In the recent Commercial Court case of Navig8 Inc. v South Vigour Shipping Inc. et al. [2015], the Court held that the term “disponent owner” had been used in that, admittedly, rare and unusual sense of a manager of a vessel, rather than as a reference to a demise charterer.

Facts

Navig8 Inc. (Navig8) were the charterers of four Aframax vessels which were withdrawn from service before the end of their respective charters. Navig8 brought a claim for damages for around USD10.9 million for breach of charterparty against the registered owners (the first

four defendants who were part of the Nan Fung Group - collectively referred to as “Nan Fung”). In the alternative, Navig8 claimed against the fifth defendant, Star Maritime Management Co Pte Ltd (SMMC), the vessels’ agent, for breach of an implied warranty of authority. Nan Fung denied that they were party to the charterparties and,

if they were party to them, they denied that SMMC had authority to act on their behalf.

SMMC were appointed vessel agents by the long term demise charterers of the vessels, Shining Marine Inc. and Sparkle Marine Inc. who, following the market crash in September 2008, found themselves in financial trouble and in difficulty fixing the vessels. SMMC had signed the charterparties as “Disponent Owners Signatory in Contract”.

Witnesses could not recall why this particular wording was used.

The Court had to decide two main issues:

  1. Did Navig8, their brokers, and SMMC, intend that the charterparties be fixed on behalf of Nan Fung?
  2. Did Nan Fung give authority to SMMC to enter into the charters on their behalf?

In respect of the first issue, the Court held that the identification of the parties to a contract is an objective question of fact, and the subjective intentions of one party are not relevant save to the extent that such intentions  are communicated to the other party. Here, the parties who brought about the contract (Navig8, their brokers and SMMC) envisaged that SMMC was acting on behalf of Nan Fung. The Court held that the parties’ use of the phrase “disponent owner” cannot have been in the usual sense of a demise charterer because that would mean they intended the demise charterers to be liable as owners which, on the evidence, none did. Accordingly, the parties must have used the phrase in that, admittedly, rare and unusual sense of a manager of a vessel.

However, in respect of the second issue the Court held that, on the balance of probabilities, Nan Fung did not authorise SMMC to act on its behalf in chartering the four vessels.

Accordingly, the claim against Nan Fung was dismissed, and SMMC was found liable in damages to Navig8 for breach of an implied warranty of authority.

Comment

The Navig8 decision illustrates that the term “disponent owner” can refer to both a demise charterer and a manager acting on behalf of the registered owner. It highlights that where an agent or manager concludes a contract on behalf of another, both parties should ensure that the agent has express authority to act. Where disputes arise in respect of a contract concluded without express authority, the parties may become embroiled in lengthy litigation, and a third party who has relied on an implied warranty of authority may only have a right of recourse against the agent, rather than the intended principal.