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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, 27 May 16
PET-COKE IMPORTS TO FACE PRESSURE IN INDIA
COALspot.com: An Indian environmental activist moved the National Green Tribunal seeking ban on the use of all forms of petroleum coke, also called ...
Friday, 27 May 16
US COAL PRODUCTION ROSE 2.9% WOW, ACCORDING TO EIA
COALspot.com – U.S the world’s second largest coal producer has produced approximately totaled an estimated 11.7 million short tons (mm ...
Thursday, 26 May 16
GIANT ORE CARRIERS SET TO PLAY A BIGGER ROLE IN THE GLOBAL SHIPPING FLEET: CHINA EMBRACES VALEMAXES - RICHARD SCOTT
Another phase of the giant ships era is approaching. Chinese shipowners placed orders recently for 30 huge ‘valemax’ ore carriers. Thes ...
Wednesday, 25 May 16
MEDIATION AS A WAY TO RESOLVE DISPUTES IN THE SHIPPING INDUSTRY - LANA JACOBS
KNOWLEDGE TO ELEVATE
The shipping market is currently experiencing a serious recession with the Baltic Dry Index and Baltic Capesize Index bot ...
Wednesday, 25 May 16
DRY BULK SNP MARKET DISPLAYS SIGNS OF STRENGTH - GEORGE ILIOPOULOS
Only a couple of weeks away from the world’s most prominent maritime event, the market for tankers displays an evident lack of confidence in ...
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Showing 2416 to 2420 news of total 6871 |
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- Parliament of New Zealand
- Sree Jayajothi Cements Limited - India
- VISA Power Limited - India
- India Bulls Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Baramulti Group, Indonesia
- Mjunction Services Limited - India
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- Romanian Commodities Exchange
- Singapore Mercantile Exchange
- Ministry of Transport, Egypt
- Goldman Sachs - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Ambuja Cements Ltd - India
- Australian Coal Association
- Star Paper Mills Limited - India
- Bukit Makmur.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Krishnapatnam Port Company Ltd. - India
- Gujarat Mineral Development Corp Ltd - India
- Price Waterhouse Coopers - Russia
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- ICICI Bank Limited - India
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Sojitz Corporation - Japan
- Carbofer General Trading SA - India
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- Kapuas Tunggal Persada - Indonesia
- Agrawal Coal Company - India
- Riau Bara Harum - Indonesia
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
- Latin American Coal - Colombia
- Power Finance Corporation Ltd., India
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Mines - Canada
- Madhucon Powers Ltd - India
- Kobexindo Tractors - Indoneisa
- IHS Mccloskey Coal Group - USA
- Ministry of Finance - Indonesia
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Vizag Seaport Private Limited - India
- The University of Queensland
- Sakthi Sugars Limited - India
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Lanco Infratech Ltd - India
- Africa Commodities Group - South Africa
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Cement Manufacturers Association - India
- Iligan Light & Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Bayan Resources Tbk. - Indonesia
- Heidelberg Cement - Germany
- Billiton Holdings Pty Ltd - Australia
- Energy Development Corp, Philippines
- Anglo American - United Kingdom
- Ind-Barath Power Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Global Coal Blending Company Limited - Australia
- Merrill Lynch Commodities Europe
- Bharathi Cement Corporation - India
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Posco Energy - South Korea
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- International Coal Ventures Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Banpu Public Company Limited - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Samtan Co., Ltd - South Korea
- Aditya Birla Group - India
- Directorate General of MIneral and Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement PLC, Thailand
- Karbindo Abesyapradhi - Indoneisa
- Oldendorff Carriers - Singapore
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Altura Mining Limited, Indonesia
- Indian Energy Exchange, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Interocean Group of Companies - India
- Parry Sugars Refinery, India
- Thiess Contractors Indonesia
- Mercator Lines Limited - India
- Minerals Council of Australia
- Rio Tinto Coal - Australia
- Alfred C Toepfer International GmbH - Germany
- Maharashtra Electricity Regulatory Commission - India
- Holcim Trading Pte Ltd - Singapore
- PTC India Limited - India
- Bhushan Steel Limited - India
- Kepco SPC Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Chettinad Cement Corporation Ltd - India
- Dalmia Cement Bharat India
- Australian Commodity Traders Exchange
- Mercuria Energy - Indonesia
- Indian Oil Corporation Limited
- Uttam Galva Steels Limited - India
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- Orica Mining Services - Indonesia
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- SMG Consultants - Indonesia
- White Energy Company Limited
- Indogreen Group - Indonesia
- Semirara Mining Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Vedanta Resources Plc - India
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Economic Council, Georgia
- Trasteel International SA, Italy
- Gujarat Sidhee Cement - India
- Tata Chemicals Ltd - India
- Straits Asia Resources Limited - Singapore
- Bhoruka Overseas - Indonesia
- Global Business Power Corporation, Philippines
- Eastern Coal Council - USA
- Savvy Resources Ltd - HongKong
- Malabar Cements Ltd - India
- Sical Logistics Limited - India
- Central Electricity Authority - India
- Xindia Steels Limited - India
- San Jose City I Power Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- South Luzon Thermal Energy Corporation
- Global Green Power PLC Corporation, Philippines
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Kideco Jaya Agung - Indonesia
- Jaiprakash Power Ventures ltd
- Binh Thuan Hamico - Vietnam
- Intertek Mineral Services - Indonesia
- Makarim & Taira - Indonesia
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- Kohat Cement Company Ltd. - Pakistan
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- SMC Global Power, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Pendopo Energi Batubara - Indonesia
- TeaM Sual Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Planning Commission, India
- New Zealand Coal & Carbon
- Leighton Contractors Pty Ltd - Australia
- Coal and Oil Company - UAE
- Thai Mozambique Logistica
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bukit Baiduri Energy - Indonesia
- Antam Resourcindo - Indonesia
- Siam City Cement - Thailand
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Commonwealth Bank - Australia
- Tamil Nadu electricity Board
- Kumho Petrochemical, South Korea
- Edison Trading Spa - Italy
- Jorong Barutama Greston.PT - Indonesia
- McConnell Dowell - Australia
- Kaltim Prima Coal - Indonesia
- Medco Energi Mining Internasional
- Energy Link Ltd, New Zealand
- London Commodity Brokers - England
- Bank of Tokyo Mitsubishi UFJ Ltd
- Metalloyd Limited - United Kingdom
- Simpson Spence & Young - Indonesia
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- Sarangani Energy Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- MS Steel International - UAE
- Karaikal Port Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Coastal Gujarat Power Limited - India
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