Detention dispute

A ship manager took over the management of a ship in June 2023. They inherited a ship with over 150 known defects. These were fully disclosed and acknowledged by the owners. In response, the manager and owners jointly developed a phased rectification plan, deploying additional crew in 2023 and scheduling further rectifications in 2024 to improve the ship’s condition. However, operational delays ensued, including a prolonged drifting period of about a month and a half. This disrupted the improvement schedule.

Just before the ship was due to receive extra crew, it was detained in March 2024 following a Port State Control (PSC) inspection. Owners alleged both crew and manager were negligent and initially claimed over US$2.5m in losses, a figure far exceeding the SHIPMAN contractual liability cap of US$1.5m.

Aside from this, the ship manager had consistently maintained that the detention and resulting losses did not arise from their own negligence and to the extent anything did, it was certainly not solely from their negligence. Furthermore, they argued they were not responsible for the negligence of the crew.

That said, there were allegations the manager’s plan had not been as good as it should have been and that delays in repairing critical issues had in part led to the detention. There were also allegations that the crew had not been properly trained which needed to be addressed.

In defending this position, ITIC successfully reduced the claim to US$250,000, a reduction of US$2.25m from the initial claimed amount. This was a sum that was paid in lieu of legal costs, and which properly reflected the potential litigation risk.

ITIC has observed a recurring pattern in which owners seek to recover substantial sums from managers without providing adequate substantiation of their claims. Usually, the amount the owners seek from the manager is almost identical to the amount they owe to the manager in fees and operating expenses.

It is therefore very important that managers keep proper records and actively defend such claims to prevent further unjustified claims in the future.