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	England and Wales High Court (Admiralty Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Admiralty Division) Decisions >> The Ruta, Re [2000] EWHC B1 (Admlty) (11 February 2000) URL: http://www.bailii.org/ew/cases/EWHC/Admlty/2000/B1.html Cite as: [2001] 1 All ER 450, [2000] EWHC B1 (Admlty), [2000] ICR 1024, [2000] 1 WLR 2068, [2000] CLC 784, [2000] 1 All ER (Comm) 847, [2000] 1 Lloyd's Rep 359

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IN THE HIGH COURT OF JUSICE
QUEEN'S BENCH DIVISION
ADMIRALTY COURT

		11th February 2000

1. It is so often the case that actions involving relatively modest sums of money raise difficult issues of law. This case is one such. The proceeds of sale of the vessel RUTA are wholly insufficient to satisfy the large number of maritime claims outstanding against her former owners and it falls to the court to decide their ranking. Two primary issues have arisen:-

a. Does a damage claimant have priority over a wages claimant or vice-versa?

b. On what terms as to priority can a claimant who has earlier obtained contractual security proceed against the proceeds of sale?

2. The background is unusual. On the 10^th October 1997, RUTA, a small general cargo vessel of 1,593 g.r.t., manned by a crew of 9, was outward bound from Ipswich. In the course of her passage, she came out of the channel and collided with three yachts lying at anchor, CARBONNADE, SHAMAL II and LUTRA II. CARBONNADE sank and was rendered a constructive total loss. Her owners had a claim for about £45,000. SHAMAL II and LUTRA II were both less severely damaged and their owners had claims in the region of £16,000 and £8,000 respectively.
3. (It is worth mentioning that only ten days earlier, RUTA had been involved in another incident in the port whereby electrical cables had become damaged. In the result, Ipswich Port Limited had been furnished with an insured guarantee covering their claim arising out of the incident in the sum of $600,000 just before RUTA sailed.)
4. During the course of 1998, with the three yacht claims laying fallow, a new crew took over RUTA. AB Seledchenko joined in February and Chief Officer Konopkin and AB Kann in March. All the remainder, Captain Maslennikov, Chief Engineer Pilippov, Second Engineer Sokolov, Electrician Poluetkov, Motorman Tjurikov and Cook Vlasov, joined in August. As their names suggest, they came either from Russia or from one of the Baltic States.
5. On the 15^th September, 1998, RUTA was arrested at Youghal in the Republic of Ireland at the instance of Morline Ltd. who were the managers of the vessel and also mortgagees. The owner of LUTRA II thereupon issued a caveat against release and, on the 25^th September, took over the arrest of the vessel from Morline. In the meantime, their solicitors had made the following proposal as regards security:

Our clients will accept security in the form of a cash deposit in an interest bearing escrow account opened in joint names, in the form of a bail bond, or in the form of a guarantee to be provided either by a first class British bank or by an International Group P & I Club.

6. Following negotiations between solicitors, the owners of LUTRA II accepted a letter of undertaking from RUTA's P&I club, Ocean Marine Mutual Insurance Association Limited, in the sum of £14,000 and the vessel was released the same day, the 2^nd October. (The undertaking also provided for the acceptance of services of English proceedings.) On the 27^th October, RUTA was arrested at Sables d'Olonne, this time at the instance of the owners of CARBONNADE and SHAMAL II. This proved to be unrewarding, as the hull underwriters of RUTA had by now gone into liquidation and the club refused to furnish security in their stead. RUTA was accordingly released from arrest with a view to her completing a laden voyage to England, thereby earning freight. On the 2^nd November, RUTA arrived at Immingham and was re-arrested. The vessel was eventually removed to Hull were she remained until sold.
7. In the meantime a substantial backlog of unpaid crew wages had built up. The crew appear to have left the vessel in December. Four of them were paid off by the owners of CARBONNADE and SHAMAL II, including their repatriation costs, pursuant to an order of this court that the owners thereby be subrogated to the relevant crew claims. The other five joined another vessel and claim their outstanding wages in their own right. The total sums involved are in the region of $30,000, representing approximately two and a half months wages.
8. A range of claimants including mortgagees, repairers and bunker suppliers subsequently entered various caveats against release or payment out. But when the vessel was eventually sold in November 1999, the sum realised inclusive of bunkers was only $167,163. Against this was ranged a number of claims: -

a. Admiralty Marshals Expenses £19,399

b. CARBONNADE £49,907

c. SHAMAL £18,062

d. Crew wages £13,310

This was enough to persuade the additional claimants that there was no realistic prospect of a dividend given their low priority as compared with the maritime lienors.

9. The position was further complicated when, having obtained default judgment in March 1999 in the sum of £8,965 (together with £14,670 in costs), the owners of LUTRA II sought to enforce the judgment against their security. They learned that provisional liquidators had been appointed to the guarantor company in March by an order of the courts of the Turks and Caicos Islands. The liquidators duly notified the owners' solicitors by letter dated the 26^th October 1999, as follows: -

"You are correct to assume that holders of Letters of Undertaking from OMNIA will be treated as unsecured creditors. I am unable to estimate either the timing or the quantum of any dividend to unsecured creditors at this early stage in what is a highly complex provisional liquidation. Similarly I am unable to release financial information at this stage, except to state that there are substantial secured claims on the assets which will rank ahead of unsecured creditors for dividends."

It is this claim, which the owners of LUTRA II now also seek to bring against the fund in court, still entitled to the priority, it is contended, of a maritime lien for damage.

The Ranking of the Wages Claim

10. Regardless of the priority of the LUTRA II claim, the entire net fund would be absorbed by the claims of CARBONNADE and SHAMAL (after allowance for interest) unless the wages claim has priority over them. This immediately raises the question of the validity of the "rule" spoken to in many of the textbooks that the lien for wages ranks below that for collision damage: e.g. Williams & Bruce, Jurisdiction and Practice in Admiralty Actions 2^nd. Ed. p. 205,Maude & Pollock, Law of Merchant Shipping 4^th Ed. p.240, Tenterden, Law of Merchant Ships, 14^th Ed. p.1026, Roscoe, Admiralty Jurisdiction and Practice, 5^th. Ed. p. 227. It is in this tradition that the status of a damage lien is summarised in McGuffie, Admiralty Practice, B.S.L. Vol. 1 (1964) as follows: -

Damage has priority over:

a. earlier salvage

b. wages

c. subsequent possessory liens

d. necessaries

e. execution creditors…

f. mortgages

11. This approach was challenged by the wages claimants. It was their case that there was no hard and fast rule in respect of this (or indeed any other) priority issue. The Admiralty Court, it was argued, approached the question of priority in a broad discretionary way, having regard to considerations of equity and public policy. In the light of the authorities, the particular features of the present case that were emphasised by the wages claimants as allegedly justifying priority of their claim over the collision claims were as follows: -

a. The wages were earned after the collisions occurred.

b. The claimants were not themselves responsible for the imposition of the damage liens.

c. At least in comparison with the damage claimants, the wages claimants could fairly be regarded as preservers of the res.

d. The interests of mariners were a special concern of the Admiralty Court.

e. With the owners being insolvent, the wages claimants had no alternative remedy.

Authorities

12. Before considering the validity of the broad submission as to the discretionary nature of the Court's task or the significance of the detailed criteria said to support the case of the wages claimants, I propose to review the principal authorities touching on the comparative priority of wages and damage claims.
13. A convenient introduction is The Airline (1839) 1 W.Rob.111 in which Dr. Lushington considered the relative priority between a damage lien on the one hand and a mortgage or bottomry bond on the other. He placed particular emphasis on the involuntary nature of the damage lienor's interest and the availability to the mortgagee or bondholder of an alternative remedy: -

In both of these cases, I apprehend the mortgagee and the bondholder cannot take any right greater than the owner could confer; viz. a lien on the ship as a security against the owner and all who claim under him. I am also of the opinion that neither the mortgagee nor the bottomry bondholder could be a competitor with the successful suitor in a cause of damage, and for this reason, that the mortgage or bottomry bond might, and often does, extend to the whole value of the ship; if, therefore, the ship was not first liable for the damage she has occasioned, the person receiving the injury might be wholly without a remedy, more especially where (as in this case) the damage is done by a foreigner, and the only redress is by a proceeding against the ship. Another reason that would incline the preponderance in favour of the person suffering the damage arises from the consideration that he has no option, no caution to exercise; the creditor on mortgage or bottomry has. He may consider all the possible risks, and advance his money or not as he may think most advisable for his own interest. He has an alternative; the suitor in a cause of damage has none.

14. Following two decisions of the English Admiralty Court in The Benares (1850) 1 Not. Cas. Supp. 50 and The Chimera (1852) 11 L.T. 113 in which damage lienors were accorded priority over wages claimants on the basis that the latter should be left to rely on their in personam claim against their employers who were not said to be insolvent, the underlying rationale for such an approach was spelt out in the Irish decision in The Duna (1861) 5 L.T. 217: -

By the maritime law of all great maritime states the mariner has a threefold remedy for the recovery of his wages. He can sue the ship herself, or he can sue her owner, or he can sue the master of her. His right to all or any of these several remedies is beyond debate, and he can select any of them which his convenience or necessity may suggest. The petitioners in this case of damage, in which the ship is a foreign one, and sold in this, a foreign country, have no other remedy than against the ship, and if that be abstracted, or its value absorbed by other claimants, they are remediless. With all these considerations before it, the court is now called upon to decide whether it ought to prefer the claim for compensation of the injured party, or the claim of those who by inference of law contributed to, or occasioned that injury - whether it ought to diminish a fund already insufficient for its specific and assigned purpose of compensating a wrong, on favour of those on account of whose unskilfulness or negligence that fund was so impounded as a penalty, and whether it would allow one party, who has diverse remedies unnecessarily to select that particular one which is the only remedy of the other party, and which, if absorbed or diminished, would leave his rights unsatisfied. Upon every principle of natural justice it is impossible for the court to prefer the claims of the master and mariners whose conduct in the management of the wrong doing ship was, at the least, so questionable, to the claim for compensation of an innocent party, who has suffered injury by or through that conduct; or to relieve the owners of the vessel from his unquestioned liability to the master and mariners for their wages at the expense of the petitioner in the cause of damage, and out of the very fund which he has compelled by an action of tort, to allocate to those petitioners as compensation. Acting on the well known principle of equity, where one party has several and the other but one remedy, it inflicts no hardship upon those seamen sending them to their personal action against and owner who is not stated to be bankrupt or insolvent, and is, moreover, a fellow subject and resident in that country to which they are about to return; and still less should they consider it a grievance that they were so sent, when they know that it was in order that justice might be done to others who, according to the judgment of the court, had received damage, and were entitled to be indemnified: per Judge Kelly at p218"

15. In the meantime, this approach had been echoed by Dr. Lushington in The Linda Flor (1857) Swab. 309. He expressly adhered to his earlier decision on the issue in The Chimera (supra) emphasising the comparison between the alternative forms of redress open to the wages claimant and the absence of any option available to the damage lienor. He did, however, compete his short judgment by commenting: - "This is not a case of a bankrupt owner; it will be time to consider such a case when it arises."
16. The issue eventually reached the Court of Appeal in The Elin 8 P.D. 129. The court refused to hold that the earlier cases had been wrongly decided, viewing the matter not as a question of priority but as the outcome of the proper application of equitable principles preventing the owner who caused the damage from being entitled to withhold part of the fund for the payment of wages. The underlying premise remained that the wages claimants were able to recover from the owners direct: -

If the Admiralty Court allowed seamen to recover wages out of this fund it would in so doing give a relief to the owner of the wrong doing ship in the hands of the court. Dr. Lushington in exercising the wide equitable maritime jurisdiction of the Admiralty court came to the conclusion that it would be unjust to the owner of the injured ship if he allowed the fund against which the lien for damage has priority to be diminished by a payment of wages. This he did quite independently of any mere questions of priority. He did it on the principle of acting justly to the owner of the injured ship…. It may perhaps be somewhat hard on the seamen not to allow them to obtain their wages from the res in court; bit it must be borne in mind that they m ay recover them from the owners of the vessel on which they have served.

17. The House of Lords gave further impetus to the status of the maritime lien for damage in Currie v. M'Knight [1897] AC 97. The speech of Lord Watson contains the following passage: -

The Bold Buccleugh which was decided by the Judicial Committee of the Privy Council affirming the judgment of Dr. Lushington, is the earliest English authority which distinctly establishes the doctrine that in a case of actual collision between two ships, if one of them only is to blame, she must bear a maritime lien for the amount of the damage sustained by the other, which has priority not only to the interest of her owner, but of her mortgagees. The principle of that decision has been adopted in the American courts; and in the Admiralty Court in England it has for nearly forty years been followed in a variety of cases in which the lien for damage done by the ship has been preferred to claims for salvage and seaman's wages, and upon bottomry bonds.

Nonetheless it has to be borne in mind that the only issue before the House of Lords was whether the Privy Council decision in The Bold Buccleugh, that there was a maritime lien for collision damage, reflected the maritime law of Great Britain. It was only being noted in passing that, as indeed was the case, there were examples of damage lien being preferred to a wages lien.

18. Matters were taken a little bit further in The Veritas [1901] P.304. The issue before the court was the relative priority of a wreck raising claim and an earlier salvage claim. In his judgment Gorell Barnes J. made this general observation regarding the relative priority of contractual and tort claims: -

It is also clear that liens arising ex delicto take precedence over prior liens arising ex contractu. The reasons for this are pointed out by Dr. Lushington in The Aline. The principal one appears to be that the person having a right of lien ex contractu becomes so to peak a part owner in interest with the owners of the vessel. He has chosen to enter into relationship with the vessel for his own interest, whereas a person suffering damage by the negligent navigation of a ship has no option. Reparation for wrongs done should come first; otherwise the injured party might be unable to satisfy his claim out of the res without paying off prior claims which arise in such circumstances that the claimants may be considered to have chosen to run the risk of subsequent events affecting their claims. It has even been held that the maritime lien for damages takes precedence over the lien of the seaman for wages earned by them since the collision: The Elin.

19. The difficulty of establishing rules of ranking based simply on the nature of the relevant causes of action was somewhat undermined by the outcome in The Mons [1932] P. 109. Counsel for the salvors conceded that wages earned subsequent to the salvage services took priority over the salvage claim. However this concession was accepted only with reluctance by the trial judge and in The Lyrma [1978] 2 Lloyds Rep. 30, following full argument on the topic, Brandon J. held that no distinction could be drawn between wages earned before and after a salvage service. They were all subordinate on the basis that the salvage services had preserved the res. As part of the analysis, Brandon J. said this: -

There is a further argument in support of the view that no distinction should be made between earlier and later wages, which arises in this way. It was held in The Elin above, following The Linda Flor (18570 Swab. 309, that earlier damage had priority over later wages, and the decision in The Elin was affirmed by the court of Appeal at p. 129 of the same volume. It was further held in The Inna above that later salvage had priority over earlier damage. Suppose then a case in which a ship becomes subject to three successive claims, the first in time a damage claim, the second in time a salvage claim, and the third in time a wages claim. In such a case, The Inna requires the court to hold that the salvage claim has priority over the damage claim, and The Elin requires the court to hold that the damage claim has priority over the wages claim. How then can the court, without defiance of logic at any rate, hold that the wages claim has priority over the salvage claim?

20. Whilst this decision focuses on the special status of a claim by virtue of which the fund has been preserved, it should be noted, at least in passing, that Brandon J. went on to recognise that the prospects of the wages claimants successfully enforcing their personal claim against the owners were "extremely poor" but that that consideration, even taken with special interest that the Admiralty Court had in welfare of seamen, was not enough to set aside the apparently well established principle of primacy for the salvage lien.

Conclusion

21. I spoke at the beginning of this section of my judgment of the suggestion in some of the text books that there is a rule whereby a damage lien has priority over a wages lien. It is clear even from the restricted citation of authority set out above that questions of priority are not capable of being compartmentalised in the form of strict rules of ranking. The general approach is accurately summarised in Thomas, Maritime Liens, B.S.L. Vol. 14 at para. 418:-

[T]he Admiralty and Appellate Courts have adopted a broad discretionary approach with rival claims ranked by reference to considerations of equity, public policy and commercial expediency, with the ultimate aim of doing that which is just in the circumstances of each case.

22. The relevant consideration in achieving justice in the present case can be summarised as follows: -

a. Whilst in appropriate cases it would be a highly significant factor, this is not a case in which either creditors can pray in aid some status as a preserver of the res.

b. Considerations of public policy are evenly matched. The interests of mariners are high in the concerns of the Admiralty Court. Lord Stowell was prone to describe their lien as "sacred". By the same token, the damage lien has been seen, perhaps somewhat quaintly, as a potent weapon in the promotion of safe navigation.

c. The contrast between the voluntary nature of the wages lien and the involuntary nature of the damage lien might afford some justification for giving priority to the damage lien. But the contrast would, on the face of it, be more significant in resolving the ranking between a damage lien and an earlier salvage lien. Once engaged the seaman has no option but to continue to volunteer his services.

d. This is not a case where the damage lien is attributable to the negligence of the crew claimants. Quite apart from the fact that their shipboard duties do not appear to involve navigational responsibilities, they joined the vessel after the collisions.

23. In my judgment, the decisive factor in resolving the present issue is the fact that the wages claimants have no alternative forms of redress. In short, the issue raised by Dr. Lushington in The Linda Flor (supra.) now falls to be decided in favour of the wages claimants. As I see it, the owners of RUTA are insolvent. Where the only remedy open to the wages claimants is recovery from the proceeds of sale, considerations of public policy justify according to them a very high level of priority. I have in mind not only the general concern for the mariner's interest properly exhibited by the Admiralty Court but also the practical implications of making a wages claimant subordinate to a damage lineor. It will be rare for the outstanding wages claims to amount to more than a fraction of the vessel's value; the damage liens on the other hand may often be as much as or even more than the value. Any preferment of the damage lien to the wages lien will encourage crews to refuse to disembark from vessels under arrest so as to try and force other claimants to pay off their claims. This would be likely to exacerbate their plight at least in the short term and in any event not be conducive to the efficient dispatch of business when vessels are under arrest.
24. In so far as support can be derived from other sources, the conclusion that I have reached is consistent with international conventions on the topic. The 1926 Convention on Maritime Liens and Mortgages, which was signed but not ratified by Great Britain, gave priority to wages claims over damages claims (and, for that matter, to claims arising out of the most recent voyage): see Articles 2, 5 and 6. Although not signed by the United Kingdom, wages claims were given the same priority in the 1967 Convention: Article 5. The draft 1993 Convention is to the same effect.
25. So far as other jurisdictions are concerned, the position with regard to those jurisdictions for which detailed material was available appears to be as follows: -

a. Germany: Albeit not a party, the rules of the 1967 Convention have been incorporated into the Commercial Code.

b. Holland: Again, it is not a party to the conventions. The Civil Code gives priority to wages claims over salvage claims. Damage claims rank below mortgages.

c. United States: Wages claims are accorded the highest priority amongst maritime liens. In particular they are to be preferred to collision claimants unless (maybe) there was personal responsibility for faulty navigation: see The C.J. Saxe I1906) 145 Fed. Rep. 749, The William Leishera (1927) 21 Fed. Rep. (2^nd.) 862.

d. South Africa: Section 11 of the Admiralty Jurisdiction Regulation Act ranks crew wages accrued during the year prior to the arrest behind only preservation costs.

(Whilst writing this judgment the parties provided a schedule extracted from Tetley, Maritime Liens and Claims, 2^nd. Ed. as regards the priority of wages claims against damage claims worldwide. This demonstrated that precedence was accorded to wages claims in 80% of jurisdictions).

For all these reasons, I hold that, on the facts of the present case, the wage claims have priority over both the damage claims.

The LUTRA Claim.

26. I must now turn to the question whether the owners of LUTRA II are entitled to any right of priority against the proceeds of sale despite having obtained security for their claim in the circumstances outlined above.
27. From the perspective of the owners of LUTRA II, the security which they extracted is unsatisfactory in two respects. First, there is obviously a significant risk that the security will not be honoured or, at best, only afford a small dividend. Second, the sum secured (£14,000) is substantially less than their claim including interest and costs (£24,000). The owners can, of course, seek to execute against the proceeds of sale by a writ of fifa. But such a claim would rank subordinate to any maritime claim supported by a maritime or statutory lien. Has the maritime damage lien survived the release from arrest, thus entitling the owners to proceed in rem against the proceeds of sale? Or, put another way, are the owners entitled to the same priority for their claim as if they had proceeded against the proceeds of sale? The answer to these questions, it seems to me, depends, in part, on the discretionary approach to priority discussed above and, in part, upon the analogous theoretical question whether the owners would have entitled to re-arrest the vessel despite earlier having obtained security.
28. As regards the latter issue, the authorities touching on rights of re-arrest are few. A convenient starting point is The Kalamazo (1851) 15 Jur. 885 where bail in the sum of £3,500 has been posted but, following judgment on liability, the plaintiff put in a claim for a higher figure and purported to re-arrest the vessel. Dr. Lushington set aside the second arrest on the basis that once a party had recovered judgment he was barred from proceeding in a second action. This decision was later followed in the The Point Greeze [1928] P. 135 and The Alletta [1974] 1 Lloyds Rep. 40, the rationale being that the right of arrest had become merged in the judgment: but cf. The Freedom (1871) L.R. 3A.&E. 495 at p.499. A different approach was adopted in Singapore: see The Daien Maru [1986] 1 Lloyds Rep. 387, Jackson on Enforcement of Maritime Claims, 2^nd Ed, p.324 but cf. The Bumbesti [1999] 2 Lloyds Rep 481. (An interesting question arises as to whether the new Admiralty Practice Direction has reversed The Alletta and adopted the Singapore approach: see para. 6.1.)
29. As regards those cases where no judgment has been obtained, the general principle was laid down in The Wild Ranger (1863) B.&L. 84 where Dr. Lushington stated: -

…now the bail given for the ship in any action is a substitute for the ship; and whenever bail is given, the ship is wholly released from the cause of action, and cannot be arrested again for that cause of action.

However, in The Hero (1865) 13 W.R. 927, bail in the sum of £1000 had been given for the release of the defendant vessel. The claim was in fact for £2600. The plaintiff's proctor had filled in the praecipe properly but his clerk erroneously entered the claim for the lesser sum. The plaintiff applied to have the arrest set aside and for leave to re-arrest the vessel. Dr. Lushington permitted the re-arrest on the following basis: -

I think that case [The Wild Ranger] has no bearing on the present question. Nothing in it militates against the power of the court to direct measures to be taken to do full justice to the plaintiff, where the application is made before judgment has been pronounced. I am of the opinion that the court has the power to grant the motion, and I think it is just and proper that the plaintiff should be relieved from the mistake committed…

In The City of Mecca (1879) 5 P.D. 28, Sir Robert Phillimore recalled that "there have been several instances in which a ship has been arrested or re-arrested, in consequence of the bail becoming insolvent".

30. The discretion is exercisable whether the vessel has been released on bail or pursuant to a contractual guarantee: The Christiansborg (1885) 10 PD 141. In Westminster Bank Ltd. v. West of England (1933) 46 Ll. L.R. 101, Roche J. observed: -

It is sufficient for me to say that there is certainly high authority for the view that in proper cases, where there has been a mistake as to the amount for which bail has been asked, or in cases where there are questions of the solvency of the security, the bail question may be reopened and there may be a requirement of further bail and a re-arrest or an arrest if such further bail is not furnished. It is further to be observed that, as far as I know, there is no authority, where the security given is not bail but on the contrary consists of a personal undertaking such as a guarantee, that an arrest cannot follow upon such a guarantee where proper reasons are shown for it.

The discretion is a broad one. It is accurately summarised in the Canadian decision in The Birchglen [1990] 3 C.F. 301: -

As I view the jurisprudence, courts appear to adopt a fairly discretionary or pragmatic approach on the question and whether or not a maritime lien continues or is revived or is extinguished when security has been put up, is determined according to the facts of each particular case and of the requirements that full justice and equity be applied: per Joyal J. at p. 311.

31. This approach does not more than reflect the decision of the Court of Appeal in The Arctic Star (The Times Feb. 5, 1985) in which Lloyd LJ stated: -

This court will not normally permit a second arrest, the reason being, as stated by my Lord, that the bail is said to represent the ship. But that rule is not without exceptions. The justification for the rule is, and always has been, the need to avoid oppression and unfairness: see also The Tjaskemolen No.2 [1997] 2 Lloyds Rep. 476.

The new Admiralty Practice Direction makes express provision for permitting an arrest or re-arrest so as to obtain further security: 6.7(3)(b). I approach the matter on the basis that permission will only be granted in circumstances of oppression or unfairness.

Conclusion

32. I have come to the conclusion that it would be appropriate for the claim of the owners of LUTRA II against the proceeds of sale to have the same priority as that of the owners of CARBONNADE and SHAMAL. This conclusion reflects the general equitable approach to issues of priority, reinforced by the consideration that the circumstances would justify permission to re-arrest RUTA: -

a. The security obtained by the owners of LUTRA II was insufficient to cover the very substantial costs element, itself brought about by the procedural complications of the default claim.

b. Not only is it likely that unsecured creditors of the P&I Club will have a long wait before the outcome of the liquidation becomes clear, but also the press reports on the financial condition of OMMIA suggest that the level of dividend will be minimal.

c. It is true that the owners had made it plain at the time of the negotiations for security that they wished any guarantee to be posted by a first class bank or by a club in the International Group and that OMMIA was not a member of the Group. But it was nonetheless a well recognised P&I Club, with a large entry and no reported financial difficulties.

d. All three collisions occurred on the same day in the same incident. All three faced similar difficulties as regards the insurance cover of RUTA. It would be unfair to accord priority to one claim over the others.