Publications
Claims Review: Issue 1
| Title | Contents | |
|---|---|---|
| 1 | Introduction | About the Claims Review |
| 2 | Wrong tariff used for container demurrage | Ship agent claim |
| 3 | Misdelivery of cargo against letter of guarantee | Ship agent claim |
| 4 | Fixture on behalf of non-existent or fictitious | Ship broker claim |
| 5 | Late submission of Customs T forms | Ship agent claim |
| 6 | Failure to report claused Mate's Receipts | Ship agent claim |
| 7 | Reefer container in general cargo stow | Ship agent claim |
| 8 | Recovery of unpaid disbursements | Ship agent debt collection |
| 9 | Time limit for demurrage claim | Ship broker claim |
| 10 | Recovery of unpaid commissions | Ship broker debt collection |
| 11 | Failure to instruct terminal of storage conditions | Ship agent claim |
| 12 | Delivery of cargo without bills of lading | Ship agent claim |
| 13 | Non-performance of charter party | Ship broker claim |
| 14 | Agents held liable to ship breakers for wharfage dues unpaid by owners | Ship agent claim |
CLAIMS REVIEW - ISSUE 1
OCT 93
Welcome to the first edition of ITIC Claims Review. This publication has been written in response to suggestions by many of ITIC's Members that we should periodically publish selections of cases which have either been paid by the Club or where assistance has been rendered in, for example, the collection of outstanding disbursements or commissions.
We hope that these "case histories" will be of interest to all Members and may help them identify potential claims exposure. We also hope that the examples will assist them when reviewing their office procedures and their arrangements for training and supervising staff.
ITIC's magazine The Intermediary will continue to be published (next edition October 1993). It will contain articles on specific issues affecting the Club and its Managers.
Wrong tariff used for container demurrage
Twenty-six containers were discharged in Antwerp and the port agents were requested by the consignees' forwarder to quote the daily demurrage rate per box. Their principal's rate was US$ 42 per box but the employee handling the enquiry referred erroneously to another line's tariff and quoted their rate which was only US$ 10 per box per day.
The lower figures encouraged the consignees to leave the boxes in the port for a considerable period and it was several weeks before the mistake was discovered. As soon as the error came to light the original invoice, based on US$ 10 per day, was reissued for the correct rate, but the consignees refused to pay the substantially higher charge and insisted that they were only liable at the lower rate.
The Club's lawyers advised that the correct amount of demurrage due from the consignees could not be recovered. The agents' principal, whilst sympathetic, insisted on recovery in full as he had quite properly filed his demurrage tariff with the FMC.
This simple error by the agents' employee cost their employers nearly US$ 60,000, which could have been very much more if the error had remained undetected for a longer period of time. Fortunately, the Club was able to relieve the agents of the problem and the ultimate loss.
Misdelivery of cargo against letter of guarantee
Liner agents were authorised by shippers to deliver a consignment of frozen chickens to receivers against a bank guarantee. The bank guarantee was received covering 112,309 kilos of frozen chickens for a value of USD$ 106,393. The agent telexed the terms of the guarantee to their principals who confirmed that the cargo should be delivered.
Unfortunately, the employee who prepared the delivery order failed to notice that the bill of lading was for 18,657 cartons of frozen chickens which was a substantially greater quantity than the 112,309 kilos covered by the bank guarantee and a delivery order was issued for the full quantity, valued at US$ 219,746.
The shippers claimed against the agents for the value of the consignment not covered by the guarantee, i.e. US$ 113,353 and the Club settled the claim for the full amount on the recommendation of its lawyers who advised that there was a clear liability on the agents.
Efforts to recover from the receivers met with no success.
Fixture on behalf of non-existent or fictitious principal
Chartering brokers fixed a vessel on behalf of charterers in Panama. The vessel was time chartered for a voyage from Far Eastern ports to Arabian Gulf and Red Sea ports.
Soon after loading had been completed it became clear that the charterers were in serious financial difficulties and had not paid the owners' hire and other ancillary expenses. Furthermore, the owners were obliged to utilise their own funds to complete the contracted voyage and discharge at Red Sea ports.
Subsequently the brokers were advised by the ship's managers that their enquiries revealed that the charterers were not registered in Panama. Thereupon the Club made enquiries in Panama and Taiwan to establish the true status of the charterers were identical.
In due course lawyers acting for the managers of the vessel served a writ for US$ 365,237 on the brokers alleging negligence in the negotiation of the charterparty and claiming that the charterers did not, in fact, legally exist.
A defence to the claim was mounted and the case was set down for hearing before the Court. By this time interest and costs added to the original claim meant that an adverse judgement would result in a claim on the brokers in excess of US$ 500,000. As there was a real risk of judgement being given in favour of owners, negotiations were commenced which ultimately resulted in a settlement of the claim for US$ 170,000.
Finally, it should be noted that a not uncommon case is where a company is in the course of formation and the broker enters into a contract on behalf of the proposed company before it has in fact been incorporated.
In such a case the broker is personally bound even if he expressly stipulates that he is only representing the company and qualifies his signature, e.g. signs adding the words "as agent only". The contract is then one between the broker as principal and the other party.
When the company comes into existence it cannot ratify the contract purporting to have been entered into on its behalf before the date of its incorporation.
Late submission of Customs T forms
Clearing agents were asked by their principals to complete the Customs formalities for a cargo of fuel oil which included reclaiming duty amounting to £48,341 under the EC tariff quota system.
Rebates under EC tariff quotas are granted on a "first come first served" basis and any claims which reach Customs after the quota has been exhausted are rejected. It is therefore essential to submit claims for rebates without delay.
In this instance the agents delayed on month before sending the documents to Customs and when they did they quoted the incorrect Customs' entry number on their covering letter.
Some months after lodging the documents, the agents were informed by Customs that the claim for rebate of duty had been declined as it was received a few days after the EEC quota was exhausted. The agents informed their principals that the claim had been rejected and they in turn put the agents on notice that they would be seeking redress from them for any losses they might incur.
Subsequently the amount of the principals' loss was reduced to £23,480 due to a refund of part of the duty from Customs and a contribution from the suppliers of the oil.
Failure to report claused Mate's receipts
A ship loaded a cargo of copper cathodes which the Chief Officer noted on the Mate's receipt and Loading Exceptions was short of six bundles.
The Chief Officer tried to contact the shippers via sub-agents to report the short shipment but was unable to do so before the ship sailed. In the circumstances the sub-agents undertook to forward the information on the Mate's receipt and Loading Exceptions report to the shippers and to the Line's agents who were to issue the bill of lading.
In the event the information passed to the Line's agents was that a full cargo had been loaded in accordance with the shippers' documentation. Consequently, the bill of lading was drawn up without any reference to the short loading of the cargo.
Inevitably the consignees at the discharge port presented a short landing claim under the bill of lading against the Line and they in turn looked to the sub-agents for indemnity.
There being no defence, the claim was settled in full for the sum of US$ 38,000.
Reefer container in general cargo stow
Agents accepted a booking for the shipment of a reefer container containing lobster meat. As agents for the Line one of their responsibilities was the preparation of the ship's stowage plan at the loading port.
Due to a clerical error in the agents' office the reefer container was loaded in a general cargo stow and when out-turned at the discharge port, the contents had to be destroyed.
The receivers made a claim for US$ 74,000 against the Line to which they had no defence and they in turn claimed indemnity from the agents. After taking legal advice, the Line's claim was settled in full.
It is pertinent to mention here that the financial consequences of simple errors are impossible to foresee. In this instance the value of the cargo was US$ 74,000 but it could well have been many times that figure.
Recovery of unpaid disbursements
Port agents requested the assistance of the Club to recover unpaid disburse- ments amounting to £24,900. The owners operated a fleet of approximately 40 ships, each of which was owned by a separate one-ship Panamanian company.
The Club's demands for payment were ignored and consideration was given to the arrest of the vessel. Unfortunately, enquiries showed that the vessel did not trade in waters which made this possible. However, the laws in France permit the arrest of associated ships if it can be proved that the shareholders of the owning company of the vessel which incurred the disbursements, the shareholders of other one-ship companies and the shareholders of the holding company are virtually identical.
This proved to be the case in this instance. Reference to Lloyds Shipping Index revealed that an associated ship owned by another company within the group was heading for France and the Club's French lawyers were instructed to arrest her on arrival.
This was done and the Club succeeded in recovering £33,945 representing the amount of the debt plus interest and costs.
Time limit for demurrage claim
Shipbrokers acted as sole brokers for the voyage charter of a tanker whose owners calculated that they had a claim for demurrage against the charterers in the amount of US$ 60,287 when the voyage was completed.
One of the terms of the charterparty was that charterers would be released from all liability for demurrage unless the documents were presented to them within 90 days of completion of the discharge.
The owners sent the required documentation to the brokers and the papers were delivered during the Christmas and New Year holiday period when only a skeleton staff was present in the brokers' office. Unfortunately, the letter was routed to the wrong department and, by the time the error was noticed, the 90 day period had elapsed and the owners' claim against charterers was therefore time-barred.
The Club's lawyers advised that no defence was available to the owners' claim for indemnity, which was promptly settled in full by the Club in the best interests of all concerned.
Recovery of unpaid commissions
Chartering brokers requested the assistance of the Club to recover commissions of US$ 21,788 in respect of the fixture of several vessels over a period of more than a year. The Club's demands for payment were ignored and further action was under consideration when another Member reported that they had been unable to collect outstanding commissions of US$ 5,789 due to them from the same principal.
Enquiries revealed that a ship managed by a division of the group concerned was reported to be sailing towards the Antilles and information was obtained that the ship was to be stemmed with bunkers on arrival. A local lawyer was instructed to arrest the bunkers as security for the outstanding commission.
An order for arrest was obtained from the Court and the debtor responded immediately with instructions to their bank to make an immediate remittance, whereupon the ship was released.
Failure to instruct terminal of storage conditions
Importers of wines from France into the United States had previously encountered problems with consignments imported through New York during the winter months when the wine could be subjected to sub-zero temperatures causing it to freeze and so lose its quality.
In response to this problem, the Line issued instructions which required the agent to instruct the terminal operator to open the container as soon as it was delivered and place portable heaters inside to keep the temperature in the container above freezing.
Unfortunately, the agent failed to give the necessary instructions in respect of a cargo of nine containers of wine, and whilst eight of the containers suffered no damage, the carriers received a claim for US$ 120,000 for freezing damage to the remaining container.
A claim was made against the agent and after lengthy negotiations a satisfactory settlement in the sum of US$ 32,650 was agreed.
Delivery of cargo without bills of lading
Liner agents took delivery of two discharged containers of frozen beef. The agents arranged for the two containers to be transferred to cold storage where they were stripped and the beef placed in storage awaiting delivery instructions.
A short time later the storage company delivered the beef to third parties on the instructions of the notify party without the bills of lading being surrendered. It was not until two weeks later that the agents became aware that the original bills of lading had not been surrendered, and their enquiries revealed that the beef had already been delivered. At about the same time the agents learned that the notify party had filed for bankruptcy.
Lawyers advised that the agents' principals would be liable to the holders of the bills of lading for the value of the cargo, and that they in turn would have a good claim for indemnity against the agents for allowing the release of the cargo without ensuring that the bills of lading were first surrendered.
The value of the cargo was US$ 73,400 which was settled in full with the Line and the shippers, in return for an assignment of their rights against the storage company and the notify party. Unfortunately, after a full investigation lawyers advised that a claim against the storage company was unlikely to succeed and there was little prospect of any recovery from the notify party's bankruptcy.
Non-performance of charterparty
Shipbrokers, acting as charterers' brokers, fixed a ship with owners' brokers with laycan 18th/22nd September. On 18th September the owners' brokers advised that the ship would be delayed. There followed a number of requests for extensions of laycan which were granted by charterers subject to the proviso that they would hold owners liable for any loss suffered due to the delay.
Owners refused to accept this proviso, and on 1st October charterers' brokers were authorised by charterers to inform owners that they would not be held responsible for the ship's delayed arrival at loading port.
The following day, owners' brokers advised that owners would not proceed with the charterparty, whereupon the charterers, through their lawyers, held charterers' brokers and others responsible for any loss suffered by them. Subsequently a writ was served claiming US$ 177,500 plus interest for additional freight charges and penalties payable by the charterers under the cargo purchase contract.
Enquiries by the Club's lawyers revealed that the so-called owners had not, in fact, completed the purchase of the ship when the charterparty was completed and this probably accounted for the delay in presenting the ship. Furthermore, the name of the ship given in the charterparty was not the true name of the ship concerned, but the name the new owner intended to use after completion of the purchase.
These circumstances identified a breach of warranty of authority by the charterers' brokers, and whilst a defence to the claim could be raised, the Club and its lawyers agreed that a negotiated settlement rather than Court proceedings was the right course to follow.
After lengthy discussions with lawyers for the claimant, the matter was settled with a payment of US$ 130,000 including interest and costs.
Agents held liable to ship breakers for wharfage dues unpaid by owners
Agents for a ship which had been sold to breakers in Taiwan took proper steps to obtain sufficient funds in advance of the ship's arrival to meet all anticipated expenses.
However, after arrival at the yard the ship was arrested in respect of monies owed to interested parties outside Taiwan. Eventually the owners were able to reach an agreement with the claimants and the arrest was lifted. In the meantime, additional wharfage dues amounting to US$ 26,800 had accumulated.
The ship breakers paid these dues under protest and subsequently brought an action against the ship's agents for indemnity.
Lawyers were instructed to represent the agents and although they were hopeful that the claim could be successfully resisted, the Court gave judgement in favour of the ship breakers. A decision was taken to appeal against the judgement, but this too was unsuccessful, and the Club settled the claim in full.
Meanwhile the vessel had been broken up and the owning company was found to have no other assets. Strenuous efforts were made to recover the Club's payment from the managers of the ship and others but for various reasons these were unsuccessful.
Notwithstanding that the agent had done nothing wrong, the claim cost the Club in excess of US$ 30,000 and it is a good example of an agent being held responsible for the liabilities of his principal. Fortunately, for the agent, the comprehensive protection offered by the ITIC's Rules covers such an eventuality.
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Permission to reproduce or distribute this document can be obtained from
Charlotte Kirk, ITIC, tel: (0)20 7204 2928, email: ITIC@thomasmiller.com