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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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Sunday, 30 March 14
FREIGHTS FROM INDONESIA TO INDIA IS EXPECTED TO BE SOFT NEXT WEEK - REDDY
COALspot.com: The freight market dropped drastically and all sectors were affected severely.
The BDI was down by 14.13 pct and closed at 1, ...
Friday, 28 March 14
US PRODUCED APPROXIMATELY 18.9 MMST IN A WEEK - EIA
COALspot.com – United States the world's second largest coal producer, produced approximately 18.9 million short tons (mmst) of coal i ...
Friday, 28 March 14
CHINA'S ENVIRONMENTAL MEASURES WILL NOT CURB GROWTH IN DOMESTIC STEEL PRODUCTION AND SEABORNE IRON ORE - WOOD MACKENZIE SAYS
Steel plants in China have been targeted as a major source of the toxic smog enveloping Beijing and Shanghai. Emergency measures have been impos ...
Thursday, 27 March 14
PANAMAX : SEEMS TO HEAD FURTHER DOWN; CAPESIZE : ANOTHER CHOPPY AND UNPREDICTABLE WEEK - FEARNLEYS AS
Handy
A weaker sentiment for the smaller size as well, with reduced activity in the Atlantic where Owners have to face significantly lower ret ...
Wednesday, 26 March 14
NEWBUILDING ORDERING ACTIVITY PICKS UP PACE ON IMPROVING DRY BULK MARKET CONDITIONS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The gradual improvement of the dry bulk market, as expected for some time now, is urging shipowners to increase their newbuilding ordering activ ...
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Showing 3776 to 3780 news of total 6871 |
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- Carbofer General Trading SA - India
- Jaiprakash Power Ventures ltd
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Central Electricity Authority - India
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Energy Development Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Siam City Cement - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Economic Council, Georgia
- Global Coal Blending Company Limited - Australia
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- White Energy Company Limited
- Wood Mackenzie - Singapore
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Parry Sugars Refinery, India
- Directorate Of Revenue Intelligence - India
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- IHS Mccloskey Coal Group - USA
- PowerSource Philippines DevCo
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- Siam City Cement PLC, Thailand
- Independent Power Producers Association of India
- Merrill Lynch Commodities Europe
- Altura Mining Limited, Indonesia
- Planning Commission, India
- The University of Queensland
- Ministry of Mines - Canada
- Central Java Power - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Eastern Coal Council - USA
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Edison Trading Spa - Italy
- Chettinad Cement Corporation Ltd - India
- Gujarat Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- Madhucon Powers Ltd - India
- Kideco Jaya Agung - Indonesia
- Wilmar Investment Holdings
- Romanian Commodities Exchange
- Indian Oil Corporation Limited
- Africa Commodities Group - South Africa
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Bukit Baiduri Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Indogreen Group - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Antam Resourcindo - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- ASAPP Information Group - India
- Agrawal Coal Company - India
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Rio Tinto Coal - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Minerals Council of Australia
- MS Steel International - UAE
- Indonesian Coal Mining Association
- Malabar Cements Ltd - India
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Ind-Barath Power Infra Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- Power Finance Corporation Ltd., India
- ICICI Bank Limited - India
- Thai Mozambique Logistica
- Semirara Mining and Power Corporation, Philippines
- Ministry of Finance - Indonesia
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- Parliament of New Zealand
- Meenaskhi Energy Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
- LBH Netherlands Bv - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Karaikal Port Pvt Ltd - India
- Bangladesh Power Developement Board
- Tata Chemicals Ltd - India
- Kaltim Prima Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- New Zealand Coal & Carbon
- Maharashtra Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Essar Steel Hazira Ltd - India
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- Eastern Energy - Thailand
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Vizag Seaport Private Limited - India
- Borneo Indobara - Indonesia
- Kobexindo Tractors - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- GVK Power & Infra Limited - India
- Medco Energi Mining Internasional
- Orica Mining Services - Indonesia
- India Bulls Power Limited - India
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- Kepco SPC Power Corporation, Philippines
- Chamber of Mines of South Africa
- Salva Resources Pvt Ltd - India
- Sical Logistics Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Heidelberg Cement - Germany
- Bharathi Cement Corporation - India
- Commonwealth Bank - Australia
- SMG Consultants - Indonesia
- Baramulti Group, Indonesia
- Savvy Resources Ltd - HongKong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Therma Luzon, Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Aditya Birla Group - India
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Ministry of Transport, Egypt
- Alfred C Toepfer International GmbH - Germany
- Larsen & Toubro Limited - India
- Barasentosa Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- London Commodity Brokers - England
- Gujarat Mineral Development Corp Ltd - India
- Kartika Selabumi Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Global Business Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Straits Asia Resources Limited - Singapore
- Meralco Power Generation, Philippines
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- Cement Manufacturers Association - India
- Mjunction Services Limited - India
- Standard Chartered Bank - UAE
- Attock Cement Pakistan Limited
- Maheswari Brothers Coal Limited - India
- CIMB Investment Bank - Malaysia
- Global Green Power PLC Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Pendopo Energi Batubara - Indonesia
- Bhushan Steel Limited - India
- Electricity Generating Authority of Thailand
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Uttam Galva Steels Limited - India
- Ambuja Cements Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Formosa Plastics Group - Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Posco Energy - South Korea
- Thiess Contractors Indonesia
- Port Waratah Coal Services - Australia
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- The Treasury - Australian Government
- Holcim Trading Pte Ltd - Singapore
- GAC Shipping (India) Pvt Ltd
- IEA Clean Coal Centre - UK
- Sindya Power Generating Company Private Ltd
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coastal Gujarat Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Georgia Ports Authority, United States
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- Makarim & Taira - Indonesia
- Riau Bara Harum - Indonesia
- Marubeni Corporation - India
- PTC India Limited - India
- San Jose City I Power Corp, Philippines
- Latin American Coal - Colombia
- Mercator Lines Limited - India
- South Luzon Thermal Energy Corporation
- Interocean Group of Companies - India
- McConnell Dowell - Australia
- Timah Investasi Mineral - Indoneisa
- CNBM International Corporation - China
- Bhatia International Limited - India
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- Gujarat Sidhee Cement - India
- Trasteel International SA, Italy
- Bukit Makmur.PT - Indonesia
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