Gift of the grabs

A ship manager was appointed as a new building supervisor by an owner in respect of two ships they had under construction in a Chinese yard with the intention that they would become the managers of both ships upon delivery. Unfortunately, the owner filed for insolvency before either of the ships were delivered.

A claim against the ship manager was brought by the supplier of two grabs which had been purchased for the ships. The ship manager was under the impression they had ordered the grabs as an agent on behalf of the owner, whereas the supplier claimed that the grabs were ordered directly by the ship manager in their own name. The price of the grabs was US$ 710,000. The supplier claimed the price, plus interest and costs to which they believed they were entitled.

Lawyers believed the ship manager had made their position clear, but even if they had not expressly stated that they were the agents of the owner, the underlying circumstances were clear to all parties. On this basis it was decided that the supplier’s claim should be defended, but if a sensible settlement could be achieved, this should be considered.

Meanwhile, the grabs themselves remained on the two ships. Chinese legal advice was that the yard would have acquired good title to the grabs when their contract with the owner was terminated following their insolvency. To further complicate the issue, the yard itself filed for insolvency. The bottom line was that the neither the supplier nor the ship manager would be able to recover the grabs.

Eventually, the matter was heard at an oral hearing which appeared to go well for the ship manager. The court even assessed the matter as 60/40 in their favour. However, when the judgment was handed down a few months later,
the court found fully in favour of supplier. They stated the ship manager had not sufficiently shown that the relevant order confirmations were made in the name of, or on behalf of, the owner. The total judgment against the ship manager was approximately US$ 900,000.

The matter was appealed and upon the filing of the appeal, the supplier offered to settle for US$ 500,000.

This was rejected, but eventually a settlement of US$ 420,000 was agreed between the parties. ITIC covered this settlement and also paid the legal fees of US$ 70,000.