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Saturday, 10 March 18
THE 'RENOS' - COURT OF APPEAL CLARIFIES CTL CALCULATION AND RIGHT OF ABANDONMENT - CLYDE & CO
 KNOWLEDGE TO ELEVATE
In the matter of the “RENOS”, Mr Justice Knowles addressed a number of issues, at first instance, regarding the calculation of total loss of the vessel and of an owner’s right to abandon the vessel in constructive total loss cases. Following the judgment, handed down on 1 July 2016, insurers appealed. In a recent ruling by Lord Justice Hamblen, the first instance decision was unanimously confirmed by the Court of Appeal, and the insurers’ appeal was dismissed.
Facts
The “RENOS”[1] was on a laden voyage in the Red Sea when a fire broke out in the engine room causing extensive damage. In August 2012, the owners signed a Lloyd’s Open Form salvage contract (LOF contract) to deliver the vessel to a place of safety. The LOF contract was signed with SCOPIC incorporated on 23 August 2012. Later that day, salvors invoked the Special Compensation Protection and Indemnity Clause. The vessel was towed to an anchorage off the Suez Canal which it reached early on 31 August. It was at this time that the owners had an opportunity to survey the vessel for the first time. By very early September, the owners’ surveyor had completed his initial work and calculated that repair costs would be in the region of US$8 million. At around the same time, the insurers’ surveyor valued the repair costs around US$5.527 million. It was common ground between the parties that, in order for the vessel to be a constructive total loss (CTL), repair costs needed to be in excess of US$8 million.
By late September, the vessel had been towed to the port of Adabiya, Egypt, and by early October it had been redelivered under the salvage contract. It was clear, at this stage, that the damage to the vessel was extensive and the owners, in conjunction with the insurers’ surveyors, drew up a repair specification. This was completed by the end of November and, by early December, the repair estimate was, according to the owners, around US$8 million. By late December, the owners had received a number of repair quotations; the final range was $2.8 million to $9 million. Discussions over the repairs continued throughout January 2013 and, on 30th January, insurers declared that it was ultimately a matter for owners to make a decision on repair. On 1 February 2013, owners issued a notice of abandonment.
Court of Appeal
Insurers stated that the owners had lost their right to abandon the vessel to them under section 62(3) of the Marine Insurance Act 1906 (the Act). This requires the owners to give notice of abandonment within a reasonable time after receipt of reliable information of the loss and a reasonable time for inquiry. Insurers contended in this case that the owners had taken more time than was reasonable, and provided a number of dates when, they stated, the owners should have exercised their option to abandon, and did not do so. The Judge concluded, at first instance, that due to the complexity of the repairs required in the circumstances, and the conflicting information from various surveyors and yard quotations, the owners were within section 62(3) of the Act, and had not lost their right to abandon the vessel to the underwriters. It was clear from the chronology that, at the time owners were considering their options, there was a vast amount of conflicting information. Hamblen LJ stated on appeal “a striking feature of the insurers’ case on reliable information is that it requires the owners to disregard or reject the Insurers’ own expert assessment at the time as to the scope of repairs, an assessment that the Insurers insist was correct”. Each of the dates the insurers submitted were rejected on the basis that, objectively, the Court could not conclude that the owners had reliable information on those dates, or even on the date they tended the notice of abandonment. Hamblen LJ went on to state “insurers chose at the time to carry out their own detailed surveys so as to produce their own repair specification and quotations for repair costs, which they relied upon to demonstrate that the vessel was not a CTL. They shared that information with owners, insisted on its correctness, and can hardly complain if it’s taken into account when considering whether there was reliable information of the loss.”
Insurers also argued that it was wrong to include the costs incurred prior to the date of the notice of abandonment as costs of repairs for the purposes of the CTL calculation. Section 60(2)(ii) of the Marine Insurance Act 1906 states that account is to be taken of any expense incurred in respect of future salvage operations and any future general average event. Insurers argued that only costs after the notice of abandonment for recovering the ship or for repair should be included in the constructive total loss calculation. This was rejected by both the Court at first instance and by the Court of Appeal, and this decision has cleared up an area of ambiguity that has existed in admiralty law for a number of years. Insurers had argued that their case was supported by the only two authorities[2] on this point, that it was a matter of logic and that section 60(2)(ii) of the Marine Insurance Act 1906 was clear. All three of these arguments were rejected by the Courts. The Court of Appeal was attracted to the commentary set out in Arnould[3] and extra judicial comments provided by Lord Donaldson in an address he gave as Chairman of the Association of Average Adjusters in 1982, which both suggest the relevant date for calculating the costs of repair for the purpose of constructive total loss was the date of the casualty. The Appeal Court confirmed that the reference to “future”[4] in s.60(2)(ii) was best explained by considering it is a word of inclusion rather than exclusion, making it clear that future costs should be taken into account alongside those already incurred.
The cost of the salvage operation was around US$1.2 million for the notional Article 13 salvage award and US$1.4 million in respect of SCOPIC paid over and above the Article 13 award. The insurers contended that the SCOPIC costs should not be costs within section 60(2)(ii) of the Marine Insurance Act 1906 or clauses 19.2 and 9.2 of the Institute Time clauses because the SCOPIC remuneration was conceptually different from the Article 13 award payable by the P&I Club. As SCOPIC was not payable under the hull and machinery (H&M) policy, they should not, it was argued, rank for the purposes of a CTL claim under the H&M policy as repair costs. The Court identified the difficulty with this construction in that, in order to recover the vessel (and put the owners in a position to repair or declare a CTL), the owners had to pay the entirety of the salvage remuneration. SCOPIC was an unavoidable part (or extension) of that salvage operation which led to the recovery of the vessel. The Court of Appeal concluded, therefore, that this must be an indivisible part of the cost of repair, confirming the first instance decision.
Comment
The decision appears to clarify a number of areas that had been considered to be ambiguous for total loss cases. It also demonstrates that insurers defending a constructive total loss claim have a high burden to meet to justify rejection under a policy. It is interesting that the proactive involvement of surveyors on behalf of the H&M insurers, and a positive/alternative case put forward on repair specifications, was detrimental to the case they brought before the Court in defence of their actions. Obtaining evidence which supported their contention that the vessel was not a constructive total loss allowed the owners additional time to make their decision as to whether to abandon. Had insurers not been so proactive (in arguing and seeking to gather evidence that the vessel was not a CTL), the owners may well have been required to declare the notice of abandonment earlier.
The Courts’ treatment of SCOPIC is also interesting. It is clear now that SCOPIC will be considered part of the overall salvage services and thus a benefit to the property, at least for constructive total loss claims. This seems to be in accordance with other areas of law. For example, SCOPIC claims sit alongside Article 13 claims for salvage in their priority as a maritime lien. The Court of Appeal concluded that benefit must have been conferred on the property by the SCOPIC services, and this could not readily be divorced from the benefit under Article 13. Ultimately, calculating a CTL is a purely arithmetical calculation regardless of who pays and under which policy of insurance. If, as in this case, it cost US$1.2m in salvage and US$1.4m in SCOPIC to get the vessel redelivered to the owners, it would make no sense to allow only the salvage element and not the rest; otherwise, had there been no SCOPIC element, the vessel would presumably have been declared economically unsalvageable and, therefore, a wreck.
[1] “The RENOS” – Sveriges Angfartygs Assurans Forening (The Swedish Club) & Ors v Connect Shipping Inc & Anor, Re Renos [2018] EWCA Civ 230 (19 February 2018)
[2] The Medina Princess [1965] 1 Lloyd’s Rep 361 and Hall v Hayman (1912) 17 Comm Cas 81
[3] Arnould’s Law of Marine Insurance and Average
[4] s.60(2)(ii) to “future salvage operations and of any future general average contributions to which the ship would be liable if repaired” (emphasis added)
Source: Clyde & Co LLP, By Martin Hall and David Handley
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Wednesday, 28 March 18
RIO TINTO TO SELL KESTREL MINE FOR $2.25 BILLION - REUTERS
Rio Tinto sold its remaining coal asset Kestrel in Australia to private equity manager EMR Capital and Indonesia’s Adaro Energy Tbk for $2.25 ...
Tuesday, 27 March 18
SHIPPING MARKET ANALYSIS - GERRY LATHROP
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Friday, 23 March 18
RIO TINTO AGREES SALE OF HAIL CREEK AND VALERIA TO GLENCORE FOR $1.7 BILLION
Press Release: Rio Tinto has entered into a binding agreement with Glencore for the sale of its entire interests in the Hail Creek coal mine and th ...
Wednesday, 21 March 18
CHINA'S RAW COAL OUTPUT UP IN 2017, FIRST GROWTH SINCE 2014 - XINHUA
China’s raw coal output rose in 2017 due to rebounding demand and high-quality capacity, according to the National Bureau of Statistics (NBS) ...
Wednesday, 21 March 18
MARKET INSIGHT - CHRISTOPHER T. WHITTY
President’s Trump administration proposed tariffs on steel and aluminum imports in an attempt to target China and Europe among others. Earlie ...
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Showing 1761 to 1765 news of total 6871 |
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- Kaltim Prima Coal - Indonesia
- Edison Trading Spa - Italy
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Barasentosa Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- OPG Power Generation Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Electricity Authority, New Zealand
- Timah Investasi Mineral - Indoneisa
- ICICI Bank Limited - India
- Tamil Nadu electricity Board
- Vedanta Resources Plc - India
- Global Coal Blending Company Limited - Australia
- SMG Consultants - Indonesia
- Indonesian Coal Mining Association
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- TeaM Sual Corporation - Philippines
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Wood Mackenzie - Singapore
- Bhoruka Overseas - Indonesia
- PTC India Limited - India
- Kideco Jaya Agung - Indonesia
- Mercator Lines Limited - India
- Thiess Contractors Indonesia
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- McConnell Dowell - Australia
- Global Business Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
- Globalindo Alam Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Interocean Group of Companies - India
- Coal and Oil Company - UAE
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Bhushan Steel Limited - India
- Baramulti Group, Indonesia
- Standard Chartered Bank - UAE
- Wilmar Investment Holdings
- SN Aboitiz Power Inc, Philippines
- GMR Energy Limited - India
- Uttam Galva Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Sidhee Cement - India
- Anglo American - United Kingdom
- Kumho Petrochemical, South Korea
- Sindya Power Generating Company Private Ltd
- Petron Corporation, Philippines
- White Energy Company Limited
- Tata Chemicals Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Parry Sugars Refinery, India
- Dalmia Cement Bharat India
- Lanco Infratech Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Eastern Energy - Thailand
- Billiton Holdings Pty Ltd - Australia
- Jorong Barutama Greston.PT - Indonesia
- Indogreen Group - Indonesia
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- GAC Shipping (India) Pvt Ltd
- Cement Manufacturers Association - India
- Savvy Resources Ltd - HongKong
- International Coal Ventures Pvt Ltd - India
- Energy Development Corp, Philippines
- Samtan Co., Ltd - South Korea
- Coalindo Energy - Indonesia
- Commonwealth Bank - Australia
- Indian Energy Exchange, India
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement PLC, Thailand
- Port Waratah Coal Services - Australia
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- Africa Commodities Group - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Orica Mining Services - Indonesia
- Posco Energy - South Korea
- Chettinad Cement Corporation Ltd - India
- GVK Power & Infra Limited - India
- Merrill Lynch Commodities Europe
- Metalloyd Limited - United Kingdom
- Kepco SPC Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Australian Commodity Traders Exchange
- Star Paper Mills Limited - India
- Marubeni Corporation - India
- MS Steel International - UAE
- Altura Mining Limited, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- San Jose City I Power Corp, Philippines
- Independent Power Producers Association of India
- Pendopo Energi Batubara - Indonesia
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Malabar Cements Ltd - India
- Vizag Seaport Private Limited - India
- Aditya Birla Group - India
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Parliament of New Zealand
- Thai Mozambique Logistica
- Videocon Industries ltd - India
- Rio Tinto Coal - Australia
- CNBM International Corporation - China
- Energy Link Ltd, New Zealand
- India Bulls Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indika Energy - Indonesia
- Electricity Generating Authority of Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Orica Australia Pty. Ltd.
- Medco Energi Mining Internasional
- VISA Power Limited - India
- The University of Queensland
- Karaikal Port Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- CIMB Investment Bank - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Ministry of Mines - Canada
- Manunggal Multi Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Ind-Barath Power Infra Limited - India
- Banpu Public Company Limited - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Grasim Industreis Ltd - India
- SMC Global Power, Philippines
- Planning Commission, India
- New Zealand Coal & Carbon
- Central Java Power - Indonesia
- ASAPP Information Group - India
- Madhucon Powers Ltd - India
- Power Finance Corporation Ltd., India
- PNOC Exploration Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- Mercuria Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Neyveli Lignite Corporation Ltd, - India
- AsiaOL BioFuels Corp., Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Singapore Mercantile Exchange
- Cigading International Bulk Terminal - Indonesia
- Eastern Coal Council - USA
- Bhatia International Limited - India
- IEA Clean Coal Centre - UK
- Alfred C Toepfer International GmbH - Germany
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Simpson Spence & Young - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Kobexindo Tractors - Indoneisa
- Chamber of Mines of South Africa
- Oldendorff Carriers - Singapore
- Leighton Contractors Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- Bangladesh Power Developement Board
- Attock Cement Pakistan Limited
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Trasteel International SA, Italy
- Makarim & Taira - Indonesia
- The State Trading Corporation of India Ltd
- Xindia Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Miang Besar Coal Terminal - Indonesia
- Latin American Coal - Colombia
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Heidelberg Cement - Germany
- Mjunction Services Limited - India
- Georgia Ports Authority, United States
- Jindal Steel & Power Ltd - India
- Minerals Council of Australia
- Essar Steel Hazira Ltd - India
- Maheswari Brothers Coal Limited - India
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Bharathi Cement Corporation - India
- Carbofer General Trading SA - India
- Indian Oil Corporation Limited
- PetroVietnam Power Coal Import and Supply Company
- Renaissance Capital - South Africa
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