Moondance Maritime Enterprises SA v Carbofer Maritime Trading APS

Under section 70(7) of the Arbitration Act 1996, security or payment into court may be ordered only for money specifically payable under the challenged award. An award of costs without an assessment does not satisfy that requirement.

Security for costs may be ordered where steps have been taken in relation to a claimant’s assets that would make enforcement difficult. A monetary award in separate arbitration proceedings will not ordinarily provide an equitable set-off against costs arising from an earlier and distinct claim. The question is whether the claims are so closely connected that it would be manifestly unjust to enforce the costs award without taking the cross-claim into account.

Carbofer Maritime Trading APS applied for two orders in proceedings concerning Moondance Maritime Enterprises SA’s challenge under section 68 of the Arbitration Act 1996 to an arbitral award. First, it sought payment into court under section 70(7) for costs awarded in its favour but not yet assessed. Secondly, it sought £42,000 security for the costs of the section 68 application under section 70(6).

Moondance relied on monetary awards made in a separate arbitration concerning unpaid hire and damages, arguing that those awards provided an equitable set-off or discretionary reason not to order security. The central issues were whether money was presently payable under the first award, whether the conditions for security were satisfied, and whether the later awards constituted security.

1. Payment into court. The application under section 70(7) of the Arbitration Act 1996 failed. The provision presupposes a specific sum payable under the challenged award. The first tribunal had awarded costs but had reserved their assessment, so no specific sum was presently payable.
2. Security for costs. The conditions in CPR 25.13(2)(c) or (d) were established. Moondance was a one-ship company, and the arrangements governing the vessel’s income made enforcement of a costs order difficult. Its draft financial statements and evidence of current loan payments did not alter that conclusion.
3. Equitable set-off. Applying the single-stage test stated in Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667, the court considered both the closeness of the connection between claim and cross-claim and the justice of the case. Although both arbitrations arose under or in connection with the same charterparty, the section 68 challenge concerned an earlier misrepresentation claim, while the later arbitration concerned a separate repudiatory breach and non-payment of hire. It was not manifestly unjust to enforce the costs award without taking the later monetary awards into account.
4. The later awards therefore supplied neither an equitable set-off nor a discretionary reason to refuse security. Moondance was ordered to provide £42,000 security within 21 days, failing which its section 68 application would be dismissed.