Dainford Navigation Inc. (Claimant/Owner) v Pdvsa Petroleo S.A and Another (Defendant/Charterer)
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Males |
| Judgment Date | 02 August 2017 |
| Neutral Citation | [2017] EWHC 2150 (Comm) |
| Docket Number | Case No: CL-2017-000283 |
| Date | 02 August 2017 |
| Court | Queen's Bench Division (Commercial Court) |
[2017] EWHC 2150 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
The Rolls Building
7 Rolls Buildings
London, EC4A 1NL
Mr. Justice Males
Case No: CL-2017-000283
Mr. Michael Coburn QC and Mr. Rupert Hamilton (instructed by HFW) appeared for the Claimant/Owner.
Mr. Michael Davey QC and Ms. Nichola Warrender (instructed by Stephenson Harwood) appeared for the Defendant/Charterer.
The application
This is an application by the claimant, the owner of the vessel "MOSCOW STARS", for an order for sale of the cargo of about 38,000 gross metric tons of Santa Barbara crude oil, and 12,000 gross metric tons of Anaco crude oil currently on board. The cargo was loaded in October 2016, pursuant to a time charter between the claimant and the defendant, PDVSA, the Venezuelan state-owned oil and gas company. This was one of a total of 14 time charters between PDVSA and companies within the Russian state-owned shipping group PAO Sovcomflot.
The application is made pursuant to section 44 of the Arbitration Act 1996. It is made with the permission of the arbitral tribunal, which was given on 13th December 2016, although this application was only issued on 5th May 2017.
Background
It is the claimant's case that there have been repeated failures on the part of the defendant to pay time charter hire since January 2016, although some payments have been made. The cargo was loaded on 14th October 2016, at Puerto La Cruz, in Venezuela, and the vessel was ordered to proceed to Freeport, in the Bahamas, for discharge. The voyage should have taken only a few days. At that stage, according to the claimant, there was an outstanding balance of some US$4.5 million. As a result of the failures by the defendant to pay hire, the claimant gave notice of exercise of a lien over the cargo on 18th October 2016, when the vessel was off the intended discharge port. The charterparty provides, in the usual way, that the owner has a lien on all sums due under the charter. The vessel later sailed to Bullen Bay, Curacao, in accordance with further orders given by the defendant. It has remained there ever since.
On 26th November 2016 the claimant served a further notice of exercise of a lien. Since then, it has updated the defendant from time-to-time on the sums due, as hire has continued to accrue at the charter rate of US$29,000 per day. Some payments were made by the defendant in December 2016 and January 2017 but it appears that they were insufficient to clear the then-existing arrears. No payments have been made since then.
The charter contains a London arbitration clause, and arbitration has been commenced. The claimant claims hire and other outstanding sums, either as sums due under the charter or by way of damages. In financial terms, the claim for hire is the principal claim. As of today, the claimant says that about US$7.7 million is outstanding.
As already noted, in December 2016 the claimant sought and obtained permission from the arbitral tribunal to apply to the court for an order for sale of the cargo. At the same time its associated company, which is the owner of a vessel called "NS COLUMBUS", obtained the same permission in an arbitration between it and PDVSA, the arbitrators in the two cases being the same.
On 21st December 2016 the claimant and three other companies in the Sovcomflot group arrested the cargo, with the leave of the Curaçao court. On 18th January 2017 a further eight Sovcomflot companies did likewise.
Accordingly the cargo is currently subject to a contractual lien being exercised by the claimant for hire and other sums due under the charter, as well as being subject to arrest at the suit of the claimant and 11 other companies in the same group, who also have similar claims under different charters.
Steps were taken by the owner of the "NS COLUMBUS" to seek an order from this court for the sale of the cargo on board that vessel pursuant to the permission given by the arbitrators in that arbitration. It is unnecessary to set out the detail of those steps. It is sufficient to say that the sale was opposed by the defendant, which proposed instead that the cargo should be discharged into storage in St. Eustatius, a course which the owner of the "NS COLUMBUS" was prepared to agree. However, such storage proved impossible to arrange on satisfactory agreed terms. In the end, the "NS COLUMBUS" cargo was discharged into storage but there were considerable disputes and, eventually, the court in St. Eustatius made an order for the sale of the cargo. The cargo has not yet been sold and, as I understand it, the order made by the court there is subject to an appeal by PDVSA.
Meanwhile, the "MOSCOW STARS" and its cargo are currently drifting off Curaçao. The claimant is incurring all the usual costs of running the vessel, including not only paying the crew, but also paying for expenses, such as the supply of bunkers, which the defendant is obliged to provide and pay for under the charterparty but for which it is failing to pay. It is likely that the vessel's hull is becoming increasingly fouled. The vessel is scheduled to go into dry-dock in January 2018 for inspections required by SOLAS and by Class, and needs to be cargo-free in advance of this date in order for that to happen.
A hearing was held in the arbitration in July 2017, in order to deal with the claimant's principal monetary claims. The Tribunal has indicated that it will produce its award as soon as possible, and the claimant hopes that this will be before the end of this month. A further hearing to deal with remaining issues has been fixed to take place during the week beginning 18th September 2017.
However, there is unchallenged evidence from the claimant, that even if it obtains an award in its favour, it would be likely to take a further three to four months to enforce any award in Curaçao and, potentially, this would take very much longer if the defendant objects or seeks to frustrate this enforcement.
It is reasonable to suppose that the defendant will take whatever steps it can to resist enforcement of any award which the claimant may obtain. On any view, therefore, a resolution of the current impasse is likely to be many months away.
These, in brief, are the circumstances in which the current application is made.
The issues
Mr. Michael Davey QC for the defendant submits that there are three reasons why the claimant's application should be dismissed, although he recognises that the latter two overlap.
They are as follows: (1), there is no power to order the sale of a cargo under section 44(2)(d) of the Arbitration Act 1996, unless the cargo is the "subject" of the arbitral proceedings, and that is not the case here; (2), if there is such a power, it can only be exercised within the scope of CPR 25.1(c)(v), which requires either that the cargo is perishable (which it is not), or that there is some other good reason why it should be sold "quickly", and that is not the case; and, (3), in any event, the exercise of such a power would be inappropriate in all the circumstances.
"Goods the subject of the proceedings"
Section 44(1) of the Arbitration Act 1996 provides:
"(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for purposes of and in relation to legal proceedings".
Section 44(2) provides:
"Those matters are —
(a) the taking of the evidence of witnesses;
(b) the preservation of evidence;
(c) making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings —
(i) for the inspection, photographing, preservation, custody or detention of the property, or
(ii) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property; and for that purpose authorising any person to enter any premises in the possession or control of a party to the arbitration;
(d) the sale of any goods the subject of the proceedings;
(e) the granting of an interim injunction or the appointment of a receiver".
In the present case the application is made under section 44(2)(d). Accordingly the court has power to order the sale of the cargo, only if the cargo comprises "goods the subject of the proceedings". There is no issue about "goods"; the issue is whether the cargo is "the subject of the proceedings", that is to say, the arbitration proceedings.
It appears that orders for the sale of cargoes have been made by Commercial Court judges in the past in circumstances similar to those in the present case. One example is The Stelios B, 24th March 2006, a decision of Tomlinson J, of which a brief summary only is reported in the Lloyd's Maritime Law Newsletter. Unfortunately that summary contains no indication whether the judgment addressed the issue whether the cargo ordered to be sold was the subject of the arbitration proceedings in that case.
Although such orders appear to have been made also in other cases, it is not apparent in what circumstances (for example, whether they were opposed and, if so, on what grounds). In the end I have not been referred to any case in this jurisdiction in which the question has been the subject of a reasoned decision.
The question has arisen in Singapore, where the relevant arbitration legislation is similar in some respects, although...
To continue reading
Request your trial
-
Dainford Navigation Inc. v PDVSA Petroleo S.A
...was mooted. 25 The application then came before the Honourable Mr Justice Males on 3 August 2017. The judgment is reported at [2017] 2 Lloyd's Law Reports 409. 26 Males J rejected the Defendant's arguments: the Court did have a power to make an order for sale under s. 44(2)(d) because ther......
-
The 'MOSCOW STARS' Charterers Challenge Court's Power To Sell Cargo In Arbitration Dispute
...party not involved in the underlying proceedings. Footnotes [1] Dainford Navigation Inc. v PDVSA Petroleo SA (The " MOSCOW STARS") (2017) - EWHC 2150 (Comm) (02 August 2017) [2] Judgment of Lord Millett in On Demand Information Plc v Michael Gerson Finance Plc [2002] UKHL 13, [2003] 1 AC 36......
-
Court Orders Sale Of Non-Perishable Cargo Before Arbitrators Have Determined Rights To Sell
...Dainford Navigation Inc v PDVSA Petroleo SA; 'Moscow Stars' [2017] EWHC 2150 (Comm), Judge Males was asked to order the sale of a non-perishable cargo to compensate a ship owner for non-payment of the charter in support of an arbitration but before the arbitrators had determined whether the......