Farenco Shipping Co.Ltd. v Daebo Shipping Co.Ltd.

Farenco Shipping Co.Ltd. v Daebo Shipping Co.Ltd.

The obligation in clause 3 of the LOI to provide bail or other security remains a current obligation even after the vessel's release by the shipowner, as the commercial purpose of the LOI is to ensure the shipowner does not incur the cost of bail. Specific performance is appropriate to enforce this obligation. The undertakings in the LOI are conditional upon delivery to the named receiver, Kremikovtzi. No binding agreement was reached between Deiulemar and Norden regarding the form of security.

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 Shipping Dispute / Judgment on Preliminary Issues
Outcome
Preliminary issues determined: obligation to provide security remains current; undertakings conditional on delivery to Kremikovtzi; no binding agreement between Deiulemar and Norden as to form of security.
Legal Topics
Letters of Indemnity, Charterparty, Specific Performance, Obligations Under LOI, Delivery of Cargo, Security for Claims
Commercial Law Shipping Law Letters of Indemnity Charterparty Specific Performance Obligations Under LOI Delivery of Cargo Security for Claims

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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 Shipping Dispute / Judgment on Preliminary Issues

Legal Issues

  1. 1 Whether clause 3 of the Letter of Indemnity obliges the party giving the indemnity to provide security directly to Stemcor
  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 even after the vessel's release by the shipowner, as the commercial purpose of the LOI is to ensure the shipowner does not incur the cost of bail. Specific performance is appropriate to enforce this obligation. The undertakings in the LOI are conditional upon delivery to the named receiver, Kremikovtzi. No binding agreement was reached between Deiulemar and Norden regarding the form of security.

Court Disposition

Preliminary issues determined: obligation to provide security remains current; undertakings conditional on delivery to Kremikovtzi; 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.
  • Further directions to be given after clarification of funds held in escrow.