The recent Queensland Supreme Court decision in Pix v Suncoast Marine Pty Ltd provides important, and potentially far reaching, authority for the proposition that the owner of a pleasurecraft or other chattel may recover general damages for loss of use despite not being able to evidence a loss of earning capacity or profit.
The case concerned a 65 foot luxury catamaran “Jalun” which was sold in 2007 subject the implied condition that it was of a merchantable quality. A number of significant defects in the vessel’s hull later came to light. From 10 May 2012 to 4 February 2013 (270 days) the vessel underwent lengthy and expensive repairs.
The buyer claimed diminution in value by reason of the defects. The Court calculated such damages by reference to the 2013 repair cost adjusted to its 2007 equivalent by reference to the consumer price index.
The buyer also claimed damages for loss of use of the vessel for 270 days. The seller disputed the claim on the basis that, absent evidence of any actual loss, the buyer should be entitled to only a trifling amount of general damages.
The Queensland Supreme Court applied the old English line of authority set down in the cases of the Greta Holme, the Mediana and the Marpessa. These cases concerned non-profit making vessels (two light ships and a dredger) and support the proposition that the owner of a non-profit making vessel may recover general damages for its loss of use. The method of calculating such damages varies. In the Mediana the House of Lords awarded a portion of the annual cost of the substitute lightship for the period of the repair. In the Marpessa the House of Lords awarded a rate of 7% per annum on the depreciated value of the damaged vessel for the period of the repair.
In 2018 the Australian Federal Court in Vautin v By Winddown, applying the same line of authority, concluded that general damages, designed to represent the unusable capital value of the vessel, could be awarded for loss of its use. Such general damages would properly be assessed by reference to a depreciation rate of 10% per annum on the vessel’s original purchase price over the period during which the vessel was unusable.
In Pix v Suncoast Marine the Queensland Supreme Court affirmed the above authorities and concluded in favour of the buyer as follows:
“The principle which emerges from the cases is that the owner of a vessel deprived of its use for a period by the wrongful act of another is entitled to general damages, whether that act is a tort or a breach of contract. It does not matter that the vessel was not being used in profit-making or that its owner has not been put to any expenditure to replace it. It is not necessary for a plaintiff to establish what particular use he or she would have made of a chattel in order to recover damages for the loss of its use….Calculating interest on the capital invested in the chattel (after depreciation) is a suitable method of assessing damages; the point is that an investment has been made in the item which is capable of yielding nothing by way of return in terms of profit or, in this case, enjoyment, during the period it is incapable of being used.”
The Queensland Supreme Court awarded the buyer general damages for loss of use calculated at 10% per annum on the value of the vessel for the period of the repair.
This Judgment is directly applicable to pleasurecraft claims and will be of particular interest to pleasurecraft insurers and liability insurers of service providers such as marinas, repair facilities and brokers dealing regularly with pleasuecraft.
Further, the Judgment has application in circumstances where a commercial vessel owner cannot prove a loss of profit or has the benefit of a replacement vessel so negating any trading loss.
Finally, it may well also have application in non-maritime claims concerning damage and repair of assets in circumstances where evidencing trading losses or loss of profit is problematic.
This article is written by Chris Sacré, Partner and Paul Vrazas, Graduate-at-Law.
P: +61 2 9334 8564
E: csacre@hwle.com.au