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Admiralty Sales – Can you stop them?

I won’t mention the “C” word in this article. Suffice to say, it’s now early April 2020 (for those reading in the future) and it’s unfortunately all around us. So, to divert attention from the “C” word, this is about something completely different.


It may be worth setting out a little bit of procedural background first. There is a special division of the High Court of Justice here in London, the Admiralty Court, which handles shipping and maritime disputes. Aside from hearing cases relating to vessel collisions, salvage, vessel mortgage-related disputes, and various other marine-related claims/disputes, the Admiralty Court also has the power to arrest vessels to stop them from moving, and to order their sale. Vessel arrest in our jurisdiction, a powerful tool in a claimant’s armoury, can only be brought under certain established grounds (which are outside the scope of this article) and which are broadly referred to as claims in rem, or claims against the vessel itself. This article focuses on the procedure being applied in a yachting context, with a surprising twist at the end.


On 25th March 2020 Mr. Justice Teare delivered an interesting judgment in the case of Qatar National Bank (QPSC) -v- The Owners of the Yacht Force India [2020] EWHC 719 (Admlty), a case involving the motor yacht “FORCE INDIA”. This was not the first judgment in this case, but more on that below. Briefly, the claimant bank (QNB) had a mortgage over the yacht and on 29th January 2020 it obtained a judgment against the yacht in the Admiralty Court (citation [2020] EWHC 103 (Admlty)) for the sums secured by the mortgage, as those sums had crystallised and the money was overdue following a default under the relevant underlying loan agreement. One unusual feature of the arrangement – and this is important in the context of what happened next – was that the mortgage wasn’t in place to secure a loan taken out by the owner to purchase or re-finance the acquisition of the yacht. No, the loan was taken out by a related company to finance a property purchase in the South of France, and the yacht was mortgaged as additional security in relation to that property purchase. Either way, in late January 2020 as already mentioned QNB obtained a Court order for the sale of “FORCE INDIA”, the Admiralty Marshall was instructed by the Court to sell the yacht (readers may already have picked up on the story in some of the well-known yachting publications at the time), and purchase bids were to be lodged by 10th March 2020.


However, on 10th March 2020 the successful claimant, QNB, applied to the Court to set aside the sale order… the Court turned down the application, but suspended the sale to conduct a hearing and make a proper determination in the matter, and sought certain undertakings to protect the position of the Admiralty Marshall, its sale broker, and certain other claimants. So what actually happened? According to Mr. Justice Teare’s ruling during the pertinent time (meaning around the time of the original QNB sale application, and subsequently) a company with no links to the owner of “FORCE INDIA”, whom I will refer to as the buyer, agreed to purchase the shares in the company which owned the French property at the centre of the loan in question. A French court approved a continuation plan for the property holding company (as it had been placed under judicial receivership), and in early March 2020 an agreement was reached between QNB and the buyer whereby the buyer would pay a certain sum of money to QNB in exchange, amongst other things, for an assignment of the mortgage on the yacht. As part of that agreement, QNB were to apply to the Admiralty Court to have the order of sale revoked by noon on 10th March 2020. As the relevant monies owed to QNB had been repaid, albeit by the buyer rather than the owner, the Court rather neatly concluded that “the judicial sale of the vessel is no longer required.” This was amplified by the very fact that it was the successful claimant, remember, who actually asked for the sale to be revoked.

So far, so clear. Still, I have to admit to having been somewhat surprised to see the official sale procedure halted so far into the process, and so near its conclusion.


The Court’s judgment actually goes into some detail into addressing any such concerns which others may share so they are worth quoting in full, not least as they serve as a useful reminder of the core purpose behind such sales and the benefits, for purchasers, of acquiring vessels from the Admiralty Marshall – reference is made to paragraphs 10 through 13 of the judgment of M. Justice Teare:


“Sales by the Admiralty Marshal of vessels which have been arrested in an Admiralty action in rem are the means by which, failing the provision of alternative security, claims in rem are enforced. Sales by the Marshal are free of pre-existing maritime liens, statutory rights of action in rem or other encumbrances. In order to ensure that the market price is achieved the vessel’s value is appraised prior to sale. The Marshal cannot sell for less than the appraised value without the permission of the court. These features of an Admiralty sale are well known to the market. If it became the practice for orders for sale to be set aside those willing to incur the time and expense involved in making a bid for a vessel ordered to be sold may feel disinclined to do so. That might lead to vessels being sold for less than their market value and might tarnish the reputation of the Court. In the long term the service provided by the Admiralty Court to the maritime community would or might be damaged.


These concerns suggest that the court should be reluctant to set aside a sale, particularly when the application is made as late as the application in this case was made. In his witness statement the Marshal has stated that, according to his broker, Paul Wilcox of Kellocks, around 20 potential bidders had carried out inspections and investigations during the sale period and that if it became widespread knowledge that parties can stop a sale process it will make interested parties “more cautious about bidding for vessels being sold through the court’s process”.


The setting aside of sales should certainly not become a practice.


However, there are very few instances of such applications being made. The only reported instance appears to be The Acrux in 1961. That such applications are rare is apparent from the witness statement of the Marshal in which he said that he had been informed by his broker, Mr. Paul Wilcox of Kellocks, that in his 40 year association with court sales he had never known such an application being made to halt a sale at such a late stage.”


Mr. Justice Teare concluded by confirming that this case was special (“unusual and perhaps exceptional” was a phrase used) because it is rare that an independent third party would be prepared, effectively, to as he put it “discharge the judgment debt and so render the sale unnecessary”, but that is exactly what happened in the case of “FORCE INDIA”. This is why the Court determined it was appropriate for the sale order to be set aside and for the yacht to be released from arrest.


The content of this article is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content herein.

#yachts #judgment #superyachts #legalupdate

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