When a commercial vessel is damaged it is common for there to be a claim for loss of hire or profit from the operation of the vessel. Private pleasure craft do not generally give rise to the same losses. However, a New South Wales Supreme Court decision demonstrates that other less tangible but just as hefty damages can be awarded. The judgment is a sobering one for the insurers of ship repairers and the like.
In Yates v Mobile Marine Repairs Pty Ltd  NSWSC 1463, the luxury game fishing vessel, the Eagle, suffered damage to its main engines due to negligent works by the defendant. The Eagle was custom built and practically new with fittings and finishings of a very high standard. The damage to its engines was such that they had to be removed and replaced by cutting open and reconfiguring the engine room to accommodate different model engines.
Not only did the owner claim the costs of repairs, he also sought damages for:
- Devaluing of the vessel by loss of reputation.
- Loss of enjoyment of the vessel during repair.
The first claim was based upon valuer evidence that the Eagle was such a high standard vessel that it commanded a premium based on its unique history and pedigree. The valuer described the vessel before the negligent works as immaculate, stating:
'The standard of finish was superb and the vessel was a credit to its builders. The extent and quality of the equipment, fixtures and fittings and internal finish was quite exceptional'.
However, the value of the Eagle lay not only in its physical features and components but also in its reputation as a high profile vessel with one of the best possible pedigrees in Australia.
By the same token, the sorry tale of the vessel's engine troubles and 'cut and shut' repair so soon after commissioning was well known to all in the industry and had irreversibly damaged the vessel's standing in Australia and internationally. A buyer, who previously might have spent a great deal of money for a vessel in pristine condition with an impeccable reputation, would no longer be interested in purchasing the Eagle with its damaged reputation. The Court allowed a 10 to 15% loss on pre-loss value of AU$2.7 to $3 million at $360,000.
Not content with that, the owner also claimed damages for loss of enjoyment of the vessel over the 348 day period it was non-operational. How do you put a value on such a thing? There was no commercial loss as the vessel was never intended for charter. Nonetheless, evidence was led that the daily charter rate that the vessel might have commanded would have been $4,500 for 88 of those days, a total of $396,000. Such a figure would of course require adjustment for offsetting expenses.
Instead the Court preferred a more general purpose method of quantifying the loss, following but adapting relevant case law dealing with the issue. It is well established, under the line of authority commencing with The Greta Holme  AC 596, that injury to property which deprives a party of the use of a non-income earning chattel is compensable. The defence challenged whether this would extend to loss of use of a chattel purely for pleasure purposes, such as the Eagle. The Court referred to a colourful example from The Mediana  AC 113:
'Supposing a person took away a chair out of my room and kept it for twelve months, could anybody say you had a right to diminish the damages by showing that I did not usually sit in that chair, or that there were plenty of other chairs in the room?'
The Court considered the vessel owner had invested a great deal of his time and money in planning and building the vessel. Doubtless he was looking forward greatly to enjoying it throughout 2004 and 2005. He would have done so but for the negligent works. Therefore the owner had a substantial need in a practical sense, if not in a commercial sense, for the use of the vessel. The appropriate measure of that loss was the time value of money invested in the vessel. The Court allowed the equivalent of interest at the Court rate on the full value of the vessel in the sum of $240,263.
The judgment is particularly important for proper underwriting and assessment of risks in respect of noncommercial vessels. It is important to note that the 'loss of reputation' claim is only likely to have very limited application in situations where a vessel is truly exceptional. A more 'run of the mill' vessel with no remarkable reputation is unlikely to suffer any valuable loss of reputation. The method of calculating the value of 'loss of enjoyment' is novel for such an asset. Interest on the value of plant has been used in the past as a substitute for evidence of actual lost profit (eg Woodman v Rasmussen  St R Qd 202). However, putting a commercial value on such an obviously non-commercial amenity as loss of enjoyment is akin to an award for pain and suffering and may well be subject to intense scrutiny in the higher courts in another case.
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