Qatar National Bank Q.P.S.C v The Owner of the Yacht Force India
| Jurisdiction | England & Wales |
| Judge | Mr Justice Teare,Mr. Justice Teare |
| Judgment Date | 27 January 2020 |
| Neutral Citation | [2020] EWHC 103 (Admlty) |
| Docket Number | Case No: AD 2018 000096 |
| Court | Queen's Bench Division (Admiralty) |
| Date | 27 January 2020 |
[2020] EWHC 103 (Admlty)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMIRALTY COURT
ADMIRALTY ACTION IN REM AGAINST THE YACHT FORCE INDIA
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Justice Teare
Case No: AD 2018 000096
Gideon Shirazi (instructed by Ince Gordon Dadds LLP.) for the Claimant
The Defendant did not appear and was not represented
Hearing date: 15 January 2020
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.
The Honourable Mr Justice Teare
Introduction
This is the trial of an action in rem which the Claimant, Qatar National Bank, seeks to enforce a mortgage on the motor yacht FORCE INDIA. The yacht is described as a superyacht, being a 49.9 metre Mangusta 165. She has been arrested and remains under arrest in Southampton.
Unusually, the mortgage was not granted as security for a loan to the owner of the yacht to enable him to purchase the yacht. A related company known as Gizmo had borrowed some €27 million in 2008 to finance the acquisition of a company which owned a property on an island off the coast of France. The mortgage on the yacht was later granted as additional security for that loan in the following circumstances.
The loan (which had been assigned to the Claimant) was due to be repaid in 2015 but negotiations took place with a view to extending the loan. By the First Amendment Letter dated 18 February 2016 the loan was extended to 31 March 2016. However, there was a need for further negotiations and by a Second Amendment Letter dated 29 September 2016 the loan was extended to 30 June 2017 on condition that a mortgage was granted over the yacht FORCE INDIA which was owned by a company related to Gizmo Invest SA. By a side letter dated 27 October 2016 it was agreed that the mortgage was limited to “a principal amount of €5 million”. The mortgage and associated deed of covenant were not executed until 15 February 2017. The mortgage was governed by Maltese law (that being the law pursuant to which the yacht had been registered) and the deed of covenant was expressly governed by English law.
Due instalments were not paid and the Claimant reserved its rights. By a Third Amendment Letter dated 13 November 2017 it was agreed that if the yacht were sold the sale proceeds would be paid to the Claimant in reduction of the amounts owing under the loan.
In January 2018 the yacht was arrested for non-payment of crew wages and judgment in default was obtained in May 2018.
On 22 June 2018 the Claimant served a notice of default. The default relied upon was a failure to pay instalments due since January 2018 pursuant to the terms of the Third Amendment Letter. Payment was demanded of the full sum owing of almost €17m. and on 3 July 2018 the Claimant issued a caution against the release of the yacht pursuant to CPR Part 61.8(2).
The Claimant's in rem proceedings were issued on 30 August 2018. By this time the crew claim had been discharged and the Claimant decided to arrest the yacht in its own action in rem.
The Owner of the yacht defended the claim by alleging that between August and October 2016 it was specifically agreed and understood between the Claimant and the Defendant that the mortgage would only be enforceable in the event that the yacht was in fact sold. That contention was denied.
In November 2019 the solicitors acting for the Defendants came off the record. The Defendant did not appear at the trial.
It was, however, apparent from a letter from the Defendant's former solicitors to the Court dated 14 January 2020 that the Defendant was aware of the trial. In those circumstances there was no reason why the court should not conduct the trial in the absence of the Defendant pursuant to CPR 39.3(1). The trial had been fixed for some time and the Claimants had prepared for it.
The letter from the Defendant's former solicitors dated 14 January 2020 enclosed a letter from a third party who “support(ed) the postponement of the hearing”. That postponement or adjournment also appeared to be supported by the Defendant's former solicitors though no formal application for an adjournment appears to have been made by the Defendant. The Claimant opposed any adjournment and in circumstances where the trial had been listed for some time and the Claimants had prepared for it there were no grounds for an adjournment.
CPR Part 39.3(1) gives the court power to strike out the Defence if the Defendant does not attend the trial. Counsel for the Claimant applied for an order to that effect and I granted it. In circumstances where the Defendant had not appeared at the trial to advance its defence and where the defence relied upon the evidence of witnesses who had not been brought to court to give their evidence and to be cross-examined upon it there was every reason to strike out the defence and so I acceded to the application.
However, since this is an Admiralty claim in rem (albeit one in which the Defendants had acknowledged service) it would not be appropriate to grant judgment in default of a defence unless the Court was satisfied that the claim had been proved; see CPR Part 61.9(3)(a)(iii). That is because other parties may have an in rem against the arrested vessel and their interest might therefore be damaged if judgment is given without the claim having been proved. In any event the Practice Direction to CPR Part 39 contemplates that the claimant must prove its claim where the trial proceeds in the absence of the defendant; see CPR 39 PD 2.2(1)(a).
Accordingly counsel opened the case by taking the court to the documents which proved the claim, calling the evidence of two witnesses and making appropriate submissions in order to be able to satisfy the court that the claim was sound.
At the outset counsel sought permission to amend the Particulars of Claim by correcting the name of the Claimant, making certain typographical corrections and bringing the sums claimed in respect of principal, interest and the costs of collection up to date. I granted that permission. By the end of the hearing it appeared that certain further amendments to the costs of collection were required and I gave permission in principle, on terms that the supporting evidence be provided within 7 days.
By letter dated 21 January 2020 the Claimant provided the court with the Amended Particulars of Claim. Those particulars also included reference to a clause relied upon at the hearing and to an additional claim in respect of mortgagee interest.
The Facility Letter, its amendments and the mortgage on the yacht
The Facility Letter was dated 28 August 2008 and was issued by Ansbacher who had agreed to lend €27 million to Gizmo of Luxembourg. Repayment was provided by clause 2.1 and envisaged that the loan would be repaid within 7 years. Clause 2.3 provided for repayment of the outstanding sum in the event of a default in the following terms:
“2.3 In the case of an Event of default as defined in paragraph 13 below we may demand repayment of the outstanding amount of the Loan, and you shall immediately pay to us such amount together with accrued interest.”
Security for the loan was provided in clause 5 and included a charge on the French property (to be purchased with the loan) and a personal guarantee from Dr. Mallya, an individual closely connected with the borrower.
Interest was payable pursuant to clause 8. Clause 8.1 set out the rate. Clause 8.2 provided for the interest to be calculated daily and for any interest to itself attract interest. Thus this was a provision for compound interest, although that adjective was not in fact used. Clause 8.3 provided for a penalty rate of interest, 3% above the rate provided in clause 8.1.
Clause 13.1 listed the events of default which included:
“(i) default is made in the payment on the due date of any amount payable under this facility letter.”
Clause 13.2 provided that:
“13.2 Immediately upon the occurrence of an Event of Default the Loan shall be cancelled ……….and all amounts outstanding under the Loan shall become immediately due and payable by you without presentment, demand, protest or any other notice whatever.”
Clause 17 provided for the facility letter to be governed by English law.
By a deed of general assignment dated 12 May 2011 the loan was assigned to the Claimant who had purchased the share capital in Ansbacher.
By the First Amendment Letter dated 18 February 2016 the loan was extended to 30 June 2016 when all amounts drawn and outstanding were to be repaid.
By the Second Amendment Letter dated 28 September 2016 the loan was extended until 30 June 2017. Provision was made for monthly repayments followed by a balloon...
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