Trafigura Maritime Logistics PTE Ltd v Clearlake Shipping PTE Ltd (Rev 1)

In an indemnity requiring a charterer to provide security to secure a vessel’s release from arrest, “forthwith” means within the shortest practicable time having regard to the circumstances, rather than instantaneously.

“Security as may be required” ordinarily refers to security required by the court at the place of arrest. Where negotiations over a bank guarantee cannot promptly resolve the issue, the charterer must consider other available means, including payment into court. A court may vary an injunction to make the indemnity effective, while respecting the jurisdiction and procedures of the arresting court.

Trafigura obtained a mandatory injunction requiring Clearlake, a voyage charterer, to provide security for the release of a vessel arrested in Singapore. Clearlake obtained a corresponding injunction against Petrobras, the sub-voyage charterer. The injunctions reflected an indemnity given after cargo was delivered without production of bills of lading.

The parties failed to agree the wording of a bank guarantee with Natixis, the arresting claimant. Applications to the Singapore Admiralty Court were pending, with the hearing delayed by the Covid-19 pandemic. Trafigura sought variation of both injunctions to require bank guarantees in Natixis’s form or, failing that, payment of approximately US$76 million into court, together with defence funds demanded by the head owners.

1. Construction of “forthwith”. The word required security to be provided in the shortest practicable time having regard to the circumstances. It did not require instantaneous performance.
2. Construction of “security as may be required”. Although this court had jurisdiction to construe the indemnity as between owner and charterer, the phrase referred to the security required by the court at the place of arrest. What that court required in a particular case was ordinarily a question of fact. The Singapore Admiralty Court was the appropriate forum to determine whether the proposed guarantees supplied adequate security.
3. The court declined to order guarantees in the form demanded by Natixis. The evidence did not establish that the Singapore Court would require the disputed terms. Issuing a guarantee on those terms under protest was also an unrealistic solution, particularly where the relevant banks objected to the wording.
4. The injunctions were varied to require Clearlake and Petrobras to pay the security sum into the Singapore Court within eight working days. The indemnity required security by means other than a bank guarantee where a bank guarantee could not be provided swiftly. Payment into court was an available and practicable alternative, notwithstanding its unusual nature and cost.
5. The charterers were also ordered to pay US$83,333 to fund the head owners’ defence within four working days. The demand was reasonable. Petrobras’s offer to conduct the defence did not satisfy the existing order because it had not been accepted.