Hermes Marine Management of Greece is suing Affinity (Shipping), blaming the shipbroker for the collapse of a VLCC purchase in 2019.
Hermes principal Ghassan Ghandour and Affinity managing partner Richard Fulford-Smith have worked together since the 1970s and have become close on a personal level.
But their relationship soured after a failed bid by Hermes, an Athens shipowner, to purchase the 306,500-dwt Phoenix Vanguard (built 2007) from Singapore’s Phoenix Tankers in June 2019.
That is according to a claim that Hermes and single-purpose company Gamma One Shipping filed with the High Court in London on 23 January and that has now been made public.
Vessel arrested
The $38.7m deal collapsed after Hermes and its nominated buyer, Gamma One, handed over a 10% down payment for the Daewoo Shipbuilding & Marine Engineering-built tanker.
When Hermes failed to pay the remaining amount, Phoenix’s parent, Mitsui OSK Lines, pocketed the $3.87m deposit and cancelled the sale agreement, as TradeWinds reported in October 2019.
Hermes later arrested the vessel, claiming that the sale agreement was wrongfully terminated by the seller, which did not return the cash.
TradeWinds understands that Hermes’ dispute with Phoenix was the subject of arbitration in London and was concluded on a confidential basis.
In the legal documents, Hermes claimed that London-based Affinity acted as its exclusive broker in its attempt to buy the VLCC.
At the same time, Affinity was acting as a non-exclusive broker for the seller, Phoenix.
The owner signed a memorandum of agreement (MOA) on 8 July 2019 to sell the vessel to Gamma One, which a month later agreed to time-charter it to a Singapore shipping unit of Koch Supply & Trading for two years with a two-year extension option.
Unforeseen delays
But just before the tanker was due to be delivered to the buyer, a dispute arose between Phoenix, Gamma One and Hermes in October 2019.
Hermes said it was delayed in remitting the outstanding balance to Phoenix due to a dispute over a technical defect on the vessel and “unforeseen delays” in locating the funds in Singapore.
But the deal fell apart due to Affinity’s actions, Hermes claimed.
“Instead of advocating a course of action in the claimants’ best interests, Affinity, in breach of fiduciary duty, advised sellers as to potential options that best protected their interests, in a manner incompatible with the duties of loyalty owed to Gamma One and/or Hermes,” the Greek company said in its claim.
“As a result, sellers purported to terminate the MOA.”
Hermes attempted to resolve the matter with Affinity before filing its claim in London but was unsuccessful, TradeWinds understands.
Affinity advised Phoenix to ditch the deal because Fulford-Smith already knew another prospective buyer was ready to purchase the tanker at a higher price, Hermes alleges.
Minerva Marine
Fulford-Smith wrote to Phoenix in mid-October 2019 to advise it that “messages from the buyers do not appear to give any comfort that the funds will be timely remitted to the suspense account”, according to an email cited in the claim document.
The same email contained Affinity’s recommendations for Phoenix to mitigate any damages arising from termination of the MOA.
In particular, Fulford-Smith stated he had been made aware by another company "that they were in a position to immediately purchase the vessel at a premium and that he was authorised to propose a profit share on the next fixture," Hermes said in its claim.
Hermes said it offered to buy the tanker for $41m a week after the MOA with Phoenix was cancelled but its offer was rejected.
The company asserted that Affinity further breached its fiduciary duties in “failing to act loyally” because it did not take action to ensure that the new offer was accepted and the MOA reinstated.
Indemnity
In the end, Phoenix sold the Phoenix Vanguard in November 2019 to Greece’s Eurotankers for $41.75m, just over $3m more than Gamma One had agreed to pay. The ship has been renamed Eurohope.
Hermes is seeking unspecified compensation for the alleged breach by Affinity, and it wants indemnity for any claims made against it and Gamma One by Koch.
Koch’s lawyers sent a letter to Gamma One in December 2019, terminating the time charter and seeking damages of $22.7m, according to the claim document.
Hermes and Gamma One told TradeWinds they were “unable to provide commentary on the litigation whilst it is ongoing”. Affinity declined to comment for this story.
This story has been revised since first publication.
