Broker liable for undertakings

A broker was representing charterers who fell behind in their obligations to pay hire to the owners.  The same brokers had also been involved in the sub-charter of the ship.  The owners threatened to approach the sub-charterers unless they were given a satisfactory guarantee for the payment of hire.

The brokers stated to owners that they had been authorised by the charterers to withhold freights due from the sub-charterers.  They subsequently confirmed that they had "irrevocable authority" to remit the hire from these sums.  The brokers paid two hire periods which had fallen due but there were insufficient funds to pay a further hire instalment because, unaware of the previous commitment, another director of the brokers had arranged for the remainder of the funds to be used to satisfy a variety of other debts of the charterers.

The issue to be determined was whether the brokers had rendered themselves liable to the owners.  The matter went to trial and the judge found against the brokers on the grounds that they had been fully aware that the owners wanted some form of  security or guarantee. In response they had themselves given an undertaking that they had irrevocable authority to make the payments out of sums to be received.  These monies had been received and the brokers were liable to pay them to the owners.

The case is a reminder of two important considerations.  Firstly, brokers should take particular care on the wording of undertakings so as not to render themselves personally liable.  If necessary the Club's advice should be obtained.  Secondly, if brokers do give undertakings they should make sure that others within their office know the terms so that they can avoid acting in breach of them.