Ship Management International column October 2016 - Reports alone are not enough

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Stuart Munro explains why ship managers should ensure that important information and recommendations about deficiencies are confirmed in writing.

ITIC regularly deals with claims against ship managers involving the poor condition of a vessel and allegations of how the defects had not been drawn to the owner’s attention. The owner will then claim that if they had been told about the issues, the problems would have been dealt with earlier and at less cost.

The manager will frequently respond that the owner was aware of the problems but didn’t provide the necessary funds. On a more detailed review of the manager’s position one or both of the following two arguments are often put forward. First the manager alleges that they told the owner about the defects. This was done at a routine meeting and that the remedial work was not done because of spending and maintenance restrictions. Secondly the manager points out that the defects were referred to in reports sent to the owner.

The manager should make sure that important information and recommendations about deficiencies are confirmed in writing.  Sometimes people are reluctant to highlight negative issues but without a written record it is much harder to defend the manager’s position.

If the manager has not provided a specific written warning about the defects in question, they will often point out that the owner had received a report from which those defects could have been ascertained. This was one of the issues in a claim recently handled by ITIC.

The ship manager acted as the manager of a vessel for a number of years until it was sold. When it was delivered in Northern Europe to the buyers, Class suspended the vessel's approvals due the state of its ballast tanks.

The sellers faced a claim from the buyers which was settled. They then turned their attention to the manager and issued proceedings in which they alleged that they had not been kept sufficiently informed about the condition of the vessel’s ballast tanks. In addition, they claimed that the manager had failed to have the ballast tanks repaired during dry-docking in South Africa six months earlier. The claimed amount was the difference in repair costs (and steel replacement) between undertaking the repairs in Durban and in Northern Europe six months later.

The manager defended the claim on the basis that they had reasonably relied upon survey reports obtained during the dry docking in South Africa and the owner had received copies of this and previous reports over the years. The court appointed expert produced their report and it stated that the survey reports provided to the owner showed deterioration in the ballast water tanks over a number of years and these should have been investigated. If this had been done, the repairs would have been undertaken earlier at less cost. The expert concluded that it was not enough that the owner had received copies of the reports and that "the manager was under a duty to bring the future need for substantial steel renewals clearly and unequivocally to the attention of the owner".

A negotiated settlement of US$ 700,000 was reached.

The case does not mean that the owner can ignore information what is sent to them. The outcome of claims will depend on their individual facts. There is a world of difference between a report which contains information that, if considered, would alert the reader to the need to ask questions and one that highlights defects. A manager does, however, need to make sure that bad news is adequately drawn to the owner’s attention.