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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, 24 May 16
WEEKLY CS COAL INDICES NEGATIVE FOR ALL TYPES OF COAL EXCEPT 3800 GAR COAL
COALspot.com: Average 5000 GAR coal index of Indonesian origin was down 0.10 percent week over week to averaging $38.90 per ton this past week, sho ...
Monday, 23 May 16
A PERFECT STORM FOR INDONESIAN STEAM COAL EXPORTS - CLARKSON RESEARCH
Indonesia is the world’s leading steam coal exporter, accounting for over 40% of global seaborne steam coal exports since 2010. However in 20 ...
Monday, 23 May 16
THE PANAMAX INDEX WAS UP 17 POINTS W/W
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose this week.
The freight market was firm and all ...
Friday, 20 May 16
SHIPBUILDING CONTRACTS: CAN I CANCEL? SHOULD I CANCEL? - THE SHIPOWNER CLUB
KNOWLEDGE TO ELEVATE
There are many circumstances in which a buyer of a new-build vessel might want to terminate or cancel their contract with ...
Friday, 20 May 16
U.S COAL PRODUCTION FOR THE WEEK ENDED 14 MAY TOTALED 11.4 MMST; UP 3.8% W/W
COALspot.com – U.S the world’s second largest coal producer has produced approximately totaled an estimated 11.4 million short tons (mm ...
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Showing 2421 to 2425 news of total 6871 |
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- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- Indo Tambangraya Megah - Indonesia
- Bukit Baiduri Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Sojitz Corporation - Japan
- Jaiprakash Power Ventures ltd
- Therma Luzon, Inc, Philippines
- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- Binh Thuan Hamico - Vietnam
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- TNB Fuel Sdn Bhd - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Meenaskhi Energy Private Limited - India
- Bhatia International Limited - India
- Eastern Coal Council - USA
- Directorate Of Revenue Intelligence - India
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wood Mackenzie - Singapore
- Grasim Industreis Ltd - India
- Wilmar Investment Holdings
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- Parliament of New Zealand
- Maheswari Brothers Coal Limited - India
- Indonesian Coal Mining Association
- Petrochimia International Co. Ltd.- Taiwan
- Indogreen Group - Indonesia
- Sical Logistics Limited - India
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Attock Cement Pakistan Limited
- Alfred C Toepfer International GmbH - Germany
- Global Green Power PLC Corporation, Philippines
- Lanco Infratech Ltd - India
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Larsen & Toubro Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Trasteel International SA, Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sakthi Sugars Limited - India
- Bangladesh Power Developement Board
- Kideco Jaya Agung - Indonesia
- Savvy Resources Ltd - HongKong
- Kartika Selabumi Mining - Indonesia
- Interocean Group of Companies - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PTC India Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Kaltim Prima Coal - Indonesia
- Indika Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Deloitte Consulting - India
- Essar Steel Hazira Ltd - India
- MS Steel International - UAE
- Kumho Petrochemical, South Korea
- Standard Chartered Bank - UAE
- Karaikal Port Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Electricity Authority, New Zealand
- Agrawal Coal Company - India
- Thiess Contractors Indonesia
- Ambuja Cements Ltd - India
- Cement Manufacturers Association - India
- Coastal Gujarat Power Limited - India
- Coalindo Energy - Indonesia
- Siam City Cement PLC, Thailand
- LBH Netherlands Bv - Netherlands
- Metalloyd Limited - United Kingdom
- Bukit Makmur.PT - Indonesia
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Samtan Co., Ltd - South Korea
- Timah Investasi Mineral - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- The State Trading Corporation of India Ltd
- Energy Link Ltd, New Zealand
- Electricity Generating Authority of Thailand
- Central Java Power - Indonesia
- Heidelberg Cement - Germany
- Ministry of Finance - Indonesia
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Minerals Council of Australia
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Energy Development Corp, Philippines
- Central Electricity Authority - India
- Australian Commodity Traders Exchange
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Gujarat Sidhee Cement - India
- Siam City Cement - Thailand
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Independent Power Producers Association of India
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- GN Power Mariveles Coal Plant, Philippines
- SMG Consultants - Indonesia
- The University of Queensland
- Petron Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Mercuria Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Commonwealth Bank - Australia
- Sinarmas Energy and Mining - Indonesia
- European Bulk Services B.V. - Netherlands
- Antam Resourcindo - Indonesia
- Carbofer General Trading SA - India
- Makarim & Taira - Indonesia
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Videocon Industries ltd - India
- Iligan Light & Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Port Waratah Coal Services - Australia
- GMR Energy Limited - India
- Banpu Public Company Limited - Thailand
- Billiton Holdings Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Kobexindo Tractors - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CNBM International Corporation - China
- Holcim Trading Pte Ltd - Singapore
- Australian Coal Association
- Posco Energy - South Korea
- Orica Australia Pty. Ltd.
- VISA Power Limited - India
- Madhucon Powers Ltd - India
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Krishnapatnam Port Company Ltd. - India
- Pipit Mutiara Jaya. PT, Indonesia
- Planning Commission, India
- Vizag Seaport Private Limited - India
- Renaissance Capital - South Africa
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Toyota Tsusho Corporation, Japan
- Bayan Resources Tbk. - Indonesia
- SMC Global Power, Philippines
- Bharathi Cement Corporation - India
- Latin American Coal - Colombia
- International Coal Ventures Pvt Ltd - India
- Africa Commodities Group - South Africa
- Semirara Mining Corp, Philippines
- Goldman Sachs - Singapore
- White Energy Company Limited
- Merrill Lynch Commodities Europe
- Singapore Mercantile Exchange
- Meralco Power Generation, Philippines
- Ministry of Mines - Canada
- New Zealand Coal & Carbon
- ICICI Bank Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Borneo Indobara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Xindia Steels Limited - India
- Oldendorff Carriers - Singapore
- OPG Power Generation Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Coal and Oil Company - UAE
- Vedanta Resources Plc - India
- Cigading International Bulk Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Jindal Steel & Power Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kepco SPC Power Corporation, Philippines
- Malabar Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Intertek Mineral Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- Orica Mining Services - Indonesia
- Ministry of Transport, Egypt
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