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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, 07 April 14
API 8 CFR SOUTH CHINA COAL SWAPS GAINED 2.09% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries gained 2.09 percent month on month and closed at US$ 75.68 per ...
Sunday, 06 April 14
THE FREIGHT MARKET KEEPS SLIDING
COALspot.com: The freight market continued to drop this week. The BDI (Baltic Dry Index) is a widely followed metric that reflects the overall r ...
Friday, 04 April 14
UNITED STATES COAL OUTPUT UP 5.4% IN PAST WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.9 million short tons (mmst) of coal i ...
Thursday, 03 April 14
PANAMAX SECTOR IS WATCHING A SEVERE DROP IN RATES - FEARNLEYS
Handy
A further weaker sentiment for the Supras as well in both hemispheres this week with oversupply of tonnage being the major headline. Tra ...
Wednesday, 02 April 14
CHINA: ARBITRATION CLAUSES IN BILLS OF LADING UNDER CHINESE LEGAL PRACTICE - SKULD
KNOWLEDGE TO ELEVATE
Successful incorporation of a charterparty arbitration clause into the bills of lading is not a straight forward matte ...
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Showing 3766 to 3770 news of total 6871 |
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- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Tata Chemicals Ltd - India
- Kumho Petrochemical, South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Generating Authority of Thailand
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- Mintek Dendrill Indonesia
- Ministry of Mines - Canada
- Karbindo Abesyapradhi - Indoneisa
- Vedanta Resources Plc - India
- Kaltim Prima Coal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Gujarat Sidhee Cement - India
- Directorate Of Revenue Intelligence - India
- Timah Investasi Mineral - Indoneisa
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Australian Coal Association
- Pipit Mutiara Jaya. PT, Indonesia
- Edison Trading Spa - Italy
- Oldendorff Carriers - Singapore
- PowerSource Philippines DevCo
- Essar Steel Hazira Ltd - India
- Bukit Baiduri Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
- South Luzon Thermal Energy Corporation
- Siam City Cement PLC, Thailand
- London Commodity Brokers - England
- International Coal Ventures Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Karaikal Port Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Deloitte Consulting - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Bharathi Cement Corporation - India
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Indian Oil Corporation Limited
- Singapore Mercantile Exchange
- Aditya Birla Group - India
- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- Eastern Energy - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Kapuas Tunggal Persada - Indonesia
- Indian Energy Exchange, India
- Indogreen Group - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Merrill Lynch Commodities Europe
- Star Paper Mills Limited - India
- Romanian Commodities Exchange
- LBH Netherlands Bv - Netherlands
- Australian Commodity Traders Exchange
- Parry Sugars Refinery, India
- Sical Logistics Limited - India
- Orica Mining Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Malabar Cements Ltd - India
- IEA Clean Coal Centre - UK
- Salva Resources Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Parliament of New Zealand
- Wood Mackenzie - Singapore
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- India Bulls Power Limited - India
- Carbofer General Trading SA - India
- Central Java Power - Indonesia
- Ambuja Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Energy Development Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Sojitz Corporation - Japan
- MS Steel International - UAE
- PTC India Limited - India
- Videocon Industries ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
- Altura Mining Limited, Indonesia
- Sree Jayajothi Cements Limited - India
- Mjunction Services Limited - India
- Barasentosa Lestari - Indonesia
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- Cement Manufacturers Association - India
- Bayan Resources Tbk. - Indonesia
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Posco Energy - South Korea
- Orica Australia Pty. Ltd.
- Ceylon Electricity Board - Sri Lanka
- CNBM International Corporation - China
- Power Finance Corporation Ltd., India
- PNOC Exploration Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indika Energy - Indonesia
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Interocean Group of Companies - India
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- McConnell Dowell - Australia
- Heidelberg Cement - Germany
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- Tamil Nadu electricity Board
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- The Treasury - Australian Government
- Intertek Mineral Services - Indonesia
- Ministry of Finance - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Metalloyd Limited - United Kingdom
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Jorong Barutama Greston.PT - Indonesia
- Meralco Power Generation, Philippines
- TeaM Sual Corporation - Philippines
- Wilmar Investment Holdings
- Holcim Trading Pte Ltd - Singapore
- Trasteel International SA, Italy
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Toyota Tsusho Corporation, Japan
- Simpson Spence & Young - Indonesia
- Medco Energi Mining Internasional
- GAC Shipping (India) Pvt Ltd
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- CIMB Investment Bank - Malaysia
- Port Waratah Coal Services - Australia
- Agrawal Coal Company - India
- Standard Chartered Bank - UAE
- Krishnapatnam Port Company Ltd. - India
- Anglo American - United Kingdom
- SMC Global Power, Philippines
- Marubeni Corporation - India
- Planning Commission, India
- Kepco SPC Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- Grasim Industreis Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Rio Tinto Coal - Australia
- Bhushan Steel Limited - India
- Chettinad Cement Corporation Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Ind-Barath Power Infra Limited - India
- Coal and Oil Company - UAE
- The State Trading Corporation of India Ltd
- San Jose City I Power Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- New Zealand Coal & Carbon
- Miang Besar Coal Terminal - Indonesia
- Commonwealth Bank - Australia
- Ministry of Transport, Egypt
- GN Power Mariveles Coal Plant, Philippines
- Minerals Council of Australia
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- Antam Resourcindo - Indonesia
- Sindya Power Generating Company Private Ltd
- SN Aboitiz Power Inc, Philippines
- Lanco Infratech Ltd - India
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Gujarat Mineral Development Corp Ltd - India
- Mercuria Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- White Energy Company Limited
- Globalindo Alam Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Formosa Plastics Group - Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- GMR Energy Limited - India
- Thai Mozambique Logistica
- Petrochimia International Co. Ltd.- Taiwan
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Makarim & Taira - Indonesia
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
- Global Coal Blending Company Limited - Australia
- Petron Corporation, Philippines
- Semirara Mining Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Central Electricity Authority - India
- The University of Queensland
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