Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening
Citations:  EWHC 716 (Comm);  1 All ER (Comm) 473;  2 Lloyd’s Rep 123;  1 CLC 460;  ILPr 52;  CLY 618.
The claimant was an English company working as a cargo recovery agent and claims correspondent. They were working on a case in which a vessel collided with another near Gibraltar and sunk. The sunken vessel was registered with the defendant, an insurance association. The owners of the cargo on board the vessel instituted American proceedings against the vessel owners. They then assigned their rights to Turkish underwriters.
The underwriters instructed the claimant to recover compensation on their behalf. The relevant contract was subject to English law, and enabled the claimant to deduct its commission from any recovery made. Any recoveries would likely be paid into the claimant’s account in England.
The underwriters (with the claimant acting as their agent) entered into a letter of undertaking with the defendant. Under this letter, the defendant agreed to pay any sums recovered from the vessel’s owners either to the claimant or to solicitors appointed by the underwriters. However, the underwriters then settled the claim with the defendant directly for $8.5 million. The defendant paid the money into the underwriters’ account, not the claimant’s. When the claimant sought their commission, the underwriters refused to pay.
The claimant argued that the defendant procured the underwriter’s breach of the commission contract, and sued them in tort. Alternatively, the claimant thought they had a claim for breach of contract. They argued that they could enforce the letter of undertaking directly, using the provisions of the Contracts (Rights of Third Parties) Act 1999.
The defendant applied to strike out the claims against them on three grounds.
- The first was that the court lacked jurisdiction. It relied on the Brussels I Regulation, arguing that it should be sued in Sweden where it was domiciled. The claimant responded that the ‘harmful event’ took place in England when they failed to receive the money into their English account. This would mean that, under Article 5(3), the English courts had jurisdiction. The defendant responded that the harmful event took place in Turkey, when the defendant paid the money into the underwriter’s Turkish account.
- The second was that claim for procuring a breach of contract had no realistic prospects of success.
- The third was that the breach of contract claim had no realistic prospects of success. The defendant argued that the claimant was not entitled to directly enforce the letter of undertaking under the provisions of the Contracts (Rights of Third Parties) Act 1999.
The High Court declined to strike out the procurement claim in tort. The claimant had an arguable case that the defendant had procured the underwriters’ breach of contract. The harm produced by this procurement was the failure to pay money into an English account. Accordingly, the ‘harmful event’ occurred in England and the English courts had jurisdiction. Article 5(3) of Brussels I applied.
However, the court struck out the breach of contract claim. The court noted that the provision in the letter requiring the defendant to pay the claimant simply concerned the way in which the defendant’s obligations to the underwriters should be discharged. Any benefit to the claimant was incidental to the parties’ purposes. The letter did not, therefore, purport to confer a benefit on the claimant for the purposes of s.1 of the Contracts (Rights of Third Parties) Act 1999.
Additionally, on proper construction of the contract it appeared that the parties did not intend that the claimant should be able to enforce the letter. This was indicated by the fact that the money could have been lawfully paid to the underwriters’ solicitors.
This Case is Authority For…
The court should not conflate the place where the harmful event occurred with the place where the loss was suffered. There are two types of case: those in which the claimant loses money or goods and those in which he did not receive a sum he should have received. In the former, the harm takes place where the goods/money are lost, even though it could be said that the loss is suffered where the claimant is domiciled. In the latter, the harmful event is the non-receipt of money, which takes place in the location the money should have been received.
In relation to the Contracts (Rights of Third Parties) Act 1999, Clarke J explained that a ‘contract does not purport to confer a benefit on a third party simply because the position of that third party will be improved if the contract is performed.’ Incidental benefits are not relevant. Rather, the language of the contract must show that one of the parties’ purposes was to benefit the third party.