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Combatting challenges of COVID-19: the UK Commercial Court delivers urgent injunctive relief after a telephonic hearing

Posted on 01 April 2020

On 24 March 2020, Henshaw J granted a mandatory injunction for the provision of security to lift an arrest over the VLCC Miracle Hope in the case of Trafigura Maritime Logistics PTE Ltd v Clearlake Shipping PTE Ltd [2020] EWHC 726 (Comm). The judgment not only reinforces English law principles around mandatory injunctive relief but also shows that the English Courts are working hard to ensure continuity of access to justice in the face of the challenges posed by COVID-19.

Background

The Claimant, Trafigura Maritime Logistics PTE Ltd, time chartered the MT "Miracle Hope" (the "Vessel") from Ocean Light Shipping Inc. ("Ocean Light") and in turn voyage chartered the Vessel to Clearlake Chartering USA Inc. ("CUSA") (not the Defendant, Clearlake Shipping PTE Ltd) (the "Charterparty"). CUSA sub-voyage chartered the Vessel to Petroleo Brasileiro SA ("Petrobras") on materially similar terms as those in the Charterparty to transport crude oil from Brazil to Asia pursuant to a trade between Hontop Energy (Singapore) Pte Ltd ("Hontop") and Petrobras Global Trading BV PGTBV. The trade was financed by Natixis, Petrobras selling the cargo to Hontop with payment to be made via the bank by letter of credit.

The Charterparty required the owner, on receipt of written notice from the charterers, to comply with orders from the charterers to discharge the cargo. It was subject to receipt of P&I Club letter of indemnity ("LOI") which was only received by the Defendant after the Charterparty became binding. The wording of the LOI included a provision that if the ship should be arrested, security would be provided on demand to secure the release of the Vessel from arrest. The LOI was governed by English law and was subject to the jurisdiction of the High Court.

During the voyage, the Defendant emailed the Claimant with orders to discharge the cargo without presentation of the Bill of Lading, which triggered the obligations set out in the LOI. The cargo was discharged by the Claimant at Dongjiakou, China on this basis. An addendum to the Charterparty was then entered into to substitute the Defendant for CUSA as the charterer.

Natixis then commenced proceedings in Singapore against "the owners and/or demise charterers" of the Vessel (the Claimant) and the Court in Singapore granted a warrant of arrest over the Vessel the same day.Petrobras had sold the cargo to Hontop but, Hontop did not reimburse Natixis for the US$65 million that it had paid to Petrobras. Petrobras endorsed and delivered the Bills of Lading to Natixis who obtained the warrant of arrest over the Vessel when Ocean Light failed to deliver up the cargo.

Natixis demanded the provision of security in the sum of US$76 million to release the arrest, and Ocean Light in turn demanded that the Claimant put up the security, who in turn called upon the Defendant to provide it pursuant to the terms of the LOI.

The Defendant failed to do so, and the Claimant applied to the English Court to seek urgent injunctive relief to compel the Defendant to provide security for the Vessel's release. The application was heard telephonically by the Court the day after it was issued.

Mandatory Injunctive Relief

While the legal principles concerning the grant of mandatory injunctive relief were uncontested at the hearing and are generally uncontroversial, Henshaw J provided a high level overview of the well-known principles in American Cyanamid. They are as follows:

  1. Whether there is a serious question to be tried;
  2. Whether damages would be an adequate remedy for the claimant at trial;
  3. A consideration of the balance of convenience; and
  4. In situations where the factors are balanced, whether the status quo between the parties should be maintained until trial.

Not all of these thresholds are necessarily applicable in every case and other "special factors" may need to be taken into account, depending on the particular facts.

The Defendant resisted the application on a number of issues specific to the facts in the case. The points raised in this regard were that: (i) the application was brought against the wrong party (i.e. the Defendant, not CUSA); (ii) the indemnity provision had not been complied with as the P&I Club LOI had been provided after the contract was concluded; (iii) no separate P&I Club letter of indemnity was provided to the Claimant as allegedly required under a strict interpretation of the indemnity; and (iv) the circumstances did not warrant the extreme urgency in which the application was made (the Defendant only received notice of the hearing on the afternoon of the preceding day).

Henshaw J rejected these arguments and granted the injunction sought by the Claimant, subject to the requirement for the Claimant to fortify its cross undertaking in damages by a parent company guarantee.

Impact of the COVID-19 on the Hearing

As the UK Government's response to COVID-19 continues to develop, the Courts' stance is that justice in civil and criminal matters should continue to be administered in a way that ensures the safety of all concerned. To facilitate this, guidance has been issued by the Lord Chief Justice stating that, while the Courts expand the availability of technology, proceedings can be heard remotely by telephone, Skype, or other video facility. Matters may also be resolved on paper where possible. Notwithstanding the emphasis on continuity, however, the need for parties to explore "the possibility for compromise" has also been made clear.

The Courts have, among other things, also introduced a new Practice Direction (namely Practice Direction 51Y) designed to ensure that hearings may take place in public where possible and for such hearings to be recorded, as well as guidance for maintaining urgent hearings.

In respect of injunctions and committal hearings, the guidance from the Lord Chief Justice states that they are "likely to be urgent and such work will need to be prioritised". As applications for breach of injunctions and undertakings are "unlikely suitable for telephone hearing", it is clear that many challenges remain. However, in line with the recent guidance the hearing in this matter was conducted remotely by telephone. Proceedings were audible in the open court room (attended by the judge's clerk) and recorded by the Court, and a written judgment handed down immediately thereafter.

Aside from reiterating the legal principles for securing a mandatory injunction, this judgment demonstrates the approach that the English Courts are seeking to adopt to try to ensure that the Court's business continues in spite of the challenges posed by COVID-19 and the implementation of social distancing measures.

Practical Guidance for COVID-19
Read the latest COVID-19 related updates on our hub.

 

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