Charterparty Indemnity Clauses and Injunctive Relief

TRAFIGURA MARITIME LOGISTICS PTE LTD V CLEARLAKE SHIPPING PTE LTD [2020] EWHC 726 (COMM)

MT “MIRACLE HOPE

The Pivotal Facts

“(6) Notwithstanding any other provision of this Charter, Owners shall be obliged to comply with any orders from Charterers to discharge all or part of the cargo provided they have received from Charterers written confirmation of such orders.

If Charterers by telex, facsimile or other form of written communication that specifically refers to this clause request Owners to discharge a quantity of cargo either:

(a) without bills of lading and/or….

then Owners shall discharge such cargo in accordance with Charterers’ instructions in consideration of receiving the an LOI as per Owners’ P & I Club wording to be submitted to Charterers before lifting the “subs”...[Emphasis pursuant to the Charterparty; 'the an' in Charterparty]

(i) Charterers shall indemnify Owners, and Owners’ servants and agents in respect of any liability loss or damage of whatsoever nature (including legal costs as between attorney or solicitor and client and associated expenses) which Owners may sustain by reason of delivery of such cargo in accordance with Charterers’ request.

(ii) If any proceedings is commenced against Owners ….in connection with the vessel having delivered cargo in accordance with such request, Charterers shall provide Owners…on demand with sufficient funds to defend the said proceedings.

(iii) If the vessel or any other vessel or property belonging to Owners should be arrested or detained, or if the arrest or detention should be threatened, by reason of discharging in accordance with Charterers’ instructions as aforesaid, Charterers shall provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such vessel or property and Charterers shall indemnify Owners in respect of any loss, damage or expenses caused by such arrest or detention whether or not the same may be justified.

…..

(vii) This indemnity shall be governed and construed in accordance with English law and each and any dispute arising out of or in connection with this indemnity shall be subject to the jurisdiction of the High Court of Justice in England.”

“1. LOI INVOCATION: Charterer’s Petrobas, hereby request Owners to discharge their cargo as per this Voyage Orders without presentation of Bill of Lading. In lieu of an LOI Charterer’s hereby invoke Part II, clause 33 (6) of the Charterparty …”

“Dear Capt Satish

We, Clearlake Shipping Pte Ltd, hereby invoke Clause 33 of relevant CP to discharge as per below orders from Charterers w/o prod of OBL”

Defendant's Submissions in Resistance

(i) The application was brought against the wrong defendant; the Charterparty described the Charterer as CUSA and not the Defendant and this was the case when the indemnity was invoked. The indemnity was thus provided by CUSA and not Clearlake.

(ii) The indemnity wording was not submitted by the Claimant before the fixture had been concluded / subs lifted but after and thus not in accordance with the requirements of the clause nor the intention of the clause, requiring certainty and the pre-consent of the Charterer.

(iii) A separate LOI was required pursuant to the clause and none had been provided, such that no indemnity was provided by the Defendant/CUSA.

(iv) There was no urgency for the application to have been brought, particularly on such short notice.

(i) It found that the Addendum was intended to place the Defendant in the shoes of CUSA for all purposes, as otherwise there was little point for the same, as all operational activities including loading had already taken place when the Addendum was entered. Further, the obligations which were the subject of the application (to provide security, defence funds and indemnity), were all required to be performed after the arrest of the Vessel, which post-dated the Addendum.

(ii) This point had no merit; the Defendant had requested the indemnity wording from the Claimant, been provided with it, and had expressly invoked the indemnity thereafter such that it must have consented to it. It achieved the certainty it may have required. The court did not regard it to be an essential condition that wording was provided before subs were lifted as long as all was in place, as it was, by the time of the discharge instructions without the bills of lading. Although not submitted, the court would have found evidence of waiver by the Defendant of any breach by the Claimant.

(iii) Construing the indemnity clause as a whole the court found clause 33 (6) to be an indemnity in itself – no separate LOI was required to activate the same. The conduct of the parties and commercial reality affirmed this finding and the Defendant waived any requirement for the same.

(iv) The Defendant was obliged to provide the indemnity some days before, had failed to do so in a market for crude carriers which was buoyant yet volatile and it was unrealistic to expect the Claimant to provide evidence of actual lost fixtures whilst the Vessel was under arrest. There was thus considerable urgency in bringing the application for the release of the Vessel.

The Legal Principles & Determination

The full judgment can be read here.

LARA MCDONNELL © 2020

BARRISTER

33 BEDFORD ROW

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