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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, 05 August 16
CAPESIZE : RATES ARE REMAINING AT DEPRESSING LEVELS DUE TO LACK OF FRESH CARGOES - FEARNLEYS
Supramax
Last week has been one of the slowest for some time with rates under pressure in most areas.
In its latest weekly report, shipbroke ...
Thursday, 04 August 16
INDONESIAN COAL PRICES ARE STARTING TO ZOOM HIGHER; HBA ROSE 10.13% TO US$ 58.37 PER TON
COALspot.com: The Indonesia coal benchmark price hits to its highest level since August 2015.
The Director General of Mineral and Coa ...
Thursday, 04 August 16
BREXIT: IMPLICATIONS FOR GLOBAL SHIPPING AND SEA TRADE - EVERSHEDS
The buzzword for the post-Brexit landscape both in Europe and further afield is ‘uncertainty’. No-one really knows the long term effect ...
Wednesday, 03 August 16
RECAAP INFORMATION SHARING CENTRE ISSUES SPECIAL REPORT ON THE ABDUCTING OF CREW FROM SHIPS IN WATERS OFF EASTERN SABAH AND SOUTHERN PHILIPPINES - THE STANDARD CLUB
KNOWLEDGE TO ELEVATE
In the light of three incidents where the crew of tug boats were abducted in the waters off Eastern Sabah and Southern Ph ...
Wednesday, 03 August 16
SHIPPING MARKET INSIGHT - EVA TZIMA
The Good…
Demand. Amidst all the unprecedented geopolitical turmoil and shifts in the likes of Brexit, the IMF lowered last month its glob ...
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Showing 2336 to 2340 news of total 6871 |
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- Energy Development Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Gujarat Sidhee Cement - India
- Xindia Steels Limited - India
- Antam Resourcindo - Indonesia
- India Bulls Power Limited - India
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- Tamil Nadu electricity Board
- Bhoruka Overseas - Indonesia
- Samtan Co., Ltd - South Korea
- Sakthi Sugars Limited - India
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- European Bulk Services B.V. - Netherlands
- Indo Tambangraya Megah - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Romanian Commodities Exchange
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Global Coal Blending Company Limited - Australia
- Bharathi Cement Corporation - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Tata Chemicals Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Deloitte Consulting - India
- Videocon Industries ltd - India
- The State Trading Corporation of India Ltd
- Indian Energy Exchange, India
- Bangladesh Power Developement Board
- Sojitz Corporation - Japan
- Standard Chartered Bank - UAE
- Rio Tinto Coal - Australia
- Siam City Cement PLC, Thailand
- MS Steel International - UAE
- Kobexindo Tractors - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Simpson Spence & Young - Indonesia
- Essar Steel Hazira Ltd - India
- Kepco SPC Power Corporation, Philippines
- Chamber of Mines of South Africa
- GAC Shipping (India) Pvt Ltd
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- Trasteel International SA, Italy
- The Treasury - Australian Government
- Makarim & Taira - Indonesia
- Metalloyd Limited - United Kingdom
- Eastern Coal Council - USA
- Thai Mozambique Logistica
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- Electricity Authority, New Zealand
- Economic Council, Georgia
- Meenaskhi Energy Private Limited - India
- Mjunction Services Limited - India
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Borneo Indobara - Indonesia
- Manunggal Multi Energi - Indonesia
- Ministry of Transport, Egypt
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- GVK Power & Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- The University of Queensland
- Australian Coal Association
- CIMB Investment Bank - Malaysia
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- Aditya Birla Group - India
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Cement Manufacturers Association - India
- Kaltim Prima Coal - Indonesia
- Renaissance Capital - South Africa
- Directorate Of Revenue Intelligence - India
- Timah Investasi Mineral - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Iligan Light & Power Inc, Philippines
- Coalindo Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Power Finance Corporation Ltd., India
- Bhatia International Limited - India
- South Luzon Thermal Energy Corporation
- Bulk Trading Sa - Switzerland
- Marubeni Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Indonesian Coal Mining Association
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Riau Bara Harum - Indonesia
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Planning Commission, India
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- PetroVietnam Power Coal Import and Supply Company
- Karbindo Abesyapradhi - Indoneisa
- Sindya Power Generating Company Private Ltd
- Parry Sugars Refinery, India
- Singapore Mercantile Exchange
- Dalmia Cement Bharat India
- Wilmar Investment Holdings
- Altura Mining Limited, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Africa Commodities Group - South Africa
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Oldendorff Carriers - Singapore
- Jorong Barutama Greston.PT - Indonesia
- LBH Netherlands Bv - Netherlands
- Cigading International Bulk Terminal - Indonesia
- PTC India Limited - India
- Krishnapatnam Port Company Ltd. - India
- Latin American Coal - Colombia
- Indogreen Group - Indonesia
- Ministry of Finance - Indonesia
- Indian Oil Corporation Limited
- Savvy Resources Ltd - HongKong
- Kideco Jaya Agung - Indonesia
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- Agrawal Coal Company - India
- Bhushan Steel Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bayan Resources Tbk. - Indonesia
- SMC Global Power, Philippines
- Pendopo Energi Batubara - Indonesia
- Attock Cement Pakistan Limited
- Indika Energy - Indonesia
- Posco Energy - South Korea
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Vizag Seaport Private Limited - India
- Kartika Selabumi Mining - Indonesia
- Coastal Gujarat Power Limited - India
- McConnell Dowell - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercuria Energy - Indonesia
- Goldman Sachs - Singapore
- Salva Resources Pvt Ltd - India
- Mintek Dendrill Indonesia
- White Energy Company Limited
- Binh Thuan Hamico - Vietnam
- Thiess Contractors Indonesia
- Rashtriya Ispat Nigam Limited - India
- Formosa Plastics Group - Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- Ambuja Cements Ltd - India
- Central Java Power - Indonesia
- Eastern Energy - Thailand
- Intertek Mineral Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Petron Corporation, Philippines
- Madhucon Powers Ltd - India
- Barasentosa Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Georgia Ports Authority, United States
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- Sical Logistics Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bahari Cakrawala Sebuku - Indonesia
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Malabar Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- IEA Clean Coal Centre - UK
- PowerSource Philippines DevCo
- Ind-Barath Power Infra Limited - India
- Parliament of New Zealand
- Mercator Lines Limited - India
- Karaikal Port Pvt Ltd - India
- Grasim Industreis Ltd - India
- Merrill Lynch Commodities Europe
- Chettinad Cement Corporation Ltd - India
- Semirara Mining Corp, Philippines
- New Zealand Coal & Carbon
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