Tansy Shiptrade Inc v Elemento Ltd

On an application to vary an interim injunction, the court must first ask whether there is a serious question to be tried and then assess the balance of convenience or justice. The practical focus is which course is likely to cause the least irredeemable prejudice. Where sale proceeds are required to be preserved in escrow, approval should be refused if the proposed transaction creates a significant risk that the cargo or proceeds will disappear before payment. Contractual liens, retention-of-title provisions and assurances outside the proposed contract may be inadequate where title passes before payment, the buyer controls the storage or may resell, and enforcement depends on parties outside the proceedings.

Tansy Shiptrade Inc applied to vary an existing injunction concerning a cargo of Venezuelan crude oil on the MT Respect. The injunction required the parties to obtain consent before selling the cargo and directed that sale proceeds be paid into escrow or court.

Elemento Ltd sought approval to sell the cargo to Beaconsfield Commodities Trading AG, with part of the proposed price paid directly to the vessel owners and the balance secured through contractual arrangements. Tansy opposed the application, relying on continuing potential liabilities to PDVSA and the vessel owners, and on concerns about the proposed safeguards.

The central issue was whether the proposed sale gave a reasonable basis for believing that the proceeds would reach the escrow account required by the existing order.

The application was refused.

1. Applying the American Cyanamid approach, the court first considered whether there was a serious question to be tried. There was an arguable case that Elemento had exposed Tansy to liability or was required to account for a share of profits, and that the July 2019 arrangement did not authorise transactions in Tansy’s name without approval or notice.

2. The court then assessed the balance of convenience or justice, including which course was likely to cause the least irredeemable prejudice. The existing approach of preserving the cargo or its proceeds, with proceeds paid into escrow or court, remained appropriate.

3. Tansy might remain liable to PDVSA and the shipowner. The performance bonds, guarantees and alleged replacement recaps gave limited protection. They did not clearly release Tansy from liability, and the evidence indicated that PDVSA had recently continued to regard Tansy as liable.

4. The proposed sale created substantial risks. The draft contemplated ship-to-ship delivery, or storage controlled by the buyer. Title would pass before payment, payment could follow discharge by two days, and the buyer could resell the cargo. The proposed security depended on contractual liens and retention-of-title provisions being legally effective and enforced by parties not before the court.

5. The proposed lien over a separate cargo was unsupported by sufficient evidence as to its existence, value, title or encumbrances. There were also unresolved concerns about the freight payable and the reliability of Beaconsfield as counterparty.

6. Although refusal would allow demurrage and other liabilities to accrue, approval carried a risk of complete dissipation of the cargo and proceeds. The proposed transaction was materially less secure than a conventional cash sale or a sale supported by a letter of credit. The application therefore failed because the court was not satisfied that the sale terms would ensure payment of the proceeds into escrow.

The judgment concerned an application to vary interim orders previously made by His Honour Judge Pelling on 7 January and 14 January 2020. It was not an appeal.