Performance problems

Operators of a passenger and ro-ro ferry service appointed a naval architect to design a 45m landing craft ferry. The design was to be based on that of an existing vessel operated by the company.

Prior to commencing the design work, the parties entered into a design agreement, under which the naval architect’s liability was limited to approximately US$750,000.

Shortly after the vessel was launched, the operators noticed various issues relating to its performance, including vibration, lack of manoeuvrability and stopping capability. The vehicle loading ramp was also at an excessive angle in certain conditions, making the loading of vehicles difficult and, in some cases, impossible.

The operators took the view that urgent rectification work was required so that improvements could be made before the approaching summer season.

The vessel was dry-docked and third party experts were engaged to provide a report detailing the extent of the problems and their potential cause. Based on the findings of the report, the operators brought a claim against the naval architect for US$3.5m, alleging that the performance issues were attributable to errors in design. The operators subsequently acknowledged that the naval architect’s liability to them was limited to US$750,000.

ITIC appointed an expert naval architect to inspect the vessel and comment on the extent to which the apparent performance issues could be attributed to design errors. The expert found that the naval architect was at fault, but that the claimant had incurred significantly more costly and extensive rectification work than was necessary.

ITIC entered into negotiations with the operators in order to resolve the matter. The claim was settled for slightly less than the limit of liability under the contract.