Locabail International Finance Ltd v Manios and Transways (Chartering) SA

JurisdictionBermuda
Judgment Date09 November 1988
Date09 November 1988
Docket NumberCivil Appeal 1988 No: 4
CourtCourt of Appeal (Bermuda)

In the Court of Appeal for Bermuda

In the Court of Appeal for Bermuda

In the Court of Appeal for Bermuda

H.L. da Costa

Blair-Kerr, P

Henry, JA

Civil Appeal 1988 No: 4

Civil Appeal No. 4 of 1988

Civil Appeal No.4 of 1988

BETWEEN:
Locabail International Finance Limited
Appellant (Defendant)

and

Dimitrios Manios
1st Respondent

and

Transways (Chartering) S.A.
2nd Respondent (Plaintiffs)
Locabail International Finance Limited
Appellant (Defendant)

and

Dimitrios Manios
1st Respondent

and

Transways (Chartering) S.A.
2nd Respondent (Plaintiffs)
Locabail International Finance Ltd.
Defendant-Appellant

and

Dimitrios Manios
Transways (Chartering) S.A.
Plaintiff-Respondent

Mr. Hargun for the Appellant.

Mr. Riihiluoma for the first and second Respondents.

Barclay-Johnson v YuillUNK [1980] 3 All ER 190

Establishment Esifka International Anstalt v Central Bank of NigeriaUNK [1971] 1 Lloyds Rep. 445

Rahman (Prince Abdul) Bin Turki v Abu-TahaUNK [1908] 3 All ER 409

Ninemia Corp v Trave Schiffahrts (The Niedersachsen)UNK [1984] 1 All ER 398

Third Chandris Shipping Corp v Unimarine SAELR [1979] QB 645

Avant Petroleum v GatoilUNK [1986] 2 Lloyds Rep. 236

Rasu Maritima SA v Perusahaan Pertambangan Minyak Dan Gas Bumi NegaraUNK [1977] 3 All ER 324

Siporex Trade SA v Comdel Commodities LtdUNK [1986] 2 Lloyds Rep. 428

Bank Mellot v NikpourUNK [1985] FSR 87

National Iranian Oil Company v Ashland Overseas Trading Ltd 1987 Civil Appeal No. 15

Negocios Del Mar SA v Doric Shipping Corp SA (The Assios)UNK [1979] 1 Lloyds Rep. 331

The Angel BellUNK [1980] 1 Lloyds Rep. 632

United Dominions Trust (Commercial) Ltd. v Eagle Aircraft Services LtdWLR [1968] 1 WLR 74

Helby v MatthewsELR [1895] AC 471

Hadmor Productions Ltd v HamiltonELR [1983] AC 191

Appeal against continuation of Mareva injunction granted against defendant — Whether exempted companies should be considered differently than local companies in deciding whether to grant Mareva injunctions — Whether exempted companies are foreign companies — Duty of plaintiff to make full and frank disclosure — Whether injunction could be discharged on grounds of material non-disclosure by plaintiffs — Standard of proof — Evidence of risk of removal of assets was scanty — Fact that defendant had recently started to make a loss was not relevant — Type of assets owned by defendant not relevant — Plaintiffs failed to show they had good arguable case — Whether contract was unilateral or conditional

JUDGMENT

The Appellant, Locabail International Finance Limited (‘Locabail’) is a Bermuda exempted company and carries on business as a leasing and finance company. It is an associated company of Locabail (U.K.) Ltd. and a subsidiary of Locabail S.A. The ultimate parent company is Compagnie Bancaire S.A., a company incorporated in France.

The first Respondent, Dimitrios Manios (‘Mr. Manios’) resides in Athens and is engaged in the shipping business. He controls the second Respondent Transways (Chartering) S.A. (‘Transways’). Transways is a company incorporated in the Republic of Liberia with its registered office in Monrovia, Liberia.

Prior to 1987 Locabail was the first preferred mortgagee of a Panamanian registered vessel ‘Victory III’. The owners were in default under the mortgage. In or about September, 1986 Locabail arrested the vessel in Holland. She was put up for sale. According to Mr. Manios when the vessel was put up for sale he became interested in her as a prospect for time charter out to the National Iranian Tanker Corporation (‘NITC’). After discussions with Locabail, it was agreed that Locabail would buy in the vessel, do some necessary repairs and let her out to Mr. Manios or one of his companies on demise charter, while he organized a time charter to NITC.

On 12th December 1986, Oakdale Shipping Corporation(‘Oakdale’) purchased ‘Victory III’ at auction as Locabail's nominee. Oakdale is also a Liberian corporation and a subsidiary of Locabail which still continued to act as mortgagee of ‘Victory III’.

The vessel arrived in Piraeus for repairs on 2nd February 1987. On the next day Oakdale agreed to demise charter the‘Victory III’ to Transways on the terms set out in the charter. Clause 3 contained a number of conditions precedent. Clause 19 contained an option to purchase the vessel. There was moreover a side letter of even date attached to the charterparty. Its construction is a matter of dispute between the parties. It will have to be looked at critically hereafter. In summary, according to Mr. Manios the effect of the side letter was—‘We were obliged to buy the vessel from Oakdale; so Oakdale were obliged to sell her to us’. Locabail submits there was no agreement to sell.

To continue the story: the repair work to the ship was expected to take four weeks. It took much longer; it was not until the end of May 1987 that the repairs were almost complete. By then the prospect of chartering the vessel to NITC had disappeared, for the market had fallen and NITC's requirements were filled by newer and more readily available tonnage. And so on May 22nd, 1987 the Respondents purported to exercise the right which they claimed the side leter gave them to purchase the vessel on completion of the repairs.

By telex dated 27th May 1987 Oakdale refused to sell the vessel. This led to the arrest of the vessel on June 20th in security proceedings in Piraeus. Eventually security for the Respondent's claim in the sum of US$400,000 was provided and the vessel was released. She was subsequently sold to a Turkish-owned corporation and renamed the ‘OBO VEGA’. This was around July 7th, 1987. According to the Public Registry and Shipping Bureau in Panama Locabail is still the first preferred mortgagee of the vessel.

On the 19th October 1987 the Respondents as Plaintiffs issued a specially endorsed writ against Locabail claimimg damages and other relief. On the same day they moved for a Mareva injunction and other relief by way of discovery. The application was granted by the Chief Justice.

The order reads as follows:

‘IT IS HEREBY ORDERED:

  • 1. That the Defendants whether by themselves, their servants or agents or otherwise howsoever be restrained until trial or further Order from removing any of their assets out of the jurisdiction of this Honourable Court, or disposing of or charging or otherwise dealing with any of their assets except insofar as the value of such assets exceeds US$1.6 million.

  • 2.In particular and without prejudice to the generality of the foregoing, that the Defendants whether by themselves, their servants or agents be restrained until trial or further Order from drawing from, charging or otherwise dealing with any accounts standing in their name or to their order at the Bank of Bermuda Ltd. except insofar as any of those accounts exceeds the sum of US$1.6 million.

  • 3.That within 7 days the Defendants identify by giving full details to the Plaintiffs' Attorneys of all accounts and other assets which they have or maintain in their own name and in particular details of all accounts they have or maintain at the said Bank of Bermuda Ltd.

  • 4.That within 7 days the Defendants produce to the plaintiffs' Atttorneys so that they may inspect and take copies of all documents relating to or dealing with the account or accounts or other assets the subject of this Order referred o above.

  • 5.That there be liberty to the Defendants and to any other person affected by this Order to apply on notice to the Plaintiffs' Attorneys to set aside or vary this ? Order or to seek further directions hereunder.’

On the 27th October, 1987 a summons was taken out asking inter alia for the discharge of the Order of 19th October 1987. The application came before Mr. Justice Austin Ward on Tuesday 1st December 1987. Judgment was reserved; it was delivered on 29th December 1987. The order of the learned judge reads:

‘I therefore order that the injunction shall remain in place with the deletion of paragraphs 3 and 4.

I would also order that the injunction be lifted on the filing by the holding company of the Compagnie Bancaire Group of a suitable guarantee that it will pay to the plaintiffs all monies, if any, which may ultimately be found to be due to the plaintiffs as a result of this claim. For that purpose would grant liberty to apply.’

On the 2nd March, 1988 Notice of Appeal was filed against the order of Austin Ward J. insofar as it continued paragraphs 1 and 2 of the Injunction granted ex parte by the Chief Justice on 19th October 1987 and ordered that each party should bear their own costs. The Notice of Appeal also asked that the whole of the Order granted ex parte on the 19th October 1987 be set aside.

Mr. Hargun for the Appellant informs us that this is the first occasion on which this Court would have had an opportunity to consider the proper ambit of a Mareva injunction within this jurisdiction. He submits that the matter is one of considerable general public importance because it raises the point whether exempted companies, which number some six and a half thousand and directly or indirectly provide some forty percent of the gross national product, should be considered differently than a local company for the purpose of granting a Mareva injunctions against their assets. In England one of the factors which a court may take into consideration whether to grant a Mareva injunction against a defendant is that the defendant is a foreign company incorporated in a tax haven where it is not possible to ascertain the identity of the owners of the company, or the assets belonging to that company. In England a court is asked to infer from the mere fact of incorporation in a foreign tax haven that the defendant may dissipate the assets belonging to it in order to avoid a judgment. That argument has sometimes, as it was in the present case, been used in Bermuda against defendant companies which have been...

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    ...and requires no authority to justify it.” 86 This passage was cited with approval in the Bermuda Court of Appeal in Locabail v Manios [1988] Bda LR 26 at page 15, per da Costa JA. 87 The Court accepts that these cases illustrate the principle that, having set aside the injunction, the Court......
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