Pacific Carriers Ltd v Banque Nationale de Paris

[2001] NSWSC 900

CITATION:	Pacific Carriers Ltd -v- Banque Nationale de Paris [2001] NSWSC 900
CURRENT JURISDICTION:	Equity Division Admiralty List
FILE NUMBER(S):	SC 8/1999
HEARING DATE(S):	19.6.00, 20.6.00, 21.6.00, 22.6.00, 26.6.00, 27.6.00, 28.6.00, 29.6.00, 4.7.00, 26.7.00, 3.11.00, 10.11.01, 24.11.00, 5.12.00, 11.12.00, 12.12.00, 13.12.00, 14.12.00, 30.1.01, 31.1.01, 1.2.01, 5.2.01, 6.2.01, 7.2.01, 8.2.01, 9.2.01, 9.3.01, 16.3.01, 21.3.01, 26.3.01, 27.3.01, 28.3.01, 17.4.01, 27.9.01
JUDGMENT DATE:	16 October 2001
PARTIES :	Pacific Carriers Limited - Plaintiff Banque Nationale de Paris - First Defendant Swiss Singapore Overseas Enterprises - Cross Defendant New England Agricultural Traders Pty Ltd - Cross Defendant
JUDGMENT OF:	Hunter J

COUNSEL :	Pacific Carriers Ltd: A Street SC, G Nell, E Cox Banque Nationale de Paris: B Rayment QC, P King, I Davidson, M Pesman New England Agricultural Traders: M McHugh Swiss Singapore Overseas Enterprises: F Douglas QC, G Rich
SOLICITORS:	Pacific Carriers Ltd: Norton White Banque Nationale de Paris: Corrs Chambers Westgarth New England Agricultural Traders: Withnell Hetherington Swiss Singapore Overseas Enterprises: Phillips Fox
CATCHWORDS:	Admiralty - C & F contracts for sale of legumes - contractual provision for letters of credit to be opened by third party - legumes shipped from Australian ports to Calcutta under voyage charter to seller by time charterer - bills of lading issued with seller as shipper and third party the notify party - three letters of credit, opened on application of third party - bills of lading 'switched' substituting third party as shipper and buyer as notify party - documents discrepant under the terms of letters of credit - acceptance of discrepant documents under two letters of credit - letters of indemnity given by seller to time charterer against delivery to buyer of cargo the subject of accepted documents without presentation of bills of lading - instruction to Master by time charterer with authority of owner to deliver cargo to buyer without presentation of bills of lading - implied indemnity by time charterer to owner - seller's letters of indemnity signed by seller's bank - effect of bank's signing of letters of indemnity - effect of switching bills on liability under indemnity - third party holder of bills of lading and pledgee of cargo the subject of accepted documents - direction by third party to time charterer to deliver cargo to buyer against banker's guarantee - nature and effect of direction - action by third party against owner for conversion of cargo delivered to buyer - liability of owner to third party - liability of time charterer to owner - liability of seller's bank to time charterer - proper law of actions in contract and tort - principles of liability in negligence causing economic loss - settlement of third party's action against owner - reasonableness of settlement - whether directions to deliver cargo to buyer interfered with contractual relations - principles of wrongful interference with contractual relations - measure of damages in conversion.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) Export Control Act 1982 (Cth) Carriage of Goods by Sea Act 1992 (UK) Contracts (Applicable Law) Act 1990 (UK) Private International Law (Miscellaneous Provisions) Act 1995 (UK) Carriage of Goods by Sea Act 1992 (Cth) Sea-Carriage Documents Act 1997 (W.A) Sea-Carriage Documents Act 1996 (QLD)
CASES CITED:	R v Toohey: Ex Parte The Attorney-General for the Northern Territory (1980) 145 CLR 374 R v Portus; Ex parte Federated Clerks Union of Australia (1949) 79 CLR 428 Banco de Portugal v Waterlaw [1932] AC 452 Segenhoe Ltd v Akins (1990) 29 NSWLR 569 Chabbra Corporation Pte Ltd v Jag Shakti (The Jag "Shakti") [1986] AC 337 Butler v The Egg and Egg Pulp Marketing Board (1996) 114 CLR 185
DECISION:	In the proceedings: judgment for the plaintiff against the first defendant in negligence in the amount as found in the reasons for judgment. Determination of currency in which judgment is to be given, the rate of conversion from other currencies, rate of interest, and time from which interest is to run on judgment, the costs of the proceedings and of cross claims be deferred pending further submissions. Otherwise summons be dismissed. All cross claims be dismissed.

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

ADMIRALTY LIST

HUNTER J

TUESDAY 16 OCTOBER 2001

8/99 PACIFIC CARRIERS LTD -V- BANQUE NATIONALE DE PARIS Re the Ship MV Nelson

REASONS FOR JUDGMENT

Background

1    These proceedings arise out of the sale of a cargo of legumes, comprising chick peas and dun peas, by an Australian grain trader, New England Agricultural Traders Pty Ltd (NEAT), to Royal Trading Company (Royal), an Indian grain trader operating out of Calcutta.

2    The most significant aspect of these proceedings so far as they concern Royal is that (a) it is not a party to the proceedings; (b) unquestionably, it engaged in dishonest conduct which has left NEAT destitute. Royal continues to trade.

The Contracts for Sale of Legumes

3    There were several C & F contracts for the sale of legumes by NEAT to Royal, negotiated through G C Goil Commodity Corporation (Goil), as brokers. Two were expressed to be “effected 7th July 1998”. They were numbered respectively 070798A and 070798B. Contract 070798A (the first chick pea contract) related to 6,000 metric tonnes (MT) of chick peas at a price of US$275 per MT. Payment was by irrevocable 90 days letter of credit to be opened and payable in Sydney with Banque Nationale de Paris, now known as BNP Paribas (BNP), “payable against shipping documents”. The letter of credit was “to be opened latest 15 days prior to first date of shipment period … through first class prime bank in Singapore or through nationalised India bank acceptable [to BNP]” . The shipment period was stated to be “15 November 1998 - 15 December 1998”, with an agreement by Royal to extend that time, if required by NEAT, due to a delay in harvest. The loading port was from any Australian port and the discharge port was Calcutta. Laytime was agreed to commence 24 hours after presentation of Notice of Readiness. The other terms were noted as “per charter party”. The manner of discharge was stipulated as follows:

“NORMAL DISCHARGE BY LIGHTERS AT DIAMOND HARBOUR WHERE 7M DRAFT OBTAINABLE. LIGHTERAGE COSTS FOR BUYERS ACCOUNT.
IF VESSEL OVER 7M OR PORTS DRAFTS FOR ENTERING CALCUTTA, LIGHTERAGE COSTS AT SAGAR /HALDIA SHIPPER’S ACCOUNT… ANY ADDITIONAL MOVEMENT BETWEEN BERTHS OF VESSEL FOR BUYERS ACCOUNT AT THE DISCHARGE PORT.
STATEMENT OF FACTS AT DISCHARGE PORT SIGNED BY THE MASTER SHALL BE FINAL FOR CALCULATION OF LAYTIME PURPOSES. BUYERS GUARANTEE THAT MINIMUM DRAFT AT 7M WILL BE AVAILABLE TO THE VESSEL ON ARRIVAL…”

4    As seen later in these reasons, Royal cynically utilised this draft limitation to its advantage when the legumes arrived at Sagor Roads. Throughout the material in evidence “Sagor” is frequently referred to as “Saugor”. Except in quotations I have adopted “Sagor” in conformity with the Admiralty chart of the area.

5    Special conditions included provision for the acceptability of charter party bills of lading with the “costs associated with separate/ multiple bills of lading/ shipping documents” being to buyer’s account. NEAT was required to send one complete set of non-negotiable copy documents to Goil. The shipping documents were prescribed as follows:

“SHIPPING DOCUMENTS:
-FULL SET 3/3 CLEAN ON BOARD CHARTER PARTY BILLS OF LADING.
-CERTIFICATE OF ORIGIN ISSUED BY A COMPETENT AUTHORITY.
-CERTIFICATE OF WEIGHT AND QUALITY ISSUED BY SGS AUSTRALIA.
-PHYTOSANITARY CERTICATE ISSUED BY GOVERNMENT BODY.
-COMMERCIAL INVOICE.
-PACKING LIST.
-FUMIGATATION CERTIFICATE ISSUED BY COMPETENT AUTHORITY.”

6    The contract bears a stamp date of 9 July 1998 and attached to the contract is a contract amendment which has a stamp date 19 October 1998. That amendment was in the following terms:

“LC SHALL BE ALLOWED TO BE OPENED BY M/S. SWISS SINGAPORE OVERSEAS ENTERPRISES PTE” [SSOE].

7    SSOE was an international commodity trading company operating out of Singapore.

8    Contract 070798B (the first dun pea contract) was for the sale of 6,000 MT of dun peas at a price of US$210 per MT on terms the same as the first chick pea contract, save for the shipment period being expressed to be “for the period 1 December - 31 December 1998”. The first dun pea contract also was subject to a contract amendment which bore a date stamp 19 October 1998 to the same effect as the amendment to the first chick pea contract.

9    There were two further contracts between these parties each stated to be effected 6 August 1998. The first of those was contract number 60898A (the second chick pea contract) for the sale of 4,000 MT of chick peas at US$278 per MT. Its terms were also to the same effect as the terms of the first chick pea contract and contained a contract amendment, the same as the amendment to the first chick pea contract.

10    The remaining contract, number 060898B (the second dun pea contract), was for the sale of 4,000 MT of dun peas at US$193 per MT. It was on the same terms as the first dun pea contract and contained the same contract amendment as applied to the other contracts.

The Buyer’s Financial Arrangements

11    According to the affidavit of Praveen Kumar Jain (Jain), a director and president of SSOE, he was contacted by telephone by Gopal Chad Bhura (Bhura), the principal of Royal, requesting “SSOE’s assistance” in financing Royal’s purchase of the cargo. In cross examination he elaborated upon this as follows:

“A. He told me he want - he has a contract for buying of
dun peas and chick piec (sic). He of course has not told me
from whom he has bought and he told me that he - if he can
open the letter of credit for him in this regard, he is tight
with the finances at that point of time for - because there
are limit problems in the India for traders to open the
letter of credit. So he says, "You open up the letter of
credit for me and if I will have the limits available at the

time when the documents will come, I'll open a letter of
credit for you; otherwise you present the documents to me
I'll make the payment for you." And then we discussed about
what margins he will give in that transactions and then I
asked him to fax me the contract copy.

Q. And what margin did you ask of him in relation to agree
to finance the contract?
A. I asked him $10 initially but we concluded $7 for dun
peas and $5 for chick peas.

…

Q. So the situation was, at the end of this conversation with Mr Bhurra (sic),
that you would finance the purchase by Royal of the 10,000 tonnes of dun peas and the
10,000 tonnes chick peas from Australia to India at a cost of $7 per metric
tonne for the dun peas and $5 per metric tonne for the chick
peas to Royal.
…

KING: Q. That's correct, isn't it?
A. Yes, we will open the letter of credit for him and if
he can take the purchase contract we have discussed about
that, yes, the purchase - if he can get it transferred in
our name, it will be very comfortable.”

(T1136:51-T1137:10 ….. T1137:52-T1137:56…T1138:3-T1138:7)

12    The rationale for the approach by Bhura was described by Jain as follows:

“A…I know in general in India, people come and approach us for finances only because they don’t have a good credit facility in India for trading, commodity trading”.
(T1141:17- T1141:19)

13    Following on this communication from Bhura, SSOE received his facsimile of 7 October 1998 forwarding the first and second chick pea contracts with the following cover note :

“AS WE DISCUSSED YESTERDAY OVER PHONE REGARDING OPENING OF LC WE ARE FAXING HEREWITH TWO CONTRACTS OF AUSTRALIAN WHICH PLEASE FIND IN ORDER AND ARRANGE LC FOR THE SAME.”

14    Royal was obliged to open letters of credit, under the chick pea contracts, by 30 October 1998 and, under the dun pea contract, by 15 November 1998. Goil was requested by NEAT to remind Royal of this on 13 October 1998. Royal’s response was to request NEAT, in effect, to change the contracts as appears from the following facsimile from Royal to NEAT of 15 October 1998:

“YOU ARE REQUESTED TO SEND THE CONTRACT IN THE NAME OF SWISS SINGAPORE OVERSEAS ENTERPRISES PTE LTD.. 3. SHENTON WAY #14-01 SHENTON HOUSE, SINGAPORE 068805 ENABLING US TO OPEN LC IMMEDIATELY. PLEASE DO THE NEEDFUL & FAX US IMMEDIATELY.”

15    NEAT responded immediately by facsimile of 16 October refusing to make the suggested changes. NEAT’s facsimile was as follows:

“Received fax dated 15.10.98 from Royal Trading requesting abovemetioned (sic) contracts (NEAT ref 070798A and 060898A) re-cut in the name of “Swiss Singapore Overseas Enterprises Pte Ltd”.
Kindly note our trades/contracts have been negotiated by yourselves to Royal Trading who have been put up to us as a reliable party. We are not in the habit of recutting agreed contracts to a third party who we do not recognise. This would put us at considerable risk as we do not recognise the receiving party as a bona fide party in this transaction.
The contract terms and conditions have been agreed to as at 7/7/98 and 6/8/98.”

16    There apparently, followed further discussions between Goil and NEAT which resulted in Goil’s email of 16 October 1998 in the following terms:

“This has further reference to our discussions today regarding contracts for Chick Peas with M/s. Royal Trading Company, Calcutta. As explained to you over phone there has been some misunderstanding in the communication.
You are requested to kindly amend your contracts incorporating the following:
L/C shall be allowed to be opened by
M/s. Swiss Singapore Overseas Enterprises Pte. Ltd.,
3 Shenton Way,
#14-01 Shenton House,
Singapore 068805
Buyers to remain as M/s. Royal Trading Co., Calcutta.
Notify part to remain as M/s. Royal Trading Co., Calcutta.
All other terms and conditions of the contracts shall remain unchanged.
Please issue your addendum to your contracts accordingly. On receipt of which we shall issue our addendum.”

17    As earlier noted, the contracts were amended in the manner proposed in this email.

18    On 23 October 1998 SSOE applied to Bangkok Bank Public Company Limited (Bangkok Bank) at its Singapore branch to open a documentary letter of credit in the sum of US$1,112,000. The expiry date was expressed to be 31 December 1998, the beneficiary was identified as NEAT and related to a shipment to Calcutta from Australia ‘latest 15 December 1998’. The description of goods identified the subject matter as chick peas and referred to the second chick pea contract by reference to its contract number. The letter of credit was opened on 27 October 1998 and was forwarded by Australia and New Zealand Banking Group Limited to BNP on 28 October 1998 bearing letter of credit number LCUA800970 (the first letter of credit). It specified the following documents which were required on the letter of credit :

1. Commercial invoices certifying that the goods shipped were as per contract number 60898A;
2. The full set of bills of lading “ made out to order blank marked free freight pre paid and notify applicant ”.

19    On 28 October 1998, on the application of SSOE, Bangkok Bank issued a second documentary letter of credit, number LCUA800983 in respect of the first chick pea contract in the sum of $1,650,000 (the second letter of credit). As with the first letter of credit it was a 90 day letter of credit which erroneously referred to the goods shipped by reference to the second chick pea contract. That error was corrected by amendment to the documentary credit of 27 November 1998. The terms and conditions of the letter of credit were in accordance with the first chick pea contract and followed the first letter of credit.

20    It was necessary to extend the date under the dun pea contracts by which the letter of credit was to be opened. That was effected in mid-November by extending the date to 30 November 1998. In conformity with that extension, Bangkok Bank opened a letter of credit, number LCUA801120 (the third letter of credit), in the amount of US$2,032,000 to cover the two dun pea contracts. It was in terms which corresponded with the first and second letters of credit.

Shipping Arrangements

21    The cargo was carried on board the MV Nelson in respect of which Pacific Carriers Limited (Pacific) had entered into a time charter (time charter) with Bolton Navigation (Bolton) on 9 December 1998 for “one time charter trip via St Port (S) Australia to St Port (S) Calcutta …” After entering into the time charter, Pacific appointed Multimode Maritime Pvt Ltd (Multimode) to represent it at Calcutta “to look after our VSL ‘MV Nelson’… due Calcutta 2nd half Jan 99…” The following further extract from that facsimile of appointment of 14 December 1998 has some bearing on events that occurred at the time of discharge of the cargo at Calcutta, namely:

“AS DISCUSSED LAST FRIDAY NIGHT, WE WISH FOR YOU TO REPRESENT US + NEGOTIATE WITH RECEIVERS TO TAKE DELIVERY OF GOODS EX-HOOK AT SAUGOR ROADS. VSL WILL NEED TO OFF-LOAD SOME 7000MTS PEAS BEFORE SHE CAN SAFELY APPROACH THE DIAMOND HARBOUR ANCHORAGE. FOR THE RECEIVERS AGREEING TO TAKE DELIVERY AT SAUGOR ROADS, PCL IS PREPARED AGREED (sic) TO RECOMPENSE THEM FOR THE ADDITIONAL COSTINGS.”

22    Diamond Harbour is well upstream from Sagor Roads which lies, roughly, at the entrance to the Hugli River. The necessity to “off-load” some of the cargo at Sagor Roads related to the need to reduce the MV Nelson’s draft to seven metres in order to safely enter Diamond Harbour.

23    For the purposes of the contracts NEAT, through brokers, Anderson Hughes, negotiated a voyage charter with Pacific in the form of the Australian Wheat Charter 1990 dated 8 December 1998 (the voyage charter), the addendum to which, dated 9 December 1998, identified the MV Nelson as the vessel to perform the voyage.

Loading of MV Nelson

24    Following upon the nomination of the MV Nelson, it sailed from Jakarta on 9 December 1998 and arrived at Fremantle on 16 December 1998. Loading of the vessel with dun peas commenced on 23 December 1998, 5,722 MT being loaded into hold number 2 and 40.58 MT into hold number 4. Loading was completed on 24 December 1998 at Fremantle and a Master’s bill of lading dated 24 December 1998 (B/L-1) issued in relation to the cargo of 5,762.58 tonnes. (There was some discussion during the case as to the true nature of the bills of lading, whether they were charter bills or Master’s bills. I do not understand that to be a live issue). It was executed by Beaufort Shipping Agency Company (Beaufort) as agent for the Master. It was expressed to be consigned “to order”. NEAT was the shipper and SSOE was identified as the notify party.

25    The vessel recommenced loading at Esperance on 27 December 1998 taking on board 4,706.65 MT of dun peas which was loaded into hold number 4. Two bills of lading issued in respect of the cargo loaded at Esperance each dated 27 December 1998 one in respect of 537.42 MT (B/L-2) and the other in respect of 4,169.23 MT (B/L-3). Both were in terms similar to B/L-1 and executed in like manner. The loading of the chick peas took place at Brisbane on 4 January 1999 when 9,273.96 MT of chick peas were loaded in holds 1 and 5. In respect of that cargo of chick peas some ten bills of lading issued, each dated 4 January 1999, all in similar form to B/L -1.

26    Each of eight bills of lading issued in respect of 1,000 MT of chick peas and were identified, respectively, as bill of lading 4A (B/L- 4A), 4B (B/L-4B), 4C (B/L-4C), 5A (B/L-5A), 5B (B/L-5B), 5C (B/L-5C), 5D (B/L-5D), and bill of lading 5E (B/L-5E).

27    One bill of lading, marked 4D, issued in respect of 800 MT of chick peas (B/L-4D) and one marked 5F, issued in respect of 473.96 MT of chick peas (B/L-5F).

28    I refer to this first tranche of bills relating to dun peas and chick peas as ‘initial’ bills of lading.

Request to switch bills

29    While the MV Nelson was en route from Esperance to Brisbane to pick up the chick peas, Royal sent a facsimile to NEAT on 29 December 1998 in the following terms:

“YOU ARE KINDLY REQUESTED TO SPLIT B/L & INVOICE EACH B/L FOR 1000 MT DUN PEAS AND 1000 MT TYSON CHICK PEAS TO CLEAR THE CARGO SMOOTHLY. PLEASE DO THE NEEDFUL AND CONFIRM.”

30    The facsimile is endorsed with what appears to be a reply by K M Murali (Murali), an employee of NEAT, which was addressed to Goil in the following terms:

“I TRIED TO CONTACT YOU, BUT LEFT A MESSAGE AT YOUR OFFICE REGARDING SPLIT B/LS. DO ONE THING WHICH IS A VERY SMIPLE (SIC) WAY, EVEN OUR BUYERS HAVE DONE IT EARLIER.
WE HAVE GIVEN SHIPPING AGENT NAME AT SINGAPORE, REQUEST SWISS SINGAPORE TO TAKE B/L’S AND SPLIT INTO 20 B/L + INVOICES.
IN AUSTRALIA, THE BANKING SYSTEM IS LIKE THIS ANY SPLIT DOCUMENTS, THEY TAKE IT AS A SEPARATE DOCUMENT NEGOTIATION WHICH COST’S (sic) HEAVELY (sic) PER TON US $1 DOLLAR THEY CHARGE WHICH WORKS OUT TO BE $20,000 HENCE REQUEST SWISS SINGAPORE TO DO THIS JOB AT SINGAPORE WITH NO EXTRA COST. HOPE YOU UNDERSTAND THE MATTER.

- PLEASE FAX AMENDMENTS URGENTLY FOR CHICK PEAS/ DUN SHIPMENT”

31    The vessel sailed for Brisbane from Calcutta on the evening of 4 January 1999 with acceptance of documents under the three LCs unresolved.

32    The reason for the request to “split” the initial bills of lading into 1000 tonne categories is not free from doubts of subterfuge as eight of the bills were each expressed to be for a cargo of one thousand MT, one for 473.96 MT and another, B/L-2, for 537.42 MT. There is reason to think that there may have been additional considerations involved in Royal’s request.

Arrival of MV Nelson – Calcutta

33    The MV Nelson arrived at Sagor anchorage on 24 January 1999. That is an anchorage at the mouth of the Hugli River. On 25 January 1999 the vessel arrived at Sagor Roads which is off Sagor Island, all of which can be seen from Exhibit 6 which is an admiralty chart depicting the Hugli River from Sagor Roads to Kukrahatti Reach, embracing Diamond Harbour. Looking at the chart, Sagor Roads is some fifty or sixty kilometres from Diamond Harbour which is situated up river on the Hugli.

Legume Market Fluctuation

34    Prior to the arrival of the MV Nelson at Sagor anchorage, there was a sharp drop in the grain market for legumes, a circumstance that, unquestionably, played a very significant part in Royal’s dishonest failure to pay NEAT for the bulk of the legumes delivered to it.

35    On 21 January 1999, Royal requested Pacific’s port agent, Multimode, to pass on a request to Pacific that the vessel wait at Sagor Heads, where it could avoid port charges, to enable Royal to explore on-sale of the legumes at other Indian ports, or at Bangladesh, in the face of falling market prices.

Commercial status of SSOE in transactions

36    As earlier noted in these reasons, NEAT had agreed to a contract amendment under which the terms of payment were amended to provide for the opening of letters of credit by SSOE. It is also worth noting that in that amendment it was confirmed that Royal would “remain” as buyer and as the “notify party”. This is in keeping with the very clear rejection by NEAT of the original approach to substitute SSOE for Royal under the subject contracts. The matter is of importance in view of a position taken in these proceedings on behalf of SSOE on the basis that it was the buyer of the legumes from NEAT.

37    Under the terms of the letters of credit opened by Bangkok Bank it was necessary to submit “signed commercial invoice in 1 original + 3 copies certifying that the goods shipped as per beneficiaries contract”. Another term upon which the letters of credit were opened required production of clean on-board ocean bills of lading made out to order blank endorse marked “freight prepaid” and “notify applicant”, which was SSOE.

38    Sniekers agreed in cross examination that he understood the words “notify applicant” as a reference to the notify party under the initial bills of lading and that it was intended to refer to SSOE: further that the requirement that the bills were “to order” meant that they were negotiable. Consistent with that understanding he completed on behalf of NEAT a “Notice of Intention to Export Prescribed Goods” in conformity with the Export Control Act 1982 (Cth). In the provision marked for ‘Name and Address of Consignee’ Sniekers completed the application to read “To Order Notify Swiss Singapore”.

39    For the purpose of acceptance of documents under the letters of credit opened on SSOE’s application, on or about 27 December 1998, NEAT raised commercial invoices to SSOE identifying the subject matter by reference to the Royal dun peas contract numbers. On 4 January 1999 NEAT issued similar commercial invoices to SSOE for the chick peas: again, identifying the subject matter by reference to the Royal chick pea contract numbers. The form of the invoices mirrored the terms of the contracts between NEAT and Royal. Under the heading “Commercial Invoice” appeared: “To: Swiss Singapore Overseas Enterprises Pte Ltd”. The invoice number also bore the same identification number as the relevant Royal contract number.

40    I think some significance lies in the fact that NEAT’s invoices to SSOE were not submitted directly to SSOE. Rather they were provided through the banking system for the purpose of acceptance under the letters of credit opened by Bangkok Bank on SSOE’s application, pursuant to the express terms of the NEAT/Royal contracts.

41    The issuing of invoices to SSOE in relation to the Royal contracts did little to clarify the legal relationships amongst the parties to these proceedings.

42    In these proceedings, SSOE has been variously described as the buyer and on-seller of the cargo to Royal, as financier of Royal’s purchase of the cargo, as pledgee of the cargo, or as a party entitled to possession of the bills of lading once discrepant documents had been accepted under the letters of credit.

43    When Sniekers was cross examined on the invoices to SSOE, he gave the following evidence:

“Q. Also did you, if you could go to page 347 as an example, cause commercial invoices to be issued to SSOE in relation to the chick peas and dun peas which had been shipped?
A. Yes.

…

Q. Were you responsible for doing that?
A. Yes.

Q. That is your signature which appears on each of them?
A. Yes.

Q. Were you not intending by issuing those commercial invoices to make it clear to SSOE that you were looking to them for payment?
A. Yes.

Q. For the goods?
A. Yes, there were invoices issued under the letter of credit.

Q. You regarded yours a contractual relationship?
A. Only insofar as SSOE was financing the goods to Royal on behalf of Royal.

Q. What do you mean by that answer?
A. SSOE were paying for the goods on behalf of Royal Trading and each commercial invoice relates to and specifies a contract which NEAT has with Royal.

Q. But so far as NEAT was concerned it would be paid by SSOE?
A. Yes.

Q. And SSOE, as you understood it, was a financier?
A. Yes.

Q. The bills of lading which were issued were negotiable?
A. Yes.

Q. You understood they could negotiate those to a third party?
A. Yes but it was implicit they would be handed to Royal.

Q. Implicit at that stage?
A. Yes.

HIS HONOUR: Q. Handed to Royal by whom?
A. By Swiss Singapore.

DOUGLAS: Q. At a time when Royal paid them for the goods?
A. That wasn't, we had no knowledge of that particular contractual arrangement, if that is what it was.

Q. You don't seriously suggest it was your expectation that SSOE as a financier of the cargo would give the bills of lading to Royal at a time when it did not receive the payment for the goods?
A. Well, if that was the case then why would Royal require a financier, they could have paid NEAT directly?

Q. Because probably Royal did not have the finance to pay for the cargo direct?
A. In that case that's why they used a financier.”

(T845:46-T845:49…T845:55-T846:54)

Terms of arrangement between SSOE and Royal

44    For reasons given later, I am satisfied that SSOE was not a purchaser of the cargo from NEAT. However, as though it was a purchaser for on-sale to Royal, SSOE raised two forms of sales contract for the sale to Royal of the chick peas and the dun peas, respectively dated 2 October 1998 and 20 November 1998. The significant aspects of those contracts are that the prices follow the sales price to Royal, with what has been described as “a margin” of $5, in the case of the chick peas, and $7, in the case of the dun peas, added to the Royal contract prices. Payment terms were described as follows:

“By irrevocable L/C at sight or D/P sight
Workable L/C as per our format can be received by us by 10.12.98
In case of D/P sight 10% advanced to be received by us latest by 10.12.98.”

45    Other terms and conditions conferred a right of cancellation in the event that the contract was not confirmed in writing by 23 October 1998, in the case of the dun peas, and by 12 October 1998, in the case of the chick peas. A further right of cancellation was conferred on SSOE if the requisite letter of credit was not opened in accordance with the format submitted by SSOE. Of some moment was the following condition of the “sales contract”:

“..the seller will make every endeavour to negotiate and/or send the documents at the earliest but in any case if the same is not available before the arrival of the vessel then the buyer has to arrange the discharge of cargo immediately against letter of indemnity duly signed by their bankers”.

46    These contracts were never executed by Royal. It did not pay for the cargo, other than that the subject of B/L-2, nor did it pay the 10% deposit. SSOE did not avail itself of its entitlement to cancel the contracts and took no action in respect of Royal’s failure to pay the deposit. It took no action to recover any payment by Royal under either contract, notwithstanding delivery of a substantial portion of the cargo to Royal without payment to SSOE.

47    In conformity with the arrangement involving the establishment of the letters of credit by SSOE, SSOE was the notify party in the initial bills of lading. While NEAT responded favourably to Royal’s request to split the bills of lading, what happened in relation to the switched bills is not fairly described as a split of the initial bills of lading. It is common ground that NEAT consented to the substitution of the initial bills. The evidence disclosed that this was effected in Singapore where the vessel was planned to bunker en route to Calcutta.

Switching of bills

48    On 4 January 1999 Derek Kilby and Associates (Kilby), maritime consultants who were retained by NEAT, provided details of the owners in Singapore to “arrange presentation of the [initial] B ladings issued in Australia”. That information was, in turn, sent by facsimile by Murali to Balodi Basba Nand (Balodi) (he being the assistant manager for shipping and marketing for SSOE), and to the agents for the owners in Singapore, Beaufort. The facsimile also went to Goil.

49    On the same date, Pacific sent a facsimile to Beaufort in Sydney requesting assistance in the splitting of the initial bills of lading. The facsimile was in the following terms:

“CHTRS WILL REQUIRE YR ASSISTANCE TO HV ORIG BILLS OF LADING ISSUED IN AUSTRALIA TO BE HANDED TO YR CO AGENTS IN SINGAPORE FOR SPLITTING DOWN INTO SMALLER DEMONINATIONS.
PLS ADVISE FULL STYLE OF YR CO AGENTS IN SPORE. BSL WILL BE SURRENDERED TO YR CO AGENTS, DESTROYED + NEW BSL TO ISSUE IN LIEU OF THE ORIGS.”

50    It is common ground that Pacific raised no objection to the issuing of switched bills of lading in this so-called splitting exercise. On 8 January 1999 the following facsimile was sent by SSOE to NEAT (Murali):

“Please instruct your shipping agent in Singapore to switch the B/L against bank guarantee or Producing (sic) original B/L.
Please Treat (sic) this message as URGENT.”

51    On 12 January 1999, Murali forwarded the following facsimile to Balodi:

“Please ref our discussions of the date. May I request you urgently fax us what changes exactly you want in B/Lading at singapore (sic), please let us know so that we can check up with our shipping agents and if possible we will certainly do the needful.”

52    On the same date, SSOE responded by forwarding by facsimile draft bills of lading to NEAT. The proposed manner of substituting the bills was set out in Anderson Hughes’ facsimile to Beaufort Sydney in the following terms:

“SHIPPERS WILL REQUIRE SPLITTING OF ORIGINAL BL INTO SMALLER DENOMINATIONS. SHIPPERS WILL PRESENT ORIG BSL TO YOU OR TO YOUR SUBBRANCH OFFICE IN SPORE, WHICH ORIGS TO BE DESTROYED AND NEW BSL TO BE RAISED IN ACCORDANCE WITH SHIPPERS’ REQUEST, IE CHANGE IN TGE, CONSIGNEES ETC.”

53    It is apparent by 12 January 1999 that SSOE was proposing more than a mere splitting of the bills of lading by the proposed substitution. Under the draft proposed by SSOE, it was shown as the shipper in place of NEAT and Royal was the designated notify party. I think Goil in his facsimile to Royal of 12 January 1999 was close to correct in his analysis of the implications proposed by SSOE. His facsimile was in the following terms:

“ I have sent you three faxes today.
As per your instructions I have talked to Mr. P.K. Jain yesterday and have also discussed with him today. It seems that one Mr. Balodi of M/s. Swiss Singapore is creating some new problems as he is asking the seller M/s. New England to authorise the shipping company to amend the B/L itself showing M/s. Swiss Singapore as shippers instead of M/s. New England.
Gopal, it is highly impossible and nowhere in the world it is being done. How can you change the name of the seller without paying the B/L and other documents? I think something is very fishy about the whole thing as you have repeatedly informed and the representative of M/s. New England Mr. Murali that you are doing the needful in the matter.
Please note the vessel is due to arrive Calcutta on 20th and the matter is becoming very very serious. Unless and until M/s. Swiss Singapore gives clear instructions as promised by you yesterday through their bank to BNP Sydney to accept the documents with discrepancy as sellers are unable to negotiate the documents under ICC500. Please note if the vessel arrives before arrivals of the documents, she will go under demurrage as the shipping company will not be able to register the vessel with Calcutta Port authorities. Please note the matter is very very serious and it requires your urgent attention.
We regret, in future we shall not be in a position to deal with M/s. Swiss Singapore for opening of any of your L/Cs which please take note as we have unnecessarily suffered a lot, sale has been the case with M/s. Comstar and now with M/s New England.”

54    Amendments to the bills of lading relating to the dun peas were stamped by Beaufort at BNP’s office on 12 January 1999. The amendments are of no significance to the events that have given rise to these proceedings.

Unavailability of bills at Calcutta

55    On 12 January 1999, Kilby informed Anderson Hughes that the initial bills of lading were in the banking system, as appears from the following facsimile:

“CHARTS ADVISE ALL BLADINGS ARE IN THE BANKING SYSTEM, CHARTS ARE PRESSING THEIR BANKERS TO EXPEDITE PROCESSING BUT THERE ARE OTHER BANKS DOWN THE LINE OVER WHICH CHARTS BANK HAS NO CONTROL. CHARTS WILL DO ALL THEY CAN TO HAVE BLADINGS IN CALCUTTA SOONEST AND HAVE PASSED ON TO BUYERS OWNERS COMMENTS RE PRE-REGISTRATION. WILL ADVISE THEIR RESPONSE.”

56    The expectation of having the bills of lading in Calcutta in time for the discharge of the MV Nelson’s cargo, particularly in light of the substitution of the initial bills, would appear to be highly optimistic. The vessel was approximately twelve days out of Sagor Roads and documents under the letter of credit opened by Bangkok Bank had not been accepted.

57    On 13 January 1999 SSOE sent a facsimile to Pacific for the attention of its employee Captain Liang Kok Beng (Liang), in the following terms:

“RE: M V NELSON
AS PER OUR TELECON TODAY, FAXING HEREWITH ARE THE DRAFT SWITCH B/LS AS DISCUSSED. PLEASE NOTE THE NOTIFY PARTY.
PLEASE ALSO INSTRUCT YOUR DISCHARGE PORT AGENT TO RELEASE THE CARGO TO THE NOTIFY PARTY AGAINST BANKERS GUARANTEE.
KINDLY CONFIRM.
THANKS & REGARDS,
[SIGNED]
PARHANA”

58    During the telephone conversation referred to in that facsimile, according to the evidence of Liang, the following exchange took place:

“16 I told Ms Farhana, during our telephone conversation, that PCL were not owners, as she thought, we were the time charterers and disponent owners. I said that I did not know who Swiss Singapore were and that we had no contact with them. I said that they should go to NEAT. Ms Farhana said they were the owners of the cargo, and I said that I really had no idea about this. So far as I can recall, there were no other contacts with Swiss Singapore until the end of January, when the Bills of Lading were switched.”
(Ex 34)

59    The significance of outstanding acceptance by SSOE of discrepant documents under the letters of credit, at a time when the MV Nelson was nearing its port of discharge, was not lost on NEAT. An internal memorandum of 14 January 1999 from Peter Sniekers (Sniekers), a director and shareholder of NEAT, to Murali was ample testimony of that concern. It was in the following terms:

“MURALI: WE URGENTLY NEED SOMETHING IN WRITING WITH REFERENCE TO SWISS SINGAPORE/ ROYAL AGREEING TO PAY L/C’S WITH DISCREPANCIES (CHARTER PARTY BILLS, LATE SHIPMENT CHICKS). DESPITE YOUR VERBAL ASSURANCES WE HAVE RECEIVED NOTHING. WE ARE AT RISK [OF] SENDING DOCUMENTS WITHOUT ASSURANCES BUT WE ARE RELYING ON YOUR ADVICE FROM YOUR CONTACTS THAT THEY HAVE PROMISED TO PAY IMMEDIATELY ON TRECEIPT (sic) OF DOCS. PLEASE SECURE A WRITTEN ASSURANCE FROM SWISS SINGAPORE VIA THEIR BANK TODAY LATEST.”

60    NEAT’s concern, in the circumstances that unfolded, should not have been assuaged by Royal’s facsimile to it of 14 January 1999 as follows:

“ RE: SHIPMENT OF DUN PEAS AND CHICK PEAS PER M/V NELSON
PLEASE NOTE ALL DOCUMENTS WITH DISCREPANCY SHALL BE ACCEPTED BY US.
THANKING YOU,
YOURS FAITHFULLY,
FOR ROYAL TRADING CO.
[signed]
(G. C. BHURA)
c.c. BNP KLAS JANESKI. ”

Commercial dealings between Royal and SSOE

61    NEAT’s position, however, was more precarious than it realised, or had any reason to realise. The commercial relationship between Royal and SSOE was far from acceptable to SSOE. On 15 January 1999, SSOE sent the following facsimile to Royal:

“FURTHER TO OUR FAX OF 05.01.99 WHEREIN WE HAD SENT YOU STATEMENT OF OUR PENDING BILLS POSITION AMOUNTING USD 8,685,518.00 (COPY ENCLOSED) AND VARIOUS TELECON THE UNDERSIGNED HAD WITH YOU REGARDING PAYMENT OF OUR BILLS. WE REGRET TO INFORM THAT DESPITE YOUR REPEATED CONFIRMATION WE HAVE NOT RECEIVED THE PAYMENT AS PER YOUR PROMISES NOTED BELOW:
1. YOU PROMISED TO PAY US THE AMOUNT OF SHIPMENT PER MV. KALIMANTHAN BY 31.12.98 WHICH IS NOT PAID TILL DATE AS PER YOUR PROMISE.
2. YOU PROMISED TO PAY OUR BILL NO. SSOE/463/98-99 FOR USD 370,875.00 AND BILL NO. SSOE/505/98-99 FOR USD 217,688.00 BY 05.01.99 WHICH ARE STILL UNPAID.
3. YOU PROMISED TO PAY OUR BILL NO. SSOE/594/98-99 FOR USD 800,000.000 AND BILL NO. SSOE/587/98-99 FOR USD 395,000.00 BY 09.01.99 WHICH ARE STILL UNPAID.

4. YOU PROMISED TO PAY THE BALANCE BILLS IMMEDIATELY UPON PRESENTATION WHICH ARE NOT PAID TILL DATE.
NON FULFILLING YOUR COMMITMENTS AND NON-RECEIPT OF PAYMENT AS PROMISED BY YOU IS DISTURBING US.
AS INFORMED TO YOU WE WILL HAVE DIFFICULTIES IN ACCEPTING DOCUMENTS OF SHIPMENTS MADE BY AGROCARE (MYANMAR) LTD AND NEW ENGLAND AGRICULTURAL TRADERS IN CASE WE DO NOT RECEIVE THE PAYMENT OF OUTSTANDING BILLS AS PER YOUR PROMISE. PLEASE FAX US SCHEDULE FOR THE PAYMENT OF BALANCE BILLS
YOUR IMMEDIATE ATTENTION ON THE SUBJECT IS REQUESTED
THANKS & REGARDS
[SIGNED]
P K JAIN”
“ROYAL TRADING CO
BILL PENDING POSITION AS ON 05.01.99

B/L DATE	INV NO	AMOUNT (USD)	DOCUMENT DATE
BL-27/10/98	463	370,875	05-Nov-98
BL-30/10/98	505	217,688	12-Nov-98
BL-07/12/98	594	800,000	23-Dec-98
BL-30/11/98	587	395,000	23-Dec-98
BL-06/12/98	613	827,723	AGRO CARE
BL-24.12.98	666, 586, 662, 661, 660	317,282	24-Dec-99
BL-24.12.98	668,669 & 670	2,242,638	DUN PEAS
BL-04.01.99	2,607,803	CHICK PEAS
SUB-TOTAL A	7,779,009
BL-16/11/98	547	108,566	MV. KALIMANTAN
BL-16/11/98	548	98,227	MV. KALIMANTAN
BL-16/11/98	549	185,299	MV. KALIMANTAN
BL-16/11/98	550	187,769	MV. KALIMANTAN
BL-16/11/98	551	115,626	MV. KALIMANTAN
BL-16/11/98	552	108,159	MV. KALIMANTAN
BL-16/11/98	553	21,663	MV. KALIMANTAN
BL-16/11/98	554	81,199	MV. KALIMANTAN
SUB-TOTAL – B	906,509
GRAND TOTAL	(A + B) =	8,685,518 ”


(Ex CX 17)

62    It is not without irony that NEAT chose the same day to forward the following facsimile to SSOE:

“Dear Balodi,
Please ref above our banker’s BNP – Sydney negotiated documents for Chick Peas today as Mr G.C. Bhura of Royal Trading Co’s advise to Bankok (sic)Bank – Singapore by DHL No: 1604758470 dtd 15/01/99. We requested them to deliver documents to Bankok (sic) Bank – Singapore on Saturday, though DHL got no deliveris (sic) on Saturday as per our request DHL obliged to give delivery as a special case with reference no 000880 to be quoted by you or Bankok (sic) Bank to deliver documents urgently to Bankok (sic) Bank, Singapore. Upon request they delivery documents on Saturday, hope Bankok (sic) Bank at Singapore must be working on Saturday.
There is an urgency for documents for your negotiation’s (sic) as well as changing b/lading at Singapore. Also for your information Mr G.C. Bhura spoke Mr P.K.Jain to accept documents with discrepancy. As you are aware of it, we got very little time for you to renegotiate the documents at Singapore and it should reach before vessel reaches to Calcutta. Dun Peas documents are at Bankok (sic) Bank - Singapore since 14/01/99.
Regards/ K.N. Murali
Copy: Mr G.C. Bhura – Royal Trading Co - Calcutta
Mr Krishna Goil – G.C Goil Community Corporation –Bombay”
(Exh M)

63    The commercial relationship between SSOE and Royal may be contrasted with the contents of NEAT’s (Murali’s) facsimile to Royal of 18 January 1999 as follows:

“Please ref our telecon discussions of the date. As explained to you our problem about our credit limits with BNP - Sydney, also your assurance accepting documents with discrepancies. May I kindly request you to send a message to Bankok (sic) Bank, Singapore accepting documents and authorise for payment at due dates urgently. Though it is 90 days bills but we can make use of our credit limits. I am sure vessel must have reached at Calcutta with out (sic) documents, to avoid dummerage (sic) and other problem’s (sic) your kind cooperation & help very much appreciated.
We once again request you to do the needful urgently for our long term business relationship with company like A.V. Birla. Our humble request to you to authorise payment to Bankok (sic) Bank - Singapore, so that we can use our credit limits, there is an urgency for us to pay to lots money to the farmer’s (sic) for purchase of wheat. As a person of your stature & sitting in a respectable chair to understand our problems and do the needful urgently.”

Need for Letter of Indemnity

64    The delay in the negotiation of the bills of lading led to the introduction of a further complication in the relations between Bolton, Pacific, NEAT and Royal as appears from the following facsimile from Anderson Hughes to Kilby of 18 January 1999 which was relayed to NEAT:

“FOLLOWING RCVD FROM PCL:-
+++++
OUR OPS DEPT ADVISED DOCS NOT FINALISED. APPARENTLY, ORIG BL STILL SOMEWHERE BETW AUST/SPORE. WITHOUT DOCS, VSL CANNOT PREPARE FOR DISCHARGE. FOR CHTRS GUAIDANCE (SIC), VSL’S ETA CALCUTTA 23 JAN (WHICH IS LESS THAN 5 DAYS AWAY). WUD SOME OF THE ORIG BL HV ARRIVED IN INDIA??
IF ORIG B/L ARE NOT TO BE PRESENTED AT DISCH, WE WUD NEED LOI FROM CHTRS.
PLEASE ADVISE”.

65    That facsimile had the following notation:

“19/1/99 – Requested wording from ship owners ref..”

SSOE’s demands on Royal for payment

66    Before endeavouring to trace the confused sequence of events, which involved the provision of a letter of indemnity by each of Royal, NEAT and Pacific in relation to the subject cargo, it is convenient to note the manner in which SSOE treated the irregular state of Royal’s outstanding accounts with it.

67    SSOE’s facsimile to Royal of 15 January 1999 was followed up with a further facsimile of 20 January 1999 in the following terms:

“ SUB: OUR VARIOUS OUTSTANDING BILLS
FURTHER TO OUR FAX OF 15.01.99 AND REMINDER DATED 16.01.99 & 18.01.99 (COPY ENCLOSED). WE ARE STILL WAITING PAYMENT OF OUR LONG OUTSTANDING BILLS AND SCHEDULE OF PAYMENT FOR OTHER BILLS. PLEASE NOTE THAT WE ARE GETTING PRESSURE FROM AGROCARE AND NEW ENGLAND AGRICULTURAL TO ACCEPT DISCREPANCIES IN THEIR DOCUMENTS WHICH WILL NOT BE POSSIBLE FOR US IN ABSENCE OF ATLEAST (SIC) AMOUNT FOLLOWING BILLS.


INVOICE NO.	AMOUNT (USD)
463	370,875.00
505	217,688.00
594	800,000.00
587	395,000.00
586, 660, 661, 662, & 666	317,282.00
TOTAL USD	2,100,845.00


PLEASE REVERT IMMEDIATELY TO ENABLE US TO RESPOND BOTH THE PARTIES CORRECTLY.”

68    The effect of Royal’s commercial unreliability was evidenced in SSOE’s response to NEAT’s (Murali’s) facsimile to it of 25 January 1999. NEAT’s facsimile to SSOE was as follows:

“Please ref our telecon discussions of the date. As explained to you our problem about our credit limits with BNP - Sydney, also your assurance accepting documents with discrepancies . May I kindly request you to send a message to Bankok (sic) Bank, Singapore accepting documents and authorise for payment at due dates urgently. Though it is 90 days bills but we can make use of our credit limits. I am sure vessel must have reached at Calcutta with out (sic) documents, to avoid dummerage (sic) and other problem’s (sic) your kind cooperation & help very much appreciated.
We once again request you to do the needful urgently for our long term business relationship with company like A.V. Birla. Our humble request to you to authorise payment to Bankok (sic) Bank - Singapore, so that we can use our credit limits, there is an urgency for us to pay to lots money to the farmer’s (sic) for purchase of wheat. As a person of your stature & sitting in a respectable chair to understand our problems and do the needful urgently.”
(Ex CX 19) ( Emphasis added)

69    Jain’s note to Balodi on that facsimile was brief, namely “accept when 800,000 paid by Bhura”. Although Jain was examined closely about these bill pending positions, I am unable to say that his evidence on the subject was clear. What, I think, was clear: SSOE was made well aware of the likely arrival of the MV Nelson in Calcutta waters. Further, it made no denial of having given an assurance to accept discrepant documents.

70    What did emerge in relation to the ‘Agro Care’ bill was that the cargo had been delivered to Royal without a letter of indemnity, or bank guarantee which had resulted in SSOE taking action against the owners of the vessel in Calcutta. SSOE had authorised delivery of the Agro Care cargo to Royal in terms similar to SSOE’s facsimile to Pacific of 13 January 1999. Another point of similarity was that the Agro Care transaction involved switched bills. A further point of discomforting similarity to this case is that SSOE took no action against Royal.

Acceptance of discrepant documents – 3rd LC

71    The US$800,000 demanded by Balodi on 25 January 1999 was paid by Royal on 27 January resulting in acceptance by SSOE of the discrepant documents under the third letter of credit relating to the dun peas.

72    By that stage the vessel had reached Sagor Roads. However it was unable to gain entry to Diamond Harbour because of the need to discharge cargo onto barges to reduce draft so as to enable safe entry into port with a seven metre draft. There was little or no likelihood of bills of lading, be they the initial bills, or the switched bills, being available for presentation to the carrier.

Form of Switched bills

73    The true nature of the bills of lading which were substituted for the initial bills distinguished them from mere splits of the initial bills of lading into smaller parcels of cargo. In relation to B/L-1, six bills of lading issued, five for 1,000 MT of dun peas each, the sixth being in respect of 760.58 MT. Those bills of lading are referred to in these reasons, respectively, as switched bills: B/L-1A, 1B, 1C, 1D, 1E and 1F. The date and place of issue of the initial B/L-1 was stated to be “Fremantle, 24th December 1998.” The switched B/Ls-1A to 1F designated place and date of issue as “SINGAPORE AS AT FREMANTLE BDT. 24.12.98”. NEAT was no longer shown as the shipper, being replaced by SSOE and the notify party became Royal.

74    B/L-2 was replaced by a bill of lading which remained unchanged as to the cargo to which it related but otherwise contained changes to the identity of the shipper and notify party as was the case with switched B/Ls-1A to 1F. Its place and date of issue was described as “SINGAPORE AS AT ESPERANCE AUSTRALIA BDT. 27.12.98”. This bill of lading is referred to as switched B/L-2. The only justification for this change was to remove NEAT from the face of the bill and to pass rights as shipper to SSOE.

75    B/L-3 was substituted for by five bills of lading, numbered 3A to 3E. Each of bills 3A to D issued in respect of 1,000 MT of dun peas, while 3E issued in respect of 169.23 MT. Each of those bills of lading are referred to respectively as switched B/Ls-3A, 3B, 3C, 3D, and 3E. They were altered in the same way as switched B/L-2.

76    In the case of initial BL-4 there was no justification for its substitution, based on the concept of splitting. Each of the substituting bills of lading was issued in respect of the identical quantity of grain represented by the bill of lading which it replaced. Those substituting bills of lading are referred to as switched B/Ls-4A, 4B, 4C and 4D respectively. The only justification for the substitution was to effect the changes to the shipper and the notify party as occurred with the other switched bills. In the case of switched B/Ls-4A to 4D the date and place of issue was identified as “SINGAPORE AS AT BRISBANE, AUSTRALIA BDT 4.1.99”.

77    It appears that the BLs-5A to 5F were not altered in that fashion, prior to the cargo being sold to a third party several months later.

Factors affecting discharge at Calcutta

78    In the second half of January 1999 leading up to the commencement of lightening at Sagor Roads on 10 February 1999 there were various commercial threads governing the conduct of the parties, namely:

(a) the inability of the carrier to gain entry to Diamond Harbour without lighterage involving discharge of chick peas and with implications as to demurrage and as to whose account was the cost of lighterage;

(b) the absence of bills of lading to be presented by the receivers, on the vessels arrival at Diamond Harbour, with the consequent attention of the parties being directed to the provision of letters of indemnity;

(c) the legume market had fallen significantly, prompting Royal to exploit the carrier’s dilemma in being unable to gain entry to Diamond Harbour without discharging chick peas;

(d) SSOE’s unwillingness to accept discrepant documents while its commercial position with Royal in unrelated transactions remained unacceptable to it.

(e) the carrier was frustrated in performing lighterage by the unavailability of barges.

79    The problem of lighterage involving the chick peas arose out of the manner in which the vessel was loaded. The dun peas went into holds two and four while the chick peas were loaded into holds one and five. To discharge the dun peas only, raised a risk of weakening the vessel unless water ballasting accompanied lighterage. To provide ballast meant that the point of carrying out lighterage to achieve the seven metre draft was frustrated.

80    By the end of January, when SSOE accepted the discrepant documents under the third letter of credit relating to the dun peas, there had been no acceptance of documents under the first or second letters of credit relating to the chick peas. Royal exploited that situation by declining to take delivery of chick peas from barges at Sagor Roads.

81    It has not been explained to me why Pacific or Bolton did not overcome Royal’s intransigence by discharging the chick peas onto barges for delivery into bond: at least when barges became available. Moreover, while there remained non-acceptance of discrepant documents in relation to the first and second letters of credit, NEAT was faced with an invidious commercial position, as charterer under the voyage charter and as seller of chick peas to Royal, in the form of a vessel waiting at Sagor Roads where bills of lading for the chick peas were not available and with NEAT having no assurance of payment under the first and second letters of credit. To add to everyone’s woes, other than Royal, there was a desperate shortage of barges at Calcutta to carry out lightening of the vessel, anyway.

Provision of Letter of Indemnity by Pacific

82    The vessel’s stress problems, confronting the Master, were reflected in the facsimile of 19 January 1999 from Albamar Shipping Co. SA (Albamar), who was Bolton’s manager, to Multimode as follows:

“CC) PLS NOTE THAT FOR LIGHTENING VSL CANNOT DISCHARGE THE 8000 M/T DUN PEAS FROM NO. 2 AND 4 DUE TO STRESS REASONS BUT SHE MUST DISCHARGE THIS QUANTITY FROM NO 1 AND 5 HOLDS (CHICK PEAS). MASTER HAS ALREADY ADVISED CHS THAT HE WILL DISCHARGE FOR LIGHTENING FROM NO 1 AND 5 HOLDS AND THEREAFTER VSL WILL HAVE 6,86 MTRS EVENKEEL IN BRACKISH WATER DENSITY 1,014.
…
FF) ORIGINAL BS/L. PLS NOTE THAT T/CHS WILL PROVIDE US WITH THEIR L.O.I AND WE WILL RVRT UPON RECEIPT/CHECKING OF SAME…”

83    The reference to Pacific, as “T/CHS”, providing “THEIR LOI” is consistent with Albamar’s submission to Pacific by facsimile of 19 January 1999 of the following:

“ M/V NELSON - VOY 25 - TC/P 8/12/98
BUNKERING SINGAPORE
FURTHER YOUR FAX OF JAN 18TH PLS FIND ATTACHED HEREWITH L.O.I WORDING WHICH REQUESTED.
PLS FAX TO US THE L.O.I WHEN FILLED IN /SIGNED/ STAMPED AND THEREAFTER MAIL TO US SAME.
TKS- RGDS.
ALBAMAR SHIPPING CO SA”

84    The owner’s pro forma wording for the required LOI was as follows:

“STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING CARGO WITHOUT PRODUCTION OF THE ORIGINAL BILL OF LADING
To: [Insert name of Owners]
the Owners of the [insert name of ship]
Dear Sirs
Ship: [Insert name of ship]
Voyage: [Insert load/discharge port, as stated in the Bill of Lading]
Cargo: [Insert description of cargo]
Bill(s) of Lading: [Insert identification number, date, place of issue]
The above cargo was shipped on the above vessel by [Insert name of shipper] and consigned to [Insert name of consignee or to whose order the Bill of Lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the Bill of Lading] but the Bills of Lading have not arrived and we, [Insert name of party requesting delivery], hereby request you to give delivery of the said cargo to [insert name of party to whom delivery is to be made] without production of the original Bills(s) of Lading.
In consideration of your complying with our above request, we hereby agree as follows:
1. To indemnify you, you servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expenses 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.
3. If, in connection with the delivery of the cargo as aforesaid, the ship or any other ship or property belonging to you should be arrested or detained or if the arrest or detention thereof should be threatened to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of the said ship or property and to indemnify you in respect of any liability, loss, damage or expenses caused by such arrest or detention or threatened arrest or detention whether or not such arrest or detention or threatened arrest or detention may be justified.
4. As soon as all original Bills of Lading for the above cargo shall have come into our possession to deliver the same to you, whereupon our liability hereunder shall cease.
5. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is a party to or liable under this indemnity.
6. The liability of each and every person under this indemnity shall in no circumstances exceed 200% of the CIF value of the above cargo.
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 the Justice of England.

Yours faithfully

For and on behalf of
[Insert name of Requestor]
………………………….
Signature

For and on behalf of
[Insert name of Bank]
………………………….
Signature”

85    It appeared that the “STANDARD” form of letter of indemnity was that of the SKULD P & I Club. The same standard form was forwarded by Kilby to NEAT on 21 January 1999 with the covering note:

“ATTACHED IS THE LOI REQUESTED BY OWNERS
PLS CALL ME TO DISCUSS ONCE YOU HAVE READ IT
RGDS”

86    On the same day NEAT forwarded to Goil a facsimile in the following terms:

“It appears that receivers will have difficulty in ensuring that original Bills of Lading will be available at Calcutta for vessel discharging, BNP Sydney has requested by swift yesterday for documentary acceptance as promised. This will allow release of the B/L’s in order for Swiss Singapore to recut the B/L’s.
To avoid delay in discharge we have prepared LOI text for Royal to open to shipping company to commence discharging against LOI pending B/L’s arrival. This needs to be signed by Royal Trading’s bank and original lodged with shipowner’s agent in Calcutta : please fax us copy of LOI which has been lodged.
Per Mr Murali’s advice: as confirmed and promised by you all documents will be accepted by Swiss Singapore forthwith (to allow re-cutting of Bills of Lading as requested) and maturity date for payment will be confirmed and advised immediately to BNP Sydney.
Please urgently advise LOI in place.”

87    The form of LOI forwarded to Goil followed the terms of the P & I pro forma document, but with alterations in form as appeared from the following extract:

“ STANDARD FORM OF UNDERTAKING TO BE GIVEN BY CARGO RECEIVERS IN RETURN FOR RECEIVING CARGO WITHOUT PRODUCTION OF THE BILLS OF LADING

To PACIFIC CARRIERS LTD
The owners of the M/V NELSON
c/- MULTIMODE MARITIME PVT. LTD
53 - A MIRZA GHALIB STREET
CALCUTTA 700016
TEL: ( 9133) 229 4314 / 7312/ 7339/ 5298
FAX: [phone] / 5353 MR BIPLAP RAY

FROM:
M/S ROYAL TRADING COMPANY
NO. 2, CLIVE GHAT STREET
5TH FLOOR, ROOM NO. 8
CALCUTTA 700 001 (W.B)
Dear Sirs,
…
Your (sic) Faithfully,
…………………………..
For and on Behalf of M/S ROYAL TRADING COMPANY
NO. 2, CLIVE GHAT STREET
5TH FLOOR, ROOM NO.8
CALCUTTA 700 001 (W.B)


Name:………………………….
Designation:………………….

For and on Behalf of ……………………….. (insert name of bank)

Banker’s signature:………………………….”

88    On 22 January 1999 Pacific sent a facsimile to Anderson Hughes in the following form:

“NELSON – LOI FOR NON PRESENTATION OF ORIG BL AT DISCHARGE
PLS INFORM OWNERS, CARGO RECEIVERS WILL SURRENDER LOI (AS PER OWS PRO FORMA) WITH BANK COUNTERSIGNATURE TO AGENTS MULTIMODE. COPY OF LOI WILL BE MADE AVAILABLE TO OWS AND CHTRS OFFICE. PLS ADVISE IF [THIS] ARRANGEMENT MEETS WITH OWS SATISFACTION. UNDERSTAND ALL CARGOES LOADED WILL BE BONDED INTO CUSTOM HOUSES + ORIG BL WILL NEED TO BE PRESENTED BEFORE CARGO IS RELEASED. LOI IS TO FACILITATE THE DISCHARGE INTO THE BONDED CUSTOM HOUSE.”

89    This facsimile is referred to in BNP’s submissions as being dated 21 January 1999. However it is clear from the affidavit of Chua Say Ong (Chua) sworn 14 April 1999 (Exhibit B) that it was sent on 22 January 1999. Chua was Pacific’s Australian representative.

90    It appeared from Pacific’s facsimile that Pacific was anticipating the provision of a Royal LOI to facilitate discharge without presentation of the bills of lading, as distinct from providing its own LOI as proposed by Albamar in its facsimile of 19 January 1999.

91    In any event, Bolton’s position was made clear by the facsimile from Anderson Hughes to Pacific of 23 January 1999 as follows:

“TKS CHS FAX OF JAN 21ST ADIVSING (sic) US THAT RECEIVERS ARRANGING LOI WITH BANK GUARANTEE WHICH WILL BE GIVEN TO AGENTS AT CALCUTTA.
PER TCP CLAUSE 63 THE LOI TO THE OWNER SHOULD BE ISSUED/ SIGNED BY T/CHS, THEREFORE OWNERS CAN NOT ACCEPT RECEIVERS LOI.
IN VIEW OF ABOVE PLS PREPARE THE LOI AS PER SPECIMEN FAXED TO YOU PREVIOUSLY AND FAX SAME DIRECTLY TO THIS OFFICE WHICH WILL BE OPEN TOMORROW FOR THIS PURPOSE (FAX NO. 30-1-4293113) SO WE MAY INSTRUCT VSL WHICH IS ARRIVING TOMORROW NIGHT TO ALLOW COMMENCEMENT OF DISCHARGE.”

92    Pacific’s response was by facsimile to BBT of 23 January 1999 in the following terms:

“RE: NELSON - LOI
LOI WILL BE FAXED TO YOU OUR OPENING 24/1/99.
PLEASE DO NOT DELAY DISCHARGE.
PLEASE ALLOW DISCHARGE TO COMMENCE.
REGARDS/ CHUA
PLS NOTE: LOI FROM RCVRS WILL BE PRESENTED TO MASTER/ AGENTS.”
(emphasis added)

93    The emphasised passages reflect something of the commercial pressure being experienced by Pacific with its charterered vessel a day’s sailing from Sagor Roads and no sign of bills of lading at Calcutta.

94    BBT I understand to be an agent of Bolton.

95    The requirement by Bolton of Pacific was passed on by Chua in his email to Anderson Hughes of 23 January in the following terms:

“NELSON – LOI FOR NON PRESENTATION OF ORIG BL
_ _ _ _

HEADOWS WILL NOT ACCEPT LOI FROM RECEIVERS. PCL WILL BE GIVING LOI TO OWS IN TURN WE WILL REQUIRE SIMILAR FROM CHTRS. PLS REQUEST CHTRS TO ISSUE LOI AS LAID OUT IN OUR LAST FRIDAY FAX TO YR OFFICE.

PLS CONFIRM SOONEST THAT CHTRS WIL ISSUE THE LOI, OTHERWISE DISCHARGE CUD BE DELAYED.”

96    As undertaken in its facsimile of 23 January 1999, on the following day, Pacific forwarded its LOI to Bolton in the following form:

“The above cargo was shipped on the above vessel by New England Agricultural Traders Pty Ltd, NSW and consigned to order for delivery at the port of Calcutta, India but the Bills of Lading have not arrived and we, Pacific Carriers Limited, hereby request you to give delivery of the said cargo to Swiss Singapore Overseas Enterprises Pte Ltd, Singapore without production of the original Bill of Lading.
In consideration of your complying with our above request, we hereby agree as follows:
1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expenses of whatsoever nature which you may sustain by reason of delivering the cargo in accordance with our request.
2. In the event of any proceeding 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.
3. If, in connection with delivery of the cargo as aforesaid, the ship or any other ship ..[or] property belonging to you should be arrested or detained or if the arrest or detention thereof should be threatened to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property and to indemnity (sic) you in respect of any liability, loss, damage or expenses caused by such arrest or detention or threatened arrest or detention whether or not such arrest or detentions or threatened arrest or detention may be justified.
4. As soon as all original Bills of Lading for the above cargo shall have come into our possession to deliver the same to you, whereupon our liability hereunder shall cease.
5. The liability of each and every person under this Indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party …[to] liable under this indemnity.
6. The liability of each and every person under this indemnity shall in no circumstances exceed 200% of the CIF value of the above cargo.
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.”

97    This LOI appears to be in conformity with cl 63 of the time charter party, which was in the following terms:

“Clause 63
In the event that original Bills of Lading are not available at the time of the vessel’s arrival at the port of discharge, Owners to agree to discharge the cargo at a safe facility or facilities designated by Charterers without presentation of original Bills of Lading provided that Charterers request such discharge by cable, telex or telefax.
Charters to agree to issue a telexed or telefaxed “Letter of Indemnity” in the form of Owners’ P&I Club wording, but no bank guarantee or counter-signature of Owners’ bank is required. Charterers to forward original to Owners promptly.”

98    Of that LOI it may be noted that it follows the P & I standard form. It does not carry a bank countersignature or endorsement. It was in respect of the initial bills of lading that it requested Bolton to deliver the cargo to SSOE.

99    With the provision of that LOI, the position as to discharge of the cargo without presentation of the bills of lading I think is recorded in Albamar’s facsimile to Multimode, copied to Chua, of 25 January in the following terms:

“ M/V NELSON - VOY 25
FURTHER OUR FAX MSG 250 OF JAN 19TH PLEASE NOTE THAT WE HAVE INSTRUCTED MASTER TO ALLOW COMMENCEMENT OF DISCHARGING WITHOUT PRESENTATION OF ORIGINAL BS/L SINCE TCHS PROVIDED US WITH THEIR L.O.I.
HOWEVER PER TCHS INSTRUCTIONS MASTER WILL RELEASE CARGO TO CONSIGNEES ONLY AFTER HE RECEIVES RECEIVERS L.O.I OR SPECIFIC INSTRUCTIONS DIRECTLY FROM T/CHS .”
(emphasis added)

100    The above passages have been emphasised to draw attention to the fact that the instruction to deliver the cargo without presentation of bills of lading came from Bolton and Pacific, not NEAT and, in Bolton’s case, anticipated an LOI from Royal.

101    The Pacific facsimile of 23 January was forwarded to NEAT on 25 January by Kilby (Ex M pg 741).

Discharge Problems at Calcutta

102    At this stage, the problems facing the Master and Pacific at Calcutta and the behaviour of Royal are captured in the following events as recorded in facsimiles passing between those caught up in the saga.

103    Notice of a barge shortage for lighterage was given by Pacific to the Master by facsimile of 25 January 1999 in terms which so far as are relevant were as follows:

“RE – LETTER OF INDEMNITY FOR NON-PRESENTATION OF ORIG B/L
26TH IS A PUBLC HOLIDAY INDIA’S REPUBIC (sic) DAY.
THERE IS A SHORTAGE OF BARGES AND BELIEVE THAT THERE WILL BE A FEW DAYS OF DELAY”.

104    Royal’s contribution was caught in Multimode’s “TOP URGENT” and facsimile of 25 January 1999 to Pacific as follows:

“REGRET TO ADVISE THAT POSITION HS BN REVERSED RIGHT NOW RECIVER ROYAL TRADING CO NOW DEMAND FULL COST OF LIGHTERAGE MUST BE SELLER’S ACCOUNT AS PER GOVERNING C/P DESPITE EARLIER CONCURRENCE TO OUR UNDERSTANDING WITH HIM TO REIMBURSE DIFFERENCE OF COST @ US $1.50/MT VIDE OUR FAX DTD 05/01/99 BUT TODAY RECEIVER JUST BACKED OUT WHICH WE RECKON DUE TO FALLING MARKET PRICE AND RECEIVER’S HUGE FINANCIAL COMMITMENT FOR 45000 MTON PEAS &30,000 MTON WHEAT, WITHIN JAN-FEB.
FURTHERMORE PRIVATE BARGES ARE ALL ENGAGE AND HV TO DEPEND ONLY ON GOVT BARGES ALL THESE REASON PROMPTED RECEIVER TO BACK OUT FM EARLIER AGREEMENT WITH US MOREOVER RCVRS ALSO UNAWARE OF C/P TERMS IN DETAILS PRESUMED NORMAL DISCH CONDITION (FYI ONE VSL OF JKI 14000 MT PEAS UNDER OUR AGENCY & ANOTHER VSL OF 30,000 MT WHEAT DISCHD OR DISCHG AT SAUGOR AT RECEIVERS COST).
NEW ENGLAND’S LOCAL BROKER G.C GOIL ALSO SUPPORTING RCVR NOT TO ACCEPT LIGHTED CARGO AT SAUGOR TH4 AT THIS STAGE WE ONLY AWAIT TO YR INSTRUCTION.
RECEIVER MTIME RECD COPIES OF Bs/L FR 10470 MTON DUN PEAS AND G.C.GOIL/ RCVR BOTH CLAIM BALANCE 9274 MT CHICK PEAS BEING SOLD TO OTHER PORT MUST BE RETAINED ON BOARD ACCDGLY RCVR PREPARING L.O.I FR 10470 MTON ONLY FR SUBMISSION TO US 27/01 BUT MASTER INFMD THRU OWNER THAT CHICK PEAS FM H/1 & 5 ESSENTIALLY TO BE LIGHTENED AT SAUGOR (OWNERS REPLY FAXED H/WITH).
APPEARS MATTER GETTING MORE COMPLICATED THAN EXPECTED SUGGEST YR TAKING UP WITH SELLER FR SOME SORT OF SETTLEMENT HWVR NEVENT OF LIGHTENING FULL COST GOES TO SELLER/CARRIER ACCOUNT WE NEGOTIATED MINIMUM COST AS FOLLOWS:
1. GOVT. BARGE HIRE FR RECEIVING EX
HOOKS & DELIVERY ONTO RCVR’S TRUCKS
AT CALCUTTA INCL LABOUR ON BARGES US$. 8.75/ MTON.
2. CUSTOM FEE AND ADDLS US$.0.25/ MTON.
TOTAL US$.9.00/ MTON.
LESS FUND SANCTIONED US$.1.50/ MTON .
I.E. ADDL FUND INVOLVED US$60,000 FOR 8000 MTON.

RECEIVER MUST TAKE DELIVERY WITHIN 3 DAYS AFTER PLACEMENT OF BARGES AT CALCUTTA WAREHOUSE FAILING OVERTIME BARGE DETENTION CHGS AT THE RATE OF BARGE OWNER TO BE PAID BY RCVR.
SINCE C/P DISCH TERM FREE-OUT WE SHALL MAKE RCVR AGREED TO ABSORB STEVEDORAGE ABT US$.1.75/MT OF LIGHTED CARGO.
AWAIT YR URGENT ADVICE.
TKS & RGDS.
[signed]
B. RAY.”

105    It is not testing one’s imagination too much to infer that Bhura was well aware of the difficulty facing Pacific in lightening the vessel by discharging to barges from the dun peas holds with a consequent weakening of the vessel.

106    Multimode’s response to Royal was to give notice of readiness in terms of its facsimile of 25 January 1999 as follows:

“RE M.V NELSON.
PLS TAKE NOTICE OF READINESS OF ABV VSL THAT SHE HS ARRIVED AT LIGHTENING ANCHORAGE AT SAUGOR ROADS AND IS READY IN ALL RESPECTS TO DISCH HER CARGO CONSIGNED TO YOU.
APPRECIATE YR ARRANGING TO COMMENCE DISCH AT THE EARLIEST.
N.O.R IS TENDERED AND LAYTIME STARTS TO COUNT AS PER GOVERNING C/P.
TKS & RGDS.
[signed]
B. RAY.
N.O.R IS TENDERED AT 1000 HRS. ON JAN 25, 1999.
N.O.R IS ACCEPTED AT _____ HRS. ON JAN_____, 1999.”

107    As to that notice, I think considerable doubt attaches to the proposition that the vessel was ready for discharge, given its inability to enter Diamond Harbour until lightening to barges had taken place to reduce the draft to seven metres.

108    Pacific’s position was reflected in its facsimile to Multimode of 26 January:

“RE: NELSON
Confirming our earlier telcon. Certainly it is very disappointing that Receivers have gone back on their agreement. This leaves us with no choice but to engage our own lightening operations.
1. Firstly, you have our authority to engage as many barges as possible to ensure the fastest discharge possible at Saugor.
2. Please negotiate the best lightening cost possible ie. max. $US 9.00 pmt. Also check closely with master + also to obtain dispensation for more draft to proceed to Diamond Harbour earliest (i.e least lightening fee)
3. Please ensure all barges proceed to Diamond Harbour to discharge shud receivers choose to divert bars elsewhere, then, we must insist that they pay for the lightening.
4. Receivers are oblige to take delivery of all cargo be it dun or chick peas. Please keep us posted on this issue shud receivers decide to be difficult.
To sum up, make pleas expedite discharge at anchorage to enable vsl to proceed to Diamond Harbour shud Receivers decides to take delivery at the anchorage, they will have to pay for the lightening (t.. (indecipherable)…PCL)
Biplap we are relying on you to protect our interests here. Given the let down by the receivers, we look forward to some good news.
Best regards,
Chua [signed]”

109    The position did not improve in relation to the availability of barges, as appears from Pacific’s facsimile to Multimode of 28 January. The seriousness of the situation is reflected in the following terms:

“RE: NELSON
So far, we do not seem to have any good news from you. It is rather distressing to hear that there is no barge available for lightening when this aspect was discussed with you a month or two ago, that all arrangements are in place.
We cannot allow vsl to sit there indefinately. Suggest you look at all options including chartering a small vsl for the lightening operations. Surely, the port must allow the barges to be shared equally among the ship owners.
Biblap, you have to assist us somehow. What you have informed us is no comfort to us.
What about hiring the small barges or even boats etc ?
I will call you your opening.
By the way, how was the meeting with the receivers?? You must keep us informed closely as the receiver’s intention.
Are they still refusing to take delivery of the chick peas?
Have receivers presented the orig B/L?. I am thinking seriously of chartering the “Kuan Yin” for lightening if you cannot give us some serious options.
Regds,
[signed Chua]”

110    The position, I think, was accurately reflected at the end of January in the facsimile of Multimode to Pacific of 28 January 1999 in the following terms:

“NO FURTHER DEVELOPMENT AT THE END OF THE DAY ALTHO EVERYONE IS FRANTICALLY RUNNING PILLAR TO POST FOR BARGES HWVR RECEIVER (BHURA) IS OPTIMISTIC TO GET A FEW BARGES ON JAN 30 - 31 AND COMMENCE DISCHARGE FEB 01 BUT DOUBTFUL AS NO SUCH INDICATION SO FAR.
BHURAS (sic)“KUANYIN” STANDING AT D/HBR IDLE NEED ABT 8-12 BARGES TO FINISH & SAIL BUT WILL HAVE TO WAIT TILL JAN 31 IF NOT MORE CIWTC (GOVT) OFCOURSE(sic) ASSURES OF SUPPLYING ONE OR TWO BARGES DAILY FM FEB 04 - 05 ONWARDS TO ENABLE TO RECEIVE ABT 1000 MTON PER DAY.
BHURA AND OTHER BARGE OWNERS STRONGLY WARN NOT TO ARRANGE ANY BARGE FM OUTSIDE CALCUTTA AS LABOUR UNION WUD NOT ALLOW ANY OUTSIDERS TO TAKE AWAY THEIR SHARE AT ANY COST AND WUD CREATE PROBLEM FOR ALL TH4 PLS DO NOT TRY ANY BARGES FM OTHER PORTS.
SEAGOING VSL WILL BE ALLOWED FOR LIGHTENING OPERATION AT SAUGOR AND DAUGHTER VSL WUD BERTH AT KP DOCK WHERE RECEIVER WUD ARRANGE DISCHARGE BASIS F.O. TERMS BUT ALL OTHER EXPENSES ON TCHTR ACCOUNT.
ABOVE IS THE LATEST POSITION & SHALL REVERT 29/01.
CONSIGNEE HAS SUBMITTED L.O.I FOR DUN PEAS ONLY FOR DELIVERY INLIEU (SIC) OF BS/L DEFINITELY CARGO CANNOT BE RELEASED ONLY DISCHARGE MAY BE ALLOWED ONTO BARGES WHICH WUD REMAIN UNDER CUSTOM DULY SEALED AND WUD NOT BE DELIVERED TO CN (illegible) OR HIS AGENT UNLESS BS/L SURRENDERED OR BANK L.O.I EXECUTED. THIS IS REGULAR SYSTEM HERE MOREOVER WE KEEP LIEN ON CARGO TILL FINAL DELIVERY ORDERS ARE ISSUED BY US FOR EACH B/L TH4 CARGO WUD REMAIN SAFE UNDER CUSTOM BOND.
FYI/ABT 70 BARGES EX KUANYIN REMAIN IN PORT/ CUSTOM CUSTODY DULY UNDELIVERED AS WE ARE NOT ISSUING FINAL DELIVERY ORDER IN ABSENCE B/L OR BANK L.O.I.
L.O.I FAXED H/WITH MUST BE RECD FAINT TH4 CONTENTS SEPARATELLY (sic) TYPED FOR YOUR READING.”

Provision of First LOI s by NEAT and Royal

111    As at 28 January 1999 neither NEAT nor Royal had provided an LOI as each had been requested. A reminder had been sent by NEAT to Goil on 25 January 1999 in the following terms:

“ Further to prev faxes ref LOI to allow discharge, vessel headowners have advised they will not accept LOI from receivers. We have to put in place LOI therefore as per request attached .
We therefore require immediatel y LOI from Royal trading to ourselves as per attached. To avoid delay in discharge we have prepared LOI text for Royal to open to ourselves to commence discharging against LOI pending B/L’s arrival . This needs to be signed by Royal Trading’s bank and faxed to us immediately; original by international courier to us. Please do the necessary. Vessel arrival is imminent .
Per Mr Murali’s advice: as confirmed and promised by you all documents will be accepted by Swiss Singapore forthwith (to allow re-cutting of Bills of Lading as requested) and maturity date for payment will be confirmed and advised immediately to BNP Sydney.
Please urgently advise LOI in place.”

112    The form of LOI was identical to that forwarded with NEAT’s facsimile of 21 January 1999. On 25 January 1999 there were two further facsimiles by Pacific, one to Multimode and the other to the Master. The latter was confirmation of the provision of an LOI to Bolton from Pacific and was in the following terms:

“TKS YR ARRIVAL REPORT
PLS ENSURE SAME SENT TO AGENT - ALSO HV A NOTICE OF READINESS TELEX SEND TO AGENT BASIS, DATE; TIME; AS THAT OF VSL’S ARRIVAL.
WE WERE INFORMED THAT LOI HV ALREADY BEEN PROVIDED TO YR OWNERS TO HV VSL DISCH CARGO WITHOUT PRESENTATION OF O.B/L. TRUST YR OWNERS HV ALREADY INFORM THIS TO YOU ACCORDINGLY.
PLS CONFIRM YR UNDERSTANDING IN ORDER TO AVOID NEEDLESS DELAYS OR CLAIMS.”

113    The facsimile to Multimode was in the following terms:

“RE: NELSON - LETTER OF INDEMNITY FOR NON PRESENTATION OF ORIG B/L
OUR CHARTERS, NEAT NSW, ADVISED THAT RECVRS WILL PROVIDE LOI (FORMAT ALREADY PROVIDED BY PCL) WITH BANKERS ENDORSEMENT TO YOU PRIOR TO DISCHARGE.
LIKEWISE, WE HAVE PROVIDED LOI TO OWNERS WHO WUD HV INSTRUCTED MASTER TO ALLOW DISCHARGE AGAINST LOI FROM RECVRS.
WE HOPE TO HV YR GOOD NEWS RE - COMMENCEMENT OF DISCH. PLS KEEP US CLOSELY INFORMED.”

114    As at 25 January, as earlier noted, SSOE was withholding acceptance of discrepant documents until it had sorted out its differences with Royal over outstanding bills. On that date, Sniekers had a telephone conversation with Era Dhiri (Dhiri), the manager of BNP’s Documentary Credits Department who had overseen the documentation for the opening of the letters of credit by the Bangkok Bank.

115    NEAT had in place an automatic recording system of telephone conversations involving use of designated connections in its Armidale office. The tapes of those conversations went into evidence together with a transcript of portions of those tapes considered o be relevant to these proceedings. Counsel for BNP wavered in his position as to their admissibility. However, in the end they went in by consent without admission as to their completeness nor as to their accuracy. The telephone conversation between Sniekers and Dhiri was recorded and the transcript of it was as follows:

725    In the case of dun peas there appears to have been a significant drop in February 1999 but not so great as the market fall in chick peas when compared with NEAT’s C & F prices of US$193 and US$210 per MT. Even so, the conversion claim of US$3,159,725.86 would appear to require a significant adjustment if market price was to govern SSOE’s entitlement to damages.

726    Counsel for BNP made an estimate of approximately US$250,000 as representing the required adjustment. I would accept a figure of between US$200,000 and US$250,000 allowing for the volatility referred to by Foote.

727    In addition, it was contended that the “margins” which SSOE charged Royal for financing the project should come off SSOE’s claim. However, in the case of cargo converted, BNP’s calculation, based on suggested market prices, came to a total of US$2,916,220. On my approach it may have been more, by, say, US$50,000. If that is the true measure of loss, then the “margins” do not come into the calculation.

728    Where margins may have some relevance lies in the calculation of the credit of US$194,974.32, allowed by SSOE in its claim as representing the net proceeds of sale of the 1498.7095 MT of dun peas of which it took delivery from the court appointed receivers of the cargo in July 1999. However, if the market value was the true measure of calculating that benefit, then, apart from an argument on the appropriateness of deducting costs of sale, I fail to see how the margins come into the calculation.

729    In his affidavit sworn 30 January 2001, Jain provided the net quantification of the credit of US$194,974.32 together with some seventy two pages of supporting data, frequently expressed in Rs and rarely further clarified. It appears that by a contract dated 20 July 1999 SSOE sold 1169.23 MT of dun peas at US$190 MT “Ex CNC Warehouse, Calcutta”. That contract was amended by addendum dated 30 September 1999 by adding a further 329.77 MT at the same price, bringing the total to 1499.00 MT.

730    A cover sheet was provided with these documents which summarised the expenses applied to the gross proceeds of sale. Mostly they are expressed in Rs from which, presumably, in time, a conversion could be made at the suggested exchange rates of 43.53, 43.58 or 43.65, or to use Foote’s flat rate, namely 42.50 Rs per US$1.00. I have not attempted that.

731    The schedule identified deductions as including moneys paid to the receivers of Rs $2,445,212.50, bank charges, exchange rate movements, Rs 777,754.81 to the clearing agent, commission of Rs 1,034,109.56 and interest. Of those figures the only basis upon which those expenses should not be taken into account, in my view, would be on the reasoning that they were expenses unrelated to the arrest of the vessel and would have been, in the ordinary course, to the buyer’s account. Clearly, the amount paid to the receivers, was related to the arrest as well might have been clearing agent fees, at least in part. In view of the lengthy delay in obtaining possession of those dun peas I think the costs incurred on sale should be treated as peculiar to the arrest of the Nelson and to allow the credit as calculated by SSOE.

732    I have approached the question as ascertaining the “real damage” to Pacific in accordance with accepted principles of causation. Ascertaining the real damage entails some examination of the circumstances of the conversion and the consequences to SSOE had no conversion taken place. Had Bhura acted honestly and recognised that he had no entitlement to possession of the cargo as between Royal and SSOE without honouring his contractual objections to SSOE by payment on documents at sight, then SSOE would have received the price of the cargo as between NEAT and Royal in addition to its margin.

733    Had, as was most likely, Bhura exploited the situation at Sagor Roads and declined to accept delivery, SSOE would have been forced to take possession of the cargo, which had been the subject of the second and third letters of credit, go into the market place, take its losses (as it did eventually with the 1499 MT of dun peas) and be left with recourse against Royal. But look at Jain’s evidence of the value of that entitlement, repeated for ease of reference:

“Q. Have you got exhibit L there? Go to page 96 which is the second conversation
you had with Mr Howard. Look at the top of the page and you'll see Mr Howard is
asking you a number of questions about whether Royal was a man of substance, a business
of substance, is he a company with money. And you answered:

"I'm saying I think you realise the difficulty is
India is a difficult place. Also you see it is a
different type of problem as one broker has put it
in big trouble last time in Bombay. So in any
litigation, suffering and nothing else, nothing is
coming out."

And then you go on after Mr Howard intervenes saying:

"No, that was in Singapore, fighting in Singapore
and nothing came out."

And then you go on to explain what appears to be the
difficulty of getting judgments enforced. Do you see all
that?
A. Yes.

Q. What were you referring to there?
A. I was referring to the general conditions that if you
made any claim in India you won't get - 10, 20 years is very
normal, you won't get your money out.

Q. For 10 or 20 years?
A. Yes, easy.”

(T1293:53- T1294:25)

734    I think one should approach SSOE’s rights against Royal as theoretical rather than real. On that basis one is thrown back on the market based method of valuation of damages, which leaves the conversion damages in the order of, say, US$3,000,000. From that there is to be deducted the net proceeds of sale of the 1499 MT of dun peas of US$194,974.32 which would bring the damages down to approximately US$2,800,000. There may be some expenses taken out of the gross proceeds of sale of the 1499 MT of dun peas, such as commission, which should be to SSOE’s account but I have not attempted to further dissect expenses associated with recovery of the dun peas from the receivers and the subsequent sale, other than as earlier examined.

735    On that assessment the settlement sum of US$2,900,000, plus interest is right at the top of the scale. However, one should, in my view, bear in mind that there is an arguable case that the real loss of SSOE lies in damages, calculated by reference to the price payable to it under its facility arrangement with Royal and, also, take into account that the settlement included SSOE’s costs of the London Arbitration and of the Calcutta proceedings: excluding the costs of the Singapore proceedings for the reasons previously given.

736    Further, it is reasonable to take into account the fact that, had the London Arbitration not been settled, significant further costs would have been incurred. For those reasons, in my view, the February 2001 settlement should be regarded as high, but a reasonable price to pay in satisfaction of SSOE’s claims relating to the arrest of the MV Nelson.

737    Accordingly in relation to item 38(c) that should be calculated on the basis of the settlement sum. I will defer the question of interest until the parties have been given the opportunity of addressing Pacific’s interest entitlements generally.

738    As to item 38(d): hire of MV Nelson during the period of arrest (claim US$440,450). The second Joint Report reduced this amount to US$434,700 in respect of the ninety two day period. For the reasons earlier given, the hearing should be based on a ninety two day period of arrest.

739    BNP’s position is that by virtue of the provisions of cl 47 of the time charter, Pacific had no liability to Bolton for this hire charge during arrest. Alternatively, if Pacific was liable the costs should be assessed on the basis of a three day period of arrest.

740    Cl 47 of the time charter is in the following terms:

“Should the vessel be arrested during the currency of this Charter Party at the suit of any person having or purporting to have a claim against or any interest in the vessel, hire under this Charter Party shall not be payable in respect of any period whilst the vessel remains unemployed as the result of such arrest, and the Owners shall reimburse to the Charterers any expenditure which they may incur under this Charter Party in respect of any period during which by virtue of the operation of the Clause no hire is payable. This clause shall be inoperative should the arrest be caused through any omission or personal act of the Charterers.”

741    Clearly, the proviso to that clause operates in view of the findings made in these reasons. The amount calculated by the experts of US$434,700 should be allowed, given my findings as to the appropriate period of arrest.

742    As to item 38(e): commission pursuant to cl 27 of the time charter (claim US$5,506). The experts have recalculated that item of claim in the sum of US$5,750.00.

743    Potter’s approach was to treat all expenses which occurred after 31 March 1999 during the period of arrest as attributable to the arrest of the vessel. The foundation for this approach lay in his analysis of the effect of the rates of actual discharge of the vessel in February and early March 1999, from which he deduced that, on a conservative approach, all discharge would have been completed by 31 March. His method recognised the existence of delays (which I have recounted in these reasons), in addition to weather interruptions. He allowed for the need to discharge onto barges at Sagor Roads to enable discharge at berth in Diamond Harbour. This was dealt with in sec 4 of his report of 14 December 2000 which is, I think, a very persuasive foundation for his opinion that, on a conservative approach, discharge would have been completed by end of March 1999.

744    In BNP’s submissions, it accepted the correctness of the claim as calculated above, if the Court is against BNP in relation to item 38(d). Accordingly, the amount of US$5,750 should be allowed.

745    It is accepted by BNP that if I adopt the ninety two day period of arrest as the basis for evaluating Pacific’s claim, then the following items should be accepted, namely:

(a) Item 38(f) diesel oil (claim US$47,564) calculated by experts at US$47,649.

(b) Part item 38(g) mooring hire (claim Rs 10,43,897) calculated by experts at Rs 8,23,355.

(c) Item 38(h) Light dues: (claim Rs 2,64,128) calculated by experts at Rs 132,064.

(d) Item 38(i) watchmen: (claim Rs 3,74,000) calculated by the experts in the sum of Rs 2,80,600. Accordingly, they should each be allowed as calculated by the experts.

746    As to part item 38(g): port deposit (claim Rs 88,217), pilotage (claim Rs 82,272), berth hire (claim Rs 10,88,005). BNP does not dispute that these amounts were incurred and paid by Pacific. It was submitted as follows:

“However funds are available in Calcutta to meet these costs and they do not properly form part of [Pacific’s] loss.”

747    This submission, apparently, is an elliptical reference to the fact that these charges may be recoverable from the funds held by the court appointed receivers in India consistently with the terms of the court orders of 11 May.

748    I note that the affidavit of Lam Wing Hong (Lam) sworn 26 January 2000 (Lam’s affidavit) identified as costs incurred “while the vessel was under arrest” numerous items of expense which included “Port dues” and “Berth hire”. In Chua’s affidavit, affirmed 18 June 2000 (Chua’s affidavit), he evidenced the payment of Rs 27,54,000 which is the total amount claimed in respect of expenses making up item 38(g). Potter, in accordance with par 25 of Chua’s affidavit, excluded items of expense identified as “Fresh Water” and “OT Fresh Water” reducing the item 38(g) claim to Rs 25,00,941.

749    The evidence of Chua was that the above expenses of port deposit, pilotage and berth hire represented the “proportion of those expenses which were incurred during the period the vessel was under arrest…”. On that basis Potter has included them in his assessment of claim item 38(g) and in accordance with his approach to assessment of costs described earlier in these reasons.

750    I note that, in the report of Halligan and Godinho of 29 January 2001, they accepted the cost of pilotage “if that cost would not otherwise have been incurred” but for the arrest. However, they said that it was “not apparent from the documents provided by [Pacific]... that the cost would have been any different if the MV Nelson had not sailed to Calcutta dock” after it was forced to leave Diamond Harbour when NEAT ordered cessation of discharge on 10 March 1999. I do not have that difficulty.

751    In relation to berth hire, it was observed in the January 2001 report of Hallingan and Godinho that they do not dispute that the costs were associated with the arrest (sec H par 58) but observe the following provision in the court orders of 11 May:

“... Costs, and charges of the said Warehouse and off-loading of the goods will be borne by the claimants according to the share of their claims in the goods. However, the same will be paid by the appellant at the first instance and will be realisable from other claimants as and when their proportion of the claims is to be fixed by the learned Single Judge on application to be made. In the event any of the claimants does not make payment for delivery of the portion payable by such claimant, it will be open to the appellant to apply before the learned Single Judge for appropriate direction.”
(Ex 26)

752    In relation to berth hire, I note that the matter upon which Halligan and Godinho relied was not put to any witness for Pacific. Presumably, I am asked to speculate upon the matter.

753    Although the evidence of Chua is expressed in general terms, I am of the view that these 38(g) expenses should be allowed as calculated by Potter. The total of the item 38(g) expenses so calculated is Rs 25,00,941 after allowing for the expense “5% surcharge”, as to which no issue was raised other than the amount upon which it was calculated.

754    As earlier noted, it is not disputed that Pacific has afoot an application seeking reimbursement of charges, including, presumably, expenses of this nature which have been paid out initially by Pacific in conformity with the court orders of 11 May. Pacific will not be entitled to double-dip by obtaining such re-imbursement in respect of charges recovered in these proceedings. As noted later in these reasons, on that principle, Pacific dropped certain claims during the course of senior counsel’s final submissions.

755    As to item 38(j): Multimode’s legal costs (claim Rs 15,000). This item is conceded by BNP in the amount claimed.

756    As to item 38(h): customs charges and expenses (claim Rs 52,328) calculated by Potter at Rs 40,908 and by Halligan and Godinho at Rs 5,158. The amount in dispute is not great. If some grasp of practicalities had been taken in these proceedings, claims such as this need not have been left to the Court to resolve. Potter reduced the claim by excluding costs which occurred prior to 31 March 1999.

757    The principal area of dispute in the first and second joint reports lay in the view of Halligan and Godinho that the evidence did not establish that it was an expense that would have been incurred, had there been no arrest.

758    Lam’s affidavit identified two items falling within this category as expenses incurred whilst the vessel was under arrest and Chua’s affidavit (par 31) evidenced the documents supporting the claim – some forty four pages of records. It is not possible to dissect from that material expenses which may have been incurred regardless of the arrest. Records such as those of the agent, Parekh Marine Agencies, which succeeded Multimode, suggest there is an overlap between arrest expenses and those which would have been incurred in the ordinary course.

759    There was no cross examination which may have assisted a dissection of the records. The best I am able to do is to adopt Potter’s calculation, as a conservative base and exclude expenses incurred prior to 31 March 1999 (erroneously referred to as “12 March 1999” in the first joint report under this item of claim (p8).) One assumes that they were paid for by Pacific in accordance with the court orders of 11 May. The amount of Rs 40,908 should be allowed.

760    As to item 38(l): costs of discharging the cargo (claim Rs 37,59,918) Potter allowed the full amount while Halligan and Godinho allowed nothing. This item was abandoned during the course of submissions on 26 March 2001 (T1469).

761    As to item 38(m): survey fees (claim Rs 52,841). Potter allowed Rs 34,231 (incorrectly shown in the second joint report as Rs 34,321) while Halligan and Godinho allowed nil. This item was abandoned in final submissions.

762    As to item 38(n): wharfage (claim Rs 4,77,600). Potter has allowed the full amount; Halligan and Godinho, nil. This item was abandoned during the course of final addresses.

763    As to item 38(o): fumigation of the cargo (claim Rs 79,624) Potter allowed the full amount; Halligan and Godinho, nil. This item was abandoned during final addresses.

764   

765    As to item 38(p): port cargo rent (claim Rs 6,61,511) Potter allowed the full amount and Godinho, nil. Chua’s affidavit (par 37) evidenced the documents. This item was abandoned during final addresses.

766    As to item 38(q): cargo storage charges (claim Rs 5,21,208) Potter allowed the full amount claimed, Halligan/Godinho, nil. This item was abandoned during final addresses.

767   

768    As to item 38(r): expenses of port agents (claim Rs 7,65,715) Potter allowed Rs 4,31,711 while Halligan/Godinho allowed Rs 2,66,145. Chua’s affidavit (par 38) evidenced these expenses and the documents exhibited to that affidavit. Potter rejected Rs 3,34,004 as having been incurred prior to 31 March 1999 or as being the subject of duplication. Potter and Halligan/Godinho are in agreement that there appears to have duplication of expenses in this claim. Moreover, Halligan/Godinho in a detailed analysis of the document supporting this claim, concluded that there was no evidence in respect of Rs 2,52,253 of the claim.

769    Counsel for BNP and Pacific have not attempted to reconcile the differences between Potter and Halligan/Godinho, either by evidence or submissions. In particular, I have been unable to ascertain from the evidence adduced through Chua whether the duplication referred to by the respective experts or the absence of supporting documentation overlap Potter’s exclusion of pre-31 March 1999 expenses.

770    In view of the contents of the second joint report, in particular, Potter’s assessment of this claim in the amount of Rs 4,31,711, I infer that he has taken into account the duplication and absence of documentation in calculating post 31 March 1999 expenses. Accordingly the amount of Rs 4,31,711 should be allowed.

771    As to item 38(s); barge demurrage (claim Rs 4,02,571). The evidence established that this was a pre-arrest expense and I am left to wonder why the claim was not dropped.

772    As to item 38(t): Captain Liang expenses, this item is conceded in the amount of Rs 59,188.

773    As to item 38(u): Calcutta legal costs (claim US$51,701 and Rs 8,39,535). Potter and Halligan/Godinho calculated the costs as claimed. However, as to Rs 8,39,535 there was no evidence of the subject account having been paid. In my view, that is no sufficient basis for rejection of the account which was not otherwise disputed. The full amount of the claim, namely, US$51,701 and Rs 8,39,535 should be allowed.

774    As to item 38(v) Legal costs (claim US$50,000). There is no dispute as to payment of Bolton’s costs of the Calcutta legal proceedings. The amount is clearly within the implied indemnity of Pacific to Bolton as a cost caused by the arrest of the Nelson and as such, in my view, falls within the damages recoverable from BNP. It has not been submitted that any of the items of expense are too remote to be recoverable as damages caused by BNP’s negligence. The amount of US$50,000 should be allowed.

775    As to item 38(w): this item of claim has been withdrawn.

776    As to item 38(x): cost of maintaining the DBS guarantee (claim US$83,204.94). This item is conceded in the amount of US$83,205.

777    As to item 38(y): legal costs incurred by Pacific in Singapore proceedings (claim US$112,349). This amount should be disallowed. As earlier stated in these reasons, the proceedings were ill-advised.

778   

779    As to item 39(z): legal costs incurred in the London Arbitration (claim US$161,619 in addition to future legal expenses). The substance of the evidence supporting this claim is to be found in that of East and Richard Peter O’Malley (O’Malley), head of the Costs Department of Richards Butler.

780    In East’s affidavit sworn 29 November 2000, he evidenced fees in acting for Pacific from 16 April 1999 to 30 August 2000 which amounted to 213,826. Those fees were rendered in relation to the following categories:

“ 5.1 advice in relation to the arbitration in London commenced by Bolton Navigation S.A (“Bolton”) against PCL for claims for non-payment of hire and non-production of a guarantee to release the vessel from arrest in Calcutta;
5.2 work done in relation to the arbitration in London being brought against Bolton by Swiss Singapore Overseas Enterprises Pte Limited (“Swiss Singapore”), including dealing with Bolton’s representative, Ince & Co. This is the arbitration which PCL is conducting in London on behalf of Bolton.

5.3 advice in relation to the arbitration in London started by PCL against NEAT;

5.4 general advice to PCL in relation to events in Calcutta both in relation to the ship and the cargo;
5.5 general advice to PCL in relation to the proceedings in Sydney; and
5.6 advising PCL generally on the issues throughout.”
(Ex V)

781    In relation to categories 5.5 and 5.6, East amplified on the work performed by Richards Butler as follows:

“ 12.5 General advice in relation to the proceedings in Sydney
My firm had been heavily involved in assisting Norton White, on behalf of PCL, in their conduct of the claim in the Supreme Court of New South Wales following the initial application by PCL for injunctive relief. PCL instructed us to act as the overall co-ordinator for the various proceedings. We have received regular, sometimes daily, reports from Norton White on the proceedings in Sydney. We have had to consider all the correspondence that has been exchanged between Norton White, ourselves and PCL and followed all the exchanges of correspondence in the Australian proceedings. We have been involved in considering the evidence that has been prepared both by Norton White and other parties to the case, and in assisting with the collection of evidence. Richards Butler’s work has also included considering all the exchanges of pleadings that have taken place in Sydney, considering the various cross claims that have been brought by the various parties and considering the defences to all those claims and, generally, following the pleadings through.
In June this year I travelled to Sydney to assist Norton White with the final stages of preparation for the hearing that commenced on 19th June 2000. I remained in Sydney until the hearing was adjourned and then after a discussion with Counsel I returned to Singapore to discuss the matter with PCL before returning to London. Since I returned to London, Richards Butler have been involved in assisting Norton White in the preparation for the resumed hearing on 11th December 2000.
12.6 Advising PCL generally on the issues throughout.
In addition to the matters addressed in paragraphs 12.1 to 12.5 above, Richards Butler has also spent time generally advising PCL in relation to other aspects of this case which I cannot neatly categorise above. This includes time spent advising PCL in relation to the original application for injunctive relief made to the Supreme Court in Sydney in April 1999, and time spent advising PCL in relation to the Court action brought in Singapore by PCL against Swiss Singapore which was handled by their Singapore solicitors, Joseph Tan Jude Benny. This general advice has included meetings both in London and in Singapore as well as very considerable correspondence.”
(Ex V)

782    In his affidavit sworn 29 November 2000, O’Malley apportioned the costs amongst the categories identified by East as follows:

Category 5.1: 20,320.00
Category 5.2: 91,466.77
Category 5.3: 11,558.00
Category 5.4: 10,128.00
Category 5.5: 50.411.97
Category 5.6: 29,940.55

783    In his further affidavit sworn 30 January 2001, O’Malley evidenced further fees incurred by Pacific in relation to the above categories and apportioned them as follows:

Category 5.1: -----
Category 5.2: 5,005.00
Category 5.3: -----
Category 5.4: -----
Category 5.5: 33,735.00
Category 5.6: 385.00

784    On that basis the fees attributable to this item of claim in category 5.2 total 96,471.77. In addition to those fees, East estimated, in the most general of terms, that future costs in the London Arbitration would be in the order of 60,000. There was no attempt to break up that estimate in any way and, in view of the settlement of those proceedings, that estimate of future costs should be excluded.

785    Halligan/Godinho have extracted an apparent discrepancy in comparing these fees with the documentary evidence adduced through the affidavits of Lam and Chua. No cross examination was directed to any witness in relation to that matter and I am unable to draw any inference from that discrepancy. In my view, the fees as evidenced by East and O’Malley should be allowed in the sum of 96,472.

786    As to item 38(aa): legal costs of Drew &Napier (claim US$67,906.57). Chua’s affidavit (par 48) evidenced a memorandum of fees from Singapore solicitors Drew & Napier, dated 24 August 1999, in the amount of US$93,656.57 which was reduced by US$25,750 by memorandum of the same date. The fees were stated to be rendered as follows:

“In the Matter of:
Agreement For Delivery of
Consignment of Peas at Saugor Anchorage Calcutta, India”

787    The fees were described simply as:

“Professional charges”.

788    No evidence was adduced through a member of that firm in the circumstances evidenced in the affidavit of Hayden Samuel Martin sworn 15 December 2000. In view of the paucity of description of the professional services said to have been rendered by Drew & Napier, these fees the subject of this claim should be disallowed.

789    As to item 38 (ab): Pacific’s liability to indemnify Bolton in respect of legal costs of the Indian proceedings. This claim has not been quantified and declaratory relief is sought. I decline to grant such relief in the absence of any evidence as to the incidence of such costs beyond the costs, the subject of item of claim 38(v), and the passage of time since any such costs may have been incurred.

790    As to item 38 (ac): Pacific’s liability to indemnify Bolton against any award of costs obtained by SSOE in the Indian proceedings: Pacific accepted that this item of claim has “been subsumed by the…[February 2001] settlement”.

791    As to item 38 (ad) and (ac): these are noted as withdrawn.

792    As to item 38 (af): Pacific accepted that this item of claim has also been “subsumed” by the February 2001 settlement.

793    As to item 38(ag): Pacific’s legal costs in the London proceedings against NEAT. The evidence of East and O’Malley, earlier referred to in these reasons, established that Pacific has incurred legal costs in the amount of 11,558.00. However I am not disposed to allow recovery of those costs in these proceedings as costs caused by the arrest of the MV Nelson. In my view, the cost associated with those London proceedings will follow the event, presumably, in those proceedings.

794    As to item 38(ah): that item is noted as withdrawn.

795    Accordingly, Pacific is entitled to judgment in the sum calculated in accordance with these findings.

796    In order to facilitate delivery of final judgment in these proceedings, at a directions hearing on 27 September 2001, I directed the parties to present written submissions as to costs and as to the appropriate method of converting currencies to express a judgment in favour of Pacific in United States dollars, on the basis that BNP was liable to Pacific in negligence and that all cross claims be dismissed.

797    The parties have responded with the provision of written submissions, namely:

(a) submissions on behalf of Pacific of 5 October 2001 accompanied by (i) affidavit of Robert Reginald Wilson sworn 5 October 2001 and (ii) correspondence between the solicitors for Pacific and BNP, marked ‘without prejudice save as to costs’.

(b) submissions on behalf of BNP of 5 October 2001 and, in reply, of 10 October 2001.
(c) submissions on behalf of SSOE of 5 October 2001 accompanied by (i) the affidavit of Jacqueline Elizabeth Rusiti affirmed 5 October 2001 and (ii) a Notice to Admit by SSOE to BNP of 2 June 2000 and the Notice disputing of 14 June 2000.

(d) submissions on behalf of NEAT of 4 October 2001.

798    In respect of those submissions, it is clear from those made on behalf of BNP that I should not proceed to make orders as to costs nor as to method of conversion of currencies until BNP has been given the opportunity of considering reasons for judgment.

799    For the same reason I will defer reading the affidavit material and the ‘without prejudice’ communications accompanying the submissions of the parties until after publication of these reasons and the parties are given the opportunity of considering the admissibility of the material accompanying the submissions.

800    The orders I make are as follows:

(a) Judgment for the plaintiff against the first defendant in negligence in such amount or amounts to which the plaintiff is adjudged entitled in accordance with these reasons.

(b) Interest to be paid on such amount or amounts, to be determined after the parties have informed themselves of the reasons for judgment in these proceedings and are given the opportunity of presenting further submissions.

(c) Orders in respect of costs of the proceedings to be determined after the parties have considered these reasons for judgment and are given the opportunity of presenting further submissions.

(d) Save for those matters, the proceedings are otherwise dismissed.

(e) Each of the cross claims are dismissed.

(f) Orders in respect of costs of the cross claims to be determined after the parties have considered these reasons for judgment and are given the opportunity of presenting further submissions.

(g) The matter be listed for directions at 9.30am on 17 October 2001 for the purpose of appointing a hearing to complete the taking of evidence and hearing any further submissions as to costs, as to the currency in which judgment in favour of the plaintiff be expressed, the method of conversion of currencies to the currency of the judgment sum and as to the interest to be paid on that judgment.

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Last Modified: 10/22/2001