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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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Tuesday, 20 March 18
SHIPPING MARKET ANALYSIS - GEORGE LAZARIDIS
It has been a chilling start to the week for the global economy, with the vast majority of stock exchanges noting a fair drop, after a series of se ...
Tuesday, 20 March 18
TRAFIGURA GROUP PTE LTD SIGNS RECORD US$5.725 BILLION EUROPEAN MULTICURRENCY SYNDICATED REVOLVING CREDIT FACILITIES AND JPY72.64 BILLION DENOMINATED THREE YEAR TERM LOAN
Press Release: Trafigura Group Pte Ltd. (“Trafigura” or the “Company”), a market leader in the global commodities industry, ...
Monday, 19 March 18
PANAMAX: DESPITE FEWER REPORTED PERIOD TRADES THIS WEEK, RATE LEVELS HAVE REMAINED SOLID - BALTIC BRIEFING
Capesize
There were finally reports of increased Brazil activity, but still largely unconfirmed. Vale reportedly took six ships Thursday for 5 Ap ...
Friday, 16 March 18
WEEKLY US COAL PRODUCTION DROPS 1.9 PER CENT WEEK OVER WEEK - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 14.8 million short tons ...
Friday, 16 March 18
INDONESIA COAL PRICE CAP POSES LIMITED RISKS TO PRODUCERS : FITCH
Indonesia’s cap on the benchmark price of coal sold to the domestic electricity sector is unlikely to have a significant impact on the credit ...
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Showing 1766 to 1770 news of total 6871 |
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- Ministry of Mines - Canada
- Tata Chemicals Ltd - India
- Merrill Lynch Commodities Europe
- Jaiprakash Power Ventures ltd
- Bayan Resources Tbk. - Indonesia
- Aboitiz Power Corporation - Philippines
- Parry Sugars Refinery, India
- Renaissance Capital - South Africa
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- PTC India Limited - India
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- Edison Trading Spa - Italy
- Marubeni Corporation - India
- Lanco Infratech Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Dalmia Cement Bharat India
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- VISA Power Limited - India
- Bhatia International Limited - India
- Vedanta Resources Plc - India
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Bhushan Steel Limited - India
- New Zealand Coal & Carbon
- Heidelberg Cement - Germany
- Petron Corporation, Philippines
- Makarim & Taira - Indonesia
- Indogreen Group - Indonesia
- Indian Oil Corporation Limited
- Bangladesh Power Developement Board
- SMC Global Power, Philippines
- Rio Tinto Coal - Australia
- Indonesian Coal Mining Association
- Bahari Cakrawala Sebuku - Indonesia
- European Bulk Services B.V. - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- Price Waterhouse Coopers - Russia
- PetroVietnam Power Coal Import and Supply Company
- Global Business Power Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Commonwealth Bank - Australia
- Karbindo Abesyapradhi - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Power Finance Corporation Ltd., India
- AsiaOL BioFuels Corp., Philippines
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Holcim Trading Pte Ltd - Singapore
- Wood Mackenzie - Singapore
- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- CNBM International Corporation - China
- Meenaskhi Energy Private Limited - India
- Riau Bara Harum - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Trasteel International SA, Italy
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- Altura Mining Limited, Indonesia
- Mjunction Services Limited - India
- Australian Coal Association
- Maheswari Brothers Coal Limited - India
- Kepco SPC Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- Iligan Light & Power Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Ind-Barath Power Infra Limited - India
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- Romanian Commodities Exchange
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
- PowerSource Philippines DevCo
- GAC Shipping (India) Pvt Ltd
- Alfred C Toepfer International GmbH - Germany
- Wilmar Investment Holdings
- GMR Energy Limited - India
- Agrawal Coal Company - India
- Rashtriya Ispat Nigam Limited - India
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- SMG Consultants - Indonesia
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Semirara Mining Corp, Philippines
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Bukit Baiduri Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sojitz Corporation - Japan
- South Luzon Thermal Energy Corporation
- Attock Cement Pakistan Limited
- Indian Energy Exchange, India
- Energy Development Corp, Philippines
- Essar Steel Hazira Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Anglo American - United Kingdom
- Banpu Public Company Limited - Thailand
- Karaikal Port Pvt Ltd - India
- Larsen & Toubro Limited - India
- Intertek Mineral Services - Indonesia
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coal and Oil Company - UAE
- Australian Commodity Traders Exchange
- Bharathi Cement Corporation - India
- Vizag Seaport Private Limited - India
- Planning Commission, India
- Timah Investasi Mineral - Indoneisa
- Sarangani Energy Corporation, Philippines
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- Coastal Gujarat Power Limited - India
- Central Java Power - Indonesia
- Independent Power Producers Association of India
- Cigading International Bulk Terminal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kideco Jaya Agung - Indonesia
- Salva Resources Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- The University of Queensland
- Orica Australia Pty. Ltd.
- Thai Mozambique Logistica
- TeaM Sual Corporation - Philippines
- Siam City Cement - Thailand
- Semirara Mining and Power Corporation, Philippines
- Georgia Ports Authority, United States
- Jorong Barutama Greston.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- Directorate General of MIneral and Coal - Indonesia
- Singapore Mercantile Exchange
- Straits Asia Resources Limited - Singapore
- McConnell Dowell - Australia
- Bulk Trading Sa - Switzerland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Africa Commodities Group - South Africa
- Kumho Petrochemical, South Korea
- Eastern Energy - Thailand
- Barasentosa Lestari - Indonesia
- Meralco Power Generation, Philippines
- OPG Power Generation Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Siam City Cement PLC, Thailand
- Kapuas Tunggal Persada - Indonesia
- Kartika Selabumi Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Videocon Industries ltd - India
- Tamil Nadu electricity Board
- Minerals Council of Australia
- Goldman Sachs - Singapore
- Gujarat Sidhee Cement - India
- Latin American Coal - Colombia
- The Treasury - Australian Government
- SN Aboitiz Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Coal Council - USA
- Directorate Of Revenue Intelligence - India
- Sinarmas Energy and Mining - Indonesia
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Xindia Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Sakthi Sugars Limited - India
- Ceylon Electricity Board - Sri Lanka
- Grasim Industreis Ltd - India
- Simpson Spence & Young - Indonesia
- Malabar Cements Ltd - India
- Ambuja Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Madhucon Powers Ltd - India
- GVK Power & Infra Limited - India
- Coalindo Energy - Indonesia
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Deloitte Consulting - India
- Sical Logistics Limited - India
- Oldendorff Carriers - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Leighton Contractors Pty Ltd - Australia
- Thiess Contractors Indonesia
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- International Coal Ventures Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Neyveli Lignite Corporation Ltd, - India
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
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