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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, 23 April 14
KOMIPO INVITES BIDS FOR LOW VOLATILE BITUMINOUS COAL
COALspot.com : Korea Midland Power Co., Ltd. has invited bids through International open bidding for 90,000 Metric Tons (MT) of low volatile bit ...
Tuesday, 22 April 14
INDONESIAN MARCH COAL EXPORT VOLUME SURGE 9.12% TO 35.54 MMT
COALspot.com: Indonesia, one of the world's largest coal producer and the global largest multi grade coal exporter shipped around $1.9 ...
Tuesday, 22 April 14
NEWCASTLE WEEKLY COAL EXPORTS FELL 13.33% THIS PAST WEEK
COALspot.com: In the week ended 07:00 hours 21 April 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensl ...
Monday, 21 April 14
Q1'15 SUB-BIT FOB INDONESIA COAL SWAP SHOWING A POSITIVE TREND
COALspot.com: Indonesian coal swaps for average Q2’ 2014 gain on month and on week according to AsiaClear OTC coal swap's reports rele ...
Monday, 21 April 14
Q4 2014 AND Q1 2015 COAL SWAPS CLOSED MARGINALLY HIGHER COMPARED TO Q2 PRICES
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries gained 0.87 percent month on month and closed at US$ 76.15 per mt as ...
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Showing 3741 to 3745 news of total 6871 |
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- Price Waterhouse Coopers - Russia
- CNBM International Corporation - China
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bangladesh Power Developement Board
- New Zealand Coal & Carbon
- Directorate General of MIneral and Coal - Indonesia
- Georgia Ports Authority, United States
- Bukit Baiduri Energy - Indonesia
- Bhushan Steel Limited - India
- Chamber of Mines of South Africa
- CIMB Investment Bank - Malaysia
- Renaissance Capital - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Authority, New Zealand
- Romanian Commodities Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Central Java Power - Indonesia
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- Jaiprakash Power Ventures ltd
- Medco Energi Mining Internasional
- Commonwealth Bank - Australia
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Binh Thuan Hamico - Vietnam
- Indo Tambangraya Megah - Indonesia
- LBH Netherlands Bv - Netherlands
- Barasentosa Lestari - Indonesia
- GVK Power & Infra Limited - India
- IEA Clean Coal Centre - UK
- Heidelberg Cement - Germany
- Alfred C Toepfer International GmbH - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercator Lines Limited - India
- Rashtriya Ispat Nigam Limited - India
- Interocean Group of Companies - India
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- Ceylon Electricity Board - Sri Lanka
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Vizag Seaport Private Limited - India
- Global Business Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- AsiaOL BioFuels Corp., Philippines
- SMC Global Power, Philippines
- Standard Chartered Bank - UAE
- Meenaskhi Energy Private Limited - India
- VISA Power Limited - India
- Bharathi Cement Corporation - India
- Coalindo Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- Makarim & Taira - Indonesia
- Australian Coal Association
- Wilmar Investment Holdings
- Sree Jayajothi Cements Limited - India
- White Energy Company Limited
- Jorong Barutama Greston.PT - Indonesia
- Malabar Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Sojitz Corporation - Japan
- Maharashtra Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Lanco Infratech Ltd - India
- Coastal Gujarat Power Limited - India
- ICICI Bank Limited - India
- Semirara Mining Corp, Philippines
- Mjunction Services Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercuria Energy - Indonesia
- PTC India Limited - India
- Trasteel International SA, Italy
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Asmin Koalindo Tuhup - Indonesia
- Indogreen Group - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Gujarat Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- London Commodity Brokers - England
- Tata Chemicals Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Sical Logistics Limited - India
- Madhucon Powers Ltd - India
- Energy Development Corp, Philippines
- Siam City Cement - Thailand
- Metalloyd Limited - United Kingdom
- Straits Asia Resources Limited - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Samtan Co., Ltd - South Korea
- Vedanta Resources Plc - India
- Orica Australia Pty. Ltd.
- Uttam Galva Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- Goldman Sachs - Singapore
- Eastern Coal Council - USA
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- Port Waratah Coal Services - Australia
- Attock Cement Pakistan Limited
- The State Trading Corporation of India Ltd
- Rio Tinto Coal - Australia
- Banpu Public Company Limited - Thailand
- Australian Commodity Traders Exchange
- Ambuja Cements Ltd - India
- Larsen & Toubro Limited - India
- The Treasury - Australian Government
- Africa Commodities Group - South Africa
- TeaM Sual Corporation - Philippines
- Economic Council, Georgia
- Singapore Mercantile Exchange
- Wood Mackenzie - Singapore
- Globalindo Alam Lestari - Indonesia
- Eastern Energy - Thailand
- Minerals Council of Australia
- Essar Steel Hazira Ltd - India
- European Bulk Services B.V. - Netherlands
- Indika Energy - Indonesia
- ASAPP Information Group - India
- Ministry of Finance - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Mining Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Oil Corporation Limited
- Edison Trading Spa - Italy
- SN Aboitiz Power Inc, Philippines
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- Global Coal Blending Company Limited - Australia
- Tamil Nadu electricity Board
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- SMG Consultants - Indonesia
- Riau Bara Harum - Indonesia
- Aditya Birla Group - India
- Kartika Selabumi Mining - Indonesia
- Marubeni Corporation - India
- Leighton Contractors Pty Ltd - Australia
- Bhatia International Limited - India
- South Luzon Thermal Energy Corporation
- Anglo American - United Kingdom
- Semirara Mining and Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Bukit Makmur.PT - Indonesia
- Antam Resourcindo - Indonesia
- Borneo Indobara - Indonesia
- Xindia Steels Limited - India
- Simpson Spence & Young - Indonesia
- Sarangani Energy Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- McConnell Dowell - Australia
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- IHS Mccloskey Coal Group - USA
- Altura Mining Limited, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Thai Mozambique Logistica
- Miang Besar Coal Terminal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Kaltim Prima Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- The University of Queensland
- Sindya Power Generating Company Private Ltd
- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Parliament of New Zealand
- Power Finance Corporation Ltd., India
- Salva Resources Pvt Ltd - India
- Agrawal Coal Company - India
- Ministry of Mines - Canada
- PNOC Exploration Corporation - Philippines
- Central Electricity Authority - India
- Billiton Holdings Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- Grasim Industreis Ltd - India
- Videocon Industries ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Thiess Contractors Indonesia
- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- GN Power Mariveles Coal Plant, Philippines
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- GMR Energy Limited - India
- Sakthi Sugars Limited - India
- Karaikal Port Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Kepco SPC Power Corporation, Philippines
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
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