Admiralty Law Part 3

Pursuant to the earlier topic of Introduction to Maritime Law in Malaysia, published on 22 February 2021, in the coming series the basis and elements of Admiralty Law will be explored.

Procedure for enforcement of claims in rem

1. Arrest of a ship and the aftermath

   When the ship is arrested, the defendant may provide security for the release of the ship from arrest. The form of security may be a letter of undertaking by the defendant’s third party liability insurers or a bank guarantee. In that undertaking the defendant is requested to submit to the jurisdiction (or instruct solicitors to do so on its behalf). Thus, from the moment the defendant shipowner defends the ship the procedure continues as a hybrid of in rem and in personam, and the defendant becomes liable for the full claim because recovery is not capped by the value of the ship, even if the security provided for the release of the ship is.
   During arrest the ship is under the custody of the court. Arrest by another claimant does not confer benefits because the priority of claims in rem does not depend on the order of arrest. When the ship is already under arrest and another claimant wishes to secure its claim, a caution against the ship’s release can be placed on the court register of arrests. The claimant must also issue the in rem claim form to ensure that the court is seised of the matter, and to cause the crystallisation of its statutory right in rem on the ship. If the ship is to be released under the first arrest – for example because security for the specific claim has been provided – then the Admiralty Marshall will, before releasing the ship, notify the person which has entered the caution against release, so that it has the opportunity of arresting the ship.If a defendant wishes to prevent the arrest of the ship because it has provided (or intends to provide) security for claims, it can enter a caution against the arrest of the ship to be issued and provide bail in court (as a form of security). This action does not remove the right of claimants in rem to apply for the arrest of the ship. A claimant may do this where it wishes to establish English jurisdiction on the merits of the case, in addition to obtaining security. The consequence of such an action for the arresting party is that it may become liable for damages caused to the party that has entered a caution against arrest.

   Re-arrest of the same ship for the same claim is possible, provided the total security does not exceed the value of the ship (The Daien Maru).

   In The Clarabelle re-arrest was allowed to obtain an increase of the security already provided. The New Zealand Court of Appeal explained that re-arrest is permitted as an exception to the rule against it only in exceptional circumstances and on the basis of a reasonably arguable best case. In this case it was permitted because of the very low security obtained by the first arrest.

   See also The Ruta where the ship was released following a letter of undertaking which became worthless due to the bankruptcy of the party providing the letter. In this case the judge approached the matter of re-arrest on the basis of discretion considering circumstances of fairness and whether or not there was oppression by the re-arrest.

   On whether a second vessel could be arrested see The Banco and also the Scottish case of The Afala.

   See also Gulf of Azov Shipping Co Ltd v Idisi where damages were awarded by the English courts for the wrongful arrest of a foreign ship in a foreign jurisdiction – a rather confused position.

   In the MV Alkyon a request was made to the court by the shipowner that the arresting bank provides a cross-undertaking in damages in the form usually given in the context of freezing orders asserting that the current practice not to require a cross-undertaking is anomalous and unjustifiable. The Court of Appeal, confirming the High Court decision, rejected the request as going against the established right to arrest following an action in rem, authority and the long-standing practice of the court.

2. Appraisement and sale of the ship by the court

   The court’s powers on appraisement and sale are described in CPR 61, PD 61 and various cases: see The Westport (No. 2); The Halcyon the Great (No. 2).

   Any interference with the court sale will be contempt of court: see The Jarvis Break; The APJ Shahin.

   Sale pending litigation: see The Myrto; The Gulf Venture [1985] 1 Lloyd’s Rep 131.

   Sale by the court gives the purchaser title free of encumbrances: The Cerro Colorado.

   What property is included in the sale? See The Silia; The Eurostar.

   Time charterers can intervene: see The Saint Anna; The Pan Oak.

   For a review of situations where the established in rem priority may be departed from see the Singaporean case The Posidon.

   For the position of foreign maritime liens in Australia see the Sam Hawk.

   Pay particular attention to the distribution of the fund. The primary issue is to distinguish the priority between categories of rights, namely, the arresting court’s rights, maritime liens, possessory liens, registered and unregistered mortgages and statutory rights in rem. Then it is important to understand the priority structure in each subcategory.

   Which claims are supported by a maritime lien is a procedural matter for the arresting court, according to English law. Thus, claims which are classified as maritime liens under a foreign law but not so classed under English law will not be given the maritime lien priority even if the foreign law concerned is the one that governs the substantive claim between the parties.

   1. Limitation periods/time bars

      One year for cargo receivers under the Hague-Visby Rules (HVR) extendable by agreement; two years under the Hamburg Rules, from the date of delivery of the goods or the date the goods should have been delivered for cases where the goods have been lost at sea or misdelivered.

      Three years in actions for loss of life/personal injury, where the Athens Convention 2002 applies.

      Three years if the action is based on the Fatal Accidents Act 1976, against the carrying vessel.

      Three years if an action arises from collision damage caused by another vessel against that vessel (the court has discretion to extend this period) (The Berny; s.190 MSA 1995). For recent case-law see: CDE SA v Sure Wind Marine Ltd (The SB Seaguard and The Odyssée); The Stolt Kestrel BV v Sener Petrol Denizcilik Ticaret AS (The Stolt Kestrel and The Niyazi S) and Former Owners of the Melissa K (now named Jasmine I) v Former Owners of the Tomsk (subsequently named Pure Energy and now named Thayer).

      One year for contribution actions under s.190 of the MSA 1995, but two years under s.1 of the Civil Liability Contribution Act 1978.

      Two years for salvage claims.

      Six years in actions for sailors’ wages (contract).

If you have any questions or require any additional information, please contact our lawyer that you usually deal with.

This article is written by our Principal Associate, Chakaravarthi