St.Maximus Shipping Co.Ltd. v A.P. Moller-Maersk A/S

A letter of undertaking promising payment of sums ascertained to be due under a General Average adjustment may require payment of the amount determined by the average adjusters, even if that amount proves to exceed or fall short of the cargo interests’ actual legal liability. The expression proper proportion concerns pro-rating, not the legal correctness of the sum assessed. A party cannot establish estoppel by silence without showing a clear representation, reliance and inequity, including any relevant duty to speak. Rectification for common mistake requires a continuing common intention, an outward expression of accord and an instrument that fails to reflect that intention.

The claimant, the demise charterer of the vessel Maersk Neuchatel, sought to enforce a letter of undertaking given by the defendant time charterer as General Average security after the vessel grounded. The letter required payment of the proper proportion of General Average and Special Charges ascertained to be due under an adjustment prepared by the appointed average adjusters.

The parties disputed whether the defendant was bound by the adjustment’s factual determinations, including the assessment of sacrificial damage, or could challenge the amount as not legally due. The defendant alternatively relied on estoppel by representation and sought rectification of the letter.

1. Construction. The letter of undertaking required the defendant to pay the sum ascertained to be due in the General Average adjustment. The wording contained a clear undertaking to pay, contrasted with the separate obligation to make payments on account. “Ascertained” connoted a determination, and the letter did not qualify payment by reference to what was legally or properly due. “Proper proportion” referred to the cargo’s pro-rated share of the overall liability. The ascertainment included constituent matters such as valuation and the adjusters’ factual determinations. The reasoning in The Jute Express supported that construction, although the wording which preserved a challenge to legal liability in that case was absent here (paras 28–46).
2. Estoppel. Estoppel by representation required a clear and unequivocal representation of fact, reliance and inequity in permitting departure. The alleged representation arose from silence or inaction and therefore required a duty to speak. No such duty arose: the covering email was unclear, was addressed to the average adjusters, and the claimant’s solicitor neither knew of nor appreciated any mistake. Issue (2) was answered “No” (paras 47–57).
3. Rectification. Rectification for common mistake required a continuing common intention, an outward expression of accord, continuation of that intention at execution, and an instrument which by mistake failed to reflect it. Those requirements were not met. There was no acceptance of the email, no outward accord, no shared understanding, and no prior accord before the letter was agreed and signed. Issue (3) was answered “No” (paras 58–66).
4. The defendant was bound by the adjusters’ determinations identified in issue (4), including their proper fees and the sums due under the Non-Separation Agreement. Issues (1) and (4)(a)–(c) were answered “Yes” (paras 67–68).