Trafigura Maritime Logistics Pte Ltd v Clearlake Shipping Pte Ltd

Hearing dates: 4,5,6, 7 and 11 July 2022

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

HIS HONOUR JUDGE Pelling QC SITTING AS A JUDGE OF THE HIGH COURT

HH Judge Pelling KC:

Introduction

This is the trial of a claim by the claimant in the 159 Claim (“Trafigura”) made under a maritime indemnity given by the defendant in the 159 Claim (“CSPL”) by reference to a voyage charter by Trafigura to the first claimant in the 171 Claim (“CUSA”) of the MT Miracle Hope (“Vessel”) in order to secure the discharge of the Vessel's cargo without presentation of the original Bills of Lading. It is also the trial of a claim under a maritime indemnity given by the defendant in the 171 Claim (“PBSA”) to CUSA in respect of a sub charter of the Vessel by CUSA to PBSA for the same purpose.

As is well known, a ship owner or disponent owner can be liable for mis-delivery if a cargo is delivered to a receiver other than on presentation of the original bills of lading. Where such a claim is made, a claimant can commence proceedings for the arrest of the vessel as security for the claim. Where that happens, typically it is necessary for security to be provided by or on behalf of the owner before the vessel concerned can be released from arrest.

Bills of Lading are often negotiable and, in many cases, particularly in the liquid hydrocarbon trade, the original bills of lading may not be available to the receiver at the discharge port on arrival of the vessel. In order to avoid the costs of delay in discharge, the practice is for the receiver to tender a letter of indemnity to the owner or disponent owner of the vessel in order to secure release of the cargo. Where the vessel has been sub-chartered, there will be back to back letters of indemnity from the disponent owner up the charter chain to the head owner so as to enable any mis-delivery related claims to be passed up and down the charter chain. Such letters of indemnity typically indemnify the owner or disponent owner in respect of any claim against it for mis-delivery, for the costs of providing security in order to obtain the release of an arrested vessel and also to fund any consequential legal action including defence costs. Many standard form charterparties require owners to discharge against a letter of indemnity, or a deemed indemnity in terms set out in the charterparty, if requested to do so. If it should turn out that the receiver was not entitled to release of the cargo, then the owner will be liable to the holder of the original bills of lading but is entitled to be indemnified in respect of that liability to the extent permitted by the terms of the letter of indemnity concerned. Letters of indemnity are free standing contracts between the indemnified and the indemnifier — see The Songa Winds [2018] EWCA Civ 1901; [2018] 2 Lloyds Rep 374 — that are frequently subject to exclusive jurisdiction provisions that differ from those in the host charterparty.

Almost invariably, liability under maritime letters of indemnity is not secured, although it can be and sometimes is. By accepting an unsecured letter of indemnity the owner or disponent owner is exposed to the risk that the letter of indemnity will not be honoured and may have to commence either proceedings in a state court (as in these claims) or an arbitration (as in the case of the claim by the head owner against Trafigura arising out of the same facts as these claims) to recover what is due. It is also relevant to note that a requirement that an owner discharge without the benefit of an indemnity and without sight of the original bills of lading would require the owner to take the risk of a claim for mis-delivery that could be avoided by the simple expedient of refusing to deliver without sight of the original bills of lading and claiming demurrage for any resulting delay in discharge. That is not a risk that a ship owner or disponent owner could reasonably be expected to take.

As will be apparent from what I have said so far, the efficient conduct of, in particular, the liquid hydrocarbon sea transport trade depends on the willingness of receivers to offer indemnities as the price of obtaining discharge without presenting the original bills of lading, and on ship owners being willing to discharge in such circumstances in return for such indemnities. As is obvious that willingness depends ultimately on owners being confident that the indemnities that are offered will be honoured. It is this willingness that eliminates both the delay and cost of refusing to discharge without sight of the original bills.

Paragraphs 2–5 above set out in summary the context in which the construction issues to which I turn below must be determined.

Frequently the purchase of a large volume high value cargo will be financed by borrowing by the purchaser from a trade finance bank, usually in the expectation that the cargo will be sold on prior to discharge. The purchase price payable as a result of such an onward sale will be paid into the original purchaser's account with the trade finance bank and that purchaser will be entitled to the margin between the purchase and sale price less any banking fees and costs, or be liable for any shortfall. Whilst the methods used for delivering finance of this sort vary, it will commonly involve the trade finance bank issuing an irrevocable letter of credit naming the original purchaser as applicant and the original seller as beneficiary, with the trade finance bank being secured by the original bills of lading being issued or endorsed to the order of the trade finance bank. Typically, the trade finance bank will then hold the bills of lading as security to ensure the original purchaser repays the sum borrowed to fund the original purchase from the date when payment is made against the irrevocable letter of credit. Generally no problems arise in practice, at any rate where there is a rising market for the cargo during the period of transportation or where the purchaser is otherwise ready, willing and able to meet its liabilities.

In this case as in many others there is a chain of charters stretching from the head owner to the sub-charterer. Trafigura was the time charterer of the Vessel from the head owners. It let the Vessel under a voyage charter to CUSA. CUSA then chartered the Vessel to PBSA. Both the voyage charter to CUSA and the sub charter by CUSA were fixed on 21 August 2019 on amended Shellvoy 6 forms in materially similar terms.

When the Vessel arrived at the discharge port, the original bills of lading were not presented by the receiver. The receiver (the purchaser of the cargo from Petrobras Global Trading BV (“PGT”), a subsidiary of PBSA) had sought discharge without presentation and orders to that effect had been provided to the master of the Vessel on the basis that PBSA as sub charterer would provide an Indemnity to CUSA. CSPL provided an indemnity up the charter chain to Trafigura, although as I have explained it was CUSA not CSPL that had chartered the Vessel from Trafigura.

As I explain in more detail below, subsequently, the Vessel was arrested following the commencement of proceedings in Singapore by the Singapore Branch of Natixis Bank (“Natixis”), on the basis that Natixis had financed the purchase of the cargo by the receiver from PGT, it was the lawful holder of the original bills of lading, and in consequence the cargo had been wrongly delivered to the receiver. Following the arrest of the Vessel, claims for indemnity (including security sufficient to enable the Vessel to be released from arrest) were made down the chain of indemnities but no indemnity was forthcoming up the chain. That resulted in the commencement of an arbitration by the head owner against Trafigura, the 159 Claim by Trafigura against CSPL under the indemnity allegedly provided by it to Trafigura, and the 171 Claim by CUSA and CSPL against PBSA under the indemnity allegedly provided to CUSA by PBSA. PBSA maintains that even if CSPL is liable to Trafigura, it is not liable to either CUSA or CSPL because CUSA has no liability to Trafigura under any indemnity and PBSA has no contract with CSPL. I refer to this issue below as the “ Contractual Lacuna Issue”.

The Facts

By a voyage charter by a fixture recap dated 21 August 2019, Trafigura chartered the Vessel to CUSA to carry a cargo of crude oil from up to 2 ports on a defined part of the Brazilian Seaboard to up to 3 ports in the Far East (the “Trafigura Charter”). On the same date CUSA sub-chartered the Vessel to PBSA. Both the voyage charter to CUSA and the sub charter by CUSA incorporated an amended version of the Shellvoy 6 voyage charterparty form provided by or on behalf of PBSA. The relevant provision within each is clause 33(6), which had been amended in materially identical terms. The drafting of the amendments was defective in a number of respects. I turn to the issues that...