Court of Appeal decision in The Skyros and Agios Minas: A yardstick on the assessment of damages for late redelivery?

In the significant case of Skyros Maritime Corporation & Anor v Hapag-Lloyd [2025] EWCA Civ 1529 the Court of Appeal overturned the Commercial Court’s decision and found that where a charterer redelivers a ship late, the owner is entitled to the usual measure of damages for the overrun, namely the difference between the charter rate and the relevant market rate for that period, even where the owner’s contractual arrangements with third parties (MOAs in this case) mean that they would not have been able to take advantage of the market.

The Court of Appeal held that those arrangements are res inter alios acta (i.e. collateral matters) and are to be disregarded when assessing damages.

Facts

The containerships Skyros and Agios Minas were chartered from Skyros Maritime Corporation and Agios Minas Shipping Company (“the Owners”) by Hapag-Lloyd AG (“the Charterer”) under charterparties dated 20th February, 2017 and 23rd March, 2020 respectively (“the Charterparties”).  The Charterparties were on NYPE form for a minimum period of 11 months and a maximum period of 13 months. The ships were redelivered late, the Skyros by about two days and the Agios Minas by about seven days. During these overrun periods the Charterer paid hire at the rates agreed in the Charterparties but the market rates had, in the meantime, significantly increased.

Before redelivery, the ships were sold to third-party buyers pursuant to MOAs in which it was agreed that the ships would not be the subject of further charters after the expiry of the current Charterparties, but would be delivered to the buyers directly after the Charterparties had concluded. Thus, it was common ground between the parties that even if the ships had been redelivered on time, they would not have been chartered again or earned any further hire, but they would have been delivered to the buyers upon redelivery under the Charterparties.

The Owners claimed as damages the difference between the hire rates under the Charterparties and the market rate for the overrun period in accordance with the general principles of measuring damages for late redelivery. The Charterer’s case was that the Owners are not entitled to such damages, because its breach had not caused the Owners to suffer any such loss. The Charterer argued that since the Owners had entered into MOAs prior to redelivery in which they had agreed that they would not charter the ships after the expiry of the current Charterparties, they would not be able to take advantage of the higher charter rates prevailing in the market in any event. The Charterer contended that any loss was, therefore, purely notional.

Arbitration proceedings

The Owners commenced arbitration proceedings in which the tribunal was asked to determine a preliminary issue as to whether the Owners were in principle entitled to recover substantial, rather than merely nominal, damages. The tribunal decided that the Owners were entitled to recover substantial damages or a reasonable sum on grounds of quantum meruit, user damages, and negotiating damages. The Charterer appealed under section 69 of the Arbitration Act 1996, i.e. appeal on a point of law.

Commercial Court judgment

In the Commercial Court, Mr Justice Bright allowed the Charterer’s appeals and concluded that the Owners were entitled only to nominal damages.

The court disagreed with the Owners and while it reaffirmed that "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", if an owner has not lost any such opportunity because of a commitment such as the one in the MOAs in this case, there is no scope for this kind of compensation to arise. The principle of remoteness and assumption of responsibility is one that constrains and limits the right to recover damages, even though loss has been suffered. It does not create a right to recover damages that would not otherwise be recoverable because there was not, in fact, any loss suffered.

The judge granted permission to appeal on whether: (i) the MOAs must be disregarded in assessing any damages and (ii) the Owners were entitled in principle to recover user damages. Accordingly, the issues concerning quantum meruit and negotiating damages were not addressed by the Court of Appeal.

Court of Appeal judgment

The Court of Appeal reversed the Commercial Court’s decision on whether the MOAs should be considered when assessing damages, restored the arbitration tribunal’s award and referred the case back to the tribunal to assess the Owners’ damages.

The court reaffirmed, with reference to a “formidable line of authority’’, the normal measure of damages for late redelivery. Namely 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 court held that 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, in more modern terminology, is a collateral matter disregarded by the law for the purpose of assessing damages.

An assessment of damages involves first determining what the injured party has lost and then determining how much can be recovered. The court confirmed that remoteness relates to the second question, i.e., whether the loss was in reasonable contemplation at the time of contracting. However, the principle of res inter alios acta operates at the first stage of determining what the claimant has lost. It is part of the 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.

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.

The particular arrangements which the owner may have made for the further employment of its ship after redelivery 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.

Lord Justice Males added that ‘‘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.’’

While the Owners’ claim had succeeded on the grounds of assessment of damages, the Court of Appeal nevertheless considered the Owners’  alternative claim on user damages and declined  to re-characterize late redelivery as wrongful use of property. While the Court recognised that late redelivery is “to some extent” wrongful use of property, it acknowledged that it is a use to which the Owners have agreed, irrespective of whether the last voyage is legitimate and there is no justification for introducing “…a novel basis of recovery, outflanking the basic compensatory principle…” into the law of damages.

On 23rd February, 2026, the Charterer was granted permission to appeal to the Supreme Court. The issue to be considered is whether the Owners are entitled to recover substantial damages assessed by reference to the market rate for the period of the overrun, taking account of the late redelivery and the fact that the Owners were precluded from chartering the ships again.

Conclusion

Pending any final determination of the matter by the Supreme Court, it is worth mentioning that the Court of Appeal decision provides clarity on the law of assessment of damages.

It makes clear that a charterer cannot look behind contractual arrangements and enquire what the shipowner actually did: MOAs, sale commitments, intended drydocking, repositioning, or other forward plans are to be ignored when assessing damages. Instead, an assessment should be made based on the prevailing market rate, even though this may mean that an owner is over-compensated or under-compensated for loss suffered as a result of a charterer’s breach.

The decision appears to establish an important benchmark in the law of damages, aiming—consistent with the Court of Appeal’s comments—to reduce unnecessary arbitrations and factual investigations into collateral matters.

It remains to be seen whether the Supreme Court will endorse this approach.