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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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Thursday, 15 March 18
SUPRAMAX: INDO TO CHINA COAL ROUNDS ARE PAYING IN THE LOW $13K TO S. CHINA AND HIGH $13K TO NORTH IN CHINA
Supramax
More activity from USG , front hauls to Far East have settled around $25000, and to Cont around $20000. Stable gain again in Black Sea w ...
Thursday, 15 March 18
BHEL COMMISSIONS 600 MW THERMAL POWER PLANT FOR APGENCO IN ANDHRA PRADESH
Bharat Heavy Electricals Limited (BHEL) has successfully commissioned a 600 MW coal-based thermal power plant in the state of Andhra Pradesh.
...
Thursday, 15 March 18
SUEK GROUP SECURES $1.055BN 5-YEAR SYNDICATED PRE-EXPORT FINANCE FACILITY
SUEK Group signed a $1.055bn syndicated pre-export loan agreement. The facility with five years duration is secured against the Group’s expor ...
Wednesday, 14 March 18
COAL PRICES UP SAYS MINERALS COUNCIL - IAN KIRKWOOD,THE HERALD
NSW thermal coal exports were at near-record levels last year but prices were up, the Minerals Council of NSW has said after appraising annual stat ...
Wednesday, 14 March 18
NEW COAL PRICE FORMULA DOESN'T APPLY RETROACTIVELY: OFFICIAL - THE JAKARTA GLOBE
The Energy and Mineral Resources Ministry has decided to change the implementation period of the new discounted price formula for coal sold to the ...
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Showing 1771 to 1775 news of total 6871 |
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- Indogreen Group - Indonesia
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- Romanian Commodities Exchange
- Coalindo Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Kideco Jaya Agung - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Transport, Egypt
- Goldman Sachs - Singapore
- Videocon Industries ltd - India
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Grasim Industreis Ltd - India
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- European Bulk Services B.V. - Netherlands
- Africa Commodities Group - South Africa
- Latin American Coal - Colombia
- Petron Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- TNB Fuel Sdn Bhd - Malaysia
- Sree Jayajothi Cements Limited - India
- Eastern Coal Council - USA
- Vedanta Resources Plc - India
- Star Paper Mills Limited - India
- Central Electricity Authority - India
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- Makarim & Taira - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Toyota Tsusho Corporation, Japan
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- Sakthi Sugars Limited - India
- Ministry of Mines - Canada
- Deloitte Consulting - India
- New Zealand Coal & Carbon
- Uttam Galva Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Australian Coal Association
- Binh Thuan Hamico - Vietnam
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- Gujarat Mineral Development Corp Ltd - India
- Karaikal Port Pvt Ltd - India
- Malabar Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- Essar Steel Hazira Ltd - India
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Formosa Plastics Group - Taiwan
- Semirara Mining Corp, Philippines
- Thai Mozambique Logistica
- LBH Netherlands Bv - Netherlands
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- South Luzon Thermal Energy Corporation
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- The University of Queensland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- AsiaOL BioFuels Corp., Philippines
- Baramulti Group, Indonesia
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- Simpson Spence & Young - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Straits Asia Resources Limited - Singapore
- GVK Power & Infra Limited - India
- Altura Mining Limited, Indonesia
- Central Java Power - Indonesia
- Kobexindo Tractors - Indoneisa
- Oldendorff Carriers - Singapore
- SN Aboitiz Power Inc, Philippines
- Heidelberg Cement - Germany
- Sical Logistics Limited - India
- GAC Shipping (India) Pvt Ltd
- Ministry of Finance - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Bhushan Steel Limited - India
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Meralco Power Generation, Philippines
- CIMB Investment Bank - Malaysia
- Commonwealth Bank - Australia
- Wilmar Investment Holdings
- Minerals Council of Australia
- Savvy Resources Ltd - HongKong
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Indian Energy Exchange, India
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- TeaM Sual Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Thiess Contractors Indonesia
- Tata Chemicals Ltd - India
- Coal and Oil Company - UAE
- Riau Bara Harum - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement - Thailand
- Mercator Lines Limited - India
- Price Waterhouse Coopers - Russia
- Bharathi Cement Corporation - India
- Merrill Lynch Commodities Europe
- The State Trading Corporation of India Ltd
- SMG Consultants - Indonesia
- PTC India Limited - India
- Interocean Group of Companies - India
- SMC Global Power, Philippines
- Power Finance Corporation Ltd., India
- ASAPP Information Group - India
- Vizag Seaport Private Limited - India
- Attock Cement Pakistan Limited
- Global Coal Blending Company Limited - Australia
- Indika Energy - Indonesia
- The Treasury - Australian Government
- Cement Manufacturers Association - India
- White Energy Company Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Mining Services - Indonesia
- India Bulls Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Bhatia International Limited - India
- Bhoruka Overseas - Indonesia
- Madhucon Powers Ltd - India
- Xindia Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Timah Investasi Mineral - Indoneisa
- Kumho Petrochemical, South Korea
- Carbofer General Trading SA - India
- Ind-Barath Power Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Lanco Infratech Ltd - India
- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- Tamil Nadu electricity Board
- Rashtriya Ispat Nigam Limited - India
- Standard Chartered Bank - UAE
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- Kartika Selabumi Mining - Indonesia
- Planning Commission, India
- Trasteel International SA, Italy
- Maheswari Brothers Coal Limited - India
- Aditya Birla Group - India
- ICICI Bank Limited - India
- MS Steel International - UAE
- International Coal Ventures Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- Intertek Mineral Services - Indonesia
- Energy Link Ltd, New Zealand
- Chettinad Cement Corporation Ltd - India
- Jaiprakash Power Ventures ltd
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- Krishnapatnam Port Company Ltd. - India
- Karbindo Abesyapradhi - Indoneisa
- Orica Australia Pty. Ltd.
- Sojitz Corporation - Japan
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Salva Resources Pvt Ltd - India
- Australian Commodity Traders Exchange
- Antam Resourcindo - Indonesia
- Borneo Indobara - Indonesia
- Indo Tambangraya Megah - Indonesia
- Bukit Baiduri Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Banpu Public Company Limited - Thailand
- Parry Sugars Refinery, India
- Agrawal Coal Company - India
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- PowerSource Philippines DevCo
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