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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, 12 June 14
HANDY : TA MARKET IS CONTINUING SOUTH WITH A DECREASE OF 26% W-O-W
Handy
The week started off with holidays in most European countries and the TA market is continuing south with a decrease of 26% w-o-w. We do see ...
Thursday, 12 June 14
CONSOLIDATION IS THE ' NAME OF THE GAME' WHEN IT COMES TO SHIPYARDS ACROSS ASIA - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Intense competition, a swelling of new greenfield shipyards over the past few years mainly in China, especially prior to the 2008 global financial ...
Wednesday, 11 June 14
INDONESIA'S COAL EXPORT VOLUME AND REVENUE SLIPS 2.75% AND 6.73% RESPECTIVELY IN APRIL
COALspot.com: Indonesia, one of the world's largest coal producer and the global largest multi grade coal exporter shipped around $1.8* b ...
Wednesday, 11 June 14
BPI TOUCHING A NEW LOW FOR THE YEAR
The Dry Bulk market closed off the week positively, on the back of firming Capesize rates, while the market overall continues to face a very challe ...
Monday, 09 June 14
GOVT GETS TOUGH ON ILLEGAL MINING, SUSPENDS LICENSES - THE JAKARTA POST
The government has temporarily suspended the licenses of 62 mineral and coal transportation companies as part of its efforts to curb illegal mining ...
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Showing 3661 to 3665 news of total 6871 |
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- Mercator Lines Limited - India
- Central Java Power - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Australian Coal Association
- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- PNOC Exploration Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Chamber of Mines of South Africa
- OPG Power Generation Pvt Ltd - India
- Orica Mining Services - Indonesia
- Wood Mackenzie - Singapore
- Commonwealth Bank - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
- Uttam Galva Steels Limited - India
- Minerals Council of Australia
- Bhushan Steel Limited - India
- White Energy Company Limited
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Attock Cement Pakistan Limited
- Agrawal Coal Company - India
- Tamil Nadu electricity Board
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- GMR Energy Limited - India
- Vizag Seaport Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Jaiprakash Power Ventures ltd
- India Bulls Power Limited - India
- Larsen & Toubro Limited - India
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- Kohat Cement Company Ltd. - Pakistan
- Coastal Gujarat Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Metalloyd Limited - United Kingdom
- Videocon Industries ltd - India
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- Parry Sugars Refinery, India
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- Energy Development Corp, Philippines
- London Commodity Brokers - England
- Price Waterhouse Coopers - Russia
- Thai Mozambique Logistica
- Semirara Mining and Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Renaissance Capital - South Africa
- Aditya Birla Group - India
- Ceylon Electricity Board - Sri Lanka
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- GVK Power & Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- Goldman Sachs - Singapore
- Mercuria Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Transport, Egypt
- Independent Power Producers Association of India
- Krishnapatnam Port Company Ltd. - India
- Bukit Makmur.PT - Indonesia
- Economic Council, Georgia
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Electricity Generating Authority of Thailand
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Thiess Contractors Indonesia
- Timah Investasi Mineral - Indoneisa
- Electricity Authority, New Zealand
- SMG Consultants - Indonesia
- SN Aboitiz Power Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Grasim Industreis Ltd - India
- ASAPP Information Group - India
- Semirara Mining Corp, Philippines
- Carbofer General Trading SA - India
- Samtan Co., Ltd - South Korea
- Port Waratah Coal Services - Australia
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- AsiaOL BioFuels Corp., Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Coal Council - USA
- Neyveli Lignite Corporation Ltd, - India
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement PLC, Thailand
- Medco Energi Mining Internasional
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- VISA Power Limited - India
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Riau Bara Harum - Indonesia
- The Treasury - Australian Government
- Antam Resourcindo - Indonesia
- Salva Resources Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- IEA Clean Coal Centre - UK
- Bahari Cakrawala Sebuku - Indonesia
- European Bulk Services B.V. - Netherlands
- Latin American Coal - Colombia
- Gujarat Sidhee Cement - India
- Meralco Power Generation, Philippines
- Ambuja Cements Ltd - India
- Tata Chemicals Ltd - India
- Sree Jayajothi Cements Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Baramulti Group, Indonesia
- Indian Energy Exchange, India
- CNBM International Corporation - China
- Georgia Ports Authority, United States
- Aboitiz Power Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Ministry of Mines - Canada
- Simpson Spence & Young - Indonesia
- Dalmia Cement Bharat India
- Sical Logistics Limited - India
- Sakthi Sugars Limited - India
- Merrill Lynch Commodities Europe
- LBH Netherlands Bv - Netherlands
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chettinad Cement Corporation Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Petrochimia International Co. Ltd.- Taiwan
- Deloitte Consulting - India
- Meenaskhi Energy Private Limited - India
- Borneo Indobara - Indonesia
- The University of Queensland
- Altura Mining Limited, Indonesia
- Ind-Barath Power Infra Limited - India
- Makarim & Taira - Indonesia
- Romanian Commodities Exchange
- Sindya Power Generating Company Private Ltd
- Asmin Koalindo Tuhup - Indonesia
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Planning Commission, India
- Essar Steel Hazira Ltd - India
- Coal and Oil Company - UAE
- Indian Oil Corporation Limited
- Cigading International Bulk Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Straits Asia Resources Limited - Singapore
- PTC India Limited - India
- Malabar Cements Ltd - India
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Star Paper Mills Limited - India
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Jindal Steel & Power Ltd - India
- PowerSource Philippines DevCo
- Karaikal Port Pvt Ltd - India
- Petron Corporation, Philippines
- Siam City Cement - Thailand
- Sojitz Corporation - Japan
- International Coal Ventures Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Xindia Steels Limited - India
- Edison Trading Spa - Italy
- Kartika Selabumi Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
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