Maritima de Ecologia, S.A. de C.V. v. Maersk Defender (Ship)

In Admiralty Practice, In Rem Actions and Arrest on (Updated )

In this matter Secunda discussed with the Appellant an arrangement whereby Secunda, or a company controlled by it, would purchase the Maersk Defender, modify the vessel to meet the requirements of the Appellant and then charter the vessel to the Appellant. Subsequently Atlantic, a company controlled by Secunda, entered into an agreement with Maersk to purchase the vessel and entered into a charter party with the Appellant. However, before the purchase could take effect, Secunda and Atlantic learned that Mexican authorities would not issue the required permits for longer than two years. As a result, Atlantic advised the Appellant that the charter party had been frustrated and in response the Appellant commenced arbitration proceedings. On 4 December 2006 the Appellant commenced an action in the Federal Court against the Maersk Defender in rem and against Secunda and Atlantic in personam. On 12 December the Maersk Defender was sold by Maersk to a company called Pacific. Also, on 12 December 2006 a second action was commenced in the Federal Court against the Maersk Defender in rem and against Secunda, Atlantic and Pacific in personam. Both actions were said to be “for the sole purpose of obtaining interim protective orders”. The Maersk Defender was arrested in the second action; however title had already been transferred to Pacific by the time of the arrest. The Respondents brought an application to strike the in rem and the in personam proceedings against Secunda and Pacific. At first instance, the motions Judge struck the in rem proceeding and stayed the in personam proceedings. On appeal, the Court of Appeal held that the in rem proceedings should be struck on two grounds. First, at the time of the commencement of the second action the vessel had been sold and therefore the requirement of s.43(2) that there be the same beneficial owner at the time of commencement of the action as at the time the cause of action arose had not been met. Second, and in any event, there was no personal liability on the part of the owner of the vessel to support the in rem jurisdiction. The Appellants claim in the arbitration was only against Atlantic and Atlantic was never the owner of the vessel. With respect to the in personam claims, the Court of Appeal held that because the actions were commenced solely for the purpose of obtaining security for the arbitration proceeding against Atlantic, there was no remedy sought against Secunda and Atlantic and the in personam claims against them must be struck.