The China Navigation Company Pte Ltd v TPT Shipping Ltd

[2020] NZHC 2675

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2020-470-91

[2020] NZHC 2675

IN THE MATTER

of a charterparty dated 3 July 2019 and a

letter of indemnity dated 5 September 2019

BETWEEN

THE CHINA NAVIGATION COMPANY PTE LTD

Plaintiff

AND

TPT SHIPPING LTD

Defendant

Judgment:

(On the papers)

12 October 2020

JUDGMENT OF BREWER J

This judgment was delivered by me on 12 October 2020 at 4:30 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Izard Weston (Auckland) for Plaintiff

THE CHINA NAVIGATION COMPANY PTE LTD v TPT SHIPPING LTD [2020] NZHC 2675 [12 October 2020]

Introduction

[1]                 The applicant (“China Navigation”) applies for an interim injunction to enforce a letter of indemnity (“LOI”). The respondent (“TPT”) has taken no steps to oppose the application. Its solicitors confirmed it would not appear at the call of the case on 12 October 2020, as in fact it did not. Accordingly, China Navigation seeks orders on the papers.

Background1

[2]                 In the material period China Navigation was the time charterer of the M/V Taikoo Brilliance (“the Vessel”). TPT was a voyage charterer pursuant to a voyage charterparty dated 3 July 2019. The original of the bill of lading relating to TPT’s cargo was not available when the Vessel arrived at the nominated port in India to discharge the cargo. Accordingly, China Navigation required TPT to produce a letter of indemnity to China Navigation’s benefit before discharging the cargo. TPT produced the LOI.

[3]The LOI is in a standard form and contains these obligations:

[1]        To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of delivering the cargo without production of the original bill of lading, 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 without production of the original bill of lading, 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 in the same or associated ownership, management or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the ship (whether by virtue of a caveat being entered on the ship’s registry or otherwise howsoever), 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 or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.

1      I draw the background from the affidavit of Wong Kang Lin filed in support of the application and affirmed on 5 October 2020.

…

[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.

[4]       The LOI is dated 5 September 2019. On 9 September 2019, China Navigation provided a letter of indemnity to the head owners of the vessel in materially identical terms.

[5]       On 18 September 2020, a sister vessel of the Vessel, the Navios Koyo, was arrested by the High Court of Singapore upon the application of a company claiming to be the holder of the China Navigation/TPT bill of lading and entitled to possession of the cargo under the bill of lading. It is alleged that the cargo was misdelivered and/or converted.

[6]       On 20 September 2020, the head owners of the Vessel required China Navigation to provide security to release the Navios Koyo in accordance with its obligations under the letter of indemnity provided by China Navigation to the head owners dated 9 September 2019.

[7]       On 21 September 2020, China Navigation informed TPT of the arrest of the Navios Koyo and the demand on China Navigation by the head owners for security to procure her release. China Navigation required TPT to provide security under the LOI. TPT neither  agreed  nor  refused  to  provide  the  security.  Accordingly,  on 23 September 2020, China Navigation wrote to TPT requiring it to confirm within the hour that it would provide the security requested. China Navigation told TPT that if security was not provided such that China Navigation had to itself provide the security then China Navigation would seek to recover losses from TPT.

[8]TPT failed to provide security.

[9]       On 25 September 2020, China Navigation complied with its letter of indemnity to the head owners and provided security for the release of the Navios Koyo in the sum of US$5,316,509.88.

[10]The Navios Koyo was released later the same day.

[11]     Subsequently, the solicitors for China Navigation wrote to TPT requesting that TPT put in place replacement security. TPT has failed to respond.

Discussion

[12]     I recently delivered a judgment in a very similar case involving TPT (“the Berge proceeding”).2 The principal issue in the Berge proceeding was whether this court had jurisdiction given the wording of the jurisdiction clause in the particular letter of indemnity. I held that this court does have jurisdiction. The LOI contains an identical jurisdiction clause and so I find that no point as to jurisdiction arises in this case.

[13]     I granted the applicant in the Berge proceeding a mandatory interim injunction requiring TPT to provide a substitute security and to supply, on demand, sufficient funds to defend any related proceeding.

[14]I will not repeat the discussion of the law set out in the Berge proceeding.

[15]     The only real factual differences between this case and the Berge proceeding are that in this case:

(a)The arrest took place in relation to a sister ship, not the actual vessel which carried the cargo.

(b)The arrest took place in Singapore, not in New Zealand.

(c)Security was paid by the time the application for interim relief was made, not afterwards.

[16]     In my view, these factual differences do not bear upon the principle that if a court does not order immediate compliance with an LOI then the very purpose of the LOI is undermined. Nor does the fact that China Navigation mitigated its liability by

2      Berge Bulk Shipping Pte Ltd v TPT Shipping Ltd [2020] NZHC 2627.

itself providing security prior to issuing proceedings reduce its right to rely upon the LOI.

[17]     The substantive proceeding claims an order that TPT provide replacement security in the sum of US$5,316,509.88. The ground is breach of the LOI.

[18]     Clause 3 of the LOI extends the indemnity to “any other ship or property in the same or associated ownership”.

[19]     China Navigation relies on clause 2 of the LOI in support of its application for an interim order that TPT provide “sufficient funds” to defend claims.

[20]It is ineluctable there is a serious question to be tried.

[21]TPT has taken no step in opposition.

[22]     For the reasons I gave in the Berge proceeding, I find the balance of convenience clearly favours the granting of the mandatory interim injunction sought. Damages would be an inadequate remedy in these circumstances. In the commercial context of the LOI, overall justice will be served by granting the interim injunction.

Decision

[23]The application for an interim injunction is granted. I order:

(a)The Defendant shall forthwith provide substitute security, or bail in the amount of US$5,316,509.88, to replace the security provided by the Plaintiff to secure the release of the vessel “Navios Koyo” from arrest under the Warrant of Arrest dated 18 September 2020 issued by the Registrar of the High Court of Singapore in proceeding “HC/ADM 207/2020”, and as security for the claims “HC/ADM 206/2020” and “HC/ADM 208/2020” filed in that same Court.

(b)Upon a demand to do so from the Plaintiff, the Defendant shall supply, or procure the supply directly to the Plaintiff, sufficient funds to defend

any proceedings brought against the Plaintiff in connection with the delivery of its Cargo (including costs already incurred in the Singapore proceedings “HC/ADM 207/2020”, “HC/ADM 206/2020” and “HC/ADM 208/2020”).

(c)The parties have permission to apply to vary or discharge this order.

(d)Any application to set aside or vary this order shall only be made after at least 48 hours’ notice has been given to the Plaintiff’s solicitors.

(e)That the Defendant pay the Plaintiff’s costs (on a 2B scale) and disbursements of and incidental to this Application totalling $2640.

Brewer J