The Blame Game

Costas Frangeskides

Rebecca Curran

At an event in the summer of 2013, issues related to where the blame lies when discrepancies occur during a paint job or refit were discussed. One thing was clear – we need more clarity. Rebecca Curran speaks with the experts about the due diligence one should exercise before undertaking a serious work order on board. (Published in The Superyacht Report, issue 151 by The Superyacht Group).

David Ball,  Managing director,  Factotom Marine Ltd

Anyone responsible for undertaking a refit/paint job needs to understand fully what he/she is signing and that all elements have been taken into consideration. If unsure, seek professional advice. A qualified paint inspector/survey should, as a minimum, be either Frosio or NACE certified.

Communication is vital, honesty helps and it’s important to acknowledge that the finish achievable with modern paints is no longer what it once was and that curtailed timings and squeezed budgets all have an impact on the final outcome.

Dave Ball

What made the old paint good was removed due to a change in EU regulations, resulting in poorer quality products that are better for the environment. Blaming the applicator, the inspector or the paint company will not change that reality – the quality of finish once achieved is now a lot harder to come by.

Be clear about timelines, consequences and dependencies. Write things down, document progress and obtain sign-offs as the work progresses. By keeping all parties informed with regular updates, expectations can be better managed. Time is a major factor on the final outcome. Sometimes it simply isn’t possible to complete the necessary work as the owner requires the yacht and the result is a rushed job and the quality is impaired.

I would recommend that anyone responsible for accepting a paint job considers waiting for 10 days in order to allow sufficient time for the paint to cure fully. Only then will orange peel, shrinkage, etc., appear. Don’t feel pressurised into signing something the moment the spray guns have been switched off, as it could cost you dearly!

Costas Frangeskides

Costas Frangeskides,  Partner, Holman Fenwick Willan LLP

For the owner of a superyacht, the focus is on the aesthetics of the external hull coatings and quality of finish. Generally, the technical specification sets out the detailed provisions on the yacht’s paint coating, including but not limited to the chosen paint system, standard of workmanship, surface preparation, gloss levels, acceptance criteria, etc. It is therefore important that the specification dovetails with the construction agreement (particularly with regard to warranty and performance characteristics of the paint). The construction agreement will include warranties from the builder and while the builder’s warranty might include paintwork, it is not uncommon for it to be dealt with by a stand-alone warranty, which might be given directly from the paint applicator or paint supplier.

With the cost of rectifying defective paint installation running into, in some cases, several million euros, clear responsibility for these liabilities is something that both builders and owners will need to get right. The benefit of having suitable insurance cover in place is that if a successful claim is made under the policy, the assured will be indemnified for its loss by the insurer, and avoid any delays in pursuing the contractors or manufacturers for the losses, which will be the insurer’s responsibility as per their subrogation rights.

Most yacht builders will have their own all-risk builders’ insurance in place. However, if the cover is deemed to be insufficient, then the owner/buyer should consider taking out his or her own insurance. The most common policies are based on the Institute Clauses for Builders’ Risks (Cl.351), which is basically an ‘all risks’ policy, covering every kind of accident or fortuity, but does not include the cost of renewing faulty welds, and whilst loss or damage arising from faulty design is usually covered, the actual object itself is not normally covered. Also, costs incurred by reason of betterment or alteration in design are not covered. The cover also excludes the statutory exclusions for wilful misconduct, ordinary wear and tear, and any consequences of delay in progressing or completing the building works. It is therefore important for an owner to understand what a builder/sub contractor is liable for under the warranties as well as any applicable insurance cover that may be available. In short, the role that insurance has to play to both builders and owners should not be overlooked.

“With the cost of rectifying defective paint installation running into, in some cases, several million euros, clear responsibility for these liabilities is something that both builders and owners will need to get right.”

Ken Hickling

Ken Hickling,  Global business development manager,  AkzoNobel

Under-performance leads either to customer dissatisfaction or rework, which in turn can ultimately lead to higher prices as these extras become built into the cost structure. When a customer is dissatisfied with the outcome this may be a result of something going wrong that was not managed well or caught in time to be corrected. This can be with the product or equipment used, the process (or lack of adherence to it) or an environmental factor such as temperature or contamination, but one thing that is highly likely to compromise a result is a shortage of time.

As a paint manufacturer, we often find that what was presented as a product failure is usually a combination of factors often in the control of more than one person. Often we find that all parties involved are of the view that their area of responsibility is fine and the problem lies elsewhere. Without establishing the root cause for failure, the risk of repeating the problem is high, and it seems a better approach would be to collaborate to get to the heart of the matter, rather than seek to blame someone else. Ultimately, an ounce of prevention is still worth a pound of cure, but that requires us all to learn from mistakes, not attack each other for making them.

Adrian McCourt

Adrian McCourt,  Managing director,  Watkins Superyachts

The best advice I can give is to manage the process from beginning to end. It’s all down to this because as well as planning the operation and the project, the owner needs to be completely engaged because if he specifically asks for something and the project manager isn’t honest about the likelihood of it happening, then the owner will be disappointed because the one thing he asked for he didn’t get. If you make your requirements clear to the yard, you pay for them, the pricing is realistic and it’s clear what is wanted, there shouldn’t be any expectations to manage, as everyone gets what they want.

If an owner walks away upset, it comes back to the planning stage – was he clear about what he wanted? Was he aware of all the options? Was he told of the implications? It doesn’t always work out that smoothly, but that is usually caused by a failure to plan. You can’t plan for everything, but it’s an ideal to strive for. With paint job issues, it’s about quality control, and I wouldn’t do anything without an experienced surveyor looking at it both before and after.

“With paint job issues, it’s about quality control, and I wouldn’t do anything without an experienced surveyor looking at it both before and after.”

Rob Papworth,  Director of projects Compositeworks

Client service shouldn’t simply stop when the vessel leaves the shipyard and so the handling of any warranty claims is an important part of the service offered by companies such as ourselves. Having a single contract with a shipyard means that an owner can conduct proper due diligence on one entity; the shipyard insurance coverage can be properly checked by their own insurers, a comprehensive works contract covering almost all eventualities can be thoroughly vetted by the owner’s legal team and the shipyard’s financial stability can be investigated.

All of these checks will then ensure that, should an unwanted problem arise, the owner can rest assured that the shipyard has both adequate insurance and, perhaps more importantly, the financial security to deal with such an issue. The shipyard will be the first point of call for any issues, so the vessel must be secure in the knowledge that any such issues arising will be dealt with in the proper manner.

Aside from these types of formal administrative checks, the owner’s team should consult previous clients to ascertain a feeling for previous issues that may have occurred with the shipyard and ask how any such problems were dealt with.

Ultimately, a shipyard that does not honour its warranty claims will not last forever, but the key is making sure that it is not your vessel that is listed in any messy legal proceedings against such a shipyard. After all, prevention is always better than cure.

Martin Penny

Martin Penny,  Partner, Hill Dickinson

When advising a client on a refit agreement, it is necessary that the agreement is clear about rights and obligations in respect of risk, liability, warranty, insurance and dispute resolution.

The shipyard should have a ship repairer’s liability cover and the yacht should be insured by the owner for physical loss or damage under its hull and machinery and increased value cover. Shipyards usually request the owner of the yacht to waive his rights and limit the shipyard’s liability to an agreed amount, therefore giving up his rights of recovering any sums in excess of that amount.

The owner of the yacht should, at that stage, liaise with his physical damage insurers in order to ensure that he is not waiving the underwriter’s rights of subrogation without the latter’s prior written approval. In appropriate circumstances, we would recommend that the owner hires a paint expert to draft the specification and monitor the preparation, the filling and the paint application in order to sign off the quality throughout the paint process. Under those circumstances, should an issue arise, the owner would, in the first instance, turn to the shipyard. If the shipyard were not responsive, the owner would have a further remedy by proceeding against the paint expert. For this reason, it is essential to ensure that the chosen paint expert has adequate professional indemnity insurance.

Such mechanisms protecting the owner’s interests should be clearly expressed in the contract. Failure to do so would result in disputes as to the allocation of liability,   resulting in complex litigation. Moreover, the shipyard will usually issue a warranty for work undertaken under the refit agreement. If an issue arises regarding either workmanship or materials, the owner can bring a warranty claim against the shipyard to rectify the defective materials/workmanship. If the shipyard does not respond under the warranty, the owner can then submit a claim to the yacht’s physical damage insurers, paying the policy deductible. The underwriter will, in turn, seek to recover any sums paid to the owner by way of a subrogation action against the shipyard and/or the paint expert. Superyacht insurance policies usually require major repairs and/or refits to be communicated to the underwriter for his approval.

In order to resolve technical disputes, the refit agreement should provide that if a dispute arises between the shipyard and the owner of the yacht during the course of the refit in relation to workmanship, materials or any alleged non-conformity with the contract it will be referred to an agreed technical expert whose decision shall be conclusive of the matters in dispute.

“We would recommend that the owner hires a paint expert to draft the specification and monitor the preparation, the filling and the paint application in order to sign off the quality throughout the paint process.”

Lessons Learned?