Be conditioned to check conditions

Managers were responsible for a ship between 2014 to 2017 subject to a shipman contract. After redelivery they were put on notice of a claim from the owners who alleged that they had suffered losses exceeding US$ 500,000 due to the managers’ negligence. However, this negligence was not fully particularised.

In anticipation that a formal claim might follow, ITIC arranged for surveyors to inspect the ship and prepare a report so as to be able to assess and/or defend any such claim. This report noted that there were a number of deficiencies in the condition of the ship upon her redelivery to the owners, many of which the surveyor believed should have been rectified by the managers prior to the redelivery. One issue for the managers in terms of defending any claim was the lack of evidence regarding the condition of the ship when they first took it on as they had not taken any survey at that point – or shortly thereafter (which is something ITIC always recommend managers do).

Some 12 months later the owners’ lawyers sent a demand for US$ 800,000 which included repair costs, off hire costs and bunkers which they alleged stemmed from the managers’ negligence and the owners commenced arbitration.

The claim was ultimately settled for US$ 250,000. This offer took into account the litigation risk and the difficulty the managers were likely to have in evidencing what they considered to be the condition of the vessel when they had taken over the management. It also accounted for the fact that the next stage in the arbitration was to have witness statements taken, which would have cost at least US$ 50,000, so by settling these costs were avoided.