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Thursday, 21 July 16
CONSTRUCTIVE TOTAL LOSS: WHAT GOES IN TO CALCULATING QUANTUM? - HILL DICKINSON
 KNOWLEDGE TO ELEVATE
The Commercial Court recently delivered its judgment in an important case (Connect Shipping Inc and Machrimar Management SA -v- Sveriges Anfgartygs Assurans Forening (The Swedish Club) and others) [2016] EWHC 1580 (Comm), interpreting the law around the obligations of insurers and the rights of owners in relation to the total loss of a vessel.
The case is authority for the proposition that a NOA tendered five-and-a-half months after the casualty is not necessarily late, considering the fact-sensitive nature of the legal right exercised by the shipowner of abandoning his vessel to his insurers. It confirmed that reasonable expenditure incurred before the issue of a Notice of Abandonment can be included in the calculation of quantum for a CTL, as well as the owners’ share of SCOPIC. Further, the Court followed the finding in another important recent decision – the “BRILLANTE VIRTUOSO” – that inevitable uncertainty about the cost of potential repairs should permit that calculation to include a significant contingency (10% in this case).
In the event, the Owners of the vessel the “RENOS”, represented by Hill Dickinson International, were successful in claiming of the Insurers their relevant proportions of the US$12 million under the hull policy (plus sue and labour costs), and triggering a further US$3 million Increased Value policy claim.
The High Court ruled that the vessel was a constructive total loss following a fire that broke out in the engine room whilst the Vessel was sailing in a laden condition of the Egyptian coast, in the Red Sea. It was common ground that the fire was an insured peril under the policies and that it caused extensive damage to the Vessel, resulting in her loss of main engine power and requiring tug assistance. The dispute concerned the measure of the indemnity to which the Owners were entitled.
The Insurers denied the Vessel was a constructive total loss as a matter of quantum, contending that the Owners were entitled to an indemnity on a partial loss basis. Owners therefore brought proceedings in the High Court against the Insurers under the hull and machinery policies. In his judgment handed down on 1 July 2016, Mr Justice Knowles ruled upon five main issues:
1. Was the notice of abandonment given too late?
The fire broke out on 23 August 2012. The NOA was given on 1 February 2013.
Mr Justice Knowles initially considered the meaning of the wording of section 62(3) of the Marine Insurance Act 1906 (MIA) which provides that the NOA ‘must be given with reasonable diligence after the receipt of reliable information of the loss, but where the information is of a doubtful character the assured is entitled to a reasonable time to make inquiry… ’.
The Court noted Roche J’s statement in George Cohen v Standard Marine Insurance (1925) 21 Lloyd’s Rep 30, that: “the assured cannot postpone his election, if all the facts are known, merely because opinions may fluctuate at all events as to the results or proper conclusion to be drawn from the facts.”
This was a case however in which in Mr Justice Knowles’ judgment, “the nature of the casualty was such that achieving reliable information of the loss would be a complex task and take time”. The Court placed particular emphasis on the fact that owners throughout the period from the casualty to the giving of NOA were in receipt of conflicting quotations from surveyors involved both on their behalf and that of the underwriters, but also from experienced shipyards on the estimated costs of repairs, including, importantly, yards consulted by the underwriters.
2. Should pre-NOA expenses count towards a CTL?
The issue of whether pre-NOA expenses should count towards a CTL has attracted a lot of attention from the legal and insurance market as existing case law has not explicitly dealt with it in detail.
The Court found no basis on the wording of clause 19 of the Institute Time Clauses for limiting the cost of recovery and repair to recovery and repair after NOA, differentiating a constructive total loss from the right to claim for a constructive total loss, which are two distinct concepts. It held, therefore, pursuant to a textual interpretation of Clause 9.2 and 19.2 of the Institute Time Clauses (1/10/83) and section 60 of the MIA, that pre-NOA expenses should be included in a CTL calculation, reiterating that a NOA is not an essential ingredient of a constructive total loss.
The Insurers denied liability based on two grounds. In arguing that pre-NOA expenses should not count towards a CTL, they proposed that what they termed a ‘protective NOA’ should be tendered prior to incurring the costs of recovery and repair in cases where it was possible that the vessel might become a CTL. The Court dismissed this out of hand observing that, under the clear provision of section 62(2) of the MIA, once a NOA is accepted ‘the abandonment is irrevocable.’
Secondly, the Insurers also argued that the phrase ‘future salvage operations’ in section 60(2)(ii) of the MIA suggests that costs already incurred should not be taken under consideration. Mr Justice Knowles disagreed, partly departing from two previous decisions, (Helmville Ltd -v- Yorkshire Insurance Company Lt [1965] 1 Lloyd’s Rep 361 (the “MEDINA PRINCESS”) and Hall -v- Hayman (1912) 17 Comm Cas 81), stating that the phrasing is not restrictive but instead the legislature’s intention was simply to (also) take into account the expenses of future salvage operations rather than exclude expenses already incurred prior to tendering the NOA.
3. Specifically amongst pre-NOA expenses, should SCOPIC remuneration (after Article 13 payments have been taken into account) count towards a CTL calculation?
The Court further considered whether SCOPIC liability is to be taken into account as a cost of recovery for the purposes of a CTL. Mr Justice Knowles considered the effect of Clause 15 of the SCOPIC and in accordance with ordinary principles of construction he held that that it is an indivisible part of the salvage operations arising from the casualty and as such must be included in the calculation of a CTL.
4. Were the costs for a standby tug reasonably incurred?
The Owners had employed the services of a standby tug for the period the Vessel remained in the Gulf of Suez, in the event, for about four months.
The Insurers argued that the size and rate of the tug was excessive as the casualty only required standby services which a smaller tug could perform.
The Court gave due consideration to the specific nature of the tug market, salvors’ requirement to deliver the vessel to a tug of sufficient capabilities on completion of the LOF, the condition of the Vessel and the purposes for which a tug was required and held, on the evidence, that it was reasonable and necessary to engage a tug of that size, although not for the entire period of four months, as owners should have explored other possibilities in the meantime, but for around half that time.
5. What margin of general contingency should be allowed?
Both parties accepted the need to allow a contingency but disagreed on the percentage to be applied. Mr Justice Knowles considered Flaux LJ’s observations in the recent case “BRILLANTE VIRTUOSO”, a case in which the Owners were also represented by Hill Dickinson, and applied a 10% contingency agreeing with Owners’ approach. The Court emphasized the necessity of allowance for uncertainty as a result of the nature of the casualty, the location of the Vessel and the range of estimates and quotations, which undermined the arithmetical test applied by the Insurers.
It is worth noting that, in the “BRILLANTE VIRTUOSO”, Flaux LJ held that, in calculating quantum for assessing if a vessel can be declared a CTL, there might well be uncertainty about the nature and extent of damage and that the Court would, therefore, allow a ‘large margin’ in assessing the cost of repair.
Thus, Mr Justice Knowles held that the NOA was effective and that the vessel, on the evidence, was a CTL. It is likely that the Insurers will seek leave to appeal on various grounds from the Court of Appeal after Mr Justice Knowles refused leave to appeal.
Source: Hill Dickinson
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Friday, 02 September 16
EIA FORECASTS U.S. COAL EXPORTS TO DECLINE BY 19 MMST IN 2016 TO 55 MMST
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 16.3 million sho ...
Thursday, 01 September 16
SUPRAMAX GETTING LEVELS OF MID/HIGHER 7K DELIVERY SINGAPORE FOR TRIPS TO CHINA AND AROUND 9K FOR DIRECTION INDIA - FEARNLEYS
Supramax
This week started slower with London on bank holiday Monday. The south east Asian market seems to have been taking a breather with chart ...
Thursday, 01 September 16
AUSTRALIA'S NEWCASTLE PORT SHIPPED 2.33 PERCENT MORE COAL IN JULY
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port has shipped $AU 1.10 bill ...
Wednesday, 31 August 16
THE DRY BULK MARKET MANAGED TO FIND FURTHER SUPPORT DURING THE LAST DAYS OF THE SUMMER SEASON - INTERMODAL
The Dry Bulk market managed to find further support during the last days of the summer season, with the BDI climbing above 700 last Friday, reachin ...
Tuesday, 30 August 16
THE SUDDEN SURGE IN IRON ORE TRADE HAS CREPT UP ON THE MARKET THIS PAST WEEK - GEORGE LAZARIDIS
The sudden surge in Iron ore trade has crept up on the market this past week bringing about a change in the prospects for Capes. Continued increase ...
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Showing 2301 to 2305 news of total 6871 |
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- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- Ambuja Cements Ltd - India
- Edison Trading Spa - Italy
- SMG Consultants - Indonesia
- Marubeni Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- Parry Sugars Refinery, India
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Therma Luzon, Inc, Philippines
- Medco Energi Mining Internasional
- IHS Mccloskey Coal Group - USA
- Oldendorff Carriers - Singapore
- Indogreen Group - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Cement Manufacturers Association - India
- Borneo Indobara - Indonesia
- GAC Shipping (India) Pvt Ltd
- India Bulls Power Limited - India
- Baramulti Group, Indonesia
- Tamil Nadu electricity Board
- Bukit Baiduri Energy - Indonesia
- Bulk Trading Sa - Switzerland
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Indian Oil Corporation Limited
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining Corp, Philippines
- GMR Energy Limited - India
- Latin American Coal - Colombia
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Power Finance Corporation Ltd., India
- Ministry of Finance - Indonesia
- Goldman Sachs - Singapore
- Orica Australia Pty. Ltd.
- Xindia Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
- Kaltim Prima Coal - Indonesia
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- MS Steel International - UAE
- Samtan Co., Ltd - South Korea
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- Economic Council, Georgia
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Sarangani Energy Corporation, Philippines
- Mercuria Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Anglo American - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Commonwealth Bank - Australia
- Leighton Contractors Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Uttam Galva Steels Limited - India
- Bhoruka Overseas - Indonesia
- Grasim Industreis Ltd - India
- Billiton Holdings Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- Standard Chartered Bank - UAE
- Trasteel International SA, Italy
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Africa Commodities Group - South Africa
- Riau Bara Harum - Indonesia
- Iligan Light & Power Inc, Philippines
- Lanco Infratech Ltd - India
- Minerals Council of Australia
- Aboitiz Power Corporation - Philippines
- Energy Development Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- Manunggal Multi Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- PetroVietnam Power Coal Import and Supply Company
- Directorate General of MIneral and Coal - Indonesia
- Eastern Coal Council - USA
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Mines - Canada
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Coal and Oil Company - UAE
- Indika Energy - Indonesia
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Larsen & Toubro Limited - India
- New Zealand Coal & Carbon
- Wood Mackenzie - Singapore
- Central Electricity Authority - India
- Mintek Dendrill Indonesia
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Kobexindo Tractors - Indoneisa
- LBH Netherlands Bv - Netherlands
- Salva Resources Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Posco Energy - South Korea
- Bangladesh Power Developement Board
- Kapuas Tunggal Persada - Indonesia
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- Romanian Commodities Exchange
- PTC India Limited - India
- Thai Mozambique Logistica
- Sakthi Sugars Limited - India
- Savvy Resources Ltd - HongKong
- The Treasury - Australian Government
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- Gujarat Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- Kideco Jaya Agung - Indonesia
- Maheswari Brothers Coal Limited - India
- Videocon Industries ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Makarim & Taira - Indonesia
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Sical Logistics Limited - India
- Eastern Energy - Thailand
- Global Business Power Corporation, Philippines
- Australian Coal Association
- Bayan Resources Tbk. - Indonesia
- The University of Queensland
- Tata Chemicals Ltd - India
- South Luzon Thermal Energy Corporation
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- Bukit Makmur.PT - Indonesia
- Wilmar Investment Holdings
- Timah Investasi Mineral - Indoneisa
- Altura Mining Limited, Indonesia
- Georgia Ports Authority, United States
- VISA Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Parliament of New Zealand
- Kumho Petrochemical, South Korea
- Globalindo Alam Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Vijayanagar Sugar Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Independent Power Producers Association of India
- Heidelberg Cement - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- Planning Commission, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- CNBM International Corporation - China
- Meralco Power Generation, Philippines
- Electricity Generating Authority of Thailand
- PowerSource Philippines DevCo
- Kalimantan Lumbung Energi - Indonesia
- Petron Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Mercator Lines Limited - India
- Price Waterhouse Coopers - Russia
- Semirara Mining and Power Corporation, Philippines
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- Vizag Seaport Private Limited - India
- Coalindo Energy - Indonesia
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- ASAPP Information Group - India
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Chettinad Cement Corporation Ltd - India
- Electricity Authority, New Zealand
- Port Waratah Coal Services - Australia
- Thiess Contractors Indonesia
- Siam City Cement PLC, Thailand
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Attock Cement Pakistan Limited
- TNB Fuel Sdn Bhd - Malaysia
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