The "Miracle Hope"

• Jurisdiction: Singapore
• Judge: Navin Anand AR
• Judgment Date: 27 May 2020
• Neutral Citation: [2020] SGHCR 3
• Court: High Court (Singapore)
• Docket Number: Admiralty in Rem No 45 of 2020 (Summons No 1766 of 2020)
• Published date: 30 May 2020
• Year: 2020
• Hearing Date: 18 May 2020
• Plaintiff Counsel: Toh Kian Sing SC, Seow Hwang Seng John, Vellayappan Balasubramaniyam and Wu Junneng (Rajah & Tann Singapore LLP)
• Defendant Counsel: Yap Ming Kwang Kelly and Keng Xin Wee Shereen (Oon & Bazul LLP),Song Swee Lian Corina and Liang Junhong Daniel (Allen & Gledhill LLP),Sze Kian Chuan and Tan Shi Yun Jolene (Joseph Tan Jude Benny LLP)
• Subject Matter: Admiralty and Shipping,Practice and Procedure of Action in Rem,Intervention,Duty of Disclosure
• Citation: [2020] SGHCR 3

Navin Anand AR: Introduction

Ship arrest has been described as a draconian remedy that may cause irreparable loss and damage to a shipowner and others who had, have, or would have, dealings with the vessel. It is for this reason that the court expects all who seek the arrest of a vessel to approach it with candour and to bring all material facts before it.

In this case, the Plaintiff, the Singapore branch of the bank, Natixis (“Natixis”) arrested the vessel “Miracle Hope” (“Vessel”) for breach of the contract of carriage evidenced by bills of lading. The 2nd Intervener, Petróleo Brasileiro S.A. ‒ Petrobras (“Petrobras”), applied to set aside the warrant of arrest on the basis that Natixis had failed to bring certain material facts to the court’s attention at the time it applied for the warrant of arrest.

I heard parties remotely by way of video-conference on 18 May 2020 pursuant to s 28(10)(a) of the COVID-19 (Temporary Measures) Act 2020 (Act 14 of 2020), read with Registrar’s Circular Nos 4 and 5 of 2020.

After hearing the parties, I have decided to dismiss Petrobras’ application to set aside the warrant of arrest. I set out my full grounds below.

Background Facts The Parties

Natixis is a bank which asserts its rights in this suit as the holder of original bills of lading (“Bills of Lading”) issued in respect of 1,001,649.37 US barrels (net) of crude oil ( “Cargo”) loaded onboard the Vessel for carriage from Porto Do Acu, Brazil, to one or more safe ports in China (“Voyage”).¹

The Defendant, Ocean Light Shipping Inc (“Owners”), is the registered owner of the Vessel.²

The Owners had time-chartered the Vessel to Trafigura Maritime Logistics Pte Ltd (“Trafigura”).³ Trafigura then voyage-chartered the Vessel to the 1st Intervener, Clearlake Shipping Pte Ltd (“Clearlake”), which in turn sub-voyage-chartered the Vessel to Petrobras.⁴ The chain of charterparties implicated in the Voyage may be illustrated as follows:⁵

The Sale Contract & Letter of Credit

The Voyage itself arose out of an international sale of goods. By way of a sale contract dated 2 September 2019 (“Sale Contract”), Hontop Energy (Singapore) Pte Ltd (“Hontop”) purchased the Cargo from Petrobras Global Trading BV (“PGT”),⁶ a related company of Petrobras.⁷ Hontop is a customer of Natixis, and Natixis extended trade facility financing to Hontop as evidenced by the following documents:⁸ a bank facility agreement dated 19 February 2019 (“Facility Agreement”); a “General Agreement for Commercial Business” dated 28 February 2019; and a “Master Security Agreement” dated 28 February 2019 (“Master Security Agreement”).

Under the Sale Contract, the Cargo was to be delivered “DES AS PER “INCOTERMS 2000””.⁹ “DES” is an abbreviation for “delivered ex ship”, and it refers to a process in which a seller delivers the goods by placing the goods at the buyer’s disposal at the port of destination (see Incoterms 2000: ICC official rules for the interpretation of trade terms (International Chamber of Commerce, 1999), at p 98 (obligation A4 for DES)).

Payment for the Cargo under the Sale Contract was to have been made by way of an irrevocable letter of credit.¹⁰ Hontop applied to Natixis, which issued a letter of credit dated 25 October 2019 (“Letter of Credit”) to finance Hontop’s purchase of the Cargo from PGT.¹¹ Under the Letter of Credit, payment for the Cargo would be made against the presentation of Bills of Lading issued or endorsed to the order of Natixis.¹² It was also provided that if the Bills of Lading are not available, a letter of indemnity issued by PGT to Hontop on the terms set out in the Letter of Credit could be presented for payment instead. The salient terms of the Letter of Credit read as follows:¹³ 46A: Documents Required

THIS LETTER OF CREDIT IS AVAILABLE WITH ADVISING BANK BY NEGOTIATION AT 10 CALENDAR DAYS AFTER THE NOTICE OF READINESS DATE TENDERED AT DISCHARGE PORT (NOR DATE TO COUNT AS DAY ZERO) AGAINST PRESENTATION OF THE FOLLOWING DOCUMENTS:

…

2) FULL SET OF 3/3 ORIGINAL CLEAN ON BOARD BILLS OF LADING ISSUED OR ENDORSED TO THE ORDER OF NATIXIS, SINGAPORE AND MARKED ‘FREIGHT PAYABLE AS PER CHARTER PARTY’.

…

IN THE EVENT THAT THE DOCUMENTS NO. 2 … ARE UNAVAILABLE AT THE TIME OF NEGOTIATION, PAYMENT WILL BE MADE ON THE DUE DATE AGAINST PRESENTATION OF THE FOLLOWING DOCUMENTS:

….

C) LETTER OF INDEMNITY ISSUED IN THE FOLLOWING FORMAT… [emphasis added in italics]

Between 13 November 2019 and 3 December 2019, Natixis disbursed US$65,134,924.70 to PGT for the Cargo against the latter’s presentation of, inter alia, a letter of indemnity dated 31 October 2019 (“Letter of Indemnity”) in lieu of PGT presenting the Bills of Lading.¹⁴ The relevant portion of the Letter of Indemnity reads as follows:¹⁵

TO: HONTOP ENERGY (SINGAPORE) PTE LTD

LETTER OF INDEMNITY

WE REFER TO [THE CARGO] DISCHARGED AT ONE OR MORE SAFE PORT(S), CHINA BY THE VESSEL MIRACLE HOPE … IN ACCORDANCE TO OUR SALES CONTRACT…

ALTHOUGH WE HAVE SOLD AND TRANSFERRED TITLE TO THE ABOVE-NAMED CARGO TO YOU, WE HAVE BEEN UNABLE TO PROVIDE TO YOU THE FULL SET OF 3/3 ORIGINAL CLEAN ON BOARD BILL OF LADING … REQUIRED UNDER THE CONTRACT (THE “DOCUMENTS”).

IN CONSIDERATION OF YOUR MAKING PROVISIONAL PAYMENT … FOR THE AFOREMENTIONED CARGO, WE HEREBY EXPRESSLY REPRESENT AND WARRANT THAT IMMEDIATELY PRIOR TO THE TRANSFER OF THE ABOVE MENTIONED CARGO TO YOU, WE HAD MARKETABLE TITLE TO SUCH CARGO FREE AND CLEAR OF ANY LIEN OR ENCUMBRANCE AND WE HAD THE FULL RIGHT AND AUTHORITY TO TRANSFER AND EFFECT DELIVERY OF SUCH CARGO TO YOU.

WE FURTHER AGREE TO MAKE ALL REASONABLE EFFORTS TO OBTAIN AND SURRENDER THE DOCUMENTS TO YOU AS SOON AS POSSIBLE AND TO INDEMNIFY AND HOLD YOU HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, COSTS, AND EXPENSES … WHICH YOU MAY SUFFER BY OUR FAILURE TO PRESENT THE DOCUMENTS TO YOU…

…

[Signature]

AUTHORISED SIGNATURE(S) OF [PGT]

Delivery of the Cargo

The Cargo was delivered to Hontop at Dongjiakou, China, between 13 and 16 November 2019 without presentation of the Bills of Lading and upon the invocation of cl 33(6) of the charterparty between Clearlake and Petrobras (“Voyage Charterparty”),¹⁶ which read as follows:¹⁷ (6) Notwithstanding any other provision of this Charter, [Clearlake] shall be obliged to comply with any orders from [Petrobras] to discharge all or part of the cargo provided that they have received from [Petrobras] written confirmation of such orders.

If [Petrobras] by telex, facsimile or other form of written communications that specifically refers to this clause request [Clearlake] to discharge a quantity of cargo … (a) without bills of lading … then [Clearlake] shall discharge such cargo in accordance with [Petrobras’] instructions in consideration of receiving [a letter of indemnity] as per [Clearlake’s] P&I Club wording…

In essence, the effect of this clause was that Clearlake was bound to comply with any order from Petrobras to discharge the Cargo without presentation of the Bills of Lading, provided Petrobras furnished Clearlake with a letter of indemnity in the latter’s P&I Club’s terms. It is not disputed that a similar indemnity provision was found in the charterparties up the chain (ie, the voyage charterparty between Trafigura and Clearlake, and the time charterparty between the Owners and Trafigura). These indemnities existed on a back-to-back basis, such that Petrobras would ultimately be liable for the consequences of its request to discharge the Cargo without presentation of the Bills of Lading.¹⁸

The Arrest

Hoptop failed to repay the amounts disbursed by Natixis under the Letter of Credit to PGT.¹⁹ On or around 3 March 2020, Natixis demanded the full set of the Bills of Lading from PGT as assignee of Hontop’s rights under the Letter of Indemnity issued by PGT to Hontop (see [11] above).²⁰ PGT complied with Natixis’ demand, and on 6 March 2020, it delivered the full set of the Bills of Lading endorsed to the order of Natixis.²¹

On 11 March 2020, Natixis, as holder of the Bills of Lading, made a demand to the Owners for delivery of the Cargo.²² Natixis received no response, and on 12 March 2020, arrested the Vessel as security for what it described as a “straightforward misdelivery claim” (“Arrest”).²³

The Arrest sparked off a series of proceedings in England between the parties in the charterparty chain on the furnishing of security for the release of the Vessel. The proceedings occurred in England because the back-to-back indemnities (referred to in [13] above) granted under the various charterparties were subject to the jurisdiction of the High Court of England. Thereafter, the following events transpired: On 13 March 2020, Natixis demanded security of US$76,050,000 from the Owners to secure the release of the Vessel.²⁴ The Owners looked to Trafigura to put up security for the release of the Vessel pursuant to the indemnity contained in the time charterparty and Trafigura, in turn, looked to Clearlake for the same (see [13] above and the judgment of the English High Court in Trafigura Maritime Logistics Pte Ltd v Clearlake Shipping Pte Ltd [2020] EWHC 726 (Comm) (“Trafigura v Clearlake”) at [2], and [23]-[24]). When Clearlake refused to do so, Trafigura successfully applied to the English High Court for a mandatory injunction to compel Clearlake to do so, obtaining this order on 24 March 2020 (see Trafigura v Clearlake at [1] and [57]). Clearlake, in turn, looked to Petrobras to put up security for the Arrest pursuant to the indemnity in the Voyage Charterparty and it likewise successfully obtained a mandatory injunction against Petrobras compelling it to furnish security for the Arrest on 1 April 2020 (see Clearlake Chartering USA Inc. & Anor v Petróleo Brasileiro S.A. [2020] EWHC 805 (Comm) (“Clearlake v Petrobras”)). On 27 April 2020, the English High Court varied the mandatory injunctions it...