Tecoil Shipping Ltd v Neptune EHF
| Jurisdiction | England & Wales |
| Judge | Mr Admiralty |
| Judgment Date | 15 June 2021 |
| Neutral Citation | [2021] EWHC 1582 (Admlty) |
| Date | 15 June 2021 |
| Court | Queen's Bench Division (Admiralty) |
| Docket Number | Case No. AD-2020-000084 |
[2021] EWHC 1582 (Admlty)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
ADMIRALTY COURT (QBD)
Royal Courts of Justice
Rolls Building, Fetter Lane, London EC4A 1NL
Mr Admiralty REGISTRAR DAVISON
Case No. AD-2020-000084
Mr Tom Bird (instructed by Stephenson Harwood) for the Claimant
Mr Kishore Sharma (instructed by Clyde & Co) for the Defendants
Hearing date: 18 May 2021 (by Microsoft Teams)
Approved Judgment (promulgated via publication on Bailii)
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.
Introduction
On 18 May 2021 I heard cross-applications – the defendants' application to set aside judgment in default and the claimant's application for summary judgment. I reserved my decision. On 25 May 2021, which was after I had drafted my judgment but before I had circulated the draft, I received an email from the parties to the effect that they had settled in principle. The parties invited me to “down tools” pending finalisation of the settlement agreement.
Following the practice encouraged in HFC Bank Plc v HSBC Bank Plc (CAT 10th February 2000), the parties were absolutely correct to have informed me of the settlement in principle and I record my gratitude to them for having done so. As the Court of Appeal said in that case:
“… in a case where judgment has been reserved, it is the duty of the parties and their professional advisers to inform the court immediately they become aware of any development which may make it unnecessary for judgment to be delivered. The foundation of that duty is not the personal inconvenience caused to the members of the court, acute though that may be. It is the requirement, which should be obvious to all, that the court's resources should be properly and efficiently deployed. These observations apply just as much to cases where judgment is reserved at first instance as to cases in which judgment is reserved in this court”.
Because the case had been fully argued and because those arguments, so far as they related to the application to set aside the judgment in default, raised issues of wider interest, I said that I proposed, notwithstanding the settlement, to promulgate that part of my judgment. In doing so, I am following the practice described at paragraphs 23.70 to 23.74 of Zuckerman on Civil Procedure: Principles of Practice 4th Ed. Essentially, whether to promulgate a judgment in these circumstances is a matter of judicial discretion:
“In exercising this discretion, the court must determine what course of action is in the public interest. Relevant factors will include, naturally, the nature and significance of the judgment on the one hand, and the wishes of the parties on the other; they will also include the relative positions of the parties, whether one of them is a litigant in person, reputational considerations and the like.”
Of those factors, it seems to me that the wishes of the parties would be the dominant consideration and would be deserving of very careful consideration. Here, the parties did not object to my taking the course I proposed. Indeed, they encouraged it by the making of further submissions on the status and effect of an in rem judgment; see below.
Narrative
These proceedings arise out of a collision on 18 July 2018 between two ships, the “POSEIDON” and the “TECOIL POLARIS”. The claimant (“Tecoil”) is the owner of the “TECOIL POLARIS”, an oil tanker. The first defendant, (“Neptune”), now in liquidation, is the owner of the “POSEIDON”, a research/survey vessel. The “TECOIL POLARIS” was at berth at Albert Dock, Hull. The “POSEIDON” was manoeuvring towards berth when she struck the starboard side of the “TECOIL POLARIS” causing considerable damage. Neptune has never disputed liability for the collision.
The “POSEIDON” had P & I insurers, Lodestar Marine Limited (“Lodestar”). Lodestar acted as agent for Royal & Sun Alliance Insurance Plc (“RSA”), who were the underlying insurer. (I will refer to them together as “the Insurers” or “the Insurer Defendants”). The Insurers are respectively the second and third defendants. On 3 August 2018 Lodestar issued a letter of undertaking (“the LOU”) “for and on behalf of” RSA, which provided as follows:
“IN CONSIDERATION of your releasing and/or refraining from arresting or re-arresting at any time hereafter or otherwise detaining the ‘POSEIDON’ or any other vessel or property in the same or associated ownership, management, possession or control for the purpose of obtaining security in respect of your claim arising out of the above collision we hereby undertake to pay you on demand such sum or sums as may be due to you from the owners of the ‘POSEIDON’ in respect of your said claim either by agreement between the parties hereto or by the final unappealable judgment of the English Courts, provided always that our total liability hereunder inclusive of interest and costs shall not exceed the sum of US$200,000.”
On 28 June 2019, Tecoil commenced in rem proceedings against the “POSEIDON”. No acknowledgement of service was filed and on 18 December 2019 Tecoil applied for judgment in default. According to the longstanding practice and procedure of the Admiralty Court, the application required “evidence proving the claim to the satisfaction of the court” (see CPR rule 61.9(3)(a)) and a public hearing of the application in open court. The hearing took place before the then Admiralty Registrar, Mr Jervis Kay QC, on 14 January 2020. The Registrar handed down his judgment on 24 February 2020; see [2020] EWHC 393 (Admlty). Tecoil was awarded EUR124,462 and £119,033 plus costs assessed at £105,584.50 (a grand total of around US$525,000). Some time before that judgment was delivered, it had become clear that RSA were not intending to make payment under the LOU. In an email sent to the claimant's solicitors, Stephenson Harwood, on 9 January 2020, Clyde & Co, acting for RSA, had said as follows:
“any judgment that your clients may obtain in these proceedings can and will only be a judgment against the “POSEIDON” itself as a res, and cannot and will not take effect as an in personam judgment against any legal or natural person, in particular, the owners of the “POSEIDON”.”
It was very clear from this correspondence that the Insurers intended to argue that the LOU would not respond to an in rem judgment. Although it had always been the claimant's position that the LOU responds to an in rem judgment, Clydes' position in correspondence left the claimant with no real choice but to issue an in personam claim against Neptune seeking substantially the same relief before the expiry of the 2-year time limit under the Merchant Shipping Act 1995 on 18 July 2020.
The claimant issued the present claim on 16 July 2020.
On 12 October 2020 Tecoil made formal demand under the LOU for the sum of US$200,000, which, as expected, Clydes rejected on the ground that the LOU only responded to an in personam judgment against Neptune. They further said that, notwithstanding that Neptune and RSA had taken no part in the in rem proceedings and notwithstanding that the judgment was an in rem judgment, it would be open to Neptune to contest liability and quantum in the in personam proceedings.
Before the service of the claim form, Tecoil amended it pursuant to CPR 17.1(1) so as to add Lodestar and RSA as parties and to include the claim against them for the sum due under the LOU, plus interest and costs. Tecoil served the amended claim form on the Insurers within the jurisdiction, and on Neptune's liquidator in Iceland pursuant to an order of 7 January 2021, which gave permission to serve out of the jurisdiction. (Neptune had gone into liquidation two years previously on 4 January 2019.)
On 5 February 2021, time having expired for Neptune to file an acknowledgement of service, the claimant made a request for judgment in default. Judgment was entered against Neptune on 12 February 2021. That same day, Tecoil made a further demand under the LOU, but this too was rejected. In an email dated 17 February 2021 Clydes advanced arguments as to why the Insurers' liability under the LOU was not engaged. These were that (a) the Default Judgment was not a “final unappealable judgment” and that (b) the LOU was not intended to protect Tecoil from the risk of Neptune's insolvency in the event that the “POSEIDON” was not of sufficient value to satisfy its claims. The latter argument was expressed as follows:
“As we have touched on in our email of 15 October 2021, the fundamental point that you seek to overlook is that, on its true construction, and as was contemplated by the parties at the time that it was given, the function of the LOU was to place your clients in no less favourable position that if they had arrested the vessel in consideration of your clients agreeing to release and / or not arrest and / or not re-arrest her. The LOU did not constitute an “all risks” insurance protecting your client from all risks of being unable to enforce their claims against the “POSEIDON”. The fact is that Vessel is available within the jurisdiction to be enforced against. Your clients' problem is that she does [not] appear to be of sufficient value to satisfy their claims, and that her owners are insolvent. Neither risk was intended to be covered by the LOU and neither is covered by it on its true construction.”
On 8 December 2020, the Insurers applied to set aside the service of the Amended Claim Form on them and on 26 February 2021 they applied to set aside (1) the order giving Tecoil permission to serve Neptune...
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The Power Of In Rem
...Tecoil Shipping Ltd v Neptune EHF [2021] EWHC 1582 (Admlty) This decision considers the effect of an in rem judgment in subsequent in personam proceedings. The Facts The proceedings arose out of a collision in July 2018 between two ships, the "POSEIDON" and the "TECOIL POLARIS". The claiman......