Delivery without the production of bills of lading – construction of LOI’s – relevant belief in the identity of receiver that of the master – limitation of duration of indemnity in charter party not replicated in LOI construed on its own wording
Pursuant to a pool agreement, the vessel was time chartered on the Shelltime 4 form by Songa to Navig8 Chemicals Pool Inc.
Navig8 chartered her on the Vegoilvoy form to Glencore Agriculture BV to carry a minimum of 19,000 m.t. of crude sunflower seed oil from Ilychevsk, Ukraine, for delivery at safe ports in the New Mangalore/Kakinada range in Glencore’s option.
The vessel loaded under the voyage charter at Ilychevsk and bills of lading consigned to order were issued naming Ruchi as the notify party.
Glencore’s contract of sale was to sell 6,000 m.t. to Aavanti . Aavanti had contracted to sell 6,000 m.t. to Ruchi.
In the event, 4,000 m.t. was delivered to Ruchi from the vessel at New Mangalore and 2,000 m.t. was delivered to Ruchi from the vessel at Kakinada.
Neither delivery was made against presentation of any original bill of lading.
By two LOIs addressed to Glencore, Aavanti requested that delivery without production of bills of lading be made 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 LOIs requested delivery of 4,000 m.t. “at the port of MANGALORE, INDIA“, the other requested delivery of 2,000 m.t. “at KAKINADA, INDIA“.
By LOIs addressed to Navig8, Glencore requested that delivery without production of bills of lading be made to Aavanti (or to such party as Navig8 believed to be, to represent, or to be acting on behalf of Aavanti) (‘the Glencore LOIs’).
By LOIs deemed to have been issued by Navig8 addressed to Songa, Navig8 requested that delivery without production of bills of lading be made to Aavanti (or to such party as Songa believed to be, to represent, or to be acting on behalf of Aavanti) (‘the Navig8 LOIs’). The deemed issue of the Navig8 LOIs, by operation of clause 87 of the time charter, was common ground between Songa and Navig8.
The purchase by Aavanti from Glencore was financed by Société Générale, the holder of the bills of lading for the quantities discharged against the LOIs.
Neither Aavanti nor SG were paid .
Having obtained security for its claim by way of a letter of undertaking provided by Glencore, against a threatened arrest of the vessel or a sister ship under in rem proceedings, SG pusued Songa in London arbitration under the bills of lading for damages for misdelivery.
Songa claimed against Navig8, in claim no. 627 under the Navig8 LOIs, that in taking delivery from the vessel, Ruchi represented or was acting on behalf of Aavanti so that delivery was indeed to Aavanti as requested, alternatively, that in effecting such delivery Songa believed Ruchi to represent or act on behalf of Aavanti, alternatively that the delivery to Ruchi was deemed by paragraph 4 of the Navig8 LOIs to have been delivery to Aavanti.
In claim no. 637 under the Glencore LOIs, Navig8 made the equivalent claim against Glencore.
Songa and Navig8 respectively sought interim declaratory and injunctive relief.
Andrew Baker J concluded that in taking delivery from the vessel, as in fact intended and requested by Aavanti, Ruchi was acting for Aavanti and Songa. The LOI’s were therefore engaged.
He held further that despite the LOI’s being addressed to the immediate counterparties and not the vessel owners as such, the belief in the identity of the receiving party was that of the master.
Paragraph 4 of the International Clubs’ standard form, and therefore paragraph 4 of the Navig8 and Glencore LOIs, provided that:
If the place at which we have asked you to make delivery is a bulk liquid or gas terminal or facility, or another ship, lighter or barge, then delivery to such terminal, facility, ship, lighter or barge shall be deemed to be delivery to the party to whom we have requested you to make such delivery …
The only relevant depot was a “bulk liquid facility”. Andrew Baker J held that the owners had not been requested to make delivery so described.
The final question, arising in claim no. 637 between Navig8 and Glencore, was whether clause 38 of the VCP effectively limited the duration of the indemnity contained in the LOI.
Clause 38 of the voyage charter was in the following terms:
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 owners 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 period, or any further extension period.
Paragraph 5 of the Glencore LOIs was as follows:
[We hereby agree] as soon as all original bills of lading for the above cargo shall come into our possession, to deliver the same to you, or otherwise to cause all original bills of lading to be delivered to you, whereupon our liability hereunder shall cease.
The LOI had to be construed on its own terms which contained no 3month limit. By the charter party Glencore had the option to insert the limit but did not.
The Court of Appeal
Only the last point was taken on appeal.
Lord Justice Simon (Sir Geoffrey Vos and Asplin LJ concurring) upheld the finding that the LOI did not incorporate clause 38 of the VCP with its 3 month extendable time bar.
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