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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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Friday, 25 April 14
US PRODUCED APPROXIMATELY 19 MILLION SHORT TONS OF COAL IN A WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.0 million short tons (mmst) of coal i ...
Friday, 25 April 14
2ND MYANMAR ELECTRIC POWER CONVENTION 2014 IS THE GATEWAY TO MYANMAR POWER INDUSTRY!
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Friday, 25 April 14
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The dry bulk market seems to have gained its footing after the past few dissapointing weeks, during which the Baltic Dry Index (BDI) shedded mos ...
Thursday, 24 April 14
HANDY : A FLOW OF FRESH REQUIREMENTS LIFTING THE PACIFIC SLOWLY TO US$ 10-11 K BSS SINGAPORE FOR COAL ROUNDS
Handy
There is still no place to hide in the Atlantic for the smaller but flexible sizes. Slow and weak seems to be the headlines, although th ...
Wednesday, 23 April 14
EUROPE WOULD BE HARD PRESSED TO REPLACE RUSSIAN GAS, FITCH RATINGS SAYS
A ban on Russian gas imports to the EU would cause substantial disruption to Europe's economy and industry, Fitch Ratings says. In the immed ...
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Showing 3736 to 3740 news of total 6871 |
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- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- Orica Mining Services - Indonesia
- Uttam Galva Steels Limited - India
- Ind-Barath Power Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Coastal Gujarat Power Limited - India
- Aboitiz Power Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Tata Chemicals Ltd - India
- Metalloyd Limited - United Kingdom
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Economic Council, Georgia
- Eastern Coal Council - USA
- Global Coal Blending Company Limited - Australia
- Xindia Steels Limited - India
- Baramulti Group, Indonesia
- Merrill Lynch Commodities Europe
- GAC Shipping (India) Pvt Ltd
- Sindya Power Generating Company Private Ltd
- Bukit Baiduri Energy - Indonesia
- Planning Commission, India
- Timah Investasi Mineral - Indoneisa
- Sakthi Sugars Limited - India
- New Zealand Coal & Carbon
- Sical Logistics Limited - India
- Makarim & Taira - Indonesia
- Petron Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining Corp, Philippines
- The State Trading Corporation of India Ltd
- Latin American Coal - Colombia
- Parry Sugars Refinery, India
- Ministry of Finance - Indonesia
- Georgia Ports Authority, United States
- PTC India Limited - India
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- Singapore Mercantile Exchange
- Coalindo Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- European Bulk Services B.V. - Netherlands
- Indonesian Coal Mining Association
- Bhatia International Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Ministry of Transport, Egypt
- Bukit Asam (Persero) Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Lanco Infratech Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Grasim Industreis Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- SMC Global Power, Philippines
- GVK Power & Infra Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Essar Steel Hazira Ltd - India
- Siam City Cement - Thailand
- Orica Australia Pty. Ltd.
- Meralco Power Generation, Philippines
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- MS Steel International - UAE
- Energy Development Corp, Philippines
- Minerals Council of Australia
- Port Waratah Coal Services - Australia
- Globalindo Alam Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indogreen Group - Indonesia
- Vedanta Resources Plc - India
- Wilmar Investment Holdings
- Kobexindo Tractors - Indoneisa
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
- Alfred C Toepfer International GmbH - Germany
- Mercuria Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Salva Resources Pvt Ltd - India
- Marubeni Corporation - India
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Posco Energy - South Korea
- San Jose City I Power Corp, Philippines
- Goldman Sachs - Singapore
- TeaM Sual Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Therma Luzon, Inc, Philippines
- Agrawal Coal Company - India
- Manunggal Multi Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bharathi Cement Corporation - India
- Edison Trading Spa - Italy
- Mjunction Services Limited - India
- Medco Energi Mining Internasional
- Vizag Seaport Private Limited - India
- CIMB Investment Bank - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Central Java Power - Indonesia
- London Commodity Brokers - England
- Bahari Cakrawala Sebuku - Indonesia
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Sojitz Corporation - Japan
- Ambuja Cements Ltd - India
- Eastern Energy - Thailand
- ICICI Bank Limited - India
- Commonwealth Bank - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- Riau Bara Harum - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Power Finance Corporation Ltd., India
- SMG Consultants - Indonesia
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- Wood Mackenzie - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Oldendorff Carriers - Singapore
- Borneo Indobara - Indonesia
- The Treasury - Australian Government
- Kumho Petrochemical, South Korea
- Heidelberg Cement - Germany
- Leighton Contractors Pty Ltd - Australia
- Price Waterhouse Coopers - Russia
- Kepco SPC Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kohat Cement Company Ltd. - Pakistan
- Mintek Dendrill Indonesia
- PNOC Exploration Corporation - Philippines
- Coal and Oil Company - UAE
- PowerSource Philippines DevCo
- Carbofer General Trading SA - India
- Bhoruka Overseas - Indonesia
- Binh Thuan Hamico - Vietnam
- Energy Link Ltd, New Zealand
- Australian Coal Association
- Aditya Birla Group - India
- AsiaOL BioFuels Corp., Philippines
- The University of Queensland
- Attock Cement Pakistan Limited
- Banpu Public Company Limited - Thailand
- Kapuas Tunggal Persada - Indonesia
- CNBM International Corporation - China
- Chamber of Mines of South Africa
- Indika Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- Simpson Spence & Young - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Altura Mining Limited, Indonesia
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Bhushan Steel Limited - India
- ASAPP Information Group - India
- Maheswari Brothers Coal Limited - India
- Savvy Resources Ltd - HongKong
- Kideco Jaya Agung - Indonesia
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Indian Oil Corporation Limited
- Samtan Co., Ltd - South Korea
- Romanian Commodities Exchange
- Thai Mozambique Logistica
- Gujarat Mineral Development Corp Ltd - India
- Rio Tinto Coal - Australia
- LBH Netherlands Bv - Netherlands
- PetroVietnam Power Coal Import and Supply Company
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Independent Power Producers Association of India
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- Standard Chartered Bank - UAE
- Star Paper Mills Limited - India
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Larsen & Toubro Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Iligan Light & Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- GMR Energy Limited - India
- Anglo American - United Kingdom
- Global Business Power Corporation, Philippines
- Trasteel International SA, Italy
- Krishnapatnam Port Company Ltd. - India
- Australian Commodity Traders Exchange
- Central Electricity Authority - India
- Cement Manufacturers Association - India
- Mercator Lines Limited - India
- McConnell Dowell - Australia
- International Coal Ventures Pvt Ltd - India
- Renaissance Capital - South Africa
- VISA Power Limited - India
- IEA Clean Coal Centre - UK
- TNB Fuel Sdn Bhd - Malaysia
- Interocean Group of Companies - India
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