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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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Tuesday, 24 December 13
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS UP 11.46% W-W
COALspot.com: In the week ended December 23, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled 3.84 ...
Tuesday, 24 December 13
SGX HAS LAUNCHED FREIGHT FUTURES
COALspot.com: Singapore Exchange (SGX) has announced the launch of freight future yesterday.
According to SGX’s press release, SGX has laun ...
Monday, 23 December 13
API 8 CFR SOUTH CHINA COAL SWAP FOR AVERAGE Q1' 14 CLOSED AT $ 82.80
COALspot.com : API 8 CFR South China Coal swaps for average Q1’ 14 delivery gained 2.97 percept month on month as on Friday 20 December 2013. ...
Sunday, 22 December 13
Q1' 14 DELIVERY COAL SWAPS CLOSING HIGH COMPARED TO Q4' 14 DELIVERY CLOSING
COALspot.com – Sub-Bit Indonesia coal swap (FOB) for average Q1’ 14 delivery gained $ 1.31 pmt month on month on Friday 20 December 2013 ...
Sunday, 22 December 13
QUIET FREIGHT MARKET DUE TO LONG HOLIDAYS
COALspot.com: The market was soft this week with all indices down. However towards second half of the week the futures on segments was firming up.
...
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- European Bulk Services B.V. - Netherlands
- Oldendorff Carriers - Singapore
- ASAPP Information Group - India
- Energy Development Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Baramulti Group, Indonesia
- Kepco SPC Power Corporation, Philippines
- London Commodity Brokers - England
- Directorate Of Revenue Intelligence - India
- Maharashtra Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- Global Coal Blending Company Limited - Australia
- Wilmar Investment Holdings
- Semirara Mining Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Latin American Coal - Colombia
- Ind-Barath Power Infra Limited - India
- Barasentosa Lestari - Indonesia
- Indian Energy Exchange, India
- Madhucon Powers Ltd - India
- Orica Australia Pty. Ltd.
- Indonesian Coal Mining Association
- Grasim Industreis Ltd - India
- Electricity Authority, New Zealand
- Petron Corporation, Philippines
- Indika Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Australian Commodity Traders Exchange
- Merrill Lynch Commodities Europe
- Economic Council, Georgia
- Australian Coal Association
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- Bhushan Steel Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Trasteel International SA, Italy
- Sakthi Sugars Limited - India
- Interocean Group of Companies - India
- Sinarmas Energy and Mining - Indonesia
- Altura Mining Limited, Indonesia
- Price Waterhouse Coopers - Russia
- Siam City Cement PLC, Thailand
- Port Waratah Coal Services - Australia
- Gujarat Mineral Development Corp Ltd - India
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- AsiaOL BioFuels Corp., Philippines
- Billiton Holdings Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Indogreen Group - Indonesia
- Independent Power Producers Association of India
- VISA Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Bangladesh Power Developement Board
- Savvy Resources Ltd - HongKong
- Ministry of Transport, Egypt
- Bahari Cakrawala Sebuku - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Jindal Steel & Power Ltd - India
- Standard Chartered Bank - UAE
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- The University of Queensland
- Essar Steel Hazira Ltd - India
- Indo Tambangraya Megah - Indonesia
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Mintek Dendrill Indonesia
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
- Meralco Power Generation, Philippines
- Binh Thuan Hamico - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- MS Steel International - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ambuja Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- SMG Consultants - Indonesia
- PTC India Limited - India
- Alfred C Toepfer International GmbH - Germany
- Mjunction Services Limited - India
- Therma Luzon, Inc, Philippines
- GMR Energy Limited - India
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Directorate General of MIneral and Coal - Indonesia
- PowerSource Philippines DevCo
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- Sojitz Corporation - Japan
- Energy Link Ltd, New Zealand
- Uttam Galva Steels Limited - India
- White Energy Company Limited
- TeaM Sual Corporation - Philippines
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Samtan Co., Ltd - South Korea
- Bayan Resources Tbk. - Indonesia
- Larsen & Toubro Limited - India
- Sarangani Energy Corporation, Philippines
- Wood Mackenzie - Singapore
- India Bulls Power Limited - India
- Planning Commission, India
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- Thiess Contractors Indonesia
- Posco Energy - South Korea
- Renaissance Capital - South Africa
- Marubeni Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- New Zealand Coal & Carbon
- Toyota Tsusho Corporation, Japan
- PNOC Exploration Corporation - Philippines
- Eastern Energy - Thailand
- Global Green Power PLC Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Singapore Mercantile Exchange
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sree Jayajothi Cements Limited - India
- The State Trading Corporation of India Ltd
- Power Finance Corporation Ltd., India
- Gujarat Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- IHS Mccloskey Coal Group - USA
- SN Aboitiz Power Inc, Philippines
- Tata Chemicals Ltd - India
- Jaiprakash Power Ventures ltd
- Cement Manufacturers Association - India
- CIMB Investment Bank - Malaysia
- Xindia Steels Limited - India
- Intertek Mineral Services - Indonesia
- Mercator Lines Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- LBH Netherlands Bv - Netherlands
- Global Business Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Anglo American - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
- Aditya Birla Group - India
- McConnell Dowell - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parry Sugars Refinery, India
- PetroVietnam Power Coal Import and Supply Company
- CNBM International Corporation - China
- Agrawal Coal Company - India
- Attock Cement Pakistan Limited
- Bhoruka Overseas - Indonesia
- Videocon Industries ltd - India
- Riau Bara Harum - Indonesia
- Simpson Spence & Young - Indonesia
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Commonwealth Bank - Australia
- Formosa Plastics Group - Taiwan
- Ministry of Finance - Indonesia
- Vizag Seaport Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coastal Gujarat Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- The Treasury - Australian Government
- Sical Logistics Limited - India
- Ministry of Mines - Canada
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Cigading International Bulk Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Manunggal Multi Energi - Indonesia
- Kumho Petrochemical, South Korea
- GVK Power & Infra Limited - India
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- Sindya Power Generating Company Private Ltd
- San Jose City I Power Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- ICICI Bank Limited - India
- SMC Global Power, Philippines
- Holcim Trading Pte Ltd - Singapore
- Star Paper Mills Limited - India
- Meenaskhi Energy Private Limited - India
- Bharathi Cement Corporation - India
- Eastern Coal Council - USA
- Salva Resources Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- Central Electricity Authority - India
- Bulk Trading Sa - Switzerland
- Metalloyd Limited - United Kingdom
- Kaltim Prima Coal - Indonesia
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