In Bunker Holdings Ltd. v. Yang Ming Liberia Corp., the Ninth Circuit Court of Appeals clarified what it means to order necessaries “on the order of the owner of a person authorized by the owner” under 46 U.S.C. Sec. 31342(a), so as to permit the entity furnishing necessaries to have a maritime lien. The facts were simple: the vessel owner (Yang Ming) made a contract to purchase bunkers from a fuel broker. The broker then made a contract to purchase bunkers from Bunker Holdings Ltd. which supplied the bunkers to the vessel and billed the broker. Yang Ming had not directed that the broker use any specific bunker provider.
When the broker filed for bankruptcy before paying Bunker Holdings, the latter sought payment through a maritime lien against the vessel. The District Court held that Bunker Holdings was not entitled to a lien under Section 31342(a). It was undisputed that Bunker Holdings did not provide bunkers on the order of the vessel owner, Yang Ming. The question decided by the Ninth Circuit was whether the broker was “a person authorized by the owner” as that term is intended by Section 31342(a).
The Court of Appeals noted that the fuel broker was not one of the listed persons presumed to have authority to purchase necessaries for the vessel under Section 31341(a)(1)-(3) (owner, master, vessel manager). Therefore, the issue came down to whether the fuel broker was the vessel owner’s “agent.” The Court found no evidence of agency, i.e., authority to bind the vessel. As Yang Ming had not specifically directed the broker to purchase the bunkers from Bunker Holdings, the broker was not acting as an agent when it contracted to buy the bunkers.
This case reinforces the importance for those providing necessaries to vessels under contracts with third parties to either obtain clear confirmation that the buyer is acting as the vessel owner’s agent or, take other steps to ensure payment.
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