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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, 08 May 14
'TRIAL BY MEDIA, TRIAL BY LAW' - A REPORT FROM TRACK 1 OF BIMCO'S ANNUAL CONFERENCE DUBAI 2014
KNOWLEDGE TO ELEVATE
Aiming to bring a very different type of event into their annual conference, BIMCO presented ‘Double Jeopardy &n ...
Thursday, 08 May 14
INDONESIAN COAL PRICE REFERENCE IN MAY CRASHES THROUGH $74
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has revised down again the coal bench mark price by US$ 1.21 / MT to ...
Wednesday, 07 May 14
THE DRY BULK MARKET HAS NOTED ANOTHER WEEKLY POSITIVE GAIN
Chartering (Wet: Softer- / Dry: Stable+)
The Dry Bulk market has noted another weekly positive gain, driven by the Capesize segment, but we ne ...
Wednesday, 07 May 14
SGX ENHANCES ITS COMMODITIES PRODUCT OFFERING
COALspot.com: SGX is building up its bulk commodity product offerings with 9 more derivative contracts over the next 2 months, subject to regula ...
Tuesday, 06 May 14
NEWCASTLE COAL EXPORT SLIPS 7.92% WEEK ON WEEK
COALspot.com: In the week ended 07:00 hours 5 May 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland ...
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Showing 3716 to 3720 news of total 6871 |
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- Anglo American - United Kingdom
- Kaltim Prima Coal - Indonesia
- Singapore Mercantile Exchange
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- SMG Consultants - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Dalmia Cement Bharat India
- Bayan Resources Tbk. - Indonesia
- Minerals Council of Australia
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- Carbofer General Trading SA - India
- Billiton Holdings Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Goldman Sachs - Singapore
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- ASAPP Information Group - India
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- Toyota Tsusho Corporation, Japan
- MS Steel International - UAE
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- Makarim & Taira - Indonesia
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Formosa Plastics Group - Taiwan
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- Posco Energy - South Korea
- Lanco Infratech Ltd - India
- Global Coal Blending Company Limited - Australia
- Cigading International Bulk Terminal - Indonesia
- India Bulls Power Limited - India
- Merrill Lynch Commodities Europe
- Karbindo Abesyapradhi - Indoneisa
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Mineral Development Corp Ltd - India
- The University of Queensland
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- Uttam Galva Steels Limited - India
- Latin American Coal - Colombia
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- Barasentosa Lestari - Indonesia
- Malabar Cements Ltd - India
- Aditya Birla Group - India
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- PowerSource Philippines DevCo
- Timah Investasi Mineral - Indoneisa
- Agrawal Coal Company - India
- SN Aboitiz Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Ministry of Mines - Canada
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- VISA Power Limited - India
- Binh Thuan Hamico - Vietnam
- Sarangani Energy Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- Meenaskhi Energy Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Semirara Mining Corp, Philippines
- Bhoruka Overseas - Indonesia
- Antam Resourcindo - Indonesia
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- CNBM International Corporation - China
- The Treasury - Australian Government
- Bukit Makmur.PT - Indonesia
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Holcim Trading Pte Ltd - Singapore
- GMR Energy Limited - India
- Eastern Coal Council - USA
- Planning Commission, India
- Straits Asia Resources Limited - Singapore
- Ind-Barath Power Infra Limited - India
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Renaissance Capital - South Africa
- Ambuja Cements Ltd - India
- Sojitz Corporation - Japan
- CIMB Investment Bank - Malaysia
- AsiaOL BioFuels Corp., Philippines
- London Commodity Brokers - England
- Neyveli Lignite Corporation Ltd, - India
- Wilmar Investment Holdings
- Cement Manufacturers Association - India
- Maharashtra Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- PTC India Limited - India
- Therma Luzon, Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Generating Authority of Thailand
- Bhushan Steel Limited - India
- Mercator Lines Limited - India
- Ministry of Transport, Egypt
- Standard Chartered Bank - UAE
- Energy Link Ltd, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- PetroVietnam Power Coal Import and Supply Company
- Jorong Barutama Greston.PT - Indonesia
- Marubeni Corporation - India
- Madhucon Powers Ltd - India
- Savvy Resources Ltd - HongKong
- Samtan Co., Ltd - South Korea
- Electricity Authority, New Zealand
- White Energy Company Limited
- Interocean Group of Companies - India
- Baramulti Group, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Riau Bara Harum - Indonesia
- Coalindo Energy - Indonesia
- Thai Mozambique Logistica
- Alfred C Toepfer International GmbH - Germany
- The State Trading Corporation of India Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- Kideco Jaya Agung - Indonesia
- Indonesian Coal Mining Association
- Gujarat Sidhee Cement - India
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tamil Nadu electricity Board
- Australian Coal Association
- Jindal Steel & Power Ltd - India
- Energy Development Corp, Philippines
- Mintek Dendrill Indonesia
- Sree Jayajothi Cements Limited - India
- Chamber of Mines of South Africa
- Orica Mining Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Directorate Of Revenue Intelligence - India
- Deloitte Consulting - India
- Iligan Light & Power Inc, Philippines
- Mjunction Services Limited - India
- Commonwealth Bank - Australia
- Sical Logistics Limited - India
- Mercuria Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Kobexindo Tractors - Indoneisa
- Central Electricity Authority - India
- Indogreen Group - Indonesia
- IEA Clean Coal Centre - UK
- Eastern Energy - Thailand
- Australian Commodity Traders Exchange
- Bhatia International Limited - India
- Essar Steel Hazira Ltd - India
- Port Waratah Coal Services - Australia
- Bangladesh Power Developement Board
- Directorate General of MIneral and Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- Simpson Spence & Young - Indonesia
- Jaiprakash Power Ventures ltd
- Thiess Contractors Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Coastal Gujarat Power Limited - India
- Parliament of New Zealand
- Orica Australia Pty. Ltd.
- Krishnapatnam Port Company Ltd. - India
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- European Bulk Services B.V. - Netherlands
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- SMC Global Power, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Global Business Power Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Indika Energy - Indonesia
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