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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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Sunday, 30 March 14
FREIGHTS FROM INDONESIA TO INDIA IS EXPECTED TO BE SOFT NEXT WEEK - REDDY
COALspot.com: The freight market dropped drastically and all sectors were affected severely.
The BDI was down by 14.13 pct and closed at 1, ...
Friday, 28 March 14
US PRODUCED APPROXIMATELY 18.9 MMST IN A WEEK - EIA
COALspot.com – United States the world's second largest coal producer, produced approximately 18.9 million short tons (mmst) of coal i ...
Friday, 28 March 14
CHINA'S ENVIRONMENTAL MEASURES WILL NOT CURB GROWTH IN DOMESTIC STEEL PRODUCTION AND SEABORNE IRON ORE - WOOD MACKENZIE SAYS
Steel plants in China have been targeted as a major source of the toxic smog enveloping Beijing and Shanghai. Emergency measures have been impos ...
Thursday, 27 March 14
PANAMAX : SEEMS TO HEAD FURTHER DOWN; CAPESIZE : ANOTHER CHOPPY AND UNPREDICTABLE WEEK - FEARNLEYS AS
Handy
A weaker sentiment for the smaller size as well, with reduced activity in the Atlantic where Owners have to face significantly lower ret ...
Wednesday, 26 March 14
NEWBUILDING ORDERING ACTIVITY PICKS UP PACE ON IMPROVING DRY BULK MARKET CONDITIONS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The gradual improvement of the dry bulk market, as expected for some time now, is urging shipowners to increase their newbuilding ordering activ ...
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Showing 3776 to 3780 news of total 6871 |
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- IEA Clean Coal Centre - UK
- Directorate General of MIneral and Coal - Indonesia
- Madhucon Powers Ltd - India
- Binh Thuan Hamico - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- GMR Energy Limited - India
- SMC Global Power, Philippines
- Planning Commission, India
- The University of Queensland
- Ministry of Finance - Indonesia
- Bhatia International Limited - India
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Sojitz Corporation - Japan
- Bukit Makmur.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- McConnell Dowell - Australia
- Global Coal Blending Company Limited - Australia
- Deloitte Consulting - India
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- LBH Netherlands Bv - Netherlands
- GAC Shipping (India) Pvt Ltd
- Cigading International Bulk Terminal - Indonesia
- European Bulk Services B.V. - Netherlands
- New Zealand Coal & Carbon
- Indo Tambangraya Megah - Indonesia
- Mjunction Services Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Marubeni Corporation - India
- Kartika Selabumi Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Aditya Birla Group - India
- Posco Energy - South Korea
- Medco Energi Mining Internasional
- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- Energy Development Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Karaikal Port Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Tamil Nadu electricity Board
- Australian Coal Association
- Holcim Trading Pte Ltd - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- Antam Resourcindo - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Merrill Lynch Commodities Europe
- Jorong Barutama Greston.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Interocean Group of Companies - India
- Meralco Power Generation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Georgia Ports Authority, United States
- Star Paper Mills Limited - India
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Siam City Cement - Thailand
- Jaiprakash Power Ventures ltd
- TeaM Sual Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Grasim Industreis Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Renaissance Capital - South Africa
- Miang Besar Coal Terminal - Indonesia
- Agrawal Coal Company - India
- Formosa Plastics Group - Taiwan
- Independent Power Producers Association of India
- Coastal Gujarat Power Limited - India
- Vizag Seaport Private Limited - India
- Kobexindo Tractors - Indoneisa
- VISA Power Limited - India
- Coalindo Energy - Indonesia
- Goldman Sachs - Singapore
- Simpson Spence & Young - Indonesia
- Commonwealth Bank - Australia
- Lanco Infratech Ltd - India
- Savvy Resources Ltd - HongKong
- Leighton Contractors Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- Central Java Power - Indonesia
- San Jose City I Power Corp, Philippines
- Global Business Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Trasteel International SA, Italy
- Salva Resources Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- AsiaOL BioFuels Corp., Philippines
- London Commodity Brokers - England
- TNB Fuel Sdn Bhd - Malaysia
- Manunggal Multi Energi - Indonesia
- Edison Trading Spa - Italy
- Larsen & Toubro Limited - India
- Parliament of New Zealand
- Port Waratah Coal Services - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Bangladesh Power Developement Board
- Ministry of Transport, Egypt
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- Bulk Trading Sa - Switzerland
- Riau Bara Harum - Indonesia
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- MS Steel International - UAE
- Rio Tinto Coal - Australia
- Gujarat Mineral Development Corp Ltd - India
- Xindia Steels Limited - India
- Parry Sugars Refinery, India
- Ind-Barath Power Infra Limited - India
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- Kaltim Prima Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- PNOC Exploration Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- India Bulls Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Bharathi Cement Corporation - India
- Ministry of Mines - Canada
- Bhoruka Overseas - Indonesia
- Malabar Cements Ltd - India
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Mintek Dendrill Indonesia
- Mercator Lines Limited - India
- Barasentosa Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Sical Logistics Limited - India
- Eastern Energy - Thailand
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- Timah Investasi Mineral - Indoneisa
- Global Green Power PLC Corporation, Philippines
- GVK Power & Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Therma Luzon, Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- IHS Mccloskey Coal Group - USA
- Electricity Authority, New Zealand
- Singapore Mercantile Exchange
- Indika Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Indonesian Coal Mining Association
- Meenaskhi Energy Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dalmia Cement Bharat India
- Ambuja Cements Ltd - India
- Bhushan Steel Limited - India
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Power Finance Corporation Ltd., India
- Economic Council, Georgia
- Videocon Industries ltd - India
- Samtan Co., Ltd - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Minerals Council of Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Borneo Indobara - Indonesia
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- PTC India Limited - India
- Maheswari Brothers Coal Limited - India
- Intertek Mineral Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kideco Jaya Agung - Indonesia
- Vedanta Resources Plc - India
- Sinarmas Energy and Mining - Indonesia
- Petron Corporation, Philippines
- Standard Chartered Bank - UAE
- Wood Mackenzie - Singapore
- Sarangani Energy Corporation, Philippines
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Orica Mining Services - Indonesia
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- Indogreen Group - Indonesia
- Banpu Public Company Limited - Thailand
- Semirara Mining Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Attock Cement Pakistan Limited
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- The Treasury - Australian Government
- Latin American Coal - Colombia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Australia Pty. Ltd.
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