UK: Congentra Ag v Sixteenthirteen Marine Sa [2008] Ewhc 1615 (Comm)

Last Updated: 13 August 2008

This case arose out of dispute between the owners and charterers of a vessel called "Nicholas M". The vessel was under a time charter providing for London arbitration and English law.

Briefly, the cargo of soyabean meal that was shipped from Argentina to St. Petersburg under a charter of the vessel was found to be wet and mouldy upon discharge at St. Petersburg. The owners and charterers disagreed as to the cause of the damage and liability for it.

After discharge was completed, the vessel was detained at St Petersburg for maintenance and repairs required by the vessel's classification society, Bureau Veritas, who had attended on board during discharge. There was also a further reason for the detention: Port State Control had also been on board and allegedly found a number of deficiencies including a hole in the bilge tank and damage to the steelwork. By the time the vessel was released, its next fixture had been cancelled.

In the subsequent arbitration proceedings started in London, owners contended that the charterers and consignees had deliberately sought to delay the vessel's discharge and departure from St. Petersburg by persuading the Port State Control to go on board and detain the vessel, further that they had done so in bad faith, resulting in a breach of the time charter and wrongful interference with the owners' business.

As a result, owners sought and obtained an attachment order against charterers in New York. There were therefore two parallel proceedings: London arbitration and New York Court proceedings relating to the attachment.

Charterers challenged the New York attachment on the grounds that it was wrongful. Inter alia, they argued that the attachment was obtained in bad faith and that the subsequent fixture would have been cancelled in any event because the repairs ordered by BV would not have been completed in time.

At the same time, the charterers applied to the English court on an urgent ex parte basis for a freezing injunction. [The injunction was sought to freeze assets belonging to the Owner so as to satisfy any award made by the London tribunal for wrongful attachment of Charterers' funds in New York]. The injunction was granted on the grounds of risk of dissipation of assets by the owners. This risk was considered sufficient to justify the court in intervening to grant a freezing injunction pursuant to section 44(3) Arbitration Act 1996 which allows either party to an arbitration in a case of urgency to apply to the court for an appropriate order to preserve evidence or assets.

Owners subsequently sought to have the freezing injunction set aside for a number of reasons, most particularly that the charterers had no justification for alleging wrongful attachment of their assets in New York.

The owners' application came before Mr. Justice Flaux in the Commercial Court. He found that owners' conduct was such that there remained a real risk of dissipation of assets, further that there had been no material non-disclosure in charterers' original application for a freezing injunction, both of which might have been good grounds for setting aside the freezing order.

More interestingly, however, he also decided as follows:

  1. On the governing law of the tort of wrongful attachment, he decided that there was a good arguable case this was US federal maritime law on the basis that the attachment was obtained in New York, so that the tort was allegedly committed there. The judge was not convinced by the alternative argument, namely, that as the charter was governed by English law ,the relevant tort was sufficiently connected to English law to make that the substantially more appropriate applicable law.

  2. Under US federal maritime law, the charterers had a good arguable case for wrongful attachment. Interestingly, although he did not need to decide the point, the judge then went on to discuss whether charterers would have had a good arguable case under English law. He concluded they would have done and cited the decision of Lord Steyn in Gregory v Portsmouth City Council [2000] 1 AC 419, where the House of Lords were dealing with the tort of malicious prosecution. In that case, Lord Steyn gave what Mr. Justice Flaux described as "express recognition that there may be scope for incremental growth and extension of the existing torts, including wrongful arrest." Mr. Justice Flaux's view was that recognising a tort of wrongful attachment of assets in maritime proceedings was no more than a limited extension to the existing tort of wrongful arrest, further that both wrongful attachment and wrongful arrest were a form of malicious prosecution.

  3. He disagreed with counsel for owners, who argued that irrespective of the governing law, charterers had no cause of action until the New York court vacated the order attaching their funds. The judge found that the attachment might remain in place because it satisfied the technical and procedural requirements and not because the issue of bad faith had been considered and decided upon or because the factual basis for obtaining the attachment in New York was beyond attack. In those circumstances, he decided that it could not be right that the charterers should be prevented from bringing a claim for wrongful attachment in another part of the world because the attachment in New York remained in place,

Consequently, the judge allowed the Charterer's freezing injunction to remain in place.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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