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Saturday, 12 April 14
HOW DO YOU CALCULATE LOSS OF EARNINGS FOLLOWING A COLLISION? - INCE & CO
 KNOWLEDGE TO ELEVATE
The recent case of Astipalaia vs Hanjin Shenzhen [2014] EWHC 120 (Admlty) has revisited the existing case law on assessment of damages following a collision and provided further clarification as to the appropriate test to be applied. On 26 March 2008 there was a collision between the fully laden VLCC tanker Astipalaia and the container ship Hanjin Shenzhen in the approaches to Singapore where Astipalaia was due to discharge. As a result of the collision, Astipalaia suffered damage to her hull, guard rails and mooring chock. Astipalaia was able to proceed into Singapore to discharge her cargo.
The background facts
At the time of the collision, Astipalaia was trading in the VLCC spot market which in early-mid 2008 was particularly buoyant and the vessel was acceptable throughout the industry to oil majors and other first class charterers. However, Astipalaia was unfixed for her next employment at the time of the collision.
As a result of the incident, the vessel’s oil major approvals were temporarily placed on “technical hold” by the majors pending the usual investigation into the collision. Astipalaia was also required by class to undertake permanent repairs before any further employment.
Astipalaia sailed from Singapore to Dubai in ballast and entered dry dock for permanent repairs which lasted around 10 days. On exiting dry dock, Astipalaia was still unable to resume trading on the VLCC spot market as the “technical hold” had not then been lifted. In the absence of oil major approvals, Astipalaia was fixed to NITC to be employed as floating storage off Kharg Island, Iran on a 60 day period charter, during which time the “technical holds” were dealt with and lifted. She completed the NITC fixture and was redelivered at Fujairah on 29 June 2008 after which she resumed her normal pattern of spot trading.
Accordingly, despite the time in dry dock only lasting some 10 days, Astipalaia was effectively unavailable for her primary trading market for the entire period from 26 March 2008 to 29 June 2008. Astipalaia brought a claim for loss of profits based on what the vessel would have earned had she traded on the normal VLCC spot market during that period, giving credit for the mitigation earnings obtained while on charter as floating storage to NITC. The total amount claimed by Astipalaia was approximately US$5,640,000 lost income during that period.
The Reference to the Registrar
Following agreement on liability, the quantum of Astipalaia’s claim was disputed and referred for determination by the Admiralty Registrar. The Court had to consider how to calculate loss of earnings of Astipalaia in circumstances where (1) the vessel did not have a specific next fixture concluded at the time of the collision such that there was no certainty as to what the vessel would have earned next, but for the collision, and (2) the vessel’s oil major approvals had been placed on “technical hold” and were not reinstated until the end of a less lucrative storage fixture.
Astipalaia’s position
Astipalaia’s Owners contended that damages should be assessed on the basis that the best evidence of Astipalaia’s potential earnings, but for the collision, were that Astipalaia would either (i) have been fixed to Indian Oil Corporation (IOC) with whom they had been negotiating for a West Africa-East Coast India fixture at the time of the collision, after which Astipalaia would have resumed a ‘typical’ spot trading pattern of a round voyage from Arabian Gulf (AG) to the Far East, or (ii) had Owners not secured the IOC fixture, the vessel would have undertaken two AG-Far East round voyages. Under either alternative, these two hypothetical voyages would have been completed within roughly the same period of time as the detention period, i.e. by 29 June 2008, such that a reasonable comparison could be drawn between what the vessel could have earned during that period, with what she did in fact earn.
Astipalaia’s Owners relied on the “time equalisation method” set out in The Vicky 1 [2008] 2 Lloyd’s Rep 45, which they argued supported their approach of comparing what the vessel would probably have earned but for the collision with what she did in fact earn in the same period. The hypothetical voyage schedule advocated by the Astipalaia’s Owners and prepared by their expert sought to provide comparable fixtures she could (but not necessarily would) have performed in the detention period in order to place a value on the vessel’s lost earnings. On that basis Astipalaia claimed damages of approximately US$5,640,000.
Hanjin Shenzhen’s position
In the Vicky 1, the claimant tanker owners had lost an actual fixture. Hanjin Shenzhen’s Owners argued that the principles from Vicky 1 only applied if the claimant ship owner had lost a secured fixture, not where there was no definite next business secured.
Their primary case was that the loss period should be split into two distinct periods: (i) the period during which the vessel was completely out of service, when repairs were being completed; and (ii) the period during which she performed the floating storage charter. On that basis, Hanjin Shenzhen argued that whilst they were liable in damages for lost income for approximately US$800,000 for period (i) during the dry docking, by the time of the floating storage charter being entered into after dry docking the spot market had in fact fallen such that no damages were recoverable for period (ii) as the rates achieved under the floating storage business successfully mitigated Astipalaia’s loss.
Hanjin Shenzhen interests also opposed the “time equalisation method” of seeking to model hypothetical voyages on the basis that it was too speculative to seek to calculate when the vessel might have been back in the AG after the first hypothetical voyage, and what the spot rate might have been at that time for the second hypothetical voyage.
During proceedings it was accepted by both experts that VLCCs operate in a well-defined and straightforward trading pattern. The largest loading area (around 72% of all VLCC cargoes) is the AG followed by West Africa, with a limited number of cargoes loading in the Caribbean or North Sea/Mediterranean. The Registrar accepted this evidence, and further evidence that of the 72% of cargoes lifted from the AG, around 70% of those cargoes are for Far East discharge. Accordingly, it could be established on the balance of probabilities what sort of business the vessel most likely would/could have achieved during the total detention period.
The Admiralty Court decision
The Registrar considered and analysed various leading cases, including The Argentino (1888) 13 PD 191 (C/A), 14 App Cas 519 (H/L), The Soya [1956] 1 WLR 714 (C/A) and The Vicky 1 [2008] 2 Lloyd’s Rep. 45 (C/A).
Having done so, the Registrar accepted Astipalaia’s approach to assessing damages. The court upheld Astipalaia’s argument that the detention period should include not only the repair period but also the additional period the vessel needed to obtain reinstatement of oil major approvals before returning to her normal employment, and that this detention period should be taken as a single period finishing on 29 June 2008, not broken into two parts. The arguments on behalf of Hanjin Shenzhen that there were principles of law curtailing or precluding such an assessment were rejected.
On the basis of the expert evidence before him, the Registrar assessed damages in the total sum of approximately US$ 4,960,000 (a loss of earnings of US$ 9,860,000 less US$ 4,900,000) earned during the floating storage contract.
Comment
This Judgment confirms that an owner can claim damages not just for the immediate loss of use of the vessel during the period of repairs but also for further knock-on effects to the vessel’s ability to return to normal trading, provided of course that such knock-on effects are not too remote or unforeseeable and that the loss can be proven by evidence.
The Judgment also confirms that there is no set rule as to the recoverability of damages for loss of use, and that such recovery is not dependent on proof of a specific lost fixture, nor (if such a fixture is established) that damages are limited to that one fixture but no more.
While there is no set methodology for calculating loss of profits, the methodologies used in earlier cases may be adapted to suit the facts of each case. The principles applied in this case were ultimately the same as those applied in The Vicky 1 and can be said to represent a recognised and well principled approach to modelling a vessel’s likely earnings over a given period which properly takes into account the relevant market position as at the time the hypothetical voyages would have been fixed.
It should be noted, however, that proving one’s loss may be more difficult in other trades. The VLCC trade is sufficiently well established and ‘predictable’, with enough data published, to allow a meaningful expert analysis of what the vessel could have earned. It would be more difficult to undertake the same exercise for ships with a more varied and unpredictable trading pattern.
Source: Ince & Co / Hellenic Shipping News
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Wednesday, 02 July 14
THE PANAMAX MARKET CONTINUED TO BLEED FOR ANOTHER WEEK - INTERMODAL
COALspot.com: The Dry Bulk market succumbed to mounting pressure this past week, while the Capesize market proved unable to “save the day&rdq ...
Wednesday, 02 July 14
HANDY BULKERS PROVE TO BE THE MOST SOUGHT AFTER VESSELS OVER THE PAST WEEK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
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Wednesday, 02 July 14
SHIPPING: MARKET INSIGHT - GEORGE DERMATIS
After 6 months, 57 ministerial meetings and 67 political agreements, the journey of the Greek Presidency in the EU reached its end yesterday; only ...
Tuesday, 01 July 14
INDIAN POWER PLANT COAL STOCKPILES VERY LOW
COALspot.com: According to today's Weekly Dry Bulk Report published by Commodore Research, Indian power plant coal stockpiles have now fallen t ...
Monday, 30 June 14
SUB-BIT FOB INDONESIA COAL PRICES ARE STILL STRUGGLING TO RECOVER
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on week and on month according to AsiaClear OTC coal swap's reports release ...
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Showing 3631 to 3635 news of total 6871 |
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- The State Trading Corporation of India Ltd
- Vijayanagar Sugar Pvt Ltd - India
- GMR Energy Limited - India
- Coal and Oil Company - UAE
- AsiaOL BioFuels Corp., Philippines
- SMG Consultants - Indonesia
- Global Coal Blending Company Limited - Australia
- Larsen & Toubro Limited - India
- Neyveli Lignite Corporation Ltd, - India
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- Power Finance Corporation Ltd., India
- Maheswari Brothers Coal Limited - India
- GVK Power & Infra Limited - India
- Metalloyd Limited - United Kingdom
- Independent Power Producers Association of India
- Meenaskhi Energy Private Limited - India
- Kumho Petrochemical, South Korea
- Jorong Barutama Greston.PT - Indonesia
- Deloitte Consulting - India
- Orica Australia Pty. Ltd.
- Kobexindo Tractors - Indoneisa
- Singapore Mercantile Exchange
- Port Waratah Coal Services - Australia
- Bayan Resources Tbk. - Indonesia
- SMC Global Power, Philippines
- Riau Bara Harum - Indonesia
- Georgia Ports Authority, United States
- Ind-Barath Power Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- Vedanta Resources Plc - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Planning Commission, India
- San Jose City I Power Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Merrill Lynch Commodities Europe
- Essar Steel Hazira Ltd - India
- Star Paper Mills Limited - India
- Binh Thuan Hamico - Vietnam
- Kideco Jaya Agung - Indonesia
- GAC Shipping (India) Pvt Ltd
- Edison Trading Spa - Italy
- Madhucon Powers Ltd - India
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- Global Business Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Petrochimia International Co. Ltd.- Taiwan
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- The Treasury - Australian Government
- Jaiprakash Power Ventures ltd
- Gujarat Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Formosa Plastics Group - Taiwan
- Minerals Council of Australia
- Cement Manufacturers Association - India
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Dalmia Cement Bharat India
- Samtan Co., Ltd - South Korea
- Sical Logistics Limited - India
- SN Aboitiz Power Inc, Philippines
- Goldman Sachs - Singapore
- Bangladesh Power Developement Board
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement - Thailand
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Baramulti Group, Indonesia
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Altura Mining Limited, Indonesia
- Manunggal Multi Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Bharathi Cement Corporation - India
- Heidelberg Cement - Germany
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Aboitiz Power Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Uttam Galva Steels Limited - India
- Indian Energy Exchange, India
- Videocon Industries ltd - India
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Aditya Birla Group - India
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- Siam City Cement PLC, Thailand
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- Central Java Power - Indonesia
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- Interocean Group of Companies - India
- Petron Corporation, Philippines
- Carbofer General Trading SA - India
- Kartika Selabumi Mining - Indonesia
- Lanco Infratech Ltd - India
- Tata Chemicals Ltd - India
- India Bulls Power Limited - India
- Oldendorff Carriers - Singapore
- Intertek Mineral Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Coalindo Energy - Indonesia
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Renaissance Capital - South Africa
- Parliament of New Zealand
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Finance - Indonesia
- Simpson Spence & Young - Indonesia
- Wilmar Investment Holdings
- Posco Energy - South Korea
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining and Power Corporation, Philippines
- Indika Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Borneo Indobara - Indonesia
- Eastern Coal Council - USA
- Indian Oil Corporation Limited
- Standard Chartered Bank - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- PTC India Limited - India
- Mercuria Energy - Indonesia
- Marubeni Corporation - India
- Central Electricity Authority - India
- Australian Coal Association
- Vizag Seaport Private Limited - India
- MS Steel International - UAE
- Mercator Lines Limited - India
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- Australian Commodity Traders Exchange
- IHS Mccloskey Coal Group - USA
- Timah Investasi Mineral - Indoneisa
- Sarangani Energy Corporation, Philippines
- Commonwealth Bank - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Mines - Canada
- Africa Commodities Group - South Africa
- CIMB Investment Bank - Malaysia
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- Jindal Steel & Power Ltd - India
- Price Waterhouse Coopers - Russia
- White Energy Company Limited
- Barasentosa Lestari - Indonesia
- VISA Power Limited - India
- Eastern Energy - Thailand
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kohat Cement Company Ltd. - Pakistan
- London Commodity Brokers - England
- The University of Queensland
- Maharashtra Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- International Coal Ventures Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Electricity Authority, New Zealand
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Mintek Dendrill Indonesia
- Karaikal Port Pvt Ltd - India
- Trasteel International SA, Italy
- Salva Resources Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Romanian Commodities Exchange
- Chamber of Mines of South Africa
- Sinarmas Energy and Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Baiduri Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Ministry of Transport, Egypt
- Thiess Contractors Indonesia
- Antam Resourcindo - Indonesia
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- Sree Jayajothi Cements Limited - India
- Iligan Light & Power Inc, Philippines
- McConnell Dowell - Australia
- PetroVietnam Power Coal Import and Supply Company
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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