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Saturday, 12 April 14
HOW DO YOU CALCULATE LOSS OF EARNINGS FOLLOWING A COLLISION? - INCE & CO
 KNOWLEDGE TO ELEVATE
The recent case of Astipalaia vs Hanjin Shenzhen [2014] EWHC 120 (Admlty) has revisited the existing case law on assessment of damages following a collision and provided further clarification as to the appropriate test to be applied. On 26 March 2008 there was a collision between the fully laden VLCC tanker Astipalaia and the container ship Hanjin Shenzhen in the approaches to Singapore where Astipalaia was due to discharge. As a result of the collision, Astipalaia suffered damage to her hull, guard rails and mooring chock. Astipalaia was able to proceed into Singapore to discharge her cargo.
The background facts
At the time of the collision, Astipalaia was trading in the VLCC spot market which in early-mid 2008 was particularly buoyant and the vessel was acceptable throughout the industry to oil majors and other first class charterers. However, Astipalaia was unfixed for her next employment at the time of the collision.
As a result of the incident, the vessel’s oil major approvals were temporarily placed on “technical hold” by the majors pending the usual investigation into the collision. Astipalaia was also required by class to undertake permanent repairs before any further employment.
Astipalaia sailed from Singapore to Dubai in ballast and entered dry dock for permanent repairs which lasted around 10 days. On exiting dry dock, Astipalaia was still unable to resume trading on the VLCC spot market as the “technical hold” had not then been lifted. In the absence of oil major approvals, Astipalaia was fixed to NITC to be employed as floating storage off Kharg Island, Iran on a 60 day period charter, during which time the “technical holds” were dealt with and lifted. She completed the NITC fixture and was redelivered at Fujairah on 29 June 2008 after which she resumed her normal pattern of spot trading.
Accordingly, despite the time in dry dock only lasting some 10 days, Astipalaia was effectively unavailable for her primary trading market for the entire period from 26 March 2008 to 29 June 2008. Astipalaia brought a claim for loss of profits based on what the vessel would have earned had she traded on the normal VLCC spot market during that period, giving credit for the mitigation earnings obtained while on charter as floating storage to NITC. The total amount claimed by Astipalaia was approximately US$5,640,000 lost income during that period.
The Reference to the Registrar
Following agreement on liability, the quantum of Astipalaia’s claim was disputed and referred for determination by the Admiralty Registrar. The Court had to consider how to calculate loss of earnings of Astipalaia in circumstances where (1) the vessel did not have a specific next fixture concluded at the time of the collision such that there was no certainty as to what the vessel would have earned next, but for the collision, and (2) the vessel’s oil major approvals had been placed on “technical hold” and were not reinstated until the end of a less lucrative storage fixture.
Astipalaia’s position
Astipalaia’s Owners contended that damages should be assessed on the basis that the best evidence of Astipalaia’s potential earnings, but for the collision, were that Astipalaia would either (i) have been fixed to Indian Oil Corporation (IOC) with whom they had been negotiating for a West Africa-East Coast India fixture at the time of the collision, after which Astipalaia would have resumed a ‘typical’ spot trading pattern of a round voyage from Arabian Gulf (AG) to the Far East, or (ii) had Owners not secured the IOC fixture, the vessel would have undertaken two AG-Far East round voyages. Under either alternative, these two hypothetical voyages would have been completed within roughly the same period of time as the detention period, i.e. by 29 June 2008, such that a reasonable comparison could be drawn between what the vessel could have earned during that period, with what she did in fact earn.
Astipalaia’s Owners relied on the “time equalisation method” set out in The Vicky 1 [2008] 2 Lloyd’s Rep 45, which they argued supported their approach of comparing what the vessel would probably have earned but for the collision with what she did in fact earn in the same period. The hypothetical voyage schedule advocated by the Astipalaia’s Owners and prepared by their expert sought to provide comparable fixtures she could (but not necessarily would) have performed in the detention period in order to place a value on the vessel’s lost earnings. On that basis Astipalaia claimed damages of approximately US$5,640,000.
Hanjin Shenzhen’s position
In the Vicky 1, the claimant tanker owners had lost an actual fixture. Hanjin Shenzhen’s Owners argued that the principles from Vicky 1 only applied if the claimant ship owner had lost a secured fixture, not where there was no definite next business secured.
Their primary case was that the loss period should be split into two distinct periods: (i) the period during which the vessel was completely out of service, when repairs were being completed; and (ii) the period during which she performed the floating storage charter. On that basis, Hanjin Shenzhen argued that whilst they were liable in damages for lost income for approximately US$800,000 for period (i) during the dry docking, by the time of the floating storage charter being entered into after dry docking the spot market had in fact fallen such that no damages were recoverable for period (ii) as the rates achieved under the floating storage business successfully mitigated Astipalaia’s loss.
Hanjin Shenzhen interests also opposed the “time equalisation method” of seeking to model hypothetical voyages on the basis that it was too speculative to seek to calculate when the vessel might have been back in the AG after the first hypothetical voyage, and what the spot rate might have been at that time for the second hypothetical voyage.
During proceedings it was accepted by both experts that VLCCs operate in a well-defined and straightforward trading pattern. The largest loading area (around 72% of all VLCC cargoes) is the AG followed by West Africa, with a limited number of cargoes loading in the Caribbean or North Sea/Mediterranean. The Registrar accepted this evidence, and further evidence that of the 72% of cargoes lifted from the AG, around 70% of those cargoes are for Far East discharge. Accordingly, it could be established on the balance of probabilities what sort of business the vessel most likely would/could have achieved during the total detention period.
The Admiralty Court decision
The Registrar considered and analysed various leading cases, including The Argentino (1888) 13 PD 191 (C/A), 14 App Cas 519 (H/L), The Soya [1956] 1 WLR 714 (C/A) and The Vicky 1 [2008] 2 Lloyd’s Rep. 45 (C/A).
Having done so, the Registrar accepted Astipalaia’s approach to assessing damages. The court upheld Astipalaia’s argument that the detention period should include not only the repair period but also the additional period the vessel needed to obtain reinstatement of oil major approvals before returning to her normal employment, and that this detention period should be taken as a single period finishing on 29 June 2008, not broken into two parts. The arguments on behalf of Hanjin Shenzhen that there were principles of law curtailing or precluding such an assessment were rejected.
On the basis of the expert evidence before him, the Registrar assessed damages in the total sum of approximately US$ 4,960,000 (a loss of earnings of US$ 9,860,000 less US$ 4,900,000) earned during the floating storage contract.
Comment
This Judgment confirms that an owner can claim damages not just for the immediate loss of use of the vessel during the period of repairs but also for further knock-on effects to the vessel’s ability to return to normal trading, provided of course that such knock-on effects are not too remote or unforeseeable and that the loss can be proven by evidence.
The Judgment also confirms that there is no set rule as to the recoverability of damages for loss of use, and that such recovery is not dependent on proof of a specific lost fixture, nor (if such a fixture is established) that damages are limited to that one fixture but no more.
While there is no set methodology for calculating loss of profits, the methodologies used in earlier cases may be adapted to suit the facts of each case. The principles applied in this case were ultimately the same as those applied in The Vicky 1 and can be said to represent a recognised and well principled approach to modelling a vessel’s likely earnings over a given period which properly takes into account the relevant market position as at the time the hypothetical voyages would have been fixed.
It should be noted, however, that proving one’s loss may be more difficult in other trades. The VLCC trade is sufficiently well established and ‘predictable’, with enough data published, to allow a meaningful expert analysis of what the vessel could have earned. It would be more difficult to undertake the same exercise for ships with a more varied and unpredictable trading pattern.
Source: Ince & Co / Hellenic Shipping News
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Wednesday, 09 July 14
PANAMAX MARKET FINALLY CORRECTING UPWARDS; AVERAGE TC MORE THAN DOUBLING WEEK ON WEEK - INTERMODAL
The Dry Bulk market has closed off on Friday on a more positive note, with most segments noting weekly gains and the Panamax market finally correct ...
Wednesday, 09 July 14
SHIPPING MARKET INSIGHT - PANOS TSILINGIRIS
The mini-boom in dry bulker values catapulted ship prices too fast too far over the last one-and-a-half year. The concurrence of historically low p ...
Tuesday, 08 July 14
INDONESIAN COAL PRICE REFERENCE FALL AGAIN IN JULY; LOST 1.62%
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia again revised down the coal bench mark price in July. HBA for month of J ...
Tuesday, 08 July 14
ENERGY IN THE MIX - INTERMODAL SHIPBROKERS
With the Tanker freight market having showed much promise this year compared to the performance that had been noted during the previous five, it is ...
Monday, 07 July 14
INDONESIA STATE-CONTROLLED COAL MINER BUKIT ASAM TO TRADE COAL ON-LINE THROUGH JFX
COALspot.com: Indonesian state owned coal miner PT Tambang Batubara Bukit Asam Tbk (PTBA) has teamed up with Jakarta Futures Exchange (JFX) to sell ...
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Showing 3616 to 3620 news of total 6871 |
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- Bhushan Steel Limited - India
- Semirara Mining and Power Corporation, Philippines
- Goldman Sachs - Singapore
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Deloitte Consulting - India
- Toyota Tsusho Corporation, Japan
- New Zealand Coal & Carbon
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Jindal Steel & Power Ltd - India
- Economic Council, Georgia
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Dalmia Cement Bharat India
- Kumho Petrochemical, South Korea
- Vizag Seaport Private Limited - India
- TeaM Sual Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Bayan Resources Tbk. - Indonesia
- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- Eastern Energy - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Tamil Nadu electricity Board
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Latin American Coal - Colombia
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Simpson Spence & Young - Indonesia
- CIMB Investment Bank - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Malabar Cements Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- The Treasury - Australian Government
- Karaikal Port Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Sree Jayajothi Cements Limited - India
- PNOC Exploration Corporation - Philippines
- Ministry of Mines - Canada
- Ministry of Finance - Indonesia
- Wood Mackenzie - Singapore
- CNBM International Corporation - China
- Altura Mining Limited, Indonesia
- Minerals Council of Australia
- SN Aboitiz Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Ambuja Cements Ltd - India
- The University of Queensland
- LBH Netherlands Bv - Netherlands
- Chettinad Cement Corporation Ltd - India
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- Energy Development Corp, Philippines
- SMC Global Power, Philippines
- Videocon Industries ltd - India
- Bhatia International Limited - India
- Meralco Power Generation, Philippines
- Australian Commodity Traders Exchange
- Savvy Resources Ltd - HongKong
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- San Jose City I Power Corp, Philippines
- Standard Chartered Bank - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Tata Chemicals Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercator Lines Limited - India
- Heidelberg Cement - Germany
- Thai Mozambique Logistica
- Rashtriya Ispat Nigam Limited - India
- Bhoruka Overseas - Indonesia
- Central Electricity Authority - India
- Bharathi Cement Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Carbofer General Trading SA - India
- Asmin Koalindo Tuhup - Indonesia
- Indika Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- GAC Shipping (India) Pvt Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Sidhee Cement - India
- Karbindo Abesyapradhi - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mjunction Services Limited - India
- Indo Tambangraya Megah - Indonesia
- Kobexindo Tractors - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Oldendorff Carriers - Singapore
- Banpu Public Company Limited - Thailand
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Salva Resources Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Aboitiz Power Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Indian Energy Exchange, India
- Anglo American - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Marubeni Corporation - India
- Semirara Mining Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Makarim & Taira - Indonesia
- Electricity Generating Authority of Thailand
- Bukit Baiduri Energy - Indonesia
- Wilmar Investment Holdings
- Bangladesh Power Developement Board
- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
- Star Paper Mills Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Energy Link Ltd, New Zealand
- Electricity Authority, New Zealand
- Global Green Power PLC Corporation, Philippines
- Port Waratah Coal Services - Australia
- PetroVietnam Power Coal Import and Supply Company
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Independent Power Producers Association of India
- Kohat Cement Company Ltd. - Pakistan
- Madhucon Powers Ltd - India
- Riau Bara Harum - Indonesia
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Maharashtra Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- MS Steel International - UAE
- Mercuria Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Australian Coal Association
- IEA Clean Coal Centre - UK
- Thiess Contractors Indonesia
- Barasentosa Lestari - Indonesia
- Timah Investasi Mineral - Indoneisa
- Aditya Birla Group - India
- GVK Power & Infra Limited - India
- Indonesian Coal Mining Association
- ICICI Bank Limited - India
- Coal and Oil Company - UAE
- Pendopo Energi Batubara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- Parliament of New Zealand
- Singapore Mercantile Exchange
- Therma Luzon, Inc, Philippines
- Vedanta Resources Plc - India
- Kepco SPC Power Corporation, Philippines
- Interocean Group of Companies - India
- Rio Tinto Coal - Australia
- GN Power Mariveles Coal Plant, Philippines
- Indogreen Group - Indonesia
- South Luzon Thermal Energy Corporation
- Central Java Power - Indonesia
- Bulk Trading Sa - Switzerland
- Africa Commodities Group - South Africa
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- PTC India Limited - India
- Antam Resourcindo - Indonesia
- Posco Energy - South Korea
- Maheswari Brothers Coal Limited - India
- Siam City Cement - Thailand
- White Energy Company Limited
- Uttam Galva Steels Limited - India
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Commonwealth Bank - Australia
- Bukit Makmur.PT - Indonesia
- Global Business Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Attock Cement Pakistan Limited
- Planning Commission, India
- London Commodity Brokers - England
- SMG Consultants - Indonesia
- Essar Steel Hazira Ltd - India
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Agrawal Coal Company - India
- Lanco Infratech Ltd - India
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- Straits Asia Resources Limited - Singapore
- Romanian Commodities Exchange
- Xindia Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
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