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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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Wednesday, 24 August 16
DRY BULK VESSELS FACE CONTINUED DISTRESS - CLEAR ASSET
Dry bulk vessels have faced extreme distress in recent years. With a combination of factors including newer vessels being ordered with up to 5-year ...
Tuesday, 23 August 16
4200 GAR COAL INDEX CLIMB 15.96% YEAR TO DATE - CS COAL INDEX
COALspot.com: Average 4200 GAR coal index of Indonesian origin rose 1.65 % week over week to averaging $31.46 per ton this past week, shows CS (i) ...
Tuesday, 23 August 16
KOMIPO TO IMPORT 250K OF 5,700 KCAL/KG NAR COAL FOR Q4' 16
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for total 250,000 Metric Tons of Bituminous Coal for ...
Monday, 22 August 16
INDONESIA'S CS 5000 GAR THERMAL COAL INDEX, ROSE TO A 57-WEEKS HIGH TO TOP $43.47 A TON
COALspot.com: Indonesia’s CS 5000 GAR thermal coal index, rose to a 57-weeks high to top $US43. 47 a ton in the latest week, extending a 18-w ...
Monday, 22 August 16
THE FREIGHT MARKET WAS STEADY THIS PAST WEEK; CAPE INDEX DECLINE 5.38%
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose and ending in a positive note this past week except ...
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Showing 2311 to 2315 news of total 6871 |
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- Gujarat Mineral Development Corp Ltd - India
- Savvy Resources Ltd - HongKong
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Star Paper Mills Limited - India
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Thai Mozambique Logistica
- McConnell Dowell - Australia
- Krishnapatnam Port Company Ltd. - India
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- ASAPP Information Group - India
- Madhucon Powers Ltd - India
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Asmin Koalindo Tuhup - Indonesia
- Renaissance Capital - South Africa
- Price Waterhouse Coopers - Russia
- Vizag Seaport Private Limited - India
- Australian Commodity Traders Exchange
- Wilmar Investment Holdings
- Coalindo Energy - Indonesia
- Global Business Power Corporation, Philippines
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- The University of Queensland
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Bhoruka Overseas - Indonesia
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sakthi Sugars Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Aboitiz Power Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Vedanta Resources Plc - India
- New Zealand Coal & Carbon
- White Energy Company Limited
- Formosa Plastics Group - Taiwan
- San Jose City I Power Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Maharashtra Electricity Regulatory Commission - India
- VISA Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Oldendorff Carriers - Singapore
- Rashtriya Ispat Nigam Limited - India
- Sical Logistics Limited - India
- Banpu Public Company Limited - Thailand
- Bukit Baiduri Energy - Indonesia
- Cement Manufacturers Association - India
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- Ambuja Cements Ltd - India
- Australian Coal Association
- Trasteel International SA, Italy
- Pendopo Energi Batubara - Indonesia
- Electricity Authority, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Tata Chemicals Ltd - India
- Makarim & Taira - Indonesia
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Billiton Holdings Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Energy Development Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- GMR Energy Limited - India
- Videocon Industries ltd - India
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Heidelberg Cement - Germany
- Orica Australia Pty. Ltd.
- Commonwealth Bank - Australia
- Maheswari Brothers Coal Limited - India
- Parliament of New Zealand
- Planning Commission, India
- Meralco Power Generation, Philippines
- Global Coal Blending Company Limited - Australia
- Anglo American - United Kingdom
- Bulk Trading Sa - Switzerland
- Ministry of Finance - Indonesia
- Manunggal Multi Energi - Indonesia
- Rio Tinto Coal - Australia
- London Commodity Brokers - England
- Carbofer General Trading SA - India
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- Samtan Co., Ltd - South Korea
- ICICI Bank Limited - India
- Altura Mining Limited, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- Parry Sugars Refinery, India
- Mjunction Services Limited - India
- Power Finance Corporation Ltd., India
- Larsen & Toubro Limited - India
- Singapore Mercantile Exchange
- European Bulk Services B.V. - Netherlands
- Sojitz Corporation - Japan
- Bharathi Cement Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- The Treasury - Australian Government
- MS Steel International - UAE
- Siam City Cement - Thailand
- Semirara Mining Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- IHS Mccloskey Coal Group - USA
- Leighton Contractors Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Simpson Spence & Young - Indonesia
- PNOC Exploration Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bangladesh Power Developement Board
- OPG Power Generation Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- GN Power Mariveles Coal Plant, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Georgia Ports Authority, United States
- Orica Mining Services - Indonesia
- Xindia Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Posco Energy - South Korea
- Jindal Steel & Power Ltd - India
- Attock Cement Pakistan Limited
- Agrawal Coal Company - India
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Baramulti Group, Indonesia
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Independent Power Producers Association of India
- Chamber of Mines of South Africa
- Aditya Birla Group - India
- Deloitte Consulting - India
- Kartika Selabumi Mining - Indonesia
- CNBM International Corporation - China
- IEA Clean Coal Centre - UK
- GVK Power & Infra Limited - India
- Thiess Contractors Indonesia
- SMC Global Power, Philippines
- Barasentosa Lestari - Indonesia
- Mintek Dendrill Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- TeaM Sual Corporation - Philippines
- Electricity Generating Authority of Thailand
- Wood Mackenzie - Singapore
- Central Java Power - Indonesia
- Karaikal Port Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- Romanian Commodities Exchange
- Kepco SPC Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercuria Energy - Indonesia
- Goldman Sachs - Singapore
- Latin American Coal - Colombia
- Siam City Cement PLC, Thailand
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- Coal and Oil Company - UAE
- Kalimantan Lumbung Energi - Indonesia
- PTC India Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Standard Chartered Bank - UAE
- Merrill Lynch Commodities Europe
- Semirara Mining and Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Indian Energy Exchange, India
- Bhatia International Limited - India
- Lanco Infratech Ltd - India
- Eastern Energy - Thailand
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indo Tambangraya Megah - Indonesia
- Iligan Light & Power Inc, Philippines
- Marubeni Corporation - India
- International Coal Ventures Pvt Ltd - India
- Intertek Mineral Services - Indonesia
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