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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, 23 March 14
THE COAL FREIGHT RATES SEEN SLIGHTLY FIRMING UP THIS WEEK - REDDY
COALspot.com: The freight market firmed up this week. BDI was up 8.26 pct week on week and index was closed at 1599 points. The Cape index was u ...
Saturday, 22 March 14
SHIP OWNERS INVEST $15 BILLION FOR NEWBUILDINGS AND SECONDHAND VESSELS DURING FEBRUARY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners have kept on their aggressive stance in the investment scene both for newbuildings, as well as for secondhand vessels globally durin ...
Friday, 21 March 14
DRY BULK MARKET STAYS ON RECOVERY MODE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has reached new year heighs, as a result of renewed Capesize demand. The Baltic Dry Index (BDI) ended yesterday's sessio ...
Friday, 21 March 14
US COAL PRODUCTION UP 1.5%; WEST MISSISSIPPI COAL PRODUCTION DOWN 1.85% WEEK ON WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.0 million short tons (mmst) of coal i ...
Friday, 21 March 14
MERCURIA ANNOUNCES ACQUISITION OF J.P. MORGAN PHYSICAL COMMODITIES BUSINESS
COALspot.com: Mercuria Energy Group announced that it has reached a definitive agreement with J.P. Morgan Chase & Co. to acquire its physica ...
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Showing 3786 to 3790 news of total 6871 |
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- New Zealand Coal & Carbon
- GVK Power & Infra Limited - India
- Samtan Co., Ltd - South Korea
- Deloitte Consulting - India
- Neyveli Lignite Corporation Ltd, - India
- Sakthi Sugars Limited - India
- Star Paper Mills Limited - India
- Planning Commission, India
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- Aditya Birla Group - India
- Gujarat Mineral Development Corp Ltd - India
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Standard Chartered Bank - UAE
- Riau Bara Harum - Indonesia
- Africa Commodities Group - South Africa
- Timah Investasi Mineral - Indoneisa
- Wood Mackenzie - Singapore
- CNBM International Corporation - China
- IHS Mccloskey Coal Group - USA
- Sojitz Corporation - Japan
- PNOC Exploration Corporation - Philippines
- Sical Logistics Limited - India
- Tamil Nadu electricity Board
- AsiaOL BioFuels Corp., Philippines
- Gujarat Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- White Energy Company Limited
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- Economic Council, Georgia
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- Ind-Barath Power Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- Bangladesh Power Developement Board
- Indogreen Group - Indonesia
- Electricity Generating Authority of Thailand
- Energy Link Ltd, New Zealand
- Orica Mining Services - Indonesia
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Bukit Makmur.PT - Indonesia
- Agrawal Coal Company - India
- Thai Mozambique Logistica
- Indika Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Oil Corporation Limited
- Kideco Jaya Agung - Indonesia
- Cement Manufacturers Association - India
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Goldman Sachs - Singapore
- Australian Commodity Traders Exchange
- Bharathi Cement Corporation - India
- LBH Netherlands Bv - Netherlands
- International Coal Ventures Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Parry Sugars Refinery, India
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- PTC India Limited - India
- London Commodity Brokers - England
- Eastern Coal Council - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- Trasteel International SA, Italy
- Vizag Seaport Private Limited - India
- Sindya Power Generating Company Private Ltd
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Salva Resources Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Pendopo Energi Batubara - Indonesia
- Borneo Indobara - Indonesia
- Kepco SPC Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- PowerSource Philippines DevCo
- Toyota Tsusho Corporation, Japan
- Karbindo Abesyapradhi - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Xindia Steels Limited - India
- Orica Australia Pty. Ltd.
- The State Trading Corporation of India Ltd
- Miang Besar Coal Terminal - Indonesia
- Carbofer General Trading SA - India
- Central Electricity Authority - India
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Java Power - Indonesia
- Indonesian Coal Mining Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Coal Association
- MS Steel International - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Dalmia Cement Bharat India
- Rio Tinto Coal - Australia
- Indo Tambangraya Megah - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- Petron Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Formosa Plastics Group - Taiwan
- Madhucon Powers Ltd - India
- India Bulls Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Altura Mining Limited, Indonesia
- Global Business Power Corporation, Philippines
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
- Videocon Industries ltd - India
- Kartika Selabumi Mining - Indonesia
- Eastern Energy - Thailand
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sree Jayajothi Cements Limited - India
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Parliament of New Zealand
- The University of Queensland
- Heidelberg Cement - Germany
- Thiess Contractors Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Price Waterhouse Coopers - Russia
- ASAPP Information Group - India
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Merrill Lynch Commodities Europe
- Bhushan Steel Limited - India
- Minerals Council of Australia
- Mjunction Services Limited - India
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Global Green Power PLC Corporation, Philippines
- Coal and Oil Company - UAE
- Kobexindo Tractors - Indoneisa
- Singapore Mercantile Exchange
- Banpu Public Company Limited - Thailand
- Kaltim Prima Coal - Indonesia
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- Meralco Power Generation, Philippines
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- Ministry of Transport, Egypt
- Electricity Authority, New Zealand
- Ministry of Finance - Indonesia
- Sinarmas Energy and Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- VISA Power Limited - India
- Indian Energy Exchange, India
- Ambuja Cements Ltd - India
- ICICI Bank Limited - India
- Leighton Contractors Pty Ltd - Australia
- Larsen & Toubro Limited - India
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Commonwealth Bank - Australia
- Anglo American - United Kingdom
- GMR Energy Limited - India
- Therma Luzon, Inc, Philippines
- Baramulti Group, Indonesia
- Power Finance Corporation Ltd., India
- Oldendorff Carriers - Singapore
- Ceylon Electricity Board - Sri Lanka
- Malabar Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Bayan Resources Tbk. - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Edison Trading Spa - Italy
- Chettinad Cement Corporation Ltd - India
- Uttam Galva Steels Limited - India
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Renaissance Capital - South Africa
- Grasim Industreis Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
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- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Port Waratah Coal Services - Australia
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