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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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Thursday, 13 March 14
HANDY: THE FAR EAST MARKET IS IN AN UPWARD TREND - FEARNRESEARCH
Handy
Atlantic is a bit under pressure for spot tonnage, but the underlying sentiment is positive for the short medium future. 2-3 legs are do ...
Thursday, 13 March 14
MARKET INSIGHT - CHRISTOPHER T. WHITTY
By Christopher T. Whitty
Marketing Manager
Cotzias Intermodal Shipping Inc.
During the last year we have noticed that a fair number of ...
Wednesday, 12 March 14
ADARO ENERGY IMPROVES EFFICIENCY AND GENERATED STRONG EBITDA IN 2013
COALspot.com: PT Adaro Energy Tbk, Indonesia's single largest coal miner posted revenue of US$ 3.28 billion and cost of revenue of US$ 2.54 ...
Wednesday, 12 March 14
DGOMC OF INDONESIA REVISED DOWN THE BENCHMARK PRICES FOR COAL BY 4.26% IN MARCH
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has revised down the government's declared coal bench mark price ...
Wednesday, 12 March 14
DRY BULK VESSELS STILL THE CREAM OF THE CROP FOR SHIP OWNERS
Dry bulk carriers have remained the most popular vessel type among ship owners as proven by the sheer number of second hand vessel sales and new ...
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- Sindya Power Generating Company Private Ltd
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Bukit Baiduri Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- Bulk Trading Sa - Switzerland
- The University of Queensland
- Sojitz Corporation - Japan
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
- Orica Australia Pty. Ltd.
- Central Java Power - Indonesia
- Carbofer General Trading SA - India
- Marubeni Corporation - India
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
- Heidelberg Cement - Germany
- Jaiprakash Power Ventures ltd
- Timah Investasi Mineral - Indoneisa
- Borneo Indobara - Indonesia
- Kumho Petrochemical, South Korea
- Mercator Lines Limited - India
- Electricity Authority, New Zealand
- Salva Resources Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- OPG Power Generation Pvt Ltd - India
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- San Jose City I Power Corp, Philippines
- Standard Chartered Bank - UAE
- Ambuja Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Renaissance Capital - South Africa
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Singapore Mercantile Exchange
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- GVK Power & Infra Limited - India
- Edison Trading Spa - Italy
- Planning Commission, India
- PowerSource Philippines DevCo
- Toyota Tsusho Corporation, Japan
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Power Finance Corporation Ltd., India
- Kartika Selabumi Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- McConnell Dowell - Australia
- New Zealand Coal & Carbon
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bayan Resources Tbk. - Indonesia
- Ind-Barath Power Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cigading International Bulk Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Tamil Nadu electricity Board
- Interocean Group of Companies - India
- Asmin Koalindo Tuhup - Indonesia
- Independent Power Producers Association of India
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- South Luzon Thermal Energy Corporation
- Chettinad Cement Corporation Ltd - India
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Australian Coal Association
- Orica Mining Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Kapuas Tunggal Persada - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Merrill Lynch Commodities Europe
- CIMB Investment Bank - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Petron Corporation, Philippines
- Savvy Resources Ltd - HongKong
- European Bulk Services B.V. - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- MS Steel International - UAE
- GMR Energy Limited - India
- Sical Logistics Limited - India
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Posco Energy - South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Ministry of Mines - Canada
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Energy Development Corp, Philippines
- Deloitte Consulting - India
- TeaM Sual Corporation - Philippines
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- Malabar Cements Ltd - India
- Iligan Light & Power Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- Siam City Cement PLC, Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Business Power Corporation, Philippines
- London Commodity Brokers - England
- Commonwealth Bank - Australia
- Economic Council, Georgia
- Madhucon Powers Ltd - India
- Banpu Public Company Limited - Thailand
- Maheswari Brothers Coal Limited - India
- Coal and Oil Company - UAE
- Kalimantan Lumbung Energi - Indonesia
- Energy Link Ltd, New Zealand
- Wood Mackenzie - Singapore
- Gujarat Sidhee Cement - India
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Meralco Power Generation, Philippines
- Mjunction Services Limited - India
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Videocon Industries ltd - India
- International Coal Ventures Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Xindia Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- SMG Consultants - Indonesia
- White Energy Company Limited
- The State Trading Corporation of India Ltd
- Altura Mining Limited, Indonesia
- Kideco Jaya Agung - Indonesia
- ASAPP Information Group - India
- Medco Energi Mining Internasional
- Formosa Plastics Group - Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- Georgia Ports Authority, United States
- ICICI Bank Limited - India
- Bangladesh Power Developement Board
- LBH Netherlands Bv - Netherlands
- Siam City Cement - Thailand
- Bharathi Cement Corporation - India
- Eastern Coal Council - USA
- Simpson Spence & Young - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Larsen & Toubro Limited - India
- Australian Commodity Traders Exchange
- Kaltim Prima Coal - Indonesia
- Kobexindo Tractors - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Minerals Council of Australia
- VISA Power Limited - India
- Rio Tinto Coal - Australia
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
- Riau Bara Harum - Indonesia
- Romanian Commodities Exchange
- Pendopo Energi Batubara - Indonesia
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Mintek Dendrill Indonesia
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- CNBM International Corporation - China
- Dalmia Cement Bharat India
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- Agrawal Coal Company - India
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- IEA Clean Coal Centre - UK
- Neyveli Lignite Corporation Ltd, - India
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- Binh Thuan Hamico - Vietnam
- Aditya Birla Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Latin American Coal - Colombia
- Krishnapatnam Port Company Ltd. - India
- Intertek Mineral Services - Indonesia
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Rashtriya Ispat Nigam Limited - India
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