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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, 27 February 14
NEWCASTLE COAL EXPORTS SLIP 26.68 PERCENT WEEK ON WEEK
COALspot.com: In the week ended 24 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 2. ...
Wednesday, 26 February 14
SMALLER SIZE SEGMENTS HOLDING ON TO THEIR LEVELS; CAPES CORRECTING UPWARDS - INTERMODAL
Chartering (Wet: Stable- / Dry: Stable+)
The Dry Bulk market continued to improve this past week, on the back of rates for the smaller size s ...
Tuesday, 25 February 14
GBCE, A COAL UPGRADING TECHNOLOGY DEVELOPER, APPOINTS RICHARD BULMAN AS PROJECT DIRECTOR
Press Release: GB Clean Energy Ltd. (GBCE) announced today the appointment of Richard Bulman as Project Director. In this capacity Mr. Bulman ...
Tuesday, 25 February 14
ULTRAMAXES ARE THE 'WEAPON OF CHOICE' FOR DRY BULK SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
It's been a busy start in 2014, as the first month of the year was a rather active in terms of second hand vessel purchases and newbuilding orderin ...
Tuesday, 25 February 14
SGX'S MONTHLY VOLUMES DRASTICALLY INCREASED AND REACHED A RECORD OF 810K TONNES YEAR-ON-YEAR
COALspot.com: SGX Thermal Coal derivatives started the new year with record volumes in January on the back of higher volatility, says SGX.
Accord ...
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- Minerals Council of Australia
- San Jose City I Power Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Sindya Power Generating Company Private Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Meenaskhi Energy Private Limited - India
- Coal and Oil Company - UAE
- Dalmia Cement Bharat India
- India Bulls Power Limited - India
- Planning Commission, India
- Singapore Mercantile Exchange
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- VISA Power Limited - India
- Salva Resources Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Aditya Birla Group - India
- Uttam Galva Steels Limited - India
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sical Logistics Limited - India
- Marubeni Corporation - India
- Siam City Cement - Thailand
- New Zealand Coal & Carbon
- Samtan Co., Ltd - South Korea
- Gujarat Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- Coastal Gujarat Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Oldendorff Carriers - Singapore
- MS Steel International - UAE
- Asmin Koalindo Tuhup - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bhushan Steel Limited - India
- Bharathi Cement Corporation - India
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- Ministry of Transport, Egypt
- Vizag Seaport Private Limited - India
- Latin American Coal - Colombia
- Carbofer General Trading SA - India
- Simpson Spence & Young - Indonesia
- ICICI Bank Limited - India
- Riau Bara Harum - Indonesia
- Kumho Petrochemical, South Korea
- CNBM International Corporation - China
- Formosa Plastics Group - Taiwan
- Wilmar Investment Holdings
- Toyota Tsusho Corporation, Japan
- The State Trading Corporation of India Ltd
- Jaiprakash Power Ventures ltd
- PNOC Exploration Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Eastern Energy - Thailand
- Aboitiz Power Corporation - Philippines
- Tamil Nadu electricity Board
- Indo Tambangraya Megah - Indonesia
- Karaikal Port Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- Goldman Sachs - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Independent Power Producers Association of India
- Indonesian Coal Mining Association
- GVK Power & Infra Limited - India
- Orica Australia Pty. Ltd.
- Economic Council, Georgia
- Standard Chartered Bank - UAE
- Banpu Public Company Limited - Thailand
- Africa Commodities Group - South Africa
- London Commodity Brokers - England
- Ambuja Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Videocon Industries ltd - India
- Globalindo Alam Lestari - Indonesia
- Altura Mining Limited, Indonesia
- Coalindo Energy - Indonesia
- Posco Energy - South Korea
- Romanian Commodities Exchange
- Deloitte Consulting - India
- Lanco Infratech Ltd - India
- LBH Netherlands Bv - Netherlands
- The Treasury - Australian Government
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Parliament of New Zealand
- Global Business Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Chettinad Cement Corporation Ltd - India
- Bulk Trading Sa - Switzerland
- Antam Resourcindo - Indonesia
- Anglo American - United Kingdom
- Orica Mining Services - Indonesia
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- SN Aboitiz Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Xindia Steels Limited - India
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- Vijayanagar Sugar Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Indogreen Group - Indonesia
- ASAPP Information Group - India
- Central Electricity Authority - India
- Indika Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kohat Cement Company Ltd. - Pakistan
- Interocean Group of Companies - India
- Global Green Power PLC Corporation, Philippines
- Electricity Generating Authority of Thailand
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Therma Luzon, Inc, Philippines
- Commonwealth Bank - Australia
- Ministry of Finance - Indonesia
- SMG Consultants - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Savvy Resources Ltd - HongKong
- SMC Global Power, Philippines
- White Energy Company Limited
- Renaissance Capital - South Africa
- Medco Energi Mining Internasional
- Larsen & Toubro Limited - India
- Heidelberg Cement - Germany
- Gujarat Sidhee Cement - India
- Grasim Industreis Ltd - India
- Thai Mozambique Logistica
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- Bangladesh Power Developement Board
- PTC India Limited - India
- Ministry of Mines - Canada
- Metalloyd Limited - United Kingdom
- Australian Coal Association
- South Luzon Thermal Energy Corporation
- Gujarat Mineral Development Corp Ltd - India
- Edison Trading Spa - Italy
- Attock Cement Pakistan Limited
- Krishnapatnam Port Company Ltd. - India
- Tata Chemicals Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Indian Energy Exchange, India
- Sarangani Energy Corporation, Philippines
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Energy Development Corp, Philippines
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- TeaM Sual Corporation - Philippines
- Mjunction Services Limited - India
- Rio Tinto Coal - Australia
- Malabar Cements Ltd - India
- Sojitz Corporation - Japan
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Bhatia International Limited - India
- Bukit Makmur.PT - Indonesia
- Electricity Authority, New Zealand
- McConnell Dowell - Australia
- Kartika Selabumi Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Meralco Power Generation, Philippines
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Vedanta Resources Plc - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Iligan Light & Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Mercator Lines Limited - India
- Semirara Mining Corp, Philippines
- Wood Mackenzie - Singapore
- Jindal Steel & Power Ltd - India
- Kideco Jaya Agung - Indonesia
- Borneo Indobara - Indonesia
- Price Waterhouse Coopers - Russia
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