ITIC says shipbrokers must protect commission entitlement

International Transport Intermediaries Club (ITIC) says the current global economic downturn means that shipbrokers will have to be particularly careful to ensure that their entitlement to commission is properly protected.

In the latest issue of its Claims Review, ITIC cites the case of a Norwegian broker which made a claim against its principal for the commission on two newbuildings. The broker, which was appointed by the principal on an ‘exclusive’ basis, introduced the principal to a shipyard. The principal, however, completed the contract directly. The principal refused to pay commission and the broker sued. The broker’s claim was rejected by the trial court but the claim was successful on appeal.

The member obtained almost $690,000 from the principal. Furthermore, the payment appeared to be just in time because, shortly thereafter, the principal went into liquidation. Some time later, the broker received an approach from the liquidators demanding repayment of the money. The relevant provisions of Norwegian law stipulate that a payment rendered by an insolvent company may be voided if made within a three-month period of the company going into liquidation.
But the rule is not absolute, because payments will only be reclaimable if they have materially worsened the company’s payment capacity and are not ‘ordinary’ commercial transactions.

The broker rejected the demand and the liquidators issued proceedings to recover the money. Faced by a strong legal defence, the liquidator eventually dropped the case. The result was that the broker, having first sued for its commission and then sued again for its return, was finally able to keep the money.

Elsewhere in its Claims Review, ITIC highlights the case of a shipbroker which fixed a bulk carrier for a time charter of 90 days. The first voyage was via a port in Thailand, where cargo was loaded for discharge in Africa. Unfortunately, during the outward passage, the ship collided with a tanker. Although there was no serious damage, the bulk carrier was arrested by the local authorities - and was not released until two months later – because the tanker hit and damaged a dolphin which formed part of the port structure.

The charterers elected to exercise their charter party option to cancel if the ship had been off hire for 30 consecutive days, and cancelled the remainder of the charter party.  The shipbroker looked to recover from ITIC under its loss of commission cover, and was fully reimbursed in respect of almost 47 days of hire, in addition to a consideration reflecting the vessel’s nomination, prior to arrest, to perform a further voyage with another cargo.

Copies of the ITIC Claims Review can be requested from: chris@merlinco.com

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com.

13 April 2012

ITIC Press Release PR0312