The Bank of Tokyo-Mitsuibishi UFJ Ltd v MV Sanko Mineral, The Owners of the & Anor, Court of Appeal - Admiralty Division, November 28, 2014, [2014] EWHC 3927 (Admlty)

Resolution Date:November 28, 2014
Issuing Organization:Admiralty Division
Actores:The Bank of Tokyo-Mitsuibishi UFJ Ltd v MV Sanko Mineral, The Owners of the & Anor
 
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Neutral Citation Number: [2014] EWHC 3927 (Admlty)

Case No: 2014 Folio 626

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMIRALTY COURT

Admiralty claim in rem against THE MV SANKO MINERAL

Royal Courts of Justice

Rolls Building, 7 Rolls Buildings

Fetter Lane, London EC4A 1NL

Date: 28/11/2014

Before :

Mr.Justice Teare

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Between :

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Neil Henderson (instructed by Ince & Co LLP) for the Defendant

Tom Smith QC and Andrew Shaw (instructed by Holman Fenwick Willan) for the Cautioner

Andrew Stevens (instructed by Watson Farley & Williams LLP)for the Claimant

Hearing dates: 14 November 2014

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Mr. Justice Teare:

  1. This is an application by the Defendant, the (former) Owner of the M.V. SANKO MINERAL, (``the vessel''), for the strike out or withdrawal of the caution against release of the proceeds of sale of SANKO MINERAL requested by Glencore Limited (``Glencore'') on 22 August 2014 and for payment out of the proceeds of sale. The application raises interesting questions concerning the Admiralty jurisdiction and the relationship between it and foreign insolvency proceedings.

  2. Before setting out the issues to which this application gave rise it is necessary to describe the circumstances which have led to the Defendant's application.

  3. Pursuant to a contract of carriage evidenced by a bill of lading dated 8 April 2012 a cargo of 9,998.717 metric tonnes of silicon manganese (of which Glencore claims to have been the owner) was shipped on board the vessel for carriage from Burgas, Bulgaria to New Orleans. The bill of lading was on the CONGEN 1994 form and, it is common ground, incorporated the terms of a charterparty dated 13 March 2012 on an amended Stemmor form between Western Bulk Carriers A/S and Glencore International AG. Clause 28 provided for London arbitration and in particular that:

    ``Any claim must be made in writing and Claimant's Arbitrator appointed within twelve months of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred.''

  4. On 7 May 2012 the vessel was made subject to various attachments in Baltimore, Maryland by creditors of Sanko. Whilst the vessel was delayed in Baltimore Glencore filed a claim against her for breach of the contract of carriage in the United States District Court for the District of Maryland under Rule C of the Supplemental Rules for Certain Admiralty and Maritime Claims. Glencore maintains that in consequence and as a matter of US law it obtained a maritime lien over the vessel.

  5. As a result of substantial financial problems Sanko, a company organised and existing under the laws of Japan, filed a petition for the commencement of insolvency proceedings in Japan. On 23 July 2012 Sanko entered into ``Reorganisation'' proceedings under the Japanese Corporate Reorganisation Act. On 30 July 2012 the reorganisation was recognised by Newey J. in the Chancery Division of the High Court in this jurisdiction as the ``foreign main proceeding'' under the Cross-Border Insolvency Regulations 2006. The terms of Newey J.'s order provided, inter alia:

    ``Pursuant to Articles 20(6) and 21(1)(g) of the Model Law, the stay and suspension in Article 20(1) of the Model law is modified as follows and additional relief is granted in the following terms:

    (1) No step may be taken to enforce any mortgage, charge, lien or other security over the Company's property except with the consent of the Foreign Representative or the permission of the Court.

    (2) ..........

    (3) No legal process may be instituted or continued against the Company or its property except with the consent of the Foreign Representative or the permission of the Court. For the purposes of this Order, the term ``legal process'' includes arbitrations, other legal proceedings, execution, distress, diligence, and all other forms of legal process.

    ............''

  6. On 2 August 2012 the vessel was released from the attachments in the US.

  7. On 4 September 2012 the cargo was delivered in New Orleans. It is Glencore's case that in breach of the contract of carriage the discharge of the cargo in New Orleans was delayed by nearly four months. In consequence Glencore claims to have suffered losses in the sum of (approximately) US$3,850,000 (including interest and costs).

  8. On 14 September 2012 Glencore submitted two claims in the Reorganisation in Tokyo. The first was a Secured Reorganisation Claim for US$3,046,959.50 plus interest in respect of its maritime lien. The second was, in the alternative, an unsecured claim in the same amount. On 5 November 2012 the Trustee of the Defendant rejected both claims and on 17 December 2012 Glencore lodged two petitions with the Tokyo District Court challenging that rejection. These petitions remain pending in Tokyo.

  9. The 12 month period within which an arbitration had to be commenced pursuant to clause 28 of the charterparty elapsed on 5 September 2013. No such arbitration was commenced by Glencore.

  10. The Trustee of the Defendant produced a reorganisation plan which was approved by the Japanese Court on 17 October 2013.

  11. Part of the plan, (chapter 3, section 1, part 1) deals specifically with secured reorganisation claims relating to vessels. Pursuant to that plan the Trustee will sell Sanko's vessels and the proceeds of sale will be paid in satisfaction of the finalised secured reorganisation claims.

  12. Glencore's claim is presently unfinalised. The process of finalising (or admitting) the claim is underway pursuant to Glencore's petitions lodged with the Tokyo District Court. If and when it is finalised as a secured reorganisation claim Glencore will have a right to be paid out of the proceeds of sale of the vessel.

  13. By letter dated 17 April 2014 the Defendant's Foreign Representative authorised the Bank of Tokyo-Mitsubishi UFJ Limited (``the Bank'') to commence proceedings against the vessel on which it held a mortgage. The Bank issued an in rem claim form in the Admiralty Court in this jurisdiction. On 23 May 2014 the Admiralty Registrar authorised the arrest of the vessel. The vessel was arrested shortly thereafter. On 20 June 2014 the Bank obtained judgment on its claim and Flaux J. ordered that the vessel be sold and that the proceeds of sale be paid into court pending a determination of priorities. Flaux J further ordered as follows:

    ``5. The Claimant shall procure that notice of the sale is advertised in Lloyd's List and Trade Winds, which advertisements shall notify all persons having claims in rem against the Vessel to apply to the Companies Court, or to request the Defendant's Foreign Representative, for permission to commence such claims forthwith and, in any event, no later than 60 days after the date of such notice.''

  14. The sale of the vessel was advertised on 26 and 27 June 2014 and on 1 July 2014 Glencore became aware of the notice of sale. The vessel was sold by the Admiralty Marshal on 7 August 2014.

  15. Glencore was concerned at these developments because it maintains that in Japanese law its security interest, derived from its maritime lien under US law and/or from the status of its claim in Japanese law as a statutory lien, takes priority over the Bank's mortgage. On 22 August 2014 Glencore issued an application to the Companies Court in this jurisdiction for permission to commence a claim in rem against the vessel and requested the issue of a caution...

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