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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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Saturday, 08 March 14
LETTERS OF INDEMNITY - SKULD
KNOWLEDGE TO ELEVATE
In today's trading market, owners are frequently requested to accept a letter of indemnity (LOI) in exchange for complying ...
Friday, 07 March 14
DRY BULK MARKET TO BENEFIT FROM CHINA'S GDP GROWTH TARGET - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
With the dry bulk market freight rates finally making waves, China's aim of 7.5% GDP growth for 2014 mean once again positive news for the shipping ...
Friday, 07 March 14
RBCT, WORLD'S LARGEST COAL EXPORTING TERMINAL SHIPPED 1.78% LESS COAL MONTH ON MONTH
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the single largest export coal terminal in the world, shipped 4.487 million tons of ...
Friday, 07 March 14
INDONESIA SHIPPED 7% LESS COAL IN JANUARY 2014 COMPARED TO ITS DECEMBER EXPORTS
COALspot.com: Indonesia, the world 4th largest coal producer and the Global largest multi grade coal exporter shipped around $1.8* billion ...
Friday, 07 March 14
INDONESIA TO PRODUCE 421 MMT OF COAL IN 2014
Coalspot.com: Indonesia finally agreed to increased 2014 coal output by as much as 6 percent to 421 million metric tons from its previous plan, a se ...
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Showing 3811 to 3815 news of total 6871 |
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- TeaM Sual Corporation - Philippines
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Commonwealth Bank - Australia
- Sojitz Corporation - Japan
- Carbofer General Trading SA - India
- Electricity Authority, New Zealand
- Global Coal Blending Company Limited - Australia
- International Coal Ventures Pvt Ltd - India
- Wilmar Investment Holdings
- Eastern Coal Council - USA
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- Coalindo Energy - Indonesia
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Madhucon Powers Ltd - India
- Africa Commodities Group - South Africa
- Indian Energy Exchange, India
- Kideco Jaya Agung - Indonesia
- Kepco SPC Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Minerals Council of Australia
- Parry Sugars Refinery, India
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- IEA Clean Coal Centre - UK
- Orica Australia Pty. Ltd.
- Aditya Birla Group - India
- Leighton Contractors Pty Ltd - Australia
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Edison Trading Spa - Italy
- Xindia Steels Limited - India
- Global Green Power PLC Corporation, Philippines
- Heidelberg Cement - Germany
- Toyota Tsusho Corporation, Japan
- ASAPP Information Group - India
- Eastern Energy - Thailand
- Jaiprakash Power Ventures ltd
- GMR Energy Limited - India
- Marubeni Corporation - India
- Posco Energy - South Korea
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- Interocean Group of Companies - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Holcim Trading Pte Ltd - Singapore
- Sakthi Sugars Limited - India
- Makarim & Taira - Indonesia
- Ministry of Transport, Egypt
- Manunggal Multi Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Dalmia Cement Bharat India
- Orica Mining Services - Indonesia
- VISA Power Limited - India
- Standard Chartered Bank - UAE
- Kartika Selabumi Mining - Indonesia
- Indian Oil Corporation Limited
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Port Waratah Coal Services - Australia
- Australian Commodity Traders Exchange
- Neyveli Lignite Corporation Ltd, - India
- Thai Mozambique Logistica
- Ambuja Cements Ltd - India
- The Treasury - Australian Government
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Riau Bara Harum - Indonesia
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- Pendopo Energi Batubara - Indonesia
- Coal and Oil Company - UAE
- Chettinad Cement Corporation Ltd - India
- Rio Tinto Coal - Australia
- Indika Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- GN Power Mariveles Coal Plant, Philippines
- Vedanta Resources Plc - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Indonesian Coal Mining Association
- Baramulti Group, Indonesia
- Sindya Power Generating Company Private Ltd
- Trasteel International SA, Italy
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Energy Development Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Romanian Commodities Exchange
- Bhushan Steel Limited - India
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining and Power Corporation, Philippines
- Bharathi Cement Corporation - India
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Renaissance Capital - South Africa
- Videocon Industries ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Ministry of Finance - Indonesia
- Essar Steel Hazira Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Uttam Galva Steels Limited - India
- Thiess Contractors Indonesia
- Meralco Power Generation, Philippines
- Energy Link Ltd, New Zealand
- Sical Logistics Limited - India
- Price Waterhouse Coopers - Russia
- AsiaOL BioFuels Corp., Philippines
- Banpu Public Company Limited - Thailand
- Directorate General of MIneral and Coal - Indonesia
- PowerSource Philippines DevCo
- Bulk Trading Sa - Switzerland
- Star Paper Mills Limited - India
- SMG Consultants - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Aboitiz Power Corporation - Philippines
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- Binh Thuan Hamico - Vietnam
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Power Finance Corporation Ltd., India
- Bangladesh Power Developement Board
- McConnell Dowell - Australia
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- The University of Queensland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- SMC Global Power, Philippines
- The State Trading Corporation of India Ltd
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Jorong Barutama Greston.PT - Indonesia
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Borneo Indobara - Indonesia
- Tamil Nadu electricity Board
- MS Steel International - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Larsen & Toubro Limited - India
- GAC Shipping (India) Pvt Ltd
- Indogreen Group - Indonesia
- Ind-Barath Power Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- San Jose City I Power Corp, Philippines
- White Energy Company Limited
- Kapuas Tunggal Persada - Indonesia
- PTC India Limited - India
- Semirara Mining Corp, Philippines
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Petron Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- ICICI Bank Limited - India
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Altura Mining Limited, Indonesia
- India Bulls Power Limited - India
- LBH Netherlands Bv - Netherlands
- Savvy Resources Ltd - HongKong
- Medco Energi Mining Internasional
- New Zealand Coal & Carbon
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- Grasim Industreis Ltd - India
- Georgia Ports Authority, United States
- Samtan Co., Ltd - South Korea
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Economic Council, Georgia
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Gujarat Sidhee Cement - India
- Indo Tambangraya Megah - Indonesia
- Deloitte Consulting - India
- Planning Commission, India
- Metalloyd Limited - United Kingdom
- IHS Mccloskey Coal Group - USA
- Australian Coal Association
- Wood Mackenzie - Singapore
- European Bulk Services B.V. - Netherlands
- Salva Resources Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Central Java Power - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bhoruka Overseas - Indonesia
- Goldman Sachs - Singapore
- Miang Besar Coal Terminal - Indonesia
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