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Can claimants who arrest vessels be required to give cross-undertakings in damages? Not at present, but the Court of Appeal says the position may be open to reconsideration

11th Dec 2018

NatWest Markets plc v Stallion Eight Shipping Co. S.A. [2018] EWCA Civ 2760

In this appeal, Robert Bright Q.C. and Charles Holroyd, instructed by Watson Farley Williams, successfully represented the respondent bank.  The appeal was brought by a vessel owner against a decision of Teare J., who had dismissed the owner’s application to have its vessel released from arrest unless the bank provided a cross-undertaking in damages in the same form as that typically required on applications for freezing orders. 

Teare J. had accepted the bank’s argument that the proposed order would be inconsistent with an in rem claimant’s entitlement to arrest as of right, and with the established law governing liability for wrongful arrest.  He also held that the order sought would be inconsistent with the long-standing practice of the Admiralty court, and with the decision of the Court of Appeal in The Bazias 3 and the Bazias 4 [1993] 1 Lloyd’s Rep. 101, as well as with dicta of Lord Clarke in Willers v. Joyce [2016] 3 WLR 477.  He concluded that it was not open to a first instance judge to grant the order sought, and that any change to the current practice was a matter for the legislature or at least the Rules Committee after proper consultation. 

In a wide-ranging judgment, which considered the position in numerous Commonwealth and other jurisdictions, the Court of Appeal upheld Teare J.’s decision.  The Court considered that requiring a cross-undertaking would result in a far-reaching change in longstanding and settled practice and that there was a need for circumspection before embarking on judicial law-making.  It held that the case against any overnight change in settled law and practice was overwhelming.   Moreover, there was a further fact-specific reason for refusing the order sought in this case, which was the Judge’s finding that the shipowner had not made good the case that alternative security could not be provided by its direct and indirect shareholders.  The shipowner could therefore not demonstrate the “risk of injustice” on which it relied.

However, the Court of Appeal disagreed with Teare J.’s view that the settled practice of not requiring a cross-undertaking in case of arrest could only be changed by the intervention of Parliament or the Rules Committee.  It was open to the Court itself to reconsider the position if properly informed as to the views of the maritime community, including the practical ramifications of any proposed changes and the preferred route to be adopted.

The decision is therefore unlikely to be the last word on this important topic, which has been debated by academic and legal commentators for over 20 years.

To view the judgment please click here.

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