Farenco Shipping Co.Ltd. v Daebo Shipping Co.Ltd. [2008] EWHC 2755 (Comm) (11 November 2008)

Farenco Shipping Co.Ltd. v Daebo Shipping Co.Ltd. [2008] EWHC 2755 (Comm) (11 November 2008)

The obligation in clause 3 of the LOI to provide bail or other security remains a current obligation notwithstanding the vessel's release, as the commercial purpose is to prevent the shipowner from incurring the cost of security. The undertakings in the LOI are conditional upon delivery to the named receiver (Kremikovtzi). No binding agreement was reached between Deiulemar and Norden as to the form of security, as any agreement was subject to terms up the charter chain.

Citation
[2008] EWHC 2755 (Comm)
Parties
Claimant: Farenco Shipping Co. Ltd.; Defendant: Daebo Shipping Co. Ltd.; Third Party: Dampskibsselskabet Norden A/S; Fourth Party: Deiulemar Shipping SPA
Jurisdiction
England and Wales
Judgment Date
11 November 2008
Procedural Posture
Commercial Court Preliminary Issues (construction of Letter of Indemnity) / Judgment on Preliminary Issues After Expedited Trial
Outcome
Preliminary issues determined: (1) obligation to provide security remains current; (2) undertakings are conditional upon delivery to Kremikovtzi; (3) no binding agreement between Deiulemar and Norden as to form of security.
Legal Topics
Letters of Indemnity, Charterparty, Misdelivery of Cargo, Specific Performance, Security for Claims
Commercial Law Shipping Law Letters of Indemnity Charterparty Misdelivery of Cargo Specific Performance Security for Claims

Case Brief

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Parties

Farenco Shipping Co. Ltd.

Claimant

Daebo Shipping Co. Ltd.

Defendant

Dampskibsselskabet Norden A/S

Third Party

Deiulemar Shipping SPA

Fourth Party

Procedural Posture

Commercial Court Preliminary Issues (construction of Letter of Indemnity) / Judgment on Preliminary Issues After Expedited Trial

Legal Issues

  1. 1 Whether clause 3 of the Letter of Indemnity obliges the party giving the indemnity to provide security directly to Stemcor UK Ltd and/or Stemcor Europe AG
  2. 2 Whether the obligation in clause 3 of the Letter of Indemnity to provide such bail or other security is no longer a current obligation, the release of the Vessel having already been secured
  3. 3 Whether the undertakings provided are conditional upon delivery to Kremikovtzi

Ratio Decidendi

The obligation in clause 3 of the LOI to provide bail or other security remains a current obligation notwithstanding the vessel's release, as the commercial purpose is to prevent the shipowner from incurring the cost of security. The undertakings in the LOI are conditional upon delivery to the named receiver (Kremikovtzi). No binding agreement was reached between Deiulemar and Norden as to the form of security, as any agreement was subject to terms up the charter chain.

Court Disposition

Preliminary issues determined: (1) obligation to provide security remains current; (2) undertakings are conditional upon delivery to Kremikovtzi; (3) no binding agreement between Deiulemar and Norden as to form of security.

Orders

  • Specific performance ordered: charterers to provide bail or other security in place of that provided by the shipowner, subject to clarification of funds held in escrow.
  • Assistance of counsel required to determine changes to previous orders in light of this judgment.