Congentra AG v Sixteen Thirteen Marine SA

A freezing injunction in support of arbitration may be maintained where the applicant has a good arguable case on liability and quantum and shows a real risk that assets will be dissipated or dealt with so as to impede enforcement without a proper business justification.

A maritime wrongful-attachment claim may arguably arise without prior vacatur where the procedure for vacating the attachment cannot determine the underlying factual merits. English law also arguably accommodates wrongful attachment as an incremental application of the tort of wrongful arrest.

Once urgent jurisdiction under section 44(3) of the Arbitration Act 1996 has been properly invoked, the court may continue or vary its order at the return date without fresh permission under section 44(4).

The claimant charterers obtained an ex parte freezing injunction against the defendant shipowners under section 44(3) of the Arbitration Act 1996. The injunction supported a London arbitration concerning the charterers’ counterclaim for wrongful attachment of assets in New York.

The owners applied to set the injunction aside. They disputed the existence and accrual of the alleged tort, the governing law, quantum, the risk of dissipation, urgency, and compliance with the duty of full and frank disclosure. The charterers applied to continue the injunction.

The principal questions were whether the charterers had a good arguable accrued claim for wrongful attachment, whether substantial loss and a real risk of dissipation were sufficiently shown, and whether any non-disclosure or jurisdictional obstacle required discharge.

1. The owners’ application to set aside the freezing injunction was dismissed, and the charterers’ application to continue it was allowed. The charterers had a good arguable case on liability and quantum and had amply established a real risk of dissipation.

2. Under sections 11 and 12 of the Private International Law (Miscellaneous Provisions) Act 1995, there was a good arguable case that federal maritime law governed the wrongful-attachment claim. The attachment occurred in New York under federal maritime law. That connection was more significant than the English governing law and London arbitration clause in the charterparty. The ultimate choice of law remained for the arbitrators.

3. Federal maritime law recognised liability for wrongful attachment upon proof of bad faith, malice or gross negligence. Even if English law applied, wrongful attachment of assets in maritime proceedings was arguably an incremental and limited application of the existing tort of wrongful arrest. Gregory v Portsmouth City Council [2000] 1 AC 419 did not establish an exhaustive closed list of actionable abuses of civil process.

4. A prior favourable determination was not invariably required before the wrongful-attachment claim accrued. An exception applied where the proceeding complained of was ancillary or interlocutory and could not determine the underlying facts. A motion under Rule E(4)(f) examined the formal requirements for a Rule B attachment rather than whether its factual basis was wrongful. The charterers therefore had a good arguable accrued claim notwithstanding that the New York attachment had not been vacated.

5. The charterers had sufficiently explained their alleged exchange-rate losses. Evidence on oath could establish a good arguable case on quantum despite the present absence of supporting documents, particularly where disclosure awaited undertakings against collateral use.

6. A freezing order requires a real risk that an award will go unsatisfied through dealings outside the ordinary course of business, or that assets will be dealt with so as to make enforcement more difficult without normal and proper business justification. Dishonesty alone does not establish that risk. Here, the alleged wrongful attachment and maintenance of an unsustainable case, the owners’ conduct, the movement of hire receipts, and the possibility of sale, remortgage or equity-stripping cumulatively satisfied the test. An undertaking merely not to sell the vessel was inadequate because it did not prevent remortgaging and left the charterers dependent on a depreciating and less accessible asset.

7. There had been no material misrepresentation or non-disclosure. In any event, any omission would have been inadvertent, and the interests of justice would have favoured continuing the injunction. Finally, jurisdiction validly acquired for an urgent application under section 44(3) continued at the return date. Section 44(4) concerned the initiation of a non-urgent application, not continuation or variation of an order already made.

• High Court (Commercial Court): On 2 May 2008 the court granted the charterers an urgent ex parte freezing injunction under section 44(3) of the Arbitration Act 1996. On the return applications, the court continued the injunction and dismissed the owners’ application to set it aside.

• London arbitration: The owners’ substantive claim and the charterers’ counterclaim for wrongful attachment remained before the arbitral tribunal. The tribunal had given permission for the application to continue the freezing order.