An important matter can be the calculation of damages in a breach of contract

situation. The basic principle is that a party should be put, as far as is reasonably possible, in the same position as if the contract had been performed subject of course to the rules relating to remoteness and mitigation. By and large there should be no windfall for the party breached against but simply a true measure of the loss which has been suffered by that party. In The ‘‘Timna’’ (see paragraph 60, above) Mr Justice Donaldson had this to say regarding damages:

‘‘It is, of course, the law that a claimant must prove his loss. However, a merchant ship is a profit-earning chattel, and in the case of this ship it is agreed that the measure of loss for the vessel’s detention is U.S. $2,500 per day or pro rata, i.e., the same rate as that agreed between the parties as applicable to demurrage claims. If, therefore, the owners prove that the ship was detained in a non-profit-earning state by the need to await orders, they establish a prima facie loss which, in the absence of further evidence, becomes a proved loss. If, on the other hand, there is evidence that the vessel could not have been used as a profit-earning chattel, even if she had not been so detained, the prima facie loss is rebutted. I see no reason to infer that the vessel could not have become an arrived ship at an earlier point of time than was in fact the case, just because no berth regularly used for the discharge of the type of cargo concerned was available. The absence of such a berth no doubt induced the charterers to delay nominating the first port of discharge, since it ensured that the vessel could not become an arrived ship at what, from their point of view, might be a premature moment, but that is quite another matter and involved a breach of their obligations under the charterparty. On the existing state of the evidence, I find the loss proved.’’

As stated already he awarded damages for the whole of the 16 days that the vessel was out of orders from the charterers without any set-off in respect of the allowed

laytime (which would of course become relevant when laytime actually com- menced). The award of damages was affirmed in the Court of Appeal,38 _Lord Denning adding (page 94 of the law report):

‘‘In any case, I think that Mr Goff was wrong in putting the burden of proof on the shipowners. It was the charterers who were in breach. It was for them to nominate a port. It does not lie in their mouth to say: ‘If we had nominated a port, the vessel could not have got there as an ‘‘arrived ship’’’. The matter was never put to the test, and it was their fault it was not put to the test. If they wished to say that there was no damage, they ought to have proved that there was no port at all to which the vessel could get as an ‘arrived ship’. They got nowhere near proving it.’’

The judgments of the High Court and Court of Appeal made no reference to setting off laytime in respect of a damages computation; the emphasis was very much on proving the loss and the onus of proof. Whether or not laytime should be set off in a damages calculation was touched upon in The ‘‘Delian Spirit’’, see below.

In The ‘‘Delian Spirit’’39_{(referred to on other matters in Chapters 1 and 2) the} owners appeared to get a windfall from the High Court. It was decided that the vessel was waiting for a berth within the limits of the port so that, on the face of things, laytime commenced but also that the charterers were in breach of the ‘‘reachable on arrival’’ provision in the charterparty. Originally, the shipowners claimed demurrage on the basis that time spent at the anchorage counted as laytime, but later restated their claim as one of damages for delay with a claim for demurrage in the alternative, the damage being based upon a delay of four and a half days while the vessel was waiting in the roads. The charterers maintained that no damages were payable because the vessel was an ‘‘arrived ship’’ as soon as she had arrived in the roads and an award of damages would deprive them of the benefit of 120 running hours of laytime which would have had the effect of more than exhausting the time that the vessel was waiting for a berth.

It was held by Mr Justice Donaldson (as he then was) that the charterers had two quite distinct obligations, one under the ‘‘reachable on arrival’’ provision and the other one to load and discharge the vessel within the laytime. In point of time these two obligations may or may not overlap wholly or partly but a breach of either must be considered separately from a breach of the other save in so far as it can be shown that the interaction of the clauses presents a situation in which no losses flowed from the breach.

In the present case, the charterers were in breach of their obligation under the ‘‘reachable on arrival’’ provision whether or not the vessel was an arrived ship and their liability to compensate the owners for any loss occasioned thereby does not deprive them of the benefit of the laytime. It is true that the laytime is wasted if the vessel is not at her berth but this flows from the charterers’ failure or inability to secure a berth for her and may well involve them in a further breach of contract in failing to complete loading and discharging within the laytime (indeed, it did in the present case). It does not flow as such from the operation of the ‘‘reachable on

38. [1971] 2 Lloyd’s Rep. 91.

arrival’’ provision and is not a case of their being deprived of the benefit of the laytime by the operation of that clause.

Mr Justice Donaldson went on to decide that the owners were entitled to damages for four and a half days of delay even though the laytime, if applied, would have extinguished any claim by the owners. His lordship was motivated, to a certain extent, by the overwhelming probability that, if a berth had been available and there had in consequence been no breach of contract by the charterers, the vessel would have gone straight in to a berth and would have completed loading and have sailed as expeditiously as she did four and a half days earlier. The charterparty did not provide for the payment of dispatch money so the owners would have had the use of their vessel four and a half days earlier than in fact occurred, without cost to them.

The Court of Appeal reversed Mr Justice Donaldson, deciding that the charterers were entitled to their full laytime as from when the vessel arrived and gave notice and it was only after using up that laytime that they were liable to demurrage at the agreed rate and they were not additionally liable for damages for delay under the ‘‘reachable on arrival’’ provision of the charterparty. Lord Denning (the then Master of the Rolls) said that he could not agree with the High Court judge since it would be most unjust that the charterers should be made liable twice over. He stated that the answer was given by a long line of cases which had established that where charterers had been guilty of a breach causing delay they were entitled to apply their laytime so as to diminish or extinguish any claim for the delay leaving the owners to claim for demurrage at the agreed rate for any extra delay over and above the laytime. The reason is because they have bought their laytime and paid for it in the freight and are entitled to use it in the way which suits them best and in particular to use it so as to wipe out or lessen any delay for which they would otherwise be responsible.

The position is now clear enough on the authorities that if a vessel has arrived at her destination then the charterers will be entitled to set off any laytime against the time that a vessel is waiting off a port when a breach of contract by them has occasioned that delay. If the vessel has not arrived at her destination then the position appeared to be open at one time. Sir Gordon Willmer, in The ‘‘Delian Spirit’’40_{had this to say:}

‘‘I prefer to say no more upon the difficult question which might have arisen if the vessel had not been found to be an arrived ship at the time when she was lying in the roads. But I certainly do not wish to be taken as accepting that, even in that situation, the owners would necessarily be entitled to prosecute an independent claim for damages, without giving credit for the laytime to which the charterers were entitled, and for which, as we have been reminded, they paid when they paid the freight.’’

In the same case Lord Denning delivered obiter that the laytime should be applied against the time the vessel is waiting in respect of a damages computation. He said:

‘‘The answer is given by a long line of cases which establish that where the charterers have been guilty of a breach causing delay, they are entitled to apply their laytime so as to diminish

or extinguish any claim for the delay, leaving the shipowners to claim for demurrage at the agreed rate for any extra delay over and above the laytime. The reason is because they have bought their laytime and paid for it in the freight, and are entitled to use it in the way which suits them best, and in particular to use it so as to wipe out or lessen any delay for which they would otherwise be responsible.’’

Lord Denning appeared to be putting it very wide in that a charterer would always be entitled to set off the laytime vis- `a-vis the waiting time in any damages computa- tion irrespective of whether or not the vessel had reached the exact geographical destination.

The matter is no longer open since it came up for consideration in The ‘‘Mass Glory’’,41_{which was an appeal from a decision by London arbitrators. The case} concerned a number of issues, including the setting off of laytime aspect.

The vessel entered Xiamen on Sunday, 14 June 1998 and passed the normal inward inspection later that day. She was then ready to berth and a berth was available for her, but she was unable to occupy it because the cargo documents were not in order and because the sellers of the cargo ordered the vessel not to allow anyone to have access to the vessel without production of an original bill of lading.

The master gave notice of readiness at 08.00 hours on Monday, 15 June but it was common ground that both voyage charters were berth charters and that since the vessel was not prevented by congestion from reaching her berth the notice of readiness was invalid.

The problems with the cargo documents were not resolved until 9 August. Discharging began later that day but no further notice of readiness was given then or at any time after she reached her berth. Discharge was completed on 19 August and the vessel left for Nantong to discharge the remainder of her cargo. The owners under each charterparty claimed damages for detention from the charterers in respect of the time lost while the vessel was kept waiting at Xiamen.

The disputes were referred to arbitration. The arbitrators held that the delay to the vessel at Xiamen was caused by the charterers’ breach of contract, that since the notice of readiness given on 15 June was invalid time did not start to count and the laytime exceptions did not apply while the vessel was waiting at the anchorage, and the whole of the time was to be taken into account in calculating damages for detention.

This decision of the arbitrators was upheld in the Commercial Court by Mr Justice Moore-Bick, who had these important words to say:

‘‘It has long been recognized that the completion of the carrying voyage is a critical stage in the adventure, not least because it marks the point at which the charterer’s obligation to co-operate with the owner in discharging the goods begins. For this reason it is usually also the point at which notice of readiness can be given in order to bring into operation the laytime and demurrage provisions of the charter and at which the risk of delay to the vessel passes from the owner to the charterer. The purpose of a notice of readiness in this context is twofold: to inform the charterer that the vessel has completed the carrying voyage and is at his disposal for the discharging of cargo; and to start the running of laytime. Unless the

parties have agreed otherwise a valid notice of readiness cannot be given until the vessel had reached her agreed destination, whether that be the port, berth or some other place identified in the charter.’’

He declined to adopt Lord Denning’s obiter (see above) and he also distinguished the case from the earlier 1991 World Navigator judgment (see later paragraph 62), as had the arbitrators, so that he rejected the premise that laytime saved should be set off regarding the damages claim.

While we now have some authority on the subject the author feels some disquiet about the result for the simple reason that a charterer buys the laytime and yet cannot have it set off in a damages computation simply because, strictly speaking, laytime has not commenced. While seeing the logic of not being able to set off something which has not yet commenced it is surely artificial to allow this somewhat theoretical point to deny a charterer what appears to be sensible, practical and just. To put it in a nutshell, it seems illogical to offset laytime if the vessel (in the case of a port charterparty) is anchored a few hundred metres within the port limits but not to do so if the vessel is anchored a few hundred metres the other way and just outside the port limits, after the completion of the sea voyage. The breach of contract, and the resulting delay, is the same whether or not the vessel is a little one side or the other of a line which, to a certain extent, may be somewhat artificial. Of course, the author realises that the Mass Glory case was concerned with a berth charterparty but it does not see why that should obfuscate a practical and fair application whereby a charterer is allowed what appears to be a sensible and just approach to a damages computation which would, in the event, appear to be in line with the general principles relating to damages. Surely, a charterer should be allowed to set-off the laytime which is bought in the contract in respect of a claim against him for damages where the vessel he has chartered waits at or off a port for a loading/discharging berth, after the completion of the sea voyage. Otherwise the owners of a vessel may obtain a windfall, as they did in The ‘‘Delian Spirit’’, prior to the appeal to the Court of Appeal (see above).

Having said the above, the fact is that we now have judicial authority on the matter and, since the Mass Glory decision was never appealed, we have to wait for an appeal to the Court of Appeal or to the House of Lords for any change in this aspect of maritime law. The judgment is, perhaps, another example of too much respect being paid to Lord Diplock’s four stages, in particular ‘‘the carrying voy- age’’; after all, there is a sound argument that, practically speaking the carrying voyage ends when a vessel gets at or off a discharging port (anchors or lies there) which may or may not be in within port limits, in the case of a port charterparty. As mentioned more than once in the book, if the vessel has reached a place from which notice of readiness can be given the owners’ remedy is not to claim for damages but to give a notice of readiness and use the laytime as a set-off, see for example LMLN 672—17 August 2005 in Chapter 1 and LMLN 329—13 June 1992 set out earlier in this chapter when dealing with implied terms.