Précis: The court declined to return security given by cargo interests even though the shipowner was bankrupt, unbeknownst to the parties, at the time security was given.
The defendant vessel was forced to return to Vancouver after a cargo of yellowcake uranium spilled in the hold of the vessel. The vessel was arrested upon its arrival and multiple actions were commenced including this action by the shipowner against the owner of the uranium to recover the damages incurred by the owner as a consequence of the spill and for contribution or indemnity in respect of claims made against the shipowner by other parties. The owner of the cargo voluntarily posted security for the shipowner’s claim in the amount of $4.6 million. However, unbeknownst to counsel involved, the shipowner had declared bankruptcy. When the owner of the cargo learned of the bankruptcy it brought this motion for the return of the security or, alternatively, to reduce the amount of the security. The cargo owner argued that the agreement to post security was void and was tainted by mutual mistake.
Decision: Application dismissed, in part.
Held: The Court held that there was insufficient evidence to set aside the security. The Court did, however, reduce the amount of the security on the grounds that one of the claims for which it was given had not been pursued against the vessel.