England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Andrew Baker

[2018] EWHC 397 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		21 August 2018

Lord Justice Simon:

Introduction

1. This is an appeal from that part of the decision of Andrew Baker J ('the Judge') given on 9 March 2018, in which he concluded that the claim of the claimant ('Navig8') was not defeated by the operation of a time bar clause in a voyage charterparty ('the voyage charter') between Navig8 as disponent owners and the defendant ('Glencore') as charterers, dated 2 February 2016.
2. The Judge dealt with a number of issues in his judgment, but the issues on the present appeal are relatively confined: whether the obligations and rights contained in two letters of indemnity issued respectively on 6 and 13 April 2016 by Glencore were subject to the limitation provisions of clause 38 of the voyage charter.

The facts

3. Before turning to the issue on the appeal, it is necessary to summarise the facts, which I take from [10]-[29] of the Judge's judgment. The Songa Winds is an oil and chemical tanker owned by Songa Chemical AS ('head owners'). Under a pool agreement dated 27 November 2013, she was time chartered to Navig8, on time charter terms based on an amended Shelltime 4 form ('the time charter').
4. On 2 February 2016, Navig8 fixed her on voyage terms based on an amended Vegoilvoy form to Glencore, to carry a minimum of 19,000 m.t. of crude sunflower seed oil from Ilychevsk in Ukraine, for delivery at safe ports in the New Mangalore/Kakinada range in India at Glencore's option. Interocean Shipping India Pvt Ltd ('Interocean') was appointed by Navig8 under both charterparties to act as ship's agent at the discharge ports in India.
5. The vessel was chartered by Glencore, in part, so that it could fulfil a contract concluded in late January 2016 to sell 6,000 m.t. of crude edible grade sunflower seed oil in bulk to Ruchi Agritrading (Pte) Ltd ('Agritrading'), a subsidiary or affiliate of Ruchi Soya Industries Ltd ('Ruchi'). The delivery term of this contract was C&F pumped out at New Mangalore or Kakinada. The sale contract provided for property to remain with Glencore until payment.
6. The vessel loaded under the voyage charter at Ilychevsk on or about 13 March 2016 and bills of lading consigned to order were issued with that date, naming Ruchi as the notify party. Subsequently, on or about 21 March 2016, Glencore's contract of sale with Agritrading was replaced by a contract to sell 6,000 m.t. of sunflower seed oil to Aavanti Industries Pte Ltd ('Aavanti') on terms materially back-to-back (save as to price) to those of two contracts dated 18 February 2016 by which Aavanti had contracted to sell (in aggregate) 6,000 m.t. to Ruchi.
7. At the commencement of delivery, it was clear that the original bills of lading were not going to be available in time for the commencement of the discharge operations, and delivery otherwise than against bills of lading was requested on the terms of LOIs on the International Clubs' standard form, as follows:

(1) By two letters of indemnity addressed to Glencore and dated 22 March 2016, Aavanti requested that delivery be made without production of bills of lading to Ruchi (or to such party as Glencore believed to be, to represent, or to be acting on behalf of Ruchi) ('the Aavanti LOIs'). One of these letters of indemnity requested delivery of 4,000 m.t. 'at the port of Mangalore, India', and the other requested delivery of 2,000 m.t. 'at Kakinada, India.'

(2) By two letters of indemnity addressed to Navig8 and dated 6 April and 13 April 2016, for 4,000 m.t. and 2,000 m.t. respectively, Glencore requested that delivery be made without production of bills of lading to Aavanti (or to such party as Navig8 believed to be, to represent, or to be acting on behalf of Aavanti) ('the Glencore LOIs'). Both of the Glencore LOIs requested that delivery be 'at New Mangalore or Kakinada, India'.

(3) By letters of indemnity deemed to have been issued by Navig8 addressed to the head owners, otherwise on terms identical to the Glencore LOIs, Navig8 requested that delivery be made without production of bills of lading to Aavanti (or to such party as head owners believed to be, to represent, or to be acting on behalf of Aavanti) ('the Navig8 LOIs'). It was common ground between head owners and Glencore at trial that the Navig8 LOIs were issued by operation of clause 87 of the time charter.

8. The vessel arrived at New Mangalore on 29 March and discharged 4,000 m.t. of cargo between 7 and 9 April 2016. The vessel then sailed to Kakinada arriving on 14 April where, between 14 and 15 April 2,000, m.t. tons of cargo was discharged. At each port, discharge and delivery was handled by Interocean in accordance with Glencore's instructions to Navig8; and in accordance with Interocean's directions the cargoes were discharged into shore tanks without production of original bills of lading.
9. This appeal is concerned primarily with the second of the sets of letters of indemnity: the Glencore LOIs.
10. These were headed: 'Int Group A: Standard Form Letter of Indemnity to be given in return for delivering cargo with production of the original bill of lading.'
11. By paragraphs 1 and 2, two substantive indemnification obligations were agreed by Glencore in favour of Navig8 if delivery were made 'without production of the original bill of lading':

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of delivering the cargo in accordance with our request.

2. In the event of any proceedings being commenced against you or any of your servants or agents in connection with the delivery of the cargo as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

12. Paragraphs 5 and 7 further provided:

5. As soon as all original bills of lading for the above cargo shall have come into our possession, to deliver the same to you, or otherwise cause all original bills of lading to be delivered to you, whereupon our liability hereunder shall cease.

…

7. This indemnity shall be governed by and construed in accordance with English law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England.

13. The Glencore LOIs were signed by and on behalf of Glencore and Navig8. There was no mention anywhere in the Glencore LOIs of the voyage charter or its terms.
14. For present purposes, the nature of the dispute between Navig8 and Glencore can be summarised as Navig8's claim that Glencore's obligations under the Glencore LOIs were engaged as a result of the discharge, and Glencore's defence that the period of validity of the Glencore LOIs was a period of 3 months from the date of issue (6 April 2016) and that, since no extension had been sought by Navig8, they expired on 6 July 2016, without any claim being made or intimated before that date.
15. Glencore relies on clause 38 of the voyage charter:

If bills of lading are not available at the discharge port, owner to release a cargo against receipt of charterer's letter of indemnity in the form of owner's P & I club wording but same without bank guarantee as per owners P & I club wording.

…

The period of validity of any letter of indemnity will be 3 months from date of issue. The period may be extended, as necessary, upon owners written request for further extension and confirmation (at time of extension request) that 1/3 original bills of lading have not been surrendered to owner. In absence of extension requests the indemnity will expire at the end of initial three month period, or any further extension period.

…

16. Glencore submits that this provision (with its reference to the indemnity expiring at the end of 3 months) must be read into the Glencore LOIs and that its effect is to bar Navig8's claim made after 6 April 2016. Navig8 submits in response that the Glencore LOIs were stand-alone agreements and that, in any event, clause 38 of the voyage charter did not have the effect of excluding a claim made after 16 April, as a matter of construction of the clause.

The issues

17. These arguments reflect the two issues on the appeal. First, whether the provisions in clause 38 of the voyage charter, in relation to the expiry of the indemnity, were incorporated into the Glencore LOIs; secondly, if so, was the effect of clause 38 such that no claims could be made after the expiry of 3 months from the date of issue?

The Judge's conclusion on the issues

18. The Judge's conclusion can be summarised by a short passage from the judgment at [65]:

The language of clause 38 falls to be construed in the light of [the Glencore LOI] language, since it is the language of the International Clubs' standard form LOI contemplated by clause 38. Both on its own terms, and read in the light of paragraph 5 of the LOIs, in my judgment clause 38 does not have the effect contended for by Mr Young QC. The language of clause 38 neither says in terms, nor conveys nor implies, that there is a limitation upon the validity of any LOI issued pursuant to clause 38, or upon Glencore's liability under any such LOI, by reference to a period for claims to be made by Navig8. The subject matter is delivery without production of bills of lading, effected by the vessel at the request of Glencore as voyage charterer. To say in that context that any LOI issued is to be valid for a period of three months is to say that it covers such deliveries effected during that three-month period, unless there is language indicating a different intention.

The first issue

19. Mr Young QC accepted that, if the Glencore LOIs stood by themselves there was no applicable time limit within which Navig8 must bring a claim in order to enforce its rights under the Glencore LOIs.
20. However, he submitted that the rights and obligations between the parties contained in clause 38 of the voyage charter had continuing contractual effect. Although Mr Ashcroft QC characterised the argument as somewhat elusive, at least by the hearing of the appeal, Mr Young's argument was that the Glencore LOIs were part of a contractual structure which included clause 38, which constituted a continuing collateral term agreed by the parties and which had to be read with, and was such as to form part of, the Glencore LOIs. He described the overall contractual arrangement as an 'umbrella contract.'
21. He referred in this context to the observations of Lord Russell of Killowen CJ, sitting at first instance, in Gillespie Brothers & Co v. Cheney Eggar & Co [1896] 2 QB 59 at 62:

I will now state why I think that, even although there is a definite written contract made between the parties, it is impossible to exclude from consideration what took place before the contract was made - in other words, their antecedent course of conduct. In the first place, although when the parties arrive at a definite written contract the implication or presumption is very strong that such contract is intended to contain all the terms of their bargain, it is a presumption only, and it is open to either of the parties to allege that there was, in addition to what appears in the written agreement, an antecedent express stipulation not intended by the parties to be excluded, but intended to continue in force with the express written agreement. That is a consideration which does not apply to this case, because the plaintiffs are not relying upon an express antecedent stipulation in addition to what is to be found in the written contract.'

22. Mr Young accepted that the terms of a written contract are to be presumed to contain all the terms of the parties' bargain. However, he argued that clause 38 of the voyage charter was intended to take effect as 'an antecedent express stipulation' or amounted to 'an antecedent course of conduct' which had continuing contractual effect between the parties. The obligation to discharge arose under the time charter and voyage charter, that obligation was contingent on the provisions of letters of indemnity and clause 38 was part of that agreement as between Navig8 and Glencore.
23. The Gillespie Brothers case is cited in Chitty on Contracts (32nd edition, 13-100) for a slightly different proposition: namely, as an illustration of an exception to the parol evidence rule. However, for present purposes, I would readily accept that parties can agree to terms that have not been expressed in a contract and can agree that a subsequent contract is to contain particular terms which are not specifically included. However, as Mr Young accepted, the starting point, when construing a commercial agreement which is subject to English law, is that the written contract is to be regarded as containing all the terms of the bargain between the parties. Furthermore, in the case of a letter of indemnity there is a strong presumption that it does so.
24. This approach in the context of letters of indemnity receives support from a passage from the judgment of HHJ Mackie QC (sitting as a Judge of the Commercial Court) in Great Eastern Shipping Co Ltd v Far East Chartering and anor (The Jag Ravi) [2011] 2 Lloyd's Rep 309 at [43]:

The goods have been delivered so owners are entitled to enforce the LOI. LOIs, particularly those in standard form are important commercial instruments which need to be interpreted robustly and in a straightforward way.

25. In the present case, I would reject the argument that the material rights and obligations in clause 38 are to be regarded as being transposed into the Glencore LOIs for a number of reasons, some of which overlap.
26. First, clause 5 of the Glencore LOIs is a self-contained provision which confines Glencore's liability, and which contains no reference to any extraneous term which might impact on the time limit of that liability.
27. Secondly, the voyage charter and the Glencore LOIs are quite distinct agreements with separate and discrete rights and obligations, with disputes under the former to be resolved by arbitration and disputes under the latter to be resolved by litigation in the High Court. The parties implicitly agreed that any dispute as to the meaning and effect of clause 38 was to be resolved by arbitration. This militates against Mr Young's submission that clause 38 is to be treated as 'carved out' of the voyage charter and construed as part of the Glencore LOIs.
28. Thirdly, clause 38 gave Glencore a contractual right to insist that a letter of indemnity incorporate the relevant delimiting terms. In the event, however, Glencore entered into letters of indemnity on the terms of the IG form, without any reservation or reference to the voyage charter or its provisions. Glencore itself received the Aavanti LOIs coming up the contractual line from Aavanti. These did not contain any time limits for the exercise of indemnity rights, and it is therefore unsurprising that Glencore did not insist on any additional terms being included in the Glencore LOIs issued in favour of Navig8. The letters of indemnity that were issued were in fact back to back; although their value depended on the financial worth of those who gave them.
29. Fourthly, the Glencore LOIs were documents which set out self-contained obligations and rights. It was common ground that they could be relied on by third parties (the agents of Navig8) as against Glencore. An example of how that might arise can be seen from the Laemthong International Lines Co Ltd v. Artis and ors, (The Laemthong Glory) (No.2) [2005] EWCA Civ 519, 2 All ER (Comm) 167. In that case, letters of indemnity had been issued by the receivers in favour of the charterers and by the charterers in favour of the owners. The issue was whether the owners were entitled to recover directly from the receivers under the receivers' letter of indemnity by reason of the provisions of the Contracts (Rights of Third Parties) Act 1999. The Court of Appeal held that the owners were to be regarded as the agents of the charterers for the purpose of complying with the receivers' request in the receivers' letter of indemnity and fell within the definition of the charterer's 'agents' whom the receivers agreed to indemnify under clause 1, which was in similar terms to the Glencore LOIs in the present case, see [27] and [30]. In my view, this case adds force to Mr Ashcroft's submission that the Glencore LOIs had the potential to confer rights on third parties, including head owners who might deliver the cargo on behalf of Navig8, and who would be entirely unaware of time limits on the exercise of rights by reference to clause 38 of the voyage charter. Mr Young is entitled to point out that the head owners had the benefit of the Navig8 LOIs, but this does not, in my view, affect the analysis that, if Glencore were right, a third-party agent might rely on the terms of the Glencore LOIs without being aware of, and unable to discover, an unexpressed collateral term: terms which Mr Ashcroft characterised as unknown and unknowable. 'Unknown' for reasons set out above and 'unknowable' because clause 47 of the voyage charter provided that its terms and conditions were to be kept private and confidential.
30. In these circumstances I agree with the Judge that the Glencore LOI neither provided in terms, nor are to be treated as including, any limitation on their validity. I would accordingly reject Glencore's argument, involving as it does the ambulatory attachment of clause 38 of the voyage charter to the Glencore LOIs and its unexpressed existence as a term limiting the rights of those entitled to rely on them.
31. Accordingly, I would reject the first ground of appeal.

The second issue

32. In the light of my conclusion on the first issue, I can state my view on the second issue more shortly.
33. Although Navig8 had relied on the arbitration clause in the voyage charter as part of its argument on the first issue, it was content for the court to deal with the construction of clause 38 'if and in so far as this was relevant to [Navig8's] claims under [the Glencore LOIs]'. On this basis, Mr Ashcroft argued for the construction of clause 38 that found favour with the Judge: that the relevant part of the wording meant that the period during which the requested delivery of the cargo must take place without the original bills of lading was 3 months from the date of delivery.
34. In my judgment the intent of clause 38 is clear. It provides a primary (but unilaterally extendable) time limit of 3 months for the making of claims which runs from the date of the letter of indemnity. The words are clear. The underlying purpose of a letter of indemnity is to secure prompt delivery, and a clearly defined time limit enables the giver of the indemnity to calculate its contingent liabilities, always subject to the beneficiary of the indemnity being able to extend its validity. I should add that I do not consider that the terms of clause 38 are ambiguous such as to enable Navig8 to invoke the contra proferentem rule.
35. Accordingly, I would decide the second issue in favour of Glencore.

Conclusion

36. However, for the reasons set out above, I would dismiss the appeal.

Lady Justice Asplin

37. I agree.

Sir Geoffrey Vos (Chancellor of the High Court)

38. I also agree.