Cyprus Supreme Court upheld Mareva injunction against ship removal despite trading asset concerns, requiring plaintiff security.

[*504] 1982 June 22

(ARTEMIS, S.D,J.)

IM THE DISTRICT COURT OR LIMSSOL

The Standard Steamship Owners’ Protection and Indemnity Association (Bermuda) Limited,

Plaintiffs,

V.

Tabco Shipping Company Limited,

Defendants.

(Action No. 1706/82).

Interlocutory injunction - Mareva injunction - Section

32 of the Courts of Justice Law, I960 (Law 14/60) - Principles applicable - English authorities on the matter should be followed in interpreting our section 32 - Injunction preventing defendants from removing ship out of the jurisdiction - Whether fact that ship a trading asset a factor militating against grant of injunction.

M. Montanios with Miss P. Panayi, for Applicants-Plaintiffs.

E. Constantinidou (Mrs.), for Messrs. Chr. Demetriades & Co., for Respondents-Defendants.

RULING

The following ruling was delivered by:-

ARTEMIS. S.D.J.: The Defendants-Respondents [*505] in this action are a private limited company duly incorporated in Cyprus and having their registered office in Limassol. They are the registered and sole owners of the Cyprus hip "MIESTO" and, according to the affidavit of the Plaintiffs/Applicants, they are a non-resident Company and all their shareholders and directors are foreigners.

The Plaintiffs are the Standard Steamship Owners’ Protection and Indemnity Association (Bermuda) Limited and the Defendants became a member of the Plaintiffs in respect of the said ship "MIESTO" subject to the bye-laws and rules of. the Plaintiffs. The Plaintiffs' claim is in respect of such membership for the sum of U.S. 34,839.65 which includes unpaid calls, compulsory release and interest until 17/3/82 under the Plaintiffs’ bye-laws and rules, plus interest.

When this Application was filed, the ship was in a Cyprus port loading a cargo of potatoes. More particulars as regards the facts of this case appear in the respective affidavits of the two litigants.

The Application is based on Section 32 of the Courts of Justice Law, 1960 and is for the grant of what is known as a Mareva Injunction.

On 28/5/82, on the ex parte Application of the Plaintiffs, the Court, after hearing argument, granted an [*506] Injunction preventing the Defendants from removing the said ship out of the jurisdiction. The Defendants deposited the amount of £19,000 as security to cover the claim and the ship was allowed to sail. They then took objection to the Injunction and opposed it, praying for its discharge. This issue was heard before me. on l4/6/82 and what the Court has now to decide is, whether the Order granted ex parte should remain in force pending the determination of the action or whether it should be discharged.

Extensive arguments on the legal points involved in the Application were put forward during the hearing. In dealing with the matter, I shall touch upon all issues raised but I consider it unnecessary to set out separately the arguments put forward as, by dealing with all issues as above, all the matters raised will be disposed of.

In 1975 the Court of Appeal, led by Lord Denning, M.R., vigorously attacked the well established principle that the assets of a defendant are afforded sanctity until judgment. Using s.45(l) of the Supreme Court of Judicature (Consolidation) Act, 1925, as a basis for jurisdiction; the Court granted injunctions preventing a foreign defendant removing assets out of the country, pending the determi­nation of a claim justiciable before the English courts. (Nippon Yusen Kaisha v. Karageorgis (1975) 3 All E.R.282; Mareva v. International Bulkcarriers

(1975) 2 Lloyd’s [*507] Rep. 509; (198p) 1 All E.R. 813). This new procedural innovation has become known to Judges and practitioners as the Mareva injunction. As such,, this procedure does not apply to cases where the Court has no other basis for jurisdiction against the defendant. As it was said by Lord Diplock in The Siskina (Cargo Owners) v. Distos Compania Naviera (1977) 3 All E.R. 803, it must be "ancillary to a substantive pecuniary claim for debt or damages", otherwise, as Lord Diplock said, it would appear "to involve the fallacy of petitio principii, or in the vernacular, an attempt to pull oneself up by one's own boot straps”.

The applicant, to be entitled to an Order, need only show that he has a good arguable case against the defendant and need not seek to discharge the civil burden of proof (i.e. on the balance of probabilities), (Establissement Esefka International Anstalt v. Central Bank of Nigeria (1979) 1 Lloyd’s Rep.445). On an analogy in Cyprus the requirements of Section 32 should be satisfied, that is, that there is a serious question to be tried at the hearing and that the plaintiff has a likelihood of success.

The early cases under this procedure were concerned with restraining the removal of cash. In Cyprus, as it was said by Malachtos, J. in.London & Overseas Co. v. Tempest Bay Shipping (1978) 1 C.L.R., 367, repeating what *[508] he had already said in the case of Consolidated Glass Works Ltd. v. Friendly Pale Shipping Co.Ltd. (1977) 1 J.S.C. 45 at p. 52:

"What was decided in the case of' Nemitsas Industries Ltd. v. S. & S. Maritime Lines Ltd. and Others (1976) 10 J.S.C. 1542, (following the Karegaorgis and Mareva cases (supra)), should be considered as so decided in the particular circumstances of that case and should not be readily extended so that to cover assets other than cash money and, especially, any dealing with a ship or any share therein."

Learned counsel for the Applicants argued that the meaning of the words "any dealing with a ship or any share therein" referred to the transfer of a ship. Irrespective of the merits of this argument, however, any notion that the procedure was so limited was destroyed in England after the decision in Rasu Maritime SA v. Perusahaan Pertambangan (1977) 3 All E.R. 324, where the Court of Appeal were prepared to grant an injunction restraining the removal of equipment from the West Gladstone docks, Liverpool.

In The Rena K. (1979) 1 All E.R. 397, it was held that the Admiralty jurisdiction in rem for the arrest of a ship was concurrent with the jurisdiction of other courts to grant a Mareva injunction in personam in respect [*509] of a ship. Brandon, J., thought that the prospect of a plaintiff obtaining a Mareva injunction in respect of several ships or of combining an arrest ,of one ship in proceedings in rem with the obtaining of a Mareva injunction in respect of one or more other ships in proceedings in personam, as one which did not fill him with any "consternation or dismay". Thus, in the unreported case of The Stolt Filia (1980), concurrent applications were made to arrest the vessel and obtain a Mareva injunction, and both applications were granted, but the Mareva injunction was later discharged solely on the ground that the main action was not justiciable in England.

For an injunction to be granted it must first be shown that there are assets belonging to the defendant within the court's jurisdiction (MBPXL Corporation v.

International Banking Corporation Ltd. (1975) CAT 411). Applying the reasoning of Lord Denning, M.R. in Third chandris

shipping v.· Unimarine (1979) 2 All E.R. 972, this requirement is to some extent mitigated by the fact that the applicant need only prove a prima facie case that the monies exist and the existence of a bank account, even if in overdraft, is sufficient.

The question of whether a Mareva injunction could be granted against a defendant permanently resident within the jurisdiction was left open by the House of Lords in The Siskina (supra), but the idea was firmly reflected [*510] by the court in Adler Cosmetica Ltd. v. Minnahurst Ltd. (1978) unreported, and The Agrabele (1979) 2 Lloyd's Rep. 117. It was subsequently held, however, that this prohibition did not apply to a foreign citizen, simply living within the jurisdiction, who was likely to leave, with his assets, at any moment. (See Chartered Bank v. Daklouche (1980) 1 All E.R. 205). Recently in Barclay- Johnson v. Yuill (1980) 3. All E.R. 190, Megarry, V.C. held that the procedure could be applied to all defendants, whether or not they were foreign based in any sense of the term. This decision was confirmed in the case of Prince Abdul Rahman Bin Turki Al. Sudairy v. Abu-Taha and Another (1980) 3 All E.R. 409 (dictum of Lord Denning, M.R. at p.412 followed in Searose Ltd. v. Seatrain Ltd. (1981) 1 All E.R.806). However, matters like residence and domicile are relevant considerations to be borne in mind when deciding whether to grant a Mareva injunction or not.

The applicant must also prove that there is a chance of the property being moved outside the jurisdiction (Montecchi v.Shimco U.K. (1979) 1 W.L.R. 1180).

In considering the grant of a Mareva injunction, the Court should always have in mind the rights and interests of third parties. Although on many occasions such interests may be adequately protected by an undertaking in damages by the plaintiff, this should not be enough in cases where a third party's freedom of action [*511] and his right to trade freely are affected. In the case of Galaxia Maritime SA v. Mineral Importexport (The "Eleftherios") 18 December, 1981, L.M.L.N.59, a Mareva injunction was discharged as, by attaching the cargo aboard the ship, the owners of the vessel, a third party, were restrained from freedom of action. In this case the owners themselves had intervened in the proceedings and obtained a cancellation of the Order which was one of the factors that distinguished this case from the Marie Leonhardt (1981) 2 Lloyd’s Rep.458. (See. also Essex Overseas v. Legent Shipping (1981) 1 C.L.R. 263 at 271.)

It has also been held that one of the purposes of granting a Mareva injunction is to force the defendant to give security and, where this is likely, as it was said in the Rasu case (supra), it might often be just and convenient to grant the injunction.

I shall now proceed to examine whether Courts in Cyprus should exercise their discretion in the matter following English authorities. Section 45(l) of the Supreme Court of Judicature (Consolidation) Act, 1925, under which Mareva injunctions are granted in England, is similar to our Section 32.

The view expressed by Malachtos, J. in the Consolidated Glass Works case (supra) and repeated in Cyprian Seaways Agencies Ltd. v. Chaldeos Shipping Co.Ltd. and Another (1977) 3 J.S.C. 292, was expressed at a time [*512] before the new decisions on the matter in England, and this is also apparent from the fact that no mention is made to those decisions. Furthermore, the aforesaid view was expressed obiter as the Court did not have to decide the matter on Section 32 of Law 14/60. (Similarly, in the Tempest Bay Shipping case (supra) no reference is made to the recent English authorities. )

In the

case of Nemitsas Industries Ltd. v. S. & S. Maritime Lines Ltd. and Others (1976) 1 C.L.R. 302, A. Loizou, J., said the following on the interpretation to be given

to Section 32, comparing it with Section 45(1) of the English Act of 1925:

"In my view the identical wording of these two sections justifies a similar approach and interpretation of our section."

In the light of the aforesaid, the English authorities on the matter should be followed in interpreting our Section 32, bearing always in mind the circumstances prevailing locally.

On the question of the affidavit of the Applicants, I find that there is sufficient evidence to indicate that the ship was about to be removed from the jurisdiction as it was going to Bail immediately. As regards the argument of the Respondents that the value of the ship is much in excess of the claim, I have found no authority [*513] preventing the Court from granting an order if the value of the chattel restrained is in excess of the claim. Even though it would have been reasonable to secure a debt by proportionate security, this could not have been done in the present case, the vessel being the only asset of the Defendants.

Having considered with the utmost care the legal position prevailing in respect of the granting of Mareva injunctions and bearing in mind all the circumstances of the present case, I feel that this is a proper instance where I should exercise my discretion in favour of the Applicants. The legal position explained hereinabove is an answer to the arguments put forward by learned Counsel for the Defendants and, in my opinion, the fact that the Defendants are a Cyprus Company and the subject-matter of the Application is not money, cannot by itself prevent me from granting the Order. The only point that needs further consideration is the submission that the ship is a trading asset and, by restraining it, the Defendants will suffer incalculable loss which may not be easy to cover by an undertaking in damages.

In the Rasu case (supra) it was held that particular care should be taken in granting an injunction where this would be likely to bring the defendant’s business to a standstill or to inflict great loss on him that might not be fully compensated by the plaintiff's undertaking in damages, and it is without losing sight of this factor that [*514] I have approached the facts of the present case.

In the Rena K case (supra) the following was said at p.420:

"There was one apparently strong point against granting an injunction. It was that the ship was a trading asset, and that, if the ship “owners were compelled by an injunction to keep her here, they would lose the benefit of trading her".

In their affidavit the Defendants state that the loss that would be inflicted on them by the Order, which would bring their business to a standstill, would in no way be compensated by the security given which is grossly inadequate. On this point it should be remembered that the security was given for a period of two or three days only and the matter could have been reviewed when the case would come up before the Court again, as it did in three days, on which occasion the Court could have raised the amount of the security to cover any damage likely to result.

Further down on the same page in The Rena K. case the following was said:

"In any case there is a certain artificiality about the concept that, if a Mareva injunction had been granted, the ship would have remained [*515] here, for it is obvious from what in fact happened that the club would have given a letter of undertaking rather than have allowed their member's ship to be detained here indefinitely."

Lord Denning, M.R. in the Rasu case (supra) went one step further when he expressed the following view at p.335:

"I see no objection in principle to an order being made in respect of assets in the expectation “ that this will compel the defendant, as a matter of business, to provide security."

The application of the above dicta to factual instances is amply illustrated by what happened in the present case where, after the Order, a deposit to cover the claim was made in Court and the ship sailed. This has also the result that no damage is likely to be caused to third parties, that is, the owners of the cargo, as the ship has sailed for its destination. So, at present, the only damage likely to result to the Defendants, if it appears at a later stage that the Order should not have been granted, will be the loss of profit from their capital which is deposited in Court, damage that can be safely calculated on the basis of the interest lost, and the security to be given by the Plaintiffs should be such as to cover such likely loss. [*516]

As regards the objection taken to the writ of summons and contained in the last paragraph of the Defendants' affidavit, I consider that any irregularity thereon can be easily corrected and that does not render it a nullity.

In respect of the prerequisites set down in the proviso to Section 32(1), from the affidavit of the Applicants it is plain that there is a serious question to be tried at the hearing and, bearing also in mind that in their affidavit the Respondents do not question the claim, it can be said that the Plaintiffs have a likelihood of success in their action. Furthermore, it is plain that, if the only asset of the Company were to be removed from the jurisdiction, then it would be very difficult to do justice at a later stage.

In the light of the aforesaid, the injunction granted on 28/5/82 is hereby made absolute on condition that the Applicants/Plaintiffs give security by way of a bank guarantee or a deposit of money in Court in the sum of £3,500 within 20 days from today. The question of costs is reserved.

Injunction granted on 28.5.82

made absolute.