Publications
Claims Review: Issue 3
| Title | Contents | |
|---|---|---|
| 1 | Arrest of Ships | Article on procedures for arrest |
| 2 | Container of glass detained in Jakarta | Ship agent claim |
| 3 | Failiure to manifest correct freight | Ship agent claim |
| 4 | Misdescription of cargo capacity of vessel | Ship broker claim |
| 5 | Frozen lobster in general stow | Ship agent claim |
| 6 | Recovery of outstanding disbursements | Ship agent claim |
| 7 | Boxship or tweendecker? | Ship broker claim |
| 8 | Broker's failure to pass voyage instructions to correct party | Ship broker claim |
| 9 | Release of container of TV sets without original B/L | Ship agent claim |
| 10 | Nineteenth-century yacht sinks | Marine surveyor claim |
| 11 | Theft of loaded vehicles from road haulier's premises | Freight forwarder claim |
| 12 | Ship manager makes late payment of release P&I call | Ship manager claim |
| 13 | Ship manager orders repairs in the name of the wrong company | Ship manager claim |
| 14 | Agent offers to settle claim in wrong currency | Ship agent claim |
CLAIMS REVIEW - ISSUE 3
Arrest of ships
The Club provides a comprehensive debt collection service, which has resulted in the collection of more than USD 5 million in the past two years. In order to accomplish recoveries it is often necessary to arrest ships on behalf of Members. (One or two ships have been arrested in each month). Before an arrest is effected we ask the Member to confirm the existence of the debt by replying to a communication on the following lines:
An arrest to obtain security for your debt is being prepared. Prior to arranging arrest the Club must seek your confirmation that the debt is owed to you by the owners and is now due and not subject to any known, or suspected, set-off or counterclaim. The arrest will be in the name of your company and you will appreciate that the Club is totally relying on the information you have provided and is unable to accept any liability for any damages that would become payable should the arrest be declared wrongful.
Members have expressed concern on receipt of this letter that the Club expects them to know whether there is a right to arrest in the particular jurisdiction. We would like to reassure Members that we are only asking for confirmation that the debt is owed and there is no counterclaim or setoff If a ship were to be arrested and for instance it subsequently emerged that the debt had already been paid to the Member, then the Member would face responsibility for wrongful arrest. Whether there is a right to arrest in any jurisdiction for a particular debt is a question on which the local lawyers will advise, and the club would not hold the Member liable for wrongful arrest if the information provided by him is accurate.
Container of glass detained in Jakarta
A liner agent Member in the UK received two separate requests from the same glass manufacturer for opentop containers to be positioned at their premises for loading with high-tech glass and thereafter carriage to the Far East on the line's regular service. One container was destined for Bangkok and the other to Jakarta. The line's regular sub-contracted hauliers were given instructions to take a specifically numbered container to pick up the Bangkok cargo and a second specifically numbered container to pick up the Jakarta cargo.
The inevitable happened and the Bangkok cargo was loaded into the Jakarta container, and vice versa. Once the job records reached the road haulier's offices the mistake was discovered and the haulier verbally informed the agent of the mistake. Unfortunately the agent issued Bs/L bearing the wrong container numbers and the containers were cross-delivered.
The Jakarta container was re-routed from Bangkok on the next sailing at a cost of US$1,000. However the Bangkok container remained in Jakarta for seven months while the line's Indonesian agents went from government department to government department trying to get permission to re-export it. The container was eventually released and surveyed at Singapore.
Storage of the glass in an opentop container under tropical conditions for seven months had resulted in microscopic etching of the surface. The glass was worthless and was destroyed. The value of the cargo, and the costs of storage, destruction, re-routing etc., amounted to nearly US$50,000.
Cross-delivery of containers is a regular occurrence but the costs are normally only those of re-directing. This case shows how costly a simple mistake can be.
Failure to manifest correct freight
A liner agent Member in Australia was asked to quote for the freight payable on a number of containers of wool from Melbourne to Annaba, Algeria. A price of AUD 211 per 1000 kgs was quoted verbally, but subsequently AUD 21.10 per 1000 KGs was entered on the manifest. Freight was then calculated and paid on the basis of the lower figure.
Some 20 months or so later, during an audit by the line the error was discovered and the agent was notified of a claim for loss of freight. The Club appointed lawyers to assess the merits of the claim and the possibility of a recourse action against the shippers, who declined to make any further payment as they alleged they had accepted the invoice in good faith and had, in turn, charged out the freight to their suppliers.
As there was little or no defence to the claim it was settled promptly and in full with a payment of US$30,845. Legal costs paid additionally by the Club were US$2,000.
Misdescription of cargo capacity of vessel
A ship broker Member acted for owners in the fixing of their ship to charterers. Unfortunately, when describing the cargo capacity of the ship, the figure of 119,995 cubic metres was given by the Member, whereas the correct capacity was 115,003 cubic metres.
The charterers submitted a claim for deadfreight, and the dispute was submitted to arbitration. The owners argued that the charterers had fixed the ship because it was of a well-known type, suitable for their purposes, and not because of any precise capacity figure. However, the arbitrators decided, by a two to one majority, that the error made by the brokers gave the charterers a right to recover damages from the owners.
The damages awarded to charterers amounted to US$30,030 plus their costs. The owners demanded an indemnity from the brokers for this amount plus their own costs. The Club's lawyers advised that there was little defence to the claim, but were able to reduce the amounts claimed by the owners and charterers as costs. The claim was settled at a total of US$75,000.
Frozen lobster in general stow
A linger agent Member in Taiwan booked a 20 foot reefer container of lobster from Keelung to Melbourne.
When the agent prepared the stowage plan for the port of Keelung the container of lobster was shown as part of the general stow. The container was therefore off power for the voyage, and on arrival at Melbourne the lobster was declared a total loss.
The receiver claimed US$74,000 from the line and the line claimed the same amount from its agent. Although it was initially felt that the line had failed to mitigate its loss and had paid too much, after consulting lawyers the Club paid the claim in full.
Recovery of outstanding disbursements
A ship agent Member in Puerto Rico acted for charterers who operated a regular service between San Juan and Florida using a particular ship which called at San Juan two or three times each month. The charterers informed the agent that the ship had been taken back by her owners, and that they had no assets with which to settle the outstanding disbursements owed to the agent which totalled US$160,000. The charterers subsequently went into bankruptcy.
US law provides that US suppliers of goods and services to a ship have a right of lien over the ship, even if the services are ordered by the charterers and not the owners. The Club's lawyers therefore arrested the ship in New Orleans and the owners provided security for the agent's claim to obtain her release.
For over two years the owners fought every aspect of the claim, and it was not until a few days before the case was due to be heard before the New Orleans District Court that the owners agreed to pay the agent US$180,000. Unfortunately, the lengthy dispute resulted in a very satisfactory outcome for the agent.
Boxship or tweendecker?
A ship broker Member had represented the same charterer for many years and the same broker had always handled the account. The business involved fixtures for cargoes of borax for which the charterers required ships with box holds. The charterer approached the Member for a ship and, in the absence of the regular broker, three ships were offered. Two of the ships were described as having box holds, whereas the third (and cheapest) was silent on the subject. The charterer chose the third ship. When it arrived at the loadport it was found to be a tweendecker and was rejected by the charterer. The Club settled the owner's claim for damages.
Broker's failure to pass voyage instructions to correct party
The broker acted for a chartering company with offices in the USA and Europe, and the agreement between them required the broker to advise the US company of the status of the charter arrangements for all shipments to the USA.
The US company entered into a contract of affreightment with owners to ship a cargo from Algeria to Louisiana. Owners nominated their ship, which charterers confirmed, and charterers issued voyage instructions which provided that the ship was to be tendered by 13/14 November. On or about 10th November, owners advised the broker that the nominated ship was not in a position to reach the Algerian port on time and suggested a replacement with new laycan 14/15
November. The broker erroneously passed this information to his principal's European company instead of the US company. On 11th November owners advised the broker that the replacement ship would not arrive until 15th November, which information was again passed to the European company in error. On 12th November the US company, having been advised by the European company of the change in the nominated ship, issued amended voyage instructions which still indicated laycan terms 13/14 November despite the fact that the European company had been advised that the ship would not arrive until 15th November. The ship duly arrived at 20.18 hours on the 15th but no berth was available until 19th November when loading began. The ship sailed on 21st November. Subsequently, owners made a claim on the brokers for US$54,000 representing demurrage for approximately 3.6 days.
In recognition of their partial responsibility in failing to pass information to the correct party, the broker offered to contribute one-third but this was rejected. Eventually, settlement was agreed with the broker paying US$36,000. Legal costs incurred were US$4,000.
Release of container of TV sets without original B/L
The German agent of a Far Eastern shipping line took delivery of four 40 foot containers, each holding 368 TV sets. Each container was covered by a separate B/L which showed 'C' as the shipper and consignee "To Order" of the shipper. 'C' was a regular shipper of the line.
After arrival, the forwarder who routinely arranged to collect 'C's' shipments asked for delivery of the four containers. The forwarder presented an original B/L for one container and the shipper handed two more originals to the line's agents in Hong Kong. The German agent erroneously delivered all four containers to the forwarder.
Some months later, a company in Singapore presented all three original Bs/L for the fourth container to the carrier with delivery instructions. It then transpired that this company had entered into sale contracts for all four containers with the manufacturers of the TV sets and in turn entered into sale contracts with shipper 'C'. Having paid the manufacturers for the four containers, the purchaser had then obtained four "switch" Bs/L from the carrier showing 'C' only paid for three containers and another buyer had therefore been found for the fourth container.
The original purchasers commenced legal proceedings against the carrier for the value of the goods in the fourth container. The carrier settled their claim and immediately debited their German agent's account for the invoice value of US$73,600.
In spite of exhaustive enquiries and the appointment of lawyers in Hong Kong, Austria and Poland (where all four containers were eventually delivered), the Club was unable to identify the guilty party. The multi-national nature of the transactions, the lack of documentary evidence and the fact that investigations of an Austrian middleman showed him to be a "man of straw" made it impossible to proceed against any of the parties. The Club settled the agent's claim in full, less the deductible. Legal costs paid by the Club amounted of US$11,600.
Nineteenth-century yacht sinks
A marine surveyor was instructed to determine the suitability for towage to a drydock of a steel hulled yacht built in the nineteenth century. The surveyor produced his preliminary report which stated that, although the yacht needed a major re-fit, the towage could be undertaken subject to certain stringent requirements.
The yacht was safely towed to the drydock, where the hull was sand-blasted and the yacht refloated. It then became obvious that water was entering the hull at several points and the yacht was put back into drydock.
After repairs the yacht was again refloated but sank at her moorings and became a total loss.
The hull underwriters declined to settle the owner's claim, and the owner commenced legal proceedings against them. The surveyor was joined into these proceedings as a Third Party by the bull underwriters, on the grounds that they had relied on the preliminary survey report when deciding to insure the yacht.
The Club's lawyers were ultimately successful in having the surveyor struck out of the main action between owners and underwriters, as he had only provided a towage suitability survey, but at a considerable cost.
It is obvious from the above case that the surveyor was innocent of any negligence, but it illustrates the costs that can be incurred in defending an unjustified claim.
Theft of loaded vehicles from road haulier's premises
An Italian freight forwarder was instructed by shippers to transport a consignment of copper pipes from a factory in Brescia to the load port, La Spezia, for onward shipment to Algiers. The forwarder instructed haulier 'A' who in turn subcontracted the work to haulier 'B'.
It was estimated that the total consignment would comprise 20 vehicle loads. During the course of the contract, two loaded vehicles were stolen from haulier 'B's' premises. The value of the stolen pipes was approximately US$135,000, but haulier 'B's' liability for the loss was limited by Italian law to US$9,000. The shippers instructed lawyers who informed the forwarder that he would be held responsible for the shipper's loss.
Haulier 'A's' insurance cover was limited to US$30,000 and the shippers alleged negligence on the part of the forwarder in that he failed to carry out their instructions to ensure that subcontracted hauliers carried adequate insurance.
The forwarder maintained that he was never instructed to arrange for subcontracted hauliers to increase their insurance to cover the value of the goods and furthermore, when the subject had been raised by haulier 'A', the shipper refused to bear the extra cost of an increase in the haulier's insurance.
On the evidence available, the Club took the view that there was no liability on the forwarder, but the Club's lawyers were in favour of a negotiated settlement rather than relying on the Courts. Accordingly meetings were arranged with the shippers and haulier 'A', and a tripartite agreement was reached whereby the forwarder, supported by the Club, agreed to make a contribution equivalent to approximately US$20,000. In addition, the Club incurred legal fees amounting to US$7,800.
Ship manager makes late payment of release P&I call
The former manager of a ship which had been sold received a debit note for the P&I release call. The terms of payment of the release call were that failure to pay by a specified date would result in a substantial penalty. The payment was received one day late and the P&I Club imposed the penalty on the owner. The ship manager paid the difference and recovered from the Club.
Ship manager orders repairs in the name of the wrong company
Scandinavian ship managers were appointed as technical managers of a tanker owned by a K/S limited partnership. The management agreement was originally between the ship managers and the shipowning company but was subsequently replaced by an agreement with the bareboat charterers, another K/S limited partnership.
The manager placed an order for various repairs with a German shipyard, but erroneously did so in the name of the shipowning company. The total repair cost was US$ 4.5 million, of which US$1.3m was paid (by the bareboat charterers) before the ship left the repair yard. When the next instalment of US$1m was not made the yard, believing it had contracted with the owners, arrested the ship and obtained security of US$1m. The bareboat charterers into bankruptcy and the technical managers were faced with claims from the repair yard for the balance of the repair bill (US$3.2m) and from the shipowners for negligently warranting that they had authority to order repairs on their behalf.
Although German lawyers confirmed that the repair yard was entitled under German law to look to the ship managers for payment, there was no doubt that the repairs to the ship had benefited the owners. The ship manager eventually contributed US$300,000 to the settlement.
Agent offers to settle claim in wrong currency
A liner agent in France acted for one partner in a joint service from North America to Northern Europe. In their capacity as agents for the joint service partner the agents received a claim from the insurers for wet damage to a cargo of rolls of newsprint carried from Vancouver to Le Havre covered by their principal's Bs/L. The carrying vessel did not belong to the agents' principal and the claim documents were therefore sent to the shipowners' representative who authorised settlement of the claim under package limitation at Canadian $500 per package. The agents erroneously offered US$500 per package, which was accepted by the cargo insurers. The shipowners were only willing to provide funds to settle on the basis of the Canadian $ offer and the Members had to provide the remaining US$10,000.
[Top]
Permission to reproduce or distribute this document can be obtained from Charlotte Kirk, ITIC, tel: (0)20 7204 2928, email: ITIC@thomasmiller.com