Jclaim for misdelivery of cargo in Trafigura Maritime Logistics Pte Ltd v. Clearlake Shipping Pte Ltd (Miracle Hope)  EWHC 2234 (Comm) gave rise to various issues under the Letters of Indemnity (LOI) which had been given to ensure delivery of the cargo without presentation of the original bills of lading.
In previous judgments, the Court has given useful guidance on the wording of the International Group of P&I Club’s letter of intent. It also clarified the security obligations of intermediary parties in a charterparty chain under consecutive letters of intent.
In the latter judgment, the Court interpreted the rather unsatisfactory language of the relevant wordings of the letter of intent in their commercial context and concluded that the indemnities were enforceable throughout the charterparty chain. Significantly, the Court held that the novation of an intermediate sub-charter to the charterer’s related company did not prevent compensation from flowing through the charter chain.
Briefly, Ocean Light Shipping Inc time chartered the vessel to Trafigura Maritime Logistics Pte Ltd; Trafigura sub-chartered to Clearlake Chartering USA Inc; and Clearlake sub-chartered to Petrobras to transport a cargo of oil from Brazil to China. The cargo had been sold by a subsidiary of Petrobras to Hontop Energy (Singapore) Pte Ltd, which financed the purchase through an irrevocable letter of credit issued by Natixis Singapore.
The two sub-charters were materially back-to-back, based on Shellvoy Form 6, which contains wording deemed LOI, the LOI being subject to the jurisdiction of the English courts.
Part of the cargo was then unloaded in China without presentation of the original invoices and against the compensation provided for by the charters concerned. After discharge and delivery, Clearlake Shipping Pte Ltd replaced Clearlake Chartering in sub-chartering with Trafigura by means of an addendum.
Hontop became insolvent and Natixis stopped the ship in Singapore, alleging that they had not been reimbursed by Hontop under the letter of credit. Natixis sought security from Ocean Light for its misdelivery claim, which it brought as the rightful owner of the original bills of lading. This led to claims for compensation (including sufficient security to allow the vessel to be released from arrest) all the way up the LOI chain, but no compensation was paid upstream. chain.
In due time, the English court issued orders against Clearlake and Petrobras requiring them to provide security for Natixis so that the arrest could be lifted. Ocean Light had obtained similar relief against Trafigura in arbitration. Following the boarding, however, Trafigura lost a tracking device and sought to claim its loss of earnings, as well as expenses it incurred as a result of the ship’s boarding. Clearlake and Petrobras have contested the claims under their respective letters of intent.
Decision of the commercial court
As the subcharters were materially back-to-back, Clearlake adopted Petrobras’ various defenses to liability under the Letters of Intent, all of which were rejected by the Court.
Specifically, sub-charter clause 33(6) provided inter alia that if there was a request to discharge cargo without presentation of original invoices, owners were to do so “in return for receipt of a letter of intent in accordance with the Owners’ P&I Club wording to be submitted to charterers prior to lifting the ‘subtitles.’ No such wording was submitted before the charters became unconditional but, given the commercial context, the Court rejected the argument that this meant there was no right to compensation, instead it found that “…before lifting the ‘subs'” was redundant and ineffectual wording and , once the parties have lifted the subs, they have waived compliance with this provision.
The Court also found that, on its proper interpretation, the wording of clause 33(6) did not require that a formal written letter of indemnification be received by the affected selling owner before he could be entitled to compensation. indemnity. Rather, it was deemed compensation “in the wording of the Owners’ P&I Club” where the charterer concerned indicated by fax, telex or e-mail that he accepted the wording offered and the cargo was then unloaded. On the facts here, an email sent by Petrobras to Clearlake amounted to a valid invocation of clause 33(6) and Clearlake had manifested a similar intent by tracing the chain back to Trafigura.
The Court also ignored Petrobras’ argument that it gave unloading instructions, not delivery, and that the owners should have unloaded the cargo but retained control of it. The unloading instructions themselves did not say so, nor was there any understanding between the parties as to the storage of the cargo after unloading. The parties to these charters and letters of intent had also used the words “discharge” and “delivery” interchangeably. The Court therefore concluded that in principle Clearlake and Petrobras were liable under their respective letters of intent.
This liability was subject to a potential break in the chain of charter parties/indemnities. The novation of the charterparty between Clearlake Chartering and Clearlake Shipping meant that Clearlake Chartering no longer had any liability to Trafigura since Clearlake Shipping had assumed such liability. In fact, the letter of intent to Trafigura had been provided by Clearlake Shipping, although at the time it had no responsibility to Trafigura (because the charter had not yet been novated) . At the same time, there was no contractual relationship between Clearlake Shipping and Petrobras.
Based on the evidence, however, the Court concluded that the two Clearlake entities wanted there to be an internal indemnity that bound them and was therefore likely to allow any liability arising from compliance with Petrobras delivery orders is transmitted along the charter chain.
In conclusion, therefore, the claims for compensation were upheld and Trafigura was entitled to recover its losses.
The Court has once again demonstrated that it will not allow the parties to the letters of intent to easily escape their responsibilities, in particular on technical aspects. However, in order to avoid disputes of this nature, it is important to carefully check the wording of the letter of intent and the charter-party to avoid inconsistencies and unclear language. Particularly where there is a chain of charter party and a series of letters of intent, as in this case, care should be taken to ensure that indemnification obligations are as consequential as possible and that any intra-group agreement does not has no undesirable consequences.
Source: Baltic Stock Exchange