Laemthong International v Artis

Laemthong International Lines Co Ltd v Artis (The Laemthong Glory) [2005] EWCA Civ 519

Contract – Letters of indemnity – Indemnity – Shipping

Facts:

The Laemthong Glory (the respondent) was a vessel chartered on a voyage from Brazil to Yemen, carrying bagged sugar. The charterparty contract provided that in the event of the original bills of lading not being available at the port, the vessel could unload the cargo at the port under a letter of indemnity (LOI). The receivers of the cargo could nominate the owner’s agents at the discharge port. The receivers requested their charters to issue the LOI to the owners and have them instruct agents for discharge and distribution without the original bills of lading. After the discharge was completed, the Yemeni Bank arrested the vessel, asserting that it held all the original bills of lading in respect of cargo and demanded a claim for its release.

Issues:

Whether shipowners were entitled to enforce the terms of a letter of indemnity (LOI) against the receivers of cargo under s 1 of the Contracts (Rights of Third Parties) Act 1999 (the Act).

Held:

The appeal by Laemthong International was dismissed. The court considered the wording of the LOI and held that it was enforceable by the shipowners given by the receivers to the charterers under the terms of the Act. The shipowners were the agents of the charterers, given their purpose was to carry out the delivery of the cargo to the receivers. There was nothing in the LOI that suggested that the parties did not intend its terms to be enforceable by the owners of the ship. The LOI relied up by the owners did confer a benefit upon the owners under s 1 of the Act, although each LOI should be considered on its own terms.