Who Is Whose Broker? - London Arbitration 19/18
Posted on 14th December 2018 at 13:19
At first it looks like just another time limitation wrangle, but London Arbitration 19/18 [(2018) 1010 LMLN 3] also offers insight into differing roles within a familiar broking structure and a brief look at some of the law of agency.
A contract of affreightment (”COA”) on an amended Asbatankvoy form had been fixed through brokers A, B, C and D. In this particular chain, A were Owners’ in-house broker, while B were independent they were also Owners’ broker, C's position was unclear, D was Charterer's broker.
The COA contained:
(a) a barring provision which said that Owners’ demurrage claims had to be presented with documents “within 21 days of discharging completion”; and
(b) additional clause 49 under which “Broker commission 1.25 pct total to [C was] payable by Owners on F/D/D.”
Many of 87 voyages had given rise to demurrage. Most claims were settled but seven (with an aggregate value of nearly $315,000) were resisted under the above clause.
Each side said C was the other’s broker and therefore agent.
Owners said they had sent all seven documented claims to C before the deadline and so, while none had likewise been passed on by C, they had nevertheless reached Charterers in time, by that agency. Owners had in fact submitted all their demurrage claims to C.
Owners also argued that:
(a) if not Charterers’ actual agents, C were ostensibly so because Charterers had held them out as such, i.e. they had behaved so as to make Owners think C were their agents; and
(b) as Charterers had paid many of the claims that had been sent to C, they were now estopped (prevented) from denying that C were their agents. It was not fair for them to pay other claims that had been submitted by that route and then contest the validity of it when it suited them.
The Tribunal first reviewed common formation in a broking chain, observing that it can involve several parties, some of whom (as here) plainly represent one side or the other. Sometimes, though, there is also an intermediate broker, who does not act for either. Such a broker has no relationship of principal and agent under contract with Owners or Charterers. The role is simply a channel for negotiations - a two-way road between each side’s brokers.
Unless the charterparty or COA says otherwise, each party as principal pays its own broker’s (i.e. its agent’s) commission, and the fixture terms will often have to cover who pays any intermediate broker.
Contrary to Owners’ assertion, there was no evidence that Charterers had held C out as acting for them, and equally clause 49 above did not suggest that C was Owners’ broker. It would not have been necessary if they were, and itself supported the conclusion that C was an intermediate broker.
On that basis the seven claims were time-barred, as none had reached Charterers, or their broker, D, in time. Sending them to a go-between who was not Charterers’ agent was not enough.
Owners’ other arguments were also rejected.
In paying other claims that had come via C, Charterers were not saying that C had their general authority. It was just that Charterers had addressed all claims that C had sent to their agent, D. Also, Charterers were not prevented from raising a time bar defence, because the evidence indicated that Charterers responded to claims that had been passed on in time by C, not simply to those that had been submitted to C.
Owners might have succeeded if they had shown that Charterers had paid a series of claims sent to C before the deadline but received (by D from C) only afterwards. However, there was only one such instance, and even then payment had been made under reservation.
The report strongly suggests that in the seven claims that Charterers said were time-barred, that was the only issue. So Owners lost almost $315,000 because they had fallen into the habit of sending their claims to an entity that was not Charterers’ agent and had no authority to receive them.
That did not matter where claims had been processed in good time and settled, but it did when the deadline came and the intermediary had not passed them to Charterers’ agent.
Thus it is very important to know from the outset who is acting for who in a broking chain, and to identify anyone who (albeit with an entirely valid role) is not actually representing either side. Otherwise, whether in a long-term COA, a lengthy course of dealing or a single spot fixture, a late claim submitted to the wrong party may prove time-barred. Broking arrangements vary greatly, it may be difficult in some cases to determine roles and the law of agency is a huge topic.
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