English law - Competing title for goods - Interpleader actions
01 MAY 2004
Competing title for goods - Interpleader actions
In short, you may be able to apply to the court for relief by way of interpleader. This is a well-established, although not frequently used, means of putting your case before a judge along with all of the competing parties, and asking him to exercise his discretion to address your predicament.
The scenario set out above was faced recently by a Gard member, although before looking at the situation a little further it is useful to examine the background to an interpleader application.
Bearing in mind that where there is a three-party or more dispute over title to goods each party could have claims and cross-claims against one another, for instance, under sale contracts the court takes a flexible approach to who is classed as being the interpleader claimants and defendants. The court is also allowed considerable powers regarding the allocation of costs depending on the outcome of the application. The remedy contemplated by Order 17 is set out in Rule 6, which gives the court the right to order that the goods be sold (in whole or part) and the proceeds of sale be held or distributed on terms that the judge considers to be just. The courts generally prefer to deal with money rather than goods, particularly where they are perishable or may be costly to store. Liquidating the subject matter of the interpleader allows for a greater variety of orders to be made; for instance the funds are to be held in court or escrow.
One of the leading cases on interpleaders is Cool Carriers v. HSBC,1 in which the jurisdictional problems were considered in some detail.2 The issue to be determined in this case was whether the charterers should have to pay hire to the owners or the owners’ assignees. The application failed as the court held it did not have jurisdiction on the basis that it could not order service out of the jurisdiction of the underlying claim form under Civil Procedure Rules Order 6 Rule 20.
However, where does this leave the shipowner in the situation outlined above? In this case an interpleader application was made to the High Court in London to try and resolve the impasse between the competing cargo interests.
Having taken advantage of a window of opportunity, following the issue of the bills of lading the vessel sailed for Singapore, shortly after which the Odessa cargo claimants attempted to serve their court order for delivery-up of the cargo, only to find that the ship and its cargo had left the jurisdiction. Fortunately, class had been kept advised of the situation and were sympathetic to owners’ plight and allowed a short extension of time.
During the voyage to Singapore each claimant to the cargo made out their claims against each other and the vessel owners. The owners’ predicament was to face a potentially very expensive “no win” situation which was not of their own making. If delivery was made to the charterers then they could be arrested or pursued for participating in a potential fraud. Alternatively, they could be in breach of charter by not following the charterer’s orders. Finding themselves on the horns of a dilemma, the owners sought interpleader relief from the High Court in London. The application was heard a day before the vessel arrived in Singapore to discharge.
The judge held that he did not have jurisdiction to decide on the whole matter as the charterparty, which called for English High Court jurisdiction and English law, was only between the vessel owners and charterers. It was only intended to deal with their relationship, not the substantive dispute which was between the charterers and the other alleged cargo owners, and subject to another jurisdiction. The court also held that notwithstanding the jurisdictional point the court probably did not have the power to order that the underlying claim form be served out of England on the defendants. If, however, the parties had been incorporated in the UK or the sale contracts were subject to English law, then it would have been more likely that the court could have exercised its jurisdiction.
Although understandable, it was disappointing that the judge did not make a decision on the specific question of how to deal with the situation owners faced. However, the application was far from fruitless, as it gave owners the benefit of understanding the position of the opposing parties in greater detail, which then led to greater confidence in confirming the legal advice to owners that they should discharge against the original bills of lading and follow the charterers’ orders. On this basis there could be no damages claim for breach of charterparty, under the bill of lading terms or in conversion.
This was certainly an unenviable situation and the owners were fortunate to have let the vessel to pragmatic charterers, who were appreciative of their position and did their best to assist.
Gard News is published quarterly by Gard Services AS, Arendal, Norway.
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