Trafigura Maritime Logistics PTE Ltd v Clearlake Shipping PTE Ltd

A contractual indemnity requiring a charterer to provide security for the release of an arrested vessel may be enforced by mandatory injunction where damages are inadequate. The court applies the usual injunction principles, asking which course creates the least irremediable prejudice and, where necessary, assessing the balance of justice.

Failure to provide agreed indemnity wording before the fixture does not necessarily prevent the indemnity arising. The requirement may be waived where the charterer later requests and receives the wording, invokes the indemnity and acts upon it. A separate letter of indemnity is unnecessary where the charterparty, construed as a whole, creates the indemnity itself.

The claimant, a time charterer, sought an urgent mandatory injunction requiring the defendant voyage charterer to provide security for the release of the vessel Miracle Hope, arrested in Singapore following a cargo misdelivery claim.

The charterparty contained an indemnity clause covering delivery without production of original bills of lading and requiring security and defence funding. The defendant disputed liability, relying on the original naming of another Clearlake entity, the late provision of indemnity wording, the absence of a separate letter of indemnity and inadequate notice of the application. The court determined whether the defendant was bound and whether interim mandatory relief should be granted.

1. The application succeeded. The court granted a mandatory injunction requiring the defendant to provide security and, where demanded, defence funds, subject to fortification of the claimant’s undertaking in damages by a parent-company guarantee.

2. Under section 37(1) of the Senior Courts Act 1981, the court may grant relief where just and convenient. The principles in American Cyanamid Co v Ethicon Ltd [1975] AC 396 apply to mandatory relief. The court should adopt the course causing the least irremediable prejudice. If damages are inadequate for the claimant and the cross-undertaking protects the defendant, relief will ordinarily be appropriate; otherwise the balance of justice is assessed, without an absolute requirement of a high degree of assurance of success.

3. The defendant became bound by the charterer’s obligations through the December addendum. At the least, it assumed obligations falling to be performed after the addendum, including the obligation to provide security following the vessel’s arrest.

4. The requirement that owners’ P&I Club wording be submitted before the fixture was not a condition preventing the indemnity from arising. The defendant requested and received the wording before invoking the clause. Its conduct amounted to waiver, and probably estoppel by convention, as to the timing requirement.

5. The clause, construed as a whole, created the indemnity without requiring a separate free-standing letter. Its references to the indemnity arising under the clause, the cessation of liability under it and disputes concerning that indemnity supported that construction. The parties’ conduct also waived, or created an estoppel concerning, any separate-letter requirement. A contrary construction would be commercially unreasonable.

6. Mandatory enforcement was appropriate. The indemnity obligations were of a kind for which damages were inadequate. The arrest created pressing urgency, and the practical irreversibility of providing security was an inherent feature of the relief. The claimant’s undertaking was adequate protection, subject to the parent guarantee.

First-instance decision. No prior appellate decision is stated in the judgment.