The claimant owner of the Moscow Stars chartered the vessel to PDVSA on a time charter in October 2016. The charterparty provided that the owner had a lien on all sums due under the charter. A cargo of crude oil was loaded on 14 October 2016 in Venezuela for discharge in Freeport, Bahamas. On 18 October 2016 the owner gave notice to exercise a lien over the cargo, alleging that there was an outstanding balance of hire of US$4.5 million. The vessel later sailed to Curacao and was still there at the time of the judgment.
On 26 November 2016 a further notice of lien was served by the owner. Some payments of hire had been made by PDVSA but further hire payments continued to accrue and there were still significant arrears.
The owner commenced arbitration against charterers claiming US$7.7 million, mainly in unpaid hire. The owner obtained permission from the tribunal to apply to the Court under Arbitration Act 1996, s 44 for an order for sale of the cargo.
By the time of the Court hearing the cargo had also been arrested by a number of other parties. Aside from the costs being incurred, the vessel was due in dry dock in January 2018 for SOLAS and Class inspections, and needed to be cargo-free in advance of that date.
The arbitration hearing was held in July 2017, but the award had not been handed down at the time of the Court judgment.
Held (Males J):
- The order for sale of the cargo was granted.
- The Court had the power to make an order for sale of goods only if they were "the subject of the proceedings". It was not sufficient that the goods were related to the arbitral proceedings in some way: a closer nexus between the cargo and the arbitral proceedings was required. The paradigm case is where the ownership of the goods is in dispute. But there was sufficient nexus where (as in this case) a contractual lien was being exercised over a defendant's goods as security for a claim which was being advanced in arbitration. (In this case the defendant was the owner of the cargo. The Judge stated that he was not considering what the position would be if the cargo were owned by a third party who was not a party to the arbitration.)
- The power to order a sale existed
where the relevant property was "of a perishable nature or
which for any other good reason it is desirable to sell
quickly". In the present case the cargo was not perishable.
However, there was no doubt that the sale of the cargo should be
ordered. The discretionary factors pointed overwhelmingly to that
conclusion:
3.1 The cargo had been on board for nine months and was likely to be so for many more months, even if there was an award to be enforced.
3.2 That prejudiced the claimant who was receiving no hire, was incurring operating expenses, and was faced with deadlines to comply with SOLAS and Class requirements.
3.3 The defendant would suffer little or no prejudice, in particular where there was no viable alternative such as discharge into storage.
3.4 If the cargo was sold, the goods would effectively be turned into money for the benefit of all parties.
- The Court had the power to direct the defendant to sign any sale contract as seller, in order to give effect to the order for sale.
(Dainford Navigation Inc v PDVSA Petroleo SA (The "Moscow Stars") [2017] EWHC 2150 (Comm))
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