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Dainford Navigation Inc v PDVSA Petroleo SA (The "Moscow Stars")

In this application by a shipowner for an order for sale of the cargo loaded on board its vessel, Michael Coburn QC and Rupert Hamilton acted for the owner of the vessel.

The Respondent was in substantial arrears in paying hire for the vessel carrying the cargo, and also owed substantial amounts to other ship-owning companies within the same corporate group as the Claimant. The Claimant had commenced arbitration proceedings against the Respondent and had exercised a lien over the cargo. The Claimant and other companies in its corporate group had arrested the cargo as security for amounts owed by the Respondent. 

In spite of this, the Respondent had continued to fail to pay the amounts which it owed, as a result of which the cargo had not been discharged. The tribunal had given the Claimant permission, under section 44 of the Arbitration Act 1996, to apply to the High Court for an order for the sale of the cargo, which had been on board for over nine months by the time the application was heard, still with no immediate prospect of any resolution of the deadlock between the parties.

The Respondent’s principal defences to the application were: (i) that the Court did not have jurisdiction to order the sale of the cargo under section 44 because the cargo was not itself “goods the subject of the proceedings” for the purposes of sub-section 44(2)(d); and (ii) that in any event, the cargo was not “of a perishable nature” and there was not “any other good reason it [was] desirable to sell quickly” so as to justify an order under CPR rule 25.1(1)(c)(v). 

Mr Justice Males rejected the Respondent’s arguments:

Section 44(2)(d) should not be read too narrowly. Where a contractual lien was being exercised over a cargo as security for a claim being advanced in arbitration there was a sufficient nexus between the claim and the cargo to say that the cargo was “the subject of the proceedings”.

There was good reason why it was desirable that the cargo should be sold quickly, which was that without an order for sale the present situation might continue for months longer, with hire continuing to accrue without being paid. Indeed, the Respondent itself had effectively acknowledged that the best course was for the cargo to be sold.

The Court therefore ordered that the Claimant should be entitled to sell the cargo, with the proceeds held to the order of the Court pending determination of the Claimant’s claim against the Respondent.

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