Bank of Scotland Plc v "Union Gold", The Owners of the M/V

As a general principle, an Admiralty Marshal should sell an arrested vessel by appraisal, advertisement and invitations to bid. The court should not ordinarily direct a sale to a buyer found by the arresting claimant at a named price, even where the price appears to reflect market value. The ordinary process protects the interests of all claimants and the shipowner, tests the market and preserves the court’s impartiality. A departure may be justified by exceptional circumstances, including an urgent sale, a distinctive commercial reason for the proposed purchase, a low prospect of competing buyers and no real risk to the court’s reputation.

The Bank of Scotland obtained orders for the sale pendente lite of four arrested vessels securing its lending to Union Transport Group plc. It asked the Admiralty Court to direct the Admiralty Marshal to sell each vessel to a named buyer at a named price, without following the usual appraisal, advertising and bidding process.

The court refused that course for three vessels. It permitted the proposed sale of the elderly and smaller UNION PLUTO because an immediate sale was needed to preserve a commercial contract and associated employment, and the proposed buyer had a particular reason to purchase the vessel.

1. General procedure. The Admiralty Marshal is an impartial officer of the court. A sale by the Marshal normally transfers the vessel free of liens and encumbrances, so the Marshal must seek the best possible price for the benefit of all interested parties. The usual process is appraisal, advertising and invitations to bid.
2. Appraisal. Valuation of a vessel, particularly where comparable sales are scarce, is not a simple task. The Marshal’s experience and access to confidential advice make it preferable for the Marshal, rather than the court, to appraise the vessel. Disclosure of an appraisal to potential buyers may affect bidding.
3. Named private sales. As a general principle, the court should not direct the Marshal to sell to a buyer found by the arresting claimant at a named price, even if the price appears to be at or near market value. A private sale may fail to test the market and may create the impression that the Marshal is acting for one claimant. The reasoning in APJ Shalin [1991] 2 Lloyd’s Rep. 62 and Halcyon the Great (No.2) [1975] 1 Lloyd’s Rep. 525 supported that conclusion.
4. Exception. Exceptional circumstances may justify departure from the ordinary process. Relevant circumstances included the vessel’s age and small size, the low likelihood of competing buyers, the proposed buyer’s particular commercial reason for purchasing, the risk that an immediate sale would otherwise be lost, and the absence of a real risk that the court’s impartiality would be tarnished.
5. The applications concerning UNION GOLD, UNION SILVER and UNION EMERALD were refused. The sale of UNION PLUTO to Angel Shipping Limited for €329,000 was exceptionally permitted without an Admiralty Marshal appraisal.