Failure to check charterparty wording catches ship manager off guard

International Transport Intermediaries Club (ITIC) has urged ship brokers and managers to check the terms of their charterparty agreements closely before signing, in order to avoid costly mistakes further down the line.

By way of illustration, ITIC cites the case of the manager of a tanker entering West African waters who believed that the terms of a charterparty provided that armed guards were to be appointed at the charterer’s expense. The manager duly appointed the guards for the voyage at a cost of $170,000, but the charterer refused to pay the invoice.

The terms of the charterparty did in fact include provisions relating to the appointment of armed guards, but their deployment was not mandatory. In addition, the charterparty provided that the charterer was only liable for up to $20,000 of any such costs. The charterer offered to pay that $20,000, and the owner demanded that the managers pay the shortfall.

The owner pointed out that it had sent the manager voyage orders stating that the decision to appoint armed guards was one for the owner to make. It had in fact only appointed armed guards for one out of the last ten calls to the area and on
that occasion the charterparty required the charterer to pay the security bill in full.

ITIC says it has seen a number of claims caused by ship brokers and managers acting on their recollection of a charterparty wording, as opposed to checking what the charterparty actually says. On this occasion, ITIC reimbursed the full claim of $150,000.

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
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 settles off-hire dispute resulting from ship manager’s negligence

International Transport Intermediaries Club (ITIC) recently settled a claim brought against a ship manager for failure to maintain its obligations under a technical management contract, leading to liability for costs incurred when the vessel was denied permission to berth by port authorities in Australia.

The manager was responsible for the technical management of a bulk carrier which called regularly at an Australian port to load iron ore. The master had notified the manager of a problem with the winch used for the vessel’s mooring rope which, although still operational, needed its worn pinion gear replaced.

The manager had taken no action to arrange the repairs and, over the following months, the vessel called several times at the same port. Each time, when the pilot went on board, the master explained the problem to him, and the pilot was satisfied that, as the mooring lines could be lifted by the winch, the vessel was able to berth safely.

The situation continued until one pilot decided that he would not accept the master’s assurances and refused to allow the vessel to berth. The pilot spoke to the harbour master, who instructed the vessel to go to the anchorage until the winch could be repaired. This caused a four-day delay, during which time the vessel went off-hire in accordance with the terms of the charter-party.

The owner subsequently brought a claim for approximately $150,000 against the manager for the hire not paid to it by the charterer during the off-hire period, and for the additional costs incurred in rectifying this problem outside of scheduled maintenance.

The owner argued that, had the manager responded when it was first made aware of the issue, the repairs could have been carried out without the vessel having to go off-hire. Investigations confirmed that this was indeed the case.

ITIC reviewed the owner’s claim, and determined that some of the losses claimed would have been incurred irrespective of the manager’s negligence. Ultimately, however, it was clear that the manager had breached its obligations to the owner under the ship management agreement and a settlement of $120,000 was negotiated by ITIC.


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

Ship manager fined for breach of US sulphur emissions regulations

International Transport Intermediaries Club (ITIC) has confirmed that a ship management company has been fined over a quarter of a million dollars in connection with a breach of clean air regulations in the United States.

ITIC reports that an inspector of the California Air Resources Board, the clean air agency of the state of California, boarded a ship in July 2011 at a terminal in Los Angeles. The chief engineer was asked if he was aware of the revised 2009 California clean air regulations which required vessels to switch main engine, auxiliary engines and auxiliary boilers to low-sulphur fuel when in California-regulated waters. The chief engineer said he was only aware of the requirement to switch auxiliary engines to low-sulphur fuel in accordance with regulations effective from 1 January, 2007.

The master checked the vessel’s Safety Management System (SMS) but was unable to locate the 2009 requirement. The inspector then examined the records of fuel switchover for the vessel’s main engine, auxiliary engines and auxiliary boilers, and ascertained that the ship had called at California ports seventeen times between 2009 and 2011 without switching over the main engine or the auxiliary boilers. A penalty of $283,500 was duly imposed on the shipowner for failure to switch fuel during the seventeen port calls. The owner claimed against the manager, maintaining that the manager had been negligent.

ITIC says, “In 2009, a fleet circular had been sent to all vessels by the manager, setting out the change in regulations, and asking that it be displayed in a prominent position. The manager therefore initially rejected the claim on the ground that it had resulted from crew negligence, which was excluded under the BIMCO management agreement. The owners, however, did not accept this rejection, maintaining instead that the manager had failed to update the SMS. As it was considered unlikely that the manager would successfully defend a claim resulting from its failure to update the SMS, the claim was paid in full.”

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 exposes real cost of crew internet access for ship manager

International Transport Intermediaries Club (ITIC) has explained how a ship manager was recently asked to pay $436,000 in communication costs as the result of an error which unwittingly allowed the crew of a ship unrestricted access to the internet over a three-month period.

In the latest issue of its Claims Review, ITIC notes that it was the policy of a particular shipping company to upgrade the communications packages on all its time-chartered and owned vessels from systems which provided email and satellite telephone communications only, to systems that also included limited onboard internet access at fixed monthly rate payments.

These new systems were gradually being fitted throughout the fleet. When the existing communications unit on board one ship (which did not include internet access) failed during the first few months of 2009, it was replaced by a modern broadband unit, but not by the new system.

This unit was intended to replace the existing email and voice communications only. But the broadband unit was also capable of internet access via satellite link. The vessel superintendent employed by the ship manager inadvertently failed to exclude internet access when he completed the activation form.

During the installation and activation he also failed to notify the crew of its intended use or advise on any tariff rates, which were in his possession. The crew, who had already been notified of the company’s intentions regarding future internet access for all its vessels, wrongly assumed that the new unit had been provided for their unlimited use, and proceeded to download at will.

The usual cost of communications under the old system was no more than $1,800 per month. Had the intended upgraded system, including limited internet access, been in place, the monthly cost would have been $3,800. During a three-month period, before the error was discovered, the crew downloaded freely and managed to run up an enormous airtime charge of $436,000.

As the shipping company had never agreed to this free-for-all use of the internet by the crew, it claimed from the ship manager the difference between what it would have paid ($5,400) and the actual amount charged.

Copies of the ITIC Claims Review can be requested from: chris@merlinco.com

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