16th May, 2008 | 7:38:39 BST

Publications

Claims Review: Issue 11

  Title Contents
  Credit Management Information Centre  
1 Unpaid Suez canal dues Ship agent claim
2 Tanker broker's disappearing principal Ship broker claim
3 Double arrest Ship agent claim
4 Ship arrest in Senegal Ship agent claim
5 Forwarder's booking note Ship agent claim
6 Failure to notify agency status Ship manager claim
7 Too long a tanker Ship broker claim
8 The name is the same Ship agent claim
9 Switchgear on deck - wet damaged Ship agent claim
10 Cable hits bridge Ship agent claim
11 The Charterer's non existent tugs Ship broker claim
12 Two expensive Russians Ship agent claim
13 Prohibited transits Ship manager claim
14 "Free out" failure Ship agent claim
15 Large or Ship Managerall steel coils Freight Forwarder Claim
16 Late submission of demurrage payments Ship broker claim

CLAIMS REVIEW - ISSUE 11

Credit Management Information Centre

Since Claims Review No 10 was issued, ITIC has re-designed its website and you are all encouraged to visit it. The website now includes access to the Club's publications issued since 1997 (including previous editions of the claims review). We have also introduced a CREDIT MANAGEMENT INFORMATION CENTRE, which enables Members who have purchased the optional cover under Rule 10 (Additional Legal Expenses Insurance and Debt Collection) to check whether the Club has any record of matters which involve a particular shipping company (or a ship). The CREDIT MANAGEMENT INFORMATION CENTRE will then generate an email to your account executive, who will contact you by email or telephone to discuss the available information. You are also able to report debts to the Club on-line if you wish to do so.

Unpaid Suez canal dues

A ship passed through the Suez Canal, and the agent's principal, a Canadian charterer who he had acted for on several previous occasions, confirmed that the transit fees of US$100,000 payable to the Suez Canal Authority had been remitted. The agent accepted the charterer's assurance, but two weeks later notified the Club that the "remittance" had not arrived. A visit to ITIC's Credit Management Information Centre prior to accepting the charterer's word would have alerted the agent in Suez to the fact that the Canadian charterer had been reported to ITIC on several occasions for failure to pay other ship agent members. In any event, as Suez Canal Dues constitute a maritime lien, the Club was able to arrest the ship on her arrival in Canada, and recovered the amount owing from the ship owner. However, a visit to the ITIC website would have saved both legal costs and a lot of anxiety on the part of the ITIC Member.

Tanker broker's disappearing principal

A tanker broker, who had moved from a large firm to a smaller one, was pleasantly surprised when a charterer client of his former employer approached him asking the broker to take over his account. The charterer told the broker that since he had left he had never been satisfied with the service from the large brokerage house. The broker fixed several ships for the charterer without incident, until a fixture went badly wrong, and the tanker owner decided to take the charterer to arbitration. The first thing the owner's lawyers discovered was that the charterer had been declared bankrupt twelve months before the fixture was made, although this had not stopped him from continuing to fix ships. At common law, a person who professes to contract on behalf of a principal who does not exist, may have contracted personally. Obviously the tanker broker would not have telephoned his old employer to find out why the charterer was leaving him, but if he had used ITIC's Credit Management Information Centre, the Club would have been able to let him know the status of the charterer.

Double arrest

When one of the branch offices of a multinational ship agent contacted the Club in respect of a large outstanding disbursement account, the ship concerned was tracked and arrested. The owners paid up immediately, and the ship was released. Although the Club had asked the agent to check that there were no further outstandings due on the ship from other branches, two days after the release of the ship the Club was contacted by another branch of the same multinational agent reporting an outstanding amount on the same ship. The Club therefore had to re-arrest her. The Member was lucky that the ship could be re-arrested. Had the Member's offices used the Credit Management Information Centre, the Club would have been able to co-ordinate matters with the two separate offices and arrest the ship only once.

Ship arrest in Senegal

Several offices of a large ship agency had provided services to a shipowner's owned ships and to one that had been chartered-in. Outstanding fees and disbursements totalled nearly US$200,000. Several months later, the shipowner had still not paid the disbursement accounts and the Club was asked to recover the debts. The entire fleet was placed under surveillance and lawyers throughout the world were instructed to arrest any ship associated with the owner in question. After several anxious weeks, the Club's French lawyers, through their West African contacts, found the chartered-in ship trading off the coast of Senegal. A petition for the arrest of the ship and her cargo of fuel oil was prepared and granted and both were seized on the next call at Dakar. The Club obtained a full recovery of all the amounts due to the ship agent.

Forwarder's booking note

A Belgian port agent accepted a booking from a local forwarder for his principal's sailing to North Africa. He then received a document headed "Liner Booking Note" from the forwarder setting out the terms of the booking. A clause in this document gave the forwarder the right to claim damages from the shipowner should he fail to ship the goods by a specified date. The ship agent immediately telephoned the forwarder to inform him that he had no authority from the shipowner to accept this term, but did not put this objection in writing. In the event, the ship suffered engine damage and never arrived at Antwerp. The forwarder claimed from the owner, and the Belgian court found the owner liable to the forwarder under the terms of the forwarder's booking note. The owner passed the claim to the agent who had failed to put his objection to the forwarder's terms in writing.

It is not unusual for cargo interests or their agents to attempt to impose their own terms on the ocean carrier. If this happens, the agent should always go back in writing to the cargo interests informing them that, as agent for a principal, they have no authority to accept such responsibilities on behalf of the principal.

Failure to notify agency status

A ship manager in South East Asia ordered bunkers to be supplied at Chittagong on behalf of one of its shipowner clients. Unfortunately, the shipowner did not pay the bunker costs of approximately US$ 60,000. The bunker trader then pursued the ship manager directly on the premise that the manager, and not the shipowner, had contracted with him. When reviewing the exchange of e-mails between the manager and the bunker supplier, it was obvious that the manager had failed to notify the bunker supplier of the identity of his principal nor had he clearly stated that the invoice should be made out to the owner of the ship care of the manager. On legal advice that the ship manager's defence was not strong, the Club settled the bunker trader's bill in full.

Ship managers (like any other agent) must ensure that,when ordering goods and services for ships under their management, they make their agency status clear. The Club has included articles on this subject, available on the ITIC website, in the 2000 and 2001 editions of "The Intermediary".

Too long a tanker

An error by a chartering broker during charterparty negotations resulted in a large claim. A chemical tanker was fixed to load a part cargo at a designated berth in a terminal which could only accommodate ships having a maximum length (LOA) of 90metres. This requirement was over-looked by the broker and the tanker, which had a length (LOA) of 95 metres, was fixed. As the ship was unable to get into the designated berth, the cargo had to be discharged at alternative ports. Compensation was claimed from the broker for the re-routing of the tanker, haulage by road tanker to the original destination, delay and other additional costs.

The name is the same

A ship agent booked 10 containers to Houston, but after the containers had been discharged at Houston, Texas, it was discovered that they were intended for Houston, Pennsylvania. The additional cost of moving the containers that extra inch on the map was US$55,000. Similar mistakes have been made with Vancouver, Washington and Vancouver, British Columbia, while China abounds with places with the same or similar names.

Switchgear on deck - wet damaged

An in-house liner agent received a booking for eight metal-clad switchgear units to be transported on his principal's service to Panama. Although the agent informed the shipper by telephone that he could not guarantee underdeck stowage for the switchgear, he failed to confirm this in writing, nor was the bill of lading claused "on deck at shipper's risk". The units were stowed on deck, and suffered wet and rust damage. The consignee refused to take delivery and the shipper sued the shipping line for US$900,000 plus interest and costs. The litigation lasted several years and was eventually settled by the line for US$600,000, of which US$500,000 (the agent's limit of liability with ITIC) was contributed by the in-house ship agent.

This claim illustrates the need to put things in writing. If the agent had confirmed in writing what he said on the telephone, this claim could not have been pursued.

Cable hits bridge

A UK liner agent booked the carriage of an electrical cable from Southampton to Singapore via Felixstowe. During the inland trucking of the cable to the port, the cable struck the underside of a road bridge. The cable was inspected and, as the damage appeared to be restricted to the packing, it was loaded on the ship. Unfortunately, when fully unpacked after arrival in Singapore, the cable was found to be useless for its intended purpose and a claim for US$500,000 was presented to the line.

The place of receipt shown on the bill of lading was Felixstowe and the UK liner agent was therefore acting for cargo during the pre-carriage. Fortunately the agent had notified the cargo interests of his own standard trading conditions by means of a footnote on the booking confirmation and was able to limit his liability. If he had not done so he would have had to pay for the value of the cargo and probably any consequential losses.

It is important for ship agents to have their own standard trading conditions (very often those of the local ship agents' association).

The Charterer's non existent tugs

The broker for a charterer was informed by his principal that he owned tugs, shore facilities and other assets. The broker passed this information to the owner without mentioning that the information had been received direct from the charterer. The charterer paid two months' hire and then went bankrupt. Subsequently it was established that the tugs and other assets had been sold before the fixture was made and the broker was sued by the shipowner for negligent misrepresentation.

If a broker represents his principal to be "first class" when he knows that he is not, or states that he is confident that the charterer will perform, when he knows that the charterer has failed to perform on previous occasions, the broker could be guilty of negligent misrepresentation and legally liable to the party who relied on his misrepresentation. A broker will not be liable if information he has passed over about a principal proves to be erroneous provided that he makes it clear that all he is doing is passing on information. If brokers do not use expressions such as "charterers advise as follows..." then they lay themselves open to the allegation that they were the source of the information and could be liable if it turns out that the information is incorrect.

Two expensive Russians

A ship agent in the Middle East agreed to "look after" two old Russian flag ships prior to sale. This decision cost the Club a large amount of money. Parties from the Middle East, who were owed approximately US$3,000,000, arrested the ships, and joined the ship agents into the action. A deal was eventually worked out with the creditors but the lawyer appointed by the Club to defend the ship agent was entitled to a fee equivalent to 10% of the claim and eventually agreed to discount this fee to US$125,000.

Prohibited transits

A commercial manager took over a newly built container ship from a Chinese shipyard and arranged a first charter to a Korean company. The charter called for the ship to proceed to load her first cargo at Keelung, Taiwan and the commercial manager ordered the master to proceed to that port. The ship was arrested on arrival at Keelung because Taiwanese law prohibits ships from sailing to Taiwan direct from China whether loaded or in ballast. The owners were fined US$98,000, which they recovered from the commercial manager.

In another case, a pool manager made a similar mistake when he fixed a voyage charter which called for a VLCC to discharge at the Louisiana Offshore Oil Port (LOOP). The head charterparty contained an exclusion of trading to the United States. Unfortunately, the tanker was already loaded and underway before it was realised she could not enter US waters. Another VLCC had to be chartered and a ship-to-ship transfer took place outside US waters. The cost of the transhipment, charter hire, insurance, etc. was US$270,000, which the owner claimed from the pool manager.

"Free out" failure

73 containers were carried from Saudi Arabia to Benghazi on a "free-out" basis (i.e. all port charges to be paid by the consignee). However, due to a clerical error on the part of the line's agent in Saudi Arabia, the "free-out" clause was omitted from the bill of lading. At Benghazi, the consignee refused to pay the free-out charges, as the appropiate clause had not been included in the bill of lading.

This resulted in the port authorities invoicing the Benghazi feeder agent, who then claimed reimbursement from the line's agent. This simple error cost US$36,500.

Large or small steel coils

A forwarder booked the transportation by rail of 140 steel coils in 70 containers. When notifying the railway authorities, the forwarder inadvertently informed them that there were 70 containers each containing 140 steel coils. The weight of each container provided by the forwarder was correct, but the fact that there were only two large coils to each container, rather than 140 small coils, would have rendered the containers unacceptable to the railway company. Large steel coils are notoriously unstable and this proved to be the case here. One coil pierced the wall of a container and damaged other containers. It also pierced the floor of the rail wagon and damaged 3 to 4 kilometers of rail track. The railway authorities ordered the removal of all 70 containers, and claimed from the forwarder for the damage caused to their property.

Late submission of demurrage payments

The most common claims against tanker brokers involve demurrage statements which have been received by the shipbroker, but allegedly, not passed on to the charterers within the time limit set out in the charterparty. ITIC has seen a whole range of reasons for the non-delivery, from the broker overlooking a message saying that the charterers had moved, to the far less avoidable sudden liquidation of the courier company responsible for delivering the statement to the charterers.

The effect is the same - a demurrage claim of thousands of dollars is rejected by the charterers and the owners then claim against the ship broker.

Although the events leading up to these claims vary, some simple steps would have prevented many of them. Firstly, it is important to have a proper system to note and monitor demurrage claims. There are many avoidable cases where the claim has been lost under a pile of paperwork. This may be the result of overstretched resources but it is still clear that the broker has been negligent. This situation will apply whether or not you take the view that these post fixture services are undertaken free of charge or as part of the package of services for which commission is paid.

Secondly, try to avoid the use of temporary support staff who do not appreciate the need to promptly pass on demurrage statements. There have been a number of cases where claims received have been put into filing cabinets to lie unactioned until the time limit has expired. The forwarding of documentation may appear to be a routine clerical task, but the effect of getting it wrong can be a claim of tens of thousands of dollars.

In addition to containing a time limit for making claims, some charterparty clauses have separate notice provisions that must be complied with.

A good example is Shellvoy 5, which provides that the owners shall notify the charterers within sixty days after completion of discharge if demurrage has been incurred. A second and separate provision is that any demurrage claims, together with supporting documentation, shall be submitted within ninety days. The second sentence of the clause makes it clear that both limits need to be complied with for the claim to be valid. If forwarding the notice is overlooked then it does not matter that the demurrage claim and documents are passed on to the charterers within the ninety day period. The claim is already time barred.

It is important to remember that it is advisable to be able to produce evidence that the demurrage statement was actually presented or submitted as set out in the clause. Charterers may allege that they have no record of receiving a claim. Always use a postal or courier service that will provide you with a receipt. When the receipt is received, keep a copy in the file.

It is usual practice to send important documents by courier. This raises the question as to what the position is if the courier company and not the ship broker is at fault. In practice the courier service will have been ordered by the broker and will therefore be responsible to the broker and not the owner. The shipment will be subject to the terms of the courier's air waybill. These will limit the amount of compensation payable to the value of the physical packages, excluding any consequential loss, such as the demurrage claim becoming time barred.

Entrusting the documents to a specialist courier company is a prudent step but the ship broker will have difficulty avoiding liability if he does not independently check to see that the package was delivered in time. It is not enough to post it and forget it. You must check that the demurrage claim has been delivered.

It is not uncommon for demurrage claims to be for considerable sums of money and adoption of these three rules will help you to avoid them:

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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

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