ITIC reimburses broker accused by owner of breach of authority

International Transport Intermediaries Club (ITIC) recently represented a shipbroker accused by an owner of breach of warranty of authority in a dispute arising under a non-performing contract of affreightment (CoA).

The shipbrokers had negotiated the terms of a CoA between the charterers and the ship owners, receiving all their instructions from an agent purporting to act for the charterers. The CoA provided for a minimum of 18 shipments to take place over a 12-month period but, when the charterers failed to nominate any cargoes during the period of the CoA, the owners began proceedings against them, claiming damages of $3.1m. In their defence, the charterers denied being a party to the CoA and alleged that neither the shipbrokers nor the agents had authority to negotiate or enter into the CoA on their behalf.

The owners then joined the shipbrokers into the proceedings, alleging that they had breached their warranty of authority by representing to them that they were authorised by the charterers to conclude the CoA. They added that, if the brokers did not have such authority, then they would be liable for the loss suffered.

Liability for breach of warranty of authority does not, under English law, depend on any negligence on the part of the shipbroker. It is, however, specifically covered under ITIC’s rules. The shipbrokers maintained that they had not purported to represent the charterers and said that the owners had known that the brokers were acting on the agent’s instructions. The agents, meanwhile, claimed that they had been authorised to conclude the CoA.

After filing their defence, the charterers did not take an active part in the proceedings. The matter went to mediation between the remaining parties but did not settle on the day. Following the mediation, the owners indicated that they would be willing to accept a
substantial reduction in their claim. The brokers and agents were able to negotiate a
split of the settlement, with the agents paying the largest proportion. ITIC reimbursed the shipbrokers’ contribution of $260,000.

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com


For more information:
Charlotte Kirk
ITIC
Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com

ITIC helps ship manager successfully refute owner’s allegation of negligence

International Transport Intermediaries Club (ITIC) has successfully defended a ship manager against allegations of negligence made by a shipowner following the loss of a lifeboat overboard.

The lifeboat was subsequently found drifting off the port of Naze, Japan, after the master of the vessel had reported it missing. In view of the cost of deviating the ship to recover the lifeboat, compared to the cost of replacing it, it was decided, in consultation with hull underwriters and the vessel’s P&I club, to abandon it. The P&I club arranged for the lifeboat’s disposal through its correspondent in Japan.

The owner brought a claim against the ship manager for $90,000, which sum was moreover withheld against fees and disbursements owed to the manager, alleging that the loss of the lifeboat had been caused by the manager’s gross negligence and mismanagement.

However, under the SHIPMAN 2009 management contract governing the relationship between the parties, the owner had no right to set off a claim against what was owed to the manager. Neither could the owner provide any evidence to support its claim that the ship manager had been negligent, let alone grossly negligent.

A report into the incident concluded that it had not been possible to physically examine the release mechanism of the lifeboat before arrangements for its disposal were made by the P&I club correspondent in Japan. The lifeboat had successfully undergone its annual service and inspection six months previously, however, and had been wire-lashed on board the vessel for added security.

ITIC advised the owner that, if the sum owed to the manager was not paid, interest would be applied, and the ship would be arrested. The owner thereafter remitted the funds due, and nothing further was heard about the lost lifeboat.

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com


For more information:
Charlotte Kirk
ITIC
Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com

ITIC reimburses surveyor accused of negligence leading to ferry damage

International Transport Intermediaries Club (ITIC) has reimbursed a marine surveyor accused of negligence by the owner of a ferry which sustained significant machinery damage while being towed to a shipyard.

The ferry, which operated in North American waters, was due to be towed to a shipyard to undergo a refit. A marine surveyor was engaged by the shipyard to undertake a ‘fit for tow’ survey and to provide a certificate of approval confirming that the towage arrangements between the tug and the ferry were satisfactory.

The surveyor completed his survey and issued the certificate of approval. Three days later, however, the ferry took on water during the course of the tow and sustained considerable damage to its main machinery compartment. The owner of the vessel brought proceedings against the shipyard, the tug company and the marine surveyor for repair costs of US$750,000.

The owner alleged that the surveyor had been negligent in confirming that all watertight openings were closed, whereas expert evidence suggested that water had entered the vessel via open air vents. The surveyor maintained that these air vents were a rarity, that it was outside the scope of the survey to inspect them, and that liability should fall on the company undertaking the tow.

Mediation proceedings took place at which the owner acknowledged contributory negligence on its part and agreed to reduce its claim to US$500,000. All three defendants, including the marine surveyor, contributed to a settlement in this amount.


ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com



For more information:
Charlotte Kirk
ITIC
Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com

ITIC warns that failure to follow lay-up procedure can be costly

International Transport Intermediaries Club (ITIC) has reported a case in which a lay-up manager was held liable for a $250,000 contribution to a claim for extensive damage to a vessel whilst in lay-up.

The lay-up manager, as agent for the owner, arranged for a contractor to fit internal blanks to the sea valves of a vessel going into cold lay-up. Subsequently, the vessel’s main engine flooded after the valve to the main cooling seawater line was accidentally opened, resulting in serious damage to the machinery and electrics.

The damage survey found that the internal blanks had not been fitted properly by the contractor, and the owner claimed against the contractor for about $3m. Amid concern that the contractor would not be able to meet such a claim, the owner turned its attention to the lay-up manager, alleging that good practice dictated that all sea valves were to be fitted with internal blank flanges. It added that external sea suctions should have been closed off by divers using fibreglass blanks fitted with neoprene seals.

The lay-up manager had not arranged for the external suctions to be blanked, and the owner argued that, had the manager arranged for the external blanks to be fitted, there would not have been any flooding. Although the contractor had clearly failed to do its job properly and was primarily liable for the claim, the lay-up manager was required to contribute $250,000 to the overall settlement, which was reimbursed under its ITIC cover.

ITIC says the case also illustrates how the outcome of claims can depend on the way in which a manager contracts. In this case, the manager had appointed the contractor as agent on behalf of the owner, whose claim lay directly against the contractor. If the manager had agreed to provide the blanking on a lump-sum basis, however, the outcome could have been very different, and the manager would have been liable for the actions of the contractor and left to pursue the contractor in a recovery action.

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com



For more information:
Charlotte Kirk
ITIC

Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com

Court rejects €1.56m claim against marine surveyor accused of poor stowage

International Transport Intermediaries Club (ITIC) has warned that the wording of instructions can potentially widen the scope of liability for marine service providers, citing the recent case of a marine surveyor sued for €1.56m for alleged poor onboard stowage of a cargo.

The marine surveyor in Germany was engaged by charterers to attend the loading of a cargo and to report on any damage caused by the stevedores. The emailed instructions from the charterer contained the following provisions:

“We hereby order the following: supervision of the loading/preloading survey; reporting of eventual damages to the coating or the material - and time of damage; reporting of negligence while handling the material and loading; detailed documentation, with photos, of the loading operations; no continuous supervision will be necessary, only during the important moments (commencement of loading operations - change of shift – securing of the cargo).”

Loading and lashing of the cargo was completed and the vessel sailed. Three days later there was a loud noise from the cargo hold and the ship developed a 30-degree list. The master reduced the list by ballasting and diverted to a port of refuge. The cargo was discharged, sorted on the quay, reloaded, lashed and secured. About 600 tonnes of damaged cargo was left behind. Over ten days later, the ship resumed its voyage.

The owners alleged that the cargo had shifted due to poor stowage, and ultimately obtained an arbitration award against the charterers for €1.56m. The charterers subsequently held the surveyor and the stevedores who had loaded the cargo jointly liable for this amount.

Lawyers appointed by ITIC represented the surveyor at court, where the claim was subsequently rejected on the basis that the stevedores were responsible for the loading and stowage, and that the surveyor’s instructions were limited to reporting on stevedoring damage caused during loading.

ITIC director Charlotte Kirk says, “The potential difficulty with this defence was that the charterer’s email instructions could have been interpreted as conferring a wider obligation. In the circumstances, it was agreed that the surveyor would make a contribution of approximately ten per cent to the settlement of the claim.

“While this contribution was relatively modest in percentage terms, the claim is an example of how the wording of instructions can potentially widen the scope of a surveyor’s liabilities. If the brief is understood to be restricted to a specific task, it is important to make sure that this is clearly recorded.”

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com



For more information:
Charlotte Kirk
ITIC
Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com

AKD recruits two first-tier shipping specialists

ROTTERDAM-based law firm AKD has further strengthened its pre-eminent position in the shipping and offshore sectors with the arrival of two senior executives.

Pieter den Haan, a specialist in handling maritime casualties, with particular expertise in major collision cases as well as in salvage and wreck removal and insurance disputes, joins from Van Traa as a partner in AKD’s Transport & Energy team with effect from 1 July, 2015. Pieter also advises shipyards, shipowners and private clients in connection with shipbuilding and repair contracts, as well as dealing with the enforcement of claims against ships and ship arrests. He says, “I am very pleased to be joining AKD’s robust transport & energy team as it provides the support which is needed to deal with marine matters at the highest level.”

Vivian van der Kuil, meanwhile, will join AKD’s Transport and Energy team from Van Traa as a senior associate. Vivian specialises in transport law, with a particular focus on maritime law, and has extensive experience of dealing with maritime casualties, as well as limitation of liability, assistance and wreck removal cases. Her expertise also extends to ship arrests and other procedures related to maritime law. Vivian has worked as a judge at the Rotterdam Court, dealing with transport law cases, among others. She has also undergone officer training at the Netherlands Royal Institute for the Navy and worked as an officer of the Maritime Service with the Royal Navy on board several ships. Vivian says, “I am looking forward to the challenge of working with the highly experienced team at AKD.”

Haco van der Houven van Oordt, lead partner of AKD’s shipping and offshore practice, says, “We are delighted to have recruited two people of the quality and experience of Pieter and Vivian. Both are first-class marine lawyers who are highly regarded in the industry. Maritime disputes are becoming increasingly more international and legally complex in their nature, and it is therefore imperative to strengthen the team to deal with the challenges that our clients face worldwide.

“The recruitment of Pieter and Vivian will enhance still further AKD’s proven ability to provide innovative solutions to often complex legal problems.”

AKD’s Transport & Energy team provides a full range of legal services. AKD is a full-service firm with over 250 lawyers. www.akd.nl

Failure to incorporate terms and conditions proves costly for marine surveyor

ITIC has emphasised the need for marine surveyors and other shipping and transport intermediaries to include their terms and conditions in all their business dealings in order to protect their position in the event of potential legal action.

In the latest issue of its Claim Review, ITIC cites the case of a marine surveyor instructed by the shippers of a cargo of wheat to survey and certify the holds of a bulk carrier as fit for loading. The surveyor issued a certificate of fitness to load, and 70,000 metric tonnes of wheat was loaded. Following the arrival of the ship at the discharge port, the local authorities ordered the stevedores to stop discharge operations because they suspected that the cargo was heat-damaged. A subsequent survey report, obtained by the shippers, indicated that the cargo was contaminated by de-laminating paint, rust, dirt and paint powder from the ship’s holds.

The shippers negotiated a reduction in price with the receivers as a result of the deterioration of the cargo, and pursued a claim against the shipowners under the terms of the contract of carriage. That dispute was resolved at mediation, but the shippers then brought a separate claim against the surveyor. They were seeking to recover alleged losses in excess of $1m, including loss of sale proceeds, additional hire paid to the owners, and costs, on the basis that the surveyor had negligently certified the vessel as fit for loading in circumstances when it was not.

ITIC appointed lawyers, and expert evidence was sought. That evidence suggested that the damage may have been caused by bobcats used in cargo discharge operations. The surveyor had terms and conditions which – if properly incorporated into its business dealings – would have reduced its liability to a fraction of the shipper’s claim. Unfortunately, the surveyor had not explicitly made the shipper aware of the terms and conditions, so it was unlikely that a court would find that these had been incorporated into the business dealing.

It also became apparent that, after the surveyor had inspected the vessel, customs inspectors had carried out their own inspection and had ordered that the vessel be cleaned prior to loading. This was both helpful and unhelpful for the surveyor: while it was a strong indication that the surveyor had failed to properly carry out its survey, it also arguably meant that it was not the surveyor’s report that the shippers were relying on, but rather customs’ approval to load.

A mediation took place, but the claim could not be settled. Negotiations continued nevertheless, and the matter was resolved with the surveyor contributing to around 30 per cent of the claim, which was covered by ITIC.

ITIC has written guidelines on the incorporation of terms and conditions, which can be found at: : http://www.itic-insure.com/rules-publications/article/guidelines-on-incorporating-standard-terms-and-conditions-129819/

Copies of the ITIC Claim Review can be requested from: chris@merlinco.com
If you wish to discuss your

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com


For more information:
Charlotte Kirk
ITIC
Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com

Seacurus says seafarers should be protected now against risk of unpaid wages

Specialist marine insurance intermediary Seacurus says that reported doubts about the insurance industry’s ability to insure the liability for unpaid wages of abandoned seafarers under the Maritime Labour Convention 2006 are inaccurate and ill-founded.

It is already an agreed principle under MLC 2006, which came into force in August 2013, that liability for the unpaid wages of seafarers currently falls to the recruitment and placement services which help seafarers find employment at sea. Some have rightly argued that this is a misdirected arrow and that it is the shipowner/employer, and not the agent, that should assume this liability.

In a positive move, it is now understood that tripartite talks between owners, unions and governments scheduled for April 2014 at the ILO headquarters in Geneva will finally address this issue, with talks set to concentrate on the specific inclusion of unpaid crew wages in the shipowner’s MLC obligation to repatriate crew in cases of abandonment.

Thomas Brown, managing director of Seacurus, says, “It is time for clarity and certainty on this important issue. The fact is that any cover that does not provide for the indemnification of unpaid wages fails to adequately protect seafarers against the real risk of abandonment. Effective employment protection must include crew wages, without which seafarers risk becoming the cashflow casualties of their employers’ insolvencies.

“It has been suggested by some industry commentators that insurance to cover unpaid wages would be unfeasibly expensive for owners, and that in any case it is only those owners who are likely to default who will need the cover. This is wrong on both counts. Firstly, the CrewSEACURE policy launched earlier this year by Seacurus provides comprehensive cover at low cost, with premiums of as little as $50 per seafarer per year available today. Secondly, the point about only bad owners requiring cover in respect of unpaid wages is immaterial, since the proposed requirement for cover will be mandatory on all shipowners. Mandating the requirement in this way will force out of business those owners who - it is claimed - ‘need the cover’, as they will be unable to obtain the requisite financial security called for by MLC.

“If you cannot pay your crew, you should not put your ship to sea, it’s that simple. Any arguments to the contrary would serve to do our industry a disservice. Unfortunately, without the proposed amendments, there is currently no meaningful deterrent to this premise.

“The fact is that affordable cover in respect of the indemnification of unpaid wages is available, and it is available now. It is in the best interests of the industry and seafarers alike that responsible owners support the ratification and early adoption of the draft amendments to MLC in this regard.”

Seacurus Ltd is an FCA-regulated insurance broker, founded in 2004, specialising in bespoke revenue protection cover for the maritime industry. It is a market leader in the design and implementation of solutions to protect companies from unforecasted balance-sheet impacts, including credit default, charter party cancellations, hijackings and voyage disruptions caused by political events. Seacurus established the first delegated underwriting binding authority for marine kidnap insurance and is an approved Lloyd’s Coverholder. www.seacurus.com

Formed in 2007, Barbican Group Holdings is an insurance group writing business predominantly through its syndicates at Lloyd’s. It also has a non-Lloyd’s financial solutions business based in Guernsey which offers insurance and reinsurance programmes to the global market. Barbican Syndicates 1955 and 6113 at Lloyd’s has a stamp capacity of £227.5m for the 2013 year of account and underwrites cyber liability, financial and professional lines, healthcare liability, international casualty reinsurance, marine insurance, marine reinsurance, North American casualty reinsurance, property, property reinsurance and corporate, middle market and scheme/affinity group clients in the UK and Ireland. www.barbicaninsurance.com