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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, 27 June 16
INDONESIA BANS (AGAIN) SHIPS SAILING TO THE PHILIPPINES FROM INDONESIA
COALspot.com: The Indonesian Transport Ministry strictly prohibited harbour masters issuing permits to all Indonesian-flagged vessels bound for the ...
Friday, 24 June 16
U.S WEEKLY COAL PRODUCTION UP MARGINALLY
COALspot.com – U.S, world’s one of the largest coal producers has produced approximately totalled an estimated 13.4 million short tons ...
Wednesday, 22 June 16
SMALL RISE IN SHIPPING CONFIDENCE - MOORE STEPHENS
In May 2016, the average confidence level expressed by respondents in the markets in which they operate was 5.1 on a scale of 1 (low) to 10 (high). ...
Wednesday, 22 June 16
SHIPPING MARKET INSIGHT - NASSOS SOULAKIS
Stagnation- With the BDI stuck in the low 600 points for almost a month now, if we had to choose a word to describe the state of the Dry Bulk freig ...
Monday, 20 June 16
CS COAL INDICES CONTINUE UPWARD TREND SINCE END APRIL
COALspot.com: Average 5000 GAR coal index of Indonesian origin was up again by 0.05 percent week over week to averaging $39.39 per ton this past we ...
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Showing 2386 to 2390 news of total 6871 |
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- Aditya Birla Group - India
- Sree Jayajothi Cements Limited - India
- Alfred C Toepfer International GmbH - Germany
- Therma Luzon, Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- PetroVietnam Power Coal Import and Supply Company
- Intertek Mineral Services - Indonesia
- Goldman Sachs - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aboitiz Power Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Simpson Spence & Young - Indonesia
- Sakthi Sugars Limited - India
- Maharashtra Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- IEA Clean Coal Centre - UK
- Metalloyd Limited - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Romanian Commodities Exchange
- Central Electricity Authority - India
- Global Coal Blending Company Limited - Australia
- Gujarat Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Dalmia Cement Bharat India
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- SMG Consultants - Indonesia
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Sarangani Energy Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
- Kideco Jaya Agung - Indonesia
- Vizag Seaport Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- Thai Mozambique Logistica
- Indogreen Group - Indonesia
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- The Treasury - Australian Government
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Africa Commodities Group - South Africa
- Power Finance Corporation Ltd., India
- Star Paper Mills Limited - India
- Port Waratah Coal Services - Australia
- Indo Tambangraya Megah - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Semirara Mining Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Videocon Industries ltd - India
- AsiaOL BioFuels Corp., Philippines
- Bukit Makmur.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kobexindo Tractors - Indoneisa
- Ministry of Mines - Canada
- Parry Sugars Refinery, India
- Australian Coal Association
- Iligan Light & Power Inc, Philippines
- Antam Resourcindo - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- Marubeni Corporation - India
- Energy Development Corp, Philippines
- Medco Energi Mining Internasional
- Ministry of Finance - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bhatia International Limited - India
- Essar Steel Hazira Ltd - India
- Deloitte Consulting - India
- Anglo American - United Kingdom
- Cement Manufacturers Association - India
- Indonesian Coal Mining Association
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- Kaltim Prima Coal - Indonesia
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Parliament of New Zealand
- Madhucon Powers Ltd - India
- Bangladesh Power Developement Board
- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- MS Steel International - UAE
- Renaissance Capital - South Africa
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Kepco SPC Power Corporation, Philippines
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- ICICI Bank Limited - India
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Globalindo Alam Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Georgia Ports Authority, United States
- Chamber of Mines of South Africa
- Wood Mackenzie - Singapore
- Price Waterhouse Coopers - Russia
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- Pendopo Energi Batubara - Indonesia
- Commonwealth Bank - Australia
- Indian Oil Corporation Limited
- Maheswari Brothers Coal Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- Electricity Authority, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- Posco Energy - South Korea
- Altura Mining Limited, Indonesia
- Bayan Resources Tbk. - Indonesia
- The University of Queensland
- CNBM International Corporation - China
- Tata Chemicals Ltd - India
- Lanco Infratech Ltd - India
- Banpu Public Company Limited - Thailand
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- Wilmar Investment Holdings
- Economic Council, Georgia
- Sical Logistics Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Riau Bara Harum - Indonesia
- Attock Cement Pakistan Limited
- Kartika Selabumi Mining - Indonesia
- Ministry of Transport, Egypt
- Grasim Industreis Ltd - India
- Kapuas Tunggal Persada - Indonesia
- VISA Power Limited - India
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Timah Investasi Mineral - Indoneisa
- Makarim & Taira - Indonesia
- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- Vedanta Resources Plc - India
- Xindia Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Coal Council - USA
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- PNOC Exploration Corporation - Philippines
- PTC India Limited - India
- Thiess Contractors Indonesia
- Jaiprakash Power Ventures ltd
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Planning Commission, India
- Ind-Barath Power Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Mjunction Services Limited - India
- Larsen & Toubro Limited - India
- Uttam Galva Steels Limited - India
- Siam City Cement PLC, Thailand
- Oldendorff Carriers - Singapore
- SN Aboitiz Power Inc, Philippines
- GMR Energy Limited - India
- Samtan Co., Ltd - South Korea
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- Sindya Power Generating Company Private Ltd
- European Bulk Services B.V. - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Meralco Power Generation, Philippines
- India Bulls Power Limited - India
- Coal and Oil Company - UAE
- Global Business Power Corporation, Philippines
- Agrawal Coal Company - India
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