MIRACLE HOPE: ENFORCEABILTY OF CHAIN OF INDEMNITIES TRAFIGURA MARITIME LOGISTICS PTE LTD v CLEARLAKE SHIPPING PTE LTD (THE “MIRACLE HOPE”) [2020] EWHC

BACKGROUND

·???????Owners of the vessel Ocean Light Shipping Inc (Ocean Light) chartered the vessel to Trafigura Maritime Logistics on SHELLTIME?4

·???????Trafigura, voyage-chartered the vessel on SHELLVOY 6 to CUSA (an entity in the Clearlake group) for the carriage of crude oil from Brazil to China

·???????CUSA then further sub-chartered the vessel to PBSA on back-to-back terms

·???????After discharge there was a novation of the charterparty between Trafigura and CUSA whereby CSPL (another entity within the Clearlake group) took over the future rights and obligations vis-à-vis Trafigura.

·???????The buyer of the cargo was (Hontop) & Whole Transaction was financed by a bank NATIXIS

·???????After discharge the buyers became insolvent. As a result, the financers arrested the vessel at Singapore

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PARTIES TO THE DISPUTE

1.?????Trafigura Maritime Logistics Pte Ltd (“Trafigura”

2.?????CSPL

3.?????Petroleo Brasileiro SA (“Petrobras”)?

THE FACTS

·???????Buyers of the cargo (Hontop) obtained delivery without presentation of the original bills of lading and without any written letter of indemnity (LOI) document being provided by the charterers to the disponent owners.

·???????They claimed that under clause 33(6) SHELLVOY 6, discharge of cargo without presentation of Bill of Lading was implied

·???????No formal written LOI was provided by the charterers to the disponent owners

·???????Petroleo Brasileiro SA sought discharge on basis of deemed indemnity provided under Clause 33(6) against Clearlake who in tun sought the same against Trafigura

·???????Clause 33(6) of the CUSA charterparty provided:

“(6) …If Charterers … request Owners to discharge a quantity of cargo either:

(a) without bills of lading and/or

(b) at a discharge place other than that named in a bill of lading and/or

(c) that is different from the bill of lading quantity then Owners shall discharge such cargo in accordance with Charterers’ instructions in consideration of receiving?an LOI as per Owners’ P&I Club wording to be submitted to Charterers before lifting the ‘subs’. Following indemnity deemed to be given by Charterers on each and every such occasion …

·???????What is of relevance is that Clause 33(6) required the wording of LOI to be provided before lifting the ‘subs”

·????????In order to determine the enforceability of the chain of indemnities, it was necessary for the court to interpret the meaning of the deemed indemnity clause especially in the view that no LOI wordings were provided prior lifting the ‘subs’

·???????Even more important for the court to interpret was whether LOI wordings were a “Condition Precedent” before ‘subs’ were lifted

·???????Another legal issue before the court was whether novation of the charterparty between Trafigura and CUSA had any impact on the enforceability of the chain of indemnities

·???????Also, an issue before the court was the legal significance of the words “Delivery” and “Discharge”. Petrobras said there was a distinction between “discharge” and “delivery”. They claimed that the cargo should have been discharged from the vessel, but the Owners should have retained control of it – for example, by putting it into a separate shore tank. They based their arguments that charterers had given Discharge orders and not delivery orders. ?

JUDGEMENT & COMMENTS

·???????The argument that LOI wordings was a “Condition Precedent” was rejected by the court. Court went on to say that, given the vast commercial experience of both the parties and once the contracts were made binding, the chain of indemnities was enforceable

·???????Despite the absence of clarity in drafting of the clause, court went to great length in giving importance to the large commercial experience of both the parties.Large experience of both the parties played a very important role in the courts reasoning

·???????Though the court did not fail in mentioning that despite their vast experiences both parties failed to take adequate precautions to insulate the clauses from conflicting interpretations.

·???????One of the major lessons learned from this judgement was that, it is paramount that parties to a contract should attempt to make the language as unambiguous and crystal clear as possible.

·???????Court also declared that for each and every case of delivery without presentation of a bill of lading, the same should be stated in unequivocal terms in the fixture recap

·???????On the question of “discharge “& “delivery”, court ruled that there was no such mention in the discharge orders that owners should only discharge and not deliver. If the intention of the parties was so, then the same should have been specifically agreed

·???????The condition precedent or any precondition should be clearly stated in the contract rather than leaving it to the arbitrators or courts to decide on the intention of the parties.?

The Judge’ found that the chain of indemnity is enforceable & Petrobras had to indemnify Clearlake, Clearlake had to indemnify Trafigura and Trafigura had to indemnify head owners.