QLU Spring 2018: LOIs revisited

QLU Spring 2018: LOIs revisited

Songa Chemicals AS v Navig8 Chemicals Pool Ltd [2018] EWHC 397 (Comm)

Facts

The Songa Winds is an oil and chemical tanker owned by Songa Chemical AS (“Songa”) who had pursuant to a pool agreement time chartered her to Navig8 Chemicals Pool Inc (“Navig8”).
 
The dispute arose out of a chain of letters of indemnity (LOIs) issued by Glencore to Navig8 and in turn by Navig8 to Songa seeking discharge of cargo without production of the original bills of lading. The wording of the LOIs was in the standard form approved by the IG P&I Clubs which stipulated  that the owners should deliver the cargo to a named receiver or “… such party as you believe to be or to represent the named receiver or to be acting on behalf of the named receiver”. 

Both sets of LOIs instructed the recipients to deliver to Aavanti. It was common ground between the parties that delivery had been effected to Ruchi Soya Industries Limited, Aavanti’s buyer. The bank, SocGen, who had financed Aavanti's purchase claimed to be the lawful holder of the bills of lading. As a consequence Songa called upon the LOIs which it had received from Navig8, and Navig8 did the same up the LOI chain against Glencore. Glencore denied that the LOIs it had issued to Navig8 had been engaged, a position adopted down the line by Navig8.

Judgment

The Court concluded on the facts that Ruchi represented or was acting on behalf of Aavanti, so that delivery of the cargo without the presentation of the original bills of lading was made to the correct party, in accordance with the terms of both LOIs. The indemnification provisions were therefore engaged, with Navig8 under an obligation to indemnify Songa in respect of SocGen's claim, and Glencore under an obligation to indemnify Navig8 for the same. Where Aavanti had not been paid by Ruchi, there was contemporaneous evidence that as between those parties, prior payment was not necessarily the practice. The facts pointed to Ruchi having claimed delivery of the cargo on behalf of Aavanti.

Obiter, if Ruchi had not taken delivery on behalf of Aavanti, the reference in the standard form LOI to a "belief" that the actual recipient was acting on behalf of the intended receiver meant the belief of the person by whom the delivery in question was made, namely the carrier, but in practice the master.

The Court also granted Navig8 summary judgment on a separate issue that arose solely between it and Glencore, holding that an argument advanced by Glencore that Navig8’s claim under the Glencore LOIs was time-barred had no prospect of success at a trial.

Comments

This is the latest judgment in a series of cases (most recently The Bremen Max [2009] 1 Lloyd’s Rep 81 and The Zagora [2017] 1 Lloyd’s Rep 194) considering the construction and operation of the international P&I Clubs’ standard form for letters of indemnity for delivering cargo without the production of the original bills of lading.

The decision, although very fact sensitive, nevertheless provides useful clarification and guidance on the construction and operation of the International Group Standard LOI wording following the Bremen Max ruling.

Please find a link to the UK P&I Club’s Circular 18/10 issued shortly after the Bremen Max decision:
https://www.ukpandi.com/fileadmin/uploads/uk-pi/Latest_Publications/Circulars/Circular18_10.pdf

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