Court of Appeal: Letter of guarantee effective security to constitute a Limitation Fund in England. This is a landmark decision reversing the long-held practice of the Admiralty Court that a Limitation Fund can only be constituted by means of a cash payment into court.

Sellers accepted the Buyers’ conduct as a repudiation of the MOA and/or cancelled the MOA.  Buyers accepted that their failure was a repudiatory breach. It was held that on a proper construction of clause 2 and clause 13 of the NSF93, Sellers are entitled to claim the deposit separately and in addition to their actual loss suffered as long as their right to the deposit has accrued before the contract was terminated.

A case that highlights the necessity to ensure that bills of lading are drafted in such a way as to incorporate not just the English law but also the jurisdiction/ arbitration clause in the sub charter that is incorporated to the bills of lading. 

It further highlights the importance of “definition of carrier” clauses in bills of lading and the care that needs to be taken when signing the bills. Owners need to give the ship agents and Master clear instructions as to whether the bills are to be signed by the Master or agent and whether such signature is to be for an on behalf of the owners or disponent owners/time charterers.

When an owner or time charterer is asked for “switch bills” he must tread carefully. A letter of indemnity is little consolation.  In Brown Jenkinson v Percy Dalton a letter of indemnity indemnifying owners for issuing clean bills when the cargo was not in apparent good order, was held unenforceable even though the Owners did not ‘intend to defraud’ and only the tort of deceit had been committed.