Date: Sat, 2 Aug 2008 09:34

From: Robert Stevens

Subject: The Achilleas

The Achilleas seems plainly correct to me, for the reasons given by their Lordships.

The doctrinal basis for the rule that losses which are not reasonably contemplated at the time of contracting as a serious possibility are irrecoverable, is that they are (or perhaps more accurately will be unless there is a stipulation to the contrary) outside the scope of the contractual duty assumed by the defendant. The rule is sourced in the duty undertaken.

This is, as Andrew Tettenborn states in his response to Andrew Burrows, an exclusionary rule, not an inclusionary one. It should not be concluded that because a loss was reasonably contemplated as a serious possibility that it is not too remote. I would, therefore, dissent from the presentation of The Achilleas of Michael Bridge. The Achilleas is not a separate rule from, or even a gloss upon, our rules for remoteness of loss: it is an application of them. A loss which is outside the contractual duty undertaken is too remote, even if reasonably contemplated by the parties as a serious possibility at the time of contracting.

A classic (torts) example is Gorris v Scott. The defendant carrier breached his statutory duty by failing to fence sheep on board ship resulting in the claimant's sheep being swept overboard in a storm. Although this was a reasonably foreseeable consequence of the breach, no claim was allowed. Why? Because the duty, on its true construction, was imposed to prevent the spread of disease, not the drowning of sheep. The loss was outside the scope of the (statutory) duty on its proper construction.

Lord Hoffmann's famous mountaineer example is precisely the same. The careless doctor in examining the patient's knee was undertaking responsibility for his medical condition. That the patient was reasonably foreseeably injured in a mountaineering accident, which he would not have gone on if the doctor had been careful, cannot make the loss recoverable if the knee never fails, as the duty assumed was in relation to the knee not rock falls.

SAAMCO although commonly seen as a claim in the so-called "tort of negligence" was really a breach of contract claim where the loss was similarly outside the responsibility assumed, even though reasonably foreseeable.

The Achilleas is the same. Now, the weakness of the case is the question of whether there genuinely was the evidence of the 'understanding in the shipping industry' to support the conclusion reached. But, assuming that there was, the result is clearly correct. It shouldn't matter what the reason for the shipping industry's understanding was. The scope of responsibility undertaken will have been reflected in the price, especially in a competitive market like this one, and so to award damages ignoring such an understanding would have been to re-write the parties' bargain.

Put another way, the remoteness rules are not a set of mechanistic rules set down as a matter of law by the courts to promote economic efficiency or any other goal. Rather, they are rooted in the parties' own agreement. The issue of construction is inescapable.

Robert

On behalf of Andrew Burrows:

  

Dear All,

As no-one has responded to Robert Stevens' e-mail a few weeks ago on The Achilleas [2008] UKHL 48, [2008] WLR 345 (remoteness in contract), I wonder whether I am alone in being troubled by the decision. I had thought that the first instance reasoning of Christopher Clarke J and of the CA (Rix LJ) had been spot on. At root my concern is as follows:

1. Leaving aside any 'understanding in the shipping industry' the loss in this case would surely not have been too remote. At the time of making a time charter, if the parties think about a charterer being in breach of contract by redelivering the ship late, it is surely reasonably contemplated as a serious possibility that the owner will lose a following fixture at a higher market rate (where market rates are dropping between the date when the ship should have been redelivered and actual redelivery). That such a loss of profit is recoverable and not too remote would seem to be the law in analogous situations (e.g. late redelivery of hired equipment).

2. The peculiarity here therefore was the 'understanding of the shipping industry' - which if 1 above is correct was based on an incorrect approach to the law of remoteness - that the loss of the following fixture was too remote. Of course, one can appreciate how that incorrect understanding came about. Until very recently (i.e. until The Peonia in 1991) it was thought that charterers were not in breach at all if there was late redelivery following a 'legitimate last voyage'. And I believe that prior to The Heron II there was a view that shipping contracts were subject to their own rules that were different than the standard contractual rules and some of that perception has no doubt remained. But as I see it, a central question one faces in analysing the decision in The Achilleas is, can it be correct for the Law Lords to have allowed the standard application of the law on remoteness to be overridden by an incorrect understanding of the law of remoteness by the shipping industry?

3. In any event, I do wonder just how strong the 'understanding' in the industry was. Can one say that there is an understanding if no-one has thought of this precise problem before? When faced with the issue, at least the owners in this case thought it worth putting forward such a claim.

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