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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, 20 February 14
SUPRAMAX: IN ASIA IS IMPROVING SIGNIFICANTLY AND TURNED FROM APS TO DOP MARKET
Handy
The activity is back in the market after Chinese holidays. Supramax in Asia is improving significantly and turned from APS to DOP market. We ...
Wednesday, 19 February 14
NEWCASTLE PORT SHIPPED 30% MORE COAL WEEK ON WEEK
COALspot.com: In the week ended 17 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Tuesday, 18 February 14
PERUVIAN HIGH COMMISSIONER FOR MINING AFFAIRS WILL BE KEY NOTE SPEAKER AT THE COLOMBIAN COAL CONFERENCE 2014
Press Release: The High Commissioner for Mining Affairs in the Presidency of the Peruvian Council of Ministers, General (R) Daniel Urresti Elera, ha ...
Monday, 17 February 14
US COAL PRODUCTION IN 2013 FELL TO ITS LOWEST LEVEL IN 20 YEARS
COALspot.com: U.S coal production for 2013 totaled an estimated 996 million short tons (MMst), 21 MMst (2%) lower than in 2012. It is the first time ...
Monday, 17 February 14
Q1 2015 COAL SWAPS CLOSED $ 2.21 HIGHER THAN Q2 2014 SWAPS
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 delivery lost 3.16 percent month on month and closed at US$ 76.12 per mt as o ...
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Showing 3846 to 3850 news of total 6871 |
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- ICICI Bank Limited - India
- Price Waterhouse Coopers - Russia
- Ministry of Transport, Egypt
- Merrill Lynch Commodities Europe
- Madhucon Powers Ltd - India
- Singapore Mercantile Exchange
- GN Power Mariveles Coal Plant, Philippines
- VISA Power Limited - India
- India Bulls Power Limited - India
- Romanian Commodities Exchange
- Indo Tambangraya Megah - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Metalloyd Limited - United Kingdom
- Rio Tinto Coal - Australia
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Petron Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- Minerals Council of Australia
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
- Wood Mackenzie - Singapore
- Sakthi Sugars Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Borneo Indobara - Indonesia
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Siam City Cement - Thailand
- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- ASAPP Information Group - India
- Lanco Infratech Ltd - India
- Oldendorff Carriers - Singapore
- Sarangani Energy Corporation, Philippines
- Eastern Coal Council - USA
- Riau Bara Harum - Indonesia
- South Luzon Thermal Energy Corporation
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Karaikal Port Pvt Ltd - India
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Larsen & Toubro Limited - India
- CIMB Investment Bank - Malaysia
- Wilmar Investment Holdings
- Kepco SPC Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Videocon Industries ltd - India
- Mercator Lines Limited - India
- Bulk Trading Sa - Switzerland
- Interocean Group of Companies - India
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Planning Commission, India
- Chettinad Cement Corporation Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Independent Power Producers Association of India
- Aboitiz Power Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Cement Manufacturers Association - India
- Savvy Resources Ltd - HongKong
- Renaissance Capital - South Africa
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- Coastal Gujarat Power Limited - India
- European Bulk Services B.V. - Netherlands
- Sojitz Corporation - Japan
- GMR Energy Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Indika Energy - Indonesia
- Vedanta Resources Plc - India
- New Zealand Coal & Carbon
- Manunggal Multi Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Eastern Energy - Thailand
- The State Trading Corporation of India Ltd
- Dalmia Cement Bharat India
- Energy Development Corp, Philippines
- Makarim & Taira - Indonesia
- Kobexindo Tractors - Indoneisa
- Attock Cement Pakistan Limited
- Carbofer General Trading SA - India
- Therma Luzon, Inc, Philippines
- Bhatia International Limited - India
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- Kalimantan Lumbung Energi - Indonesia
- Marubeni Corporation - India
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Agrawal Coal Company - India
- Intertek Mineral Services - Indonesia
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- Iligan Light & Power Inc, Philippines
- Economic Council, Georgia
- Mintek Dendrill Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indian Energy Exchange, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhushan Steel Limited - India
- Kartika Selabumi Mining - Indonesia
- PTC India Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- Power Finance Corporation Ltd., India
- Semirara Mining and Power Corporation, Philippines
- Ministry of Mines - Canada
- Bhoruka Overseas - Indonesia
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Salva Resources Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Bukit Baiduri Energy - Indonesia
- Coalindo Energy - Indonesia
- Thai Mozambique Logistica
- Edison Trading Spa - Italy
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Gujarat Sidhee Cement - India
- Anglo American - United Kingdom
- Parry Sugars Refinery, India
- SN Aboitiz Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- Semirara Mining Corp, Philippines
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- San Jose City I Power Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Gujarat Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Ambuja Cements Ltd - India
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Meenaskhi Energy Private Limited - India
- Formosa Plastics Group - Taiwan
- Georgia Ports Authority, United States
- Xindia Steels Limited - India
- Straits Asia Resources Limited - Singapore
- Medco Energi Mining Internasional
- Bayan Resources Tbk. - Indonesia
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Global Green Power PLC Corporation, Philippines
- Deloitte Consulting - India
- Indonesian Coal Mining Association
- Cigading International Bulk Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- IHS Mccloskey Coal Group - USA
- Aditya Birla Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Jaiprakash Power Ventures ltd
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- Orica Mining Services - Indonesia
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- Trasteel International SA, Italy
- Gujarat Mineral Development Corp Ltd - India
- Kumho Petrochemical, South Korea
- London Commodity Brokers - England
- CNBM International Corporation - China
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Australian Coal Association
- SMG Consultants - Indonesia
- Malabar Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bharathi Cement Corporation - India
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- Directorate Of Revenue Intelligence - India
- Kaltim Prima Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Standard Chartered Bank - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- Mercuria Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- Orica Australia Pty. Ltd.
- Electricity Authority, New Zealand
- McConnell Dowell - Australia
- Directorate General of MIneral and Coal - Indonesia
- The Treasury - Australian Government
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