Notice of Lecture: Lord Clarke on Ethics

The Institute of International Shipping and Trade Law in the College of Law and Criminology at Swansea University has the pleasure of hosting a talk by Lord Clarke of the Supreme Court. 

 

When: Thursday 1st December 2016 from  6.30pm

Where: Richard Price Lecture Theatre, Richard Price Building, Swansea University

Speaker: Lord Clarke, Justice of the Supreme Court of the United Kingdom

Subject: “Ethics”

 

This lecture is free of charge and open to the public.

Tea/coffee will be served prior to the lecture in the Foyer of Richard Price Building from 6.00pm onwards.

Non-payment of hire not breach of condition

As widely expected, the CA in Grand China Logistics Holding (Group) Co. Ltd. v Spar Shipping AS [2016] EWCA Civ 982 has upheld Popplewell J’s decision that failure to pay hire on the nail in a time charter is not a breach of condition. IISTL stalwart Simon Rainey QC was on the winning side (though not on this issue): the court relied on the Restatement of the English Law of Contract, an increasingly respected publication for which another IISTL man, Professor Andrew Tettenborn, was partly responsible. More detailed analysis will follow later.

Collecting containers from bankrupt shipowners: liens, security and life at the sharp end.

An excellent post from The Maritime Advocate (issue 667) describes some events following the arrest of the Hanjin California in Sydney. Reproduced below:

Hanjin Crisis – Welcome to the Hanjin California

Frazer Hunt of Mills Oakley in Sydney writes –

September 19 2016 –

As we enter the third week following Hanjin Shipping filing for receivership, let’s review how the various stakeholders handled the fallout following arrest of MV “Hanjin California” in Sydney and whether there are any lessons to be learned before further containers are discharged from MV “Hanjin Milano” which remains anchored off Melbourne awaiting advice from Korea.

“So I called up the Captain…”

“Hanjin California” was arrested by unpaid bunker suppliers earlier this month after it berthed at SICT. The terminal discharged some of the containers and since Hanjin would not be paying any of the charges, exercised a lien over the containers for the stevedoring costs and administration charges. Consignees who had already paid freight were also required to pay these charges to obtain release of their containers. Still, if you wanted your container….

Then it got a lot more complicated: to secure return of container to the depot, Hanjin also required a deposit, bond or a solicitors letter of undertaking that the deposit would be paid on demand.

For a short period, the terminal ALSO required security for the return of the container. Consignees were then faced with the dilemma that if they returned the container to Hanjin’s depot, they would lose their security to the terminal but if they returned the container to the terminal, then they would lose the security provided to Hanjin. Fortunately, common sense quickly prevailed and the terminal withdrew their parallel demand.

“What a nice surprise (what a nice surprise)… bring your alibis…”

THEN the port authority got in on the act and asked the consignees to pay the wharfage costs that would have otherwise been paid by the vessel.

“There were voices down the corridor, I thought I heard them say.. Welcome to the Hanjin California…”

OH, your container holds dangerous goods? While grappling with the delays associated with the procedures referred to above and getting Hanjin to answer the phone, you are then served with a notice from the port authority to remove the container and threatened with penalties if it is not removed immediately. The notice then continued “You are invited to present information on any difficulties encountered in complying with the permitted time periods on the terminal which may be taken into account by the port authority when making a determination for the above alleged offence”.

“Mirrors on the ceiling, the pink champagne on ice…”

OK, so you have finally paid the stevedoring charges, wharfage costs and provided security for the return of the container and then picked up the container having also paid multiple fees for missed slots. Great, you now have your goods BUT: Hanjin’s container depots refused to accept re-delivery of Hanjin containers, presumably fearing that they would never be collected. You are asked to hold onto the container until further notice, presumably without further container demurrage accruing….hopefully….

“…Plenty of room at the Hanjin California”

In one sense, the consignees who got their containers out of the terminal were lucky – you have to feel sorry for the owners of goods in the Hanjin containers which were bundled up at the terminal and loaded on “Hanjin California” which remains under arrest at Glebe Island terminal that does not have facilities to load and unload containers with no appearance from the owners of the vessel in the arrest proceedings at this stage. Consignees who wish to have their containers discharged from “Hanjin California” will have to wait or apply to court to have their containers unloaded. Whether the costs associated with moving the vessel again for that purpose will be economically viable is another matter.

“Relax,” said the night man, “we are programmed to receive.
you can check-out any time you like, but you can never leave!”

Meanwhile, the residents near Glebe Island Terminal are not happy – it is most inconvenient for them to have to pull the shades down on their windows.

Up ahead in the distance, I saw a shimmering light….

Seriously, you cannot make this stuff up!

Hopefully, the service providers at other ports will learn from our experience and that procedures for the release of the remaining Hanjin containers will be more streamlined and with less angst.

AND I was thinking to myself, “This could be Heaven or this could be Hell”

 

 

Safe berths, charters and occupiers’ liability in the US

An otherwise unremarkable, but bitterly fought, safe berth / occupiers’ liability case from the Eastern District of Pennsylvania a few weeks ago. A tanker, the Athos I, was owned by Frescati, time-chartered to a tanker pool Star, and voyage-chartered by them to Citgo, an oil company, to carry a crude oil cargo from Venezuela to its own facility at Paulsboro, NJ (opposite Philadelphia). On the way in to the berth she hit an abandoned anchor, was holed, and oil escaped costing tens of millions to clean up. Could Frescati sue Citgo, the voyage (sub)charterers, for repair costs to the vessel (which actually they scrapped) plus the other costs incurred? Yes. The safe berth warranty was broken by Citgo. Interestingly the courts had earlier held that this enured to the benefit of Frescati, disponent owner under the time charter to Star, as a third-party beneficiary (In re Frescati Shipping Co Ltd, 718 F.3d 184, 200 (3d Cir. 2013): something lawyers in England might care to bear in mind, especially where a mesne charterer is bankrupt). In addition there was an occupiers’ liability claim against Citgo for negligence, which also succeeded, the court making it clear that there could be a pro-active duty to check for hidden hazards using things like sonar side-scans. Frescati recovered the clean-up costs they had paid, plus the repair costs, even though no repairs had in fact been done (the vessel having been scrapped); the latter point confirming that the rule as repair costs is much the same both sides of the Atlantic.

See In re Petition of Frescati Shipping Co Ltd, Civil Action Nos. 05-cv-305 (JHS), 08-cv-2898 (JHS), ED Pa, 25 July, 2016.

..

The freezing order — a useful weapon, but there is a price tag attached

The ability to get a worldwide freezing order with comparative ease is one of the reasons why claimants like to bring their heavy international litigation to England. Quite right too: but there is a price attached, which can be high. It is known as the undertaking in damages. Today Fiona Trust found this out to their cost in the latest episode of the Privalov saga, Fiona Trust v Privalov [2016] EWHC 2163 (Comm). Essentially Fiona, a Russian state-owned shipping conglomerate, alleged that another Russian shipping magnate, Yuri Nikitin (whom Russia had previously tried without success to extradite from the UK and has it seems recently taken steps to prosecute in his absence), had suborned an officer of theirs to enter into charters that were disadvantageous to them and hugely profitable to him, in exchange for a cut of the profits. They claimed a cool half-billion dollars or rather more in damages, and in 2005 and 2007 got orders freezing assets of Nikitin worth, in round figures, $600 million. After bitter litigation (see  Fiona Trust v Skarga & Nikitin [2013] EWCA Civ 275, and also Novoship (UK) Ltd v Mikhaylyuk & Ors [2014] EWCA Civ 908;[2015] Q.B. 499, the latter of which is now a leading case on account of profits), Fiona recovered about $16 million.

The day of reckoning then arrived for the undertaking in damages. Andrew Smith J had earlier decided, rightly, that findings of dishonesty on Nikitin’s part did not bar such claims, on the basis that even crooks had rights not to have their financial lives upended without recourse (see Fiona Trust v Privalov [2014] EWHC 3102 (Comm)). Males J in the present follow-on case decided that Nikitin was entitled to damages in a sum which remained to be calculated, but cannot have been too far from $50 million. Most of this arose from the loss of the opportunity to make profits in the volatile shipping market. In particular Males J made some points that could usefully be borne in mind:

(1) A ‘liberal approach’ was appropriate, in that the court should not be over eager in its scrutiny of the evidence or too ready to subject its methodology to minute criticism, in part because the very nature of the exercise rendered precision impossible;

(2) The fact that all claims to would-be profits were speculative and that it was always possible that the person seeking recompense would in fact have made a loss was no bar;

(3) Although loss of profits had to be proved and a “loss of chance” award was not appropriate, there was no need for rigorous proof and the court could look at the figure in the round with reference to the vagaries of business;

(4) Males J was unimpressed with an argument that Nikita had failed to mitigate his loss by failing to apply for permission to use the blocked funds for business activities. Not only was there no such exception in the terms of the freezing orders; in any case to demand that a defendant to litigation indulge in further satellite litigation in such a situation was hardly reasonable;

(5) He was also unconvinced by an argument that in a volatile shipping market it should be possible for the person seeking compensation to rely on the rate at which he could have borrowed money (LIBOR + 2.5), either as surrogate proof for the profits he would have made, or as a ‘conventional’ measure.

All in all, one suspects, a chain of litigation that seems a fairly Pyrrhic victory for Russian state shipping. $16 million against an incidental ‘undertaking in damages’ bill of three times that amount is not that pretty a balance sheet, and might well serve as a warning.

Andrew Tettenborn

Annual Colloquium

A final reminder that there are a few spaces still available at the IISTL’s Annual Colloquium at Swansea, the premier event in the shipping and commercial lawyers’ calendar, on 15-16 September. The theme is charterparties (of all sorts). The size of the gathering is deliberately kept from becoming enormous in order to ensure that everyone has a chance to benefit and (we hope) discuss the issues.

Details here: programme here: registration paperwork here. Further enquiries to April Adanah on 01792 602487, or Prof Baris Soyer on 01792 295125.

IX European Colloquium of Maritime Law Research 2016

This is a free conference taking place in Bilbao, Spain on 14-15 September, at the Bizkaia Aretoa. The theme is maritime liens, mortgages and forced sales. Details here. A large number of excellent speakers, including Profs Erik Røsæg and Paul Myburgh. Two IISTL stalwarts will be speaking, Prof Andrew Tettenborn and Prof Rhidian Thomas.  For information contact Olga Fotinopoulos, Olga.fotinopulos@ehu.eus, Tel + 00 34 945 01 3417.

October diary –Piraeus Conference

On 13-15 October this year we have the Ninth International Conference on Maritime Law in Piraeus. An excellent cast of speakers will feature, headed by names such as Marc Huybrechts, Thomas Schoenbaum and Giorgio Berlingieri who need no introduction from anyone. There will also be the IISTL’s own Andrew Tettenborn and old IISTL friend Olivier Cachard from Nancy, together with many others from industry, academia and government. A number of other IISTL members will also be there. Programme here: bookings here.

Freezing injunctions and contribution claims

A nice point about freezing injunctions in the High Court today, in which Leggatt J provided some joy for honest but hard-pressed litigants. Kazakhstan Kagazy (KK), a British company with big interests in paper & recycling in Kazakhstan, sued a number of its subsidiaries’ employees, including A and Z, for dishonestly siphoning off something over $100 million to themselves and their chums in Central Asia (the serious litigation is booked for next year). KK settled with Z for what one suspects was a tidy sum plus an agreement to co-operate in chasing the other defendants. Proceedings against Z were duly stayed.

A issued a Pt 20 notice claiming contribution from Z in the event that he was held liable to KK. As an adjunct he also sought a freezing injunction against Z. In fact the contribution notice was bad for other reasons, but Z also raised an interesting argument on the freezing injunction. According to The Veracruz [1992] 1 Lloyd’s Rep 353, there can be no freezing injunction until you have a right against the defendant: it won’t do to say, however convincingly, that you almost certainly will have a right next week and that there won’t then be a cat in hell’s chance of making it good if the defendant can hide his assets. Well then, said Z: this must protect me. Any right A may have against me for contribution will arise only when A has been sued by, or settled with, KK; until then there is no right but merely the prospect of one.

Apparently logical: but if correct, this would effectively mean that freezing injunctions would be a dead letter in contribution claims. Leggatt J was having none of it. To get freezing relief, he said, all you needed was to have the ability to bring proceedings which wouldn’t automatically be struck out. Since you can Part 20 a third party as soon as you are sued, and indeed A had done just that, it followed that had the  contribution notice been good, there could have been an asset-freeze. As I say, much relief for hard-pressed litigants.

See Kazakhstan Kagazy Plc v Zhunus & Ors [2016] EWHC 1048 (Comm), available on BAILII.

Andrew Tettenborn