ARAMCO TRADING FUJAIRAH FZE v GULF PETROCHEM FZC

A court may grant declarations after judgment in default where they are necessary to secure the claimant the fullest justice, particularly where the order will require enforcement abroad and the declaration clarifies the basis of the judgment. The usual practice against granting declarations without a trial is a rule of practice, not jurisdiction.

A written instrument may be corrected by construction where the mistake is clear from the document and its context, and the necessary correction is clear. Apparent authority may arise from conduct, including permitting an agent to use the principal’s letterhead and corporate stamp. A principal may also ratify a contract by receiving its benefit with knowledge of the relevant circumstances. An indemnifier’s payment gives rise to subrogation, so a money judgment for sums paid as security does not necessarily overcompensate the indemnified party.

The claimant bought fuel oil from the defendant against a letter of indemnity because the original bills of lading were unavailable. After the vessel was arrested in Singapore in proceedings brought by an alleged holder of the bills, the claimant provided security and sought indemnity from the defendant.

The defendant’s defence was struck out for failure to comply with unless orders. The claimant then sought declarations concerning the indemnity and money judgments for the security and related legal costs. The defendant argued that declarations should not be granted without a trial, that the indemnity was ineffective because of errors in the named entities and lack of authority, and that the security payment was not yet an actionable loss.

1. Declarations. The general practice is not to grant declarations by consent or following judgment in default without a trial. That practice is not jurisdictional. Where declarations are necessary to provide the fullest justice, the court may grant them. Relevant considerations include the effect on foreign third parties and whether the declarations affect anyone other than the parties and those claiming through them.
2. The present application followed a contested hearing at which the defendant was represented. The declarations would clarify the basis of the money judgment and were likely to assist enforcement abroad. They therefore formed the more appropriate relief than recitals alone.
3. Construction and authority. The upstream letter of indemnity naming another Aramco entity contained a clear mistake apparent from the contextual documents. The documents showed that the claimant, rather than that entity, was the charterer and intended indemnitor. The instrument could therefore be construed as having been offered by the claimant.
4. The defendant had no more than a fanciful case that the signatory lacked apparent authority. The defendant’s letterhead, corporate stamp and email systems, together with receipt of more than US$4 million in reliance on the indemnity, constituted conduct supporting apparent authority. The defendant was also unable in commercial justice to accept the purchase price on that basis and later rely on alleged lack of authority. Ratification or estoppel provided an additional answer.
5. Security payment and subrogation. The letter was a contract of indemnity and did not exclude subrogation. On payment by the indemnifier, the indemnifier would acquire the indemnified party’s rights and remedies against third parties, including rights concerning any recovery of the security. The claimant was therefore entitled to judgment for the security sum.
6. Declarations were granted broadly in the terms sought, subject to drafting points. Judgment was also entered for the security sum and the uncontested related costs.