The Charterer’s non existent tugs

The broker for a charterer was informed by his principal that he owned tugs, shore facilities and other assets. The broker passed this information to the owner without mentioning that the information had been received direct from the charterer.  The charterer paid two months' hire and then went bankrupt. Subsequently it was established that the tugs and other assets had been sold before the fixture was made and the broker was sued by the shipowner for negligent misrepresentation.

If a broker represents his principal to be "first class" when he knows that he is not, or states that he is confident that the charterer will perform, when he knows that the charterer has failed to perform on previous occasions, the broker could be guilty of negligent misrepresentation and legally liable to the party who relied on his misrepresentation. A broker will not be liable if information he has passed over about a principal proves to be erroneous provided that he makes it clear that all he is doing is passing on information. If brokers do not use expressions such as "charterers advise as follows…" then they lay themselves open to the allegation that they were the source of the information and could be liable if it turns out that the information is incorrect.