Westwood Shipping Lines Inc & Others v Universal Schifff Ahrtsgesellschaft MBH (2012)
An order of a German court appointing a preliminary liquidator was a judgment opening insolvency proceedings for the purposes of recognition by the English courts under Regulation 1346/2000.
The court was required to determine issues in proceedings to enforce an arbitration award.
The defendant (G) was the time charterer of a vessel from its owner (K). G sub-chartered the vessel to the claimant (W) and W sub-sub-chartered the vessel back to G for the balance of the period of the sub-charter from G. K withdrew the vessel from the charter service in order to carry out repairs. G then cancelled the sub-sub-charter on the ground that the vessel was off-hire or reasonably estimated to be off-hire for 60 days, relying on a clause in the sub-sub-charter which permitted cancellation in that event. W commenced an arbitration against G claiming that the actual or estimated off-hire had been caused by G's failure to meet its maintenance obligations under the sub-charter. G did not bring arbitration proceedings up the charter chain against K as it could have done in reliance on the identical maintenance obligations in the head charter. In fact G had agreed not to make any claim against K or the vessel's managers. The arbitrators made an award in favour of W. G told W that it intended to honour the award but a few days later successfully applied to the German court for the appointment of a preliminary liquidator. W obtained permission to enforce the award and serve the enforcement application out of the jurisdiction, and obtained a freezing injunction without notice. It also applied for the appointment of receivers to bring a claim by G against K. W then discovered that G had given up its rights against K and had gone into liquidation. W did not seek to continue the freezing order or pursue the receivership application. The issues were whether the receivership application should be struck out or only stayed; and who should pay the costs.
(1) The order of the German court appointing a preliminary liquidator was a judgment opening insolvency proceedings for the purposes of Regulation 1346/2000. On the expert evidence G could not dispose of its assets without the liquidator's consent; it was subject to his supervision for the purpose of securing and conserving its assets and could not incur liabilities without his consent; it could not collect its debts for itself and they were to be paid to the liquidator; it could not suffer execution to be levied against it; and it had to hand over its books and records. To that not inconsiderable extent it had lost control of its assets. There had been at least a partial divestment of the debtor company as required by art.1,Eurofood IFSC Ltd, Re (C-341/04)  Ch. 508 considered. The fact that the order might become ineffective if the filing was withdrawn or if the court so decided did not mean that there had been no opening of proceedings under the Regulation. Thus the order fell to be recognised by the English court, and in particular the prohibition of measures of enforcement. That meant that the application for a receiver was prohibited. It should simply be dismissed (see paras 59-75 of judgment). (2) G had confirmed to W that it had reserved its rights against K when it had agreed not to pursue them; it had also said that it would in time pay the award and then started insolvency proceedings four days later; it then did not inform W that it had done so. It was unlikely that the applications would have been brought by W, if G had kept W properly informed. G's conduct was not reasonable or consistent with the overriding objective of saving costs. The court should make a costs order to reflect the degree of success and the conduct of the parties. G should pay W its costs of the application contained in the arbitration claim form up to and including the date when W learned of the appointment of the liquidator. G should not be entitled to recover from W any of its costs incurred before the date on which it had served most of its evidence and applied for the enforcement application to be struck out, except for the costs of the report of its German law expert. Thereafter W should pay the costs of the report and 50 per cent of G's costs, if and to the extent that it was shown that G was liable for such costs (paras 83-94).
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25 May 2012
Queen's Bench Division
Christopher Clarke J
LTL 25/5/2012 :  EWHC 1394 (Comm)
International & Offshore