THE FIRST ADMIRALTY CASE HEARD REMOTELY OWING TO COVID19 PANDEMIC

On 29 January 2020, the Admiralty Court made an order at the request of the claimant in Qatar National Bank QPSC v Owners of the Yacht Force India [2020] EWHC 103 (Admlty) that the yacht Force India be sold. The circumstances in which the order for the sale was granted were described in a previous post on this blog. See https://iistl.blog/2020/03/09/no-judgment-in-default-of-a-defence-in-in-rem-proceedings-against-an-arrested-ship-unless-the-court-is-satisfied-that-the-claim-has-been-proved/.

After twenty bids had been received by the Admiralty Marshal during the sale process, Qatar National Bank QPSC applied to the Court for an order to set aside the order for the sale. While the Admiralty Court declined to grant such order, it suspended the sale to enable a proper hearing to take place on notice to the interested parties. 

On 20 March 2020, the hearing took place by telephone as a result of the COVID19 pandemic, making Qatar National Bank QPSC v Owners of the Yacht Force India [2020] EWHC 719 (Admlty) the first case to be heard by the Admiralty Court remotely.

The Court decided to set aside the order for sale in the present case. That is because an independent third party paid the sums secured by the mortgage. As a result, the judicial sale of the yacht Force India was rendered unnecessary.

It may be worth noting here that the case at hand is exceptional in that the mortgage had been granted as additional security for a €27 million loan to finance the acquisition of a company which owned a property on an island off the coast of France. Thus, when the loan secured by the charge on the property was paid to Qatar National Bank QPSC, the smaller sum secured by the mortgage on the yacht was also discharged.

Indeed, the Admiralty Court emphasised the need for orders setting aside judicial sales of vessels to remain the exception rather than the norm, with a view to protecting its reputation and its ability in future cases to achieve a vessel’s market value when an order for sale is made.

NO JUDGMENT IN DEFAULT OF A DEFENCE IN IN REM PROCEEDINGS AGAINST AN ARRESTED SHIP UNLESS THE COURT IS SATISFIED THAT THE CLAIM HAS BEEN PROVED

In Qatar National Bank QPSC v Owners of the Yacht Force India [2020] EWHC 103 (Admlty), the claim arose out of a mortgage granted by Qatar National Bank QPSC over the yacht Force India as additional security for a €27 million loan to finance the acquisition of a company which owned a property on an island off the coast of France. The mortgage was limited to a principal amount of €5 million. Due instalments were not paid and the claimant, Qatar National Bank QPSC, served a notice of default in June 2018.

Two months later, Qatar National Bank QPSC issued in rem proceedings and arrested the yacht Force India. The defendants, Force India Ltd, did not appear at the trial. It was, however, apparent from a letter from their former solicitors to the Court dated 14 January 2020 that Force India Ltd were aware of the trial. Against this backdrop, Qatar National Bank QPSC applied for an order to strike out the defence if Force India Ltd did not attend the trial. Mr Justice Teare granted this order pursuant to CPR Part 39.3 (1).

His Justice explained, however, that, in a case concerning in rem proceedings against an arrested ship, it is not appropriate to grant judgment in default of a defence pursuant to CPR Part 61.9(3)(a)(iii), unless the Court is satisfied that the claim has been proved. That is because other parties may have an action in rem against the arrested vessel. Thus, their interests might be damaged if judgment is given without the claim having been proved. Furthermore, the Practice Direction to CPR Part 39 provides that the claimant must prove his/her claim where the trial proceeds in the absence of the defendant.

Accordingly, Mr Justice Teare examined the documents which proved the claim and gave judgment for the sums claimed. These included €5 million for the value of the mortgage plus interests and the costs of collection. In addition, ancillary orders were given for the yacht to be appraised and sold.

Want to Arrest in Singapore? If you’re Not Actually Malicious, Feel Free

For more than 150 years, the test for wrongful arrest of a vessel has been that of ‘malice’ and ‘gross negligence’ on the part of the arresting party, as first described in The Evangelismos (1858) 12 Moo PC 352. While this test remains unchallenged in England and Wales, other common law jurisdictions including, but not limited to, Australia, South Africa, and Singapore have questioned its validity. More recently, the so-called Evangelismos test came under scrutiny in the judgment of the Singapore High Court in Hansa Safety Services GmbH v The Owner of the Vessel, the “King Darwin” (The King Darwin) [2019] SGHC.

On 13 November 2018, the claimant, Hansa Safety Services GmbH, brought an action in rem for services rendered to the vessel, the King Darwin. The total sum of the claim was 5,864.00 euros. On the same day, Hansa Safety Services GmbH arrested the King Darwin pursuant to a warrant of arrest. On 19 November 2018, the owners of the King Darwin provided security and the vessel was released.

On 21 January 2019, the Insolvency Administrator of the owners of the King Darwin, Hendrik Gittermann, was granted leave to intervene in the action. In his summons, Hendrik Gittermann sought to set aside the warrant of arrest and obtain damages for wrongful arrest of the vessel from Hansa Safety Services GmbH.

On 21 March 2019, Hansa Safety Services GmbH served a Notice of Discontinuance which it had filed on 7 February 2019, fourteen days after service of the defence to it. The purpose of the Notice of Discontinuance was to rescind the action as a whole including the counterclaim for damages for wrongful arrest of the vessel from Hansa Safety Services GmbH.

On 22 March 2019, Hendrik Gittermann applied to strike out the Notice of Discontinuance on the ground that it is necessary to prevent injustice or an abuse of process of the Court. The Senior Assistant Registrar granted the application. Hansa Safety Services GmbH appealed.

Vincent Hoong JC dismissed the appeal and upheld the order to strike out the Notice of Discontinuance. According to Vincent Hoong JC, this was an appropriate case for the Court to exercise its inherent powers to strike out a Notice of Discontinuance to prevent injustice to Hendrik Gittermann. The time and effort that Hendrik Gittermann would expend in recommencing a claim for the wrongful arrest of the King Darwin from Hansa Safety Services GmbH, taken in conjunction with the uncertainty of the test to be applied when bringing a claim for damages for wrongful arrest outside of in rem proceedings, were sufficient to set aside the Notice of Discontinuance.

Hendrik Gittermann argued that, by discontinuing the action, Hansa Safety Services GmbH would deprive him of his right to pursue a claim for wrongful arrest, which must be pursued in the context of an in rem action by the arresting party. Vincent Hoong JC rejected this argument. Hendrik Gittermann could bring a claim for damages for wrongful arrest independently of any in rem action by the arresting party. Vincent Hoong JC, reviewing the judgments in The Wallet D Wallet [1893] P 202, Best Soar Ltd v Praxis Energy Agents Pte Ltd [2018] 3 SLR 423 and Congentra AG v Sixtenn Thirteen Marine Sa (The Nicholas M) [2009] 1 All ER 479 (Comm), explained that such claim could be brought under the tort of wrongful arrest, which has long been recognised by the English Courts.

Furthermore, Hendrik Gittermann argued that, were he to pursue a claim for wrongful arrest independently of any in rem action by the arresting party, the test to be applied is unclear. Vincent Hoong JC recognised that the Court of Appeal’s observations in The Kiku Pacific [1999] 2 SLR (R) 91 and The Vasiliy Golovin [2008] 4 SLR (R) 994 have raised arguments that the applicable test for pursuing a claim for wrongful arrest when an in rem action is discontinued and an independent action is brought should be that of ‘without reasonable or probable cause’, rather than ‘malice’, as suggested in The Evangelismos (1858) 12 Moo PC 352. Nevertheless, Vincent Hoong JC took the view that these observations were not enough to lay down a less stringent test and ‘malice’ would almost certainly be the relevant threshold.