Agent sued for principal's debts

The agents were appointed as general agents in the UK for liner operators who went bankrupt owing approximately £7 million to their creditors.

As is not unusual in such cases, some creditors of the line, including suppliers, sought to recover their losses wherever possible and a number of them commenced legal proceedings against the agents alleging that they had not disclosed their agency status or alternatively had acted as agents  for an undisclosed  principal.  The liquidators also pursued the agents for outstanding freight due to the line which the agents had offset against claims from suppliers.

After extensive enquiries the Managers were satisfied that there was an effective defence to every claim.  Furthermore, they strongly believed that it was important to clearly establish the capacity in which all ship agents act, notwithstanding that this would entail long and costly proceedings.  In the event, all claims against the agents were successfully repudiated over a period of four years but the legal costs amounted to US$ 70,840.

This particular matter serves as a reminder to Members to make adequate provision for costs and expenses when deciding the amount of cover they require.  The limit of indemnity selected is the maximum amount payable by the Club for any one claim inclusive of all costs and expenses.  These costs often exceed any sum paid in settlement of a claim and they tend to increase year by year.