Veracruz Transportation Inc. v V.C. Shipping Company Inc. (Veracruz I)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BELDAM,LORD JUSTICE NOURSE,SIR JOHN MEGAW |
| Judgment Date | 07 November 1991 |
| Judgment citation (vLex) | [1991] EWCA Civ J1107-6 |
| Docket Number | 91/1240 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 November 1991 |
and
[1991] EWCA Civ J1107-6
Lord Justice Nourse
Lord Justice Beldam
and
Sir John Megaw
91/1240
QBCMI 91/0250/B
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR. JUSTICE HOBHOUSE
Royal Courts of Justice,
MR. M.N. HOWARD Q.C. and MR. T.D. BRENTON (instructed by Messrs. Ince & Co, London, EC3) appeared on behalf of the Appellants (Defendants).
MR. CHARLES MACDONALD (instructed by Messrs. Constant & Constant, London, SE1) appeared on behalf of the Plaintiffs (Respondents).
( .)
The defendant, VC Shipping Co. Inc. (Liberia), appeals against the order of Hobhouse J. made on 20th December 1990 by which he continued until after publication of an arbitration award between the parties a Mareva injunction granted ex parte to the plaintiff by Gatehouse J. initially on 14th November and later, with variations, on 19th November 1990. The form of the injunction granted ex parte provided that it should not take effect until 20th November. It restrained the defendant from dealing with U.S. $7,279,679, part of the purchase price of U.S. $9.9m payable to the defendent by the plaintiff upon delivery to them by the defendant of its cruise ship Veracruz I.
Hobhouse J. reduced to U.S. $2.85 m the amount subject to the restraint of the Mareva injunction, but in this appeal the defendant contends that the learned judge should have discharged the order of Gatehouse J. altogether; alternatively that the amount should have been still further reduced.
The dispute between the parties arises from an agreement for the sale by the defendant of its cruise ship Veracruz I to the plaintiff for U.S. $9.9m. The terms of the agreement were set out in a memorandum dated 23rd June 1989. The defendant is a single ship corporation registered in Liberia. The Veracruz I was registered in Panama and was subject to a bare boat charter for one year from May 1989 to Rederi A.B. Effjohn. In the memorandum, c1.4 recorded that the vessel and class records had been inspected and accepted by the plaintiff, who had conducted a survey of the records in April 1989 and had inspected the vessel at the end of April and again at the end of May. The agreement provided that the vessel was to be delivered free of charter commitment and substantially in the same condition and order as it was when inspected by the plaintiff, fair wear and tear excepted. The latest date for delivery under the agreement was 31st May 1990 but the defendant had the option to deliver in January 1990 provided it gave notice to this effect by 15th September 1989. The agreement by C1.15 further provided for arbitration of disputes in London and for the proper law of the contract to be English law.
On 12th May 1989 the charters were replaced by Theodore Caribbean Co. Ltd., a Panamanian company. The parties expected that the charterer would operate the Veracruz I until the end of the charter period but, in the event, on 25th November 1989 the ship was laid up. A dispute arose between the defendant owner and the charterer about liability to pay for substantial repairs which the vessel then needed. To comply with the requirements of the Classification Society's periodical survey and to put her into substantially the same state of repair as inspected by the plaintiff, repairs costing over U.S. $3m were necessary. Arbitration proceedings were commenced in Norway between the owner and charterer, which currently continue. From documents before the court it would appear that the plaintiff became anxious whether the repair would be fully carried out to the satisfaction of the Classification Society. So, through its technical consultant, Dr. Canepa, it contacted the society to make enquiries about the proposed repairs. Counsel for the defendant has characterised this conduct of the plaintiff as an officious intermeddling contrary to accepted commercial practice. The plaintiff concedes that the course of conduct was unusual and contrary to normal practice but contends that it was justified in the unusual circumstances of this case. Whether that is so or not seems to me to have little bearing on the issues in this appeal.
The plaintiff's anxiety seems to have stemmed partly from the fact that the ship was to be laid up for six months before delivery and partly from the dispute over responsibility for repairs.
In the result, the Veracruz I was not ready for delivery until the middle of November 1990. For the purposes of these proceedings it is conceded that the defendant was in breach of its duty to deliver on the contractual date. The plaintiff has referred the dispute to arbitration pursuant to c1.15 of the agreement.
By November 1989 the plaintiff believed that the repairs carried out to the Veracruz I to put her into the condition required for delivery had not been fully carried out. The contract provided that payment of the balance of the purchase price and release of the deposit was to take place on delivery of the vessel. The plaintiff was concerned that the purchase price paid to the defendant in London would be its only asset within the jurisdiction and that the defendant fearing an adverse award in the arbitration would remove it and thus render the plaintiff's claim worthless. When therefore on November 12th the defendant gave notice of intention to deliver the ship, the plaintiff made its application ex parte to Gatehouse J. supported by an affidavit of Mr. J.F. Smith, its solicitor. Basing the application on the decision of Saville J. in A. v. B. [1989] 2 Lloyd's Rep. 423, the plaintiff claimed an order restraining the defendant from dealing with the purchase price, when it was paid over, the order being so worded that it was not to come into effect until after delivery and payment.
In addition to its claim for damages for delay in delivery, the plaintiff claimed damages for breach of the term of the agreement that on delivery the ship would be in the same condition as it was when inspected, fair wear and tear excepted. The plaintiff contended that there were many defects in the physical condition of the ship and, in addition, defects in its certification. It was further alleged that the ship was subject to undischarged liens and that the plaintiff had been denied inspection rights. On the ex parte hearings before Gatehouse J., the learned judge was persuaded by the evidence contained in the affidavits of Mr. Smith, to restrain the defendants from dealing with assets worldwide up to the value of U.S. $7,279,679, a substantial proportion of the purchase price. On handing over the purchase price, the plaintiff's solicitor told the defendant's representative that it was subject to the injunction.
The defendant applied to discharge the injunction. Its application was supported by an affidavit of Mr. Suchy, its solicitor.
As in this appeal, the defendant sought a complete discharge of the order: alternatively a very substantial reduction in the amount of the assets subject to the order contending that:
(i) The plaintiff had no cause of action for defects in the condition of the ship until it was delivered. Consequently the court had no jurisdiction to make any order based on allegations that the defendant was in breach of contract in that respect.
(ii) That the plaintiff had seriously misled the court about the condition of the ship and the need for repairs and had failed to make proper disclosure of relevant matters.
(iii) That the plaintiff ought not to have applied ex parte for the order. There was no reason why notice should not have been given of the application which could then have been heard inter partes at the outset. This amounted to an abuse of process.
(iv) That the plaintiff's claim based on the condition of the ship was grossly exaggerated and in many instances the defects were non-existent.
We are told that the learned judge at the parties' request delivered his judgment immediately after the close of agrument. He held:
(1) That the defendant company was a one ship company registered in Liberia and that once the purchase price had been paid over and applied to other uses the plaintiff company would have no effective remedy for any breach of contract. It was a clear case in which relief by Mareva injunction was available.
(2) That the plaintiff had shown a good arguable case that the defendant was in breach of its duty to deliver on the due date giving rise to a substantial claim for damages. That was an accrued cause of action. The plaintiff had, however, no accrued cause of action for damages for defects in the ship at the time of the ex parte application. Nevertheless, to the extent that the plaintiff could show an arguable claim for damages for defects which it was expected would be present on delivery, the court had jurisdiction to grant "an anticipatory Mareva injunction". He distinguished such an injunction from a quia timetMareva injunction which a court could not grant merely because a party feared there would be some future breach of contract. The judge said:
"The situation is one in which there is a cause of action that it can be adequately proved is going to arise at a certain point in time (that is, the delivery of the vessel); it is going to give rise to a substantial claim by the intended plaintiff against the intended defendant; and the need for the Mareva will then immediately arise, and if it is not to be granted immediately at that moment in the transaction then it will be...
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