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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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Friday, 02 May 14
US WEEKLY COAL PRODUCTION RELATIVELY FLAT AT -0.1%, SAYS EIA
COALspot.com – United States the world's second largest coal producer, produced approximately 19.0 million short tons (mmst) of coal i ...
Friday, 02 May 14
DRY BULK MARKET SHOWING SIGNS OF COMEBACK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market which has been hovering below the 1,000-point market (BDI) during the past couple of weeks, could be exhibiting signs of a s ...
Thursday, 01 May 14
INDONESIA EXPORT BAN POINTS TO QUESTIONS OVER CHINA'S LONG-TERM BAUXITE SUPPLY - WOOD MACKENZIE
China’s Bauxite demand forecast to reach 240 million tonnes by 2030
In light of the Indonesian mineral ore ban that came into force o ...
Thursday, 01 May 14
DRY BULK MARKET STILL REELING UNDER PRESSURE FROM VARIOUS FACTORS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market's revival is still overdue, as the industry's benchmark, the BDI is still lagging below the 1,000-point mark. In fac ...
Wednesday, 30 April 14
FREIGHT MARKET FOR DRY BULKERS STILL REMAINS WEAK - INTERMODAL
One week after the Easter holiday and the celebration for the resurrection of Christ, everybody expected to see a similar sign of a revival in t ...
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Showing 3726 to 3730 news of total 6871 |
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- Standard Chartered Bank - UAE
- Tata Chemicals Ltd - India
- OPG Power Generation Pvt Ltd - India
- Africa Commodities Group - South Africa
- White Energy Company Limited
- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- Renaissance Capital - South Africa
- Sarangani Energy Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Semirara Mining and Power Corporation, Philippines
- GMR Energy Limited - India
- The Treasury - Australian Government
- Lanco Infratech Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Indogreen Group - Indonesia
- Thiess Contractors Indonesia
- Coal and Oil Company - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- Interocean Group of Companies - India
- Antam Resourcindo - Indonesia
- Globalindo Alam Lestari - Indonesia
- Attock Cement Pakistan Limited
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- ASAPP Information Group - India
- Orica Mining Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Global Green Power PLC Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- Indika Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- Indonesian Coal Mining Association
- Latin American Coal - Colombia
- Kobexindo Tractors - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Energy Link Ltd, New Zealand
- Commonwealth Bank - Australia
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- ICICI Bank Limited - India
- Directorate Of Revenue Intelligence - India
- CIMB Investment Bank - Malaysia
- Altura Mining Limited, Indonesia
- Cigading International Bulk Terminal - Indonesia
- New Zealand Coal & Carbon
- Borneo Indobara - Indonesia
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Bharathi Cement Corporation - India
- Baramulti Group, Indonesia
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- Georgia Ports Authority, United States
- London Commodity Brokers - England
- Indian Energy Exchange, India
- Romanian Commodities Exchange
- Krishnapatnam Port Company Ltd. - India
- PTC India Limited - India
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Mintek Dendrill Indonesia
- Tamil Nadu electricity Board
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Xindia Steels Limited - India
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Salva Resources Pvt Ltd - India
- Bhushan Steel Limited - India
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Kumho Petrochemical, South Korea
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Meralco Power Generation, Philippines
- Parliament of New Zealand
- Port Waratah Coal Services - Australia
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- Central Electricity Authority - India
- Maharashtra Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Barasentosa Lestari - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Sical Logistics Limited - India
- Orica Australia Pty. Ltd.
- Makarim & Taira - Indonesia
- Eastern Energy - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Marubeni Corporation - India
- European Bulk Services B.V. - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Minerals Council of Australia
- Kaltim Prima Coal - Indonesia
- Indian Oil Corporation Limited
- Iligan Light & Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement PLC, Thailand
- Maheswari Brothers Coal Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jorong Barutama Greston.PT - Indonesia
- Energy Development Corp, Philippines
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- Mercator Lines Limited - India
- Dalmia Cement Bharat India
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Power Finance Corporation Ltd., India
- Therma Luzon, Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- VISA Power Limited - India
- Banpu Public Company Limited - Thailand
- Indo Tambangraya Megah - Indonesia
- International Coal Ventures Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- SMC Global Power, Philippines
- Heidelberg Cement - Germany
- Aditya Birla Group - India
- Sakthi Sugars Limited - India
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- CNBM International Corporation - China
- IHS Mccloskey Coal Group - USA
- Electricity Generating Authority of Thailand
- AsiaOL BioFuels Corp., Philippines
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
- Bangladesh Power Developement Board
- Cement Manufacturers Association - India
- Madhucon Powers Ltd - India
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Singapore Mercantile Exchange
- Goldman Sachs - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Kartika Selabumi Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- MS Steel International - UAE
- Simpson Spence & Young - Indonesia
- Electricity Authority, New Zealand
- Anglo American - United Kingdom
- Australian Coal Association
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Mines - Canada
- Vedanta Resources Plc - India
- Jindal Steel & Power Ltd - India
- Australian Commodity Traders Exchange
- Posco Energy - South Korea
- Global Coal Blending Company Limited - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Mjunction Services Limited - India
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- Edison Trading Spa - Italy
- The University of Queensland
- Eastern Coal Council - USA
- Oldendorff Carriers - Singapore
- Economic Council, Georgia
- Meenaskhi Energy Private Limited - India
- Kideco Jaya Agung - Indonesia
- Coalindo Energy - Indonesia
- Merrill Lynch Commodities Europe
- Parry Sugars Refinery, India
- Ministry of Finance - Indonesia
- Kepco SPC Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- Global Business Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- Semirara Mining Corp, Philippines
- Price Waterhouse Coopers - Russia
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- GVK Power & Infra Limited - India
- San Jose City I Power Corp, Philippines
- Trasteel International SA, Italy
- Videocon Industries ltd - India
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
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