Navig8 Chemicals Pool Inc. v Glencore Agriculture BV

Hearing date: 11 July 2018

Judgment Approved

Introduction

This is an appeal from that part of the decision of Andrew Baker J (‘the Judge’) given on 9 March 2018, in which he concluded that the claim of the claimant (‘Navig8’) was not defeated by the operation of a time bar clause in a voyage charterparty (‘the voyage charter’) between Navig8 as disponent owners and the defendant (‘Glencore’) as charterers, dated 2 February 2016.

The Judge dealt with a number of issues in his judgment, but the issues on the present appeal are relatively confined: whether the obligations and rights contained in two letters of indemnity issued respectively on 6 and 13 April 2016 by Glencore were subject to the limitation provisions of clause 38 of the voyage charter.

The facts

Before turning to the issue on the appeal, it is necessary to summarise the facts, which I take from [10]–[29] of the Judge's judgment. The Songa Winds is an oil and chemical tanker owned by Songa Chemical AS (‘head owners’). Under a pool agreement dated 27 November 2013, she was time chartered to Navig8, on time charter terms based on an amended Shelltime 4 form (‘the time charter’).

On 2 February 2016, Navig8 fixed her on voyage terms based on an amended Vegoilvoy form to Glencore, to carry a minimum of 19,000 m.t. of crude sunflower seed oil from Ilychevsk in Ukraine, for delivery at safe ports in the New Mangalore/Kakinada range in India at Glencore's option. Interocean Shipping India Pvt Ltd (‘Interocean’) was appointed by Navig8 under both charterparties to act as ship's agent at the discharge ports in India.

The vessel was chartered by Glencore, in part, so that it could fulfil a contract concluded in late January 2016 to sell 6,000 m.t. of crude edible grade sunflower seed oil in bulk to Ruchi Agritrading (Pte) Ltd (‘Agritrading’), a subsidiary or affiliate of Ruchi Soya Industries Ltd (‘Ruchi’). The delivery term of this contract was C&F pumped out at New Mangalore or Kakinada. The sale contract provided for property to remain with Glencore until payment.

The vessel loaded under the voyage charter at Ilychevsk on or about 13 March 2016 and bills of lading consigned to order were issued with that date, naming Ruchi as the notify party. Subsequently, on or about 21 March 2016, Glencore's contract of sale with Agritrading was replaced by a contract to sell 6,000 m.t. of sunflower seed oil to Aavanti Industries Pte Ltd (‘Aavanti’) on terms materially back-to-back (save as to price) to those of two contracts dated 18 February 2016 by which Aavanti had contracted to sell (in aggregate) 6,000 m.t. to Ruchi.

At the commencement of delivery, it was clear that the original bills of lading were not going to be available in time for the commencement of the discharge operations, and delivery otherwise than against bills of lading was requested on the terms of LOIs on the International Clubs' standard form, as follows:

(1) By two letters of indemnity addressed to Glencore and dated 22 March 2016, Aavanti requested that delivery be made without production of bills of lading to Ruchi (or to such party as Glencore believed to be, to represent, or to be acting on behalf of Ruchi) (‘the Aavanti LOIs’). One of these letters of indemnity requested delivery of 4,000 m.t. ‘at the port of Mangalore, India’, and the other requested delivery of 2,000 m.t. ‘at Kakinada, India.’

(2) By two letters of indemnity addressed to Navig8 and dated 6 April and 13 April 2016, for 4,000 m.t. and 2,000 m.t. respectively, Glencore requested that delivery be made without production of bills of lading to Aavanti (or to such party as Navig8 believed to be, to represent, or to be acting on behalf of Aavanti) (‘the Glencore LOIs’). Both of the Glencore LOIs requested that delivery be ‘at New Mangalore or Kakinada, India’.

(3) By letters of indemnity deemed to have been issued by Navig8 addressed to the head owners, otherwise on terms identical to the Glencore LOIs, Navig8 requested that delivery be made without production of bills of lading to Aavanti (or to such party as head owners believed to be, to represent, or to be acting on behalf of Aavanti) (‘the Navig8 LOIs’). It was common ground between head owners and Glencore at trial that the Navig8 LOIs were issued by operation of clause 87 of the time charter.

The vessel arrived at New Mangalore on 29 March and discharged 4,000 m.t. of cargo between 7 and 9 April 2016. The vessel then sailed to Kakinada arriving on 14 April where, between 14 and 15 April 2,000, m.t. tons of cargo was discharged. At each port, discharge and delivery was handled by Interocean in accordance with Glencore's instructions to Navig8; and in accordance with Interocean's directions the cargoes were discharged into shore tanks without production of original bills of lading.

This appeal is concerned primarily with the second of the sets of letters of indemnity: the Glencore LOIs.

These were headed: ‘Int Group A: Standard Form Letter of Indemnity to be given in return for delivering cargo with production of the original bill of lading.’

By paragraphs 1 and 2, two substantive indemnification obligations were agreed by Glencore in favour of Navig8 if delivery were made ‘without production of the original bill of lading’:

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of delivering the cargo in accordance with our request.

2. In the event of any proceedings being commenced against you or any of your servants or agents in connection with the delivery of the cargo as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

Paragraphs 5 and 7 further provided:

5. As soon as all original bills of lading for the above cargo shall have come into our possession, to deliver the same to you, or otherwise cause all original bills of lading to be delivered to you, whereupon our liability hereunder shall cease.

…

7. This indemnity shall be governed by and construed in accordance with English law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England.

The Glencore LOIs were signed by and on behalf of Glencore and Navig8. There was no mention anywhere in the Glencore LOIs of the voyage charter or its terms.

For present purposes, the nature of the dispute between Navig8 and Glencore can be summarised as Navig8's claim that Glencore's obligations under the Glencore LOIs were engaged as a result of the discharge, and Glencore's defence that the period of validity of the Glencore LOIs was a period of 3 months from the date of issue (6 April 2016) and that, since no extension had been sought by Navig8, they expired on 6 July 2016, without any claim being made or intimated before that date.

Glencore relies on clause 38 of the voyage charter:

If bills of lading are not available at the discharge port, owner to release a cargo against receipt of charterer's letter of indemnity in the form of owner's P & I club wording but same without bank guarantee as per owners P & I club wording.

…

The period of validity of any letter of indemnity will be 3 months from date of issue. The period may be extended, as necessary, upon owners written request for further extension and confirmation (at time of extension request) that 1/3 original bills of lading have not been surrendered to owner. In absence of extension requests the indemnity will expire at the end of initial three month...