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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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Thursday, 26 June 14
COAL DIVESTMENT CAMPAIGNS COME WITH RISKY UNINTENDED CONSEQUENCES - WCA
Last week I presented to the Expert Group on investments in coal and petroleum companies, the body set up to advise the Norwegian Government on whe ...
Wednesday, 25 June 14
INDONESIAN COAL EXPORTS ON RISE; EARNINGS FALL ON LOWER SELLING PRICES
COALspot.com: Indonesia, one of the world's largest coal producer and the global largest multi grade coal exporter shipped around $1.84* ...
Wednesday, 25 June 14
THE PANAMAX MARKET REACHED FRESH LOWS FOR THE YEAR, SAYS INTERMODAL
COALspot.com: The Dry Bulk market closed off the week noting a slight decrease, but this image of stability is merely representative of freight rat ...
Wednesday, 25 June 14
SHIPPING: MARKET INSIGHT - YANNIS OLZIERSKY
During his recent visit in London, China's Premier, Li Keqiang, announced that China's economy, the world's second largest after the US ...
Tuesday, 24 June 14
INDONESIAN COAL MINER TARGETS RP 313 BILLION IPO
COALspot.com: Indonesian coal miner PT Mitrabara Adiperdana is aiming to raise up to Rp 313 billion to Rp 368 billion (approximately $26.133 millio ...
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Showing 3641 to 3645 news of total 6871 |
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Baiduri Energy - Indonesia
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Straits Asia Resources Limited - Singapore
- New Zealand Coal & Carbon
- VISA Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- Cigading International Bulk Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- White Energy Company Limited
- Sakthi Sugars Limited - India
- Cement Manufacturers Association - India
- Pendopo Energi Batubara - Indonesia
- OPG Power Generation Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
- Heidelberg Cement - Germany
- Electricity Authority, New Zealand
- Metalloyd Limited - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- Maharashtra Electricity Regulatory Commission - India
- Thai Mozambique Logistica
- Ambuja Cements Ltd - India
- Central Electricity Authority - India
- Billiton Holdings Pty Ltd - Australia
- Minerals Council of Australia
- Petron Corporation, Philippines
- Australian Coal Association
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- ASAPP Information Group - India
- PowerSource Philippines DevCo
- Xindia Steels Limited - India
- Parliament of New Zealand
- Simpson Spence & Young - Indonesia
- IEA Clean Coal Centre - UK
- Mercuria Energy - Indonesia
- Energy Link Ltd, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Bharathi Cement Corporation - India
- Tamil Nadu electricity Board
- Standard Chartered Bank - UAE
- Parry Sugars Refinery, India
- Antam Resourcindo - Indonesia
- Therma Luzon, Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- India Bulls Power Limited - India
- Karaikal Port Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sree Jayajothi Cements Limited - India
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Bulk Trading Sa - Switzerland
- Renaissance Capital - South Africa
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- Timah Investasi Mineral - Indoneisa
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- Eastern Energy - Thailand
- Ceylon Electricity Board - Sri Lanka
- Riau Bara Harum - Indonesia
- Mintek Dendrill Indonesia
- Bukit Makmur.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Salva Resources Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Indika Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Siam City Cement PLC, Thailand
- The State Trading Corporation of India Ltd
- MS Steel International - UAE
- Central Java Power - Indonesia
- Altura Mining Limited, Indonesia
- Economic Council, Georgia
- Trasteel International SA, Italy
- Indian Oil Corporation Limited
- GMR Energy Limited - India
- Grasim Industreis Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Chamber of Mines of South Africa
- Vedanta Resources Plc - India
- GN Power Mariveles Coal Plant, Philippines
- CNBM International Corporation - China
- Bangladesh Power Developement Board
- Bahari Cakrawala Sebuku - Indonesia
- San Jose City I Power Corp, Philippines
- Videocon Industries ltd - India
- SN Aboitiz Power Inc, Philippines
- McConnell Dowell - Australia
- Latin American Coal - Colombia
- Semirara Mining Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Orica Australia Pty. Ltd.
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- Australian Commodity Traders Exchange
- Globalindo Alam Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Wilmar Investment Holdings
- Kobexindo Tractors - Indoneisa
- Essar Steel Hazira Ltd - India
- Chettinad Cement Corporation Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- International Coal Ventures Pvt Ltd - India
- Anglo American - United Kingdom
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Carbofer General Trading SA - India
- The University of Queensland
- Uttam Galva Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coalindo Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Sical Logistics Limited - India
- Kepco SPC Power Corporation, Philippines
- Bhatia International Limited - India
- Gujarat Sidhee Cement - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Energy Exchange, India
- Malabar Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Meralco Power Generation, Philippines
- Energy Development Corp, Philippines
- Oldendorff Carriers - Singapore
- Borneo Indobara - Indonesia
- Larsen & Toubro Limited - India
- Jindal Steel & Power Ltd - India
- Coal and Oil Company - UAE
- Marubeni Corporation - India
- Binh Thuan Hamico - Vietnam
- TeaM Sual Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercator Lines Limited - India
- Ministry of Finance - Indonesia
- Banpu Public Company Limited - Thailand
- Indo Tambangraya Megah - Indonesia
- Bhushan Steel Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- Vizag Seaport Private Limited - India
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Indonesian Coal Mining Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- GVK Power & Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- The Treasury - Australian Government
- PTC India Limited - India
- Manunggal Multi Energi - Indonesia
- Georgia Ports Authority, United States
- Rio Tinto Coal - Australia
- Ind-Barath Power Infra Limited - India
- Sojitz Corporation - Japan
- South Luzon Thermal Energy Corporation
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Deloitte Consulting - India
- Vijayanagar Sugar Pvt Ltd - India
- Aditya Birla Group - India
- Wood Mackenzie - Singapore
- Goldman Sachs - Singapore
- Posco Energy - South Korea
- Kartika Selabumi Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Planning Commission, India
- Sindya Power Generating Company Private Ltd
- Romanian Commodities Exchange
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- Indogreen Group - Indonesia
- London Commodity Brokers - England
- Tata Chemicals Ltd - India
- Siam City Cement - Thailand
- Dalmia Cement Bharat India
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Kumho Petrochemical, South Korea
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- Edison Trading Spa - Italy
- Karbindo Abesyapradhi - Indoneisa
- Singapore Mercantile Exchange
- IHS Mccloskey Coal Group - USA
- TNB Fuel Sdn Bhd - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Coastal Gujarat Power Limited - India
- PNOC Exploration Corporation - Philippines
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