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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, 19 May 14
API 8 CFR SOUTH CHINA COAL LOST 2.49% MONTH ON MONTH
COALspot.com: API 8 CFR South China Coal swaps for average Q3 14 deliveries lost 2.49 percent month on month and closed at US$ 74.35 per mt as on F ...
Sunday, 18 May 14
FREIGHT RATES ARE EXPECTED TO BE FIRM NEXT WEEK
COALspot.com: The freight market was steady with the BDI was closed slightly higher at 1027 points or up 3.00 pct week on week.
The Cape ...
Friday, 16 May 14
KOMIPO IS LOOKING FOR 60K MT OF LOW VOLATILE BITUMINOUS COAL
COALspot.com : Korea Midland Power Co., Ltd. has invited bids through International open bidding for 60,000 Metric Tons (MT) of low volatile bitumi ...
Friday, 16 May 14
U.S. COAL PRODUCTION TOTALED APPROXIMATELY 18.9 MMST
COALspot.com – United States the world's second largest coal producer, produced approximately 18.9 million short tons (mmst) of coal i ...
Thursday, 15 May 14
PANAMAX : SHORT PERIOD UP TO ONE YEAR REPORTED IN THE 12.000-12.500 RANGE - FEARNRESEARCH
Handy
The Supra and handy market seems to be affected by the recent holidays in Singapore which still relatively quiet. There are some Indo / ...
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- Kaltim Prima Coal - Indonesia
- Standard Chartered Bank - UAE
- Simpson Spence & Young - Indonesia
- TeaM Sual Corporation - Philippines
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- McConnell Dowell - Australia
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- Electricity Generating Authority of Thailand
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Bulk Trading Sa - Switzerland
- Timah Investasi Mineral - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Sindya Power Generating Company Private Ltd
- Petron Corporation, Philippines
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Ministry of Transport, Egypt
- ICICI Bank Limited - India
- Economic Council, Georgia
- Rio Tinto Coal - Australia
- Coalindo Energy - Indonesia
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Gujarat Sidhee Cement - India
- Manunggal Multi Energi - Indonesia
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- White Energy Company Limited
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- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Sakthi Sugars Limited - India
- Larsen & Toubro Limited - India
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- Pipit Mutiara Jaya. PT, Indonesia
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
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- Intertek Mineral Services - Indonesia
- Mercator Lines Limited - India
- Ambuja Cements Ltd - India
- IEA Clean Coal Centre - UK
- Sinarmas Energy and Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- ASAPP Information Group - India
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Miang Besar Coal Terminal - Indonesia
- Indogreen Group - Indonesia
- Singapore Mercantile Exchange
- Uttam Galva Steels Limited - India
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- Ministry of Finance - Indonesia
- Eastern Coal Council - USA
- Semirara Mining and Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Bhushan Steel Limited - India
- Energy Link Ltd, New Zealand
- Videocon Industries ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Commonwealth Bank - Australia
- Toyota Tsusho Corporation, Japan
- Jaiprakash Power Ventures ltd
- Neyveli Lignite Corporation Ltd, - India
- Attock Cement Pakistan Limited
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Heidelberg Cement - Germany
- CNBM International Corporation - China
- Parry Sugars Refinery, India
- Bahari Cakrawala Sebuku - Indonesia
- PTC India Limited - India
- Samtan Co., Ltd - South Korea
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- Petrochimia International Co. Ltd.- Taiwan
- Indian Energy Exchange, India
- Ministry of Mines - Canada
- CIMB Investment Bank - Malaysia
- San Jose City I Power Corp, Philippines
- Bukit Makmur.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Coastal Gujarat Power Limited - India
- Minerals Council of Australia
- PowerSource Philippines DevCo
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- VISA Power Limited - India
- Tata Chemicals Ltd - India
- Bangladesh Power Developement Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Aditya Birla Group - India
- Romanian Commodities Exchange
- Antam Resourcindo - Indonesia
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- The University of Queensland
- Latin American Coal - Colombia
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Straits Asia Resources Limited - Singapore
- International Coal Ventures Pvt Ltd - India
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- Oldendorff Carriers - Singapore
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- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- Cigading International Bulk Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- GVK Power & Infra Limited - India
- Barasentosa Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Carbofer General Trading SA - India
- London Commodity Brokers - England
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- Energy Development Corp, Philippines
- Mintek Dendrill Indonesia
- Africa Commodities Group - South Africa
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- Lanco Infratech Ltd - India
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- Interocean Group of Companies - India
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- Planning Commission, India
- Medco Energi Mining Internasional
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- Sical Logistics Limited - India
- Thiess Contractors Indonesia
- Wilmar Investment Holdings
- Star Paper Mills Limited - India
- Holcim Trading Pte Ltd - Singapore
- Billiton Holdings Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Borneo Indobara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Chettinad Cement Corporation Ltd - India
- Eastern Energy - Thailand
- Orica Mining Services - Indonesia
- Madhucon Powers Ltd - India
- Trasteel International SA, Italy
- Coal and Oil Company - UAE
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- Ind-Barath Power Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Baramulti Group, Indonesia
- Siam City Cement - Thailand
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- GMR Energy Limited - India
- Parliament of New Zealand
- Sarangani Energy Corporation, Philippines
- Wood Mackenzie - Singapore
- Riau Bara Harum - Indonesia
- Power Finance Corporation Ltd., India
- Georgia Ports Authority, United States
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Meralco Power Generation, Philippines
- Globalindo Alam Lestari - Indonesia
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- Bhoruka Overseas - Indonesia
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- Global Business Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- Kartika Selabumi Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Australian Coal Association
- Aboitiz Power Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Semirara Mining Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Siam City Cement PLC, Thailand
- MS Steel International - UAE
- GN Power Mariveles Coal Plant, Philippines
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- Kepco SPC Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
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- SN Aboitiz Power Inc, Philippines
- Vedanta Resources Plc - India
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