speakers notes home

Surveyors, Consultants and other Transport Industry Professionals: Tuesday 3rd October

14.30 - 15.00 R. A. McCunn - Shaw And Croft

WHO CAN YOU SUE FOR YOUR UNPAID ACCOUNTS?

And How do you do it?

 

Shaw and Croft

  1. The collapse of the Ocean club has highlighted once again the relatively exposed position of agents and others such as surveyors, experts, and indeed lawyers, who undertake work in the shipping field for principals or clients often in other jurisdictions, and frequently in urgent circumstances when looking to one’s own financial position is traditionally secondary to doing the job.
  2. So, what can you do to get your money?
  3. This presentation can only deal with the general position. There may be considerable differences between the positions of different agents, correspondents, surveyors and others (let us call them contractors for the moment) which can only be determined by an examination of the terms of instruction, and other correspondence and documents, in any particular case. Nevertheless, it is hoped that this presentation will give some guidance as the general position. To a large extent the general principles are common to most categories of contractor.
  4. The first question is who to sue. This is not always straight forward.

    LIABILITY OF AGENTS

  1. The contractor will be instructed either
    1. directly by a principal, such as an owner or a charterer, or
    2. by an agent or manager on behalf of a principal.

Clubs always act through managers or agents; owners often do. Thus, in the case of, say, surveyors the chain of command may be long;

    • the Club, its managers/agents, and a correspondent in the relevant port, or
    • the owner, his manager, and perhaps some other agent. There is thus at least one agent between the contractor and the employer.

Do such agents have any liability?

  1. Whether an agent is liable personally on a contract into which he has entered depends in part upon the circumstances in which the contract is concluded, and in part upon the terms of the contract. It might also depend on the applicable law; I have to stick to English law, but other systems may have different rules.
  2. Once upon a time it was the case under English law that, where the principal to a transaction was not English, and the contract was concluded through an agent in England, it was the agent in England who was liable on the contract and not the foreign principal. Perhaps not surprisingly that rule no longer exists. However, it is also clear that, ‘In all cases the parties can by their express contract provide that the agent shall be the person liable either concurrently with or to the exclusion of the principal, or that the agent shall be the party to sue either concurrently with or to the exclusion of the principal.’
  3. Letters of instruction normally end with a formula such as "as managers" or " as correspondents for the managers." or "as agents only" and may contain instructions such as "when submitting your invoice for fees and disbursements, will you please ensure it is addressed to" the principal, or the owner, not the agent, though occasionally one sees an express statement that the costs of the work will be for club’s account in the first instance.
  4. In some cases agents make it clear that contractors are to look to the owners for reimbursement of fees, and it would be difficult in those circumstances to claim against the agent, be it a club or its managers. The contractor knows from the outset that he is to look to the owner for his fees. In such cases where it has been made clear in instructions that contractors should look to the owners for reimbursement of fees, they should do so.
  5. In most cases, therefore, where an agent is clearly an agent contracting on behalf of a principal, then the liability on a contract is that of a principal not the agent. However, there are many cases under English law where an agent may be liable directly, or where he may be jointly liable with the principal. As a matter of general principle, if the agent adds words to his signature, indicating that he signs as an agent, he is deemed not to have contracted personally, unless it is clear from other parts of the document (in this case the letters of instruction) that notwithstanding the qualified signature, the agent intended to bind himself. Agents may also in effect agree to accept liability for your bill if there is a course of dealing to this effect. That is how it has always been done.
  6. Where you are in any doubt, and prefer to have the agent on the hook for your bill, I suggest you accept instructions in writing, and say clearly that you look to the person actually instructing you, i.e. the agent, to be responsible for your fees.
  7. As for instructions from clubs, the position depends largely on the rules of the association. These normally provide that, whilst managers may appoint lawyers, surveyors or others they are instructed by the club on behalf of members. The effect is that the club acts as agent in the appointment of such agents and correspondents, and that their costs are a claim by the member on the association. The association may short circuit the process by paying the representative directly, but the legal position seems to be clear; the owner or other member remains the principal in the transaction, and remains liable for the debt. But the letter of instruction may, of course provide otherwise. There are those cases in which a contractor is instructed not to handle a member’s problem, but to handle a club problem, for example the appointment of a surveyor to determine whether the owner has complied with his warranties as to the condition of the vessel. Clearly that is a club matter and owners/members can have no liability in principle in such cases.
  8. It should also be born in mind that agency law differs from one country to another, so that if the agent is resident abroad, he may incur a personal liability that would not be incurred in England.
  9. Two questions have often been asked in relation to the Ocean collapse, namely:
    1. does the fact that the principal, the owner, may be liable prevent or make unwise the presentation of claims to the Ocean liquidators?
    2. does it entitle the liquidators to dispute the claim against the club?
  10. The answer to the first is "no". The liquidators must make their own decision as to whether the claim is properly made against the club. When presenting claims to owners it should be made clear that the claimant has lodged claims with the liquidators as a precaution, and that such presentation is without prejudice to claims against members. The liquidators could dispute the claim and take the view that the claim is properly payable by the member, who has, or may have, a claim against the liquidators if he has discharged the liability. However, contractors have at least an arguable case that the club and the member are jointly liable, or that the club, having given the instructions, warrant that the account will in due course be paid.

    CLAIMS AGAINST PRINCIPALS

  1. So we now turn to look at claims against owners and other principals.
  2. If a contractor has undertaken work for a principal, has done that work in accordance with his instructions, and billed for it, he is entitled to be paid. Where the principal is in England, the courts provide relatively speedy small claims procedures that do not cost a great deal of money, and do not require the involvement of lawyers. Court staff will help with advice on what to do to start the proceedings, and how much it will cost, will serve the proceedings once they are started, and will provide the office services to run the proceedings. All you need to do is fill out the forms (there are plenty of those) and follow the instructions.
  3. Court staff will also give you booklets, brochures and other free material to explain what you can do, for example to apply for summary judgment (because the principal has no defence), and to enforce judgment. The courts try to be as user friendly as possible, and my experience is that they usually succeed where issues are straight forward.
  4. If you regularly have problems with bad debts and slow payers, you could do worse than popping into your local County Court and raid their rack of freebies. I do.
  5. The mechanics of starting claims would be the same if you were to use small claims procedure for claims against agents.
  6. The problem of suing for your fees is greater when your principal is abroad, and almost certainly in those circumstances you will need the help of a lawyer.
    1. Many legal systems have similar small claims procedures to ours, but access to them is not so easy, and will usually involve a local lawyer, and therefore expense.
    2. There may be grounds for claiming in England even though the principal is abroad, but the legal issues are more complex, and if the principal has no assets here against which to enforce, there may be little point in an English judgment.
  7. There are two possible ways to overcome the problem of the foreign debtor if he owns ships which visit England. The first is to start in rem proceedings and arrest a ship when it calls here, the second is to obtain a judgment, and try to enforce it against a ship when it calls here.

    8. ARREST OF SHIPS

  8. Having raised in the past the suggestion that correspondents should present their claims to owners and, if they are not settled, should then arrest vessels in respect of which they have claims, various practical considerations have been put to me; individual claims against particular vessels may be very small; vessels may now be entered with other clubs which correspondents also represent. I have also sensed some resistance to the suggestion that a club’s correspondents could arrest the vessel in respect of which their services had been rendered.
  9. So far as English law is concerned there seems to me clear authority for the proposition that correspondents can in a case called the "Westport" (1966) 1LLR 342. Mr Justice Hewson held, in considering a claim brought by an agent in respect of "disbursements made on account of a ship" that, as an agent does not work for nothing in making disbursements, and given the usual arrangements that an agent is expected to make, he was entitled to include in his claim a reasonable figure for his services.
  10. The interpretation given to sections of the 1952 Arrest Convention in different jurisdictions may well vary, and I would not profess to be an expert on the law of other maritime nations, but I am aware, for example, that there are specific provisions of French law in relation to a ship’s agent’s claim for disbursements, and I understand that Dutch Courts have permitted arrest for agents’ fees.
  11. Where a correspondent has claims not only in respect of his own fees, but in respect of money expended by him on behalf of the vessel, then it seems to me that such claim is clearly within "any claim by ..................... an agent in respect of disbursements made on account of a ship". There may, of course, be cases in which the club’s correspondent cannot be said to be acting as an agent of the shipowner, but it seems to me probable that in very many cases it would be appropriate so to describe the correspondent. I would be interested to learn the view of practitioners on other jurisdictions.
  12. It as at this point that the position of contractors who are agents, who are appointed to undertake work on behalf of a principal, differs from contractors who are independent contractors, and who are employed to provide a service to a client or customer. Whilst the 1952 Arrest Convention provides for a right to arrest in respect of disbursements made on account of a ship, and in respect of goods and materials supplied to a ship for her operation or maintenance, there is nothing that covers the provision of services by independent contractors as distinct from agents. It seems that an agent can arrest if he instructs and is liable for the fees of a surveyor, but the same surveyor, having been directly instructed, has no right to arrest.
  13. It may in some cases be possible to stretch the Convention. For example, any claim in respect of the repair or equipment of a ship gives rise to a right to arrest, so a surveyor involved in repairs might bring himself within this head. It has been held that a Classification Society’s claim for issuing a class certificate came within this section, on the basis that the certificate was part of the ship’s equipment. It might be possible to stretch the meaning of agent and bring the claim for fees under the "Westport" (1966) 1LLR 342, but I would not rely on it.
  14. Once a judgment is obtained, it can in principle be enforced against any asset of the debtor, whether it be a property (his office) a bank account, a piece of office equipment, his car, and if the judgment is not satisfied, proceedings for winding up may be commenced. Indeed, in some cases proceedings for winding up may be commenced without a judgment, by serving a statutory demand on the company, but this procedure has in the past been abused, and I would recommend taking legal advice before serving a statutory demand; it can back fire expensively.
  15. On the whole, the best advice I can give is that, unless the credit of those instructing you is very good, get money on account. Get your money when they need you, not when they don’t.
  16. Oh, and if you get stuck, talk to a lawyer