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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, 10 August 16
THE INDONESIAN DRAFT NEW MINING LAW - AMENDMENTS TO THE 2009 MINING LAW
KNOWLEDGE TO ELEVATE
COALspot.com: A draft mining law published by Indonesia's Minister of Energy and Mineral Resources provides use ...
Tuesday, 09 August 16
CS50 COAL INDEX HITS NEW FIFTY-WEEKS HIGH
COALspot.com: Average 5000 GAR coal index of Indonesian origin rose 1.78% week over week to averaging $41.85 per ton this past week, shows CS (i) C ...
Tuesday, 09 August 16
HARD COAL PRODUCTION AND WORLD TRADE ON THE DECLINE FOR THE FIRST TIME IN YEARS - VDKI
Hard coal production and world trade on the decline for the first time in years – not a harbinger of a global energy turnaround
Worldwid ...
Tuesday, 09 August 16
BREXIT, BRITANNIA AND THE WAVES - TREVOR CROWE, CLARKSON RESEARCH
This week, the Bank of England put into place its action plan following the UK referendum on 23rd June, which indicated the British population&rsqu ...
Monday, 08 August 16
INDONESIA'S DRAFT MINING LAW HINTS AT FUTURE REGULATORY FRAMEWORK
KNOWLEDGE TO ELEVATE
COALspot.com: A draft mining law published by Indonesia's Minister of Energy and Mineral Resources provides use ...
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Showing 2326 to 2330 news of total 6871 |
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- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Banpu Public Company Limited - Thailand
- San Jose City I Power Corp, Philippines
- Thiess Contractors Indonesia
- Ministry of Mines - Canada
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- New Zealand Coal & Carbon
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- London Commodity Brokers - England
- Lanco Infratech Ltd - India
- Borneo Indobara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Kobexindo Tractors - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Central Electricity Authority - India
- MS Steel International - UAE
- CNBM International Corporation - China
- Savvy Resources Ltd - HongKong
- Gujarat Sidhee Cement - India
- GMR Energy Limited - India
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Edison Trading Spa - Italy
- Toyota Tsusho Corporation, Japan
- Anglo American - United Kingdom
- Electricity Authority, New Zealand
- Rio Tinto Coal - Australia
- Leighton Contractors Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Alfred C Toepfer International GmbH - Germany
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Interocean Group of Companies - India
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Standard Chartered Bank - UAE
- Indian Oil Corporation Limited
- Jorong Barutama Greston.PT - Indonesia
- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
- Simpson Spence & Young - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Trasteel International SA, Italy
- Kepco SPC Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Aboitiz Power Corporation - Philippines
- Mercator Lines Limited - India
- Gujarat Mineral Development Corp Ltd - India
- ICICI Bank Limited - India
- Maheswari Brothers Coal Limited - India
- Therma Luzon, Inc, Philippines
- Tata Chemicals Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- Barasentosa Lestari - Indonesia
- Energy Development Corp, Philippines
- Dalmia Cement Bharat India
- Australian Coal Association
- Timah Investasi Mineral - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Deloitte Consulting - India
- Wilmar Investment Holdings
- Planning Commission, India
- Vizag Seaport Private Limited - India
- Bhatia International Limited - India
- Agrawal Coal Company - India
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- Meralco Power Generation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Kumho Petrochemical, South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Larsen & Toubro Limited - India
- Attock Cement Pakistan Limited
- Intertek Mineral Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Aditya Birla Group - India
- Kohat Cement Company Ltd. - Pakistan
- Power Finance Corporation Ltd., India
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- Global Coal Blending Company Limited - Australia
- Iligan Light & Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Grasim Industreis Ltd - India
- Mjunction Services Limited - India
- Orica Mining Services - Indonesia
- Renaissance Capital - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- White Energy Company Limited
- India Bulls Power Limited - India
- Uttam Galva Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Vedanta Resources Plc - India
- Ministry of Transport, Egypt
- Riau Bara Harum - Indonesia
- Globalindo Alam Lestari - Indonesia
- Madhucon Powers Ltd - India
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Malabar Cements Ltd - India
- Formosa Plastics Group - Taiwan
- Ind-Barath Power Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Salva Resources Pvt Ltd - India
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Essar Steel Hazira Ltd - India
- Oldendorff Carriers - Singapore
- Parry Sugars Refinery, India
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Chamber of Mines of South Africa
- Parliament of New Zealand
- Port Waratah Coal Services - Australia
- Sakthi Sugars Limited - India
- Indika Energy - Indonesia
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PowerSource Philippines DevCo
- Australian Commodity Traders Exchange
- PTC India Limited - India
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Coastal Gujarat Power Limited - India
- VISA Power Limited - India
- Wood Mackenzie - Singapore
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- Tamil Nadu electricity Board
- The University of Queensland
- Jindal Steel & Power Ltd - India
- Price Waterhouse Coopers - Russia
- Kideco Jaya Agung - Indonesia
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Eastern Energy - Thailand
- Africa Commodities Group - South Africa
- Jaiprakash Power Ventures ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indo Tambangraya Megah - Indonesia
- Bulk Trading Sa - Switzerland
- IEA Clean Coal Centre - UK
- Heidelberg Cement - Germany
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Sree Jayajothi Cements Limited - India
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- ASAPP Information Group - India
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Bangladesh Power Developement Board
- European Bulk Services B.V. - Netherlands
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Marubeni Corporation - India
- Indogreen Group - Indonesia
- Manunggal Multi Energi - Indonesia
- Singapore Mercantile Exchange
- SMG Consultants - Indonesia
- Altura Mining Limited, Indonesia
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- LBH Netherlands Bv - Netherlands
- Minerals Council of Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Antam Resourcindo - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- SMC Global Power, Philippines
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Medco Energi Mining Internasional
- Bhoruka Overseas - Indonesia
- Pendopo Energi Batubara - Indonesia
- Economic Council, Georgia
- Krishnapatnam Port Company Ltd. - India
- Cigading International Bulk Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
- GVK Power & Infra Limited - India
- Latin American Coal - Colombia
- Semirara Mining Corp, Philippines
- Bukit Makmur.PT - Indonesia
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