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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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Friday, 27 December 13
THE EXPORT OF UNPROCESSED MINERALS WOULD NOT BE ALLOWED AFTER 12 JAN 2014 - INDONESIAN ENERGY MINISTER
COALspot.com: The government of Indonesia will implement Law No. 4 of 2009 on Mineral and Coal in full and consistently by January 12, 2014, said, m ...
Friday, 27 December 13
INDONESIA SHIPPED 15.75 PERCENT MORE COAL IN NOVEMBER
COALspot.com: Indonesia, the world's 4th largest coal producer and the largest multi grade coal exporter shipped over $2* billion worth of co ...
Thursday, 26 December 13
COAL & OIL GROUP SECURES US$ 250 MILLION FUNDING FOR ITS 1200MW THERMAL POWER PLANT IN INDIA
COALspot.com: Dubai-based Coal & Oil (C&O) Group has announced that it has secured additional funding of approximately Dhs. 1 billion (appro ...
Wednesday, 25 December 13
DRY BULK INDEX LOST SOME GROUND THIS PAST WEEK - INTERMODAL
Chartering (Wet: Firm+ / Dry: Softer - )
The Dry Bulk Index lost some ground this past week, on the back of activity slowing down befor ...
Wednesday, 25 December 13
SHIPPING : AS FAR AS THIS CYCLE IS CONCERNED, 'WE HAVE SEEN THE WORST....!' - JOHN N. COTZIAS
In a week’s time the year comes to an end. Having been a speaker in two seminars over the past 5 days I was able to see the year ending trends ...
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Showing 3936 to 3940 news of total 6871 |
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- Star Paper Mills Limited - India
- LBH Netherlands Bv - Netherlands
- Tamil Nadu electricity Board
- Sical Logistics Limited - India
- Indian Energy Exchange, India
- Mercator Lines Limited - India
- Mintek Dendrill Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sinarmas Energy and Mining - Indonesia
- Economic Council, Georgia
- Tata Chemicals Ltd - India
- Salva Resources Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- White Energy Company Limited
- European Bulk Services B.V. - Netherlands
- Ministry of Mines - Canada
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Meenaskhi Energy Private Limited - India
- Power Finance Corporation Ltd., India
- OPG Power Generation Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Mjunction Services Limited - India
- Orica Mining Services - Indonesia
- The Treasury - Australian Government
- SMG Consultants - Indonesia
- Anglo American - United Kingdom
- PTC India Limited - India
- Eastern Energy - Thailand
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- Directorate Of Revenue Intelligence - India
- Madhucon Powers Ltd - India
- Thai Mozambique Logistica
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- VISA Power Limited - India
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Parliament of New Zealand
- Videocon Industries ltd - India
- Bhushan Steel Limited - India
- Krishnapatnam Port Company Ltd. - India
- Riau Bara Harum - Indonesia
- Wilmar Investment Holdings
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Energy Link Ltd, New Zealand
- Parry Sugars Refinery, India
- London Commodity Brokers - England
- The State Trading Corporation of India Ltd
- Vedanta Resources Plc - India
- Bukit Makmur.PT - Indonesia
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Transport, Egypt
- Baramulti Group, Indonesia
- Malabar Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ambuja Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Orica Australia Pty. Ltd.
- Carbofer General Trading SA - India
- MS Steel International - UAE
- GMR Energy Limited - India
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- Electricity Generating Authority of Thailand
- Interocean Group of Companies - India
- Deloitte Consulting - India
- Global Coal Blending Company Limited - Australia
- Iligan Light & Power Inc, Philippines
- Vizag Seaport Private Limited - India
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- Marubeni Corporation - India
- Coastal Gujarat Power Limited - India
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- India Bulls Power Limited - India
- Trasteel International SA, Italy
- Leighton Contractors Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Borneo Indobara - Indonesia
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- IEA Clean Coal Centre - UK
- Aditya Birla Group - India
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- Chettinad Cement Corporation Ltd - India
- Indonesian Coal Mining Association
- Medco Energi Mining Internasional
- Mercuria Energy - Indonesia
- Indika Energy - Indonesia
- Ministry of Finance - Indonesia
- Coal and Oil Company - UAE
- Port Waratah Coal Services - Australia
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- Kaltim Prima Coal - Indonesia
- Merrill Lynch Commodities Europe
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- McConnell Dowell - Australia
- Globalindo Alam Lestari - Indonesia
- Siam City Cement - Thailand
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
- ICICI Bank Limited - India
- Kobexindo Tractors - Indoneisa
- Electricity Authority, New Zealand
- Ind-Barath Power Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- Semirara Mining Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Planning Commission, India
- Energy Development Corp, Philippines
- San Jose City I Power Corp, Philippines
- PowerSource Philippines DevCo
- Antam Resourcindo - Indonesia
- Bulk Trading Sa - Switzerland
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Gujarat Sidhee Cement - India
- Oldendorff Carriers - Singapore
- Eastern Coal Council - USA
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- GVK Power & Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Global Business Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Edison Trading Spa - Italy
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Chamber of Mines of South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Toyota Tsusho Corporation, Japan
- Metalloyd Limited - United Kingdom
- Binh Thuan Hamico - Vietnam
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- Central Electricity Authority - India
- Africa Commodities Group - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Grasim Industreis Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Standard Chartered Bank - UAE
- Therma Luzon, Inc, Philippines
- Larsen & Toubro Limited - India
- Sindya Power Generating Company Private Ltd
- Jorong Barutama Greston.PT - Indonesia
- Xindia Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Pendopo Energi Batubara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Minerals Council of Australia
- Kumho Petrochemical, South Korea
- Altura Mining Limited, Indonesia
- Central Java Power - Indonesia
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- Bangladesh Power Developement Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wood Mackenzie - Singapore
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- Sree Jayajothi Cements Limited - India
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- South Luzon Thermal Energy Corporation
- International Coal Ventures Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Maheswari Brothers Coal Limited - India
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Formosa Plastics Group - Taiwan
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