Introduction

The UK Court handed down a decision in Trafigura Maritime Logistics Pte Ltd v Clearlake Shipping Pte Ltd [2020] EWHC 726 (Comm) after a remote hearing by telephone and granted to the Claimant time charterer an urgent mandatory injunction compelling the Defendant voyage charterer to provide security to enable the release of a vessel “Miracle Hope” (“Vessel”) which was under arrest in Singapore.

Background

The Claimant time chartered the Vessel from Ocean Light Shipping Inc (“Ocean Light”), and then voyage chartered the Vessel to Clearlake Chartering USA Inc (“CUSA”) (“Charterparty”), which is a different entity from the Defendant, Clearlake Shipping Pte Ltd, in the case. CUSA voyage chartered the vessel to Petroleo Brasileiro SA on terms materially similar to those contained in the Charterparty, including the indemnity provision, to ship crude oil pursuant to a trade financed by the bank Natixis. No Club letter of indemnity (“LOI”) was provided to or requested by CUSA or the Defendant before the Charterparty became an unconditional binding contract. An addendum to the Charterparty was then entered into to substitute the Defendant for CUSA as the charterer after the discharge of cargo.

A dispute arose in relation to the relevant bills of lading. In March 2020, the bank Natixis Singapore commenced proceedings against the “Owners and/or demise charterers” of the Vessel and the Singapore Court granted a warrant of arrest over the Vessel. Natixis demanded security of US$76 million to secure the release of the Vessel and the Ocean Light demanded the Claimant to put up the security. The Claimant then requested the Defendant to comply its obligations under the indemnity clause but no positive response was received. Finally, the Claimant sought urgent injunctive relief from the Court to compel the Defendant to fulfil its obligations under the indemnity to provide the security as requested by Natixis to secure the release of the Vessel.

Legal principles

In deciding whether an injunction should be granted, the Court highlighted that it has the power to grant an injunction where it is “just and convenient” to do so and the principles set out in American Cyanamid Co v Ethicon Ltd [1975] AC 396 apply to the grant of mandatory injunctive relief: If the Court is persuaded that damages would not be an adequate remedy for the Applicant and that a cross-undertaking in damages would adequately protect the Respondent if the injunction were found to have been wrongfully granted at trial, that should ordinarily be in favour of granting the mandatory injunction, without the need to progress to the balance of convenience assessment. If there is uncertainty as to the adequacy of damages, then the Court should proceed to analyse the balance of convenience.

Defendant’s arguments and Court’s decision

The Defendant argued that it was not liable under the indemnity and no injunction should be granted for the following main reasons:

1.        There was at the least a serious question whether the application had been brought against the correct party;

2.        The terms of the indemnity clause relied upon had not been provided in time as required under the Charterparty thus had not been complied with;

3.        No separate LOI was provided to the Claimant as required under the Charterparty therefore no indemnity has in fact arisen; and

4.        The circumstances did not justify the extreme urgency with which the application had been made, particularly bearing in mind the serious nature of the relief being sought, namely a mandatory injunction that the Defendant put up US$76 million by way of security plus defence costs (in an unspecified amount) in relation to a claim between two third parties.

The Court rejected all of the Defendant’s arguments. The Court found it unable to accept the wrong defendant point because the signature of the addendum would have served little purpose unless it was intended to place the Defendant in the shoes of CUSA for all purpose, including any outstanding liabilities that had already arisen, and, as a result of the addendum, the Defendant at the very least assumed all the charterer’s obligations required to be performed after the signing of the addendum.

Regarding the argument of indemnity wording not provided in time, in circumstances where the Defendant had in fact after conclusion of the fixture requested the indemnity wording from the Claimant, had been provided with it, and had then gone on specifically to invoke the clause in conjunction with instructions to discharge the cargo without presentation of original bills of lading, the Court found that this point had no merit.

Considering the communications between the parties in the past, the Court found that the Defendant had waived any requirement for a separate LOI and/or would be estopped by convention from asserting now that no indemnity arose. The Court also considered that the shipping market for Very Large Crude Carriers such as the Vessel was very volatile and there was a very pressing need for the security to be provided in order to secure its release.

In view of the above, the Court held that the Claimant would succeed on its claim on the merits, the damages would not be an adequate remedy, cross-undertaking in damages would provide adequate protection to the Defendant if the injunction were found to have been wrongfully granted, and taking into account the risk of prejudice to each party, the balance of justice is in favour of granting the mandatory injunction sought by the Claimant.

Therefore, the Court granted the mandatory injunction, subject to the provision of a parent company guarantee by the Claimant as a cross-undertaking in damages.

Conclusion

In this case, the judgment reinforced the legal principles in granting a mandatory injunction, in particular whether damages would be an adequate remedy and cross-undertaking in damages would provide adequate protection to the Defendant. The Court hearing the case by way of telephone also demonstrated that the Court is making its best endeavours to overcome the difficulties currently arising from the COVID-19 and minimise the disruption to court operation as well as access to justice. Whilst all hearings in Hong Kong Court have generally resumed starting from 4 May 2020, it also announced a greater use of remote hearings by video-conferencing facilities back in early April 2020 to cope with the challenges posed by the COVID-19, which provided a helpful guidance on how to better utilise technology in dispute resolution. However, it remains to be seen whether the Hong Kong Court will adopt the UK Court approach and is prepared to hear injunction applications by way of telephone hearing.