Dainford Navigation Inc. v PDVSA Petroleo S.A
| Jurisdiction | England & Wales |
| Judge | Christopher Hancock |
| Judgment Date | 13 August 2018 |
| Neutral Citation | [2018] EWHC 2130 (Comm) |
| Date | 13 August 2018 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2016-000826 & CL-2017-000283 |
[2018] EWHC 2130 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Hancock QC SITTING AS A DEPUTY HIGH COURT JUDGE
Case No: CL-2016-000826 & CL-2017-000283
Thomas Steward (instructed by HFW) for the Claimants
Tom Bird (instructed by Stephenson Harwood) for the Defendants
Hearing date: 11 May 2018
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Christopher Hancock QC SITTING AS A DEPUTY HIGH COURT JUDGE
Christopher Hancock QC sitting as a Deputy High Court Judge:
Introduction.
These are two related applications arising out of the charter of two vessels by the Charterers (“Charterers”) from the two Owners' companies (“Owners”). Both applications arise out of virtually identical facts. Because of this, I set out the factual background first, before turning to the issues, which differ in the two different applications.
The charterparties and the arbitrations.
In early 2016, substantial arrears had accrued in respect of the hire due from the Charterers under 14 time charterparties with companies in the Sovcomflot (“SCF”) group: by 14 June 2016, arrears stood at US$27.7 million, and by 13 July 2016, arrears were over US$30 million. Some sums were paid, but not enough to reduce the arrears owed.
On 14 October 2016, the Owners commenced arbitrations for the outstanding hire. Of particular relevance for present purposes, in two sets of arbitration proceedings which were heard concurrently they claimed the hire due under the two charterparties in respect of the MOSCOW STARS and the NS COLUMBUS which, at that time, stood at US$4,543,787.85 and US$6,588,366.14 respectively.
In October 2016, cargoes of oil had been loaded onboard the MOSCOW STARS and the NS COLUMBUS by the Charterers, and bills of lading issued naming the Charterers as shipper and “ PDVSA FOR STORAGE” as consignee.
As security for their unpaid claims, therefore, the Owners then exercised liens over the cargoes onboard the respective vessels: on 18 October 2016, a lien was exercised over the MOSCOW STARS while she was off the intended discharge port of Freeport, Bahamas; and on 15 October 2016, a lien was exercised over the NS COLUMBUS while she was off the intended discharge port of St Eustatius in the Dutch Antilles.
On 14 October 2016, the Owners applied for an arrest of the cargo onboard the NS COLUMBUS in St Eustatius, which was granted on 20 October 2016. Other SCF companies then also arrested the cargo on 3 November 2016.
On or about 22 November 2016, the MOSCOW STARS proceeded to Bullen Bay, Curaçao, where she remained at anchorage. Dainford, along with other SCF companies, also then applied to arrest the cargo onboard that vessel, on 16 December 2016 in Curaçao, which was granted on 20 December 2016.
Hire continued to accrue on both vessels and, although the Charterers made some further payments, it was still not enough to clear the arrears.
Applications for sale
The parties then found themselves at an impasse: the Owners were unwilling to give up their security, but the Charterers had failed to make any offer of alternative security which was acceptable to the Owners.
The Owners therefore sought permission from the arbitral tribunals to make applications to the High Court in these two sets of proceedings for a sale of the cargoes under s. 44 of the Arbitration Act 1996 (“the 1996 Act”). The tribunals granted permission in both arbitrations on 13 December 2016.
On 29 December 2016, the Owners issued proceedings in the High Court in relation to the NS COLUMBUS. Permission was sought (and obtained) for substituted service on Stephenson Harwood, Solicitors for the Charterers in the arbitrations, since the Charterers had refused to nominate solicitors to accept service.
Witness statements were exchanged in relation to the application in London as follows:
(1) 28 December 2016, first and second statements of Mr Butler on behalf of the Owners;
(2) 9 February 2017, first statement of Mr Gibbons on behalf of the Charterers;
(3) 24 February 2017, third statement of Mr Butler on behalf of the Owners;
(4) 22 March 2017, fourth statement of Mr Butler on behalf of the Owners;
(5) 23 March 2017, second statement of Mr Gibbons on behalf of the Charterers.
The Owners contended that the Court had jurisdiction to grant this relief, and that this was an appropriate case for such, because:
(1) The charter period had expired on 30 October 2016. However, whilst the goods remained on the vessel, hire was continuing to increase, and the Owners were unable to bring the charter to an end and utilise the vessel elsewhere.
(2) The Owners were not willing however to give up their lien and it was reasonable not to do so.
(3) There was no other available storage in the Caribbean other than some storage which was leased to the Charterers, and the Owners were not willing to use that storage.
The Charterers raised three objections to the Owners' application:
(1) There was no power to order the sale of a cargo under section 44(2)(d) of the 1996 Act, unless the cargo was the “subject” of the arbitral proceedings, and that was not the case here;
(2) If there was such a power, it could only be exercised within the scope of CPR 25.1(c)(v), which requires either that the cargo was perishable (which it was not), or that there is some other good reason why it should be sold “quickly”, which was not the case; and,
(3) In any event, the exercise of such a power would be inappropriate in all the circumstances. These circumstances included the fact that the arbitrations were still ongoing, and the fact that the cargo was under arrest in St Eustatius, which, it was said, gave rise to practical problems of enforcement of any order for sale. The suggested way forward included an application in the country of arrest, i.e. the Dutch Antilles.
On 20 February 2017, without notice to Owners, the Charterers submitted a petition to the St Eustatius Court for the cargo to be discharged into and held in shore tanks owned by Nustar, which tanks were leased to an affiliate of the Charterers. At this point, the English application had not been listed, but much of the preparatory work had been done.
The term of the petition are notable. They included the following:
“17. It must be stated first and foremost that the NS COLUMBUS itself (the vessel) was not attached. However, since the cargo located onboard the NS COLUMBUS was attached as an unintended side effect the costs for PDVSA are accumulating unnecessarily”…
20. PDVSA has a legal duty to limit its damages.
21. Reasonably, the Charterers are obliged to cooperate in preventing that PDVSA would incur additional damages and would run the risk with regard to the insurance of the NS COLUMBUS.
22. SNC has requested a sale order from the English Courts prior to a definitive judgment in the arbitration proceedings.
23. This qualifies as an improper use of an attachment in Sint Eustatius in order to effectuate the sale of the cargo without a title to enforcement.
24. Reasonably, the Charterers are obliged to cooperate in preventing that PDVSA would incur additional damages. The Charterers are abusing their rights by preventing the cargo from being transferred, or at least by not cooperating in the transfer of the cargo which is unlawful vis a vis PDVSA….
THEREFORE:
That it may please your Honourable to give a judgment, where possible provisionally enforceable:
1. principally ordering the Charterers to permit and tolerate that PDVSA transfers the cargo currently on board the NS COLUMBUS to bunkers on Statia under the control of PDVSA for storage, subject to penalty payments of USD 1 million per day in case the attaching parties would not comply with such order, and ordering the Charterers to pay for the costs of the proceedings;
2. alternatively ordering the Charterers to permit and tolerate that PDVSA transfers the cargo currently on board the NS COLUMBUS to bunkers on Statia under the control of PDVSA for storage while appointing a third party (to be determined by the court) as custodian for the cargo, subject to penalty payments of USD 1 million per day in case the attaching parties would not comply with such order, and ordering the Charterers to pay for the costs of the proceedings.
The Owners assert that this was unsatisfactory for two obvious reasons: first, because English proceedings were already on foot in which the Charterers were adopting the position that there was no need for action because the cargo was not perishable and that there were ongoing arbitration proceedings which made the Owners' application premature; and secondly, because the shore tanks were leased by the Charterers and under their control. A bare assertion was made by the Charterers (in correspondence but not in the Charterers' petition itself) that the discharge would be “ subject to the local arrests / attachments and Owners' putative lien,” but this was of little comfort in circumstances where, so the Owners said, local law would not recognise the lien.
What the Charterers' petition did not include, and what the Charterers did not offer, was any guarantees to protect the Owners. The Owners therefore counterclaimed for an order for sale; or alternatively for the production of guarantees from Nustar and the Charterers as a precondition to discharge. The Charterers, for their part, argued that whether or not the cargo should be sold was a matter which the...
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