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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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Tuesday, 04 March 14
HIGHER PRICES AND STEADY FREIGHT RATES LEAD SHIP OWNERS TO TEMPORARILY HALT SECOND HAND VESSEL PURCHASES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the dry bulk market has kept on improving, but at a very slow rate, ship owners have elected to take a step back from the flurry of the S&P m ...
Monday, 03 March 14
SUB-BIT INDONESIA COAL SWAP (FOB) FOR AVERAGE Q115 CLOSED AT $60.28, $ 1.70 HIGHER THAN 2Q14
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 slightly corrected do ...
Monday, 03 March 14
API 8 CFR SOUTH CHINA SWAPS: Q4' 2014 DELIVERY CLOSED US$ 1.40 HIGHER COMPARED TO Q2' 2014 DELIVERY
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.90 percent month on month and closed at US$ 76.27 per mt as on Fr ...
Monday, 03 March 14
COSTS LIABILITY PASSING DOWN A CHARTERPARTY CHAIN - SKULD
KNOWLEDGE TO ELEVATE
Provided that charterparties are on back to back terms, and the claim is successful, liability for costs incurred shoul ...
Sunday, 02 March 14
THE FREIGHT MARKET WAS STEADY TO FIRM THIS PAST WEEK - CAPT. REDDY
COALspot.com: The freight market was steady to firm this past week. The BDI was up 7.06 pct and closed at 1258 points and the cape index was also fi ...
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Showing 3821 to 3825 news of total 6871 |
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- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Banpu Public Company Limited - Thailand
- Sical Logistics Limited - India
- Ind-Barath Power Infra Limited - India
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Rio Tinto Coal - Australia
- Siam City Cement - Thailand
- White Energy Company Limited
- New Zealand Coal & Carbon
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Larsen & Toubro Limited - India
- Standard Chartered Bank - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- San Jose City I Power Corp, Philippines
- Madhucon Powers Ltd - India
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Jindal Steel & Power Ltd - India
- Kartika Selabumi Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Carbofer General Trading SA - India
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Energy Link Ltd, New Zealand
- Meenaskhi Energy Private Limited - India
- Parry Sugars Refinery, India
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Holcim Trading Pte Ltd - Singapore
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Formosa Plastics Group - Taiwan
- Indonesian Coal Mining Association
- GAC Shipping (India) Pvt Ltd
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Bhatia International Limited - India
- Riau Bara Harum - Indonesia
- Cement Manufacturers Association - India
- Malabar Cements Ltd - India
- London Commodity Brokers - England
- Eastern Energy - Thailand
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Petrochimia International Co. Ltd.- Taiwan
- Kideco Jaya Agung - Indonesia
- Heidelberg Cement - Germany
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- GMR Energy Limited - India
- Global Green Power PLC Corporation, Philippines
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- Central Java Power - Indonesia
- Economic Council, Georgia
- Kumho Petrochemical, South Korea
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- Planning Commission, India
- Kaltim Prima Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- Bulk Trading Sa - Switzerland
- TeaM Sual Corporation - Philippines
- Baramulti Group, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Kapuas Tunggal Persada - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- Orica Mining Services - Indonesia
- Agrawal Coal Company - India
- Latin American Coal - Colombia
- Globalindo Alam Lestari - Indonesia
- Videocon Industries ltd - India
- Oldendorff Carriers - Singapore
- Port Waratah Coal Services - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Parliament of New Zealand
- Indogreen Group - Indonesia
- The University of Queensland
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Barasentosa Lestari - Indonesia
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- Bayan Resources Tbk. - Indonesia
- India Bulls Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Medco Energi Mining Internasional
- Australian Coal Association
- Indika Energy - Indonesia
- Merrill Lynch Commodities Europe
- Samtan Co., Ltd - South Korea
- Miang Besar Coal Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- GVK Power & Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Sindya Power Generating Company Private Ltd
- Salva Resources Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Thai Mozambique Logistica
- Coastal Gujarat Power Limited - India
- Altura Mining Limited, Indonesia
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Therma Luzon, Inc, Philippines
- Global Business Power Corporation, Philippines
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Central Electricity Authority - India
- Meralco Power Generation, Philippines
- Uttam Galva Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Trasteel International SA, Italy
- PTC India Limited - India
- Rashtriya Ispat Nigam Limited - India
- Wilmar Investment Holdings
- Interocean Group of Companies - India
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- CNBM International Corporation - China
- Aditya Birla Group - India
- Borneo Indobara - Indonesia
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cigading International Bulk Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Dalmia Cement Bharat India
- ASAPP Information Group - India
- VISA Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Coal and Oil Company - UAE
- Vizag Seaport Private Limited - India
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- IHS Mccloskey Coal Group - USA
- Maharashtra Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- The Treasury - Australian Government
- OPG Power Generation Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Ambuja Cements Ltd - India
- Eastern Coal Council - USA
- Krishnapatnam Port Company Ltd. - India
- Bukit Makmur.PT - Indonesia
- Makarim & Taira - Indonesia
- Bharathi Cement Corporation - India
- Chamber of Mines of South Africa
- Sinarmas Energy and Mining - Indonesia
- Iligan Light & Power Inc, Philippines
- Minerals Council of Australia
- Deloitte Consulting - India
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Tamil Nadu electricity Board
- Bukit Baiduri Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Savvy Resources Ltd - HongKong
- Alfred C Toepfer International GmbH - Germany
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