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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, 06 February 14
PANAMAX: FAR EAST IS ALMOST ABSENT AND ATLANTIC ON SLOW STEAM
Handy
Due to ongoing Chinese New Year the market is still quiet. Slowly we can see some fresh coal cargos entering the market with second half Feb/ ...
Wednesday, 05 February 14
DRY BULK MARKET HAS LOST FURTHER GROUND THIS PAST WEEK - INTERMODAL
COALspot.com: The Dry Bulk market has lost further ground this past week as activity ex-Far East disappeared into the Chinese holidays and owners id ...
Wednesday, 05 February 14
MARKET INSIGHT - TASOS PAPADOPOULOS
KNOWLEDGE TO ELEVATE
COALspot.com: Let's take a break from market prospects, numbers, order book etc. and shed some light on the conclusions of ...
Tuesday, 04 February 14
NEWCASTLE PORT'S WEEKLY COAL EXPORTS HIT NEW HIGH OF 3.53 MMT
COALspot.com: In the week ended 3 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Monday, 03 February 14
SUB-BIT INDONESIA COAL SWAP GAINED WEEK ON WEEK
COALspot.com – Swaps prices gained for thermal coal loading from Indonesia, the world’s largest exporter of the fuel, according SGX.
...
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Showing 3866 to 3870 news of total 6871 |
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- Banpu Public Company Limited - Thailand
- Wood Mackenzie - Singapore
- Sarangani Energy Corporation, Philippines
- Singapore Mercantile Exchange
- Interocean Group of Companies - India
- OPG Power Generation Pvt Ltd - India
- Deloitte Consulting - India
- GMR Energy Limited - India
- Vedanta Resources Plc - India
- MS Steel International - UAE
- Bhushan Steel Limited - India
- Toyota Tsusho Corporation, Japan
- Bahari Cakrawala Sebuku - Indonesia
- Africa Commodities Group - South Africa
- Metalloyd Limited - United Kingdom
- Bhatia International Limited - India
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- Goldman Sachs - Singapore
- Indo Tambangraya Megah - Indonesia
- Marubeni Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Energy Development Corp, Philippines
- Energy Link Ltd, New Zealand
- Kideco Jaya Agung - Indonesia
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- Maharashtra Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Chamber of Mines of South Africa
- Asmin Koalindo Tuhup - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Australian Coal Association
- Vizag Seaport Private Limited - India
- Borneo Indobara - Indonesia
- Bharathi Cement Corporation - India
- Oldendorff Carriers - Singapore
- Straits Asia Resources Limited - Singapore
- Medco Energi Mining Internasional
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- International Coal Ventures Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Therma Luzon, Inc, Philippines
- Attock Cement Pakistan Limited
- Dalmia Cement Bharat India
- The Treasury - Australian Government
- Ministry of Mines - Canada
- Jindal Steel & Power Ltd - India
- Xindia Steels Limited - India
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- GVK Power & Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SN Aboitiz Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Price Waterhouse Coopers - Russia
- Malabar Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- McConnell Dowell - Australia
- VISA Power Limited - India
- Formosa Plastics Group - Taiwan
- Central Electricity Authority - India
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement - Thailand
- The State Trading Corporation of India Ltd
- Kaltim Prima Coal - Indonesia
- Mercuria Energy - Indonesia
- Carbofer General Trading SA - India
- CIMB Investment Bank - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Bukit Makmur.PT - Indonesia
- Globalindo Alam Lestari - Indonesia
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Trasteel International SA, Italy
- Salva Resources Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Holcim Trading Pte Ltd - Singapore
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Bayan Resources Tbk. - Indonesia
- Renaissance Capital - South Africa
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- Standard Chartered Bank - UAE
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- Independent Power Producers Association of India
- Bangladesh Power Developement Board
- Romanian Commodities Exchange
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- Intertek Mineral Services - Indonesia
- IHS Mccloskey Coal Group - USA
- PetroVietnam Power Coal Import and Supply Company
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Electricity Authority, New Zealand
- Star Paper Mills Limited - India
- Makarim & Taira - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- London Commodity Brokers - England
- Altura Mining Limited, Indonesia
- Georgia Ports Authority, United States
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coastal Gujarat Power Limited - India
- Lanco Infratech Ltd - India
- Eastern Coal Council - USA
- Ministry of Transport, Egypt
- White Energy Company Limited
- Sindya Power Generating Company Private Ltd
- Coalindo Energy - Indonesia
- Posco Energy - South Korea
- Manunggal Multi Energi - Indonesia
- ICICI Bank Limited - India
- Alfred C Toepfer International GmbH - Germany
- Agrawal Coal Company - India
- TeaM Sual Corporation - Philippines
- Mercator Lines Limited - India
- Bukit Baiduri Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- India Bulls Power Limited - India
- Ind-Barath Power Infra Limited - India
- Indian Energy Exchange, India
- Mjunction Services Limited - India
- Pendopo Energi Batubara - Indonesia
- Iligan Light & Power Inc, Philippines
- CNBM International Corporation - China
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Finance - Indonesia
- Central Java Power - Indonesia
- Sree Jayajothi Cements Limited - India
- Orica Australia Pty. Ltd.
- SMG Consultants - Indonesia
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- South Luzon Thermal Energy Corporation
- Essar Steel Hazira Ltd - India
- PowerSource Philippines DevCo
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- Ambuja Cements Ltd - India
- Sakthi Sugars Limited - India
- Grasim Industreis Ltd - India
- Semirara Mining Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Tamil Nadu electricity Board
- Rio Tinto Coal - Australia
- Baramulti Group, Indonesia
- Maheswari Brothers Coal Limited - India
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- LBH Netherlands Bv - Netherlands
- Heidelberg Cement - Germany
- Australian Commodity Traders Exchange
- Thiess Contractors Indonesia
- Gujarat Sidhee Cement - India
- Edison Trading Spa - Italy
- Simpson Spence & Young - Indonesia
- Antam Resourcindo - Indonesia
- Merrill Lynch Commodities Europe
- Riau Bara Harum - Indonesia
- Global Business Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Siam City Cement PLC, Thailand
- Neyveli Lignite Corporation Ltd, - India
- IEA Clean Coal Centre - UK
- Orica Mining Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Minerals Council of Australia
- Larsen & Toubro Limited - India
- Eastern Energy - Thailand
- Timah Investasi Mineral - Indoneisa
- Petron Corporation, Philippines
- Barasentosa Lestari - Indonesia
- San Jose City I Power Corp, Philippines
- Aditya Birla Group - India
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Commonwealth Bank - Australia
- Miang Besar Coal Terminal - Indonesia
- Parliament of New Zealand
- Planning Commission, India
- PTC India Limited - India
- Kobexindo Tractors - Indoneisa
- Jaiprakash Power Ventures ltd
- Latin American Coal - Colombia
- Thai Mozambique Logistica
- Aboitiz Power Corporation - Philippines
- Wilmar Investment Holdings
- Offshore Bulk Terminal Pte Ltd, Singapore
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