tolerance period, and at the current market rate for the excess period thereafter.’
[35]Time Charters, 7th Ed (2014) is to the same effect I should add for completeness that the latest edition of Time Charters, 8th Ed (2025), departs to some extent from the analysis in the 7th Edition by suggesting that the rationale for the owner’s recovery of damages in accordance with the normal measure is that the owner has lost the value of the use of the ship during the overrun period, which is estimated on the basis of the market rate of hire at that time (paras 4.65 and 4.69) – in other words that they represent a form of user damages. However, as Mr Kenny acknowledged, these paragraphs were written with the question raised by the present appeal in mind. We were not referred to any other statement in a judgment or textbook which suggests that the normal measure described in the cases is a form of user damages. :
‘4.52. Where the charterers fail to redeliver the ship at the end of the agreed charter and the market rate of hire at that time exceeds the charter rate, the owners are entitled to damages compensating them for the loss of the opportunity to take advantage of the market rate during the period of the overrun. … 4.53. The normal measure of damages is the difference between what the owners earned in hire under the charter during the period of the overrun and what the market would have paid for the use of the ship during the same period. …’
[36]So too is Carver on Charterparties, 3rd Ed (2024) (omitting footnotes):
‘12-285. Legitimate last voyage Where the late redelivery has been caused by the performance of a last voyage, the charterer is liable in damages for breach, even if the voyage was legitimate. In such a case, the charterer is liable to pay hire (at the charter rate) until redelivery and damages at the market rate of hire for the period between the contractual date of redelivery and the actual date of redelivery (if the market rate is higher than the charter rate). Such damages are recoverable where the legitimate last voyage is not performed in time to allow redelivery by the redelivery date through some fault of the charterer or for reasons (such as bad weather) for which neither party is responsible, but they are not recoverable where the failure to perform the last voyage in time to allow timely redelivery is due to some fault of the shipowner itself. 12-286. Illegitimate last voyage The measure of damages is the same where the late redelivery has been caused by the performance of an illegitimate last voyage. The shipowner’s claim for damages might be advanced either as one for damages for instructing the vessel to undertake an illegitimate last voyage or damages for redelivering the vessel after the end of the charter period, but, in practical terms, there is no difference.’
[37]It is striking that in none of these cases or textbooks has there been any suggestion that the owner’s entitlement to recover damages in accordance with this measure has depended or should depend on whether the owner would in fact have entered the market to conclude a new fixture on the latest date when the vessel ought to have been redelivered. That is so despite the fact that entry into the market to conclude a new fixture on the date when the vessel ought to have been redelivered is probably the exception rather than the rule. Even in the (perhaps typical) case when the owner’s intention is to conclude a new fixture, the owner is likely to have concluded that fixture some time in advance of the latest contractual redelivery date, for example on receipt of the charterer’s redelivery notice, in order to minimise the time between hire earning fixtures. But it has not been suggested that the relevant market rate for the purposes of assessing damages should be the rate applicable on the date when the owner does in fact enter the market, or might reasonably have done so on receipt of a redelivery notice, which may well be different from the rate on the latest contractual redelivery date.[38]Moreover, an owner may have other plans for its vessel which do not include entry into a new fixture as soon as possible after redelivery. It may be convenient to have the vessel dry docked for repairs or periodic survey, or to carry out a positioning voyage at the owner’s own expense with a view to more favourable employment thereafter. Or the owner may have committed to sell the vessel, as in the present case, either because it has decided to exit the shipowning business or in order to purchase a new vessel for the future. In any of these events, which are commonplace and foreseeable, damages for the overrun period assessed by reference to the market rate at the latest contractual redelivery date will not reflect the owner’s actual loss. But again, it has not been suggested that these possibilities should affect the owner’s right to recover damages in accordance with the normal measure.[39]In my judgment this is in accordance with principle. The late redelivery means that the owner has lost the opportunity to conclude a new fixture at the market rate, but whether it would or could in fact have done so (or when) is res inter alios acta – or, to use more modern terminology, is a collateral matter disregarded by the law for the purpose of assessing damages.[40]In The Achilleas [2008] UKHL 48, [2009] 1 AC 61 the late redelivery caused the owner to lose the vessel’s next fixture, which had been concluded some weeks before redelivery, at a high market rate in a period of particular volatility. By the time of redelivery, the market had fallen and the owner was forced to renegotiate the follow-on fixture. The owner claimed damages, not limited to the overrun period, for the loss of this lucrative fixture consisting of the difference between the high rate initially agreed and the market rate which the owner had subsequently been forced to accept for the whole period of the follow-on charter. The House of Lords rejected this claim, holding that such damages were too remote, but that the owner was entitled to recover damages in accordance with the normal measure, that is to say the difference between the market rate and the charter rate for the period of the overrun. This was described as ‘the loss which would generally happen in the ordinary course of things’ if the vessel was redelivered late.[41]The true nature of the ratio of The Achilleas has been much discussed but need not concern us in the present case. Two passages are of particular interest. First, Lord Hoffmann said that:
‘23. If, therefore, one considers what these parties, contracting against the background of market expectations found by the arbitrators, would reasonably have considered the extent of the liability they were undertaking, I think it is clear that they would have considered losses arising from the loss of the following fixture a type or kind of loss for which the charterer was not assuming responsibility. Such a risk would be completely unquantifiable, because although the parties would regard it as likely that the owners would at some time during the currency of the charter enter into a forward fixture, they would have no idea when that would be done or what its length or other terms would be. If it was clear to the owners that the last voyage was bound to overrun and put the following fixture at risk, it was open to them to refuse to undertake it. What this shows is that the purpose of the provision for timely redelivery in the charterparty is to enable the ship to be at the full disposal of the owner from the redelivery date. If the charterer's orders will defeat this right, the owner may reject them. If the orders are accepted and the last voyage overruns, the owner is entitled to be paid for the overrun at the market rate. All this will be known to both parties. It does not require any knowledge of the owner's arrangements for the next charter. That is regarded by the market It was suggested in argument before us that Lord Hoffmann meant to say that the owner's arrangements were regarded by the law, rather than by the market, as being res inter alios acta.Whether or not that is so, the sense of the passage is clear. [as] being, as the saying goes, res inter alios acta.’
[42]This passage recognises expressly that the follow-on fixture, where there is one, is likely to be concluded some time in advance of redelivery, but this does not affect the normal measure of damages. That is because the owners’ particular arrangements for the further use of the vessel are disregarded by the law for the purposes of assessing damages.

Lord Rodger said this:

‘54. The obligation of the charterers was to redeliver the vessel to the owners by midnight on 2 May. Therefore, the charterers are taken to have had in contemplation, at the time when they entered into the addendum, the loss which would generally happen in the ordinary course of things if the vessel were delivered some nine days late so that the owners missed the cancelling date for a follow-on fixture. Obviously, that would include loss suffered as a result of the owners not having been paid under the contract for the charterers' use of the vessel for the period after midnight on 2 May. So, as both sides agree, the owners had to be compensated for that loss by the payment of damages. But the parties would also have contemplated that, if the owners lost a fixture, they would then be in a position to enter the market for a substitute fixture. Of course, in some cases, the available market rate would be lower and, in some cases, higher, than the rate under the lost fixture. But the parties would reasonably contemplate that, for the most part, the availability of the market would protect the owners if they lost a fixture. That I understand to be the thinking which lies behind the dicta to the effect that the appropriate measure of damages for late redelivery of a vessel is the difference between the charter rate and the market rate if the market rate is higher than the charter rate for the period between the final terminal date and redelivery: Hyundai Merchant Marine Co Ltd v Gesuri Chartering Co Ltd (The Peonia) [1991] 1 Lloyd's Rep 100, 108. In that passage Bingham LJ was adopting the approach which had been indicated in earlier authorities: Alma Shipping Corpn of Monrovia v Mantovani (The Dione) [1975] 1 Lloyd's Rep 115, 117-118, per Lord Denning MR, and Arta Shipping Co Ltd v Thai Europe Tapioca Service Ltd (The Johnny) [1977] 2 Lloyd's Rep 1, 2, per Lord Denning MR.’
[44]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.[45]Just as the owner in The Achilleas was not entitled to recover damages for loss of the follow-on fixture, so too the owners in the present case would not have been entitled to recover damages for loss of the sale contracts if the late redelivery of the vessels had given the buyers a right to cancel those contracts. In that event, at least, the sale contracts would have been regarded as either too remote or res inter alios acta.

Remoteness and res inter alios acta

[46]Although these terms have not always been used consistently or accurately, particularly in some of the older cases, there is an important difference between the principle of remoteness of damage and the principle that the law will disregard certain matters as collateral when assessing damages. The role of the remoteness principle is clearly and succinctly explained by Professor Treitel (Damages for breach of warranty of quality (1997) LQR 188):
‘… in discussing damages for breach of contract, it is necessary to distinguish between many questions: for example, one has to ask first what the injured party has lost and then for how much (if any part) of that loss he can recover damages. Under the rules of remoteness, the answer to the second question depends on the “reasonable contemplation” test associated with Hadley v Baxendale (as interpreted in later authorities). But the answer to the first question has nothing to do with that test: it simply depends on whether the injured party is worse off, as a result of the breach, than he would have been if the contract had been duly performed.’
[47]The principle of res inter alios acta, on the other hand, operates at the first stage of determining what the claimant has lost. It is part of the Robinson v Harman comparison between the financial position in which the claimant would have been if the contract had been performed and the financial position in which the claimant finds itself as a result of the breach. But it operates to require that some aspects of the claimant’s actual financial position should be disregarded for the purpose of assessing damages. Such matters are regarded as collateral, or res inter alios acta, because they arise independently of the circumstances giving rise to the loss, and are ignored in determining the damages to which the claimant is entitled. This is so regardless of whether the effect of disregarding such matters is to increase or decrease the loss which the law determines the claimant to have suffered.[48]For example, in The Doric Valour [2024] EWCA Civ 1312, [2025] 1 Lloyd’s Rep 401 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, i.e. as independent of the contractual arrangement between the bill of lading holder and the defendant shipowner.[49]In my judgment it is the res inter alios acta principle which applies in the present case. The particular arrangements which the owner may have made for the further employment of its vessel after redelivery – or in this case, for the sale of the vessels – arise independently of the circumstances giving rise to the breach and are therefore ignored by the law for the purposes of assessing damages. The result is that the owner is entitled to damages for late redelivery in accordance with the normal measure, that is to say to recover the difference between the contract rate and the market rate for the period of the overrun, regardless of any arrangements which it has in fact made for the future use of the vessel. The charterer is simply not concerned with such matters.[50]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’.

User damages

[51]The conclusion which I have reached so far is the result of applying the ordinary compensatory principle, which includes disregarding matters which the law regards as collateral. If this conclusion is correct, it is unnecessary to consider whether the owners would be entitled to the same recovery by way of user damages. However, as the point was argued, I will deal with it briefly. It arises on the basis, contrary to what I have decided, that applying the ordinary compensatory principle leads to the conclusion that the owners have suffered no measurable financial loss.[52]The leading modern authority which has discussed the circumstances in which user damages are recoverable is the decision of the Supreme Court in One Step (Support) Ltd v Morris-Garner [2018] UKSC 20, [2019] AC 649. In that case Lord Reed described user damages as being available where there has been an invasion of the claimant’s rights to property, including intangible property, but no pecuniary loss or physical damage to the property in question. The principle, described by Lord Shaw in Watson, Laidlaw & Co Ltd v Pott, Cassels & Williamson (1914) SC (HL) 18, is that ‘wherever an abstraction or invasion of property has occurred, then, unless such abstraction or invasion were to be sanctioned by law, the law ought to yield a recompense under the category or principle, as I say, either of price or of hire’. A famous example, given by Lord Shaw, is the liveryman’s horse:
‘If A, being a liveryman, keeps his horse standing idle in the stable, and B, against his wish or without his knowledge, rides or drives it out, it is no answer to A for B to say: “Against what loss do you want to be restored? I restore the horse. There is no loss. The horse is none the worse; it is the better for the exercise”.’
[53]A similar example of an invasion of property rights causing no pecuniary loss is the example of Lord Halsbury’s chair, described by

Lord Justice Nicholls in Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406, 1416:

‘It is an established principle concerning the assessment of damages that a person who has wrongfully used another’s property without causing the latter any pecuniary loss may still be liable to that other for more than nominal damages. In general, he is liable to pay, as damages, a reasonable sum for the wrongful use he has made of the other’s property. The law has reached this conclusion by giving to the concept of loss or damage in such a case a wider meaning than merely financial loss calculated by comparing the property owner’s financial position after the wrongdoing with what it would have been had the wrongdoing never occurred. Furthermore, in such a case it is no answer for the wrongdoer to show that the property owner would probably not have used the property himself had the wrongdoer not done so. In The Mediana [1900] AC 113, 117, Earl of Halsbury LC made the famous observation that a defendant who had deprived the plaintiff of one of the chairs in his room for 12 months could not diminish the damages by showing that the plaintiff did not usually sit upon that chair or that there were plenty of other chairs in the room.’
[54]After referring to this passage in One-Step, Lord Reed continued:
‘30. In these cases, the courts have treated user damages as providing compensation for loss, albeit not loss of a conventional kind. Where property is damaged, the loss suffered can be measured in terms of the cost of repair or the diminution in value, and damages can be assessed accordingly. Where on the other hand an unlawful use is made of property, and the right to control such use is a valuable asset, the owner suffers a loss of a different kind, which calls for a different method of assessing damages. In such circumstances, the person who makes wrongful use of the property prevents the owner from exercising his right to obtain the economic value of the use in question, and should therefore compensate him for the consequent loss. Put shortly, he takes something for nothing, for which the owner was entitled to require payment.’
[55]Much of this reasoning can be applied to the late redelivery of a vessel on time charter, albeit that the owner’s claim is for damages for breach of contract rather than for a tortious invasion of property rights. By continuing to use the vessel after the latest contractual redelivery date the charterer is wrongfully using the owner’s property, albeit that under a time charter the owner retains possession of the vessel. The right to control the use of the vessel can be seen as a valuable right, as demonstrated by what the market is prepared to pay for such a right. By failing to redeliver on time the charterer prevents the owner from exercising its right to obtain the economic value of the use in question. That is so regardless of whether the owner would in fact have exercised that right, just as the liveryman would not in fact have hired out the horse and Lord Halsbury’s chair would have remained unoccupied in the corner of his room.[56]However, while much of the reasoning of Lord Justice Nicholls and Lord Reed can be applied to the late redelivery of a vessel on time charter, the question is whether it should be extended in this way to what would be a novel situation. In my judgment it should not. If I am wrong in my primary conclusion, that must be because the law does not require the owners’ arrangements for the sale of the vessels to be disregarded as collateral for the purpose of assessing damages in accordance with the basic compensatory principle. Moreover, although late redelivery can to some extent be characterised as a wrongful use of property, it is in one sense a use to which the owners have agreed. Either the last voyage was legitimate, in which case the charterer was entitled to require it to be performed, albeit liable in damages in the event of an overrun; or it was illegitimate, in which case the owner need not have accepted the order but did in fact do so and received hire at the contract rate. This is not truly comparable with an invasion of property rights as in the case of the liveryman’s horse or Lord Halsbury’s chair.[57]In those circumstances I see no justification for introducing into the law of damages in contract a novel basis of recovery, outflanking the basic compensatory principle and awarding user damages where in fact no loss has been suffered.

The carriage and sale of goods cases

[58]We had the benefit of extensive submissions on the sale of goods and carriage cases concerning the circumstances in which a claimant’s sub-contracts should be taken into account for the purposes of assessing damages for non-delivery, late delivery and delivery of damaged goods. These included cases such as Rodocanachi, Sons & Co v Milburn Brothers (1886) 18 QBD 67, Wertheim v Chicoutimi Pulp Co [1911] AC 301, Williams Brothers v Ed. T. Agius Ltd [1914] AC 510, Slater v Hoyle & Smith Ltd [1920] 2 KB 11 and R & H Hall Ltd v W.H. Pim Jnr & Co Ltd (1928) 30 Ll L Rep 159. In my opinion these are potentially deep waters which it is unnecessary to explore in this appeal. This appeal can and should be decided on the relatively straightforward basis which I have sought to explain.

Conclusion

[59]Accordingly I would allow the appeal and (albeit for different reasons) would restore the award of the arbitrators.[60]The case will therefore have to go back to the arbitrators to assess the damages to which the owners are entitled for the overrun period. These will need to be assessed on the basis that the owners are entitled to recover the difference between the market rate and the contract rate, but the question of what is the relevant market rate will need to be determined. The only case cited to us which bears on that question is The Johnny [1977] 2 Lloyd’s Rep 1, where the Court of Appeal was divided, but that was a case on the Baltimore form of charterparty with an express clause requiring the charterer ‘to pay the market rate’ if higher than the contract rate in the event of late redelivery.

LADY JUSTICE ANDREWS:

[61]For the cogent and compelling reasons set out by my Lord, Lord Justice Males, I too would allow this appeal. LORD JUSTICE COULSON:[62]I agree that, for the reasons given by my lord, Lord Justice Males, this appeal must be allowed. As he explains, the maritime authorities point firmly to that conclusion. But as the arguments proceeded, I found myself drawn to a different but analogous line of cases: those where an asset had been damaged by the defendant, who then sought to avoid the ordinary measure of loss (in those cases, the cost of repair) by relying on subsequent events. In Manchikalapati v Zurich Insurance PLC [2019] EWCA Civ 2163, it was submitted that, because the homeowners had not carried out any repairs works themselves, they had suffered no loss; in The London Corporation [1935] P 70 it was argued that, because the owners had previously arranged that the vessel was to be sold and broken up, it would never be repaired, and again there was therefore no loss. Neither argument succeeded. In the latter case, Greer LJ referred at page 78 to the sale of the vessel as an “accidental circumstance which ought not to be taken into account in the way of diminution of damages”. In my view, the fact that, in the present case, the vessels had been sold and therefore could not have been chartered for the period of the overrun, was a similar “accidental circumstance” which was irrelevant to the assessment of damages.