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Monday, 29 February 16
LOSS OF EARNINGS IN THE WAKE OF A COLLISION - GARD
 KNOWLEDGE TO ELEVATE
A shipowner’s loss of earnings can form a significant part of a collision claim. Awareness of the ways of calculating loss of earnings claims can be useful in both presenting and challenging this type of claim. This Gard Insight looks at some general principles and methods applied by the courts.
A recent Gard example
A product tanker was hit by a bulker while at berth. Although the extent of the physical repairs – and therefore the repair costs – were relatively limited, the damaged tanks required stainless steel plates which had to be specially ordered. Long lead times led to a significant loss of earnings. As owners were able to document this loss with care and precision, leaving little room for doubt, the case against the owners of the bulker was settled quickly and amicably.
Basic principles
A claimant not only has the burden of proving that it has lost earnings as a result of the collision but also that it has suffered an actual loss. The fact that a ship has been unable to trade due to repairs being carried out is generally not enough, though it raises an obvious presumption that the shipowner has indeed suffered some sort of loss.
In the majority of jurisdictions, the principle of restitutio in integrum governs the measure of damages. This means that a shipowner who suffers a loss of earnings due to the negligence of another party will be put back into the position it would have been but for the negligence. Therefore, the shipowner must prove what the ship would have earned had the collision not occurred. This means that if the repairs are performed during a pre-arranged dry-docking period for example – there will be no loss.
The methods used to prove the loss depend on the facts of each case and one approach is not necessarily better than another. The optimal way is largely dependent on the trade patterns of the ship at the relevant time.
Ships on time charter
If a ship is damaged in a collision it will usually go off-hire until it has been repaired and able to function again under the terms of the charterparty. The shipowner can rely on specific off-hire statements and invoices from charterers. The loss will consist of:
- a fixed amount per day for the total time the ship is off-hire
- the bunkers consumed during the off-hire period, and
- any additional charges the time charterer may have incurred.
If the time charter has been justifiably cancelled as a result of the unavailability of the ship, the loss of earnings from that point onwards will be the difference between what the ship would have earned under the cancelled charter and what was actually earned during the same period.
Ships trading on the spot market
For a ship trading on the spot market, the approach is more flexible to calculate its loss of earnings. The starting point will be the total number of days the ship is unable to trade due to repairs, including removal time to the shipyard. However, losses may extend beyond the actual repair period, especially when the market has fallen in the meantime. If a shipowner can prove that it lost an actual fixture on the spot market due to a collision and necessary repairs, the potential net income from that fixture will be compared with the ship’s actual net income until the date the lost fixture would have ended. This is known in some jurisdictions as the time equalisation method, most recently approved in the English case of THE ASTIPALAIA [2014] EWHC 120.
For situations where a ship trading on the spot market is not fixed for her next voyage, the way to calculate the loss will depend on whether the ship was operating in an established or specialist trade.
For established trades such as the VLCC trade, fixture data is readily available throughout the year. It is a relatively simple exercise for a broker to work out what a VLCC would have earned at the relevant World Scale rates for a given period. Provided the ship would have obtained employment with a reasonable degree of certainty, the estimated charter earnings will be compared with the ship’s actual earnings for the period using the time equalisation method.
For specialised trades and trading patterns with little continuity, market data will be less readily available and reliable, so the loss of earnings calculation in each case will be more fact specific. In these cases, the best approach may be to present the average time charter equivalent earnings of the ship for a limited period around the time of collision, e.g. the casualty voyage and the voyages preceding and following the casualty. For some trades, it may be relevant to present income statements for even longer periods, however, the more remote the evidence, the more difficult it will be to prove that the figures are a true representation of the loss.
In the Norwegian collision case of Rana Frakt v ROBAS (LG-2013-173128) one party based its loss of earnings on two annual audited income statements, however the Court of Appeal made a discretionary reduction of about 33 per cent due to the lack of evidence relating to tangible fixtures the ship would have been engaged in during the period of repairs. That said, the mere fact that the loss of earnings cannot be quantified exactly will not be fatal to a claim.
FFO claims
Loss of earnings claims can arise in other contexts, e.g. where a ship damages a quay or shore based crane and renders part of a terminal unusable. The underlying assumptions and calculations involved can be complex and the appointment of a forensic accountant with knowledge of the local accountancy rules and tax law may very well be necessary in order to properly defend a shipowner’s position.
Checklist
Whether claiming or challenging loss of earnings claims, the following should be submitted:
Evidence of the total period claimed for, such as:
– Master’s statement of facts
– copies of the deck log
– the off-hire statements from charterers.
A summary of the daily net loss of earnings for the total period and the underlying documentation relied upon, such as:
– the charterparty and recap
– the off-hire invoice
– a statement from a broker of potential earnings or income statements where a time charter equivalent rate per day is arrived at.
Evidence of any mitigation, e.g. that the claimant:
– has chosen the quickest and most reasonable repair option, or
– has used other ships in its fleet to perform the contractual obligations of the damaged ship.
Evidence of the average utilisation of the ship. For ships actively trading only 80 per cent of the time, it is clearly unreasonable to claim a loss equating to 100 per cent utilisation during the period of repairs.
Final note
It is well worth spending time and effort in presenting loss of earnings claims in a clear and unambiguous manner, so that both parties understand the figures presented and the assumptions behind them. This can help achieve a quick settlement in a collision dispute.
Source: GARD
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Friday, 18 March 16
OUTLOOK ON GLOBAL SHIPPING SECTOR TURNS NEGATIVE AS SUPPLY-DEMAND GAP WIDENS AND EBITDA DECLINES - MOODY'S
Moody’s Investors Service (Moody’s) has changed its outlook on the global shipping sector to negative as it expects supply growth to ou ...
Friday, 18 March 16
DRY BULK MARKET HAS LITTLE TO LOOK FORWARD TO FROM CHINA AT THE MOMENT - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market’s rebound is long overdue, but when it comes, it won’t be because of China’s strong demand for commodities, o ...
Friday, 18 March 16
COAL PRODUCTION IN THE UNITED STATES SLIGHTLY DECREASED THIS WEEK - EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 12.5 million shor ...
Thursday, 17 March 16
THE PANAMAX MARKET SEEMS TO BE A BIT TOPPISH THIS WEEK - FEARNLEYS
Cape
There are challenging days with rates or less unchanged from last week; West Australia to China still below US$ 3 pmt, and Tuarao to China i ...
Wednesday, 16 March 16
OIL SUPPLY OUTPACES DEMAND ON ANY GIVEN DAY, AND BILLIONS OF BARRELS OF OIL ARE BEING STORED RATHER THAN CONSUMED - CHRISTOPHER
Oil producers have turned to the concept of limiting their output to January levels as a certain form of action to boost prices that have fallen mo ...
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Showing 2516 to 2520 news of total 6871 |
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- Vijayanagar Sugar Pvt Ltd - India
- Ambuja Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- Medco Energi Mining Internasional
- Petron Corporation, Philippines
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Jindal Steel & Power Ltd - India
- Siam City Cement - Thailand
- Aditya Birla Group - India
- Formosa Plastics Group - Taiwan
- Global Business Power Corporation, Philippines
- Indonesian Coal Mining Association
- Gujarat Sidhee Cement - India
- Miang Besar Coal Terminal - Indonesia
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Tamil Nadu electricity Board
- Energy Link Ltd, New Zealand
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Kideco Jaya Agung - Indonesia
- Indian Oil Corporation Limited
- Eastern Coal Council - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- Ind-Barath Power Infra Limited - India
- ICICI Bank Limited - India
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bharathi Cement Corporation - India
- Semirara Mining and Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- MS Steel International - UAE
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- Central Java Power - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- The Treasury - Australian Government
- Rashtriya Ispat Nigam Limited - India
- Directorate Of Revenue Intelligence - India
- European Bulk Services B.V. - Netherlands
- Planning Commission, India
- Economic Council, Georgia
- Sojitz Corporation - Japan
- CIMB Investment Bank - Malaysia
- Banpu Public Company Limited - Thailand
- AsiaOL BioFuels Corp., Philippines
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining Corp, Philippines
- Essar Steel Hazira Ltd - India
- Oldendorff Carriers - Singapore
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
- Goldman Sachs - Singapore
- Kohat Cement Company Ltd. - Pakistan
- GN Power Mariveles Coal Plant, Philippines
- Barasentosa Lestari - Indonesia
- Coal and Oil Company - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Asam (Persero) Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Sical Logistics Limited - India
- Meenaskhi Energy Private Limited - India
- SMC Global Power, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- The University of Queensland
- Marubeni Corporation - India
- OPG Power Generation Pvt Ltd - India
- Mercator Lines Limited - India
- Bukit Baiduri Energy - Indonesia
- Mjunction Services Limited - India
- Tata Chemicals Ltd - India
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- PetroVietnam Power Coal Import and Supply Company
- Coastal Gujarat Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Deloitte Consulting - India
- Anglo American - United Kingdom
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Timah Investasi Mineral - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CNBM International Corporation - China
- PTC India Limited - India
- Indian Energy Exchange, India
- Electricity Authority, New Zealand
- Toyota Tsusho Corporation, Japan
- Chamber of Mines of South Africa
- VISA Power Limited - India
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
- Ministry of Finance - Indonesia
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Kobexindo Tractors - Indoneisa
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Transport, Egypt
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Generating Authority of Thailand
- Posco Energy - South Korea
- Manunggal Multi Energi - Indonesia
- Attock Cement Pakistan Limited
- Bhushan Steel Limited - India
- Jorong Barutama Greston.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Makmur.PT - Indonesia
- Dalmia Cement Bharat India
- Cigading International Bulk Terminal - Indonesia
- Merrill Lynch Commodities Europe
- IHS Mccloskey Coal Group - USA
- Thiess Contractors Indonesia
- Thai Mozambique Logistica
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- Romanian Commodities Exchange
- Parliament of New Zealand
- San Jose City I Power Corp, Philippines
- Kaltim Prima Coal - Indonesia
- GMR Energy Limited - India
- Siam City Cement PLC, Thailand
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Bahari Cakrawala Sebuku - Indonesia
- Orica Mining Services - Indonesia
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- Simpson Spence & Young - Indonesia
- Meralco Power Generation, Philippines
- Georgia Ports Authority, United States
- Holcim Trading Pte Ltd - Singapore
- Kapuas Tunggal Persada - Indonesia
- New Zealand Coal & Carbon
- PNOC Exploration Corporation - Philippines
- GVK Power & Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- Videocon Industries ltd - India
- Malabar Cements Ltd - India
- Salva Resources Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Pipit Mutiara Jaya. PT, Indonesia
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- Kumho Petrochemical, South Korea
- Globalindo Alam Lestari - Indonesia
- Larsen & Toubro Limited - India
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- Makarim & Taira - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bhatia International Limited - India
- ASAPP Information Group - India
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Kepco SPC Power Corporation, Philippines
- Australian Coal Association
- Commonwealth Bank - Australia
- Riau Bara Harum - Indonesia
- Bayan Resources Tbk. - Indonesia
- GAC Shipping (India) Pvt Ltd
- Intertek Mineral Services - Indonesia
- Mintek Dendrill Indonesia
- Straits Asia Resources Limited - Singapore
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- India Bulls Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Coalindo Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Madhucon Powers Ltd - India
- Star Paper Mills Limited - India
- Minerals Council of Australia
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
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