Yachts berthed at a marina on Saint Martin.
[Illustrative photograph; the vessels shown are unrelated to the hypothetical scenario discussed.]

Consider a hypothetical co-owned yacht preparing for its next charter. One person described as an owner tells the manager to confirm the booking. Another asks the captain to keep the vessel available for a prospective buyer’s inspection. A deposit is expected, crew arrangements are underway and a broker has promised access. Each decision has a commercial consequence before anyone has established who can authorise it.

The pressure to keep the programme moving can turn a disagreement between owners into a problem for everyone around the vessel. Managers and brokers may find themselves interpreting company documents, weighing competing messages and explaining delays to third parties. A useful starting point is an authority file: a current record of the ownership structure, delegated powers and instructions relevant to the decision in hand.

The file’s purpose is to make the source and scope of authority visible. In a company-owned yacht, the conversation begins with the registered owner and the company’s decision-making arrangements. Direct co-ownership calls for examination of the agreement between the owners and any management mandate. The individuals who enjoy the yacht, fund its running costs and speak most often to the captain may occupy different legal roles.

A maintenance approval, a charter commitment and a sale each deserve their own examination. A practical file connects the proposed act to the document or decision said to authorise it. That may involve a management agreement, board resolution, power of attorney or specific written instruction. Recording the date, scope and any conditions makes it easier to identify a change in authority when relationships deteriorate.

The way an owner has allowed business to be conducted can matter, particularly where another party has relied on an appearance of authority.

How the history of instructions matters
Formal documents are part of the picture. The way an owner has allowed business to be conducted can also matter, particularly where another party has relied on an appearance of authority. Three decisions illustrate why careful records help, while also showing the importance of applying the law of the relevant jurisdiction.

In the Dutch Supreme Court’s ING/Bera decision of 19 February 2010, a bank had acted on payment instructions from a person who lacked authority over the company’s account. The court held that justified reliance on apparent authority could arise from circumstances attributable to the company’s risk. It set aside the appellate judgement and sent the dispute back for further consideration. The judgement therefore established an approach to assessing authority rather than finally deciding every disputed payment.

For a yacht’s management team, the practical lesson concerns the history behind an instruction. Who introduced the representative? Which decisions had the owning company previously allowed that person to communicate? Where were reports sent and how were objections handled? Keeping those communications alongside the formal mandate gives advisers evidence with which to assess what the parties reasonably understood.

The Dutch Supreme Court examined the limits of that approach in its decision of 3 February 2017, involving a disputed property sale negotiated through a lawyer. The court explained that reliance based solely on the unauthorised person’s statements or conduct was insufficient. Circumstances concerning the principal were also required. On the facts, the judgement binding the seller survived: the principal’s provision of relevant documents and agreement that the lawyer should seek a buyer contributed to the assessment.

Yacht operations also involve layers of service providers. A supplier may communicate with a broker, management company or purchasing intermediary while delivering directly to the vessel. The contract and the communications need to identify which party is accepting the obligation to pay.

That combination is particularly useful to owners considering a sale. Giving an intermediary documents and access can communicate something to a prospective purchaser, depending on the surrounding circumstances. A clearly expressed mandate should address what the intermediary may negotiate, which approvals remain outstanding and who can commit to the transaction. A buyer’s advisers can then test the proposed agreement against that mandate before the completion timetable becomes urgent.

Knowing who stands behind a commitment
Yacht operations also involve layers of service providers. A supplier may communicate with a broker, management company or purchasing intermediary while delivering directly to the vessel. The contract and the communications need to identify which party is accepting the obligation to pay.

In The Bunga Melati 5, decided by Singapore’s Court of Appeal in 2016, a bunker supplier sought payment from a shipowner after contracting through an intermediary. Its appeal relied on agency by estoppel [Ed’s note: a legal principle that stops a person from going back on their word, promise or previous statement if doing so would be unfair or cause harm to someone who relied on it]. The court dismissed the appeal because the evidence failed to establish the shipowner’s alleged knowledge that the supplier was proceeding on the mistaken belief that the intermediary acted as its agent. The case shows how much can turn on the chain of communication and the precise understanding attributed to each participant.

These decisions arise from Dutch and Singaporean law and different commercial settings. They offer useful illustrations for the international yacht industry; their application to a particular vessel requires attention to the governing law and facts. A yacht’s presence in the Dutch Caribbean can bring local procedural questions alongside the law governing its owning company, management contract and proposed transaction. Aruba, Curaçao and Sint Maarten have their own legal systems, while Bonaire, Saba and Sint Eustatius form the Caribbean Netherlands. Identifying the relevant island is an early part of the brief to counsel.

When competing instructions arrive, preparation can keep a time-sensitive commercial decision from becoming a much wider dispute.

A workable response to disagreement
When instructions conflict, an accurate chronology helps the people responsible decide what can safely proceed. It should record the instruction, its author, the stated basis of authority and the resulting action. Charter receipts, expenditure, maintenance commitments and communications with prospective buyers provide the commercial context. Allegations can be recorded as allegations, with disputed matters kept distinct from established events.

The captain needs a clear route for escalating the conflict while immediate safety and operational obligations receive proper attention. Any proposal to suspend performance, hold money or restrict access requires assessment against existing duties and the applicable law. A carefully framed holding response can identify the decision awaiting clarification and the practical deadline, without requiring the crew to determine the ownership dispute.

If a court becomes involved, the operative wording of its order belongs in the authority file. Permission relating to management, access or a particular transaction must be read within its stated scope and conditions. Advisers can then translate the order into precise instructions for the manager, captain and broker.

An authority file earns its value before a dispute reaches that stage. Maintained as part of ordinary yacht management, it helps an owner delegate with clarity and gives the people running the vessel a dependable basis for acting. When competing instructions arrive, that preparation can keep a time-sensitive commercial decision from becoming a much wider dispute.

Daniel D. Zahavi is Managing Partner of ZL Attorneys at Law, advising on commercial and dispute matters connected to the Dutch Caribbean. This article provides general educational information; advice on a particular vessel requires review of its documents and applicable law.

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