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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, 07 March 14
US PRODUCED 19.4 MMST OF COAL IN PAST 7 DAYS, SAYS EIA
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.4 million short tons (mmst) of coal in ...
Thursday, 06 March 14
PANAMAX MARKET IS STRUGGLING IN BOTH HEMISPHERES - FEARNRESEARCH
Handy
The Handy/Supra market experienced a rate increase in the Pacific. The activity itself is not too big, but spot tonnage is clearing up and ow ...
Wednesday, 05 March 14
THE BIG BULKERS HAVE IN FACT WITNESSED SIGNIFICANT IMPROVEMENTS IN BOTH BASINS
The BDI continues to gain back some of the lost ground, although in reality there isn't a lot to celebrate abou ...
Wednesday, 05 March 14
LEAVE IT TO CAPES TO CHANGE THE DIRECTION OF THE DRY BULK MARKET - INTERMODAL
Chartering (Wet: Stable- / Dry: Stable+)
Leave it to Capes to change the direction of the Dry Bulk market. The big bulkers managed to drag the BDI ...
Tuesday, 04 March 14
AUSTRALIA'S NPC TO SHIP 11.85 MMT OF COAL IN MARCH
COALspot.com: In the week ended 3 March 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 3.15 m ...
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Showing 3816 to 3820 news of total 6871 |
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- Malabar Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Mjunction Services Limited - India
- The State Trading Corporation of India Ltd
- Rio Tinto Coal - Australia
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Kideco Jaya Agung - Indonesia
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- LBH Netherlands Bv - Netherlands
- Agrawal Coal Company - India
- Bukit Baiduri Energy - Indonesia
- Parry Sugars Refinery, India
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Bangladesh Power Developement Board
- Sical Logistics Limited - India
- India Bulls Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- Ind-Barath Power Infra Limited - India
- IEA Clean Coal Centre - UK
- Intertek Mineral Services - Indonesia
- GVK Power & Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- TNB Fuel Sdn Bhd - Malaysia
- Altura Mining Limited, Indonesia
- Meralco Power Generation, Philippines
- Salva Resources Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Mercuria Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Australian Coal Association
- Maharashtra Electricity Regulatory Commission - India
- Kaltim Prima Coal - Indonesia
- Samtan Co., Ltd - South Korea
- Ceylon Electricity Board - Sri Lanka
- Sree Jayajothi Cements Limited - India
- Savvy Resources Ltd - HongKong
- Indian Energy Exchange, India
- The University of Queensland
- Wood Mackenzie - Singapore
- Coal and Oil Company - UAE
- Neyveli Lignite Corporation Ltd, - India
- Alfred C Toepfer International GmbH - Germany
- Sinarmas Energy and Mining - Indonesia
- Xindia Steels Limited - India
- Coalindo Energy - Indonesia
- Indian Oil Corporation Limited
- Orica Australia Pty. Ltd.
- MS Steel International - UAE
- Vijayanagar Sugar Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Ministry of Transport, Egypt
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kobexindo Tractors - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Ministry of Mines - Canada
- Bharathi Cement Corporation - India
- Banpu Public Company Limited - Thailand
- Vedanta Resources Plc - India
- New Zealand Coal & Carbon
- Formosa Plastics Group - Taiwan
- Dalmia Cement Bharat India
- Georgia Ports Authority, United States
- Posco Energy - South Korea
- SMC Global Power, Philippines
- Singapore Mercantile Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Toyota Tsusho Corporation, Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Indika Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- Independent Power Producers Association of India
- Cigading International Bulk Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- GAC Shipping (India) Pvt Ltd
- Indogreen Group - Indonesia
- Sindya Power Generating Company Private Ltd
- Deloitte Consulting - India
- Indo Tambangraya Megah - Indonesia
- Simpson Spence & Young - Indonesia
- Kumho Petrochemical, South Korea
- Parliament of New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Orica Mining Services - Indonesia
- Meenaskhi Energy Private Limited - India
- San Jose City I Power Corp, Philippines
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- White Energy Company Limited
- Gujarat Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- Maheswari Brothers Coal Limited - India
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Jindal Steel & Power Ltd - India
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Straits Asia Resources Limited - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Commonwealth Bank - Australia
- PowerSource Philippines DevCo
- South Luzon Thermal Energy Corporation
- ASAPP Information Group - India
- Kalimantan Lumbung Energi - Indonesia
- Anglo American - United Kingdom
- Borneo Indobara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Iligan Light & Power Inc, Philippines
- Latin American Coal - Colombia
- Merrill Lynch Commodities Europe
- Lanco Infratech Ltd - India
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- Globalindo Alam Lestari - Indonesia
- Ambuja Cements Ltd - India
- The Treasury - Australian Government
- Central Electricity Authority - India
- Pipit Mutiara Jaya. PT, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Grasim Industreis Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- Mintek Dendrill Indonesia
- Karaikal Port Pvt Ltd - India
- Marubeni Corporation - India
- OPG Power Generation Pvt Ltd - India
- Carbofer General Trading SA - India
- Semirara Mining Corp, Philippines
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Interocean Group of Companies - India
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Baramulti Group, Indonesia
- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
- Standard Chartered Bank - UAE
- Manunggal Multi Energi - Indonesia
- Bulk Trading Sa - Switzerland
- IHS Mccloskey Coal Group - USA
- Global Coal Blending Company Limited - Australia
- Wilmar Investment Holdings
- Electricity Generating Authority of Thailand
- SMG Consultants - Indonesia
- PTC India Limited - India
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Cement Manufacturers Association - India
- PetroVietnam Power Coal Import and Supply Company
- Bayan Resources Tbk. - Indonesia
- Sojitz Corporation - Japan
- Minerals Council of Australia
- Uttam Galva Steels Limited - India
- Madhucon Powers Ltd - India
- Global Business Power Corporation, Philippines
- CNBM International Corporation - China
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Ministry of Finance - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Price Waterhouse Coopers - Russia
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Global Green Power PLC Corporation, Philippines
- Goldman Sachs - Singapore
- Australian Commodity Traders Exchange
- Siam City Cement - Thailand
- Bhatia International Limited - India
- Timah Investasi Mineral - Indoneisa
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