Agent's liability to authorities

An agent at Karachi acted for charterers of a vessel which arrived at the port and was discharging a heavy package on to a barge which sank, taking the cargo with it.  The Karachi Port Authority held the agent liable for the cost of salvaging the barge and cargo in their capacity as agents for the carriers.  The agent, in turn, obtained a letter of indemnity in the amount of Rps 500,000 from the carriers' P&I Club.

In the event the salvage operation proved to be extremely lengthy and cost far more than had been originally estimated.  The amount invoiced by the Port Authority was Rps 1,338,792 (US$ 43,866).

In the meantime, the carriers had encountered severe financial difficulties and had ceased to trade.  Furthermore, they had failed to pay their P&I Club calls and their insurance cover had been cancelled from inception.  The agent was able to collect the amount of Rps 500,000 (US$ 16,383) covered by the P&I Club's letter of indemnity but remained liable for the balance i.e. Rps 838,792 (US$ 27,483).

The Club appointed lawyers in Karachi to attempt to negotiate a reduced settlement with the Karachi Port Authority but their efforts were unsuccessful.  The agent was obliged to pay the full balance, which was equivalent to USD 34,210, and was reimbursed by the Club.

This claim highlights the value of the cover provided by the Club under Rule 3(3) and is an example of the way in which the Club's Rules have been designed to protect its Members from risks which are peculiar to their business.