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 puts members on alert after uncovering fraudulent diversion of cash

International Transport Intermediaries Club (ITIC) has warned its members to perform proper bank account checks when transferring funds to principals and intermediaries.

The warning comes following the fraudulent diversion of a significant sum of cash transmitted in good faith by ship agents to the master of a ship. The ship agents received a request from a shipowner to deliver $45,000 in cash to the ship’s master during an upcoming port call. The funds were remitted and received by the agents who, a few days later, received a call from a supply company and then from the master asking that, rather than delivering the full amount to the master, they should first deduct part of the amount as payment for fresh provisions, to be delivered to the ship during its stay at the port.

The ship agents agreed, as it was not an unusual request, and they subsequently received email confirmation from the master, copying-in the shipowner. A few days later the master confirmed that the actual amount to be delivered on board was $23,000, adding that the remaining funds should be remitted to the supply company as settlement for provisions. This email contained a preliminary delivery note signed by the ship supply company.

Later that week, the ship agents received a message from the master explaining that he expected the provisions to be delivered at 1800hrs the same day, and outlining the denomination of the funds required. This email had the ship supply company in copy and was sent as a reply to previous messages regarding the provisions and cash to master.
However, it transpired that the email had not been sent by the master, but rather had originated from a very similar - but crucially different - email address. This was not spotted by either the agents or the ship supply company.

The agents received an invoice with banking details bearing the ship’s stamp and master’s signature, together with the stamp and signature of the ship supply company. The email attaching the documentation appeared to have the ship supply company in copy, but in fact the email address - again unnoticed by the unsuspecting parties - was slightly different.

The money had in fact been remitted to a party which had intercepted the communication chain and fraudulently obtained the funds. ITIC reminds its members that, when transferring funds, they should use the telephone to check the account details with a trusted representative at the recipient’s office.

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 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

ITIC to pay continuity credit for 21st year in succession

For the 21st year in succession, International Transport Intermediaries Club (ITIC) is to pay a continuity credit to all those members who renew their insurance cover during the 2016 policy year, which begins on June 1, 2016.

The CEO of ITIC, Stuart Munro, explains, “ITIC’s board of directors is committed to reducing insurance costs wherever possible. The ongoing worldwide economic downturn, together with fiercely competitive conditions in the shipping and transportation sector, continues to make life very difficult for our members. One of the great strengths of a mutual insurer is the fact that the surpluses accrue to the membership, rather than to third-party shareholders. Therefore, ITIC has decided to pay a continuity credit of up to 17.5% of the annual premium for yet another year in recognition of the outstanding loyalty shown by its members. Loyalty, after all, works both ways. ”

ITIC is the leading insurer of companies providing services to the transport industry in the marine, aviation, road and rail sectors. It 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

ITIC says broker follow-up is vital in fluctuating markets

ITIC says that the failure of shipbrokers to follow up on time-sensitive messages can have serious financial consequences, particularly in fluctuating spot markets.

In its latest Claims Review, ITIC cites the case of a ship fixed for a trip time charter for two voyages, with an option for a third. The option was to be declared by the charterers on completion of loading for the second voyage. The fixture had been negotiated through brokers in two different offices of the same company. The third trip option was exercised by charterers on a Friday afternoon, and the broker who received the message forwarded it to his colleague in the other office. Unfortunately, that broker did not immediately pass it on to the owners.

The ship completed the second voyage on the Sunday, but it was not until Monday that the message declaring the option was passed on to the owners. On the following Wednesday, the owners argued that, because they had not received the notice until the day after loading had been completed, the declaration was invalid. They therefore expected redelivery of the ship on completion of the second voyage.

The spot market at the time was extremely volatile, but rising. Therefore the owners wanted the ship redelivered. The charterers, on the other hand, clearly wanted to retain the ship to maximise the profit from the final voyage. The market changed again, however, and after a week the owners confirmed that they would allow the third voyage. But the business available to the charterers was by this stage less profitable than at the time they had declared the option, and they subsequently claimed lost profits against both the owners and the brokers.

The brokers argued that the majority of the delay was caused by the unreasonable conduct of the owners in refusing to agree to the third voyage. A settlement was ultimately agreed, with the brokers’ contribution reflecting their delay in passing on the message, but not the subsequent fall in the market.

In another case handled by ITIC, a shipbroker fixed an extension of a charter in direct continuation, but forgot to include the charterer’s ‘subject to 24 hours reconfirmation’ in the negotiation. The owners subsequently claimed that the subject was not part of the negotiations they had seen and considered themselves fully fixed. The charterers failed to perform the extension and redelivered the ship to the owners, who then fixed the ship to a different charterer for a shorter period and at a lower rate. The owners brought a damages claim against the charterers, who in turn brought a claim against the shipbroker. ITIC settled the claim for $140,000.

ITIC says, “Time-sensitive messages should always be followed up with a telephone conversation to ensure that they have been received and acted upon.”

Copies of the ITIC Claim 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