• Date: 01/11/2018

A dispute arose between the owner Member and its financing bank under a secured loan agreement. The bank had obtained a valuation of the ship that had led it to demand additional security from the Member.  The Member challenged this and the ship was arrested in England.  

An issue arose as to whether the arrest should be set aside if the bank failed to provide a cross-undertaking in damages, as is the standard procedure when granting interlocutory relief, such as a freezing order.

The Member requested the English High Court to exercise its power to order the release of the ship unless the bank provided a cross undertaking in damages in respect of any losses suffered as a result of the arrest, should the court later find the arrest to have been wrongful.

In his judgment Mr Justice Teare found against the Member concluding:

“The court is unable to accede to the application that the vessel be released in the event that the Bank fails to provide a cross-undertaking in damages. To exercisethe court’s discretion to release in that way would (i)run counter to the principle that a claimant in rem may arrest as of right, (ii) be inconsistent with the court’s long-standing practice that such a cross-undertakingis not required, and (iii) be contrary to the decision of the Court of Appeal in Bazias 3 and Bazias 4 and to the dicta of Lord Clarke in Willers v Joyce which I, as a first instance judge, must respect. Finally, any change in Admiralty law and practice, given that the present positionhas prevailed for so long, is not a matter for the Court to change overnight (even assuming that it could do so) but for Parliament or the Rules Committee to consider after proper consultation.”

Mr Justice Teare noted that this is an area of law that had not been considered by the higher courts for more than twenty years and was a matter of general importance and interest.  As a consequence he gave the Member permission to appeal to the Court of Appeal.
The Court of Appeal considered that there were “formidable considerations” in support of the current position being maintained and dismissed the Member’s appeal.  

Read about The High Court decision here and The Court of Appeal decisions here​​​​​​​.

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