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Yachts arrested when transport company can’t pay its bills

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Since mid-February, the owners of at least 30 private pleasure boats and megayachts have had to pay again the cost of shipping their vessels after the yacht transport company failed to do so.

 

Ft. Lauderdale-based Yacht Path was unable to make the freight payments in at least five shipments of vessels arriving in ports stretching from Hong Kong to Gibraltar since Feb. 15. In all of those cases, the yachts were either arrested or threatened with arrest by the shipper, causing yacht owners and their representatives to frantically pay hundreds of thousands of dollars direct to the shippers before they could take possession of their yachts.

 

Dennis Cummings, president of Yacht Path, said a legal judgment against the company in December resulted in the freezing of its bank accounts on Feb. 12 so it could not access money to pay shippers.

 

“As a result of this legal action and subsequent garnishment, we were unable to meet our financial obligations to this vessel owner prior to the vessel arriving in her final discharge port,” Cummings wrote in an e-mail in early March.

 

He referred to M/V BBC Vesuvius, the cargo ship that arrived in Port Everglades late on the afternoon of Feb. 22 and whose cargo of six boats and yachts was arrested upon discharge the following day.

 

His explanation generated little sympathy from yacht owners and their representatives. The captain of two yachts arrested from the Vesuvius said the owner paid $250,000 to get his two Christensens back.

 

“That’s on top of the $320,000 and insurance already paid,” Sloate said, sitting in the wheelhouse of the 145-foot Aghassi just before the Palm Beach show. “They’re robbing Peter to pay Paul. I guess it finally caught up with them.”

 

The vessels under Sloate’s command – Aghassi and the 120-foot M/Y First Draw, both in the boat show this week – along with the four others were arrested by U.S. Marshals and discharged into the custody of National Liquidators. The boat owners worked out payment of the $392,000 Yacht Path owed BBC Chartering, which owns the ship.

 

“At least three ships have had this same issue, but this is the first time we’ve been involved where the shipper has not been paid,” said attorney Robb Maass of Alley Maass Rogers & Lindsay in Palm Beach, which represented the owners of three vessels on Vesuvius. Two more ships would become known since this interview.

 

A few days after the yachts on Vesuvius were arrested, M/V Billesborg pulled into Port Everglades, but not before Yacht Path informed the owners of the 16 boats on its deck that it couldn’t pay the freight bill. Those owners scrambled to wire money to Danish shipowner Nordana and within a few days of arriving, their vessels were discharged without arrest.

 

Four vessels on M/V Star Laguna weren’t as lucky. Freight unpaid, those vessels were arrested when the ship arrived in Vancouver on Feb. 18 and remained so as of press time.

 

In Gibraltar, two yachts shipped through Yacht Path arrived on March 6 but the shipper had again not been paid. The owner’s representative and captain of a 115-foot yacht and its 25-foot tender wired money directly to the German shipper and paid all the port fees and other miscellaneous expenses to get the vessels released.

 

And a ship expected to arrive in Hong Kong on March 23 has at least two yachts on its deck. Yacht Path notified owners that it could not pay the freight and suggested how much money each one should wire to the shipper to retrieve their yachts.

 

In many cases, in covering the freight charges, stevedoring costs, port dues, marshals fees, tow boats and other expenses, vessel owners wound up paying almost as much as they spent to have the yachts shipped in the first place.

Lawsuits pile up
Dozens of lawsuits in state courts and U.S. federal court have been filed against Yacht Path in its myriad corporate identities: Yacht Path Palm Beach, Yacht Path International, Yacht Path Marine Group, and Unity Shipping. Many of them are over shipping delays, route changes or altered discharge ports and the associated costs that Yacht Path indicated it would reimburse its clients for but didn’t.

 

But the arrests that began in Vancouver and stretched to Ft. Lauderdale and Gibraltar mark the first time Yacht Path has not paid its shippers.

 

“All that money yacht owners paid to Yacht Path went somewhere,” said Bruce McAllister, also of Alley Maass and the attorney who managed the Billesborg release. “Where is that money?”

“It’s frozen,” Cummings said simply.

 

That situation arose from a business deal involving a merger or acquisition that Cummings would not discuss, except to say it was not pursued, he said.
“The guy wanted 51 percent of our company,” Cummings said.

 

When they refused, the company was sued over unpaid transaction and other costs in “a deal that never happened,” he said. Both Cummings and his brother, Yacht Path Vice President Kevin Cummings, had their personal bank accounts frozen as well, he said.

 

Money in the accounts was enough to pay the legal judgment, he said, but once frozen, the legal process gave banks and other parties weeks in which to respond and act. In the meantime, ships carrying their clients came in, expecting to be paid.

 

“We figured we’d have it resolved,” Cummings said. “The ship [Vesuvius] was coming in Saturday and we wanted it to sit out. We’d pay the extra charges, and on Monday, it would get resolved.”

 

But BBC filed the warrant of arrest on Friday before it even arrived.

 

“We discovered the arrest warrant Friday afternoon and called them,” Cumming said. “What did you do, what happened?”
Despite doing about $8 million in business with BBC a year, the shipper was under time pressures to unload the ship and keep going.

 

“In commercial shipping, it’s not unusual for a ship to arrive and the cargo is unpaid,” Kevin Cummings said. In that case, the cargo doesn’t clear customs until the bill is paid, he said. But when the cargo is a yacht that can sail away, the shipper’s only recourse is to arrest them.

 

“Something so typical in shipping becomes a spectacle because it’s a yacht,” he said.

 

Clients warned
With the M/V Billesborg due to arrive the following week, Yacht Path contacted Alley Maass and each of its clients, warning them what was happening and advising them to pay the shipper to avoid arrest.

 

“It approached $600,000 before it was all done, with the additional demurrage charges, stevedoring and port fees,” McAllister said. The yachts onboard included a 93-foot Broward, two 85-foot Pacific Mariners and a 74-foot Viking.

 

The ship arrived late Monday, Feb. 25, just a few days after Vesuvius had arrived. All charges has been paid by Tuesday and the yachts were discharged without arrest.

 

Capt. Marvin Wilson in Gibraltar didn’t have that chance.
The 115-foot yacht and 25-foot tender under his command were booked in December for a Jan. 6 loading in Ft Lauderdale but they weren’t loaded until Feb. 23. Yacht Path charged the owner $260,000.

 

Just before the ship arrived in Gib on March 7, Capt. Wilson was told the yacht was being arrested. He and the owner’s rep scrambled to get the shipping fee of $100,000 paid, but that still didn’t release the yachts.

 

“Yacht Path did not tell us what was going on,” Wilson said. “If we had known this was coming, we would have wired the money sooner. But because they waited until the last moment, the yacht was arrested so we had to pay the $8,500 arrest fee, too.”

 

The agents hadn’t been paid and there were port dues as well.

 

“The next day I walked in with $50,000 in hundred-dollar bills in my backpack,” Wilson said. “I told them, ‘We need the yacht and we need it now; what’s it going to take?’”
About $36,000 more, all told.

 

Red flags alert
In doing his research for shipping Aghassi and First Draw, Capt. Sloate said he ran across a few red flags with Yacht Path, but ultimately the owner chose to ship with the company as it was less expensive than other transport companies. And he wanted to ship them to avoid the additional wear and time on the engines as the yachts are for sale.

 

Of course, after the ordeal they went through, Capt. Sloate acknowledged that shipping the yachts really wasn’t cheaper.
“I could have taken them over on our bottom, one at a time, and still gotten here sooner and cheaper,” he said. “In a nutshell, you’re at their mercy; the contract says so. You are cargo. With a judge’s order, they could have auctioned off the yachts to pay their fee.”

 

He’s right. At the heart of the events is the intersection of ancient laws created for the commercial shipping industry and the relatively new science of transporting yachts.

 

In commercial shipping, a bill of lading is issued by the shipowner to the cargo owner for the goods it will carry. That is the cargo owner’s proof that the ship will get the cargo to its destination safely.

 

Not so in yacht transport. There is no bill of lading required nor offered by the shipper.
“It’s outrageous,” McAllister said. “That’s the universal reaction of the 16 yacht owners on Billesborg: ‘This is outrageous’.
“What [owners, brokers and manufacturers] ought to do is refuse to send a yacht on a vessel unless they have a bill of lading signed by the ship’s captain,” he said. “Who are you going to trust, the guy who owns a 600-foot ship or the guy with a phone and a chair?”

 

Yacht transporters, and Yacht Path in particular, “took total advantage of a little-used commercial practice of retailing cargo space without binding the shipowner to performance,” McAllister said.

 

But the system works, as long as the ship does what it’s supposed to do (namely, carry good from point A to point B) and the company chartering the space does what it’s supposed to do (namely, pay its bills).

 

“Up until a year ago, Yacht Path had a sterling reputation, but it’s been crumbling little by little,” he said.

 

When bills aren’t paid, the shipowner is left with the only recourse to arrest the cargo. If owners refuse to pay, the shipper has the legal right to auction the cargo to get paid.

 

Owners, it seems, have few options as well. They could refuse to pay and watch their yachts be sold to pay the shipper; once arrested, they can bond their vessel out by paying 120-130 percent of what is owed, and then pursue legal action to recoup those expenses; or they can pay what is owed and carry on with their cruising plans.

 

“Nobody likes to look like a sucker,” McAllister said. “They all got taken and there’s nothing they can do about it. The system works if Yacht Path does the right thing; there’s no protection for the owners if they don’t.”

 

Maass had advice for yacht owners considering shipping their yachts on cargo ships.
1. Don’t assume that all brokers that arrange shipping are the same. “Do your research and know who you are dealing with,” he said.
2. Verify with the broker or agent that the shipper has been paid.
3. If you can negotiate it, pay a low initial payment and the rest when the yacht is offloaded.
Capt. Sloate agreed with that last tip. If he had it to do over, he would put the transport fee in escrow to be paid when the yacht is discharged at its eventual destination.
Cummings said he plans to do that moving forward. (See sidebar story that begins on A1.)

 

Yachts taken over
What happened to Capt. Sloate’s yachts can be a little unnerving for any captain who takes seriously his command.
After the yachts were arrested, he convinced the marshals to allow him onboard to help with offloading procedures and to make sure systems were back up in running.

 

Once offloaded, the tugs showed up for a tow up the New River. He had signed the standard waiver agreement when the marshals took control. And two men he called “watchmen” took command. Capt. Sloate remained on the dock, watching the yachts get hauled away.

 

“I totally felt violated with these guys on the boat,” Capt. Sloate said. “They wanted to know what bunk was theirs. They can do anything they want onboard. They can cook in the galley, they can take a shower. He took my jacket out of my cabin because he was cold.”

 

His crew stayed in hotels for two days until National Liquidators granted them permission to move back aboard and begin the lengthy task of cleaning the yachts from their 28-day journey. The lawyers did their thing and the yachts were released a few days later, a week after they arrived.

 

“It was quite an ordeal,” Capt. Sloate said. “I felt really bad for the owner. There were people all over the boat.
“These boats don’t deserve that,” he said. “These boats get taken care of so well. We walk around with socks on, we don’t touch more than we need to. These guys were all over it.

 

“It was none of our doing and it was happening. I felt more violated even for the boat.”


Lucy Chabot Reed is editor of The Triton. Comments on this story are welcome at lucy@the-triton.com.

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