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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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Thursday, 15 May 14
USA COAL CONFERENCE
Press Release: IHS Inc. (NYSE: IHS), the leading global source of information and analysis, will host the Coal USA Conference, June 18-20, 2014, ...
Wednesday, 14 May 14
COAL PRICES IN CHINA HAVE DROPPED TO THEIR LOWEST LEVELS SINCE END-2008
COALspot.com: Coal prices in China have dropped to their lowest levels since end-2008, Fitch says in its latest rating report on one of the coal ...
Wednesday, 14 May 14
ALMOST THROUGH THE HALF OF THE YEAR, THE DRY BULK INDEX SHOW SIGNS OF WEAKNESS; CREATING TO BOTH EXISTING SHIP OWNERS AND POTENTIAL INVESTORS A LOT OF INSECURITY - PANOS MAKRINOS
Almost through the half of the year, the overall shipping market and more specifically the Dry Bulk Index show signs of weakness, creating to bo ...
Tuesday, 13 May 14
NPC COAL EXPORT VOLUMES PLUNGE TO 2.48 MMT WEEK ON WEEK
COALspot.com: In the week ended 07:00 hours 12 May 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Quee ...
Tuesday, 13 May 14
YET ANOTHER POSIDONIA EXHIBITION IS ON ITS WAY - INTERMODAL
With less than a month to go before another Posidonia exhibition starts and all the parties and celebrations get under way we thought that it wo ...
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Showing 3706 to 3710 news of total 6871 |
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- Bhatia International Limited - India
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- Wood Mackenzie - Singapore
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- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Lanco Infratech Ltd - India
- Tata Chemicals Ltd - India
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Commonwealth Bank - Australia
- Larsen & Toubro Limited - India
- Ministry of Transport, Egypt
- Semirara Mining Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Kumho Petrochemical, South Korea
- PNOC Exploration Corporation - Philippines
- Carbofer General Trading SA - India
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Parry Sugars Refinery, India
- IEA Clean Coal Centre - UK
- AsiaOL BioFuels Corp., Philippines
- Eastern Coal Council - USA
- Jindal Steel & Power Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- New Zealand Coal & Carbon
- Mjunction Services Limited - India
- Globalindo Alam Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Coalindo Energy - Indonesia
- Parliament of New Zealand
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- Therma Luzon, Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Simpson Spence & Young - Indonesia
- Formosa Plastics Group - Taiwan
- Indogreen Group - Indonesia
- Power Finance Corporation Ltd., India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Anglo American - United Kingdom
- Standard Chartered Bank - UAE
- Kobexindo Tractors - Indoneisa
- Central Electricity Authority - India
- LBH Netherlands Bv - Netherlands
- London Commodity Brokers - England
- Medco Energi Mining Internasional
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- Global Business Power Corporation, Philippines
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- Iligan Light & Power Inc, Philippines
- Savvy Resources Ltd - HongKong
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- Oldendorff Carriers - Singapore
- VISA Power Limited - India
- Energy Development Corp, Philippines
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- Siam City Cement - Thailand
- Uttam Galva Steels Limited - India
- Timah Investasi Mineral - Indoneisa
- Straits Asia Resources Limited - Singapore
- SN Aboitiz Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- Thiess Contractors Indonesia
- Singapore Mercantile Exchange
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- Xindia Steels Limited - India
- Orica Australia Pty. Ltd.
- Vedanta Resources Plc - India
- Eastern Energy - Thailand
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Energy Link Ltd, New Zealand
- Indian Oil Corporation Limited
- GMR Energy Limited - India
- Bangladesh Power Developement Board
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- Aditya Birla Group - India
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Minerals Council of Australia
- Orica Mining Services - Indonesia
- Electricity Authority, New Zealand
- Planning Commission, India
- Bahari Cakrawala Sebuku - Indonesia
- Wilmar Investment Holdings
- Manunggal Multi Energi - Indonesia
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- Kartika Selabumi Mining - Indonesia
- MS Steel International - UAE
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- Edison Trading Spa - Italy
- White Energy Company Limited
- Electricity Generating Authority of Thailand
- The Treasury - Australian Government
- Ambuja Cements Ltd - India
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- Interocean Group of Companies - India
- Kaltim Prima Coal - Indonesia
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- PTC India Limited - India
- Chamber of Mines of South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Intertek Mineral Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- Petron Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Banpu Public Company Limited - Thailand
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Riau Bara Harum - Indonesia
- Borneo Indobara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bharathi Cement Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Finance - Indonesia
- ASAPP Information Group - India
- Binh Thuan Hamico - Vietnam
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Independent Power Producers Association of India
- Mercator Lines Limited - India
- Goldman Sachs - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Rio Tinto Coal - Australia
- Sojitz Corporation - Japan
- Karaikal Port Pvt Ltd - India
- Meralco Power Generation, Philippines
- Directorate Of Revenue Intelligence - India
- PowerSource Philippines DevCo
- Australian Coal Association
- PetroVietnam Power Coal Import and Supply Company
- Madhucon Powers Ltd - India
- Merrill Lynch Commodities Europe
- The State Trading Corporation of India Ltd
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- Malabar Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Posco Energy - South Korea
- Salva Resources Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- IHS Mccloskey Coal Group - USA
- Vizag Seaport Private Limited - India
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
- SMG Consultants - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- McConnell Dowell - Australia
- Pendopo Energi Batubara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- TeaM Sual Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Aboitiz Power Corporation - Philippines
- Videocon Industries ltd - India
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Samtan Co., Ltd - South Korea
- ICICI Bank Limited - India
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- Jorong Barutama Greston.PT - Indonesia
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
- India Bulls Power Limited - India
- European Bulk Services B.V. - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Sarangani Energy Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- Indika Energy - Indonesia
- The University of Queensland
- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Thai Mozambique Logistica
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SMC Global Power, Philippines
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