Bazias 3, The (Bazias 4)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LLOYD,LORD JUSTICE RALPH GIBSON,LORD JUSTICE BUTLER-SLOSS |
| Judgment Date | 08 October 1992 |
| Judgment citation (vLex) | [1992] EWCA Civ J1008-3 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 92/0907 |
| Date | 08 October 1992 |
Admiralty Action in Rem Against the Ship or Vessel Bazias 4
And Admiralty Action in Rem Against the Ship or Vessel Bazias 3
[1992] EWCA Civ J1008-3
Lord Justice Lloyd
Lord Justice Ralph Gibson
Lord Justice Butler-Sloss
92/0907
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMIRALTY COURT
(MR JUSTICE SAVILLE)
(MR JUSTICE SHEEN)
Royal Courts of Justice
MR STEWART BOYD Q.C. and MR JULIAN FLAUX, instructed by Messrs Stephenson Howard, appeared for the Appellants (Interveners).
MISS BELINDA BUCKNALL Q.C. and MR CHARLES HADDON-CAVE, instructed by Messrs Herbert Smith, appeared for the Respondents (Plaintiffs.)
MR STEPHEN MALES, instructed by Messrs Sinclair Roche & Temperley, appeared for the Respondents (Defendants.)
The defendants, Romline Shipping Company, are a state trading organisation situated in Constanza, Romania. They are the owners of two vessels known as the Bazias 3 and the Bazias 4. By two bare boat charters dated 17th August 1990 they were chartered to the plaintiffs, Greenmar Navigation Limited, for a period of five years from November 1990. The charters were in identical terms; both contained an arbitration clause.
In May 1991 the plaintiffs time chartered the vessels to Sally Line Limited. They were employed on a cross-channel ferry service between Ramsgate and Ostend. On 12th May 1992 the defendants withdrew both vessels on the ground of non-payment of hire and other breaches of the bare boat charters. On 13th May Sally Line gave notice that, as the plaintiffs were no longer able to perform under the time charters, those charters were at an end.
On 8th June the defendants commenced arbitration proceedings against the plaintiffs, claiming unpaid hire and damages. On 25th August the plaintiffs served defence and counterclaim in the arbitration, claiming inter alia a total of $5.6 million damages for loss of profit over the unexpired period of the bare boat charters. Meanwhile, on 12th June 1992, the defendants entered into fresh bare boat charters with Sally Line for a period of five years. So the vessels were able to continue to be employed on the cross-channel service. There were provisions in the substitute bare boat charters which expressly recognised the possibility—one might even say probability—that the vessels would be arrested pursuant to claims against the defendants.
On 24th September the plaintiffs issued proceedings in rem against the vessels, having given due warning that they intended to arrest the vessels in order to obtain security for their counterclaim in the arbitration. The amount of security sought, including interest, amounted to $10.7 million although that, of course, far exceeds the value of the two vessels. On 28th September the vessels were arrested and taken into the custody of the Admiralty Marshall. It is not disputed that the plaintiffs' claims fall within the jurisdiction of the Admiralty Court in rem and that the jurisdiction was properly invoked.
On 29th September the case came before Mr Justice Saville, as vacation judge in Admiralty, on the defendants' motion for a stay under section 1 of the Arbitration Act 1975 and for the warrant of arrest to be set aside. There was an application by Sally Line to intervene. The matter was dealt with in a great hurry. The plaintiffs' counsel was given only 20 minutes notice of the hearing. Mr Justice Saville read the affidavits prepared on behalf of the defendants and Sally Line in his room. There was no time for the plaintiffs to file any evidence themselves and scarcely any time for their counsel to make submissions. Mr Justice Saville made an order that the vessels should remain under arrest, but allowed them to return to their employment on their cross-channel service against certain undertakings given by the defendants and by Sally Line. He describes this as a sensible, short term commercial solution. He did not deal with the application under section 1 of the Arbitration Act. Regrettably, he gave no judgment, formal or informal. He did not identify the source of his discretion or explain why he was exercising it in the way he did. It is now common ground that the order made by the judge was a contradiction in terms. There is no way in which the vessels could remain within the custody of the Admiralty Marshall, as required by the judge, and yet be allowed to trade outside the jurisdiction.
On Monday 5th October Mr Justice Sheen made an order regularising the position. He varied the order of Mr Justice Saville by ordering that the vessels return to, or remain in, the jurisdiction of the court pending a full hearing on 9th October. But on 6th October the defendants and Sally Line obtained leave to appeal from Mr Justice Sheen's order. Later the same day they obtained leave to appeal from Mr Justice Saville's order. On that occasion Mr Justice Saville said
"According to my recollection the question whether the vessels should be released was touched on but in view of the urgency of the application before me nobody at that stage considered that this question was more than a technical point. No-one suggested that the question whether the vessels should be released made any practical difference. I do not blame anyone for that, in view of the serious time constraints."
Mr Justice Saville then emphasised that his order of 29th September was only ever intended as an immediate short-term and temporary commercial solution, balancing the interests of all the parties as best he could. Accordingly, he gave leave without reluctance to all the parties to appeal against his order.
It is agreed on all sides that the plaintiffs are entitled to a mandatory stay under section 1 of the Arbitration Act 1975 and I propose to proceed on the assumption that a stay had been granted, as it should have been.
The important question of principle which has been debated before us is the extent of the discretion under section 26 of the Civil Jurisdiction and Judgments Act 1982 and the effect of that section on the pre-existing practice of the Admiralty Court. Mr Males, on behalf of the defendants, and Mr Boyd, on behalf of Sally Line, argue that the pre-existing practice is preserved by section 26 so that when a claim is subject to an arbitration clause, the court has a discretion to release the vessel without requiring equivalent security, depending on whether the defendant is likely to be able to meet any arbitration award in the plaintiffs' favour.
Miss Bucknall, for the plaintiffs, argues that the effect of section 26 was to assimilate claims in arbitration with in rem proceedings in the Admiralty Court, so that the discretion is now the same in both classes of case.
Mr Justice Saville did not consider section 26, and his decision both to release the vessel and not to release the vessel, shows that he did not in reality exercise a discretion under Order 75, rule 13. There...
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