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Weekly Law Reports (ICLR)/1982/Volume 1 /GALAXIA MARITIME S.A. v. MINERALIMPORTEXPORT -

[1982] 1 WLR 539

[1982] 1 WLR 539

GALAXIA MARITIME S.A. v. MINERALIMPORTEXPORT

[COURT OF APPEAL]

1981 Dec. 17, 18

Eveleigh and Kerr L.JJ. and Sir George Baker

Injunction -- Interlocutory -- Mareva injunction -- Third party interests -- Injunction to restrain removal from
jurisdiction of defendants' cargo laden on ship -- Ship under voyage charter -- Effect of injunction on third
party ship owners -- Whether unwarrantable interference with third party rights -- Whether injunction to be
discharged

Ships' Names -- Eleftherios

The plaintiffs obtained a Mareva injunction restraining the defendants from removing from the jurisdiction
their assets, in particular cargo laden on board a motor vessel owned by a third party. The plaintiffs gave an
undertaking to pay the reasonable costs of third parties in complying with the injunction. The owners of the
vessel, which was subject to a voyage charter, applied to discharge the injunction to enable the vessel to sail,
alleging that they would otherwise be deprived of the effective use of their only trading asset. The judge
ordered the injunction to be maintained on the plaintiffs undertaking to provide a bank guarantee in respect of
the loss and expense suffered by the owners.

On appeal by the owners:--

Held , allowing the appeal, that a plaintiff was not entitled to an injunction which would have the effect of
substantially interfering with the business rights of a third party in order to secure the ultimate recovery of
debts or damages from the defendant with which the third party was in no way concerned, merely by the
offer of an indemnity (post, pp. 541F-H, 542D-E); and that the injunction granted to the plaintiffs involved an
unwarrantable interference with the trading activity of the vessel's owners and would be discharged.

Clipper Maritime Co. Ltd. of Monrovia v. Mineralimportexport [1981] 1 W.L.R. 1262 distinguished.

Decision of Neill J. reversed.

The following cases are referred to in the judgments:

Clipper Maritime Co. Ltd. of Monrovia v. Mineralimportexport [1981] 1 W.L.R. 1262; [1981] 3 All E.R.
664.

Z Ltd. v. A-Z and AA-LL [1982] 2 W.L.R. 288; [1982] 1 All E.R. 556, C.A.
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No additional cases were cited in argument.

APPEAL from Neill J.

On December 16, 1981, pursuant to an application made ex parte by the plaintiffs, Galaxia
Maritime S.A., Neill J. ordered, inter alia, that the defendants, Mineralimportexport, be restrained
and an injunction be granted restraining them from disposing of or dealing with their assets within
the jurisdiction or from removing such assets from the jurisdiction and in particular the cargo loaded
on board the motor vessel Eleftherios so as to reduce the value of those assets below the sum of
U.S. $413,403.47 until trial or further order, on the plaintiffs undertaking (1) to issue and serve a
writ; (2) to abide by any order which the court might make as to
[1982] 1 WLR 539 at 540
damages should the defendants suffer any by reason of the order which in the opinion of the court
the plaintiffs ought to pay; (3) to pay the actual income lost to the port authority controlling the port
of Barry in South Wales and administrative costs incurred by the port authority as a consequence of
the granting of the injunction; and (4) to pay the reasonable costs of other third parties in complying
with the order.

On December 17, 1981, the owners of the Eleftherios , Ocean Blue Compania Naviera S.A.,
applied to discharge the injunction. Neill J. ordered the injunction to be maintained but varied on
terms that the loss and expense suffered by the owners of the Eleftherios was to be secured by a
first class bank guarantee in a figure to be agreed.

The owners of the Eleftherios appealed on December 17, 1981. The Court of Appeal discharged
the injunction forthwith and delivered judgment on December 18, 1981.

The facts are stated in the Judgment of Eveleigh L.J.

H. B. Eder for the owners.

P. C. H. Simon for the plaintiffs.

The defendants were not present or represented.

EVELEIGH L.J. This is an appeal by third parties in Mareva proceedings from a refusal by Neill J. to lift an
injunction.

The plaintiffs are a company incorporated in Switzerland; the defendants are a Romanian trading
corporation. The plaintiffs claim against the defendants a sum of about U.S. $400,000 for demurrage under a
charterparty. They are the disponent owners of a vessel, the Grecian Legend . which was on charter to the
defendants, and it would appear that they have, prima facie at any rate, a good claim against the defendants
for that sum. They obtained from Neill J. a Mareva injunction against the assets of the defendants in this
country.

The third party are the owners of the motor vessel Eleftherios which, at the relevant moment, had on board a
cargo of 11,000 metric tons of coal at the port of Barry in South Wales.
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Again it would appear (at least for the purposes of this judgment I will assume) that the coal was the property
of the defendants, having been loaded under the terms of an agreed contract with the sellers, the National
Coal Board.

Neill J. granted a Mareva injunction, and an important term of that injunction for the purposes of this appeal
is:

"that the defendants by themselves their employees or agents or otherwise howsoever be restrained and an injunction
is hereby granted restraining them from disposing of or dealing with their assets within the jurisdiction or from removing
such assets from the jurisdiction and in particular the cargo loaded on board the M.V. Eleftherios so as to reduce the
value of those assets below the sum of U.S.$413,403.47 until trial or further order."

There was also, as one would expect, incorporated into that order undertakings by the plaintiffs:

"to abide by any order which the court may hereafter make as to damages should the defendants suffer any by reason
of this order which in the opinion of the court the plaintiffs ought to pay" -- and, what is important -- "to pay the actual
income lost to the port
[1982] 1 WLR 539 at 541
authority controlling the Port of Barry in South Wales ... [and] to pay the reasonable costs of other third parties in
complying with this order."

The injunction having been made, the owners of the Eleftherios applied to the court, and at that hearing the
plaintiffs gave a further undertaking that they would provide a guarantee in respect of any loss or damage
suffered by the third parties as a result of the order. However that guarantee had not been forthcoming by the
time we heard the appeal, but again for the purposes of my judgment I will assume that that guarantee had in
fact been produced.

This matter was heard by this court yesterday, and at about quarter-past four we lifted the injunction and
stated that our reasons would be given today.

The Eleftherios was under a voyage charter and we were told that unless the vessel sailed by 2100 hours on
December 17 it would not be able to sail until just before Christmas.

The judge was referred to Clipper Maritime Co. Ltd. of Monrovia v. Mineralimportexport [1981] 1 W.L.R.
1262. That was a case of a vessel under time charter and a Mareva injunction was granted. In that case
Robert Goff J. obtained from the plaintiffs an undertaking to indemnify the port authority against any loss
which they might sustain as a result of the injunction, which had the effect of preventing the movement of the
vessel.

It does not appear that Neill J. had his attention specifically drawn to the fact that that case involved a vessel
on time charter. Furthermore, it does not appear from the report that the owners of the vessel had made any
application. Moreover, in so far as the order impeded the trading activities of the port authority it is very
important to appreciate that the port authority was present, if not at the application initially at least at the end
of the proceedings, and was quite content with an undertaking being given. So that that case provides little
guide, as it turns out, to the facts of this case.

Only yesterday this court, in Z Ltd. v. A-Z and AA-LL [1982] 2 W.L.R. 288, drew attention to the need to pay
particular regard to the extent to which the freedom of action of third parties would be affected by a Mareva
injunction.
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The effect of this present injunction, in so far as the owners of the Eleftherios are concerned, is to interfere
with their trading assets. Mr. Simon has submitted to this court that that is a matter which should not affect
the final outcome because, as he says, his clients have given a guarantee. For myself, I do not believe that
when the third party protests, the fact that a guarantee has been given should be decisive in the matter at all.
A third party is entitled to freedom of action and he is entitled to trade freely. I do not think that a plaintiff has
the right to a "compulsory purchase" of the rights of a third party and that is what it amounts to in this case.

Not only is the trading activity of the third party interfered with in this case, but one does not know what
arrangements could be made by the members of the crew -- and perhaps others -- for their own movements
after this vessel completes its voyage. At this time of the year it is particularly relevant, it seems to me, that
this order may have the effect of interfering with the Christmas of every single person on board and with all
his private arrangements.
[1982] 1 WLR 539 at 542

I regard it as absolutely intolerable that the fact that one person has a claim for a debt against another, that
third parties should be inconvenienced in this way, not only to affect their freedom of trading but their
freedom of action generally speaking.

I feel sure that these matters were not fully put before the judge in contrast with the facts of the Clipper
Maritime case [1981] 1 W.L.R. 1262, and for those reasons I would allow this appeal and, as I say, we have
in fact lifted the injunction.

KERR L.J. I agree. In Z Ltd. v. A-Z and AA-LL [1982] 2 W.L.R. 288 yesterday, this court laid down guidelines
for the protection of third parties, and in particular of banks, on whom a Mareva injunction may be served in
respect of assets of defendants. However, I then also drew attention to the danger that this important and
useful jurisdiction must not be abused.

To allow a plaintiff to serve a Mareva injunction on a shipowner in relation to cargo, which is owned or
alleged to be owned by the defendant and which is on board pursuant to a voyage charter concluded
between the shipowner and the defendant, in order to seek to prevent the ship from sailing out of the
jurisdiction with the cargo, appears to me to be a clear abuse of this jurisdiction, because it involves an
unwarrantable act of interference with the business of the third party, the shipowner.

A plaintiff seeking to secure an alleged debt or damages due from the defendant, by an order preventing the
disposal of assets of the defendant, cannot possibly be entitled to obtain the advantage of such an order for
himself at the expense of the business rights of an innocent third party, merely by proffering him an indemnity
in whatever form.

In this connection, it is crucial to bear in mind not only the balance of convenience and justice as between
plaintiffs and defendants, but above all also as between plaintiffs and third parties. Where assets of a
defendant are held by a third party incidentally to the general business of the third party -- such as the
accounts of the defendant held by a bank, or goods held by a bailee as custodian, for example in a
warehouse -- an effective indemnity in favour of the third party will adequately hold this balance, because
service of the injunction will not lead to any major interference with the third party's business. But where the
effect of service must lead to interference with the performance of a contract between the third party and the
defendant which relates specifically to the assets in question, the right of the third party in relation to his
contract must clearly prevail over the plaintiff's desire to secure the defendant's assets for himself against the
day of judgment.

In this case the effect of the service of the injunction prevents the third party from sending its ship on a
voyage out of the jurisdiction under a previously concluded contract between the third party and the
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defendants. In my view, this is a clear case of an abuse of this jurisdiction. It is said that the jurisdiction was
exercised in a similar manner in the Clipper Maritime case [1981] 1 W.L.R. 1262. However, it is not clear
whether the shipowners objected in that case. Furthermore, that was a case of a time charter (with these
same defendants), so that the financial consequences of delay would be more likely to have fallen on the
defendants and not on the shipowners, as here.
[1982] 1 WLR 539 at 543

However, even in cases of time charters, disputes might well arise as to whether or not the vessel remained
on hire during the consequent delay. A plaintiff is not entitled, in my judgment, to expose the third party to the
risk of such disputes merely by the offer of an indemnity. He cannot, merely in order to secure a benefit for
himself, coerce the third party into a serious risk of litigation or arbitration with the defendant, and thereafter
possibly also with himself under the terms of the proffered indemnity.

Where the effect of service of the injunction on the third party substantially interferes with the third party's
business, the rights of the third party must in my view always prevail over the desire of the plaintiff to secure
the ultimate recovery of debts or damages from the defendant with which the third party is in no way
concerned.

Accordingly I agree, without hesitation, that leave to appeal should be granted in this case and that the
injunction should be discharged. Whether the plaintiffs may be entitled to an injunction operating generally on
the defendants' assets, if any, within the jurisdiction -- which would not substantially interfere with the
business activities of third parties who have contractual relationships with the defendants -- does not arise for
consideration on the material before us today.

SIR GEORGE BAKER. I agree and would only draw attention to what Robert Goff J. said in Clipper Maritime
[1981] 1 W.L.R. 1262, 1264:

"The Commercial Court is very anxious to provide a service to the commercial community which is sensitive to its
needs: and in particular it is anxious that the Mareva jurisdiction, in the administration of which the Commercial Court
plays so substantial a part, should be implemented in a manner which takes account of the interests of innocent third
parties."

For my part I am appalled by the possible ramifications of the granting of a Mareva injunction in the
circumstances of this case on the innocent third party and the crew of the ship and others no doubt, as
represented by the owners before us. I too agree that the appeal should be allowed.

Appeal allowed with costs.

Leave to appeal refused.

Solicitor: Richards Butler & Co.; Middleton Potts & Co.

C. N.