Andrew Jamieson

In Seascope Capital Services v Anglo Atlantic Steamship the Commercial Court set out the requirements for a broker to successfully pursue a claim for commission. The case looked at, and rejected, some of the reasons for non-payment commonly given by owners.

The dispute involved the re-financing of two tankers. The brokers’ case was that they had entered into an agreement with the owners to find them finance and that, if they succeeded, a commission of one per cent would be paid. The brokers found a number of sources of potential finance one of which seemed promising. The brokers had, with owners’ permission, approached the bank concerned for an indication of the costs. The owners, however, informed the brokers that they had decided that the proposed mechanism was too expensive and that they were not interested in proceeding.

The brokers attempted to locate and develop other sources of finance. A number of proposals were examined but it appeared that the brokers would not be successful. They found out, however, that the owners were in direct discussions with the bank whose proposal they had been told were too expensive. Ultimately the owners entered into a refinancing agreement with that bank. The brokers issued legal proceedings and after a nine-day trial were awarded their commission. The judge reviewed the points that had to be satisfied for the broker to be entitled to commission.

The broker must show that the owners had engaged them to act as their brokers. In this case, the brokers had written to the owners setting out their proposed terms and, on receiving the owner’s agreement, had reconfirmed this in writing. The court, therefore, had no difficulty in finding that the owners had engaged the shipbroker to act on their behalf. Sometimes it will not be possible to point to an express agreement but the law will imply one from the way the parties acted. This case, however, clearly demonstrated the benefit of reconfirming arrangements in writing.

The court held that the substance of the agreement was that the broker would be paid if they introduced an acceptable source of finance to the owners. In this case, the broker had to show that the introduction had been the effective cause of the eventual transaction. This test has been described as “whether the actions of the agent really brought about the relationship of buyer and seller”.

The owners claimed that the broker had not introduced that particular bank because they already knew it and had regular meetings with an individual within the bank. The judge pointed out that they had, however, never done any business with the bank. They had specifically authorised the brokers to approach the bank and that the prior relationship had not been causative in bringing about the transaction.

Another argument was that the final deal was different from the original proposal worked on by the brokers. The judge held, however, that although there were differences there was nothing to suggest that these would not have been present had the broker still continued to be involved in the negotiations.

In this case, there had been a gap of about two months between the breaking off of negotiations via the brokers and the direct dealings with the bank. The judge held that this gap did not prevent there being a direct link between the initial introduction and the eventual transaction. The problem of shipbrokers being cut out of deals is a worldwide one. It is positive to note that the courts have shown a willingness to enforce the brokers’ right to commission.

Andrew Jamieson is the legal adviser and Director of ITIM, managers of the International Transport Intermediaries Club. More information on ITIC or claims issues can be found on www.ITIC-insure.com.

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