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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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Thursday, 19 May 16
AUSTRALIAN IRON ORE CARGOES PUSHED UP THE FREIGHT RATES FOR CAPE THIS WEEK - FEARNLEYS
Cape
It has been a big jump in the freight rates for Cape size this week, says Fearnleys in its latest weekly report. All of the Australian iron ...
Thursday, 19 May 16
DISPUTE OVER VAT ON COAL DRAGS ON, CAUSING DOUBLE-BLOW TO MINERS - JP
The dispute over the value-added tax ( VAT ) mechanism between coal miners operating under third-generation contracts and the Finance Ministry&rsqu ...
Wednesday, 18 May 16
DRY BULK OUTLOOK REMAINS GLOOMY SAYS DANISH SHIP FINANCE, AS SHIPPING NEEDS TO RETHINK BUSINESS MODEL - HELLENIC SHIPPING
Our Shipping Market Review – May 2016 is devoted to the fourth industrial revolution. To understand the truly disruptive nature of the fourth ...
Wednesday, 18 May 16
LONG TERM FUNDAMENTALS ARE SLOWLY IMPROVING FOR THE DRY BULK MARKET - INTERMODAL
As we are approaching the end of the first half of the year, there is a number of market participants over at the dry bulk sector that have started ...
Tuesday, 17 May 16
INDONESIAN COAL PRICE REFERENCE DECLINE AGAIN
COALspot.com: The Indonesia Coal Benchmark Price declined in May 2016.
The Director General of Mineral and Coal of Indonesia, the regulator of ...
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Showing 2426 to 2430 news of total 6871 |
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- Ind-Barath Power Infra Limited - India
- Antam Resourcindo - Indonesia
- Ministry of Mines - Canada
- Coalindo Energy - Indonesia
- Orica Australia Pty. Ltd.
- Ambuja Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Australian Commodity Traders Exchange
- Siam City Cement - Thailand
- Economic Council, Georgia
- Tamil Nadu electricity Board
- Meralco Power Generation, Philippines
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Kumho Petrochemical, South Korea
- Agrawal Coal Company - India
- MS Steel International - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- GMR Energy Limited - India
- GAC Shipping (India) Pvt Ltd
- Globalindo Alam Lestari - Indonesia
- Sakthi Sugars Limited - India
- Marubeni Corporation - India
- TeaM Sual Corporation - Philippines
- Central Electricity Authority - India
- Bukit Makmur.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Maharashtra Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Bangladesh Power Developement Board
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- Baramulti Group, Indonesia
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- Trasteel International SA, Italy
- Lanco Infratech Ltd - India
- Karaikal Port Pvt Ltd - India
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Ceylon Electricity Board - Sri Lanka
- Global Coal Blending Company Limited - Australia
- IEA Clean Coal Centre - UK
- Central Java Power - Indonesia
- Sarangani Energy Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Eastern Coal Council - USA
- SMG Consultants - Indonesia
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Meenaskhi Energy Private Limited - India
- Binh Thuan Hamico - Vietnam
- Mercuria Energy - Indonesia
- Latin American Coal - Colombia
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Indian Oil Corporation Limited
- LBH Netherlands Bv - Netherlands
- Barasentosa Lestari - Indonesia
- Heidelberg Cement - Germany
- Karbindo Abesyapradhi - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Riau Bara Harum - Indonesia
- Semirara Mining Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- Vizag Seaport Private Limited - India
- Savvy Resources Ltd - HongKong
- Cement Manufacturers Association - India
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Directorate Of Revenue Intelligence - India
- Romanian Commodities Exchange
- Madhucon Powers Ltd - India
- Dalmia Cement Bharat India
- Siam City Cement PLC, Thailand
- Global Business Power Corporation, Philippines
- Star Paper Mills Limited - India
- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Bharathi Cement Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
- McConnell Dowell - Australia
- Wilmar Investment Holdings
- Miang Besar Coal Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Indika Energy - Indonesia
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- Indogreen Group - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Mjunction Services Limited - India
- Bhoruka Overseas - Indonesia
- Essar Steel Hazira Ltd - India
- Xindia Steels Limited - India
- Borneo Indobara - Indonesia
- Grasim Industreis Ltd - India
- Sical Logistics Limited - India
- Intertek Mineral Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- India Bulls Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Energy Development Corp, Philippines
- Renaissance Capital - South Africa
- Mintek Dendrill Indonesia
- Ministry of Transport, Egypt
- Goldman Sachs - Singapore
- Manunggal Multi Energi - Indonesia
- Therma Luzon, Inc, Philippines
- Thai Mozambique Logistica
- PTC India Limited - India
- Tata Chemicals Ltd - India
- Straits Asia Resources Limited - Singapore
- Kobexindo Tractors - Indoneisa
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Orica Mining Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Merrill Lynch Commodities Europe
- Asmin Koalindo Tuhup - Indonesia
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Parliament of New Zealand
- European Bulk Services B.V. - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- PNOC Exploration Corporation - Philippines
- Chamber of Mines of South Africa
- Thiess Contractors Indonesia
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- Formosa Plastics Group - Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- White Energy Company Limited
- Singapore Mercantile Exchange
- The University of Queensland
- SN Aboitiz Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Africa Commodities Group - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Neyveli Lignite Corporation Ltd, - India
- PowerSource Philippines DevCo
- Malabar Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- SMC Global Power, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Bhushan Steel Limited - India
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- TNB Fuel Sdn Bhd - Malaysia
- Kapuas Tunggal Persada - Indonesia
- ICICI Bank Limited - India
- Bayan Resources Tbk. - Indonesia
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
- Coastal Gujarat Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- Kideco Jaya Agung - Indonesia
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- GVK Power & Infra Limited - India
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- Sojitz Corporation - Japan
- Independent Power Producers Association of India
- Mercator Lines Limited - India
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Coal Association
- Sree Jayajothi Cements Limited - India
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- VISA Power Limited - India
- Toyota Tsusho Corporation, Japan
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Oldendorff Carriers - Singapore
- ASAPP Information Group - India
- Edison Trading Spa - Italy
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