OVERVIEW
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 claimant ("Tecoil") was the owner of
the "TECOIL POLARIS'. The first defendant
("Neptune") was the owner of the
"POSEIDON". The "TECOIL POLARIS" was at berth
in Hull when the "POSEIDON" crashed into her. Neptune had
never disputed liability for the collision.
After the collision, Neptune's insurers ("the
Insurers") issued a letter of undertaking
("the LOU") which provided:
"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."
In June 2019 Tecoil commenced in rem proceedings
against the "POSEIDON". No acknowledgement of service was
filed and Tecoil applied for judgment in default. The application
required evidence proving the claim to the satisfaction of the
court and a public hearing of the application in open court. The
hearing took place before the then Admiralty Registrar, Mr Jervis
Kay QC, who gave judgment on 24 February 2020 ([2020] EWHC 393
(Admlty)). He awarded Tecoil EUR124,462 and £119,033 plus
costs assessed at £105,584.50 (a grand total of around
US$525,000).
The Insurers made it clear that they were not intending to make
payment under the LOU on the ground that it did not respond to
an in rem judgment. Tecoil issued an in
personam collision claim against Neptune seeking
substantially the same relief. Tecoil joined the Insurers as
defendants to these proceedings.
Tecoil applied for and obtained judgment against Neptune in default
of an acknowledgment of service under CPR Part 12 in the same terms
as the in rem judgment. It then made a demand
under the LOU. The Insurers rejected the demand – contending
that the default judgment was not a "final unappealable
judgment" within the meaning of the LOU – and applied to
set the judgment aside.
The Decision
After the hearing of this application but before the Registrar had
circulated a draft judgment, the parties informed the Court that
they had settled the dispute. The Registrar nevertheless exercised
his discretion to promulgate the part of his judgment which raised
issues of wider interest.
The first issue concerned the Insurers' contention that the
judgment was wrongly entered because default judgment was
unavailable in a collision claim unless the party seeking judgment
had either filed a collision statement of case or at least obtained
an order dispensing with that requirement. Rejecting this
submission, the Registrar held that an application for judgment
could be made in default of an acknowledgment of service under CPR
Part 12. There was no requirement to file a collision statement of
case.
The more significant point arose on the Insurers' argument that
the Court should set aside the default judgment under CPR 13.3 on
the ground that there was a reasonable prospect of successfully
defending the claim. This depended on the Insurers establishing
that it would be open to Neptune to re-litigate the issues
determined in the earlier in rem judgment. In
the Registrar's judgment, however, Neptune was bound by the
determinations in the in rem claim. At para.
30, he said:
"This is because although Neptune were not, strictly
speaking, parties to the in rem proceedings, they were 'at
least indirectly impleaded to answer to, that is to say, to be
affected by, the judgment of the Court'; see the analysis of
Brett LJ in The "Parlement Belge" (1880) LR 5 PD 197 (CA)
at 218. The liability to compensate was 'fixed not merely on
the property, but also on the owner through the property',
ibid. That is why, following longstanding practice, the owners
appeared on the in rem claim form as nominal defendants and were
described there and in other documents as 'The Owners of the
Ship 'POSEIDON''; (see PD61 paragraph
3.3)."
The Registrar added that he would hold that this result would follow save, perhaps, in a case where, despite service on the ship, the owners were able to satisfy the court that they had no notice of the in rem proceedings.
Conclusion
This is an important decision which supports the proposition that
an in rem judgment in a collision action can be
deployed against the shipowner in later in
personam proceedings, even if it took no part in the
original claim. Shipowners and their insurers who choose not to
respond to an in rem claim may find themselves
bound by the result. This case serves as a cautionary tale.
Whether the LOU would have responded to the original in
rem judgment remains an open question and one which
– given the standard wording – may arise for
determination in another case.
Tom Bird acted for the Claimant (instructed by Haris
Zografakis, Rebecca Crookenden and Simon Domin of Stephenson
Harwood)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.