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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, 21 May 14
SHIPPING: MARKET INSIGHT - GEORGE LAZARIDIS
The recent revision by the OECD of its global growth forecast has sparked a debate as to the potential outcome these new figures will have on seabo ...
Tuesday, 20 May 14
NEWCASTLE'S COAL EXPORT VOLUME UP 39.11 PERCENT WEEK ON WEEK
COALspot.com: In the week ended 07:00 hours 19 May 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, ...
Tuesday, 20 May 14
DRY BULK MARKET TO IMPROVE OVER THE COURSE OF 2014, BUT OVERSUPPLY STILL AN ISSUE SAYS BIMCO'S CHIEF SHIPPING ANALYST
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Tuesday, 20 May 14
DRY BULK MARKET IS BOUND FOR A RECOVERY CLAIMS PARAGON SHIPPING'S HEAD MICHAEL BODOUROGLOU
The dry bulk market is bound for a recovery in the coming weeks, as the market will be better balanced, said Mr. Michael Bodouroglou, Chairman and ...
Monday, 19 May 14
INDO COAL SWAPS FOR AVERAGE Q3' 2014 DELIVERY LOST ON WEEK AND ON MONTH
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 3696 to 3700 news of total 6871 |
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- Australian Commodity Traders Exchange
- ICICI Bank Limited - India
- Mjunction Services Limited - India
- IEA Clean Coal Centre - UK
- Lanco Infratech Ltd - India
- Power Finance Corporation Ltd., India
- Bangladesh Power Developement Board
- Antam Resourcindo - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Chamber of Mines of South Africa
- Mintek Dendrill Indonesia
- European Bulk Services B.V. - Netherlands
- Siam City Cement - Thailand
- Petron Corporation, Philippines
- Australian Coal Association
- Madhucon Powers Ltd - India
- Global Green Power PLC Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Indogreen Group - Indonesia
- Anglo American - United Kingdom
- SN Aboitiz Power Inc, Philippines
- SMC Global Power, Philippines
- Aboitiz Power Corporation - Philippines
- Renaissance Capital - South Africa
- Karaikal Port Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- SMG Consultants - Indonesia
- Central Electricity Authority - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Vijayanagar Sugar Pvt Ltd - India
- Sakthi Sugars Limited - India
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Iligan Light & Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Georgia Ports Authority, United States
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Mines - Canada
- PNOC Exploration Corporation - Philippines
- Marubeni Corporation - India
- Ministry of Finance - Indonesia
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- TeaM Sual Corporation - Philippines
- Eastern Energy - Thailand
- Africa Commodities Group - South Africa
- Deloitte Consulting - India
- Gujarat Mineral Development Corp Ltd - India
- PowerSource Philippines DevCo
- Coastal Gujarat Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Edison Trading Spa - Italy
- Parliament of New Zealand
- Barasentosa Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
- Sical Logistics Limited - India
- Jindal Steel & Power Ltd - India
- Cement Manufacturers Association - India
- GVK Power & Infra Limited - India
- Singapore Mercantile Exchange
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Electricity Generating Authority of Thailand
- White Energy Company Limited
- Borneo Indobara - Indonesia
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Larsen & Toubro Limited - India
- Independent Power Producers Association of India
- Coalindo Energy - Indonesia
- London Commodity Brokers - England
- Essar Steel Hazira Ltd - India
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Simpson Spence & Young - Indonesia
- Indonesian Coal Mining Association
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Vedanta Resources Plc - India
- Electricity Authority, New Zealand
- India Bulls Power Limited - India
- Semirara Mining Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Videocon Industries ltd - India
- Mercuria Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Aditya Birla Group - India
- GAC Shipping (India) Pvt Ltd
- Sinarmas Energy and Mining - Indonesia
- South Luzon Thermal Energy Corporation
- OPG Power Generation Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- PTC India Limited - India
- Parry Sugars Refinery, India
- Tamil Nadu electricity Board
- Indika Energy - Indonesia
- Planning Commission, India
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Altura Mining Limited, Indonesia
- Siam City Cement PLC, Thailand
- Ministry of Transport, Egypt
- Thai Mozambique Logistica
- Vizag Seaport Private Limited - India
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thiess Contractors Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Xindia Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Toyota Tsusho Corporation, Japan
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Kartika Selabumi Mining - Indonesia
- CNBM International Corporation - China
- Standard Chartered Bank - UAE
- Krishnapatnam Port Company Ltd. - India
- Straits Asia Resources Limited - Singapore
- Samtan Co., Ltd - South Korea
- The University of Queensland
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- TNB Fuel Sdn Bhd - Malaysia
- Latin American Coal - Colombia
- McConnell Dowell - Australia
- Asmin Koalindo Tuhup - Indonesia
- Bhushan Steel Limited - India
- Cigading International Bulk Terminal - Indonesia
- Intertek Mineral Services - Indonesia
- Bukit Makmur.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Economic Council, Georgia
- Directorate General of MIneral and Coal - Indonesia
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- LBH Netherlands Bv - Netherlands
- Romanian Commodities Exchange
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Energy Exchange, India
- Neyveli Lignite Corporation Ltd, - India
- Heidelberg Cement - Germany
- Bhatia International Limited - India
- Interocean Group of Companies - India
- Chettinad Cement Corporation Ltd - India
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- Ind-Barath Power Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Central Java Power - Indonesia
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Carbofer General Trading SA - India
- Wilmar Investment Holdings
- Mercator Lines Limited - India
- IHS Mccloskey Coal Group - USA
- AsiaOL BioFuels Corp., Philippines
- Tata Chemicals Ltd - India
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- Indo Tambangraya Megah - Indonesia
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Orica Mining Services - Indonesia
- Orica Australia Pty. Ltd.
- Medco Energi Mining Internasional
- Timah Investasi Mineral - Indoneisa
- New Zealand Coal & Carbon
- Formosa Plastics Group - Taiwan
- Baramulti Group, Indonesia
- Coal and Oil Company - UAE
- Malabar Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Star Paper Mills Limited - India
- Binh Thuan Hamico - Vietnam
- Rashtriya Ispat Nigam Limited - India
- Jaiprakash Power Ventures ltd
- Bharathi Cement Corporation - India
- Maheswari Brothers Coal Limited - India
- Global Business Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Banpu Public Company Limited - Thailand
- Kaltim Prima Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Meralco Power Generation, Philippines
- Meenaskhi Energy Private Limited - India
- Minerals Council of Australia
- Eastern Coal Council - USA
- Dalmia Cement Bharat India
- MS Steel International - UAE
- Bhoruka Overseas - Indonesia
- Gujarat Electricity Regulatory Commission - India
- VISA Power Limited - India
- The Treasury - Australian Government
- Kapuas Tunggal Persada - Indonesia
- Therma Luzon, Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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