An Inspector doesn’t call

A manager took on the management of a bulk carrier which had been purchased by the owner six months earlier on an “unseen as is basis”. It was managed by another third party manager until the ship manager took over. They did not carry out a pre-management survey of the ship at the time she entered into their fleet.

Very shortly thereafter, the ship was detained by Port State Control until certain issues were rectified. These remedial works were undertaken at a cost of US$ 400,000.

The ship was then allowed to sail on a single voyage basis to a repair yard where a further US$ 3m was expended to bring the ship back into Class. The owner argued that all the works were due to the managers’ mismanagement of the ship. 

Experts were appointed who advised that it was evident the ship had deteriorated over a long period of time, well before the ship manager had taken the ship into their management and they concluded the money spent on the repairs could not have been avoided as the works were required by Class, Flag and Port State Control. Therefore, any liability for the costs of the repairs was refuted.

However, due to the detentions and subsequent repairs the ship was off-hire for 78 days. The owner therefore submitted a claim against the manager for US$ 2m, alleging that the off-hire period could have been minimised had the ship’s maintenance been properly managed.

Experts were again appointed. Their advice was that had a full inspection been carried out by the ship manager when the ship first came into their management they would have seen the ship was in poor condition and work could have been properly planned to maximise efficiencies. The experts advised that out of the 78 days off-hire claimed, proper planning by the manager could have reduced this by 35 days. This would have reduced the total claim from US$ 2m to about US$ 1m. The maximum liability under the Shipman contract was US$ 1.2m.

US$ 0.75m was offered to the owner in settlement which was accepted. This claim shows how vital it is to carry out a detailed survey of a ship when it comes into members’ management.

A prudent ship manager should ensure that a comprehensive inspection of the ship is carried out when (or as close as possible to when) they commence management services. ITIC has seen numerous claims where the manager has had difficulty proving the condition of the vessel was already bad when the management commenced. Without a contemporaneous survey the manager can find such allegations difficult to refute. Further, if the ship is in an extremely bad condition, a manager may wish to take the opportunity to decline the appointment.