Admiralty Court Sales

There has been a recent judgment in the Admiralty Court in England (Teare J) - Bank of Tokyo -v- Mitsubishi UFJ Limited -v- Sanko Mineral and Clam Core Limited ("Sanko Mineral")  which decided, very surprisingly in the view of most practitioners, that a claimant with a statutory right to an Admiralty claim in rem and had issued its claim after the Admiralty Court had ordered the sale of a vessel did not lose its right to enforce the claim.

The Judge in this case held that the claim established an "in rem" claim could be enforced against the sale proceeds of that vessel sold under the "sealed bids" Admiralty Court procedure. The only caveat was that the person liable in personam in the original cause of action, still had to be the same as the beneficial owner of the sale proceeds.

The Judge went on to say that he had reached his conclusion because of:-

a) The long established principle of Admiralty law that when a vessel was sold by the Admiralty Court rights in rem were transferred to the sale proceeds, and

b) His reflection of the principles set out in the UK Civil Procedure Rules (61) concerning notices of sale by the Court which provided that a claim was not served on the vessel but was to be filed at Court.

He also relied on the fact that orders of sale pursuant to CPR 61 were intended to protect, not harm the interests of those with rights in rem.

Accordingly he took the view that a sale by the Court was not a sale by the owner and therefore a creditor did not lose its right of action in rem. In this case it was Glencore that benefited as a direct result of this judgment because the Court was able, as a result of proceedings extant in Japan, to preserve a right against the sale proceeds in the Admiralty Court in England.

It has always been thought by most practitioners that once an Admiralty Court sale had taken place the buyer had good clean title in all 64/64 shares and there was no right of any other creditor to pursue a claim in rem following the transfer of the Admiralty Marshal's bill of sale.

However, it now seems that if monies paid into Court have not been paid out, there are still causes of action that can be brought by a party that may have an interest in the sale proceeds - even though the Admiralty Marshal has authorised and indeed endorsed the sale.

This must be of concern to buyers who were thought to be afforded the full protection of the Court in this types of transactions, once the sealed bid procedure had been finalised. The message must be that as soon as the sale has taken place, for the seller to extract its money immediately whereupon it will no longer remain an asset in Court to which a creditors claim can attach.

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