Fimbank Plc v Discover Investment Corp

A freezing order requires a good arguable case on the underlying claim. Where contractual arrangements authorised delivery of cargo ashore without presentation of bills of lading, and the subsequent loss resulted from an independent warehouse fraud, the shipowner may have no liability for substantial damages. The claimant’s undisclosed contractual arrangements and known facts must be fairly and fully presented on an ex parte application. Material non-disclosure may justify discharge even if the merits threshold is otherwise met, particularly where the merits are not compelling. In a non-proprietary freezing order, the court may require information about the disposal of recently held sale proceeds where that information assists in identifying assets caught by the order.

The claimant financed the purchase of wheat cargo and claimed to be the lawful holder of the bills of lading. The defendant’s vessel discharged the cargo in Alexandria without production of the bills, under a letter of indemnity. The cargo was subsequently released from a bonded warehouse against forged documents.

The claimant obtained an ex parte freezing order in support of an intended misdelivery claim. The defendant applied for discharge, alleging that there was no good arguable case, material non-disclosure, procedural failures, and no sufficient risk of dissipation. The central issues were whether the defendant could be liable for the warehouse loss and whether the freezing order should continue.

1. Outcome. The freezing order was discharged. The claimant’s application for its continuation was dismissed and the defendant’s cross-application was allowed.
2. The claimant’s financing and stock-management arrangements contemplated that the cargo would be discharged from the vessel without presentation of bills of lading and then held in a bonded warehouse. The stock-management agreement authorised the financed buyer to take delivery from the vessel, including through a local agent. The defendant’s lack of knowledge of that authority did not prevent it from operating as an actual authority between the claimant and the buyer.
3. The debate illustrated by The Houda [1994] 2 Lloyd's Rep. 541 as to the consequences of delivery to the party entitled without production of bills of lading did not need to be resolved. At its highest for the claimant, such delivery could result only in nominal damages where delivery was made to a party authorised by the bill-holder.
4. There was no good arguable case for substantial damages. The later release of cargo from the warehouse against forged documents was legally and factually unrelated to the defendant’s discharge of the cargo. The warehouse fraud was the effective cause of the loss. The intended contractual arrangements meant that the claimant had no intention of presenting the bills to the vessel.
5. The claimant had failed to give the court a full and fair account of the contractual arrangements, the timing of the cargo releases, and the circumstances giving rise to the alleged dissipation risk. That failure prevented proper scrutiny of the merits and independently justified discharge. Even if the merits had crossed the good arguable case threshold, they were not sufficiently compelling to outweigh the disclosure failures.
6. On the evidence, an unexplained disposal of the vessel-sale proceeds could support an inference that valuable rights or assets remained connected with the defendant and presented a risk of dissipation. The court would, if necessary, have required compliance with the order requiring information about the proceeds of sale. That conclusion was ancillary to the freezing order and did not affect the result.

The judgment concerned an inter partes return hearing following an ex parte freezing order. An initial application before Popplewell J failed. A renewed application before Moulder J succeeded. The matter was subsequently listed before Carr J and came before Andrew Baker J for the substantive return hearing. The freezing order was discharged.