E and Others (Applicant/Claimant) v M (Respondent/Defendant)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 08 May 2013 |
| Neutral Citation | [2013] EWHC 895 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 08 May 2013 |
[2013] EWHC 895 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Mr Justice Hamblen
In the Matter of the Arbitration Act 1996 And
In the Matter of a Lmaa Arbitration
Ms Julia Dias QC (instructed by Reed Smith) for the Second Claimant
Mr John Jarvis QC and Miss Josephine Davies (instructed by Cooke, Young and Keiden) for the Defendant
Hearing dates: 12 April 2013
Introduction
The present hearing concerns an application by the Second Claimant ("the Claimant") and a cross application by the Defendant relating to a Worldwide Freezing Order granted by Gloster J on 9 March 2012 and renewed on 30 March 2012 ("the WFO").
A number of further orders have been made arising from the WFO. In particular on 26 October 2012 I held that the Defendant was in deliberate and contumacious contempt of the WFO in failing to file an affidavit of assets and that this contempt had been actively procured and instigated by its Chief Executive, Mr X. Pursuant to the orders I made in the autumn of 2012, permission was granted to issue a writ of sequestration against the real and personal property of both the Defendant and Mr X. Mr X was committed to prison for 18 months and a warrant for his arrest has been issued. The writs of sequestration have not yet been issued.
The Defendant has finally now provided an affidavit of assets. This was sworn on 14 March 2013 and served on the Claimant's solicitors the following day.
The affidavit was followed by further correspondence between the parties' solicitors relating to the adequacy of the affidavit provided.
The main applications made by the Claimant which are to be dealt with at the present hearing are for:
(1) an order debarring the Defendant from defending the underlying arbitration proceedings unless it fully and properly purges its contempt within 7 days;
(2) variation of the WFO to include expressly certain assets, escrow monies and dividend amounts held by a UK bank as security in separate litigation with certain of the companies in the same group as M, the so called "M Group"("the Securities)
(3) release of the counter-security of US$50,000 lodged by the Claimant with its solicitors, Reed Smith LLP, in fortification of its cross-undertaking in damages.
The main applications made by the Defendant which are to be determined at the present hearing are for:
(1) a declaration that it is not in contempt of court;
(2) an order that the WFO be discharged and/or for the release of MV "XYZ".
There are further applications which may arise depending on the resolution of these main issues.
General Background
By a charter party dated 20 May 2008 on an amended NYPE form ("the charter party"), the Claimant let a vessel ("the vessel") to the Defendant. During the course of the charterparty, the Defendant did not pay hire in the amounts required or at the times required.
This led to arbitration being commenced. The arbitration was begun in mid-2011. In August and November 2011 the Claimant obtained two interim partial awards for unpaid hire.
On about 30 December 2011 the vessel was dry-docked by the Claimant. Following dry-docking, the Defendant insisted that the vessel must perform a full sea trial so as to address the Defendant's concerns about her performance. The Claimant said that the Defendant could not insist on such a trial. During this period, the Claimant asserted a right to hire and the Defendant denied that it was obliged to pay.
On 4 March 2012, the Claimant terminated the charterparty prematurely relying on clauses 5 and 46 of the charterparty and asserting that the Defendant was in repudiatory breach of the charterparty. This alleged breach founds the lion's share of the claim for damages in support of which the WFO was granted on 9/30 March 2012.
The Issues
I propose to address the Issues under the following headings:
(1) Whether the Defendant has purged its contempt.
(2) Whether the WFO should be discharged.
(3) Whether the WFO should be varied to include the Securities.
(4) Whether the counter security should be released.
(1) Whether the Defendant has purged its contempt
The affidavit of assets was served on 15 March 2013.
By a letter dated 19 March 2013 the Claimant asserted that the affidavit was incomplete and incorrect and raised six queries. By a letter dated 8 April 2013 the Defendant's solicitors provided answers to these questions.
Subject to two points it is not now disputed that a satisfactory affidavit of assets has been provided. The first point made is that no accounts have been supplied. However, I accept that in this case accounts are not required as part of the affidavit of assets. That affidavit is required to identify the assets, not to provide evidence relating to them. The assets have been identified. Further, the Defendant states that it, as a no-ship Panamanian company, has no accounts, as has been confirmed by a witness statement from Mr X. This leads on to the second point which is that it is contended by the Claimant that that should be confirmed by affidavit. Since I have found that there is no obligation to provide accounts there can be no requirement to verify the non-existence of such accounts by affidavit. In any event, in all the circumstances, and bearing in mind the nature of the Defendant company, I would have accepted that a witness statement was sufficient.
On the face of it the Defendant has therefore finally purged its contempt by providing the long overdue affidavit of assets. However, the Claimant took a further point that for the contempt to be purged the Defendant not only had to provide that affidavit but also had to apologise to the court in a satisfactory manner. It was contended that the apology contained in Mr X's affidavit was insufficient because there was no adequate explanation of why the Court's order had not been complied with. However, there is an apology and that apology is not conditional or limited as was the case, for example, in the case of Lambeth LBC v Pead (unreported) which was relied upon by the Claimant. In my judgment the apology given is sufficient to enable the Defendant's contempt to be purged and it is entitled to the declaration sought by it.
It follows that the Claimant's application, made on the basis that the contempt had yet to be purged, that there should be an order debarring the Defendant from defending the arbitration does not arise. There were serious issues raised as to the Court's jurisdiction to make any such order and, if so, the appropriateness of doing so, but it is not necessary to resolve such issues.
For completeness I should add that the Claimant suggested that if I held that the contempt had been purged I should consider fining the Defendant for its past contempt. Previously it had been the Claimant's case that a fine would serve little purpose and the appropriate sanction against the Defendant was permission to issue a writ of sequestration, which I gave. In all the circumstances, which include the fact that the individual responsible for the contempt has been sentenced to imprisonment, I do not consider that a fine should be imposed.
(2) Whether the WFO should be discharged
The Defendant contended that it should be discharged for either or both of the following reasons:
(1) The Claimant's delay in prosecuting the underlying arbitration claim.
(2) The arrest of MV "XYZ" in alleged breach of the Claimant's undertaking to the Court.
As to (1), the Defendant stressed that a claimant who obtains a freezing injunction is under an obligation to proceed with the underlying claim as quickly as he can, as set out in the White Book at §25.1.25.11:
"A freezing injunction is an adjunct to a claim and not a substitute for the relief to be obtained at the trial. Therefore a claimant applying for and granted such injunction should press on quickly with their action. It as an abuse of process for a litigant to obtain a freezing injunction and then not to prosecute the action; a litigant is under a duty either to proceed with their claim or to apply, on their own motion, to have the injunction discharged ( Town and Country Building Society v Daisystar Ltd 139 N.L.J. 1563 (1989). Failure to progress the action, wherever it is taking place, is a ground upon which a court may discharge an injunction previously granted."
In the present case the Defendant submitted that there had been serious and inexcusable delay by the Claimant in prosecuting the claims which were the subject matter of the WFO made in March 2012. Over a year later there has still not been service of submissions advancing the claims which the Claimant stated to the Court in March 2012 that it intended to prosecute.
The Claimant accepted that an applicant for a freezing order would normally be expected to bring forward its claims with reasonable expedition, although it observed that the Court did not require the Claimant to give any undertaking to this effect.
It pointed out, by reference to Dr Panagopoulos's 12 th affidavit, that between 1 February 2012 and 4 April 2012 there were without prejudice discussions between the parties.
Thereafter the Claimant submitted that the delay in serving Submissions was explicable and excusable. It was bound up with the issue of whether the Claimant was to be allowed to proceed with its application for a third partial award without being required to incorporate its further claims.
In summary, on 9 April 2012 the Claimant applied to the Tribunal for an Interim Award on an expedited basis. This provoked an application by the Defendant to the Tribunal on 17 April 2012, in...
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