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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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Wednesday, 01 January 14
DRY BULK CARRIER OWNERS ANTICIPATING AN EVEN STRONGER 2014 YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
To begin with, The Hellenic Shipping News Worldwide team would like to wish you all a Happy and Prosperous 2014! We begin the New Year with our firs ...
Tuesday, 31 December 13
INDONESIA'S COAL PRODUCTION COULD HIT 450 MMT IN 2014 - ICMA
COALspot.com: Indonesia, the fourth largest coal producer and largest coal exporter in the world, to increase coal output in year 2014 instead of th ...
Tuesday, 31 December 13
U.S. COAL PRODUCTION INCREASED WEEK ON WEEK, EIA SAYS
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.5 million short tons (mmst) of coal in ...
Tuesday, 31 December 13
MORE THAN $21 BILLION INVESTED IN SECOND HAND SHIP PURCHASES IN 2013
One thing that was apparent in the sale and purchasing markets during 2013 was the ship owners' larger appetite for vessel acquisitions, as most so ...
Monday, 30 December 13
INDONESIAN COAL TO BE PART OF INDEX DETERMINING POWER TARIFFS - BUSINESS STANDARD
In a significant move, power sector regulator CERC has decided to provide 50 per cent weightage for Indonesian coal in the benchmark index that is u ...
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Showing 3931 to 3935 news of total 6871 |
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- PowerSource Philippines DevCo
- Malabar Cements Ltd - India
- Independent Power Producers Association of India
- Uttam Galva Steels Limited - India
- Banpu Public Company Limited - Thailand
- CIMB Investment Bank - Malaysia
- IEA Clean Coal Centre - UK
- Videocon Industries ltd - India
- Jindal Steel & Power Ltd - India
- PNOC Exploration Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Star Paper Mills Limited - India
- Altura Mining Limited, Indonesia
- Rio Tinto Coal - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Minerals Council of Australia
- ASAPP Information Group - India
- Kobexindo Tractors - Indoneisa
- Maheswari Brothers Coal Limited - India
- Baramulti Group, Indonesia
- Kumho Petrochemical, South Korea
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- TeaM Sual Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- Goldman Sachs - Singapore
- Indika Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- Siam City Cement - Thailand
- Heidelberg Cement - Germany
- Sical Logistics Limited - India
- Manunggal Multi Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Essar Steel Hazira Ltd - India
- Singapore Mercantile Exchange
- Bukit Baiduri Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pendopo Energi Batubara - Indonesia
- Marubeni Corporation - India
- Merrill Lynch Commodities Europe
- Ministry of Mines - Canada
- Bhushan Steel Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Formosa Plastics Group - Taiwan
- Lanco Infratech Ltd - India
- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Agrawal Coal Company - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Makmur.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Indonesian Coal Mining Association
- Karaikal Port Pvt Ltd - India
- Eastern Energy - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- Latin American Coal - Colombia
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Central Java Power - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Timah Investasi Mineral - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Trasteel International SA, Italy
- The Treasury - Australian Government
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Borneo Indobara - Indonesia
- Vizag Seaport Private Limited - India
- SMC Global Power, Philippines
- South Luzon Thermal Energy Corporation
- Georgia Ports Authority, United States
- SMG Consultants - Indonesia
- Toyota Tsusho Corporation, Japan
- MS Steel International - UAE
- Straits Asia Resources Limited - Singapore
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- Simpson Spence & Young - Indonesia
- SN Aboitiz Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Alfred C Toepfer International GmbH - Germany
- Oldendorff Carriers - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Sidhee Cement - India
- Chamber of Mines of South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GAC Shipping (India) Pvt Ltd
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
- Medco Energi Mining Internasional
- Electricity Generating Authority of Thailand
- Wood Mackenzie - Singapore
- GN Power Mariveles Coal Plant, Philippines
- CNBM International Corporation - China
- Ministry of Finance - Indonesia
- Anglo American - United Kingdom
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Leighton Contractors Pty Ltd - Australia
- Metalloyd Limited - United Kingdom
- Ambuja Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- IHS Mccloskey Coal Group - USA
- International Coal Ventures Pvt Ltd - India
- Africa Commodities Group - South Africa
- Indogreen Group - Indonesia
- Eastern Coal Council - USA
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- Therma Luzon, Inc, Philippines
- Parliament of New Zealand
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Sakthi Sugars Limited - India
- AsiaOL BioFuels Corp., Philippines
- Binh Thuan Hamico - Vietnam
- Bangladesh Power Developement Board
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Posco Energy - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Meralco Power Generation, Philippines
- Indian Oil Corporation Limited
- Kaltim Prima Coal - Indonesia
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Electricity Authority, New Zealand
- Price Waterhouse Coopers - Russia
- Ministry of Transport, Egypt
- Sree Jayajothi Cements Limited - India
- Thiess Contractors Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Power Finance Corporation Ltd., India
- Petron Corporation, Philippines
- PTC India Limited - India
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- Savvy Resources Ltd - HongKong
- Gujarat Mineral Development Corp Ltd - India
- Global Green Power PLC Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Australian Coal Association
- Mjunction Services Limited - India
- Interocean Group of Companies - India
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- The State Trading Corporation of India Ltd
- Globalindo Alam Lestari - Indonesia
- Energy Link Ltd, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Grasim Industreis Ltd - India
- Xindia Steels Limited - India
- Global Business Power Corporation, Philippines
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Central Electricity Authority - India
- Barasentosa Lestari - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Makarim & Taira - Indonesia
- Bharathi Cement Corporation - India
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
- Indo Tambangraya Megah - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Energy Development Corp, Philippines
- Renaissance Capital - South Africa
- Dalmia Cement Bharat India
- Orica Australia Pty. Ltd.
- Australian Commodity Traders Exchange
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- McConnell Dowell - Australia
- Bhoruka Overseas - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- The University of Queensland
- Standard Chartered Bank - UAE
- Port Waratah Coal Services - Australia
- Indian Energy Exchange, India
- Sindya Power Generating Company Private Ltd
- Aboitiz Power Corporation - Philippines
- Mintek Dendrill Indonesia
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
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