eSignature Lawfulness for Shipping in Mexico

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good morning good afternoon or good evening depending on where you're watching us we'd like to welcome you to this the second quad caste shipping special as with the first of our shipping specials the province we're about to discuss our set against the background of the current pandemic however the topics discussed are relevant in any situation where there's potential litigation arising in connection with letters of indemnity by way of brief introduction I am Nigel Cooper and I'm joined by Chris Smith Sarah parikh and Paul Henson today we're going to be looking at what can go wrong when discharge or delivery of cargo is made against letters of indemnity rather than bills of lading the issues to be discussed of course ones that we're all familiar with from our own practices before we get into it just one knows of housekeeping there will be time for questions at the end so please do post your questions using the Q&A function that should be available on your screen and then I'll throw them out along the panel to be answered as we go at the end so letters of indemnity are of course an important tool enabling trade keep moving in circumstances where shipping documents are delayed often within the financing chain that practical role is not new but it has become even more important where Kovac 19 and the global response to it has imposed delay and restrictions on the movement of trade for example the impact of the pandemic and the governmental response to it has meant delays in the banking chain preventing the presentation of documents an imposition of restrictions imports have prevented have limited the options for discharge or delivery in other words there's been an increase in those situations where the owners wish to get the vessel out quickly and charters and receivers want to get access to the cargo as quickly as possible as well but there's a perennial problem with letters of indemnity name either an owner gains very little ordinarily gains very little by agreeing to discharge will deliver without production of an original bill of lading on the contrary the owner runs the risk of a misdelivery claim if he agrees to deliver against the LOI and where such a claim arises the unlucky owner will then look to enforce that letter of indemnity against its charter and so on down the chain of any sub chances in other words letters of indemnity claims which find their way to court will routinely involve multi-party litigation so how did the claims play out and perhaps more importantly how does one avoid such claims in the future now such questions aren't easily answered in the abstract luckily or perhaps unluckily for the parties concerned we've managed to identify an unlucky but entirely fictitious voyage which has thrown up a series of problems relating to the indexes of indemnity passing down the chain so I think this is over to you know to take us through the max please it's Nigel you should have received copy of the case study in the quad cast Pat but in brief the the facts of our case they do as follows aim were time charters of the ominously named vessel the MV misadventure a sub charted to be who in turn sub charted to be the sub chances were a voyage to carry a cargo of iron ore from Brazil to Singapore the charged parties allowed for discharge without production of the bills of lading against head owners standard LOI wedding and head owners adopted the international standard route a wording for this purpose and again you should have a copy of that in your pack the vessel arrived at Singapore but due to carried related delays documents did not make it through the contraction chain in time C requested delivery of the cargo to receivers without production of the bills of lading the request passed through the chain to head owners discharge was effected against the chain of otherwise as prescribed by the child's parties the cargo was discharged by stevedores wearing full PPE gear stevedores were not arranged by head owners and due to carry restrictions the crew had very little interaction with the stevedores head owners also did not make or did not ask too many questions their priority was to get out of Singapore because there was risk of further lockdown and then their besson would be stuck cargo is discharged without incident and the vessel sailed for her next port of call but well that's a return Singapore some four months later she was arrested by the receivers financing bank and damages but playing from miss delivery against head on its head owners demanded the a protect security to release the vessel this demand was passed down the chain to be and intend to be ste does not respond so what should my donors do exactly yeah hedonistic all the lawyers and and say well we've we've had over the cargo to a bunch of people in hazmat suits and and now we're staring down the barrel of arrest proceedings in Singapore I suppose more personally what do we do as lawyers and nowadays I think it's fair to say that we would be thinking of an injunction I think we have put in a few citations to some of the latest by cases authorities in a gram in a handout which everybody participating hopefully has and I think it's pretty well recognized nowadays that ello eyes are an area where injunctions are granted and where damages would be an inadequate remedy in a lot of cases and on the basis of the whole points of the LOI is to replace the secondary liability under any damages claim for detention by a primary performance obligation under narrow eyes to I think maybe in some of the earlier cases it used to be the advice that where you put up a security and then you look for declaratory relief we look for damages or something that nowadays you would be clearing the desk and putting everything else on hold and looking to put papers together for an injunction it's mandatory injunction and it's not something you can really dress up as a premature injunction you're asking for pretty draconian remedy effectively compelling the issue of the LOI to actually dip into their pocket and for not security so for that reason the cases establish that the owners of the applicant injunction will need to show as part of the balance of convenience test at a high degree of assurance the merits that high degree of assurance that they'll succeed on the merits at trial and basically what you're trying to show that the risk of injustice if it's Junction is refused would be sufficiently outweighed and by the injustice not granted and for that reason you need to be looking for you to establish a high relatively high marys threshold what is a relatively early stage of the litigation Paul referred to a high degree of assurance and a high threshold and that of course begs the question doesn't it a what an owner or an applicant will have to prove just to satisfy that test absolutely cuantos dismissed yeah well if I can kind of chip in on that point and essentially the owners have to show to the required standard that Paul's just described that the obligations in the other way have been engaged so you have to ask yourself well what is owners side of the bargain in this regard everyone can just track back to the wording of the standard formula I was in their packs what owners I've been requested to do this is the first main paragraph about full lines down is they've been requested to deliver the cargo to X or to such party as you the owners believe to be or to represent X or to be acting on behalf of X now the key there is deliver said cargo its compliance with the request to deliver the cargo that triggers the numbered obligations you see below that can be found from the words in consideration of your complying with our above request so the owners need to establish a strong prima facie case that the cargo has in fact been delivered to X now that creates a bit of a problem for the owners a modern shipping delivery and discharge takes place at two distinct stages now Nigel who is a keen graphic illustrator has produced a little something for us over the pictorial representation of these two stages that's what you need silks there you go beauty yeah good luck by the way Nigel with your graphic design GCSE results um so at the right-arrow is the discharge stage now this is the point where the owners hand over the cargo to the people in the hazmat suits but as soon as the cargo is off the vessel the vessel will leave the port however delivery in the strict sense only occurs at the left-arrow now not only is that had a slightly different geographical location but also with the goods going through the poor going through customs passing through various different hands it may occur slightly after discharge by which point in time the vessel is long gone I think that's enough of the diagram for the time being so owners are in a position where they've discharged the cargo at the right-arrow but they've now left the LOI refers to delivery but they don't know what's happened between the right at the left arrow what can owners do well they can ask party a down the chain say what happened after we handed the goods over were the goods deliver two acts but by this stage an event is party a will know that had owners are gearing up to get an injunction against them and a woke up the information needed which is just gonna result in them getting the injunction against so a will quite often say stun one of the cases recently the universal Bremen about a year ago that's exactly what happened the party's down the chain he knew exactly what had happened just said we're still investigating the position they won't get any information which would enable an injunction be granted against so what can owners do to fill this information gap the first thing they can try and do is maybe argue that the LOI is merely engaged by the discharge of the cargo on it's true construction this argument though is succeed it was tried in the Bremen Max and Mr Justice tier said in that case well delivery and discharge are two well-known distinct concepts the other I refers liberty not discharge and therefore the LOI cannot be construed as applying it but yeah but how does I mean how does that construction square with the fact that you know as we all know the owner in this case wearing exactly no is actually being delivered well that is a difficulty for the owners but it's mitigated to a certain extent by the wording of the other way if we just look back in it your rule that the owners are being requested to deliver the cargo two acts all to the party that they believe to be or represent acts now now that dilutes the head owners obligations somewhat in that in these Agora and in the Sangha wins decision it was held that all that means that the owners need to do is have an honest belief that the party to whom they're handing the goods over represents X now to take a an easy and often to convenient in the real world example that would mean that if the person with the hazmat suit comes on and the master or chief officer says to him who is your principal who you instructed by and they go X has Matt suit then even if it's not in fact the case that they represent X you've got enough information there for the owners to have the necessary honest belief now obviously that won't happen in most circumstances in most circumstances the guy in the hazmat suits can say I don't know I was just told to turn up and take this cargo or they might say I'm instruct by Y in entirely different entity but any event those are the kind of problems the owners going to grapple with at this stage and in the main difficulty is for the owners to show that the LOI has been engaged but I think for the purpose of this discussion that's probably about as all that we can say about it and I think we should just assume for present purposes that the owners can show the compelling case that they need to to show that the LOI has been engaged exactly but then on that assumption I guess next question for the video is then is where they are going to seek their injunction against do they go just against their counterparty at Sarah Creek thankful and well the obvious answer is hey donors would go against their counterparties there in this case vested a and they would and seek to enforce the lesser wouldn't Dennis Lee provided by age by way of an injunction said Abel benasi to enforce against B & B against thee these will be ex parte applications and we'll start off at least as three separate matters with three hearings in our case we are told that the less demand Emma T are on the same terms the internet will standard group items this includes at clause 7 an English High Court jurisdictional course so that would allow for consolidation of all three hearings and metals then as far as head owners are concerned consolidation is not really in their interest because they just want to claim against their counterparty party a and get the security for their vessel can be released because the longer this tape and more costly it becomes the real question for her donors is whether to put up security first for for seeking an injunction and it seems to me that the better approach is to seek the injunction first I say this because once the vessel is being released there may be a suggestion that when considering whether to grant an injunction the factors such as urgency and where the damage is efficient and are effective I'll give you there is no longer a neo and damages could be sufficient because once vessels release the owners can go about their business in fact own so kosterman Ross Cranston in the universal Bremen made the point and in open comments when he says that the purpose behind Clause 3 of the LOI is to provide a means of Swift relief where a ship has been arrested that is where a mandatory interim injunction is relevant so if the besson is no longer under arrest the case for an injunction perhaps at the very least becomes less component can I ask you to question there so what about a and B in the middle of the chain I mean what what should they do I mean should they presumably be looking to pass the injunction on because they've obviously got some of the pressures of the head owners in terms of the vessel being stuck in higher or Demuro degree but also once the homeowners have got an injunction they're under threat of contempt of court presumably if they don't comply with the wording the injunction which will usually require them to do X Y or Z fourth width exactly Chris so as I said it's not the head owners and it's not in their interest for their matters to be consolidated but it would be in the interests of the intermediate party so in our case parties a and B for the hearings and the applications to be consolidated at the return date first it seemed like a fortunate waiter to move forward but we should note that it would only work if the LOI is all have the same jurisdiction clause in fact this is what happened in the case of the miracle hope earlier this year in the usual way the injunctions were granted down the chain the parties in the middle wanted to have the matters consolidated so that they could simply pass the demand along and drop annulled and but that then waived the issue of timing in our case if a has an injunction against it if they don't comply with it they would be held in contempt but they in turn want to pass it down the chain so as you mentioned Chris the injunctions had the wording that security should be put up forthwith and if if that's not complied with then obviously party a would be in contempt so the question arises - what forthwith meant does it mean immediately without regards to practicalities of doing so or does it mean in the shortest practicable time LT came back that it was a second of those shortest practicable time which in turn depends on the facts of the case so the answer to Chris's question is that the intermediate party need to apply for their injunctions quickly enough so that they're not in contempt so that they can then argue but it's not the notice tube should pay but in fact in this case it should be party C then you have another issue as well which is that the parties and the chain are to argue that they're discharged from their obligations under their own l o eyes if security had been put up by party further up the chain from them well that's a good question Paul and it reflects a line of argument was run by one of the sub class rooms in the brain and max this is probably a good moment just to remind ourselves at the international group worrying that Clause 3 requires a party requesting discharge against an LOI in paraphrase to provide on demand such bail or security as may be required to prevent the arrest of the vessel or obtain her release and the argument put forward by the sub charter in the brain and Max was that this wording only required a port party to put up security if it had not already been put up by another party in order to obtain the release of the vessel if the vessel had been already been released it was said there was no longer an obligation to put up security but but this argument received short trip from the judge mr. justice tier held that an NRI imposes a primary obligation on a charter to put up security to prevent arrest or to obtain the release of the vessel in the event that the vessel has already been released if an owner has already had to put up security that fact does not release the Charter from its primary obligation on the contrary while the action of an owner in putting up the security may have mitigated its a loss the Charter remains in breach of its obligation under three and that breach isn't discharged by the owner putting up security I'm what the court said was that worried to be otherwise the commercial in purpose and intent of the LOI would be frustrated and it's in that context that mr. justice chair went on to hop in this circumstance that the appropriate remedy was toward a specific performance and require the charterer to provide replacement security um and I agree with Sarah that you always got to satisfy the test for an injunction whether on the balance of convenience is there sufficient urgency and whether it's necessary but it is clear from the authorities that the courts are going to looks are going to look to specific performance as as the remedy to be granted if a charter or sub charter a downline is not putting up security where they should do um but there's then the question who to whom is the security to be provided and if it's been provided by a party further down the chain do they provide that security to the party immediately above them in the chain or do they have to provide it directly to the arresting party usually back either in the form of original security or as replacement security now clearly the former would lead to a potentially bizarre situation where you have several sets of security in place possibly on different terms certainly from different providers and obviously on our facts there'd be at least four sets of security now there's no direct authority with no direct case law which discusses the issue in any detail but the trend of the case it certainly suggests that there should only be one set of security in place in the brain and max the issue was one which was to have been decided by mr. justice tier but before he gave judgment the parties had accepted among themselves that the security was going to be provided directly to the arresting party more recently in the universe of Bremen so Ross transferred granted an application that the sub charter should provide security to the arresting party and rejected an application that it should be provided up a chain but without discussing the issue in any detail I have to say that in my view the requirement for only one set of security is the only answer a security directly to the arresting party is the only answer consistent with the intent and purpose of an LOI because it's for the party providing the indemnity to take the burden and responsibility of the risks prevalent in the release of the cargo against the letter of indemnity now this does of course mean that the party providing the security will not have control of the claim and abeyance in the in the arresting court but that's the point we can return to later on so then the next question is what fullness of what form should the security to take is it the case that whatever the bank wants whether it's a bag of diamonds or cash that they get so I'll take I'll do at this one and yeah I mean well so that was one of the points that I was touched on in the miracle hope case 2020 case the last of the cases meant hand out I think in the third of the judgment cited there which was the return date so you had you had to ex parties and then you had a return date but everybody involved that was judgments just steer and and there was some three possibilities considered the first one you mentioned Sara their whatever their whatever the bank wants to bang get and and and the obligation is to provide whatever it takes to satisfy the bank and that one was was injected the this and then the other two options were either that it's a matter for the court in the arresting jurisdiction to determine or that it's a matter for the Commercial Court has the courts seized under the under the Oh eyes and mr. justices here held that it was an option so in our case it would be whatever the court in Singapore borders and so I think because we've got a friend Z jurisdiction I don't think it necessarily there's too many difficulties and I think also most cases obviously there'll be discussions with the arresting party and again we've got a bank here arresting in Singapore but obviously option two opens up to the pot the difficulty love as seen in practice where you know the arresting jurisdiction ship in is one which will in turn bowed to the demands of the arresting party so I think I mean I think the answer must be right is consistent with the the requirements of Drs Convention I think the Commercial Court will have jurisdiction over the question but will in practice we refer it back to you whatever has been ordered by the arresting jurisdiction and okay well new new topic should we now look at some of the insolvency situations with we we're told that sea might be a man of straw in our problem so what happens if if she doesn't comply with the with the injunction well clearly pull the first situation in which this can arise as if she or another party in the chains and solvents as you've mentioned there may be other right reasons why I see doesn't comply whether or not is because he hasn't known they have no identifiable assets when they just simply fail or refuse to comply with the order to put up security Chris what happens then well I mean obviously if sees insolvent and that's proven establish there's an as long as he measures in one sense the position is quite clear he's not going to put the money up but quite often you get the scenario where C effectively prevaricate and says oh I'm trying or oh I don't have the money without putting proof in many other cases C just simply takes the view well my assets my officers there are outside of the reach of the English Court so I'm not gonna respond and that's a situation Paul and Nigel very familiar with because that's exactly what your clients did in these agora if I remember increased um but anyway but it's all the same position whether or not C has a good excuse or or not for not complying with the injunction that suddenly puts be in a bit of a quandary the minute a got its injunction against be beyond our sample facts then went and got an injunction against C now at that point B could've perhaps rested easy at least for a moment or two thinking okay I've got an injunction against me but I've now gone and got a like one against C C you'll put up the security few but if she doesn't play ball or insolvent etc the question arising for B is well what do I have to do now how I comply with my obligations under the injunctions simply by virtue the fact that I've gone and got an injunction against see myself well the answer to that I think must be no assuming the injunction has been properly drafted it will require B forthwith to take such steps as are necessary to secure the release of the vessel not to take one step which even if is not successful that's good enough for you and you can down tools so B is suddenly now on AM horns of a dilemma where the one attempt is taken has failed and it's now at risk of being contempt of court because it hasn't secured the releasing the vessel forthwith the answer in that scenario I think is that B something now has to stump up the cash and take steps to get the best released itself yes it B is now the party at the end of the chain effectively prevented yeah I mean so for those who are watching and listening in and don't know there's a case that Chris mentioned the Zagora was one where I think Nigel's clients were at the bottom of the chain and took the view that they were beyond the reach of the of the courts and systems out of the litigation at quite an early stage a clients were a party in the middle and in ance with Sarah's very prudent advice earlier the party in the middle doctor back to back position and so we probably did precisely the same thing as you keep his clients and also dropped out leaving Christmas party is to sort of the new party at the end of the chain and and I suppose the other the other insolvency scenario or man of straw scenario that we then have to think about would be what if it had been a slightly difference now what if the owners had gone after nigel's clients because it was Chris and my clients who are dropping out of the picture so in our example what if C is the party of means what is his house the receiver with the money and it's the parties in the middle who are the the men of straw with no identifiable assets or flight risk or they're out of the jurisdiction party so that's that's just that's sort of the second insolvency is not awaited it was Sarah why don't you take that way and in short head owners in that scenario sorry um party a or party B and were insolvent all men of straw head owners could claim directly against state court B this case may be and and that's by virtue of the contracts rights and third parties act 1999 and there aren't many cases that deal with this actually but the in the length all glory to standard international wording which was used for the letter of modernity in that case was held by the Court of Appeal to compare of confer a benefit on owners as agents of charterers we looked at the standard wording the letter of indemnity is actually addressed the charges their servant or agents so it was held that in delivering the cargo owners are actually acting as Charlton's agent as charges have no obligation to deliver themselves so in court held that the wording of the LOI fulfills the requirements of section one one-eighth of the 1999 Act and thus owners could take the benefit of the letter modernity further down the chain even though they weren't direct contractual party to it in our case the same wording applies so owners could bring a claim and an application for an injunction against be if it was a he was insolvent or even against see if that was deemed worth the other cases that deals with this point is to jag Rebbe in that case the owners brought a claim against charges and receivers charges played no part in the child as they were in liquidation at first incidence his honor judge Mackey QC held in line with the Lennis on glory but given the wording of the LOI again it was the standard wording owners could enforce a lesser indemnity directly against the receivers again by virtue of the 1999 Act the Court of Appeal upheld that decision but their reasoning slightly less clear the court of appeal put more emphasis on the fact that in their case the letter of indemnity from receivers was expressly addressed at the top of it to charles's and lanes so it couldn't mean that it was held to be a tripartite contract however Lord Justice Tomlinson also expressly stated that he agreed with judge Mackay at First Instance so it's not clear exactly the basis on which it was found that a direct train report against the receivers but in any event it deems that where the standard International Group wording is used in terms of Clause 1 the 9099 act can provide parties a way to meet Krogh those who are no good for the money thanks Sara well as hopefully we've shown just in half an hour so far there are a fair number of knotty issues arising now the points we've covered in this element of a webinar have been almost like The Greatest Hits and we can get on to some of the deep cuts a little bit later in the Q&A session and deal with some of the issues that arise after the injunction has been granted and after the vessels released I mean one of the points that the courts still have to work through is what the position is on claims control who is going to direct the defense of the arresting party's claim for misdelivery and what happens if they do a bad job of it does that affect the obligations of the party down the chain who may put up the security these are all points we can dive into if needs be in the question-and-answer session if anyone's interested but before we get on Paisley question on the Q&A we've got six so far say very exciting but before we get on to the Q&A and those six questions I think now I do you've got a few suggestions for avoiding pitfalls in the future yeah thank you very much Chris as you say we can we can get some of the knotty problems on the questions in there so some good ones there so far um but what of the future how does one avoid things as judges they've time and again in cases are all sorts of contractual missions it's all in the wording as the case and repeatedly emphasized the passage rights will be determined by the proper construction of the wording of the airlines and in this regard as an intermediate party it's essential to ensure but the analyzer on back to back terms so as to avoid a situation where the chain of liabilities ends prematurely before they was reached the party ultimately intended to receive the cargo now typically the wording of the LOI will be agreed between owners and their charters at the time of the charter and then it's taken down the chain as to the form of the LOI the International Group a standard wording which you have in your packs is clearly a good starting point but as with any standard form one needs to ask if it will be enough in another in its unamended form and some of the points to consider that arise from what we've discussed her as follows so the beneficiary of the LOI as an owner or time charter and one may wish to protect oneself against the risks that have parties further down the chain becomes insolvent and breaks the chain as Chris has pointed out in lol I address to the charterer its servants or agents will also allow a party higher up the chain to rely on the LOI lower down in the chain as a servant or agent of the Charter and therefore it's important to ensure that that wording is going to be incorporated in otherwise down the chain secondly there's the question of when the obligations under the LOI are triggered and we will be coming back to this in the questions it's essential to have Claire see about which operation is going to bring to an end owners responsibility for the cargo I'm bringing to play a child rosamma geishas under the LOI from an owners perspective it went may well be the discharge of the cargo is the critical point critical moment and the standard wording needs to be amended to trigger obligations at the point of discharge from a Charteris point of view it's likely to be advantageous to a sip insist on the unamended form of LOI which responds to delivery either way ensure that there is clarity about the point in the operations in which the indemnity is to bite thirdly is the person to whom the owners are to release the cargo properly defined is the recipient to be a named person only or our owners to have the benefit of the proviso that they can deliver to such party as the owner believes honestly believes to be able to represent the named party either way as charter one may wish to consider whether or to include an obligation on the owner to verify the identity of the party to whom it is delivering or discharging the cargo of course one would expect a prudent owner to do this anyway because some attempt to verify the identity of the party to whom they're handing over the cargo he's going to be important in establishing an honest belief they have handed his over to the right person depending on the nature of the cargo consider whether one requires the deeming provisioning tours four of the standard wording allowing delivery to be made to a terminal or other facility ship light or barge there may well be circumstances where it makes sense certainly from a challengers perspective to delete this provision to ensure delivery to unnamed party only and then finally let's let's go back to the point that Sara made quite early on they only ensure that the law and jurisdiction provisions through the chain of the NRIs are the same owners may consider consolidated proceedings to be an inconvenience to say the least but one does not want to be a party further down the chain who finds themselves forced to litigate in a different jurisdiction because different law and jurisdiction provisions have been agreed oh those were my points does anyone have an into ad before we move on to questions not from a Q&A Q&A okay well we've certainly got a fun one to start with um so the first question would the transmission and receipt of the bills of lading by electric electronic admission for example ESS docks changed the situation so anticipate that means would it change the rights and liabilities of the parties presumably it would change the situation in the sense that it would minimize the risk of delays in the banking chain of the bills of lading being transmitted and that might mean we never get to this scenario in the first place but otherwise the kind of issues we've been talking about delivery discharge security etc I think an effect on affected by that possibility here is that the LOI is an independent contract separately from charters in chain or anything else so electronic transmission as Chris as you say leads hopefully leads you to a situation where you're not litigating under a chain of pass back otherwise but if you are then you're under independent contracts and so these issues are still open arise well I think from the nodding and for the answers we've had so far we're all in agreement the starting point would be I think the one that Chris made initially which is that we're unlikely to a rock it is less likely to come to a point where 1 means letters of indemnity if the documents have made being transmitted electronically I we then have a question relating to what happens on the sale contracts which require letters of indemnity for the cargoes that we're similar questions arise under the lessons of indemnity for carriage and the questions in these tips see may well have an CIF contract with receivers you have to pay a game against an LC against documents such as bills of lading that sale contract could similarly have an LOI provision to enable payment in the context of that LOI presumably the case law relating to delivery and discharge is different as delivery in the sense of the sale contract occurs at the load port who wants to take the running on that one first well obviously I'll have a stab I mean it's it's obviously a different scenario because in the one that we're dealing with the ship owner is being asked to breach the bill of lading contract and the ship owners because under the Bill of Lading contract the ship owner has to deliver the cargo against production bills of lading the shipping has been asked to do that the ship owner is therefore running the risk of miss delivery and the risk of the ship being arrested and it's those risks that the otherwise intending to kind of like hedge against and to give the ship owner protection now in this scenario under the contract of sale what effectively the seller is do it's giving up its security payment for the goods in the form of holding the bills of lading and it's doing so in return for an LOI now presumably in other why on those terms would have different protections in place and would be concerned with a different scenario namely whereby the seller releases the bills of lading the buyer gets the goods and but the buyer then subsequently doesn't make payment now in that scenario as I believe it's David Clarke says well you're not really arguing so much about what what delivery means because deliveries already occurred for what you are going to be arguing about is whatever the LOI says has to be done please provide the cargo two acts because there must be a physical handing over of the cargo all the bills of lading in order and that's being offered up by the seller in return for the LOI has that been done and if it has been done what are the obligations the buyer is in saying it's going to do and it must be something more over or on top the ordinary contractual problems that has to pay for the goods what further obligations is the buyer offering in the other way and can you secure performance of those obligations fire an injunction so we all of which will raise similar equestions to our ones but it will be more focusing in question of delivering the bill of lading rather than delivery of the goods yeah I think that's right I can say though is probably that the authorities in that we've been discussing may be of assistance by way of guidance is to be approached to take construction in the yellow construction the process of construction if not directly relevant to what are the obligations of the party under the bills of lading sorry on the letters indemnity come on quiz master Q times given the question from mr. Shimono raises any different point I think it's this question in similar terms good morning how do you see the interrelation of Annalise issued by seller Chartres in the context of sale contract even though they have we seen more and more cases where said that even they've not been able to present the bills of lading for payment and issue an LOI but at the same time ask a counter guarantee from the buyer has no bills of lading are available at the discharge port yeah I so I saw I'd seen pen wads question when answering the original one from David Clarke's I tried to encompass that and my answer so we hopefully Benoit feel this thing we've we've dealt with your point if you're there any more specific you want and obviously the Q&A sessions open for a while yet so far another questioning yeah I took the same view Chris I think your answer and all the answers we've given have covered that off but if there is any further point then please ping as another question so this is the next question concerns the sketch that I put up earlier so I just put it back up and ask the question that what actually happens when they drive bolt Carter such as I&R or in this example is discharged onto a key ing to most charter parties that is the end of the obligation of the head owner or despondent owner who is not involved with the overland movement of the cargo to its interim or final recipient so who wants to take that one that I mean that maybe raises an issue of differences between rights and obligations under the Charter party and obligations under the LOI which they said is their separate independent contracts and look you need to be clear you can negotiate for an LOI which operates on which bites on discharge only and not delivery so that you know that power is is with the contracting party and then the obligations are are at an end on discharge but you know ultimately if you've for a string of elloe eyes which operates on delivery and then you know we're gonna have this issue you know miss regardless of what the obligations are under the underlying trust parties which would be I know obviously has to be remembered that the very reason the otherwise needed is because whilst the obligations under the Charter may be satisfied by discharge onto the key seems not true under the Bill of Lading and that's why the ship owner needs an LOI because the ship owner is still those obligations under the Bill of Lading which is potentially being asked to breach okay um now we're coming to a couple of questions that concerned the preceding the the the arrest of the vessel or the requests for security by an arresting party I'm the first of which is what happens if the arresting party won't accept security from a charter or sub charter down the chain that's kind of the the miracle hope point that we were talking about yeah with the the unreasonable security demand and and who is the deal breaker in that situation say in your ordinary case what's being put up is probably a bank guarantee security something like that and so for for the recipient of the bank you say no we won't we won't accept that from Steam we want it from Biore sounds like the sort of unreasonable response and and that's one which then you know ultimately the court has to to decide what's what's reasonable security and you know in the facts of the case and deferring that to the course of the arresting jurisdiction that's necessary so I'm just gonna say that I think that that's a good question for the court of the arrest make your best that Court will determine presumably whether sufficient security we put up say that the best can be released yeah indeed and I guess DSU that's that the interesting issue is where you have you know I shall not I will not accept security from this entity and perhaps in you know some of the more esoteric jurisdictions that not Singapore but in our case but we're well in jurisdiction happy to go along with whatever the you know the arresting party once and then whether the commercial court then steps in and imposes its own standard of reasonableness above and beyond or whether it's simply just defer to the arresting jurisdiction and so far the the answer the courts have given back has been we defer to the course of the arresting jurisdictional reasons of comity and and so on that might impose a position therefore that the for the owner that if if they've got an order from the English Court requiring security by the sub job to be put up directly by the sub chartres but the bank refuses and the arresting party upholds that refusal by the bank so a the arresting court upholds that refusal and then then the owner is of course going to have to come back to the English Court and seek a variation of their order perhaps of that point asking for security to be given to it in relation to the security that it's had to put in place in the in the country of arrest I think in the miracle hope I think the reason why the the judge I think miss justice here got involved in this question was because it was thought that the courts in Singapore couldn't deal with it because they were locked down and he didn't want there to be a delay so I think that's why he he got involved in his question at all as to what the efficient security would be and because I think the primary position is that is a question for the court of the arresting party so they're quite particular facts as to why it was an issue at all actually in the court here I'm just going to pick up one of the questions and a little bit further down the chain because I think it arises in this context as well and it comes back to the point that Chris raised earlier namely who directs the defense in order to avoid prejudicing and parties rights under the LOI I read that as being a question for who deals with control of any proceedings in the arresting court yeah I could pick up axe I kind of trailed that as a problem of it earlier yeah obviously what's happened in our scenario and in most of these scenarios is the arresting party quite often the bank who's got the bills of lading we're not being paid is arresting the ship the head owners the party to the Belov lading and is bringing a claim for miss delivery so the direct fame is going to be Bank arresting party against carrier normally the ship under the Bill of Lading now but what happens if seized put up security down the bottom of the chain sees not the one being sued by the bank but sees the one who is financially on the hook does see have a contractual right to say to the head owner's boy because I'm the one who's financially on the hook even though you're being sued let me and my lawyers take care of the defense's claim now it's a point that's not really being properly worked through yet by the course I mean song the winds there was an argument about it but Mr Justice Andrew Baker affected me he said that he was encouraged that the party seemed to be walk working towards a consensual solution and in the universe of Bremen so Ross Cranston again in a one-line bit of the judgment simply says well you've got no rights in that regard to the party in seized position so legally I think the position is that the party's down the bottom of the chain who put up the security don't have a contractual right to direct the defense of the misdelivery proceedings practically speaking they're often given that right by the parties up the chain but I'm not sure they have the right to demand it now that gives on then to a follow-on question which again is quite naughty and hasn't been worked through well let's say the head owners refused to hand over conduct of the defense to see how they lose do it but because financially they don't really have any skin in the game they didn't do a very good job of it and as a result the misdelivery claim succeeds or succeeds to a greater extent than it ought to have done such that C is liable under its security in a greater amount than it ought to have been what happens there to see have a right to recover the excess amounts that it's been held liable for to be or not to knows I mean he'll age of the letter indemnity that allows them to recover do they have a common law right for negligence okay or something on there under the chain of charges exactly I mean these are all the points that I think of all the remaining issues that haven't really been ventilated at all in relation to these letters in indemnity that that's the major one awaiting consideration from the courts and then the practical advice I suppose for for people watching listening and thinking about these issues is to try and get it bound up in your security arrangements so you have an escrow agreement or you know I'm gonna put on security in exchange for that I want x control witnesses I want access to doctors whatever it might be and probably if you can't get it if you can't get it agreed formally in the security arrangements it's certainly something you would be ventilating at the corpus any court proceedings relating to the grant of an injunction essentially to put the owners in a position where they've got to acknowledge that they will take into account the views of other parties who are required to put up security absolutely as regards Paul suggests in terms of asking for it being a practical point to make is the party in seize position is going to be have a stronger bargaining chip to play if the injunction is not being granted so if they're negotiating for the provision of security before they've the injunctions been granted once the injunctions been granted they've got very little by way of bargaining heft at all because they have to comply with the order forthwith so head on say no there's nothing of that in the order put up a security now please well unless unless they get to pull the Segura trick and say we're outside of the jurisdiction and we're not complying with this injunction yeah in which case that claims control becomes irrelevant something else we have quite an interesting one is is there any duty on the rightful consign e of goods to somehow emphasize the fact so as to put others for example the ship iron on notice that if they deliver to any other party they will in breach or to contact the ship owner directly anybody got any views on that one that question my immediate thought was knowing at this stage the party who the rightful consign II so to speak by which I presume the questioner means the party holding the bills of lading is the back and it would be very rare for the bank to get involved at this stage but let's say the bank was aware that this was going on that the otherwise were being issued and there was the prospect of the cargo being relief before Bankard being paid if the bank then sent to the ship said to everyone involved I hold the bill of lading do not deliver the cargo I will see you for miss delivery then I think they were in argument there that the owners you know not just they wouldn't be obliged to comply with the other way and deliver the cargo without the bill of lading but actually they'd be you know they'd be committing on flat notwithstanding what they've said they would do in the other way if they handed over the cargo in those circumstances because they'd be on notice of a conversion thing and so they noticed that the Act they're being asked to do in the other way is an unlawful one so that that's a point that the lawful consignee or the bank that's something they can do to protects themselves but I don't think they have a duty to do so they're absolutely not I think Finn goes back to whether the ship owners can say that they reasonably believed but honestly believed they'll get me to the right place and say things made duty on the Kansai knee but if by doing that they take away an argument that she bonus but otherwise be able to raise well I think it's good that you're on online as it were Sara because I think the next one will throw your direction first because I think it falls under what you were talking about I'm referring to the scenario at hand if CLO I expressly excludes the rights of third parties can the head owners still reach past be directly to see in circumstances where the LOI is up the chain I understand the terms well that is yes you can expressly exclude it's and then owners wouldn't be able to delete crock or reach past B and the reason I say that is simple application of the 1999 act the way that the 99 act comes in is that you've got to show that the term that you're trying to reliably grants your relief or the obligation or trying to move in force is and it purports to confer a benefit on the third party if there is something in the contract that that derogate from that so expressly says that it doesn't purport to it doesn't confer a right on the third party than the admin to plan so yes you could expressly and exclude the application of the Act okay I think we're gonna we have got a number of questions still outstanding but I'm going to apologize to all those who've asked questions that we haven't got to if there is anything anybody in particular once for please do that as know and we'll see what we can do afterwards but one final question I commented that an analyte triggered by discharge made you known as better protection will be easiest to operate even after discharge however does the owner still not continue to be responsible to ensure proper delivery of the cargo to the party entitled to it discharge is not equivalent filling the Bill of Lading contract um nobody else wants comment on that just something to make the point that that's that's obviously absolutely right discharge well unless you're discharging to the party named in the Bill of Lading discharge does not fulfill the Bill of Lading contract but that that's what gives the very need for the other why in the first place because the head owner is being asked to breach the Bill of Lading contract yeah so the head owner may still have a liability to the Bill of Lading holder if it's found to have discharged or delivered the cargo to the wrong person but if the LOI provides for release of the cargo against discharge the hen owner would be able to turn able to look to the indemnifying party and seek an indemnity in relation to any liability under the bills of lading yeah and obviously in a situation envisaged by the question I mean they're obviously right but I think the point you were making earlier Nigel is just that if the LOI is triggered by discharge you don't have any of the difficulties of proof you just have to prove that you discharge the cargo which will be the easiest thing in the world for a ship owner you would imagine I gave you the guys in the in the PPE job done okay ladies and gentlemen to all of those of you still online thank you very much for joining us for this quad cast we hope you found it interesting if you want to watch this one back or indeed catch up on any of the other editions please do go to the quadrant chambers YouTube channel and can I also finish with a plug for the second issue of quadrant on shipping which is now available if you haven't received it and would like to do so please do get in touch with Sarah launder it's thank you very much from me for watching and good bye for everybody hopefully we'll see you as a later podcast thanks very much thank you everyone