Demurrage – the nature of demurrage as liquidated damages – fundamental breach
The facts
The contract, referred to by Mocatta J at first instance as a “hybrid”, was a single voyage charter converted to provide for an undetermined number of voyages over a fixed two year period to carry coal between the USA and Europe.
The contract provided for laytime and demurrage.
In an arbitration, the owners were charged with deliberate tardiness to suit their own commercial purposes which resulted in fewer voyages than would have been possible if the voyages were carried out with reasonable dispatch. The charterers claimed loss of profits.
The issue was whether the demurrage clause provided exhaustive cover for delay.
The proceedings
A panel of arbitrators stated a consultative case for the court.
Mocatta J (at first instance), Sellers, Harman and Diplock LJJ (in the Court of Appeal) and Viscount Dilhorne, Lords Reid, Hodson, Upjohn and Wilberforce (House of Lords) all decided against the owners.
Counsel for owners were Brandon, MacCrindle and Evans; for charterers were Donaldson and Staughton. All (save for MacCrindle) later proceeded to distinguished judicial careers.
Discussion
The owners should have been successful as they suffered loss which was caused by breach of contract.
The outcome of this case mirrors that of the Achilleas (2009) where the correct measure of damages, albeit in the context of re-delivery in a time charter, was also in issue.
The doctrine of fundamental breach received special attention. Brandon QC was brought in as an impact player to argue this point in the House of Lords.
In the best judgment/speech, Lord Wilberforce explains in lucid fashion that it is not necessary to have a special doctrine of “fundamental breach” and that the cases said to employ it can be explained by the application of ordinary principles.
In both this case and the Achilleas, the prevailing viewpoint was that the parties intended the outcomes. The issue was therefore not one of principle, but of fact.
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