What does it cost you if you disable a supertanker? Given the Admiralty Court’s longstanding position as the collision capital of the world and experienced P & I clubs’ everyday practice in settling such claims, one might have thought that once the facts were known the matter was largely one of arithmetic: repair costs, loss of use damages and a few other miscellaneous matters. The Vicky I 1 shows that matters are less straightforward than they seem. Not only did the parties’ computations of the proper measure of recovery on agreed facts differ by a factor of three, but there was also a nice argument on the proper application of recovery for loss of a chance.

On 12 December 2002 the defendants’ vessel Vicky 1, a tanker used to ferry oil from supertanker to refinery, hit and damaged the Front Ace, the claimants’ VLCC, which was about to slip her a cargo. The defendants’ liability was not seriously in doubt. What was importantly in issue, however, was the measure of recovery for loss of use of the Front Ace. Although repairs to the vessel took only a few days, they took her beyond the laycan for a previously-arranged and extremely lucrative2 voyage charter to Chevron to carry crude oil from the Gulf to the Far East.3 This charter would have lasted from 20 December 2002 to 20 January 2003 and was worth, in round figures, $62,000 profit per day. Rates having dropped remarkably since the charter was fixed, Chevron had no compunction in cancelling it. At the end of December the now patched-up Front Ace was refixed with Vitol for a longer and much less rewarding4 voyage charter from West Africa ending on 18 April 2003, at an effective rate of profit of about $35,000 per day.

How should the loss be computed? Front Ace’s owners contended that the most accurate measure of their loss was the so-called “time equalisation method”. According to this argument, you took the would-be profit on the Chevron charter, added in the pro rata profit that would probably have been made in the market between 20 January and 18 April (had not the vessel been bound by the Vitol charter), deducted the actual profit made on the Vitol charter, and awarded the difference. The result: approximately $2.36 million. The defendants argued for the “ballast-laden method”. Ignoring its recondite title, this meant taking the profit that would have been made on the abortive Chevron charter, deducting from it the pro rata profit that was in fact made on the Vitol charter during the putative period of the Chevron charter (ie, up to 20 January 2003), and awarding the balance—which worked out at about $850,000. Or, to put matters more simply, the issue between the parties was whether the extra loss of profits caused by the fact that the claimants were bound in to the Vitol charter until April was for the claimants’ or the defendants’ account.