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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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Sunday, 16 February 14
SUPRAMAX : THE FAR EAST/SE ASIA CHARTER RATES FIRMED UP
COALspot.com: The freight market had a mixed reaction this week with BDI increased by 1.37 pct and closing at 1106 points on Valentine day. The cape ...
Friday, 14 February 14
US COAL PRODUCTION STILL SLIPPING
COALspot.com – United States the world’s second largest coal producer, produced approximately 17.9 million short tons (mmst) of coal in ...
Thursday, 13 February 14
PANAMAX : NOT ENOUGH REQUIREMENTS TO KEEP THE ATLANTIC MARKET FLOATING - FEARNLEYS AS
Handy
After the Chinese holidays the week started on a positive note. Owners are talking higher rates but chrtrs are still somehow reluctant to mov ...
Thursday, 13 February 14
DRY BULK MARKET FACES BETTER PROSPECTS ON THE BACK OF IMPROVING DEMAND AND SUPPLY BALANCE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has started off the New Year on the "left foot", with the strong finish of 2013 proving to be unsustainable, on the ba ...
Wednesday, 12 February 14
NEW BUILDING ORDERS REACHING NEW POST-CRISIS HEIGHTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners are looking to take advantage of the last few attractive deals in the new building market, before prices start climbing to new highs and ...
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- Tamil Nadu electricity Board
- Antam Resourcindo - Indonesia
- Standard Chartered Bank - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Kepco SPC Power Corporation, Philippines
- Petron Corporation, Philippines
- GMR Energy Limited - India
- Bangladesh Power Developement Board
- Mercuria Energy - Indonesia
- Heidelberg Cement - Germany
- Coastal Gujarat Power Limited - India
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- India Bulls Power Limited - India
- Jaiprakash Power Ventures ltd
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Coalindo Energy - Indonesia
- Vizag Seaport Private Limited - India
- PNOC Exploration Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Karbindo Abesyapradhi - Indoneisa
- Binh Thuan Hamico - Vietnam
- Lanco Infratech Ltd - India
- Commonwealth Bank - Australia
- TeaM Sual Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Independent Power Producers Association of India
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- Global Green Power PLC Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Sojitz Corporation - Japan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Mines - Canada
- Wilmar Investment Holdings
- Mintek Dendrill Indonesia
- Essar Steel Hazira Ltd - India
- Carbofer General Trading SA - India
- Thiess Contractors Indonesia
- Sinarmas Energy and Mining - Indonesia
- Romanian Commodities Exchange
- Wood Mackenzie - Singapore
- Medco Energi Mining Internasional
- Georgia Ports Authority, United States
- Directorate Of Revenue Intelligence - India
- International Coal Ventures Pvt Ltd - India
- Sical Logistics Limited - India
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- ASAPP Information Group - India
- Simpson Spence & Young - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Ind-Barath Power Infra Limited - India
- Latin American Coal - Colombia
- Agrawal Coal Company - India
- Sakthi Sugars Limited - India
- Attock Cement Pakistan Limited
- Cement Manufacturers Association - India
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- GAC Shipping (India) Pvt Ltd
- Jorong Barutama Greston.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- ICICI Bank Limited - India
- Samtan Co., Ltd - South Korea
- Karaikal Port Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Banpu Public Company Limited - Thailand
- Chettinad Cement Corporation Ltd - India
- Salva Resources Pvt Ltd - India
- The Treasury - Australian Government
- Alfred C Toepfer International GmbH - Germany
- Interocean Group of Companies - India
- Gujarat Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- Holcim Trading Pte Ltd - Singapore
- Indika Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Rio Tinto Coal - Australia
- Kartika Selabumi Mining - Indonesia
- Parliament of New Zealand
- Timah Investasi Mineral - Indoneisa
- Vedanta Resources Plc - India
- Singapore Mercantile Exchange
- Deloitte Consulting - India
- Kaltim Prima Coal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Edison Trading Spa - Italy
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Africa Commodities Group - South Africa
- Aboitiz Power Corporation - Philippines
- CNBM International Corporation - China
- SN Aboitiz Power Inc, Philippines
- Economic Council, Georgia
- Makarim & Taira - Indonesia
- Globalindo Alam Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Electricity Generating Authority of Thailand
- Bulk Trading Sa - Switzerland
- Planning Commission, India
- Eastern Energy - Thailand
- Indian Energy Exchange, India
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- Tata Chemicals Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Bhatia International Limited - India
- PowerSource Philippines DevCo
- Indonesian Coal Mining Association
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- IEA Clean Coal Centre - UK
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- Maheswari Brothers Coal Limited - India
- Thai Mozambique Logistica
- Intertek Mineral Services - Indonesia
- VISA Power Limited - India
- Star Paper Mills Limited - India
- Dalmia Cement Bharat India
- Miang Besar Coal Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Renaissance Capital - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Jindal Steel & Power Ltd - India
- Parry Sugars Refinery, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Java Power - Indonesia
- White Energy Company Limited
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- Eastern Coal Council - USA
- Oldendorff Carriers - Singapore
- San Jose City I Power Corp, Philippines
- Posco Energy - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Uttam Galva Steels Limited - India
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- CIMB Investment Bank - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- IHS Mccloskey Coal Group - USA
- Sree Jayajothi Cements Limited - India
- SMC Global Power, Philippines
- European Bulk Services B.V. - Netherlands
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Grasim Industreis Ltd - India
- The University of Queensland
- Ceylon Electricity Board - Sri Lanka
- Leighton Contractors Pty Ltd - Australia
- Baramulti Group, Indonesia
- Sarangani Energy Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Global Business Power Corporation, Philippines
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Bhushan Steel Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Central Electricity Authority - India
- Gujarat Sidhee Cement - India
- Energy Development Corp, Philippines
- Ministry of Transport, Egypt
- Indogreen Group - Indonesia
- MS Steel International - UAE
- Kalimantan Lumbung Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Metalloyd Limited - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- Kideco Jaya Agung - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ambuja Cements Ltd - India
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- Xindia Steels Limited - India
- Merrill Lynch Commodities Europe
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- Cigading International Bulk Terminal - Indonesia
- Borneo Indobara - Indonesia
- Videocon Industries ltd - India
- Pendopo Energi Batubara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- GVK Power & Infra Limited - India
- Ministry of Finance - Indonesia
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