Fingad Shipping Ltd. v. Ningbo Arts & Crafts Imp & Exp. Co. Ltd.

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

Précis: The court applied issue estoppel and struck an in rem action on the grounds that a French court had previously determined the owner at the time of the commencement of the action was not the same as at the time the cause of action arose.

Facts: The plaintiffs contracted with the defendant for the construction of several vessels, including the defendant vessel, the “Chemical Aquarius”. The contracts were subsequently cancelled and arbitral proceedings were held. In 2012 the “Chemical Aquarius” was sold by the corporate defendants. In 2013 the plaintiffs obtained arbitral awards against the corporate defendants, substantial portions of which were outstanding. In April 2015 the plaintiffs commenced a proceeding in France to enforce the arbitral awards and had the “Chemical Aquarius” arrested. On 7 May 2015 the French court lifted the arrest of the vessel. On 3 July 2015 the plaintiffs commenced this action in the Federal Court for the amounts outstanding and again arrested the “Chemical Aquarius”. The plaintiffs also commenced a separate application in the Federal Court for recognition and enforcement of the arbitral awards. The defendants then brought this application to strike the statement of claim or, alternatively, to set aside the arrest.

Decision: Application granted. The statement of claim is struck.

Held: To succeed in this application the defendants must show it is “plain and obvious” the statement of claim has no merit. The burden is high and the court should only strike a pleading in the clearest of cases. The facts pleaded are to be taken as true but the legal conclusions that are alleged to flow from such facts are not entitled to the same presumption. The defendants argue that the owner of the “Chemical Aquarius” at the time this action was commenced was different from the owner at the time of the events giving rise to the action and, therefore, there is no right of action in rem. In particular, the defendants argue that this issue was determined by the French court in a decision that gives rise to issue estoppel. The three pre-conditons for issue estoppel are: (1) the same question has been decided; (2) the judicial decision that creates the estoppel is final; and (3) the parties are the same in both actions. Conditions 2 and 3 are not disputed and the only condition at issue here is whether the French court decided the same issue. Although the French court was dealing with the 1952 Arrest Convention, the central issue in that decision was the same as the central issue in the present motion, namely, whether the ownership of the “Chemical Aquarius” had changed. The French court held the vessel could not be arrested because of the change in ownership. The issue was considered in full and the decision was final. The plaintiffs now say they have new evidence that was not considered by the French court. To allow new evidence would “permit parties to gut issue estoppel of any substantial meaning”. Accordingly, the conditions for issue estoppel are satisfied.