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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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Monday, 14 April 14
CHINA'S MEASURES TO STIMULATE ECONOMY'S GROWTH COULD OFFER ROOM FOR STABILITY IN SHIPPING MARKETS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Since the outbreak of the 2008-crisis, the shipping industry, in most of its aspects, i.e. dry bulk and tanker markets alike, has been dealing w ...
Sunday, 13 April 14
INDONESIA TO INDIA FREIGHT MARKET DECLINE CONTINUES
COALspot.com: The freight market continued to drop this week and BDI almost touched 1000 points. BDI closed at 1002 points fell 16.85 pct week o ...
Friday, 11 April 14
US COAL PRODUCTION IN MARCH INCREASED 9.69% TO 82.6 MMST MONTH ON MONTH
COALspot.com – United States the world's second largest coal producer, produced approximately 19.10 million short tons (mmst) of coal ...
Thursday, 10 April 14
DRY BULK MARKET IS RISING CLAIMS BIMCO - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite the recent fall of the Baltic Dry Index (BDI), when one compares the first quarter of 2014, to similar quarters of the recent past, it i ...
Wednesday, 09 April 14
DRY BULK MARKET STRUGGLED THROUGHOUT THE WEEK - INTERMODAL
The Dry Bulk market struggled throughout the week but the poor performance across the board didn't allow for any positive reversal, pushing ...
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- Maharashtra Electricity Regulatory Commission - India
- Cigading International Bulk Terminal - Indonesia
- TeaM Sual Corporation - Philippines
- Larsen & Toubro Limited - India
- Parliament of New Zealand
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Bahari Cakrawala Sebuku - Indonesia
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- Bangladesh Power Developement Board
- Salva Resources Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Indian Energy Exchange, India
- Vedanta Resources Plc - India
- The Treasury - Australian Government
- Bharathi Cement Corporation - India
- Energy Development Corp, Philippines
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Parry Sugars Refinery, India
- ICICI Bank Limited - India
- White Energy Company Limited
- Lanco Infratech Ltd - India
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Eastern Coal Council - USA
- Timah Investasi Mineral - Indoneisa
- European Bulk Services B.V. - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- London Commodity Brokers - England
- Maheswari Brothers Coal Limited - India
- New Zealand Coal & Carbon
- Kepco SPC Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Globalindo Alam Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Coastal Gujarat Power Limited - India
- Australian Commodity Traders Exchange
- Latin American Coal - Colombia
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- Coal and Oil Company - UAE
- Sree Jayajothi Cements Limited - India
- Kapuas Tunggal Persada - Indonesia
- Global Business Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- Orica Mining Services - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Deloitte Consulting - India
- Central Electricity Authority - India
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- GAC Shipping (India) Pvt Ltd
- Vizag Seaport Private Limited - India
- Meenaskhi Energy Private Limited - India
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- IHS Mccloskey Coal Group - USA
- Wilmar Investment Holdings
- OPG Power Generation Pvt Ltd - India
- Central Java Power - Indonesia
- Standard Chartered Bank - UAE
- Kideco Jaya Agung - Indonesia
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
- Aboitiz Power Corporation - Philippines
- Planning Commission, India
- Metalloyd Limited - United Kingdom
- Sojitz Corporation - Japan
- GN Power Mariveles Coal Plant, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- Merrill Lynch Commodities Europe
- PTC India Limited - India
- Interocean Group of Companies - India
- Meralco Power Generation, Philippines
- Tata Chemicals Ltd - India
- Samtan Co., Ltd - South Korea
- Rashtriya Ispat Nigam Limited - India
- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
- Toyota Tsusho Corporation, Japan
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Carbofer General Trading SA - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Xindia Steels Limited - India
- Minerals Council of Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- Videocon Industries ltd - India
- Africa Commodities Group - South Africa
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- Goldman Sachs - Singapore
- Heidelberg Cement - Germany
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mjunction Services Limited - India
- Banpu Public Company Limited - Thailand
- Riau Bara Harum - Indonesia
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Essar Steel Hazira Ltd - India
- Sindya Power Generating Company Private Ltd
- Thiess Contractors Indonesia
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- ASAPP Information Group - India
- Uttam Galva Steels Limited - India
- Australian Coal Association
- Medco Energi Mining Internasional
- Orica Australia Pty. Ltd.
- Mercuria Energy - Indonesia
- Ministry of Transport, Egypt
- Sakthi Sugars Limited - India
- Madhucon Powers Ltd - India
- Directorate Of Revenue Intelligence - India
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Grasim Industreis Ltd - India
- Pendopo Energi Batubara - Indonesia
- CNBM International Corporation - China
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indo Tambangraya Megah - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Attock Cement Pakistan Limited
- Leighton Contractors Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Borneo Indobara - Indonesia
- Karaikal Port Pvt Ltd - India
- Agrawal Coal Company - India
- Energy Link Ltd, New Zealand
- Romanian Commodities Exchange
- Indonesian Coal Mining Association
- Petrochimia International Co. Ltd.- Taiwan
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- Asmin Koalindo Tuhup - Indonesia
- SN Aboitiz Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Bukit Baiduri Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Chettinad Cement Corporation Ltd - India
- LBH Netherlands Bv - Netherlands
- PNOC Exploration Corporation - Philippines
- Sical Logistics Limited - India
- Simpson Spence & Young - Indonesia
- South Luzon Thermal Energy Corporation
- Dalmia Cement Bharat India
- MS Steel International - UAE
- Rio Tinto Coal - Australia
- Power Finance Corporation Ltd., India
- Bhushan Steel Limited - India
- CIMB Investment Bank - Malaysia
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- Savvy Resources Ltd - HongKong
- Commonwealth Bank - Australia
- Trasteel International SA, Italy
- Kaltim Prima Coal - Indonesia
- India Bulls Power Limited - India
- San Jose City I Power Corp, Philippines
- The University of Queensland
- Ambuja Cements Ltd - India
- Singapore Mercantile Exchange
- Kohat Cement Company Ltd. - Pakistan
- Pipit Mutiara Jaya. PT, Indonesia
- Petron Corporation, Philippines
- Edison Trading Spa - Italy
- TNB Fuel Sdn Bhd - Malaysia
- Mercator Lines Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Marubeni Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- The State Trading Corporation of India Ltd
- Gujarat Sidhee Cement - India
- Bulk Trading Sa - Switzerland
- PetroVietnam Power Coal Import and Supply Company
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- GVK Power & Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Manunggal Multi Energi - Indonesia
- Kobexindo Tractors - Indoneisa
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- Kumho Petrochemical, South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tamil Nadu electricity Board
- Intertek Mineral Services - Indonesia
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