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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Oldendorff GmbH & Co KG (Oldendorff) v Sea Powerful Ii Special Maritime Enterprises (Head Owners) [2016] EWHC 3212 (Comm) (15 December 2016)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2016/3212.html
Cite as: [2016] EWHC 3212 (Comm), [2017] 1 CLC 426, [2017] 1 Lloyd's Rep 194

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Neutral Citation Number: [2016] EWHC 3212 (Comm)
Case No: CL-2015-000162, CL-2014-000346 and CL-2014-000682

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
15/12/2016

B e f o r e :

MR. JUSTICE TEARE
____________________

Between:
OLDENDORFF GmbH & Co KG ("Oldendorff")
Claimant
-and-

SEA POWERFUL II SPECIAL MARITIME ENTERPRISES ("Head Owners")
Defendant


AND


OLDENDORFF CARRIERS GmbH & Co KG ("Oldendorff Carriers")
Claimant
-and-

SCIT SERVICES LIMITED ("SCIT Services")
Defendant


AND


SCIT TRADING LIMITED ("SCIT Trading")
Claimant
- and -

XIAMEN C&D MINERALS CO., LTD ("Xiamen C&D")

m.v. "Zagora" ("the Vessel")
Defendant

____________________

Luke Parsons QC and Chris Smith (instructed by MFB Solicitors) for the Claimants - Oldendorff & Oldendorff Carriers
Michael Ashcroft QC and Oliver Caplin (instructed by Ince & Co LLP) for the Defendant - Head Owners
SCIT Services, SCIT Trading and Xiamen C&D were not represented

Hearing date: 5 December 2016

____________________

HTML VERSION OF JUDGMENT APPROVED
____________________

Crown Copyright ©

    Mr. Justice Teare :

  1. This is the trial of an action about letters of indemnities given to permit the delivery of cargo other than on production of an original bill of lading, a practice which is "commonplace in international trade"; see The Jag Ravi [2012] All E.R. (Comm) 707 at paragraphs 1-2 per Tomlinson LJ. In the present case a cargo of iron ore was carried from Koolan Island in Western Australia to Lanshan in China. The cargo was loaded on the vessel Zagora between 11 and 14 December 2013. On 20 December 2013 the Owners of the vessel informed the master that they had received a letter of indemnity from the charterers of the vessel, Oldendorff, and instructed the master "to deliver the cargo to Xiamen C&D Minerals Co. Ltd. ("Xiamen") or to such party as you believe to be or to represent Xiamen …….or to be acting on behalf of Xiamen ……..at Lanshan Port, China, without production of the original bill of lading." The vessel arrived at Lanshan on 29 December 2013 and discharge was completed by 31 December 2013. Prior to the commencement of discharge a representative of Rizhao Sea-Road Shipping Agency Co. Ltd. ("Sea-Road") boarded the vessel and informed the master that he was there to handle discharge on behalf of Xiamen. Some 8 months later, on 27 August 2014 when the vessel was again at Lanshan, she was arrested at the suit of the Bank of China who asserted that they were the holders of an original bill of lading and that the cargo had been discharged without production of an original bill of lading. That arrest inevitably led the Owners to claim an indemnity from Oldendorff pursuant to the terms of the letter of indemnity. In addition claims for indemnities pursuant to related letters of indemnity were made down the chartering chain. The merits of the claim asserted by the Bank of China are being litigated in China whilst the claims for an indemnity are before this court.
  2. The sale of the cargo

  3. On 21 October 2013 SCIT Trading agreed to sell a cargo of 70,000 mt of iron ore to Xiamen on CFR China Main Port terms with Koolan Island as the loading port. Clause 9 of the contract of sale provided for the discharge port agent to be appointed by the buyer, Xiamen. On 6 November 2013 Xiamen agreed to sell the cargo to Cheongfuli Company Limited ("Cheongfuli"). Xiamen and Cheongfuli are associated companies, the latter's business being the collection of payments under letters of credit. Xiamen's employees usually negotiate the terms of third party sales on behalf of Cheongfuli. Thus on 28 November 2013 Cheongfuli agreed to sell the cargo to Shanxi Haixin International Iron and Steel Co. Ltd. ("Shanxi Haixin"). Clause 9 of that contract also provided for the discharge port agent to be appointed by the buyer, Shanxi Haixin.
  4. The contracts of carriage

  5. As head CFR seller SCIT Trading had to arrange a vessel to carry the cargo. SCIT Trading had in place a contract of affreightment with SCIT Services dated 1 December 2012 pursuant to which it assumed responsibility for transportation of cargoes sold by SCIT Trading. As a result SCIT Services concluded a voyage charterparty dated 19 November 2013 with Oldendorff Carriers for the carriage of the cargo from Koolan Island to China. The charter provided for the agents at the discharge port to be "Charterers'agents" (see box 21) and also provided that in the event that an original bill of lading was not available at the discharging port "the owners/master agree to discharge and release" the cargo against a letter of indemnity (see clause 30).
  6. Oldendorff Carriers had in place a long term agreement, "General Agreement about Cargo Re-Lets" dated 5 March 2005, with Oldendorff whereby the latter would provide tonnage to the former. The agreement provided that any charter concluded would be on back to back terms with the relevant voyage charter that Oldendorff Carriers wished to perform. On 3 December 2013 Oldendorff concluded a time charter trip on the NYPE form with the Owners of the Zagora. That time charter provided that the charterers shall provide and pay for agencies (clause 2) and that the master "shall be under the orders and directions of the charterers as regards employment and agency" (see clause 8). The charterers' agents were to provide certain named services for the Owners at actual cost (see clause 43). If an original bill of lading were not available at the discharge port the charterers were to issue a letter of indemnity and "the vessel will not discharge until a faxed copy of the letter of indemnity has been received……" (see clause 61). Also on 3 December 2013 Oldendorff Carriers nominated the vessel to SCIT Services and on 9 December 2013 SCIT Trading nominated the vessel to Xiamen.
  7. The appointment of agents

  8. On 16 December 2013 Shanxi Haixin informed Xiamen that Lanshan was the discharge port and stated that the shipping agent was Sea-Road. On 18 December 2013 the nomination of Lanshan as the discharge port and of Sea Road as the shipping agent was passed up the chain to SCIT Trading, SCIT Services, Oldendorff Carriers and then Owners. Also on 18 December 2013 Oldendorff Carriers instructed Sea-Road to "attend the vessel during her port call and give your full assistance to master/crew and keep us closely informed about her berthing/discharging prospects."
  9. The letters of indemnity

  10. Anticipating the likely need for a LOI, Oldendorff, on 10 December 2013, requested the Owners to provide a copy of its standard LOI wording for delivery of cargo without production of a bill of lading. The Owners provided the form of LOI that day (the name of the person to whom delivery was to be made being left blank) and also requested a letter of authorisation identifying the person (name and ID number) authorised to take delivery on behalf of the notify party. On 11 December 2013 Oldendorff refused to do so because such a letter was a not a requirement of the charter. On the same day the Owners replied saying that a letter of authorisation was required in order to confirm that the person who comes on board and instructs the vessel to discharge is in fact acting on behalf of the receivers. The Owners said they would accept a message from the receivers or charterers' agents confirming the name and ID of the person who will come on board and is authorised to take delivery. But Oldendorff, on 12 December 2013, maintained its refusal.
  11. Between 17 and 18 December 2013 the Owners' requested form of LOI was passed down the line to SCIT Services, SCIT Trading and Xiamen. When Xiamen passed on the form of LOI to Shanxi Haixin on 18 December 2013 Xiamen identified the person to whom delivery was to be made as Sea-Road (or such party as is believed to be Sea-Road or to be acting on behalf of Sea-Road).
  12. However, when Xiamen provided SCIT Trading with the requested LOI the person to whom delivery was to be made was identified as Xiamen (or such party as is believed to be Xiamen or to be acting on behalf of Xiamen). An LOI in this form was passed up the line so that on 19 December 2013 SCIT Services issued an LOI to Oldendorff Carriers and Oldendorff issued an LOI to the Owners.
  13. Communications concerning delivery

  14. On 19 December 2013 the Owners requested the details (name and ID number) of the local representative who was to come on board and claim the cargo. There then followed some discussion between SCIT Services and Oldendorff Carriers. On 20 December 2013 SCIT Services said that its understanding was that the "d/port agent will handle the discharging of the cargo and the cargo will NOT be released until presentation of original b/l." Oldendorff Carriers sought clarification "whether LOI will still be used, or cargo could not be released until OBL [original bill of lading] is available at Lanshan." SCIT Services replied saying "the LOI is for discharging cargo without presentation of orig B/L, as the orig B/L will not be available upon vsl's arrival, D/port agent will issue delivery order and cargo will be released after orig B/L is available at Lanshan". Oldendorff Carriers then said that "Head Owners want to know who will be going on board on your behalf. Normally master would receive obls and know he had discharged to correct party. If I read yrs below we understand cgo will be released into the care of the discharge agent/your nominated agent – correct?" Oldendorff then informed the Owners that " ….only disch port agent will go onboard the vessel to handle discharge of cargo. There will not be local representative from receivers' side going onboard. Cargo will remain under the care of the agent until OBL is available, when the cargo will then be released to the relevant party." SCIT Services replied to the question of Oldendorff Carriers as follows: "Yes, charterers request owners to discharge the cargo under custody by "Rizhao Sea-Road Shipping Agency Co. Ltd." Cargo to be finally released to receivers against orig B/L. Please check with d/port agent directly, if h/owner needs the info of exact PIC". Finally the Owners replied to Oldendorff stating that they wanted "the name and ID number of the person who will come on board and is authorised to take delivery of cargo (in this case the discharge port Agent) …to ensure that delivery is done to the correct party." They added that "should Charterers not wish to provide Owners with the relevant information then any risk or whatsoever claim with regard to miss delivery of cargo will on Charterers account."
  15. On 20 December 2013 the Owners informed the master that they had received an LOI for delivering the cargo to Xiamen. He was instructed to deliver the cargo in accordance with the terms of the LOI and was instructed to keep a record of the name and ID number of the person who came on board and instructed him to discharge.
  16. Events at the discharge port

  17. Shortly before the vessel's arrival at Lanshan, on 25 December 2013, Sea-Road advised the relevant parties that the original bill of lading was not available. On 26 December 2013 Sea-Road asked the master to confirm that he "could discharge the cargo without presentation of OBL or not ?" There is no record of the master's reply. On 27 December 2013 the vessel arrived at Lanshan and on 29 December 2013 the vessel berthed. A person boarded and he introduced himself as being with Sea-Road. It is likely that he gave the master a business card. The master's recollection is that the person stated that discharge was to take place without production of an original bill of lading against charterers' LOI and that he was there to handle discharge of the cargo on behalf of Xiamen. The vessel's gangway/visitors log records that on 29 and 30 December a named agent boarded (the name is illegible) and that his ID was checked. The master gave instructions for the cargo to be discharged. Discharge was completed on 31 December 2013. So far as the master was concerned he delivered the cargo in accordance with the LOI to Xiamen or its representative Sea-Road.
  18. Thereafter, it appears that Shanxi Haixin received delivery orders for the cargo from Sea-Road on 13/14 January 2014 and that the cargo was transported from Lanshan via rail between 14 January and 8 February 2014. On 18 February 2014 Shanxi Haixin informed Sea-Road that it was in possession of the bill of lading. On 20 February 2014 the Bank of China paid the purchase price on behalf of Shanxi Haixin who were not required to reimburse the Bank of China for 150 days. The Bank of China has asserted that it has not been reimbursed but has been in possession of the original bill of lading since 21 February 2014.
  19. The arrest of the vessel and enforcement of the LOIs

  20. Following the arrest of the vessel in Lanshan on 27 August 2014 at the suit of the Bank of China the Owners called upon Oldendorff to obtain the release of the vessel pursuant to the LOI it had issued. Oldendorff Carriers made a like demand on SCIT Services and SCIT Trading passed on the demand to Xiamen.
  21. On 5 September 2014 Oldendorff carriers obtained in interim mandatory injunction from this court requiring SCIT Services to do what was necessary to secure the release of the vessel. SCIT Trading obtained a similar order against Xiamen but no action was taken to secure the release of the vessel.
  22. Oldendorff and Oldendorff Carriers broke the impasse by agreeing to provide security to obtain the release of the vessel and for the Owners' losses without prejudice to their right to argue that the LOI had not been engaged. Thus security was put up and on 24 September 2014 the vessel was released from arrest.
  23. The course of this action

  24. Between 10 October 2014 and 2 January 2015 Oldendorff Carrers pleaded its case against SCIT Services, SCIT pleaded its case against Xiamen and the defendants in both actions pleaded their defences. Oldendorff decided that since SCIT was denying liability it was necessary to issue proceedings against the Owners which they did on 30 March 2015. All three actions were consolidated on 10 September 2015.
  25. On 27 September 2016 Xiamen's solicitor came off the record. Xiamen did not attend the pre-trial review on 18 November 2016 and took no part in the trial. The day before the pre-trial review the solicitor for SCIT Services and SCIT Trading also came off the record and neither of those companies appeared at the pre-trial review or took part in the trial.
  26. The result of these unusual events is that the only parties represented before the court at the trial were the Owners, Oldendorff and Oldendorff Carriers. Whilst it would have been open to Oldendorff Carriers to seek judgment in default against SCIT Services it was mindful of the difficulties of enforcing such a judgment. For that reason it preferred to seek a judgment on the merits. Mr. Parsons QC, on behalf of Oldendorff Carriers therefore drew the attention of the court both to the arguments advanced by SCIT Services in its defence (which Oldendorff seeks to pass on as against the Owners) and (without formally putting them in evidence) to the witness statements exchanged by SCIT Services and Xiamen before they ceased to take part in this consolidated action. Mr. Parsons invited the court to give a judgment on the merits, not only as between the Owners and Oldendorff but also as between Oldendorff Carriers and SCIT Services. He also invited the court to rule on the issues between SCIT Trading and Xiamen because the terms of the LOI issued by Xiamen are identical to the terms of the LOI issued by SCIT Services and by Oldendorff. I accede to those requests. It is or may be important for other courts which are called upon to enforce or recognise the judgment of this court to know (i) that the Owners' claim against Oldendorff, Oldendorff's claim against SCIT Services and SCIT Trading's claim against Xiamen have been considered by this court on their merits and (ii) the reasons for this court's determination of those issues. This approach to the issues in a consolidated action where some of the parties have absented themselves is consistent with the approach of the Court in Habib Bank Limited v Central Bank of Sudan [2014] EWHC 2288 (Comm) at paragraphs 9 and 10.
  27. The Owners' claim against Oldendorff

  28. Mr. Ashcroft QC, on behalf of the Owners, submitted that the LOI issued by Oldendorff was engaged by the circumstances in which the cargo was discharged in China because the Owners discharged the cargo and delivered it to Sea-Road who took delivery on behalf of Xiamen. Mr. Parsons QC, on behalf of Oldendorff and Oldendorff Carriers, adopted these submissions as against SCIT Services. But he also put before the court the arguments which Xiamen and SCIT Services have advanced as to why the LOIs were not engaged by the discharge in China and adopted them as against the Owners.
  29. In its pleading SCIT Services said that discharge of the cargo into the possession and control of Sea-Road did not engage the LOI because such discharge did not amount to delivery to Xiamen. Rather, Sea-Road took custody of the cargo as agent for the Owners and/or Oldendorff. Thus there was no delivery to Xiamen. In its pleading Xiamen said that it did not nominate Sea-Road as its agent for the purpose of taking delivery of the cargo and did not instruct SCIT Trading or SCIT Services to deliver the cargo to Sea-Road. Xiamen said that it only discovered that the cargo had been discharged into the possession of Sea-Road on 2 January 2014 when it received a copy of the Statement of Facts from Shanxi Haixin.
  30. Before considering the rival arguments it is as well to have in mind the concepts of discharge and delivery. In The Bremen Max [2009] 1 Lloyd's Reports 81 at paragraph 32 I said:
  31. "…discharge and delivery are different concepts. Discharge is the movement of the cargo from the ship "over the ship's rail" ashore. Delivery is the transfer of possession of the cargo to a person ashore. Discharge and delivery may occur simultaneously but they need not do so. A cargo may be discharged ashore into a warehouse and only delivered as later date. Delivery is effected by the shipowner who has the cargo in his possession. "
  32. Possession will only be transferred when the shipowner has surrendered possession, that is, when he has divested himself of "the power to compel any dealing in or with the cargo which can prevent the consignee from obtaining possession"; see The Jag Ravi [2012] All E.R. 707 at paragraph 45 per Tomlinson LJ.
  33. Shanxi Haixin was the ultimate buyer of the cargo and would expect to take delivery of the cargo in Lanshan. It is therefore to be expected that it would appoint an agent at that port. Consistently with that expectation it appointed Sea-Road as agent on 16 December 2013. Further, consistently with that appointment clause 9 of the sales contract between Cheongfuli and Shanxi Haixin provided for "buyer's appointed discharging port agent". The same wording was to be found in clause 9 of the sales contract between Xiamen and SCIT Trading so that Sea-Road was also the agent for Xiamen as buyer. The nomination of Sea-Road as agent was passed up the chain of charterparties to the Owners. Under the trip time charter with Owners Oldendorff were to provide and pay for "Agencies" (with Owners paying agents for Owners' matters directly). Thus when the vessel arrived at Lanshan it is probable that Sea-Road performed one or more functions for all of named entities in this case. The crucial question, however, is whether, when taking delivery of the cargo from the ship, Sea-Road was acting on behalf of the Owners (or Oldendorff) or on behalf of Xiamen.
  34. When Xiamen passed the requested form of LOI to Shanxi Haixin it identified Sea-Road as the person to whom delivery was to be made in the absence of an original bill of lading. It no doubt did so because Sea-Road was the nominated agent at Lanshan. However, when Xiamen provided SCIT Trading with the requested LOI it identified itself as the party to whom the cargo was to be delivered. It is possible, and indeed, more likely than not, that the reason Xiamen inserted its name in the LOI as the party to whom delivery should be given was that it had opened a letter of credit in favour of SCIT Trading on 15 November 2013 but that it had not yet received a letter of credit in its favour. (Its sister company Cheongfuli did not receive a letter of credit until long after discharge on 29 January 2014.) By so doing Xiamen ensured that it would have possession of the cargo in Lanshan and so would not suffer loss as and when it had to reimburse its bank for honouring the letter of credit. The inevitable inference to be drawn from Xiamen naming itself as the person to whom the cargo should be delivered in the absence of an original bill of lading is that Xiamen intended that the nominated agent Sea-Road would take delivery of the cargo on its behalf. Of course, not being the ultimate buyer in the chain Xiamen did not intend to retain possession of the cargo. That would be transferred to Shanxi Haixin on production of an original bill of lading.
  35. This was understood by Mr. Eddy Law, a trading manager with SCIT Trading, who said in his statement:
  36. "It is obvious to me when I see that LOI from Xiamen ,,,from my knowledge of the company, that Xiamen…does not intend to take delivery of the cargo itself. Its only intention is to have the cargo discharged from the ship and then not deliver to anyone else. It is a form of protection ie restricting who the cargo could be released to."
  37. The discussion between the parties on 20 December 2013 was to the same effect. SCIT Services advised Oldendorff Carriers that the bill of lading would not be available on the vessel's arrival and so the LOI would be required to enable discharge to take place whereafter the "D/port agent", namely Sea-Road, would issue a delivery order and release the cargo against presentation of an original bill of lading. Since the LOI provided for delivery to Xiamen SCIT Services must have envisaged that Sea-Road would take delivery of the cargo on behalf of Xiamen. Oldendorff in turn advised the Owners that the "disch port agent", namely Sea-Road, would go on board to "handle discharge", that there will be no local representative of the receivers going on board and that the cargo would remain under the care of the agent until the original bill of lading was available when it would be released to "the relevant party", namely the person presenting the bill of lading. Again, since the LOI provided for delivery to Xiamen Oldendorff must have envisaged that Sea-Road would take delivery on behalf of Xiamen.
  38. On 20 December 2013 Sea-Road completed an Entry Application Form for Inspection of the cargo. The consignee was described as Shanxi Haixin and the consigner as Cheongfuli. That information is likely to have been received from Xiamen, Cheongfuli or Shanxi Haixin. It is unlikely to have been received from the Owners or from Oldendorff. Similarly Sea-Road's notification to the parties on 25 December 2013 that the original bill of lading was not available is unlikely to have come from the Owners or Oldendorff.
  39. The master's recollection was that the representative of Sea-Road who boarded the vessel on 29 December 2013 stated that he was there to handle discharge on behalf of Xiamen. The master had no recollection that the agent showed him a copy of the LOI but he said that in his experience it was usual for the agent to have a copy. If the agent did have a copy one would expect him to say that he was there to handle discharge on behalf of Xiamen. The master did not give oral evidence because he no longer works for the Owners and was, I was told, at sea. But there is no reason to doubt his evidence. The master had a copy of the terms of the LOI because they had been sent to him on 20 December 2013. In those circumstances it is likely that he would have wished to know whether the agent was acting on behalf of Xiamen. It is unlikely that he would have agreed to discharge the cargo if he had not been told that the agent was acting on behalf of Xiamen. It does not appear however that he kept a record of the name and ID number of the agent, as he had been instructed to do by the Owners.
  40. These matters suggest that it is more likely than not that Xiamen intended that Sea-Road would take delivery of the cargo on Xiamen's behalf and that Sea-Road were aware of that intention and accepted that it was acting on behalf of Xiamen when it took delivery of the cargo from the Owners. Conversely, it is most unlikely that Sea-Road was acting on behalf of the Owners at that time. The Owners' interest at the discharge port, if the receivers were not in possession of an original bill of lading, was to discharge and deliver the cargo in accordance with the terms of the LOI. If they did so, they would have the protection of the LOI. The Owners had no interest in discharging the cargo into the possession of Sea-Road as their own agent. Such discharge would not provide the protection of the LOI because the Owners would not have delivered the cargo to Xiamen. They would have retained possession of the cargo through Sea-Road. Mr. Bhatia, the senior operations manager of the Carriers, said in his statement that the Owners "would not accept a situation in which we would discharge the cargo without an original bill of lading, to an agent with whom we have had no prior dealing, without an LOI being in place. Other than in connection with this case, I have never heard of Sea-Road." Since the Owners would have no interest in delivering the cargo to Sea-Road as their agent it is most improbable that Sea-Road was their agent for the purposes of delivery. There may be matters in respect of which Sea-Road acted as agents for the Owners (for example, Oldendorff's instructions to the master contemplated that the agent may attend to "minor Owners matters such as ship's mail, communications, transportation etc." and Mr. Sinclair, the Owners' head of operations, accepted that there were minor routine matters which Owners arranged directly with Sea-Road – cash to master and fresh water) but it does not follow that anything which the agent does is done on behalf of the Owners. Similarly, although, as between the Owners and Oldendorff Sea-Road were the agents of Oldendorff under the trip time charter it does not follow that anything which the agent did was done on behalf of Oldendorff. It is improbable that in taking delivery of the cargo Sea-Road were acting on behalf of Oldendorff. There is no evidence that they were so doing and Oldendorff had no interest in taking delivery of the cargo from the Owners. The LOI they had received provided for delivery to Xiamen. There would have been no purpose in Oldendorff taking delivery itself of the cargo through Sea-Road.
  41. I have already noted the pleading of Xiamen to the effect that it did not nominate Sea-Road as its agent for the purpose of taking delivery of the cargo and did not instruct SCIT Trading or SCIT Services to deliver the cargo to Sea-Road. I have read the statement of Green Ye, the general manager of Xiamen, and the statement of Yuwei Zhang, an operations assistant, although they are not formally in evidence. Ms. Green Ye states that she "believes" that Sea-Road was the agent of SCIT Trading or the vessel owner and that she does not believe that delivery of the cargo to the agent would trigger Xiamen's liability under the LOI which it issued. Ms. Yuwei Zhang also said that she "understood" that the agent was the agent of the vessel owner or SCIT Trading. However, neither Ms. Ye nor Ms. Zhang explained why Xiamen provided to SCIT Trading an LOI which required delivery to Xiamen. I therefore did not find these statements persuasive.
  42. For these reasons I have concluded that the cargo was delivered to Xiamen through the agency of Sea-Road. That was what the Owners were required to do in order to obtain the protection of the LOI and so the LOI was engaged. It follows that Oldendorff is liable to indemnify the Owners in respect of the arrest of the vessel and in respect of such liability it has to the Bank of China for delivering the cargo other than upon production of an original bill of lading. Since the LOIs down the line are in the same form it follows that SCIT Services is likewise liable to Oldendorff Carriers and that Xiamen is likewise liable to SCIT Trading.
  43. In those circumstances it is unnecessary to consider the alternative ways in which the Owners' case has been put. But for the sake of completeness I add that were it the case that Sea-Road did not act on behalf of Xiamen when taking delivery of the cargo the Owners nevertheless believed that Sea-Road was acting on behalf of Xiamen and so the LOI was engaged. I have recounted the discussions between the parties on 20 December 2013. Mr. Sinclair, the Owners' head of operations, has given evidence of his understanding of those discussions as follows:
  44. "71. Our understanding from this message was there would not be an actual employee of Xiamen coming on board. ………
    72. We further understood that it would only be the discharge port agent, ie Sea-Road who had just been appointed, who would be attending onboard, and that Sea-Road were authorised to handle discharge of the cargo on behalf of Xiamen. We had this belief because Charterers were both (i) providing a draft LOI requesting delivery to Xiamen or such person as represents them, and (ii) at the same time stating that no employee from Xiamen would be coming onboard and instead the local agent Sea-Road would handle the discharge. We understood from this message and the exchanges to date that Charterers were identifying Sea-Road as the party representing Xiamen to whom delivery was to be made under the LOI. ………."
  45. At the discharge port the master was told by Sea-Road that Sea-Road acted for Xiamen for the purposes of delivery. It is improbable that the master would have given delivery had he not been told that. He said in his evidence, and I accept, that he understood that Sea-Road acted for Xiamen for the purposes of delivery.
  46. The combination of the understanding of Mr. Sinclair and the information given to the master at the discharge port shows that the Owners believed that they were delivering the cargo to a person whom they believed to be acting on behalf of Xiamen. It was accepted by Mr. Ashcroft that such belief had to be an honest belief for the purposes of the LOI. I agree that it must be; otherwise it would not be a belief. There is no reasons to suppose that Mr. Sinclair's belief was other than honest. There was also some discussion as to whether the contractual requirement that the Owners held that belief was subject to an implied term, in order to ensure that the LOI was not abused, that the belief was not arbitrary, capricious or irrational in the sense in which that term is used when reviewing the decisions of public authorities; see Braganza v BP Shipping [2015] 1 WLR 1661. It is unnecessary to decide that point because the belief of the Owners was not arbitrary, capricious or irrational in that sense. Mr. Sinclair's understanding of the position appears to me to be justified. So for this reason also the LOI was engaged by the discharge and delivery to Sea-Road.
  47. Oldendorff Carriers' claim against SCIT Services

  48. It remains to mention four points made in the pleadings by SCIT Services which did not apply as between Oldendorff and the Owners. Mr. Parsons drew my attention to these points because if any of them were valid Oldendorff Carriers would be unable to enforce the LOI issued by SCIT Services.
  49. The first of these was that the terms of the sub-charter were materially different from the terms of the trip time charter. Thus the former provided for the discharge and release of the cargo against provision of the LOI whereas the latter provided for the discharge of the cargo against provision of the LOI. In the context of the delivery of the cargo in the absence an original bill of lading it is unlikely that there is any meaningful distinction between these terms but what determines whether the LOI is engaged is the terms of the LOI and there is no material difference between the terms of the various LOIs. The other suggested difference is that under the sub-charter (clause 28) Sea-Road were to be regarded as the agents of Oldendorrf Carriers (as disponent owners) whereas under the trip time charter (clause 43) Sea-Road were to be regarded as the agents of Oldendorrf (as charterers). I am not sure that clause 28 provides that Sea-Road were to be the agents of Oldendorff Carriers but Mr. Parsons accepts that Oldendorff Carriers as disponent owners under a voyage charter were required to instruct a ship's agent at the discharge port. However, the suggested difference does not assist SCIT Services, for the fact that Sea-Road may for some purposes be the agent of Oldendorff Carriers does not mean when taking delivery of the cargo from the vessel it was acting as their agent. For the reasons I have given it is probable that they were not and were in fact acting on behalf of Xiamen.
  50. The second point was that the exchanges between the Owners and Oldendorff were materially different from the exchanges between Oldendorff Carriers and SCIT Services. I have already set out those exchanges. In my judgment there was no material difference between them.
  51. Third, it is said that Oldendorff Carriers had specific knowledge that in China discharge to an agent and delivery by that agent against the original bill of lading are two separate acts. Mr. Parsons was content to assume that this was so but submitted that it was irrelevant. I agree that the distinction does not assist because, for the reasons I have given, the LOI was intended to protect Oldendorff Carriers and it could only have done so if discharge and delivery to Sea-Road was regarded by the parties as delivery to Xiamen.
  52. Fourth, it is said that Oldendorff carriers is not entitled to rely upon the belief of Mr. Sinclair and the master that in delivering to Sea-Road delivery was being given to Xiamen. However, Oldendorff Carriers' obligations as owner under the voyage charterparty can only be vicariously performed by the Owners; see The Global Santosh [2016] 1 WLR 1853 at paragraphs 14-19 for an explanation of vicarious performance in a chain of charters. That being so Oldendorrf Carriers must also be entitled to be rely upon the beliefs of the Owners' servants when vicariously performing Oldendorff Carriers' obligations.
  53. Conclusion

  54. Accordingly, in my judgment the Owners are entitled to an indemnity from Oldendorff pursuant to the LOI issued by Oldendorrf, Oldendorff Carriers are entitled to an indemnity from SCIT Services pursuant to the LOI issued by SCIT Services and SCIT Trading is entitled to an indemnity from Xiamen pursuant to the LOI issued by Xiamen.


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URL: http://www.bailii.org/ew/cases/EWHC/Comm/2016/3212.html