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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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Monday, 11 July 16
DRY BULK MARKET: UP TO 30 MILLION DWT OF OLDER BULKERS WILL NEED TO BE SCRAPPED BY END OF 2017 FOR MARKET TO FIND BALANCE
Tonnage oversupply in the dry bulk market is more than evident, as newbuildings have been hitting the water faster than owners can scrap their olde ...
Friday, 08 July 16
U.S. WEEKLY COAL OUTPUT UP 3% TO 14.1 MMST - EIA
COALspot.com – U.S, world’s second largest coal producers has produced approximately totalled an estimated 14.1 million short tons (mms ...
Thursday, 07 July 16
PANAMAX : THE TENDENCY FROM LAST WEEK CONTINUES WITH A CONSIDERABLY STRONGER SENTIMENT ALL ACROSS THE BLOCK - FEARNLEYS
Capesize
Rates have been holding at steady levels over the last weeks but towards end of this period they are becoming under more pressure as gen ...
Thursday, 07 July 16
CONSOLIDATION TO RULE OVER SHIPPING, AS EXECUTIVES SEEK INVESTMENT OPPORTUNITIES IN CHINA, INDIA AND EUROPE SAYS NORTON ROSE SURVEY
The transport sector is looking to Asia Pacific as the key market for investment over the next five years, according to the seventh The way ahead T ...
Wednesday, 06 July 16
KOMIPO INVITES BIDS FOR 780000 MT OF BITUMINOUS COAL
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for 780,000 Metric Tons of Bituminous Coal for its B ...
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Showing 2366 to 2370 news of total 6871 |
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- Leighton Contractors Pty Ltd - Australia
- Agrawal Coal Company - India
- Wilmar Investment Holdings
- Interocean Group of Companies - India
- Meenaskhi Energy Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Port Waratah Coal Services - Australia
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- Directorate General of MIneral and Coal - Indonesia
- Australian Commodity Traders Exchange
- Globalindo Alam Lestari - Indonesia
- Sarangani Energy Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- Coalindo Energy - Indonesia
- Wood Mackenzie - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Bangladesh Power Developement Board
- Ind-Barath Power Infra Limited - India
- Price Waterhouse Coopers - Russia
- Semirara Mining and Power Corporation, Philippines
- Standard Chartered Bank - UAE
- CIMB Investment Bank - Malaysia
- Kideco Jaya Agung - Indonesia
- Global Business Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Merrill Lynch Commodities Europe
- Indo Tambangraya Megah - Indonesia
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Siam City Cement - Thailand
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Independent Power Producers Association of India
- Minerals Council of Australia
- Formosa Plastics Group - Taiwan
- SN Aboitiz Power Inc, Philippines
- Thai Mozambique Logistica
- Petrochimia International Co. Ltd.- Taiwan
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- Goldman Sachs - Singapore
- Energy Link Ltd, New Zealand
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Meralco Power Generation, Philippines
- Indonesian Coal Mining Association
- Heidelberg Cement - Germany
- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Altura Mining Limited, Indonesia
- London Commodity Brokers - England
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- Metalloyd Limited - United Kingdom
- Sakthi Sugars Limited - India
- South Luzon Thermal Energy Corporation
- Maharashtra Electricity Regulatory Commission - India
- Deloitte Consulting - India
- Electricity Authority, New Zealand
- Global Coal Blending Company Limited - Australia
- Tamil Nadu electricity Board
- Siam City Cement PLC, Thailand
- Kaltim Prima Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- PNOC Exploration Corporation - Philippines
- Romanian Commodities Exchange
- Bhoruka Overseas - Indonesia
- ASAPP Information Group - India
- GVK Power & Infra Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- AsiaOL BioFuels Corp., Philippines
- IHS Mccloskey Coal Group - USA
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- CNBM International Corporation - China
- SMC Global Power, Philippines
- PowerSource Philippines DevCo
- International Coal Ventures Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Chamber of Mines of South Africa
- Global Green Power PLC Corporation, Philippines
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- Jindal Steel & Power Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Australia Pty. Ltd.
- Makarim & Taira - Indonesia
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Rio Tinto Coal - Australia
- Borneo Indobara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Parliament of New Zealand
- Trasteel International SA, Italy
- PTC India Limited - India
- McConnell Dowell - Australia
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- Kepco SPC Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
- Billiton Holdings Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Commonwealth Bank - Australia
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mjunction Services Limited - India
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- LBH Netherlands Bv - Netherlands
- Indian Energy Exchange, India
- Bukit Baiduri Energy - Indonesia
- New Zealand Coal & Carbon
- Bayan Resources Tbk. - Indonesia
- Marubeni Corporation - India
- Bukit Makmur.PT - Indonesia
- Ministry of Mines - Canada
- Barasentosa Lestari - Indonesia
- Parry Sugars Refinery, India
- Edison Trading Spa - Italy
- Krishnapatnam Port Company Ltd. - India
- Holcim Trading Pte Ltd - Singapore
- Sojitz Corporation - Japan
- Iligan Light & Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coastal Gujarat Power Limited - India
- SMG Consultants - Indonesia
- The University of Queensland
- Thiess Contractors Indonesia
- Coal and Oil Company - UAE
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Australian Coal Association
- White Energy Company Limited
- Timah Investasi Mineral - Indoneisa
- Riau Bara Harum - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Antam Resourcindo - Indonesia
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- Mercuria Energy - Indonesia
- Cement Manufacturers Association - India
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Central Electricity Authority - India
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Eastern Coal Council - USA
- San Jose City I Power Corp, Philippines
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Anglo American - United Kingdom
- Savvy Resources Ltd - HongKong
- Electricity Generating Authority of Thailand
- Medco Energi Mining Internasional
- GAC Shipping (India) Pvt Ltd
- OPG Power Generation Pvt Ltd - India
- Mercator Lines Limited - India
- Kobexindo Tractors - Indoneisa
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Aditya Birla Group - India
- Simpson Spence & Young - Indonesia
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- VISA Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Africa Commodities Group - South Africa
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ICICI Bank Limited - India
- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sree Jayajothi Cements Limited - India
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- Intertek Mineral Services - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Eastern Energy - Thailand
- Planning Commission, India
- Ministry of Transport, Egypt
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhatia International Limited - India
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