In Rem arrest and in Personam claims
Atlas Baltic Ou -V- Owners And All Persons Concerned MV Lady Magda - Record Number 2017 6557 P

On the 19th July 2017 a warrant of arrest was issued for the vessel m/v “Lady Magda” for sums alleged to be due and owing from the defendant as the owner of the vessel in respect of disbursements and agency services contractually arranged for by a time charterer.

The Plaintiff obtained a warrant to arrest the vessel when it came to Ireland on the basis that the underlying claim constituted a “maritime claim” within the meaning of Article 1 of the 1952 International Convention relating to the arrest of Seagoing Ships (“the arrest convention”), incorporated into Irish law by virtue of the jurisdiction of Courts (Maritime Convention) Act, 1989. The Owners of the Vessel did not accept that the agent had a right to arrest and that the arrest was unlawful due to the fact that the owner of the vessel was not the agent’s debtor and further disputed that they were liable for the underlying substantive claim on the basis that the arresting party’s claim was one based on breach of contract and that it as owner had never entered into any contract with the arresting party.

The Plaintiff relied heavily on the judgment of Rushington J. in “the Pearla” (1858) 1 Swabey 353 wherein the course of his judgment the learned judge stated, “where goods are furnished for the use and benefit of the ship, the presumption is that the ship is liable; and, to rebut this presumption, it must be distinctly proved that credit was given to the individual only, whoever he may be.”

The Defendants in response relied on Campus Oil Ltd v. MF/V “Avro Hunter” [2004] 4JIC 2701. This case involved a claim in respect of necessaries or fuel supplied by the plaintiff to the vessel. The application was made on notice to Mr. Barry English who was not the registered owner of the vessel but the beneficial owner. The circumstances were that Mr. English purchased the vessel in 2001 from Brendan McGrath. He did so with the aid of a loan from AIB Plc. Mr. English did not procure his registration as owner and the vessel remained registered in the name of Brendan McGrath who executed a declaration of trust of the vessel in favour of Mr. English dated 1st June 2001. Mr. McGrath executed a mortgage of the vessel in favour of AIB Plc to secure the advance to Mr. English. The agreement between the parties was that Mr. McGrath would repay the loan made by AIB to Mr. English by making the repayments to on foot thereof. He defaulted in making the agreed payments and proceedings in rem were commenced by the Plaintiff to recover the cost of fuel supplied to the vessel. In the course of his judgment Finnergan P. stated: “A lien for necessaries is not a maritime lien and a plaintiff’s right to the res as a security only arises on proceedings being instituted and is subject to any claim then existing: The Pacific (1864) 10 LT 541: The Two Ellens (1872) L.R. 4 P.C.. 161. The object of the arrest is to provide for the plaintiff for the sum which he claims: The Cella (1888) 13 P.D. 82.
Finnegan P. also referred to the remark of Hewson J. at p. 543 in the “St. Merriel” that "It is a fundamental rule that the basis of maritime liens lies in the personal liability of the owner". On the basis of those decisions Finnegan P. decided in the “Avro Hunter” that as there was no personal liability on the beneficial owner and the demise charter having been terminated before the institution of the proceedings there was no entitlement to arrest the vessel.

On hearing the case before him, Judge McGovern noted that while the master of the vessel was employed by the Defendants, he was not the servant or agent of the defendants while acting as master during the currency of the time charter since he was subject to the directions of the charterer. The court noted that there was absolutely no evidence before it showing that the master entered into any arrangements which were the subject matter of the proceedings. The agent gave evidence that the services were provided on the basis of written appointments sent by the time charterer’s operation department. Judge McGovern found that this distinguished the present case from “the Pearla” where the Master of the vessel came to the office of the Plaintiff accompanied by another man who placed the order. Judge McGovern found there was no evidence to support a claim that the master of the vessel sought the services of the plaintiff or made any representations to the plaintiff about his authority to do so. The Plaintiff’s own evidence is clear as to how agreement was reached with the time charterer for the provision of services.

Judge McGovern was satisfied that the owner of the vessel did not enter into the agreements which were the subject matter of these proceedings and only became aware of them after the time charterer got into financial difficulties and had failed to adhere to a repayment schedule agreement with the plaintiff. The plaintiff’s own conduct in its dealings with the time charterer established clearly that it regarded the time charterer as the party to the contract and the party which had liability.
Judge McGovern concluded that he was satisfied that this claim was based on a breach of contract and the defendant was never a party to that contract. There was in his view no evidence of a contractual relationship between the plaintiff and the defendants. The fact that the claim was one for disbursements merely went to the issue of the admiralty jurisdiction to arrest the vessel. It was not determinative of whether or not the vessel could be condemned for this claim. Judge McGovern adopted the judgment of Finnegan P. in the “Avro Hunter” and was satisfied that there was no liability on the part of the defendants in respect of the claim made in these proceedings and therefore neither the vessel nor the security provided could be condemned in respect of the claim.

Noble Shipping Law acted on behalf of the successful Defendants in the above proceedings.