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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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Saturday, 07 June 14
U.S. MONTHLY COAL PRODUCTION SLIGHTLY HIGHER IN MAY 2014
COALspot.com – United States the world's second largest coal producer, produced approximately 19.2 million short tons (mmst) of coal in a ...
Friday, 06 June 14
RICHARDS BAY COAL TERMINAL SHIPPED 4.221 MMT OF COAL TO SOUTHERN ASIAN COUNTRIES IN MAY
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the single largest export coal terminal in the world, shipped 5.58 million tons ...
Thursday, 05 June 14
RBCT SOUTH AFRICA SHIPPED 21% LESS COAL IN APRIL COMPARED TO MARCH EXPORTS
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the single largest export coal terminal in the world, shipped 5.45 million tons ...
Thursday, 05 June 14
PANAMAX : THIS WEEK STARTED IN A SLOW PACE - FEARNLEYS
Handy
After last week's silent and unexciting week we see some more activity this week, especially from the South American market. The rates ...
Thursday, 05 June 14
PORT OF NEWCASTLE SHIPPED 2.91 MMT OF COAL IN THIS PAST WEEK
COALspot.com: The figure constitutes a 4.30 percent higher compared to the previous week, following a week on week decreased of 19.13 percent recor ...
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Showing 3671 to 3675 news of total 6871 |
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- OPG Power Generation Pvt Ltd - India
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- Independent Power Producers Association of India
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- Altura Mining Limited, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
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- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Salva Resources Pvt Ltd - India
- New Zealand Coal & Carbon
- Global Green Power PLC Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
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- Metalloyd Limited - United Kingdom
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- Global Business Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- Ministry of Finance - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Ministry of Mines - Canada
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- Ambuja Cements Ltd - India
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- Australian Coal Association
- Samtan Co., Ltd - South Korea
- Indika Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Chamber of Mines of South Africa
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Asmin Koalindo Tuhup - Indonesia
- International Coal Ventures Pvt Ltd - India
- Formosa Plastics Group - Taiwan
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- GMR Energy Limited - India
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- Kepco SPC Power Corporation, Philippines
- Energy Development Corp, Philippines
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- Singapore Mercantile Exchange
- Siam City Cement PLC, Thailand
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- Australian Commodity Traders Exchange
- Wood Mackenzie - Singapore
- Economic Council, Georgia
- Bhatia International Limited - India
- Indonesian Coal Mining Association
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- GN Power Mariveles Coal Plant, Philippines
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- Orica Australia Pty. Ltd.
- Jorong Barutama Greston.PT - Indonesia
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercuria Energy - Indonesia
- Marubeni Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Renaissance Capital - South Africa
- SMG Consultants - Indonesia
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Posco Energy - South Korea
- Aditya Birla Group - India
- Lanco Infratech Ltd - India
- Planning Commission, India
- Eastern Energy - Thailand
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- Meralco Power Generation, Philippines
- Xindia Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Larsen & Toubro Limited - India
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Medco Energi Mining Internasional
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Petron Corporation, Philippines
- Bharathi Cement Corporation - India
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Global Coal Blending Company Limited - Australia
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- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- Merrill Lynch Commodities Europe
- Therma Luzon, Inc, Philippines
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- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Intertek Mineral Services - Indonesia
- Sojitz Corporation - Japan
- Krishnapatnam Port Company Ltd. - India
- Thiess Contractors Indonesia
- Sakthi Sugars Limited - India
- Bhushan Steel Limited - India
- Thai Mozambique Logistica
- Price Waterhouse Coopers - Russia
- Sindya Power Generating Company Private Ltd
- India Bulls Power Limited - India
- Borneo Indobara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- Indo Tambangraya Megah - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- The State Trading Corporation of India Ltd
- Commonwealth Bank - Australia
- Latin American Coal - Colombia
- Minerals Council of Australia
- European Bulk Services B.V. - Netherlands
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Coal and Oil Company - UAE
- CIMB Investment Bank - Malaysia
- Baramulti Group, Indonesia
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- Banpu Public Company Limited - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Kaltim Prima Coal - Indonesia
- Heidelberg Cement - Germany
- Vizag Seaport Private Limited - India
- Georgia Ports Authority, United States
- CNBM International Corporation - China
- Coalindo Energy - Indonesia
- IEA Clean Coal Centre - UK
- Parry Sugars Refinery, India
- Antam Resourcindo - Indonesia
- Bangladesh Power Developement Board
- Uttam Galva Steels Limited - India
- Dalmia Cement Bharat India
- The University of Queensland
- Romanian Commodities Exchange
- The Treasury - Australian Government
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- Binh Thuan Hamico - Vietnam
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Vedanta Resources Plc - India
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- Wilmar Investment Holdings
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- South Luzon Thermal Energy Corporation
- Sinarmas Energy and Mining - Indonesia
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Kideco Jaya Agung - Indonesia
- Manunggal Multi Energi - Indonesia
- Indogreen Group - Indonesia
- GAC Shipping (India) Pvt Ltd
- ICICI Bank Limited - India
- Timah Investasi Mineral - Indoneisa
- Ind-Barath Power Infra Limited - India
- Bukit Baiduri Energy - Indonesia
- Tamil Nadu electricity Board
- ASAPP Information Group - India
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- Indian Energy Exchange, India
- GVK Power & Infra Limited - India
- Power Finance Corporation Ltd., India
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- Tata Chemicals Ltd - India
- Grasim Industreis Ltd - India
- Directorate Of Revenue Intelligence - India
- Kapuas Tunggal Persada - Indonesia
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- Straits Asia Resources Limited - Singapore
- Parliament of New Zealand
- Eastern Coal Council - USA
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- Rio Tinto Coal - Australia
- Essar Steel Hazira Ltd - India
- White Energy Company Limited
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- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Electricity Authority, New Zealand
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Mjunction Services Limited - India
- Ministry of Transport, Egypt
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