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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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Tuesday, 19 July 16
INDONESIAN THERMAL COAL INDEXES CONTINUALLY FIRM UP ON ROBUST BUYING INTEREST - CS COAL INDEX
COALspot.com: Average 5000 GAR coal index of Indonesian origin rose One percent week over week to averaging $40.38 per ton this past week, shows CS ...
Monday, 18 July 16
FROM PIT TO PORT: DRY BULK NEEDS A NEW PATH TO PROFITABILITY - TOC EUROPE
During the golden years for commodities, from 2005 to 2014, high demand and big profit margins pushed companies to produce more and more, sacrifici ...
Monday, 18 July 16
BALTIC DRY INDEX REMAIN FIRM, UP BY 5.97 WEEK OVER WEEK
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities continued to remain firm with all segments ending in posi ...
Friday, 15 July 16
US COAL PRODUCTION DOWN 8.4% WEEK-OVER-WEEK
COALspot.com – U.S, world’s second largest coal producers has produced approximately totalled an estimated 12.9 million short tons (mms ...
Thursday, 14 July 16
SHIPPING'S HALF YEAR REPORT - 'MUST DO BETTER' - CLARKSONS
It’s the time of year, with the school holidays and end of term approaching, that many pupils will nervously take home their school reports t ...
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Showing 2356 to 2360 news of total 6871 |
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- The University of Queensland
- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- Ministry of Transport, Egypt
- Meralco Power Generation, Philippines
- Bukit Baiduri Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Agrawal Coal Company - India
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Australian Coal Association
- Meenaskhi Energy Private Limited - India
- GMR Energy Limited - India
- India Bulls Power Limited - India
- SMC Global Power, Philippines
- Straits Asia Resources Limited - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Vizag Seaport Private Limited - India
- Bayan Resources Tbk. - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Globalindo Alam Lestari - Indonesia
- Carbofer General Trading SA - India
- PowerSource Philippines DevCo
- SMG Consultants - Indonesia
- Salva Resources Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Baramulti Group, Indonesia
- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
- Orica Mining Services - Indonesia
- Indika Energy - Indonesia
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- The Treasury - Australian Government
- Georgia Ports Authority, United States
- Electricity Authority, New Zealand
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Central Java Power - Indonesia
- CIMB Investment Bank - Malaysia
- Kideco Jaya Agung - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Minerals Council of Australia
- Port Waratah Coal Services - Australia
- Larsen & Toubro Limited - India
- Essar Steel Hazira Ltd - India
- Kartika Selabumi Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Manunggal Multi Energi - Indonesia
- MS Steel International - UAE
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Chettinad Cement Corporation Ltd - India
- Latin American Coal - Colombia
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- Uttam Galva Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Mercator Lines Limited - India
- Rio Tinto Coal - Australia
- Medco Energi Mining Internasional
- Toyota Tsusho Corporation, Japan
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Jindal Steel & Power Ltd - India
- Altura Mining Limited, Indonesia
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- Marubeni Corporation - India
- Kaltim Prima Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- Parliament of New Zealand
- Semirara Mining Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Bhatia International Limited - India
- South Luzon Thermal Energy Corporation
- Riau Bara Harum - Indonesia
- Singapore Mercantile Exchange
- Siam City Cement - Thailand
- Aboitiz Power Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- Borneo Indobara - Indonesia
- Antam Resourcindo - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- Indian Energy Exchange, India
- Sakthi Sugars Limited - India
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- New Zealand Coal & Carbon
- GVK Power & Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Africa Commodities Group - South Africa
- Grasim Industreis Ltd - India
- PTC India Limited - India
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- Standard Chartered Bank - UAE
- Merrill Lynch Commodities Europe
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- ICICI Bank Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement PLC, Thailand
- TeaM Sual Corporation - Philippines
- Edison Trading Spa - Italy
- Kumho Petrochemical, South Korea
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Ind-Barath Power Infra Limited - India
- White Energy Company Limited
- Bulk Trading Sa - Switzerland
- Formosa Plastics Group - Taiwan
- Deloitte Consulting - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Samtan Co., Ltd - South Korea
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Gujarat Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Mjunction Services Limited - India
- Power Finance Corporation Ltd., India
- Independent Power Producers Association of India
- Goldman Sachs - Singapore
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- Planning Commission, India
- Parry Sugars Refinery, India
- Economic Council, Georgia
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- Bharathi Cement Corporation - India
- ASAPP Information Group - India
- Kepco SPC Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Mines - Canada
- Energy Development Corp, Philippines
- Global Business Power Corporation, Philippines
- London Commodity Brokers - England
- OPG Power Generation Pvt Ltd - India
- Wilmar Investment Holdings
- Gujarat Mineral Development Corp Ltd - India
- Interocean Group of Companies - India
- Anglo American - United Kingdom
- Tata Chemicals Ltd - India
- Vedanta Resources Plc - India
- Miang Besar Coal Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- LBH Netherlands Bv - Netherlands
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Jaiprakash Power Ventures ltd
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Dalmia Cement Bharat India
- The State Trading Corporation of India Ltd
- Global Green Power PLC Corporation, Philippines
- Lanco Infratech Ltd - India
- CNBM International Corporation - China
- Eastern Coal Council - USA
- Global Coal Blending Company Limited - Australia
- Coalindo Energy - Indonesia
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Energy Link Ltd, New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Bangladesh Power Developement Board
- Sinarmas Energy and Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Indian Oil Corporation Limited
- Indonesian Coal Mining Association
- Trasteel International SA, Italy
- GAC Shipping (India) Pvt Ltd
- Aditya Birla Group - India
- Xindia Steels Limited - India
- Attock Cement Pakistan Limited
- Sree Jayajothi Cements Limited - India
- Holcim Trading Pte Ltd - Singapore
- Tamil Nadu electricity Board
- Star Paper Mills Limited - India
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
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