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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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Wednesday, 16 April 14
Q1 2014 : TERMS OF FREIGHT RATES THE PERFORMANCE IN THE DRY BULK MARKET HAS NOT MET THE HIGH EXPECTATIONS - INTERMODAL
This year the dates for the celebration of Easter will coincide for the Orthodox and the Catholic, so we are already seeing most people in the m ...
Tuesday, 15 April 14
NEWCASTLE SHIPPED MORE COAL WEEK ON WEEK
COALspot.com: In the week ended 07:00 hours 14 April 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensl ...
Monday, 14 April 14
SUB-BIT FOB INDO COAL SWAP FOR Q1' 15 DELIVERY CLOSED AT US$ 60.12 PER MT
COALspot.com: Indonesian coal swaps for average Q4’ 2014 gain on month and on week according to AsiaClear OTC coal swap's reports rele ...
Monday, 14 April 14
INDONESIA'S Q1 COAL PRODUCTION LITTLE CHANGED EVEN WITH PRICE DROP - INVESTOR DAILY
Indonesia’s coal production by volume in the first quarter remained little changed from the same period last year despite the decline in t ...
Monday, 14 April 14
API 8 CFR SOUTH CHINA COAL SWAPS GAIN FOR THE MONTH & WEEK
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries gained 4.61 percent month on month and closed at US$ 76.18 per mt as ...
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- Thiess Contractors Indonesia
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Vijayanagar Sugar Pvt Ltd - India
- Bhushan Steel Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- GMR Energy Limited - India
- IEA Clean Coal Centre - UK
- PowerSource Philippines DevCo
- Videocon Industries ltd - India
- Power Finance Corporation Ltd., India
- South Luzon Thermal Energy Corporation
- Cigading International Bulk Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CIMB Investment Bank - Malaysia
- Kepco SPC Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Madhucon Powers Ltd - India
- PNOC Exploration Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- Miang Besar Coal Terminal - Indonesia
- Electricity Authority, New Zealand
- Energy Link Ltd, New Zealand
- Sojitz Corporation - Japan
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Standard Chartered Bank - UAE
- TNB Fuel Sdn Bhd - Malaysia
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Global Business Power Corporation, Philippines
- McConnell Dowell - Australia
- Manunggal Multi Energi - Indonesia
- Bangladesh Power Developement Board
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- Coal and Oil Company - UAE
- Directorate General of MIneral and Coal - Indonesia
- Chamber of Mines of South Africa
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- Mercuria Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- White Energy Company Limited
- Vizag Seaport Private Limited - India
- The Treasury - Australian Government
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Renaissance Capital - South Africa
- Therma Luzon, Inc, Philippines
- Central Java Power - Indonesia
- Sical Logistics Limited - India
- San Jose City I Power Corp, Philippines
- Bhoruka Overseas - Indonesia
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Global Green Power PLC Corporation, Philippines
- Ministry of Transport, Egypt
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Ministry of Finance - Indonesia
- Deloitte Consulting - India
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- Bayan Resources Tbk. - Indonesia
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- Mjunction Services Limited - India
- Cement Manufacturers Association - India
- Dalmia Cement Bharat India
- Xindia Steels Limited - India
- Heidelberg Cement - Germany
- Parry Sugars Refinery, India
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- The University of Queensland
- Bahari Cakrawala Sebuku - Indonesia
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- PTC India Limited - India
- Siam City Cement PLC, Thailand
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- European Bulk Services B.V. - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- Parliament of New Zealand
- SN Aboitiz Power Inc, Philippines
- Bharathi Cement Corporation - India
- Banpu Public Company Limited - Thailand
- International Coal Ventures Pvt Ltd - India
- Makarim & Taira - Indonesia
- Eastern Coal Council - USA
- Global Coal Blending Company Limited - Australia
- Goldman Sachs - Singapore
- Krishnapatnam Port Company Ltd. - India
- Planning Commission, India
- Mintek Dendrill Indonesia
- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- Toyota Tsusho Corporation, Japan
- Rashtriya Ispat Nigam Limited - India
- Coastal Gujarat Power Limited - India
- Tata Chemicals Ltd - India
- Australian Commodity Traders Exchange
- Mercator Lines Limited - India
- Meralco Power Generation, Philippines
- Riau Bara Harum - Indonesia
- Indian Oil Corporation Limited
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Kartika Selabumi Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Singapore Mercantile Exchange
- VISA Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Bukit Makmur.PT - Indonesia
- Kumho Petrochemical, South Korea
- Minerals Council of Australia
- Lanco Infratech Ltd - India
- The State Trading Corporation of India Ltd
- Jaiprakash Power Ventures ltd
- Latin American Coal - Colombia
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Posco Energy - South Korea
- Interocean Group of Companies - India
- GVK Power & Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Pipit Mutiara Jaya. PT, Indonesia
- Sindya Power Generating Company Private Ltd
- Formosa Plastics Group - Taiwan
- New Zealand Coal & Carbon
- Kohat Cement Company Ltd. - Pakistan
- Altura Mining Limited, Indonesia
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Bulk Trading Sa - Switzerland
- Indika Energy - Indonesia
- London Commodity Brokers - England
- MS Steel International - UAE
- ICICI Bank Limited - India
- Gujarat Sidhee Cement - India
- Siam City Cement - Thailand
- Uttam Galva Steels Limited - India
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Aboitiz Power Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- SMG Consultants - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Straits Asia Resources Limited - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Ambuja Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Maheswari Brothers Coal Limited - India
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Energy Development Corp, Philippines
- Intertek Mineral Services - Indonesia
- Wood Mackenzie - Singapore
- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Baramulti Group, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sakthi Sugars Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Economic Council, Georgia
- Semirara Mining Corp, Philippines
- Carbofer General Trading SA - India
- Grasim Industreis Ltd - India
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