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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, 19 August 16
U.S. YEAR-TO-DATE COAL PRODUCTION TOTALLED AN ESTIMATED 421.6 MMST
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 15.8 million short ton ...
Thursday, 18 August 16
CAPESIZE: AN EXTREMELY VOLATILE LAST WEEK, WHERE THE MAIN DRIVER HAS BEEN THE WEST AUSTRALIA MARKET
Supramax
The week has held up. After the most of the world is back at work there is some optimism again in the market. The Far East volume has in ...
Tuesday, 16 August 16
WEEKLY CS42 COAL INDEX SOARS 14.08% YEAR TO DATE AMID HIGH DEMAND
COALspot.com: Average 5000 GAR coal index of Indonesian origin rose 2.37% week over week to averaging $42.84 per ton this past week, shows CS (i) C ...
Monday, 15 August 16
DRY BULK: 2017 COULD MARK THE START OF LOWER SHIP DELIVERIES HELPING TONNAGE SUPPLY ISSUES IN THE MARKET, SAYS SHIPOWNER - HELLENIC SHIPPING NEWS
Dry bulk owner Pacific Basin, mainly active in the Handysize and Supramax trades appeared optimistic in its analysis of the prospects of the dry bu ...
Monday, 15 August 16
INDONESIAN COAL PRICES RALLYING; COAL OUTPUT REMAINS FLAT
COALspot.com: Global thermal coal prices, including Indonesian coal prices have risen sharply due to jump in imports from China as it curbs domesti ...
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Showing 2316 to 2320 news of total 6871 |
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- Ceylon Electricity Board - Sri Lanka
- Jorong Barutama Greston.PT - Indonesia
- White Energy Company Limited
- Global Green Power PLC Corporation, Philippines
- Mercuria Energy - Indonesia
- GVK Power & Infra Limited - India
- Gujarat Sidhee Cement - India
- Chettinad Cement Corporation Ltd - India
- Ministry of Transport, Egypt
- South Luzon Thermal Energy Corporation
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- Banpu Public Company Limited - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- CNBM International Corporation - China
- Australian Coal Association
- Thai Mozambique Logistica
- Vijayanagar Sugar Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- SN Aboitiz Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Siam City Cement - Thailand
- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Therma Luzon, Inc, Philippines
- Salva Resources Pvt Ltd - India
- Star Paper Mills Limited - India
- Thiess Contractors Indonesia
- Uttam Galva Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- Merrill Lynch Commodities Europe
- Mintek Dendrill Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Finance - Indonesia
- Attock Cement Pakistan Limited
- Indian Energy Exchange, India
- Kobexindo Tractors - Indoneisa
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Metalloyd Limited - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- The Treasury - Australian Government
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- Sindya Power Generating Company Private Ltd
- Jaiprakash Power Ventures ltd
- Gujarat Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bayan Resources Tbk. - Indonesia
- Globalindo Alam Lestari - Indonesia
- Wilmar Investment Holdings
- Rashtriya Ispat Nigam Limited - India
- Aboitiz Power Corporation - Philippines
- SMG Consultants - Indonesia
- Videocon Industries ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Central Electricity Authority - India
- Kaltim Prima Coal - Indonesia
- VISA Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- IEA Clean Coal Centre - UK
- The University of Queensland
- McConnell Dowell - Australia
- Indian Oil Corporation Limited
- IHS Mccloskey Coal Group - USA
- Bukit Makmur.PT - Indonesia
- Carbofer General Trading SA - India
- Directorate Of Revenue Intelligence - India
- Toyota Tsusho Corporation, Japan
- Mercator Lines Limited - India
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- Vedanta Resources Plc - India
- Energy Link Ltd, New Zealand
- Jindal Steel & Power Ltd - India
- Goldman Sachs - Singapore
- GMR Energy Limited - India
- Samtan Co., Ltd - South Korea
- The State Trading Corporation of India Ltd
- Antam Resourcindo - Indonesia
- Formosa Plastics Group - Taiwan
- Bangladesh Power Developement Board
- Edison Trading Spa - Italy
- Coastal Gujarat Power Limited - India
- PTC India Limited - India
- Kumho Petrochemical, South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Coal Council - USA
- Rio Tinto Coal - Australia
- MS Steel International - UAE
- Asmin Koalindo Tuhup - Indonesia
- Larsen & Toubro Limited - India
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Power Finance Corporation Ltd., India
- Bukit Baiduri Energy - Indonesia
- SMC Global Power, Philippines
- Sakthi Sugars Limited - India
- Indogreen Group - Indonesia
- Deloitte Consulting - India
- Grasim Industreis Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Iligan Light & Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- Indonesian Coal Mining Association
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- TeaM Sual Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- Krishnapatnam Port Company Ltd. - India
- Economic Council, Georgia
- Posco Energy - South Korea
- AsiaOL BioFuels Corp., Philippines
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- LBH Netherlands Bv - Netherlands
- Riau Bara Harum - Indonesia
- Vizag Seaport Private Limited - India
- Orica Australia Pty. Ltd.
- Coalindo Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Parliament of New Zealand
- Independent Power Producers Association of India
- Maharashtra Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- London Commodity Brokers - England
- OPG Power Generation Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Miang Besar Coal Terminal - Indonesia
- Petron Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Sojitz Corporation - Japan
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Aditya Birla Group - India
- Madhucon Powers Ltd - India
- Agrawal Coal Company - India
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- Planning Commission, India
- Ambuja Cements Ltd - India
- Ministry of Mines - Canada
- Orica Mining Services - Indonesia
- Sical Logistics Limited - India
- Commonwealth Bank - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PowerSource Philippines DevCo
- Heidelberg Cement - Germany
- Karbindo Abesyapradhi - Indoneisa
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
- Central Java Power - Indonesia
- Coal and Oil Company - UAE
- Minerals Council of Australia
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Malabar Cements Ltd - India
- Tata Chemicals Ltd - India
- GAC Shipping (India) Pvt Ltd
- Standard Chartered Bank - UAE
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Lanco Infratech Ltd - India
- Barasentosa Lestari - Indonesia
- Cement Manufacturers Association - India
- Parry Sugars Refinery, India
- Oldendorff Carriers - Singapore
- Semirara Mining Corp, Philippines
- Bharathi Cement Corporation - India
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- European Bulk Services B.V. - Netherlands
- Singapore Mercantile Exchange
- Eastern Energy - Thailand
- Port Waratah Coal Services - Australia
- Global Coal Blending Company Limited - Australia
- Indika Energy - Indonesia
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Borneo Indobara - Indonesia
- Energy Development Corp, Philippines
- Bhatia International Limited - India
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
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