Ship Managers Bilked by Owners

Ship managers sometimes victims of owners' bogus negligence claims

Hard times have brought about an increase in bogus claims against ship managers by shipowners, warned the International Transport Intermediaries Club (ITIC) in its latest issue of 'Claims Review'.

The ITIC finds that shipowners are resisting payment of ship maintenance costs and end up owing ship managers, not only for their own fees but also for money paid on owners' behalf, reported London's Tanker Operator.

But when ship managers go to collect, they are charged with negligence in the running of the ship. Resulting claims are costly to defend, the ITIC said.

One case that ended up costing US$250,000 in legal fees, involved a balance of funds owed to the ship manager.

The matter remained idle for five months, until the owner raised a claim against the ship manager, through its lawyers, for alleged negligence, said the report. The owner claimed that the manager was in breach of its duty to maintain the ship in an efficient, employable state and that resulted in significant losses.

The claim put forward by the shipowner was in excess of $17 million and included alleged losses in respect of the vessel's future employment, expenses paid by the shipowner for repairs, spares, drydockings, reduction in the vessel's market value and other additional damages.

The ship manager rejected these allegations in full and lawyers were appointed by ITIC to defend its position. The manager maintained that the vessel's condition had deteriorated due to age, constraints of trade, plus expenditure and maintenance restrictions imposed by the owner.

The manager further stated that the owner was fully aware of the deficiencies and the condition of the ship when it was taken under management. Despite this, the owner had not taken the necessary steps to facilitate remedial action.

Lawyers for the owner pursued the claim against the manager, but the manager's files and correspondence on the ship were in good condition and a thorough audit trail existed for every decision regarding the running and maintenance of the ship.

The ship was eventually scrapped, but the owner continued to maintain that it had a claim against the manager, even though it was unable to provide any proof, or to document its losses, said the report.