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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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Monday, 07 July 14
RBCT, THE WORLD'S SINGLE LARGEST EXPORT COAL TERMINAL SHIPPED 31.91 MMT OF COAL IN H1 2014
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the world’s single largest export coal terminal, shipped 31.91 million ton ...
Monday, 07 July 14
SOUTH AFRICA'S RICHARDS BAY COAL TERMINAL SHIPPED 12% LESS COAL IN JUNE COMPARED TO MAY EXPORTS
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the world’s single largest export coal terminal, shipped 4.91 million tons ...
Monday, 07 July 14
INDONESIAN SUB-BIT COAL SWAPS FOR Q3 DELIVERY CRASHES THROUGH $ 54.50
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on day, week and on month according to AsiaClear OTC coal swap's reports re ...
Monday, 07 July 14
API 8 CFR SOUTH CHINA COAL SWAPS SHOW A DOWNWARD TREND THIS PAST WEEK
COALspot.com: API 8 CFR South China Coal swap for delivery in Q3 drops US$ 5.47 month on month on Friday, dipping under $68 a ton. The CFR South Ch ...
Sunday, 06 July 14
PANAMAX INDEX BEING THE BIGGEST GAINER THIS WEEK; UP 52.75% W-O-W
COALspot.com: This week there was some positive signs in all the sectors. The Panamax index being the biggest gainer this week after losing for sev ...
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Showing 3621 to 3625 news of total 6871 |
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- Leighton Contractors Pty Ltd - Australia
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Siam City Cement - Thailand
- Borneo Indobara - Indonesia
- Electricity Authority, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Manunggal Multi Energi - Indonesia
- London Commodity Brokers - England
- Medco Energi Mining Internasional
- Carbofer General Trading SA - India
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- Planning Commission, India
- Banpu Public Company Limited - Thailand
- Sindya Power Generating Company Private Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Interocean Group of Companies - India
- Kalimantan Lumbung Energi - Indonesia
- Merrill Lynch Commodities Europe
- CNBM International Corporation - China
- Wood Mackenzie - Singapore
- Economic Council, Georgia
- Agrawal Coal Company - India
- Orica Mining Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Transport, Egypt
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Directorate Of Revenue Intelligence - India
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- India Bulls Power Limited - India
- Thai Mozambique Logistica
- Simpson Spence & Young - Indonesia
- The State Trading Corporation of India Ltd
- Gujarat Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- Bulk Trading Sa - Switzerland
- Miang Besar Coal Terminal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- GVK Power & Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Tata Chemicals Ltd - India
- Bangladesh Power Developement Board
- Indonesian Coal Mining Association
- Australian Coal Association
- Coastal Gujarat Power Limited - India
- Global Business Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Therma Luzon, Inc, Philippines
- Mercator Lines Limited - India
- Vedanta Resources Plc - India
- GAC Shipping (India) Pvt Ltd
- Larsen & Toubro Limited - India
- Thiess Contractors Indonesia
- Karaikal Port Pvt Ltd - India
- Videocon Industries ltd - India
- OPG Power Generation Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Xindia Steels Limited - India
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- Heidelberg Cement - Germany
- Kartika Selabumi Mining - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Uttam Galva Steels Limited - India
- Dalmia Cement Bharat India
- SMC Global Power, Philippines
- Indogreen Group - Indonesia
- Globalindo Alam Lestari - Indonesia
- Riau Bara Harum - Indonesia
- Tamil Nadu electricity Board
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Jaiprakash Power Ventures ltd
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Mines - Canada
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Essar Steel Hazira Ltd - India
- Billiton Holdings Pty Ltd - Australia
- McConnell Dowell - Australia
- SMG Consultants - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mjunction Services Limited - India
- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Singapore Mercantile Exchange
- Straits Asia Resources Limited - Singapore
- IHS Mccloskey Coal Group - USA
- Vizag Seaport Private Limited - India
- Coal and Oil Company - UAE
- Georgia Ports Authority, United States
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Java Power - Indonesia
- PTC India Limited - India
- Grasim Industreis Ltd - India
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Toyota Tsusho Corporation, Japan
- Antam Resourcindo - Indonesia
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- Aditya Birla Group - India
- Attock Cement Pakistan Limited
- Kideco Jaya Agung - Indonesia
- Intertek Mineral Services - Indonesia
- GMR Energy Limited - India
- SN Aboitiz Power Inc, Philippines
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- Indian Energy Exchange, India
- Neyveli Lignite Corporation Ltd, - India
- Iligan Light & Power Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- MS Steel International - UAE
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Meenaskhi Energy Private Limited - India
- PNOC Exploration Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Petrochimia International Co. Ltd.- Taiwan
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Bhushan Steel Limited - India
- South Luzon Thermal Energy Corporation
- The University of Queensland
- Energy Development Corp, Philippines
- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Eastern Coal Council - USA
- Marubeni Corporation - India
- Barasentosa Lestari - Indonesia
- Sojitz Corporation - Japan
- Orica Australia Pty. Ltd.
- Ministry of Finance - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- New Zealand Coal & Carbon
- Bharathi Cement Corporation - India
- Siam City Cement PLC, Thailand
- Coalindo Energy - Indonesia
- Sical Logistics Limited - India
- Meralco Power Generation, Philippines
- Lanco Infratech Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Latin American Coal - Colombia
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Bhatia International Limited - India
- Alfred C Toepfer International GmbH - Germany
- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- Petron Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Parry Sugars Refinery, India
- Krishnapatnam Port Company Ltd. - India
- Chamber of Mines of South Africa
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Rio Tinto Coal - Australia
- Jindal Steel & Power Ltd - India
- Kepco SPC Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Energy Link Ltd, New Zealand
- Trasteel International SA, Italy
- Gujarat Mineral Development Corp Ltd - India
- LBH Netherlands Bv - Netherlands
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