Appeal Court says cross-undertakings requirement could be changed

At the moment claimants who arrest vessels cannot be required to give cross-undertakings in damages, but the Court of Appeal says the position may be open to reconsideration, report barristers 7KBW.

Robert Bright QC and Charles Holroyd were instructed by Watson, Farley & Williams LLP), representing the respondent bank NatWest Markets plc v Stallion Eight Shipping Co. (S.A. [2018] EWCA Civ 2760).

The appeal was brought by Stallion Eight against a decision of Teare J, who had dismissed the owner’s application to have its vessel released from arrest unless the bank provided a cross-undertaking in damages in the same form as that typically required on applications for freezing orders.

Teare J had accepted the bank’s argument that the proposed order would be inconsistent with an in rem claimant’s entitlement to arrest as of right, and with the established law governing liability for wrongful arrest.

The judge also held that the order sought would be inconsistent with the long-standing practice of the Admiralty court and with other court decisions. He concluded that it was not open to a first instance judge to grant the order sought, and that any change to the current practice was a matter for the legislature, or at least the Rules Committee, after proper consultation.

In a wide-ranging judgment which considered the position in numerous Commonwealth and other jurisdictions, the Court of Appeal upheld Teare J’s decision.

The Appeal Court considered that requiring a cross-undertaking would result in a far-reaching change in longstanding and settled practice and that there was a need for circumspection before embarking on judicial law-making.

It held that the case against any overnight change in settled law and practice was overwhelming.

Moreover, there was a further fact-specific reason for refusing the order sought in this case, which was the Judge’s finding that the shipowner had not made good the case that alternative security could not be provided by its direct and indirect shareholders. The shipowner could therefore not demonstrate the “risk of injustice” on which it relied.

The Court of Appeal (Master Of The Rolls Sir Terence Etherton, Lord Justice Gross and Lord Justice Flaux) disagreed with Teare J’s view that the settled practice of not requiring a cross-undertaking in case of arrest could only be changed by the intervention of Parliament or the Rules Committee.

The higher court said that it was open to the Court itself to reconsider the position if properly informed as to the views of the maritime community, including the practical ramifications of any proposed changes and the preferred route to be adopted.

7KBW said that the decision was therefore unlikely to be the last word on this topic, which had been debated by academic and legal commentators for more than 20 years.

Tim Lord QC and Geoffrey Kuehne (instructed by Hill Dickinson LLP) for the Appellant.

Robert Bright QC and Charles Holroyd (instructed by Watson, Farley & Williams LLP) for the Respondent.

Hearing date: November 6th 2018