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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, 30 June 14
WEEKLY CFR SOUTH CHINA COAL SWAPS DECLINE CONTINUES; Q1'15 LOST US$ 4.55 PMT IN A WEEK
COALspot.com: API 8 CFR South China Coal swap for delivery in Q3 fell US$ 5.25 month on month on Friday, dipping under $69 a tone. The CFR South Ch ...
Monday, 30 June 14
INDO - INDIA FREIGHT RATES CONTINUE TO WEAK
COALspot.com: The latest dry Index shows that average all-in spot freight declined, the Panamax and Supramax slipping by 9.11 percent and 4% respec ...
Friday, 27 June 14
DRY BULK MARKET STILL LOOKING FOR UPSIDE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept up its lacklustre performance during the past week, as evidenced by the course of the Baltic Dry Index (BDI). The BDI ...
Thursday, 26 June 14
PANAMAX : A PACIFIC ROUND PAYS AROUND US$ 3K DAILY - FEARNLEYS AS
Handy
In the Atlantic there has been little activity which again has caused rates to slip across all trades. TA´s are now down to US$ 5,500 ...
Thursday, 26 June 14
KOMIPO INVITES BIDS FOR TOTAL 750K MT OF BITUMINOUS COAL FOR 3CY
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) has issued a new tender for supply of total 250,000 MT of bituminous co ...
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Showing 3636 to 3640 news of total 6871 |
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- Electricity Authority, New Zealand
- Makarim & Taira - Indonesia
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Mjunction Services Limited - India
- Energy Link Ltd, New Zealand
- Thai Mozambique Logistica
- Tata Chemicals Ltd - India
- Parry Sugars Refinery, India
- Billiton Holdings Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Heidelberg Cement - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- Jaiprakash Power Ventures ltd
- Bharathi Cement Corporation - India
- Vedanta Resources Plc - India
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- ASAPP Information Group - India
- PetroVietnam Power Coal Import and Supply Company
- Semirara Mining and Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Agrawal Coal Company - India
- Aboitiz Power Corporation - Philippines
- Power Finance Corporation Ltd., India
- TNB Fuel Sdn Bhd - Malaysia
- Karaikal Port Pvt Ltd - India
- Indian Oil Corporation Limited
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- International Coal Ventures Pvt Ltd - India
- Bhatia International Limited - India
- Jindal Steel & Power Ltd - India
- Semirara Mining Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- PowerSource Philippines DevCo
- White Energy Company Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Africa Commodities Group - South Africa
- Sindya Power Generating Company Private Ltd
- GVK Power & Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Meenaskhi Energy Private Limited - India
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- AsiaOL BioFuels Corp., Philippines
- Kapuas Tunggal Persada - Indonesia
- Formosa Plastics Group - Taiwan
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Asmin Koalindo Tuhup - Indonesia
- Tamil Nadu electricity Board
- Sarangani Energy Corporation, Philippines
- CNBM International Corporation - China
- Ceylon Electricity Board - Sri Lanka
- McConnell Dowell - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- Orica Australia Pty. Ltd.
- Deloitte Consulting - India
- TeaM Sual Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Mintek Dendrill Indonesia
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- Metalloyd Limited - United Kingdom
- India Bulls Power Limited - India
- Kaltim Prima Coal - Indonesia
- Global Business Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Cement Manufacturers Association - India
- Kartika Selabumi Mining - Indonesia
- Economic Council, Georgia
- Sojitz Corporation - Japan
- MS Steel International - UAE
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- Salva Resources Pvt Ltd - India
- The University of Queensland
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- Energy Development Corp, Philippines
- The Treasury - Australian Government
- Barasentosa Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Kumho Petrochemical, South Korea
- OPG Power Generation Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Mercator Lines Limited - India
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- Global Green Power PLC Corporation, Philippines
- Chamber of Mines of South Africa
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Coalindo Energy - Indonesia
- VISA Power Limited - India
- Borneo Indobara - Indonesia
- Siam City Cement - Thailand
- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Dalmia Cement Bharat India
- Medco Energi Mining Internasional
- Rashtriya Ispat Nigam Limited - India
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- Electricity Generating Authority of Thailand
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Ministry of Transport, Egypt
- Bhoruka Overseas - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Gujarat Mineral Development Corp Ltd - India
- Malabar Cements Ltd - India
- Xindia Steels Limited - India
- Australian Coal Association
- Sical Logistics Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Holcim Trading Pte Ltd - Singapore
- Edison Trading Spa - Italy
- Wood Mackenzie - Singapore
- Madhucon Powers Ltd - India
- Bukit Baiduri Energy - Indonesia
- Romanian Commodities Exchange
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- Eastern Energy - Thailand
- Star Paper Mills Limited - India
- Rio Tinto Coal - Australia
- Goldman Sachs - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Videocon Industries ltd - India
- New Zealand Coal & Carbon
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- Grasim Industreis Ltd - India
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- Interocean Group of Companies - India
- Thiess Contractors Indonesia
- Larsen & Toubro Limited - India
- Gujarat Sidhee Cement - India
- SN Aboitiz Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Georgia Ports Authority, United States
- Global Coal Blending Company Limited - Australia
- Maheswari Brothers Coal Limited - India
- Indogreen Group - Indonesia
- Iligan Light & Power Inc, Philippines
- Orica Mining Services - Indonesia
- Indonesian Coal Mining Association
- Riau Bara Harum - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
- Intertek Mineral Services - Indonesia
- Posco Energy - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- South Luzon Thermal Energy Corporation
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- San Jose City I Power Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CIMB Investment Bank - Malaysia
- Globalindo Alam Lestari - Indonesia
- Marubeni Corporation - India
- Bukit Makmur.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Ind-Barath Power Infra Limited - India
- Wilmar Investment Holdings
- Kobexindo Tractors - Indoneisa
- Merrill Lynch Commodities Europe
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coastal Gujarat Power Limited - India
- Essar Steel Hazira Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- Kideco Jaya Agung - Indonesia
- Minerals Council of Australia
- Meralco Power Generation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- Maharashtra Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
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