Great Eastern Shipping Company Ltd v Far East Chartering Ltd & Anor

A letter of indemnity issued for delivery of cargo without production of original bills of lading is construed commercially and straightforwardly. Delivery may be established by discharge to barges, the issue of a delivery order and the resulting availability of the cargo to the receiver. The recipient may enforce the indemnity under section 1 of the Contracts (Rights of Third Parties) Act 1999 where the term purports to confer a benefit on an identified class including the recipient’s agents. The public-policy defence is narrow. It is not engaged by an ordinary commercial dispute absent conduct that is manifestly unlawful or known to be unlawful. A question concerning acceptance of a unilateral offer in ignorance of the offer was left undecided.

The claimant shipowners delivered a coal cargo in India without production of the original bills of lading. The cargo had been chartered by the first defendant and purchased by the second defendant, which issued a letter of indemnity to the charterers. The owners sought to enforce that indemnity under the Contracts (Rights of Third Parties) Act 1999 and, alternatively, as a unilateral contract.

The second defendant disputed whether the indemnity was addressed to the charterers, whether delivery had occurred within its terms, whether enforcement was barred by public policy, and the recoverability of various losses and expenses.

1. The claim succeeded on the primary contractual basis. The letter of indemnity was issued to the charterers. Its wording was not displaced by the covering email or by the surrounding commercial arrangements. The owners were within the class of charterers’ agents capable of enforcing the benefit under section 1 of the Contracts (Rights of Third Parties) Act 1999, consistently with The Laemthong Glory (No 2).

2. Delivery was a matter of construction of the indemnity. The cargo was discharged to barges, a delivery order was issued in favour of the receiver, and the cargo was made available to it. Paragraph 4 of the indemnity also treated delivery to a barge as delivery to the requested party. Those steps were sufficient to constitute delivery. Alternatively, the subsequent physical release of the cargo to the receiver constituted delivery. A close and literal approach to the wording was inappropriate.

3. The public-policy defence failed. The principles in Holman v Johnson, Weld-Blundell v Stephens and Brown Jenkinson v Percy Dalton operate within narrow limits. The transaction involved a bona fide commercial dispute. Nothing showed conduct that was manifestly unlawful or known to be unlawful. The caution stated in Mitsubishi v Alafouzos and Saunders v Edwards was important.

4. The alternative unilateral-contract argument was not determined. The issue whether a person can accept an offer by performing the requested act while ignorant of the offer was left open because the primary claim succeeded.

5. Decision on disputed quantum items, and on the extent of any declaration, was deferred to hand-down with further submissions and, if appropriate, evidence.