Menu
Court rejects attempt to reargue issues previously determined in in rem action

Insights / / London

Tecoil Shipping Ltd v. Neptune EHF & Ors (Poseidon c/w Tecoil Polaris) [2021] EWHC 1582 (Admlty)

The Admiralty Court recently confirmed that judgment in default of acknowledgement of service may be obtained in an in rem collision claim. Now, in in personam proceedings concerning the same collision, the Admiralty Court has held that the shipowners and their insurers are bound by the earlier in rem judgment and that the Owners may not re-argue points already decided in the in rem proceedings.

The background facts

In the in rem proceedings, the Court concluded that it is possible for a party in an in rem collision action to obtain judgment in default where the other party has failed to acknowledge service of the claim form. The Court duly gave judgment for the Owners of the Tecoil Polaris, Tecoil Shipping Ltd, who proved their claim to the satisfaction of the Court. A link to our article on that decision can be found here.

After the collision, the insurers of the other vessel, Poseidon, had given a letter of undertaking (LOU). This was issued on their behalf by the vessel’s P & I Club and it provided as follows:

“IN CONSIDERATION of your releasing and/or refraining from arresting or re-arresting at any time hereafter or otherwise detaining the ‘POSEIDON’ or any other vessel or property in the same or associated ownership, management, possession or control for the purpose of obtaining security in respect of your claim arising out of the above collision we hereby undertake to pay you on demand such sum or sums as may be due to you from the owners of the ‘POSEIDON’ in respect of your said claim either by agreement between the parties hereto or by the final unappealable judgment of the English Courts, provided always that our total liability hereunder inclusive of interest and costs shall not exceed the sum of US$200,000.”

The Poseidon’s insurers subsequently declined to make payment under the LOU, arguing that it did not respond to an in rem judgment. Tecoil, therefore, commenced in personam proceedings against the Owners of the Poseidon, Neptune EHF, and joined the insurers to those proceedings. No acknowledgment of service was filed and Tecoil sought and obtained judgment in default of acknowledgment of service, just as they had done in the in rem proceedings. The insurers still declined to pay under the LOU, this time on the basis that:

  • (1) The default judgment was not a "final unappealable judgment"; and
  • (2) The LOU was not intended to protect Tecoil from the risk of Neptune’s insolvency, in the event that the Poseidon was not of sufficient value to satisfy Tecoil’s claims.

The defendants applied to set aside the default judgment. Tecoil applied for summary judgment against the insurers under the LOU. While the parties settled before the draft judgment was handed down, the Admiralty Court nonetheless circulated the judgment because the issues were of wider interest.

The Admiralty Court decision

Neptune and the insurers argued that the default judgment should be set aside for two reasons.

Firstly, they submitted that in collision claims in personam, a claimant cannot obtain judgment in default where a defendant has failed to acknowledge service of a claim (and that judgment in default is only available where the party seeking judgment has either filed a collision statement of case or obtained an order dispensing with that requirement).

The Court rejected this argument, stating that the procedural rules and the relevant textbooks make it clear that judgment in default of acknowledgement of service is available in a collision action which has been brought in personam. The Court referred to the earlier decision in the in rem proceedings, with which it agreed, and reiterated that this is also the position in an in rem collision claim.

Secondly, it was argued that the judgment should be set aside as a matter of the Court’s discretion because the defendants had a real prospect of successfully defending the claim. The defendants said that it was possible to establish that the Tecoil Polaris was effectively worthless at the time of the collision, as a result of her unsafe and dilapidated state and her detention by the Maritime and Coastguard Agency. They further contended that the damages should be nil or, at least, less than those awarded in the in rem proceedings and below the amount of US$ 200,000 guaranteed in the LOU.

The defendants were, therefore, seeking to contest liability on the basis of points already determined in the earlier in rem claim. However, they contended that they were entitled to do so because the judgment in the in rem claim was not binding on Neptune as the Poseidon’s Owners, but only on the vessel as a res.

The Court disagreed and held that Neptune was bound by the determinations in the in remclaim. The practice of bringing an in personam claim where judgment has already been obtained in an in rem claim is well established. Relying on past authority, the Court stated that the liability to compensate was “fixed not merely on the property, but also on the owner through the property”. That is why the owners of a vessel appear on an in rem claim form as nominal defendants (e.g. “the owners of the ship Poseidon”).

Consequently, Neptune could not now re-litigate in the in personam action matters that had already been determined in the in rem claim. The Court observed, however, that the outcome might perhaps be different in a case where, despite service on the ship, the owners sufficiently demonstrated to the Court that they had not had notice of the in rem proceedings.

The Court also highlighted that the insurers had had, but had declined, the opportunity to participate in the in rem proceedings. They should have done so if they wished to dispute quantum. Instead they made a tactical decision not to take part and could not now complain about the outcome as a basis for setting aside judgment.

Comment

It is now clear that judgment in default of acknowledgment of service is available in both in rem and in personam collision claims. Furthermore, parties to an in personam claim will generally be bound by a judgment on the same issues in an earlier in rem action. A party that makes a tactical decision not to participate in proceedings may find itself bound by the outcome.

Whether a LOU as worded in this case would have responded to an in rem judgment remains an open question and one which, in light of standard P & I Club wordings, may well arise for determination in another case.

This article was co-authored by Trainee Solicitor at Ince, Charlie Boyles.

Charlie Boyles

Charlie Boyles Associate

Related sectors:

Featured news & insights

Insights / Failure to acknowledge service of in rem collision claim results in default judgment

03-06-2021 / Maritime

Tecoil v. Owners of Poseidon [2020] EWHC 393 (Admlty)

Failure to acknowledge service of in rem collision claim results in default judgment