Tecoil Shipping Ltd -v- Neptune EHF & Ors [2021] EWHC 1582 (Admlty)

In this case, the admiralty registrar was required to consider an application to set aside a judgment in default. In doing so, the registrar considered whether, in an action issued in personam, the defendant was bound by determinations made in an in rem claim.

Factual background

On 18 July 2018, a collision occurred between two ships, the “POSEIDON”, a research/survey vessel, and the “TECOIL POLARIS”, an oil tanker. The “TECOIL POLARIS” was at berth at Albert Dock, Hull, and the “POSEIDON” was manoeuvring towards the berth when she struck the starboard side of the “TECOIL POLARIS”, causing considerable damage. The claimant is the owner of the “TECOIL POLARIS” and the first defendant, now in liquidation, is the owner of the “POSEIDON”.

On 3 August 2018, Lodestar Marine Limited (Lodestar), the P&I insurers of the “POSEIDON”, acting as agents for Royal & Sun Alliance Insurance Plc (RSA), the underlying insurer, (the insurers) issued a letter of undertaking (the LOU). Under the LOU, RSA undertook to pay to the claimant, on demand, such sum due from the first defendant, provided that their total liability, inclusive of interest and costs, did not exceed US $200,000.00.

On 28 June 2019, the claimant commenced in rem proceedings against the “POSEIDON”. No acknowledgment of service was filed. Accordingly, on 18 December 2019, the claimant applied for judgment in default. A hearing took place before the then admiralty registrar, Mr Jervis Kay QC, on 14 January 2020. In accordance with the practice of the Admiralty Court the hearing was in open court and the claimant had to prove the claim to the satisfaction of the court. Judgment was handed down on 24 February 2020 and the claimant was awarded around US $525,000.00.

Prior to the judgment being delivered, it had become clear that RSA were not intending to make payment under the LOU. RSA argued that the LOU would not respond to an in rem judgment. As a result, the claimant had no real choice but to issue an in personam claim against the first defendant. The claimant issued this claim on 16 July 2020.

Before the service of the claim form, the claimant amended it, pursuant to CPR 17.1(1), so as to add the insurers as parties and to include the claim against them for the sum due under the LOU. The claimant served the amended claim form on the insurers within the jurisdiction and on the first defendant’s liquidator in Iceland, having been granted permission by the court to do so.

On 5 February 2021, time having expired for the first defendant to file an acknowledgment of service, the claimant made a request for judgment in default. Judgment was entered against the first defendant on 12 February 2021 (the default judgment). That same day, the claimant made a, further, formal demand under the LOU for the sum of US $200,000.00. The insurers rejected the demand.

In an email dated 17 February 2021, the insurers argued that (a) the default judgment was not a final unappealable judgment (following the wording of the LOU), and (b) the LOU was not intended to protect the claimant from the risk of the first defendant’s insolvency in the event that the “POSEIDON” was not of sufficient value to satisfy its claims.

On 8 December 2020, the insurers applied to set aside the service of the amended claim form on them and on 26 February 2021, they applied to set aside (a) the order giving the claimant permission to serve the first defendant out of the jurisdiction and (b) the default judgment against the first defendant. The admiralty registrar heard the applications on 12 March 2021 and rejected the procedural objections taken by the insurers to service of the amended claim form on them and to the order giving permission to serve out on the first defendant, but deferred consideration of the application to set aside the default judgment.

On 23 March 2021, the claimant issued an application for (a) permission to re-amend the claim form, so as to plead a claim based on the demand made on 12 February 2021, and (b) for summary judgment against RSA. On 18 May 2021, the admiralty registrar heard the insurers’ application to set aside the judgment in default and the claimant’s application for summary judgment.

On 25 May 2021, after the admiralty registrar had drafted his judgment but before he had circulated it, he received an email from the parties to the effect that they had settled in principle. As the admiralty registrar considered that the arguments advanced by the parties, in relation to the application to set aside the judgment in default, raised issues of wider interest, he proposed, notwithstanding the settlement, to promulgate that part of his judgment. The parties did not object to this proposal.

Legal analysis

The insurers’ application to set aside the default judgment

The insurers advanced two arguments; first, that the judgment was wrongly entered and therefore fell to be set aside as a matter of right pursuant to CPR 13.2; second, the judgment ought to be set aside as a matter of discretion pursuant to CPR 13.3.

The insurers’ first argument was based upon the proposition that, in a collision claim, judgment in default is not available unless the party seeking judgment has either filed a collision statement of case, or, at least, obtained an order dispensing with that requirement. The insurers sought to rely on CPR 61.9(2).

The admiralty registrar rejected this argument, stating that the insurers’ submission did not reflect the wording of CPR 61.9. The admiralty registrar held that the requirement to serve a collision statement of case is triggered by the filing of an acknowledgment of service, in accordance with CPR 61.4(5), and, as no acknowledgment of service had been filed, the requirement to file a collision statement of case had not been triggered. The admiralty registrar stated that the application was therefore governed by CPR 6.19(3)(b), which provided that it had to be made in accordance with Part 12 with any necessary modifications.

The admiralty registrar pointed out the fact that, contrary to the insurers’ submission, the textbooks are unanimous that judgment in default of acknowledgment of service is available in a collision action which has been brought in personam. In addition, although the issue did not arise, the admiralty registrar stated that, had CPR 61.9(2) applied, it would have been necessary for the insurers to distinguish admiralty registrar Kay QC’s decision that judgment in default of acknowledgment of service was available in a collision claim in rem. The admiralty registrar held that had it been necessary for him to decide this issue; he would have followed admiralty registrar Kay QC’s decision.

As to the insurers’ second argument, their starting point was that it would be open to the first defendant in in personam proceedings to contest liability and/or the sums for which the registrar gave judgment in rem. The insurers argued that admiralty registrar Kay QC’s judgment of 24 February 2020 was not an in rem judgment because it did not determine the status of the res, ie the “POSEIDON”. The insurers submitted that the registrar’s determinations were in personam decisions and, accordingly, they did not bind all the world and were not conclusive evidence of the matters decided therein.

The admiralty registrar stated that this submission was contrary to the general understanding of practitioners as to what is meant by an in rem judgment. The admiralty registrar held that the proceedings before admiralty registrar Kay QC were quite clearly in rem proceedings in that they were brought against a res, the “POSEIDON”, and they established rights over the res which were good against all the world. The admiralty registrar went on to state that, without deciding the point, the insurers were probably correct to say that the judgment in the in rem proceedings against the “POSEIDON” could not be directly enforced against the first defendant. However, the admiralty registrar stated that the cases upon which this point had been decided were in relation to enforcement in in rem proceedings, whereas, in the present case, the claimant was not seeking to enforce the in rem judgment against the first defendant, the claimant had brought an entirely fresh action.

Quoting from Admiralty Jurisdiction and Practice, 5th Ed, the admiralty registrar stated it is a well-established principle that even though judgment has already been obtained in a claim in rem, a party may bring a subsequent claim in personam in respect of the same claim, unless the proceeds of sale are sufficient to cover the damages. The admiralty registrar stated that, in such a claim, it does not follow that the defendant is entitled to re-litigate all the issues in the in rem action. The admiralty registrar held that as against the first defendant the judgment in rem was conclusive evidence of the matters therein decided and it was not open to the first defendant to go behind it. This was because although the first defendant was not, strictly speaking, a party to the in rem proceedings, it was at least indirectly impleaded to be affected by the judgment of the court. Quoting from The “Parlement Belge” (1880) LR 5 PD 197 (CA) at 218, the admiralty registrar stated that the liability to compensate was fixed not merely on the property, but also on the owner through the property. The admiralty registrar went on to state that it was clear that in this subsequent action in personam the first defendant was bound by the determinations in the in rem claim, and there was therefore no point at all in setting aside the default judgment.

In case his decision was wrong, the admiralty registrar went on to set out a number of reasons as to why he would not anyway, as a matter of discretion, set aside the judgment. One of the reasons being that the insurers had a full opportunity to participate in the in rem proceedings which, if they wished to contest the quantum of the claim, would have been the proper thing to do, but they deliberately decided to take no meaningful part.

Accordingly, the admiralty registrar dismissed the insurers’ application, and in doing so held that to allow the insurers to re-litigate the claimant’s claim would be an abuse of process.

The claimant’s application for summary judgment

The admiralty registrar held that as the parties had settled, it was unnecessary, and would be inappropriate, for him to promulgate his judgment on this aspect.

Comment

This is an important decision which makes clear that determinations made in an rem claim can bind an owner, or their insurers, in a subsequent action in personam.  However, and although the point was not officially decided by the registrar, it appears that a judgment in rem cannot be directly enforced against an owner, a fresh action in personam is required.