High Court refuses to allow constitution of limitation fund by letter of undertaking
Ince recently represented cargo interests in English High Court proceedings in which ship owners sought to constitute a tonnage limitation fund under the 1976 Convention and 1996 Protocol to limit their potential liability towards various interests following the sinking of the vessel together with the claimants’ cargoes. One issue the court had to consider was whether the owners are entitled to set up a limitation fund by way of a guarantee in the form of a letter of undertaking (LOU) issued by a reputable P&I Club, instead of the usual payment into court.
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Mr Justice Field, sitting in the Commercial Court, has had to consider the meaning of the phrase ‘proper and business-like’.
Swallowfalls v Monaco Yachting provides further support for the construction of contracts in the manner most consistent with ‘commercial common sense’.