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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, 14 June 16
CS COAL INDICES ROSE UP FOR A THIRD STRAIGHT WEEK; 4200 GAR COAL UP 0.73%
COALspot.com: Average 5000 GAR coal index of Indonesian origin was up 0.54 percent week over week to averaging $39.37 per ton this past week, shows ...
Monday, 13 June 16
DEMAND FOR DRY BULK COMMODITIES COULD PROVIDE FUTURE BOOST FOR SHIP OWNERS - HELLENIC SHIPPING NEWS
When it comes to the dry bulk market, shipowners these days are looking for news in any shape or form they can find them. However, as the discussio ...
Monday, 13 June 16
ONSHORE SHALE: WORTH KEEPING IN THE SHIPPING SPOTLIGHT CLARKSONS
Generally, shipping industry watchers spend much of their time monitoring events out to sea: how fleets are evolving, trade volumes growing and fre ...
Monday, 13 June 16
PORT OF NEWCASTLE SHIPPED 5.03% MORE COAL IN MAY; AVERAGE SELLING PRICE DECLINED 2.08% FROM APRIL
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port has shipped $AU 1.162bill ...
Monday, 13 June 16
BALTIC INDEX FLAT, INDEX FOR CAPE RISE
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities flat this past week. The freight market was almost same l ...
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Showing 2396 to 2400 news of total 6871 |
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- GAC Shipping (India) Pvt Ltd
- Chettinad Cement Corporation Ltd - India
- Globalindo Alam Lestari - Indonesia
- Marubeni Corporation - India
- Barasentosa Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Commonwealth Bank - Australia
- Minerals Council of Australia
- AsiaOL BioFuels Corp., Philippines
- Merrill Lynch Commodities Europe
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Latin American Coal - Colombia
- VISA Power Limited - India
- McConnell Dowell - Australia
- Wilmar Investment Holdings
- SN Aboitiz Power Inc, Philippines
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- PNOC Exploration Corporation - Philippines
- Australian Coal Association
- Romanian Commodities Exchange
- Standard Chartered Bank - UAE
- San Jose City I Power Corp, Philippines
- SMC Global Power, Philippines
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- Orica Mining Services - Indonesia
- The University of Queensland
- Indo Tambangraya Megah - Indonesia
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- Sakthi Sugars Limited - India
- Coastal Gujarat Power Limited - India
- Dalmia Cement Bharat India
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Grasim Industreis Ltd - India
- ICICI Bank Limited - India
- Bhushan Steel Limited - India
- Jindal Steel & Power Ltd - India
- Bangladesh Power Developement Board
- Alfred C Toepfer International GmbH - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Agrawal Coal Company - India
- Eastern Energy - Thailand
- PTC India Limited - India
- Ministry of Finance - Indonesia
- Directorate Of Revenue Intelligence - India
- IHS Mccloskey Coal Group - USA
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- International Coal Ventures Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- Iligan Light & Power Inc, Philippines
- Meralco Power Generation, Philippines
- Bulk Trading Sa - Switzerland
- White Energy Company Limited
- Energy Link Ltd, New Zealand
- Formosa Plastics Group - Taiwan
- Kobexindo Tractors - Indoneisa
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- Riau Bara Harum - Indonesia
- Ambuja Cements Ltd - India
- Siam City Cement - Thailand
- Goldman Sachs - Singapore
- Pendopo Energi Batubara - Indonesia
- Petron Corporation, Philippines
- Altura Mining Limited, Indonesia
- Antam Resourcindo - Indonesia
- Lanco Infratech Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Parry Sugars Refinery, India
- Thai Mozambique Logistica
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Central Java Power - Indonesia
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- Aditya Birla Group - India
- Savvy Resources Ltd - HongKong
- Kalimantan Lumbung Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- SMG Consultants - Indonesia
- Global Business Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- LBH Netherlands Bv - Netherlands
- Electricity Generating Authority of Thailand
- Baramulti Group, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Sidhee Cement - India
- Singapore Mercantile Exchange
- Edison Trading Spa - Italy
- Tata Chemicals Ltd - India
- Wood Mackenzie - Singapore
- Billiton Holdings Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- PowerSource Philippines DevCo
- Attock Cement Pakistan Limited
- Ind-Barath Power Infra Limited - India
- Semirara Mining Corp, Philippines
- The State Trading Corporation of India Ltd
- Indonesian Coal Mining Association
- Banpu Public Company Limited - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Power Finance Corporation Ltd., India
- Heidelberg Cement - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Renaissance Capital - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- London Commodity Brokers - England
- Timah Investasi Mineral - Indoneisa
- CNBM International Corporation - China
- Manunggal Multi Energi - Indonesia
- Electricity Authority, New Zealand
- Therma Luzon, Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Port Waratah Coal Services - Australia
- Economic Council, Georgia
- GMR Energy Limited - India
- Orica Australia Pty. Ltd.
- Indian Oil Corporation Limited
- Australian Commodity Traders Exchange
- Rio Tinto Coal - Australia
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Kartika Selabumi Mining - Indonesia
- Carbofer General Trading SA - India
- Oldendorff Carriers - Singapore
- Videocon Industries ltd - India
- Kumho Petrochemical, South Korea
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Sindya Power Generating Company Private Ltd
- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Kepco SPC Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Independent Power Producers Association of India
- Anglo American - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Sical Logistics Limited - India
- Indian Energy Exchange, India
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Eastern Coal Council - USA
- Posco Energy - South Korea
- New Zealand Coal & Carbon
- Meenaskhi Energy Private Limited - India
- GVK Power & Infra Limited - India
- Malabar Cements Ltd - India
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Thiess Contractors Indonesia
- European Bulk Services B.V. - Netherlands
- Mjunction Services Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
- Vijayanagar Sugar Pvt Ltd - India
- MS Steel International - UAE
- Bukit Baiduri Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Interocean Group of Companies - India
- Krishnapatnam Port Company Ltd. - India
- Madhucon Powers Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Ministry of Mines - Canada
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- The Treasury - Australian Government
- Coalindo Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- TeaM Sual Corporation - Philippines
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- Siam City Cement PLC, Thailand
- Straits Asia Resources Limited - Singapore
- South Luzon Thermal Energy Corporation
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- OPG Power Generation Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Indika Energy - Indonesia
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