Brokers exposed to liability as a result of email shortcomings

International Transport Intermediaries Club (ITIC) says that shipbrokers run the risk of exposure to substantial liabilities as a result of inadequate monitoring of their email communications.

In the latest issue of its Claims Review, ITIC cites the case of a shipbroker acting for a ship owner which had a demurrage claim against charterers. The charter party included a sixty-day notification period and a ninety-day time-bar for documented claims. The owner passed the full documented claim to the shipbroker, which sent it to the charterer via email on the same day, to the email address specified by the charterer. The shipbroker did not receive any email failure notice or rejection and, on this basis, believed that it had been sent successfully. But the charterer’s instructions stated that the sender would receive an automated confirmation of receipt within 48 hours and this was not received by the shipbroker.

The broker, not having heard from the charterer, re-sent the claim to the same email address, after the sixty-day notification period but before the ninety-day period had expired. Again, no notice of any systems failure or rejection was generated and, again, no automated response was received from the charterer. The owner continued to chase for payment, but the charterer argued that it had never received the claim and that it was therefore time-barred. The charterer was not prepared to negotiate further.

ITIC, acting for the shipbroker, obtained counsel’s opinion that the charterer was likely to succeed in its claim. When the shipbroker did not receive the automated response from the charterer, this should have alerted it to the fact it was not received. However, as the broker had sent the email in time, it did not seem fair that the charterer should be able to avoid liability completely.

The owner started arbitration proceedings against the charterer, but insisted that it would issue litigation against the broker if the arbitration was unsuccessful. Following ITIC’s intervention, however, the charterer agreed to contribute towards the costs of the claim and the owner agreed to forgo its entitlement to the legal costs which it had already incurred.

The claim against the shipbroker was paid by ITIC, which says it has issued several circulars and guidelines on demurrage time bars, and emphasises that it is important that all brokers review their systems to ensure that no mistakes can occur.

Elsewhere in its Claims Review, ITIC notes that a number of claims against shipbrokers are caused by failing to monitor the email addresses to which messages are sent. One example involved a broker which used the ‘reply’ instead of the ‘forward’ button in email communication. This resulted in an offer with a time limit not being passed on to the charterer, but instead being sent back to the owner. When the time limit expired, the owner fixed the ship to another charterer.

ITIC notes, also, that sale and purchase business is not immune to this type of error. In a recent case, a ship had been sold but not yet delivered to the buyer. The seller’s broker received a speed and performance claim from the charterer. The ship had been fixed with the same charterer in direct continuation once the buyer took possession of the vessel. The seller’s broker mistakenly forwarded the claim to the buyer and not to its client, the seller. The buyer immediately became concerned whether the performance of the vessel would match the figures it had been given. The buyer’s lawyers sent a strongly worded message reserving its rights against the seller for misrepresentation. The seller, of course, vehemently complained to its broker.

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.

23rd September 2010
ITIC Press Release PR0710