Almatrans SA v Steamship Mutual Underwriting Association (Bermuda) Ltd

A letter of undertaking is construed according to its terms and the circumstances existing when it was made. A term requiring notice of proceedings will not be implied merely because the guarantor would benefit from receiving notice, particularly where the document was negotiated by lawyers and could have contained an express notice provision. A mistaken description of the beneficiary may be corrected as misnomer where only one real entity fits the transaction. Irregular service of foreign proceedings does not necessarily invalidate the resulting judgment. The relevant question is whether, under the applicable foreign law, the defect was capable of cure and was in fact cured. A guarantor cannot ordinarily rely on a substantive limitation defence which the principal debtor could no longer raise after judgment.

The claimant sought payment under a letter of undertaking issued by the defendant P and I Club in connection with claims against the owners of the vessel Tutova. The undertaking was addressed to a non-existent company name, although the underlying claim belonged to the claimant.

The defendant argued that the undertaking was not enforceable because of misnomer, breach of implied notice conditions, sharp practice, and defects in service of Italian proceedings on the Cyprus company. It also sought declarations concerning limitation and cancellation of the undertaking. The central issues were the proper construction of the undertaking, the effect of irregular service under Italian and Cypriot law, and whether the Italian judgment remained effective against the principal debtor.

1. Misnomer. The undertaking was addressed to a non-existent company, but the surrounding documents and the reference to the underlying claims identified Almatrans SA as the only possible contracting party. The error was therefore a misnomer capable of correction. If necessary, rectification would also have been available because the document did not record the parties’ true common intention.
2. Implied terms. No term requiring notice to the Club or its lawyers of the commencement or progress of proceedings was implied. The undertaking was in conventional and explicit form, had been negotiated by lawyers, and could have contained an express notice or nomination provision. The alleged sharp practice and uncertain professional obligations of Italian lawyers did not establish the required obviousness or necessity.
3. Sharp practice. The proposed public-policy defence failed. BCCI v Ali concerned the particular context of a release and did not establish a general remedy for sharp practice. Niru Battery Manufacturing Co v Milestone Trading Ltd was concerned with good faith in restitution and unjust enrichment.
4. Service and judgment. The defendant was liable only to the extent that Tutova was liable. The irregularity in service had to be assessed under Italian law. The service attempts were sufficiently connected with Tutova and its officers to constitute an irregularity capable of cure. The Italian judgment was therefore valid and effective notwithstanding the defects in service. The claim that an inexistent service could in some circumstances leave a judgment unenforceable did not apply on the facts.
5. Limitation and order. The limitation issue could not be used to look behind the Italian judgment. Judgment was entered for the claimant for US$220,000. The claimant’s unsatisfactory conduct did not alter the result; the Club’s safeguard lay in the drafting of its undertaking.