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Lloyd's Law Reporter


[2009] EWHC 716 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Christopher Clarke, 2 April 2009

Jurisdiction – Insurance (marine) – Cargo insurers appointing claims correspondent to negotiate with P&I Club – Agreement providing for direct payment to claims correspondent – Club issuing letter of undertaking by way of security, specifying that settlement payment would be paid to claims correspondent – Club making direct payment to insurers – Claim against Club alleging inducing breach of contract and conspiracy – Whether English court had jurisdiction – Whether harmful act took place in England – Whether claims correspondent had direct claim – Council Regulation (EC) No 44/2001, article 5(3) – Contracts (Rights of Third Parties) Act 1999, section 1

The vessel New Flame , registered in Panama, was entered into the defendant P&I Club, Sveriges. At the end of July 2006 the vessel left New York carrying a cargo of steel bound for Turkey. The cargo, purchased by Nursan, had insured it with two Turkish insurance companies. On 12 August 2007 New Flame was involved in collision with another vessel, Torm Gertrud , and ran aground off Gibraltar. Attempts at salvage failed, and the Government of Gibraltar ordered the wreck to be removed. The insurers paid the cargo owners and, having become subrogated to their rights, instituted proceedings against the owners of both vessels. Dolphin, an English company carrying on business as a cargo recovery agent and claims correspondent, was instructed by the insurers to act for them. Dolphin’s standard terms provided that they would deduct 10 per cent commission from the amount of any recovery and pay the balance to the insurers. At the end of 2007 Dolphin entered into two agreements with the Club. The first was an escrow agreement which provided that any recoveries from the owner of Torm Gertrud would be paid into an escrow account by way of security for any settlement in favour of the owners of New Flame against the cargo owners (under a both to blame collision clause). The second, which was a condition of the first, was a letter of undertaking under which the Club was to provide security to the cargo owners in return for the release of the vessel. In February 2008, following direct negotiations between the Club and the insurers which took place without Dolphin’s knowledge, the parties agreed to a without prejudice settlement in the sum of US$8.5 million, that sum to be paid directly by the Club to the insurers. Dolphin rendered an invoice to the insurers, but the declined to pay the full amount and offered a lesser sum. That led to an email from Dolphin to the Club, asserting that the Club had been guilty of inducing breach of contract between Dolphin and the insurers, but the dispute remained unresolved. On 14 May 2008 a formal settlement was concluded between the owners of New Flame and the insurers. The following day Dolphin wrote to the Club asserting that Dolphin had been appointed irrevocably to act on behalf of the insurers, and that the insurers were precluded from negotiating with third parties. Dolphin issued proceedings against the Club, seeking damages for procuring or inducing a breach of contract between the insurers and Dolphin, and for conspiracy. The Club contested the jurisdiction of the English court under the Brussels Regulation, Council Regulation (EC) No 44/2001. Christopher Clarke J held as follows. (1) The English court possessed jurisdiction under article 5(3) of the Brussels Regulation, which confers jurisdiction on the courts of the place where the damage occurred or the place of the event giving rise to it. There was a well arguable case that under Dolphin’s terms the insurers were bound to procure that the sums recovered from the Club were in the first instance to be paid to Dolphin. The damage occurred in England, the place where the money should have been received. (2) Dolphin did not have a claim under the Contracts (Rights of Third Parties) Act 1999 against the Club in respect of the letter of undertaking. That document provided that payment should be made to Dolphin, and was not intended to confer a benefit upon Dolphin within the meaning of section 1(1)(b) of the 1999 Act: it was merely a statement of how the Club was to discharge its obligations to the insurers. Even if that was wrong, the term was not – as required by section 1(3) – one which was intended to be enforceable by Dolphin.

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