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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, 21 April 14
DRY BULK MARKET UPS AND - MOST RECENTLY - DOWNS OFFERS NO ROOM FOR RELAXING AMONG DRY BULK SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market's latest demise, with the market retrating once again, since the end of March, has come at a time, when most ship owners ...
Sunday, 20 April 14
FREIGHT RATES END WEEK ON WEAK NOTE - VISTAAR
Wish you all Happy Easter.
The freight market continued to its downwards as BDI was fell 7.187 percent to 930 points week on week.
The ...
Friday, 18 April 14
US WEEKLY COAL PRODUCTION DECLINED BY 1% TO 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, 17 April 14
DRY BULK MARKET ON RETREAT MODE, WHILE NEWBUILDING ORDERING ACTIVITY STALLS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept on retreating this week, a pattern which emerged since late March. Yesterday the BDI (Baltic Dry Index) ended yet a ...
Wednesday, 16 April 14
INDONESIA'S FEBRUARY 2014 COAL EXPORT VOLUME FELL 2.41%
COALspot.com: Indonesia, the world 4th largest coal producer and the global largest multi grade coal exporter shipped around $1.77* billio ...
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Showing 3746 to 3750 news of total 6871 |
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- GAC Shipping (India) Pvt Ltd
- Antam Resourcindo - Indonesia
- Intertek Mineral Services - Indonesia
- Thiess Contractors Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Indo Tambangraya Megah - Indonesia
- GVK Power & Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Commonwealth Bank - Australia
- Metalloyd Limited - United Kingdom
- International Coal Ventures Pvt Ltd - India
- White Energy Company Limited
- Chamber of Mines of South Africa
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Kobexindo Tractors - Indoneisa
- Siam City Cement - Thailand
- Bhatia International Limited - India
- Kideco Jaya Agung - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Standard Chartered Bank - UAE
- Cement Manufacturers Association - India
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Thai Mozambique Logistica
- Rashtriya Ispat Nigam Limited - India
- VISA Power Limited - India
- PNOC Exploration Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Larsen & Toubro Limited - India
- Bharathi Cement Corporation - India
- CNBM International Corporation - China
- Marubeni Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Bulk Trading Sa - Switzerland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kapuas Tunggal Persada - Indonesia
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Rio Tinto Coal - Australia
- Straits Asia Resources Limited - Singapore
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- Xindia Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Parry Sugars Refinery, India
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Goldman Sachs - Singapore
- TeaM Sual Corporation - Philippines
- The University of Queensland
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- MS Steel International - UAE
- Energy Development Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Central Java Power - Indonesia
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- The State Trading Corporation of India Ltd
- Aboitiz Power Corporation - Philippines
- Ministry of Mines - Canada
- Kohat Cement Company Ltd. - Pakistan
- Directorate Of Revenue Intelligence - India
- Ceylon Electricity Board - Sri Lanka
- European Bulk Services B.V. - Netherlands
- Holcim Trading Pte Ltd - Singapore
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Global Green Power PLC Corporation, Philippines
- ICICI Bank Limited - India
- Gujarat Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Merrill Lynch Commodities Europe
- Interocean Group of Companies - India
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Africa Commodities Group - South Africa
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Baiduri Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Grasim Industreis Ltd - India
- Tamil Nadu electricity Board
- Independent Power Producers Association of India
- Carbofer General Trading SA - India
- Edison Trading Spa - Italy
- Mjunction Services Limited - India
- Ministry of Transport, Egypt
- Vizag Seaport Private Limited - India
- Eastern Coal Council - USA
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- Borneo Indobara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Simpson Spence & Young - Indonesia
- Maheswari Brothers Coal Limited - India
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Neyveli Lignite Corporation Ltd, - India
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement PLC, Thailand
- Latin American Coal - Colombia
- Power Finance Corporation Ltd., India
- Mintek Dendrill Indonesia
- Therma Luzon, Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Sakthi Sugars Limited - India
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Wilmar Investment Holdings
- Banpu Public Company Limited - Thailand
- Australian Commodity Traders Exchange
- Electricity Authority, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Heidelberg Cement - Germany
- CIMB Investment Bank - Malaysia
- Romanian Commodities Exchange
- India Bulls Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Videocon Industries ltd - India
- SMC Global Power, Philippines
- Star Paper Mills Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Global Business Power Corporation, Philippines
- Anglo American - United Kingdom
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- Ind-Barath Power Infra Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- IEA Clean Coal Centre - UK
- Kaltim Prima Coal - Indonesia
- Sical Logistics Limited - India
- Uttam Galva Steels Limited - India
- Formosa Plastics Group - Taiwan
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- Aditya Birla Group - India
- Trasteel International SA, Italy
- Minerals Council of Australia
- Iligan Light & Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Bangladesh Power Developement Board
- Lanco Infratech Ltd - India
- Vedanta Resources Plc - India
- Coal and Oil Company - UAE
- Eastern Energy - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Central Electricity Authority - India
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Bhushan Steel Limited - India
- Renaissance Capital - South Africa
- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Orica Australia Pty. Ltd.
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Jaiprakash Power Ventures ltd
- PTC India Limited - India
- Global Coal Blending Company Limited - Australia
- Gujarat Sidhee Cement - India
- AsiaOL BioFuels Corp., Philippines
- Sree Jayajothi Cements Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Sojitz Corporation - Japan
- Deloitte Consulting - India
- Makarim & Taira - Indonesia
- Kepco SPC Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Georgia Ports Authority, United States
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Agrawal Coal Company - India
- Riau Bara Harum - Indonesia
- Mercator Lines Limited - India
- London Commodity Brokers - England
- Orica Mining Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Medco Energi Mining Internasional
- Semirara Mining Corp, Philippines
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