Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening [2009] EWHC 716 (Comm)

KEY POINTS

• 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 fact that the performance of a contract may result in an improved position of a third party does not necessarily imply that the contract intends to bestow a benefit upon that party.
• The clause within the Letter of Undertaking (LOU) stipulating that payment must be made to Dolphin or the solicitors of the underwriters represented an understanding regarding the manner in which the Club's obligation to the underwriters would be fulfilled.
• It did not serve as evidence that the agent payee was a party intended to benefit from the promise. Rather, the beneficiaries intended were the underwriters, on whose behalf the payment was to be received.

FACTS

• Claimant Dolphin Maritime and Aviation Services Limited ("Dolphin") is a cargo recovery agent and claims correspondent while Defendant Sveriges Angfartygs Assurance Forening (“the Club”) is a P & I Club. Recovery agents such as Dolphin are often paid by way of commission on the recoveries which they take by way of deduction from the monies recovered.
• Defendant engaged the Panamanian flagged vessel "New Flame" which was insured with two Turkish insurers, Anadolu Sigorta (“Anadolu”) and Eureko Sigorta (“Eureko”), collectively the underwriters.
• New Flame collided with another vessel and became semi-submerged. When attempts to salvage her were unsuccessful, the underwriters paid the cargo owners and became subrogated to their rights.
• The underwriters instructed Dolphin to recover compensation in respect of the cargo on their behalf and that of the owners of the cargo. Dolphin issued a Letter of Undertaking (LOU) to the Club.
• Amidst negotiations, the underwriters settled directly with the Club and as a result, Dolphin did not receive any commission on the recovery. The underwriters refused to pay the commission, hence, Dolphin brought action against the Club on the ground of their failure to comply with the LOU.

COMMENTARY

• While it is a common practice among recovery agents to deduct their fees or commission from the recovery they make, that alone is not enough to transform an agreement to pay an agent on behalf of their principal into one that is intended to provide a benefit directly to the agent under section 1(1)(b) of the 1999 Act.