New legislation will help shipbrokers to collect commission

In the last two editions of the “Intermediary“ we have reported on how English law has been amended in a way which will assist brokers to collect their commission. We are grateful to Chan Leng Sun and Anna Quah of Singapore law firm Ang & Partners for providing us with news of similar legislation which has now been enacted in Singapore.

The Contracts (Rights of Third Parties) Act (Cap. 53B), the Singapore Statute, is broadly similar to the English statute. Singapore Law has however, also adopted some concepts from similar legislation in New Zealand.

One immediate impact of the Act, which will be well received by shipbrokers, is that brokers can now take action to enforce the terms of a brokers’ commission clause in a charterparty. Prior to the passing of this legislation an unpaid shipbroker could not simply sue the owner to enforce the terms of a commission clause. This restriction applied even though the clause provided the broker should receive a commission from that owner. The problem facing the shipbroker was the Doctrine of Privity. This provided that only parties to a contract (the charterers and owners under a charterparty) had enforceable rights and obligations. A non party, such as a shipbroker, could not simply sue to enforce the commission clause. The law did provide the shipbroker with a remedy based on equitable principles but this was clumsy as the broker had to persuade the charterer to sue the owners on his behalf. If the charterers were not prepared to co-operate, the broker had to sue both them and the owners. These problems have now been removed by the Act.

The essence of the Act is set out in Section 2. This provides that a party who is not a party to the contract may enforce a term of it if the contract expressly provides that he may. If there is no express provision, the third party may enforce the term if it purports to confer a benefit on him. It is that provision that will be the most important for shipbrokers faced with traditional printed commission clauses, such as those found in Baltime and Asbatankvoy charterparties. These confirm the owners’ obligation to pay the commission but without expressly stating that the broker may, in his own right, enforce the commission clause.

The rights granted by the new Act are important and brokers should beware if a term appears in a charterparty specifically excluding the rights under the Act.

An important practical question is whether the broker now has a right to invoke the Admiralty jurisdiction of The Singapore Courts to arrest a ship to obtain security for his claim. Section 3(1)(h) of the High Court (Admiralty Jurisdiction) Act (Cap 123) allows an arrest for any claim “arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship“. The Courts have previously been willing to interpret these words quite widely. Given the importance of Singapore as a maritime centre it is likely that the brokers’ right to arrest will soon be considered by the Courts.

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