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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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Friday, 28 February 14
PTBA TO INCREASE ITS COAL TERMINAL'S LOADING CAPACITY TO 25 MILLION TONS PER ANNUM BY JULY 2014
COALspot.com: PT. Bukit Asam (PTBA), the Indonesian government owned coal miner operates several coal mining units in Sumatera as well as in Kaliman ...
Friday, 28 February 14
U.S PRODUCED 1.9% LESS COAL WEEK ON WEEK
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.8 million short tons (mmst) of coal in ...
Friday, 28 February 14
DRY BULK MARKET SLOWLY BUT STEADILY FINDS ITS FOOTING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market, hit by the low seasonal demand which is a typical characteristic of the first quarter of each year, is beginning to emerge from ...
Thursday, 27 February 14
PANAMAX : MARKET CONTINUED TO DECLINE IN THE ATLANTIC
Handy
The Atlantic handy/supra market experienced a downward trend this week but not a dramatic one. TA rates are down around USD 800 w-o-w lead b ...
Thursday, 27 February 14
SHIPPING LOANS WORTH $5 BILLION HAVE CHANGED HANDS OVER THE PAST YEAR, AS FUNDS INVEST IN SHIPPING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Funds investing in shipping has been the "talk of the town" over the past couple of years, as institutional investors, private equity and ...
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Showing 3826 to 3830 news of total 6871 |
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- Indika Energy - Indonesia
- GMR Energy Limited - India
- Chamber of Mines of South Africa
- Siam City Cement PLC, Thailand
- SN Aboitiz Power Inc, Philippines
- London Commodity Brokers - England
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- Barasentosa Lestari - Indonesia
- Thiess Contractors Indonesia
- Commonwealth Bank - Australia
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- Grasim Industreis Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- Georgia Ports Authority, United States
- Ambuja Cements Ltd - India
- Independent Power Producers Association of India
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Central Java Power - Indonesia
- Bhoruka Overseas - Indonesia
- Renaissance Capital - South Africa
- Ministry of Transport, Egypt
- Coal and Oil Company - UAE
- Maharashtra Electricity Regulatory Commission - India
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Tata Chemicals Ltd - India
- Star Paper Mills Limited - India
- Therma Luzon, Inc, Philippines
- Australian Coal Association
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Wilmar Investment Holdings
- Kepco SPC Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Eastern Energy - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maheswari Brothers Coal Limited - India
- The University of Queensland
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- Simpson Spence & Young - Indonesia
- Singapore Mercantile Exchange
- Ministry of Finance - Indonesia
- Antam Resourcindo - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Attock Cement Pakistan Limited
- Vedanta Resources Plc - India
- Metalloyd Limited - United Kingdom
- Riau Bara Harum - Indonesia
- Bhatia International Limited - India
- Meralco Power Generation, Philippines
- Indian Energy Exchange, India
- Videocon Industries ltd - India
- Mjunction Services Limited - India
- Essar Steel Hazira Ltd - India
- Binh Thuan Hamico - Vietnam
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- Sree Jayajothi Cements Limited - India
- Xindia Steels Limited - India
- Heidelberg Cement - Germany
- MS Steel International - UAE
- Savvy Resources Ltd - HongKong
- Uttam Galva Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- ASAPP Information Group - India
- Deloitte Consulting - India
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- LBH Netherlands Bv - Netherlands
- Meenaskhi Energy Private Limited - India
- Directorate Of Revenue Intelligence - India
- Energy Link Ltd, New Zealand
- Petron Corporation, Philippines
- PTC India Limited - India
- Gujarat Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- GVK Power & Infra Limited - India
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Gujarat Mineral Development Corp Ltd - India
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- Electricity Generating Authority of Thailand
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- Parry Sugars Refinery, India
- Cement Manufacturers Association - India
- Indo Tambangraya Megah - Indonesia
- OPG Power Generation Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Interocean Group of Companies - India
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Miang Besar Coal Terminal - Indonesia
- Sakthi Sugars Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bayan Resources Tbk. - Indonesia
- Sical Logistics Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Coastal Gujarat Power Limited - India
- Lanco Infratech Ltd - India
- Global Business Power Corporation, Philippines
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Coalindo Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Parliament of New Zealand
- Central Electricity Authority - India
- Oldendorff Carriers - Singapore
- Intertek Mineral Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indonesian Coal Mining Association
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Merrill Lynch Commodities Europe
- European Bulk Services B.V. - Netherlands
- Semirara Mining and Power Corporation, Philippines
- Tamil Nadu electricity Board
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Kaltim Prima Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- Eastern Coal Council - USA
- GAC Shipping (India) Pvt Ltd
- Romanian Commodities Exchange
- Directorate General of MIneral and Coal - Indonesia
- IHS Mccloskey Coal Group - USA
- The State Trading Corporation of India Ltd
- Energy Development Corp, Philippines
- Bangladesh Power Developement Board
- Mercator Lines Limited - India
- Timah Investasi Mineral - Indoneisa
- Semirara Mining Corp, Philippines
- Ministry of Mines - Canada
- Edison Trading Spa - Italy
- VISA Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Bharathi Cement Corporation - India
- Sojitz Corporation - Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- CNBM International Corporation - China
- Bhushan Steel Limited - India
- Samtan Co., Ltd - South Korea
- Banpu Public Company Limited - Thailand
- ICICI Bank Limited - India
- Global Coal Blending Company Limited - Australia
- Kartika Selabumi Mining - Indonesia
- Larsen & Toubro Limited - India
- Posco Energy - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Salva Resources Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Orica Australia Pty. Ltd.
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- Dalmia Cement Bharat India
- San Jose City I Power Corp, Philippines
- Australian Commodity Traders Exchange
- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- Borneo Indobara - Indonesia
- TeaM Sual Corporation - Philippines
- New Zealand Coal & Carbon
- Price Waterhouse Coopers - Russia
- Alfred C Toepfer International GmbH - Germany
- Vizag Seaport Private Limited - India
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Sindya Power Generating Company Private Ltd
- Planning Commission, India
- Cigading International Bulk Terminal - Indonesia
- Marubeni Corporation - India
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