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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$1.4m in SCOPIC to get the vessel redelivered to the owners, it would make no sense to allow only the salvage element and not the rest; otherwise, had there been no SCOPIC element, the vessel would presumably have been declared economically unsalvageable and, therefore, a wreck.
[1] “The RENOS” – Sveriges Angfartygs Assurans Forening (The Swedish Club) & Ors v Connect Shipping Inc & Anor, Re Renos [2018] EWCA Civ 230 (19 February 2018)
[2] The Medina Princess [1965] 1 Lloyd’s Rep 361 and Hall v Hayman (1912) 17 Comm Cas 81
[3] Arnould’s Law of Marine Insurance and Average
[4] s.60(2)(ii) to “future salvage operations and of any future general average contributions to which the ship would be liable if repaired” (emphasis added)
Source: Clyde & Co LLP, By Martin Hall and David Handley
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Friday, 09 March 18
U.S. EXPORTED 97 MMST OF COAL IN 2017, A 61 PER CENT INCREASE FROM 2016 - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15.1 million short tons ...
Thursday, 08 March 18
BUMA SIGNED OVER US$ 500 MILLION WORTH OF NEW CONTRACT WITH PT TANAH BUMBU RESOURCES
PT Delta Dunia Makmur Tbk., announced that its subsidiary, PT Bukit Makmur Mandiri Utama ("BUMA"), has entered into mining services ...
Thursday, 08 March 18
THE ENERGY CONTRIBUTION FROM COAL-BASED POWER PLANTS IS LIKELY TO INCREASE TO 1072 BU BY 2021-22 : PIB
Government of India has set an ambitious target of 175 GW from Renewable energy sources (RES) by 2022, which comprises of 100 GW Solar, 60GW from W ...
Thursday, 08 March 18
SUPRAMAX: THE MARKET IS STILL GOING STRONG IN THE PACIFIC - FEARNLEYS
Supramax
The market is still going strong in the Pacific, with Ultra fixing high US$ 13000+375000 bb for South Africa to ECI while nickel ore run ...
Thursday, 08 March 18
AVERAGE U.S. COAL MINING PRODUCTIVITY INCREASES AS PRODUCTION FALLS - EIA
Coal mining productivity in the United States increased 26% over the past five years, reaching 6.8 tons per miner hour in 2017, up from 5.4 tons pe ...
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Showing 1781 to 1785 news of total 6871 |
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- Bukit Asam (Persero) Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Aditya Birla Group - India
- Sree Jayajothi Cements Limited - India
- Wilmar Investment Holdings
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- New Zealand Coal & Carbon
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- Economic Council, Georgia
- The University of Queensland
- Carbofer General Trading SA - India
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- Wood Mackenzie - Singapore
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- The Treasury - Australian Government
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- Vedanta Resources Plc - India
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- Karbindo Abesyapradhi - Indoneisa
- Grasim Industreis Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- McConnell Dowell - Australia
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Pipit Mutiara Jaya. PT, Indonesia
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- Banpu Public Company Limited - Thailand
- Agrawal Coal Company - India
- Edison Trading Spa - Italy
- Sakthi Sugars Limited - India
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Eastern Coal Council - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Port Waratah Coal Services - Australia
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Parliament of New Zealand
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- Merrill Lynch Commodities Europe
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Bhoruka Overseas - Indonesia
- AsiaOL BioFuels Corp., Philippines
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- Rio Tinto Coal - Australia
- Orica Mining Services - Indonesia
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- Karaikal Port Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Indogreen Group - Indonesia
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Power Finance Corporation Ltd., India
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- GAC Shipping (India) Pvt Ltd
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- Thai Mozambique Logistica
- PowerSource Philippines DevCo
- Trasteel International SA, Italy
- Aboitiz Power Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coastal Gujarat Power Limited - India
- Kobexindo Tractors - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Therma Luzon, Inc, Philippines
- Larsen & Toubro Limited - India
- SN Aboitiz Power Inc, Philippines
- Tamil Nadu electricity Board
- Ceylon Electricity Board - Sri Lanka
- Miang Besar Coal Terminal - Indonesia
- Minerals Council of Australia
- Directorate Of Revenue Intelligence - India
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Bhatia International Limited - India
- Price Waterhouse Coopers - Russia
- Mintek Dendrill Indonesia
- Siam City Cement PLC, Thailand
- Antam Resourcindo - Indonesia
- Central Electricity Authority - India
- Gujarat Mineral Development Corp Ltd - India
- Baramulti Group, Indonesia
- Australian Coal Association
- Ministry of Mines - Canada
- Globalindo Alam Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Eastern Energy - Thailand
- CIMB Investment Bank - Malaysia
- Attock Cement Pakistan Limited
- Romanian Commodities Exchange
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Meralco Power Generation, Philippines
- Chettinad Cement Corporation Ltd - India
- Thiess Contractors Indonesia
- Metalloyd Limited - United Kingdom
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Meenaskhi Energy Private Limited - India
- Parry Sugars Refinery, India
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- Mercuria Energy - Indonesia
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- Neyveli Lignite Corporation Ltd, - India
- Global Coal Blending Company Limited - Australia
- Jindal Steel & Power Ltd - India
- GVK Power & Infra Limited - India
- Madhucon Powers Ltd - India
- Manunggal Multi Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- SMG Consultants - Indonesia
- Central Java Power - Indonesia
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Siam City Cement - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- Planning Commission, India
- Lanco Infratech Ltd - India
- GMR Energy Limited - India
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Intertek Mineral Services - Indonesia
- Riau Bara Harum - Indonesia
- Indonesian Coal Mining Association
- Indian Energy Exchange, India
- Malabar Cements Ltd - India
- Latin American Coal - Colombia
- Toyota Tsusho Corporation, Japan
- Vizag Seaport Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Sojitz Corporation - Japan
- Bharathi Cement Corporation - India
- ASAPP Information Group - India
- Standard Chartered Bank - UAE
- Energy Development Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
- PetroVietnam Power Coal Import and Supply Company
- Coal and Oil Company - UAE
- Uttam Galva Steels Limited - India
- Pendopo Energi Batubara - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Baiduri Energy - Indonesia
- Cement Manufacturers Association - India
- Interocean Group of Companies - India
- Africa Commodities Group - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- Petron Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- IEA Clean Coal Centre - UK
- PTC India Limited - India
- Medco Energi Mining Internasional
- Energy Link Ltd, New Zealand
- PNOC Exploration Corporation - Philippines
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
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- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Mjunction Services Limited - India
- Sindya Power Generating Company Private Ltd
- Savvy Resources Ltd - HongKong
- White Energy Company Limited
- Alfred C Toepfer International GmbH - Germany
- Tata Chemicals Ltd - India
- Indian Oil Corporation Limited
- CNBM International Corporation - China
- MS Steel International - UAE
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