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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, 17 May 16
CHINA THERMAL-POWER OVERSUPPLY TO WORSEN - FITCH
COALspot.com: The overcapacity in thermal-power generation in China is likely to worsen in 2016 to 2017, Fitch Ratings says in a new report.
F ...
Tuesday, 17 May 16
ON YOUR MARKS: TRACKING CHINESE TRADE - CLARKSONS
One of the major drivers behind the challenges currently facing many of the shipping markets has been slower demand growth. World seaborne trade gr ...
Monday, 16 May 16
INDONESIAN WEEKLY COAL INDICES AT POSITIVE LEVELS - CS (I) COAL INDEX
COALspot.com: Average 5000 GAR coal index of Indonesian origin up 0.31 percent week over week to averaging $38.94 per ton this past week, shows CS ...
Monday, 16 May 16
OPEC SEES RIVAL OIL PRODUCTION DECLINING
Crude Oil Price Movements
The OPEC Reference Basket averaged $37.86/b in April, a gain of $3.21 or 9.3%. This was 40% higher than the lows reache ...
Monday, 16 May 16
THE FREIGHT MARKET WAS WEAK AND ALL SEGMENTS EXCEPT PANAMAX WERE DOWN
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities decline this week.
The freight market was weak and a ...
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Showing 2431 to 2435 news of total 6871 |
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- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- The State Trading Corporation of India Ltd
- Indian Energy Exchange, India
- Timah Investasi Mineral - Indoneisa
- Kobexindo Tractors - Indoneisa
- Straits Asia Resources Limited - Singapore
- PNOC Exploration Corporation - Philippines
- PowerSource Philippines DevCo
- Australian Coal Association
- Coalindo Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- Formosa Plastics Group - Taiwan
- Maharashtra Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Global Coal Blending Company Limited - Australia
- Kapuas Tunggal Persada - Indonesia
- Globalindo Alam Lestari - Indonesia
- Siam City Cement - Thailand
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Sinarmas Energy and Mining - Indonesia
- Anglo American - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Grasim Industreis Ltd - India
- Vizag Seaport Private Limited - India
- The University of Queensland
- Gujarat Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Videocon Industries ltd - India
- Parry Sugars Refinery, India
- TeaM Sual Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Authority, New Zealand
- San Jose City I Power Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- Thai Mozambique Logistica
- Marubeni Corporation - India
- Central Electricity Authority - India
- Indo Tambangraya Megah - Indonesia
- Medco Energi Mining Internasional
- Tata Chemicals Ltd - India
- Kumho Petrochemical, South Korea
- Orica Mining Services - Indonesia
- ICICI Bank Limited - India
- White Energy Company Limited
- Sindya Power Generating Company Private Ltd
- PTC India Limited - India
- Standard Chartered Bank - UAE
- Ind-Barath Power Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Barasentosa Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Romanian Commodities Exchange
- Bulk Trading Sa - Switzerland
- Larsen & Toubro Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Altura Mining Limited, Indonesia
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Attock Cement Pakistan Limited
- Krishnapatnam Port Company Ltd. - India
- Agrawal Coal Company - India
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- Posco Energy - South Korea
- The Treasury - Australian Government
- Jorong Barutama Greston.PT - Indonesia
- SMG Consultants - Indonesia
- Eastern Coal Council - USA
- Interocean Group of Companies - India
- IHS Mccloskey Coal Group - USA
- International Coal Ventures Pvt Ltd - India
- CNBM International Corporation - China
- Makarim & Taira - Indonesia
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Miang Besar Coal Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Jindal Steel & Power Ltd - India
- Banpu Public Company Limited - Thailand
- Essar Steel Hazira Ltd - India
- McConnell Dowell - Australia
- Carbofer General Trading SA - India
- Power Finance Corporation Ltd., India
- Renaissance Capital - South Africa
- SMC Global Power, Philippines
- Africa Commodities Group - South Africa
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Simpson Spence & Young - Indonesia
- Bangladesh Power Developement Board
- Pipit Mutiara Jaya. PT, Indonesia
- Parliament of New Zealand
- Sojitz Corporation - Japan
- Heidelberg Cement - Germany
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Economic Council, Georgia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Latin American Coal - Colombia
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Independent Power Producers Association of India
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- Dalmia Cement Bharat India
- Bharathi Cement Corporation - India
- Ministry of Mines - Canada
- Eastern Energy - Thailand
- Energy Development Corp, Philippines
- Minerals Council of Australia
- Price Waterhouse Coopers - Russia
- Madhucon Powers Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Planning Commission, India
- Bahari Cakrawala Sebuku - Indonesia
- MS Steel International - UAE
- Uttam Galva Steels Limited - India
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- London Commodity Brokers - England
- Thiess Contractors Indonesia
- Semirara Mining Corp, Philippines
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- European Bulk Services B.V. - Netherlands
- Chamber of Mines of South Africa
- Sree Jayajothi Cements Limited - India
- Tamil Nadu electricity Board
- Central Java Power - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Borneo Indobara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- VISA Power Limited - India
- Bhatia International Limited - India
- Jaiprakash Power Ventures ltd
- Electricity Generating Authority of Thailand
- Oldendorff Carriers - Singapore
- Mercator Lines Limited - India
- Orica Australia Pty. Ltd.
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- Star Paper Mills Limited - India
- Aboitiz Power Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Indogreen Group - Indonesia
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Meralco Power Generation, Philippines
- Maheswari Brothers Coal Limited - India
- Georgia Ports Authority, United States
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Riau Bara Harum - Indonesia
- Wilmar Investment Holdings
- Gujarat Mineral Development Corp Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Trasteel International SA, Italy
- Baramulti Group, Indonesia
- Global Business Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Merrill Lynch Commodities Europe
- Goldman Sachs - Singapore
- Coal and Oil Company - UAE
- Commonwealth Bank - Australia
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Salva Resources Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Aditya Birla Group - India
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Sical Logistics Limited - India
- Ministry of Transport, Egypt
- Bukit Baiduri Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- IEA Clean Coal Centre - UK
- Vedanta Resources Plc - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Directorate Of Revenue Intelligence - India
- GMR Energy Limited - India
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