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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, 08 May 14
'TRIAL BY MEDIA, TRIAL BY LAW' - A REPORT FROM TRACK 1 OF BIMCO'S ANNUAL CONFERENCE DUBAI 2014
KNOWLEDGE TO ELEVATE
Aiming to bring a very different type of event into their annual conference, BIMCO presented ‘Double Jeopardy &n ...
Thursday, 08 May 14
INDONESIAN COAL PRICE REFERENCE IN MAY CRASHES THROUGH $74
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has revised down again the coal bench mark price by US$ 1.21 / MT to ...
Wednesday, 07 May 14
THE DRY BULK MARKET HAS NOTED ANOTHER WEEKLY POSITIVE GAIN
Chartering (Wet: Softer- / Dry: Stable+)
The Dry Bulk market has noted another weekly positive gain, driven by the Capesize segment, but we ne ...
Wednesday, 07 May 14
SGX ENHANCES ITS COMMODITIES PRODUCT OFFERING
COALspot.com: SGX is building up its bulk commodity product offerings with 9 more derivative contracts over the next 2 months, subject to regula ...
Tuesday, 06 May 14
NEWCASTLE COAL EXPORT SLIPS 7.92% WEEK ON WEEK
COALspot.com: In the week ended 07:00 hours 5 May 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland ...
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Showing 3716 to 3720 news of total 6871 |
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- Mercator Lines Limited - India
- Mercuria Energy - Indonesia
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- The State Trading Corporation of India Ltd
- Merrill Lynch Commodities Europe
- PowerSource Philippines DevCo
- Edison Trading Spa - Italy
- Sical Logistics Limited - India
- Rashtriya Ispat Nigam Limited - India
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- PetroVietnam Power Coal Import and Supply Company
- Bukit Makmur.PT - Indonesia
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Siam City Cement - Thailand
- Latin American Coal - Colombia
- Kalimantan Lumbung Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- PNOC Exploration Corporation - Philippines
- Ministry of Finance - Indonesia
- Directorate Of Revenue Intelligence - India
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Wood Mackenzie - Singapore
- Sree Jayajothi Cements Limited - India
- Binh Thuan Hamico - Vietnam
- Karaikal Port Pvt Ltd - India
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- New Zealand Coal & Carbon
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Videocon Industries ltd - India
- Minerals Council of Australia
- GVK Power & Infra Limited - India
- Grasim Industreis Ltd - India
- Lanco Infratech Ltd - India
- Orica Mining Services - Indonesia
- ICICI Bank Limited - India
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Malabar Cements Ltd - India
- Deloitte Consulting - India
- Bhatia International Limited - India
- AsiaOL BioFuels Corp., Philippines
- GN Power Mariveles Coal Plant, Philippines
- GAC Shipping (India) Pvt Ltd
- Power Finance Corporation Ltd., India
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Sindya Power Generating Company Private Ltd
- Salva Resources Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- OPG Power Generation Pvt Ltd - India
- Dalmia Cement Bharat India
- SN Aboitiz Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Offshore Bulk Terminal Pte Ltd, Singapore
- Australian Coal Association
- Karbindo Abesyapradhi - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Aditya Birla Group - India
- Gujarat Sidhee Cement - India
- Ministry of Transport, Egypt
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Kartika Selabumi Mining - Indonesia
- Indika Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Electricity Generating Authority of Thailand
- Kideco Jaya Agung - Indonesia
- Sarangani Energy Corporation, Philippines
- Heidelberg Cement - Germany
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Uttam Galva Steels Limited - India
- Therma Luzon, Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Electricity Authority, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Global Business Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Bulk Trading Sa - Switzerland
- Billiton Holdings Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- Chamber of Mines of South Africa
- IEA Clean Coal Centre - UK
- LBH Netherlands Bv - Netherlands
- Thai Mozambique Logistica
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- Georgia Ports Authority, United States
- Savvy Resources Ltd - HongKong
- Banpu Public Company Limited - Thailand
- Siam City Cement PLC, Thailand
- Trasteel International SA, Italy
- Energy Link Ltd, New Zealand
- Goldman Sachs - Singapore
- South Luzon Thermal Energy Corporation
- White Energy Company Limited
- SMG Consultants - Indonesia
- Xindia Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Attock Cement Pakistan Limited
- Kaltim Prima Coal - Indonesia
- Sakthi Sugars Limited - India
- Cigading International Bulk Terminal - Indonesia
- Iligan Light & Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Larsen & Toubro Limited - India
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Romanian Commodities Exchange
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Madhucon Powers Ltd - India
- ASAPP Information Group - India
- The University of Queensland
- Commonwealth Bank - Australia
- Jorong Barutama Greston.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- CNBM International Corporation - China
- Central Electricity Authority - India
- Central Java Power - Indonesia
- PTC India Limited - India
- Riau Bara Harum - Indonesia
- MS Steel International - UAE
- Coal and Oil Company - UAE
- Vedanta Resources Plc - India
- Straits Asia Resources Limited - Singapore
- Indonesian Coal Mining Association
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Energy - Thailand
- India Bulls Power Limited - India
- Bangladesh Power Developement Board
- Indian Energy Exchange, India
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- Makarim & Taira - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Carbofer General Trading SA - India
- Star Paper Mills Limited - India
- Intertek Mineral Services - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- IHS Mccloskey Coal Group - USA
- Altura Mining Limited, Indonesia
- Bhushan Steel Limited - India
- Rio Tinto Coal - Australia
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Barasentosa Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- Indian Oil Corporation Limited
- Sinarmas Energy and Mining - Indonesia
- Australian Commodity Traders Exchange
- Krishnapatnam Port Company Ltd. - India
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- Oldendorff Carriers - Singapore
- Baramulti Group, Indonesia
- Eastern Coal Council - USA
- Bukit Baiduri Energy - Indonesia
- London Commodity Brokers - England
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- Orica Australia Pty. Ltd.
- Globalindo Alam Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- San Jose City I Power Corp, Philippines
- Price Waterhouse Coopers - Russia
- SMC Global Power, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Semirara Mining Corp, Philippines
- VISA Power Limited - India
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