In an age of easy communications, there is a diverse range of means for getting a chartering message across. Whatever the medium, the importance of keeping proper records of all conversations remains, but brokers also face the dilemma of deciding who has rightful access to those records. A request from a principal is easy enough to accommodate, but when acting for two parties problems arise. Here, honesty could be the best and most non litigious policy.
ITIC frequently deals with enquiries from members who have received demands, often couched in aggressive terms, that they produce copies of their files. The background to these requests is usually that a legal dispute has arisen and the lawyers wish to review the broker’s file.
In general terms, brokers have an obligation to their principals to preserve and make available documents created in pursuance of the brokers’ duties. This would obviously include copies of exchanges relating to negotiations and post-fixture matters. The expression ‘documents’ is not limited to traditional paper files and includes records held electronically. The duty arises from the broker’s position as an agent and is owed to the broker’s principal and not to other parties.
The first issue on receiving one of these demands is to consider who has sent it. If the request comes from the broker’s principals, then they are entitled to see the documents. If the party making the request is not the broker’s own principal then the broker is under a duty to its principal to keep matters confidential and should not release the file.
The choice as to whether to allow third parties access to the file is a matter for the principal, and brokers should pass the request to their principals for instructions. It is not something that, whatever the commercial pressures, brokers should take upon themselves to decide.A difficult situation arises in cases where the broker is acting between two clients. In these cases, on receipt of a demand from one party, it would be wise for the broker to write to both the principals pointing out that a request to produce the file has been received and stating that the broker intends to allow equal access to both parties. The message should then allow either party a reasonable time to put forward a claim for exclusive right to the documents.
The demands received by brokers will often specify that the solicitor wants all written documents, emails, electronic messages and notes. The concept of a file has changed. We live in an era in which there are more channels of communication available and it is not unusual to have to reconstruct fixture negotiations from a combination of emails, telephone calls and instant messenger services. This in itself can create practical problems.
We live in an era in which there are more channels of communication available and it is not unusual to have to reconstruct fixture negotiations from a combination of emails, telephone calls and instant messenger services
In one recent English High Court case the judge observed that the brokers and owners conducted some of their exchanges by email, and print-outs of them were in evidence. Occasionally they communicated by Yahoo messaging, and a record of those communications was kept and disclosed by the owners. There were also important communications by telephone and there was no recording of those telephone conversations. The evidence of those conversations was the often significantly different accounts of the individuals concerned.
Looking at the other side of the negotiations, the judge noted that the broker communicated with the charterers by telephone and by email. Many of the calls were recorded and transcripts were available. On occasion, calls were made to or from a mobile and there was no recording of those conversations.
A notable omission from the English judge’s list of evidence was an old-fashioned daybook. The most recent edition of the Baltic Exchange Code (2012) recognises that modern practices in this regard have changed and brokers should not be criticised for not having handwritten notes.
The sources of evidence relating to negotiations are rarely now kept in a single ‘file’ and brokers need to be certain that their records remain accessible.
Collating the evidence can be time-consuming
In the past few years ITIC has seen a number of cases where electronic records have been inadvertently lost. One company found that the messages had only been stored on the broker’s individual PC. When the broker had changed desks the company’s IT department had simply wiped the machine. In another case the company had lost all messages when the company moved offices and changed computers. Obviously, records should be archived centrally and preserved.
In both cases the brokers had received requests for their ‘files’ and had subsequently received complaints that the disclosure they made was incomplete. Obviously you cannot produce what no longer exists but clearly brokers are vulnerable to suggestions that their failure to preserve documents is ‘convenient’.
The Baltic Code refers to the need to retain correspondence for a reasonable time. ITIC advises that brokers in England and Wales, or those who arrange fixtures subject to the laws of England and Wales, should note that the limitation period for actions in contract and tort is six years from the date on which the cause of action arose. A claim must be issued within that time for it to be valid. It may not, however, be served until after the limitation period has expired and it is for this reason that ITIC advises destroying documentation only after seven years from the completion of a fixture.
ITIC’s claims files are a continuing reminder of the way in which a simple mistake by a shipbroker can have expensive consequences. In one case, a broker which fixed an extension of a charter party in direct continuation forgot to include the charterer’s ‘subject to 24 hours reconfirmation’ in the negotiation. When a clean recap was received from the owner’s broker, the charterer immediately replied that they had asked for 24 hours subreconfirmation on the business. The owner refused, as the subject was not part of the negotiations which they had seen, and they considered themselves fully fixed.
The charterer failed to perform the extension and redelivered the ship to the owner. The owner fixed the ship to a different charterer, but the period of the new charter was shorter and the rate was lower. The owner brought a damages claim against the charterer and the charterer in turn brought a claim against the shipbroker. ITIC paid the amount of $140,000 in settlement.
Another case involved delay to the loading of a ship as a result of which the owner made a Euro70,000 demurrage claim against the charterer under the terms of the charter party. The charter contained a standard clause exempting the charterer from liability in respect of demurrage claims unless received within 60 days of the completion of discharge. Documentation supporting such claim had to be provided by the owner within the same time frame.Within the 60-day period, the owner sent the broker a claim for demurrage, which the broker received but failed to pass on to the charterer. The owner followed up with the broker as to the status of their claim after the 60-day period had elapsed. The broker approached the charterer, who relied on the time-bar provision to decline to settle or contribute towards the owner’s demurrage claim. The owner then turned to the broker for settlement of their claim.
ITIC discovered that, although the owner had passed the demurrage claim to the brokers within the 60-day period, the documented claim was in respect of the same ship but a different voyage. The owner’s claim was therefore rejected. The owner then pursued a claim on the basis that the broker, on receipt of the incorrect documentation, should have alerted the owner to their error. Negotiations took place and the claim was eventually settled on an approximately 50/50 basis.
Andrew Jamieson is ITIC’s claims director and has been with the club since its foundation in 1992. Previously he had been employed by one of ITIC’s predecessors, CISBACLUB, and as an in-house lawyer at a container leasing company. Andrew is the author of ‘Shipbrokers and the Law’ LLP (1999), and provided a chapter on shipping contracts for ‘Privity of Contract’ edited by Robert Merkin LLP (2000). He has extensive experience of solving disputes worldwide by negotiation, litigation and mediation.
He frequently gives lectures at events organised by industry bodies such as BIMCO, the Baltic Exchange, FONASBA, The Irish Maritime Law Society, The Institute of Chartered Shipbrokers and the London Shipping Law Centre. He has lectured regularly on the legal position of shipbrokers for Lloyd’s Maritime Academy’s Annual Sale and Purchase of Second Hand Ships Seminar.