21/07/2016

L v A [2016] EWHC 1789 (Comm)

On 18 July 2016, Knowles J handed down judgment on a s.69 appeal raising an important question of law relating to the law of international trade, namely whether for the purposes of a contractual indemnity, a liability to a third party is “established and ascertained”, such that the cause of action under the indemnity accrues, by a judgment of a court of competent jurisdiction even though that judgment may be the subject of an appeal.  

On the facts of the case, charterers of a vessel had promised to indemnify the owners against the consequences of requiring “clean” bills of lading.  There were delays at the loading port as a result of the charterers so requiring, as a result of which claims were brought by the port operators against the owners in India, leading to a judgment against the owners.  The owners sought an indemnity from the charterers in respect of that judgment, which they had provided security for, but the charterers argued that there was no crystallised right to an indemnity, because the Indian judgment was being appealed by the owners, and might in due course be set aside. 

This argument was accepted by the arbitrators, but rejected by the Judge on appeal, who held that the arbitrators’ decision was wrong in law.  According to the Judge, the cause of action under the indemnity accrued once the owners’ liability to the port operators had been “established and ascertained” by the judgment of the Indian court (see The Caroline P [1984] 2 Lloyd’s Rep 466, 474) , and it made no difference that the judgment was subject to appeal.  Nor did it make any difference that the judgment was from a foreign court, as opposed to a court within the jurisdiction.      

Luke Pearce appeared on behalf of the successful appellant.