1412

The Weekly Law Reports,

Dillon L.J. Jelson Ltd. v. Harvey (C.A.) [1983]
The appeal should, however, be allowed to the extent of reducing the A
penalty, as Cumming-Bruce L.J . has indicated.
Appeal allowed to extent fine reduced
to 2,500.
Defendant to pay half plaintiff s costs
of appeal on party and party basis.
No order as to costs below.
Solicitors: Cripps Harries for Oldham Marsh & Son, Melton Mowbray;
Kingsford Dorman for Geoffrey Tew & Co., Leicester.
S. S.
B
[COURT OF APPEAL]
D
*NINEMIA MARI TI ME CORPORATI ON v. TRAVE
SCHI FFAHRTSGESELLSCHAFT m.b.H. UND CO. K.G.
[1983 N. No. 549]
1983 July 18, 19; 29 Eveleigh, Kerr and Dillon L.J J . E
InjunctionInterlocutoryMareva injunctionPrinciples applicable to
exercise of jurisdictionStrength of plaintiff s case and degree of
prejudice to plaintiff required to be shownSupreme Court Act
1981 (c. 54), s. 37(1)
Ships' NamesNiedersachsen
F
A dispute having arisen relating to a contract for the purchase
of a ship by the plaintiffs from the defendants, the plaintiffs
applied ex parte for, and were granted, aMareva injunction. On
the defendants' application to discharge the application, Mustill
J. in his judgment considered two questions, namely, what
probability of success at the ultimate trial the plaintiff was
required to demonstrate before an injunction could be granted or
maintained, and what type of prejudice, in the shape of dissipation G
of assets, the plaintiff had to show, and with what degree of
conviction. The judge granted the defendants' application and
discharged the injunction.
On appeal by the plaintiffs:
Held, dismissing the appeal, that the jurisdiction to grant
Mareva injunctions was exerciseable in cases where it appeared
just and convenient to the court to grant the injunction, and the
plaintiff had, inter alia, to show, on the evidence as a whole, that "
there was at least a good arguable case that he would succeed at
the trial, and that a refusal of an injunction would involve a real
risk that a judgment or award in his favour would remain
unsatisfied; and that since the judge correctly applied those tests
to the evidence, there was no ground for impugning the manner
in which he exercised his discretion (post, pp. 1416H1417F,
1422H, 1426E-F).
Per curiam. TheMareva jurisdiction cannot be invoked simply
The Weekly Law Reports, December 9, 1983
1413
1 W.L.R. Ninemia Corpn. v. Trave G.m.b.H. (C.A.)
for the purpose of providing plaintiffs with security for claims,
A even when these appear likely to succeed and even when there is
no reason to suppose that an order for an injunction, or the
provision of some substitute security by the defendants, would
cause any real hardship to the defendants (post, p. 1422C-D).
Decision of Mustill J . affirmed.
The following cases are referred to in the judgment of the court:
B Barclay-Johnson v. Yuill [1980] 1 W.L.R. 1259; [1980] 3 All E.R. 190.
Etablissement Esefka International Anstalt v. Central Bank of Nigeria [1979]
1 Lloyd's Rep. 445, C.A.
Farey-Jones (Insurance) Ltd. v. I.F.M. Funding G.m.b.H. (unreported),
April 10, 1979; Court of Appeal (Civil Division) Transcript No. 223 of
1979, C.A.
Galaxia Maritime S.A. v. Mineralimportexport [1982] 1 W.L.R. 539; [1981]
C 1 All E.R. 796, C.A.
Garden Cottage Foods Ltd. v. Milk Marketing Board [1983] 3 W.L.R. 143;
[1983] 2 All E.R. 770, H.L.(E.).
Hadmor Productions Ltd. v. Hamilton [1983] 1 A.C. 191; [1982] 2 W.L.R.
322; [1982] I .C.R. 114; [1982] 1 All E.R. 1042, H.L.(E.).
Home Insurance Co. v. Administratia Asigurarilor de Stat (unreported), J uly
29 1983 Parker J
D
Montecchi v.' Shimco (U.K.) Ltd. [1979] 1 W.L.R. 1180; [1980] 1 Lloyd's
Rep. 50, C.A.
Piccinini v. Partrederiet Trigon II (The Alfred Trigon) [1981] 2 Lloyd's Rep.
333.
Rahman (Prince Abdul) bin Turki al Sudairy v. Abu-Taha [1980] 1 W.L.R.
1268; [1980] 3 All E.R. 409, C.A.
Rasu Maritima S.A. v. Perusahaan Pertambangan Minyak Dan Gas Bumi
c Negara (Government of the Republic of Indonesia intervening) (Pertam-
n
ina) [1978] Q.B. 644; [1977] 3 W.L.R. 518; [1977] 3 All E.R. 324, C.A.
Third Chandris Shipping Corporation v. Unimarine S.A. [1979] Q.B. 645;
[1979] 3 W.L.R. 122; [1979] 2 All E.R. 972, C.A.
Z Ltd. v. A-Z and AA-LL [1982] Q.B. 558; [1982] 2 W.L.R. 288; [1982] 1
All E.R. 556, C.A.
P No additional cases were cited in argument.
INTERLOCUTORY APPEAL from Mustill J .
By writ dated March 10, 1983, the plaintiffs, Ninemia Maritime
Corporation, claimed damages for breach of a memorandum of agreement
dated J anuary 24, 1983, between the plaintiffs and the defendants, Trave
Schiffahrtsgesellschaft m.b.H. und Co. K.G., in respect of the sale and
G purchase of the ship, Niedersachsen. On March 8, 1983, on an ex parte
application by the plaintiffs, Mustill J . granted the plaintiffs an injunction
restraining the defendants for a period of 28 days or until further order
from removing from the jurisdiction or otherwise disposing of or dealing
with any of their assets within the jurisdiction of the court so as to reduce
the value thereof below U.S. $787,000, on the plaintiffs undertaking inter
J J alia to issue the writ and serve it on the defendants forthwith. On May 10,
1983, Mustill J . discharged the injunction.
The plaintiffs appealed on the grounds (1) that the judge erred in law
and/or in principle in holding that, when seeking to establish that there
was a sufficient risk of the defendants disposing of their assets before any
arbitration award could be enforced against them so as to justify the
maintenance of aMareva injunction, the plaintiffs had no right to criticise
the defendants' evidence for omissions or obscurities; (2) that the judge
VOL. 1 77
The Weekly Law Reports, December 9, 1983
1414
Ninemia Corpn. v. Trave G.m.b.H. (C.A.) [1983]
erred in principle (a) in holding that there was no evidence before him .
from which a prima facie inference could be drawn, requiring rebuttal by
the defendants, that there was a risk of the defendants disposing of their
assets before an arbitration award could be enforced against them suffi-
cient to justify the maintenance of a Mareva injunction against the
defendants; (b) in failing to take into account the fact that the plaintiffs
had made inquiries about the credit of the defendants and that that had
produced little useful information; (c) in failing to take into account the B
fact that the defendants' evidence concerning the structure and financial
position of the defendants represented all that the plaintiffs could have
been expected to discover about such structure and financial position
beyond what the plaintiffs themselves had, in the time available, been
able to discover; (d) in failing to give any or any sufficient weight to the
following facts and matters: (i) that the defendants were a partnership
with limited liability with assets consisting of two ships, which, at the time
of the present proceedings, had been sold for a loss of nearly $100 m.; (ii)
that the total share capital of the defendants amounted to only DM.
70,000; (iii) that the defendants admitted that the funds, if freed from the
injunction, would be removed from the jurisdiction and invested in other
(unspecified) companies in the Oldendorff group of companies; (iv) that
the defendants gave no evidence about the corporate structure of the D
Oldendorff group of companies or of the defendants' place in the group;
(v) that the defendants gave no information about their own financial
position beyond the admission of having lost nearly $100 m. on the sale
of their only assets; (vi) that the defendants gave no evidence as to the
assets or turnover of profits of the Oldendorff group or of any companies
within it; (vii) that there was no evidence that the Oldendorff group had
given any legally enforceable undertaking or any undertaking at all to the E
defendants that the group would assist the defendants in meeting any
award enforced against them by the plaintiffs; and/or (viii) that the
Oldendorff group as distinct from the defendants had refused to give any
legally enforceable undertaking or any undertaking at all to the plaintiffs
that the group would itself meet or assist the defendants in meeting any
award enforced against the defendants by the plaintiffs; and (e) in taking p
into account an assumption that the Oldendorff group had sufficient assets
to meet any award made against the defendants, when there was no
evidence before the court of the financial position of the Oldendorff
group; and (3) that the judgment of the judge was wrong, arid ought to
be set aside in so far as it decided that there was no risk of the defendants
disposing of their assets sufficient to justify the maintenance of a Mareva
injunction against the defendants. G
By a respondent's notice, the defendants contended that the judge's
order should be affirmed on the additional grounds (1) that the plaintiffs'
application for the injunction was an abuse of the procedure whereby such
injunctions were granted; (2) that the judge ought to have held that, as a
matter of law, the plaintiffs' case was insufficiently strong to justify the
maintaining of the injunction, since two surveyors representing the vessel's J J
classification society surveyed the vessel at the material time and, not-
withstanding the plaintiffs' complaints, the vessel was kept in class without
any recommendations attaching thereto, and there was therefore no
"average damage affecting class"; and (3) that even if the plaintiffs had a
sufficiently arguable case to satisfy the "threshold" test, as described by
the judge, it was not sufficiently strong to justify the injunction being
maintained when weighed with other factors of the case, namely: (i) the
The Weekly Law Reports, December 9, 1983
1415
1 W.L.R. Ninemia Corpn. v. Trave G.m.b.H. (C.A.)
^ lack of evidence that the defendants would dissipate their assets so as to
defeat any award that might be made, if the injunction were discharged;
(ii) the plaintiffs' failure to disclose that the defendants were members of
a long-established group of companies with a good reputation for hon-
ouring the obligations of companies within the group; (hi) the nature of
the application being, or arguably being, an improper use of theMareva
jurisdiction; (iv) the defendants being incorporated in West Germany,
B which was a party to the New York Convention on the Enforcement of
Arbitration Awards; and (v) the failure by the plaintiffs to justify, or even
to seek to justify, the estimate of damage upon which the injunction was
granted.
The facts are stated in the judgment of Kerr L.J .
C John Griffiths Q.C. and Bernard Eder for the plaintiffs.
Timothy Young for the defendants.
Cur. adv. vult.
July 29. KERR L.J . read the following judgment of the court. This is
D the judgment of the court on an appeal from a reserved judgment of
Mustill J . delivered on May 10, 1983, whereby he discharged aMareva
injunction, after a hearing inter partes, which he had himself previously
granted on the plaintiffs' application ex parte. In the course of his lengthy
judgment the judge referred to many of the authorities concerning the
grant or refusal of Mareva injunctions in the context of two questions on
which he felt that further guidance was needed. He formulated these
questions as follows:
"First, what probability of success at the ultimate trial is the plaintiff
required to demonstrate, before an injunction can be properly granted
or maintained? Second, what type of prejudice must the plaintiff
demonstrate, in the shape of a risk of dissipation of assets, and with
what degree of conviction must it be shown, before the defendant's
F assets can properly be detained to await a possible judgment?"
The voluminous evidence was directed to both these aspects, though
mainly to the first. We begin by summarising this, which we can do fairly
shortly.
Q The first question
The dispute arose out of a "memorandum of agreement" dated J anuary
24, 1983, in what is usually known as the Norwegian Sale Form, whereby
the plaintiffs agreed to buy the defendants' vessel Niedersachsen for a
total price of U.S. $3,745,000. As provided in the printed form, a deposit
of 10 per cent, was to be paid by the plaintiffs on signing of the contract
TT and the balance on delivery "without any deductions." Both payments
were to be made to the defendants' account with Citibank, London. The
printed clause providing for dry docking and inspection was deleted, and
the dispute centres on an additional clause 18 of which the following terms
are material:
"Delivery of the vessel where presently anchored off Dubai, without
dry docking, safely afloat . . . with steam raised in both boilers and
ready to sail between February 14, 1983, and March 7, 1983, in
1416
The Weekly Law Reports, December 9, 1983
Ninemia Corpn. v. Trave G.m.b.H. (C.A.) [1983]
seller's option . . . present class fully maintained, free of recommen- ^
dations, free of average damages affecting class . . . "
Although the vessel was in class with Germanischer Lloyd, the plain-
tiffs had grave doubts about the condition of her boilers, since there had
been some leakages in February 1983 and further leakages on March 6,
7 and 8, the day on which the vessel was delivered, all of which were said
to have been repaired, but which understandably gave concern to the B
plaintiffs. There was also some evidence suggesting that there might be
damage to the tailshaft and stern gland. The plaintiffs and an independent
surveyor who advised them disagreed with the conclusion of the surveyors
of Germanischer Lloyd that the vessel had been properly classed, as
required by the contract, and there was also some appearance of dissent
from this conclusion by a surveyor of Det Norske Veritas, another -,
classification society which was brought in on behalf of the plaintiffs. The
defendants and their advisers refuted all these conclusions. The main
point at issue is not the condition of the boilers and the other alleged
defects as such, but whether these constituted "average damages affecting
class." The vessel was about seven years old, she was bought as she lay at
a price which was said to be not greatly in excess of her scrap value
(although this value is also in dispute), and the defendants maintained D
that the alleged defects were due to wear and tear and not "average
damages affecting class."
The plaintiffs' first ex parte application for aMareva injunction was
made on March 7, 1983, the day before the vessel's delivery. The judge
rightly rejected this as being premature. The plaintiffs then completed the
purchase and paid the balance of the price and renewed their application
p
on the following day, asking for an order to "freeze" the total amount of
$3,745,000 in the defendants' account at Citibank. The judge granted this
application, but only to the extent of $787,000, the plaintiffs' then estimate
of the cost of repairs and of their resulting loss. On March 29 and 30 and
April 11 there was then an inter partes hearing upon the defendants'
application to discharge the injunction, and the judge did so on May 10
for the reasons discussed hereafter. These bear on the second of the two F
questions posed by him, as set out above, with which we will deal later on
in this judgment.
Since the inter partes hearing the plaintiffs have produced further
affidavit evidencewithout objection from the defendantsdescribing
what the state of the boilers and the tailshaft was in fact found to be after
the vessel had been delivered and had sailed to Bahrain and had been
opened up for repairs. They say that whereas their original estimate of
the cost of repairs and of other losses which they would sustain was
$787,000, their present estimate is $1,300,000. However, the defendants
have not had the opportunity of dealing with these allegations, and in the
circumstances it is unnecessary to consider them further. There was rightly
no application before this court to increase the amount of the injunction
beyond the sum of $787,000, and there still remains the hotly disputed H
issue whether any of the defects were "average damages affecting class."
The substance of the plaintiffs' appeal is simply that the injunction should
not have been discharged pending the hearing of the dispute by arbitration
under the auspices of the London Maritime Arbitrators' Association,
which has been fixed to begin in about eight months.
It is convenient to pause at this point since this is all that needs to be
said by way of summarising the evidence on the first of the questions
The Weekly Law Reports, December 9, 1983
1417
1 W.L.R. Ninemia Corpn. v. Trave G.m.b.H. (C.A.)
^ posed by the judge. Having referred to a number of the authorities, he
answered this by saying, in effect: "Have the plaintiffs shown that they
have a good arguable case?" He took this test from the judgment of Lord
Denning M.R. in Rasu Maritima S.A. v. Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara (Government of the Republic of Indonesia
intervening) (Pertamina) [1978] Q.B. 644, 661G, and pointed out that this
test was followed by this court in Farey-Jones (Insurance) Ltd. v. I.F.M.
B Funding G.m.b.H. (unreported), April 10, 1979; Court of Appeal (Civil
Division) Transcript No. 223 of 1979. Although other, and perhaps slightly
stronger, words have been used in other cases, the defendants did not
challenge this formulation of the present appeal. We respectfully agree
with it, but would add that this aspect of the evidence before the court
should not be looked at in isolation when deciding whether or not to
Q exercise the discretion to grant aMareva injunction. The ultimate basis
for this jurisdiction is now to be found in section 37 of the Supreme Court
Act 1981. Subsection (1) provides:
"The High Court may by order (whether interlocutory or final) grant
an injunction . . . in all cases in which it appears to the court to be
just and convenient to do so."
D In the context of Mareva injunctions one must now also have regard to
subsection (3):
"The power of the High Court under subsection (1) to grant an
interlocutory injunction restraining a party to any proceedings from
removing from the jurisdiction of the High Court, or otherwise
dealing with, assets located within that jurisdiction shall be exercisable
in cases where that party is, as well as in cases where he is not,
domiciled, resident or present within that jurisdiction."
It follows that the evidence, including the evidence on the second question
posed by the judge to which we turn in a moment, must be looked at as
a whole. A "good arguable case" is no doubt the minimum which the
plaintiff must show in order to cross what the judge rightly described as
p the "threshold" for the exercise of the jurisdiction. But at the end of the
day the court must consider the evidence as a whole in deciding whether
or not to exercise this statutory jurisdiction.
In the present case the judge weighed the evidence on this aspect and
also referred to the decision of Robert Goff J . in Piccanini v. Partrederiet
Trigon II (The Alfred Trigon) [1981] 2 Lloyd's Rep. 333 on the meaning
of "average damage affecting class" and concluded that the plaintiffs had
G satisfied the test of a good arguable case. This was not challenged on
behalf of the defendants on this appeal and we therefore find it unnecess-
ary to say anything further about this aspect.
The second question
We then turn to the second of the questions posed by the judge, and
H we begin again by summarising the evidence which bears on this. The
main evidence for the plaintiffs was provided in an affidavit sworn by a
Mr. Nott-Bower, a director of Embiricos Shipping Agency Ltd. who act
as the agents in this country for the managers of the plaintiffs, Buenamar
Compania Naviera S.A. of Piraeus, Greece, the plaintiffs themselves
being a company incorporated in Liberia. He said that the sellers were a
West German corporation who were selling their only two vessels, the
Niedersachsen and Schleswig Holstein, the latter being sold elsewhere. In
The Weekly Law Reports, December 9, 1983
1418
Ninemia Corpn. v. Trave G.m.b.H. (C.A.) [1983]
this connection it appeared later in the evidence that both vessels had ^
originally been built on behalf of the defendants at a cost of about
$50,000,000 each and that they were now being sold at low prices due to
the shipping slump, but that the mortgages on both of them had been
fully discharged prior to their sale. The material extract from Mr. Nott-
Bower's affidavit is in paragraph 7, from which the following extracts need
to be set out in full:
"I verily believe that if the plaintiffs take delivery of the ship and pay
the whole of the price to the sellers they will have no security for
legitimate claims and will thus be effectively prevented from pursuing
legitimate claims. The vessel is under steam, her class certificates are
in order and a notice of readiness has been issued. Accordingly, the
plaintiffs are effectively put in the position of being obliged to take
delivery though knowing that the vessel is defective. The defendants C
are a West German corporation who are selling both of their only
two vessels. The defendants have an account with Citibank, London,
W.C.2, i.e., within the jurisdiction of this Honourable Court. The
moneys payable under the [memorandum of agreement] are to be
paid into such account. I verily believe that on closing such moneys
as held in such account will be removed very quickly so that the
defendants will have no assets in this country against which the
plaintiff buyers would be able to enter any award or judgment. I am
pessimistic about the prospects of the defendants honouring any
award or judgment unless they are forced to keep sufficient assets in
this country. A request was made by a telex dated March 4, 1983, to
the sellers that they should undertake to indemnify the buyers in
respect of further leakages when steam was raised but such request E
was ignored. . . . Finally, I should mention that it would be the
intention of the plaintiffs not to disclose the existence of any injunc-
tion that the court may make until immediately after closing and
delivery of the ship. If the defendants are notified of the injunction
beforehand, the plaintiffs fear that the defendants will sell the vessel
elsewhere or may seek to assign the proceeds of sale to a third
party. . . . "
F
Before dealing with the defendants' evidence in reply and the plaintiffs'
evidence by way of riposte, it is convenient to make a number of
comments on this evidence which were also raised in the judgment below
and discussed on the appeal before us.
First, Mr. Nott-Bower made no reference to the fact that the defend- >-,
ants formed part of the Oldendorff group of companies, who are well
known in shipping circles generally. This fact was not disputed, and it was
also not seriously disputed that the plaintiffs were perfectly well aware of
this when they agreed to buy the vessel; indeed, they subsequently offered
to consider the discharge of the injunction by consent against a guarantee
from a major company in this group. The judge felt that Mr. Nott-Bower's
affidavit was open to criticism for not having referred to this fact, and Mr. H
John Griffiths rightly accepted this on the present appeal. It is obviously
a matter which is relevant to the second question posed by the judge.
Secondly, the plaintiffs adduced no evidence about the defendants
let alone the groupto support Mr. Nott-Bower's expression of pessimism
about the prospects of the defendants honouring any award or judgment,
other than what is stated in the passage quoted above. The reference to
the sellers' refusal "to indemnify the buyers in respect of further leakages
The Weekly Law Reports, December 9, 1983
1419
1 VV.L.R. Ninemia Corpn. v. Trave G.m.b.H. (C.A.)
. when steam was raised" was rightly disregarded by the judge as inappro-
priate; it would have amounted to an admission of liability in advance in
respect of defects which were disputed and which depended in any event
on the meaning of "average damages affecting class."
Thirdly, there was the fact that the plaintiffs were proposing to use the
machinery of a Mareva injunction in order to "freeze" the price of the
vessel as soon as it was paid over, unbeknown to the sellers. In this
B connection the judge referred to a passage in the judgment of Kerr L.J .
in Z Ltd. v. A-Z and AA-LL [1982] Q.B. 558, 585, with which Eveleigh
L.J . agreed at p. 584, and expressed reservations about this conduct on
the part of the plaintiffs even though their intentions in this regard had of
course been fully disclosed in Mr. Nott-Bower's affidavit. However, given
the fact that a plaintiff's intention in this regard is fully disclosed to the
court, as it must be, we do not think that it would be desirable to express
any views about this aspect. We agree with the judge when he said:
"there is something unattractive about the idea of a buyer, who is
ostensibly paying the full price of a chattel, preparing himself behind
the seller's back to deprive him of part of the price. This gives the
buyer the best of both worlds."
D This factor should certainly be borne in mind by the court when it arises,
and it may well militate against the exercise of the discretion to grant the
injunction in such cases. However, in other cases the circumstances might
well be such as to justify a Mareva injunction even in the face of this
factor. In our view it would not be appropriate to seek to lay down any
guidelines about it.
Since this was the whole of the evidence which was before the judge
E when he granted theMareva injunction ex parte to the extent of $787,000,
it is again convenient to pause at this point, in particular since the judge
refers to the different problems which arise in the exercise of this
jurisdiction at the stage of an application ex parte and at the later stage
of an application inter partes to discharge the injunction. In this connection
he said:
F "Having been reminded of the authorities, and after hearing full
argument, I am bound to say that I am doubtful whether the ex parte
relief should have been granted in the first place. It may well be that
current practice has unwittingly crept away from the authorities. If
this case should go further, this is a matter upon which guidance
would, I believe, be welcome to the judges who hear these
Q applications."
However, in our view this is again not a matter on which this court
should, or usefully could, express any general view. Although the plain-
tiffs' evidence on this aspect is open to the three criticisms mentioned
abovethe first of which was probably unknown to the judge at that
stagewe do not think that it would be useful to seek to lay down any
H standard of evidence which applicants for Mareva injunctions must satisfy
in order to succed upon an ex parte application. Bare assertions that the
defendants are likely to put any asset beyond the plaintiffs grasp and are
unlikely to honour any judgment or award are clearly not enough by
themselves. Something more is required. Viewed from this point of view,
the plaintiffs' evidence in the present case can certainly be described as
exiguous. In that respect it is very much of a borderline case. However,
the judge presumably took the view that in all the circumstances there
1420
The Weekly Law Reports, December 9, 1983
Ninemia Corpn. v. Trave G.m.b.H. (C.A.) [1983]
was just enough to justify the limited injunction which he granted, leaving A
it to the defendants to apply to have it discharged, as happened, and
knowing that no real harm would thereby befall them which could not be
dealt with by an order as to costs. Accordingly, despite the judge's implied
invitation to us to do so, we would not go so far as to say that, in the
exercise of his discretion, he was wrong to make the order which he made.
However, the exiguousness of the plaintiffs' evidence on this aspect must
naturally weigh strongly, as it did with the judge in this case, when the B
court comes to consider the whole of the evidence on the application inter
partes to discharge the injunction.
We then turn to the remainder of the evidence on this aspect which
was before the judge on the defendants' application inter partes to
discharge the injunction, as he did. The evidence on behalf of the
defendants was contained in a short affidavit by a Mr. Henning Olden- ^
dorff, and it is necessary to quote all except the last paragraph of this in
full:
"(1) I am a Generalbevollmaechtigter for Messrs. Egon Oldendorff
K.G., who are the managers of Trave Schiffahrtsgesellschaft m.b.H.
und Co. K.G. I thus have a general and complete power to act on
behalf of Messrs. Egon Oldendorff K.G. without necessary reference
to other directors or shareholders of Messrs. Egon Oldendorff. ^
"(2) The contents of this affidavit are true to the best of my
knowledge, information and belief, such being obtained from my
personal knowledge and experience of the business practice of the
Oldendorff group of companies and of the circumstances of this case.
"(3) I refer to the affidavit of Mr. Nott-Bower and in particular to
the allegations in paragraph 7 thereof regarding the prospects of our g
honouring any award or judgment.
"(4) I confirm very emphatically: (1) there is and has never been
any intention of dealing with those proceeds so as to avoid any award
that may be made against them; (2) the proceeds would probably
have been removed from the Citibank account in London for other
normal business of the company because they could be put to better
use than earning a low rate of interest; (3) the most likely use to F
which the money would be put is investment in other German
companies in the Oldendorff group; (4) there is and has never been
any intention of liquidating the company so as to avoid enforcement
of any award; (5) if the market improves sufficiently the company
may well become shipowners again, although it is to be appreciated
that losing nearly $100 m. on the price of theNiedersachsen and the Q
Schleswig Holstein has not been a happy experience. I totally reject
Mr. Nott-Bower's suggestion that we would 'very quickly' remove
the money implying that we would act improperly.
"(5) I would add that since the company of Messrs. Egon Old-
endorff K.G. was formed in 1921 by my father, Herr Egon Olden-
dorff, to my knowledge, none of the Oldendorff associated companies
have ever: (a) defaulted on a loan; (b) failed to honour an arbitration H
award in whatever jurisdiction; (c) failed to honour a court judgment
in any jurisdiction. As a result the Oldendorff group has an excellent
reputation in respect of the above matters in the shipping world."
By way of riposte to this there was some further evidence on behalf of
the plaintiffs which can be summarised quite briefly. The plaintiffs
evidently made no attempt to make any inquiries about the financial
The Weekly Law Reports, December 9, 1983
1421
1 W.L.R. Ninemia Corpn. v. Trave G.m.b.H. (C.A.)
A resources or standing of the defendants or of the Oldendorff group. In an
affidavit by a partner of the firm of solicitors acting for the plaintiffs there
is a reference to Embiricos Shipping Agency having made some vague
attempt to obtain bank references in respect of the defendants and that
these "had produced little useful information." It was also stated that
upon Citibank in London being requested that the defendants should
provide "a corporate guarantee" this had met with a firm refusal. Then
B there was evidence that the defendant company itself was a limited
partnership with a share capital of only DM.20,000. Finally, there was
evidence that when the plaintiffs offered to consider the discharge of the
injunction by consent on the basis of a bank guaranteeas already
mentionedor a guarantee from a major company in the group, this was
refused; the defendants' solicitors stated in a telex that "our clients feel
Q very strongly that there is no merit in your clients' claim" and that the
defendants would be applying to have the injunction discharged.
That was the evidence before the judge on the hearing inter partes.
On this appeal the plaintiffs thought it right to adduce further evidence in
the form of two press cuttings from Lloyd's List newspaperwithout
objection on behalf of the defendantsreferring to a dispute in March
1975 between the Oldendorff group and a German shipyard about the
D possibility of cancelling or varying a contract for the construction of two
vessels against the background of the shipping slump. This was designed
to cast a blemish upon the defendants' reputation. But such disputes have
been commonplace and worldwide in the shipping industry over the last
decade or so. In our view this adds nothing whatever to the plaintiffs'
case.
P In the ultimate analysis the issue on this appeal is whether or not this
court should interfere with the exercise of the judge's discretion when he
decided to discharge the injunction. As to this, we are clearly of the view,
for the reasons discussed below, that no case has been made out on behalf
of the buyers which would justify us taking this course. Recent decisions
of the House of Lords have emphasised the importance of appellate courts
resisting the temptation to interfere with the exercise of judicial discretions
F other than in limited circumstances which do not apply here: see, e.g.,
Hadmor Productions Ltd. v. Hamilton [1983] 1 A.C. 191 and Garden
Cottage Foods Ltd. v. Milk Marketing Board [1983] 3 W.L.R. 143. We
will deal below with the plaintiffs' submissions in this regard. At the same
time, since the judge treated this case as one which might provide some
guidance, in particular on the second question which he posed, and since
Q this request was echoed in the arguments before us, we think it right to
make a number of general comments. However, these are not in any way
intended to be exhaustive about the exercise of the discretion concerning
Mareva injunctions in general.
(1) Although the discretion ultimately rests upon the words of section
37 of the Supreme Court Act 1981 to grant an interlocutory injunction
"in all cases in which it appears to the court to be just and convenient to
H do so," certain material criteria have already been laid down in a number
of well known authorities to which regard must be had in the application
of these wide words in relation to Mareva injunctions. We mention this
because some of Mr. Griffiths's submissions on this appeal appeared to go
much further. Thus, he submitted at one stage of his argument that the
fact that the defendants did not assert that they required the frozen sum
of $787,000 for the purpose of their trade or to pay their creditors, but
merely to invest as they thought best, was in itself a ground for granting
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Ninemia Corpn. v. TraveG.m.b.H. (C.A.) [1983]
the injunction, coupled with the plaintiffs' "good arguable case," because
this would do little harm to the defendants, in particular if the plaintiffs'
cross-undertaking in damages was supported by security, as was offered
on this appeal (though not below). He also submitted that if the defendants
wished to have the use of these funds, they could easily provide a bank
guarantee instead, in order to secure the plaintiffs. Finally, he submitted,
in effect, that the grant of Mareva injunctions should be greatly extended
generally, so as to align the practice in this country with what he claimed B
to be the position in other jurisdictions, of requiring defendants to provide
security for claims which appear to the court to be well-founded, unless
the defendants show some sufficient reason why this should not be done.
In our view all these submissions go much too far in the light of the
authorities and are indeed wholly inconsistent with the origin and devel-
opment of this jurisdiction. The machinery of the Mareva injunction is Q
extremely useful in appropriate cases. But, as the law stands, this
jurisdiction cannot be invoked for the purpose of providing plaintiffs with
security for claims, even when these appear likely to succeedwe are
speaking generally and not with reference to this caseand even when
there is no reason to suppose that an order for an injunction, or the
provision of some substitute security by the defendants, would cause any
real hardship to the defendants. Mr. Griffiths even went so far as to D
suggest that unless this jurisdiction were extended along these lines,
Mareva injunctions might fall into desuetude. But the tendency is notori-
ously the other way. In his judgment the judge referred to "a rapid and
sustained increase in the number of applications"; and it is clear that his
general concern was that under the present practice Mareva injunctions
may well be granted too readily in some cases. p
(2) Since the origin of this jurisdiction, the authorities clearly show
that in order to obtain aMareva injunction, plaintiffs must show that they
would suffer some prejudice as a result of what the judge referred to in
his second question as a "dissipation of assets" in the event of the
injunction being refused. The issue is as to the test which the plaintiffs
must satisfy. We were told on this appeal that there is a difference of
judicial opinion as to whether the test isto use the judge's words"that F
the defendant will deal with his assets with the object, and not just with
the effect, of putting them out of the plaintiffs reach." To some extent
this difference appears to have arisen from a phrase in an obiter passage
in the judgment of Kerr L.J . in Z Ltd. v. A-Z and AA-LL [1982] Q.B.
558, 585F, that a defendant may "take steps designed to ensure that these
[assets] are no longer available or traceable when judgment is given G
. . . " (emphasis supplied). Thus, we were referred to an unreported
judgment of Parker J . in Home Insurance Co. v. Administratia Asigurarilor
de Stat in which these words were interpreted "as a requirement that one
must show nefarious intent." However, this interpretation of the empha-
sised words goes much further than the tenor of the authorities to which
we refer below. We also consider that the distinction mentioned by the J J
judge in the present case, which he did not in fact find it necessary to
resolve, between "object" and "effect," is not the right basis for providing
the appropriate test. In our view the test is whether, on the assumption
that the plaintiffs have shown at least "a good arguable case," the court
concludes, on the whole of the evidence then before it, that the refusal of
a Mareva injunction would involve a real risk that a judgment or award
in favour of the plaintiffs would remain unsatisfied.
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1 W.L.R. Nlnemia Corpn. v. Trave G.m.b.H. (C.A.)
. The judgment in the present case quotes many passages which have
referred to this aspect of the Mareva jurisdiction. We need not repeat
these here. In support of the test indicated above we would only quote
the following, which should be read in their context, though bearing in
mindas the judge pointed outthat although most of the reported cases
have dealt with the removal of assets from the jurisdiction, Mareva
injunctions can, and nowadays frequently are, also granted where there
B is a danger of a dissipation of assets within this country.
Etablissement Esefka International Anstalt v. Central Bank of Nigeria
[1979] 1 Lloyd's Rep. 445, 448, per Lord Denning M.R.:
"The Mareva injunction is only to be granted where there is danger
of the money being taken out of the jurisdiction so that if the plaintiffs
succeed they are not likely to get their money."
C Third Chandris Shipping Corporation v. Unimarine S.A. [1979] Q.B.
645, 669, per Lord Denning M.R.:
"In such cases the very fact of incorporation there gives some ground
for believing there is a risk that, if judgment or an award is obtained,
it may go unsatisfied."
n
Per Lawton L.J ., at pp. 671-672:
"There must be facts from which the Commercial Court, like a
prudent, sensible commercial man, can properly infer a danger of
default if assets are removed from the jurisdiction. . . . These facts
should enable a commercial judge to infer whether there is likely to
be any real risk of default."
E
Montecchi v. Shimco (U.K.) Ltd. [1979] 1 W.L.R. 1180, 1183, per
Bridge L.J .:
"the basis of the Mareva injunction is that there has to be a real
reason to apprehend that if the injunction is not made, the intending
plaintiff in this country may be deprived of a remedy against the
foreign defendant whom he seeks to sue."
F Barclay-Johnson v. Yuill [1980] 1 W.L.R. 1259, 1265, per Sir Robert
Megarry V.-C:
"it must appear that there is a danger of default if the assets are
removed from the jurisdiction. Even if the risk of removal is great,
no Mareva injunction should be granted unless there is also a danger
of default."
" Prince Abdul Rahman bin Turki al Sudairy v. Abu-Taha [1980] 1
W.L.R. 1268, 1273, per Lord Denning M.R.:
"So I would hold that aMareva injunction can be granted against a
man even though he is based in this country if the circumstances are
such that there is a danger of his absconding, or a danger of the
assets being removed out of the jurisdiction or disposed of within
H the jurisdiction, or otherwise dealt with so that there is a danger that
the plaintiff, if he gets judgment, will not be able to get it satisfied."
(3) There is a further problem, concerning the respective evidence of
the parties, which is referred to in the judgment and was also discussed in
the arguments before us. It can best be dealt with by setting out some
inevitably lengthy extracts from the judgment, but these will also serve to
show how the judge reached his decision on the exercise of his discretion.
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Ninemia Corpn. v. TraveG.m.b.H. (C.A.) [1983]
We have already said that we see no basis for reviewing his decision, and .
nothing that we say is intended to imply any disagreement with it.
However, we have emphasised certain passages on which we comment
below.
"For the buyers, criticism was made of the evidence for the sellers,
which was said to be incomplete and unsatisfactory, on several
important points. In my judgment, neither of these attitudes is wholly
correct. The judge who hears the proceedings inter partes must
decide on all the evidence laid before him. The evidence adduced for
the defendant will normally be looked at for the purposes of deciding
whether it is enough to displace any inferences which might otherwise
be drawn from the plaintiff's evidence. But I see no reason in
principle why, if the defendant's evidence raises more questions than
it answers, and does so in a manner which tends to enhance rather Q
than allay any justifiable apprehension concerning dissipation of
assets, the court should be obliged to leave this out of account. On
the other hand, the plaintiff has no right to criticise the defendant's
evidence, for omissions or obscurities. The defendant is entitled to
choose for himself what evidence, if any, he adduces. The less
impressive his evidence, the less effective it will be to displace any
adverse inferences. But there must be an inference to be displaced, D
if the injunction is to stand, and comment on the defendant's evidence
must not be taken so far that the burden of proof is unconsciously
reversed."
The judge then referred to aspects of the evidence which it is
unnecessary to set out and continued with certain criticisms made on
behalf of the defendants of the plaintiffs' evidence:
"(1) The deponent did not say that the sellers, or companies and
persons connected with them, have a history of default on loans or
trade debtsthat, in the words of Lawton L.J . in Third Chandris
Shipping Corporation v. Unimarine S.A. [1979] Q.B. 645, 672A, they
are 'debt dodgers.' He did not speak to any bad reputation in the
trade. He did not even say that the buyers had tried without success
to find out about the sellers' reputation. (2) He did not say, and
indeed in the case of a company incorporated in the Federal Republic
of Germany, could not say that companies registered there are
difficult to track down, or are notoriously fallible in providing assets
to meet large adverse judgments. (3) He does not say, and again
could not say, that there exists no mechanism for enforcement of
awards in the sellers' country of incorporationfor the Federal
Republic (unlike the Republic of Liberia, in which the buyers are
incorporated) is a party to the New York Convention on the Recog-
nition and Enforcement of Foreign Arbitral Awards."
He then referred in detail to the affidavit of Mr. Oldendorff, as already
quoted, and went on:
"The buyers say that this affidavit reinforces their own evidence, and
so in part it does. It confirms their assertion that the moneys will be
removed from the jurisdiction, unless the injunction is maintained. It
goes on to admit that once removed from the United Kingdom, the
funds will not stay with the company, but will be redeployed within
the groupand the affidavit does not say that they will necessarily
stay in West Germany. The affidavit also shows what is indeed
E
F
G
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1 W.L.R. Ninemia Corpn. v. Trave G.m.b.H. (C.A.)
. obvious, that the sellers have suffered a grievous financial blow from
the fall in the market, which must impair or totally preclude their
ability to meet from their own funds any damages which may be
awarded.
"These are important points, and the sellers could well have done
more to answer them. Thus(1) the sellers have not said anything
about the corporate structure of the Oldendorff group, or how the
B partners in the buyers' limited partnership, referred to in the affidavit
of Mr. Strong, fit into the structure as a whole. (2) The sellers have
said nothing about the capitalisation of the group. The only infor-
mation comes from Mr. Short's affidavit, which indicates a very
modest share capital for the immediate proprietors of the sellers.
(3) The sellers have given no information at all about their own
P activities or finances. They do not even say whether they are still
trading. (4) Not a single figure is given for the assets, turnover or
profits of any company in the Oldendorff Group.
"These omissions are such that if the sellers had the task of making
the court confident the money would be there when called for, I would
doubt very much whether they had succeeded. But this is not their
task. They have no obligation to disclose their financial affairs, simply
D to answer a challenge from the buyers which is unsupported by solid
evidence. Their reticence does not justify the inference that they have
uncomfortable facts to hide. True, they have suffered losses on ships
which (like all trading ships) were heavily mortgaged. Yet the sellers
are not bankrupt; the mortgages have been redeemed, no doubt with
backing from the rest of the group; there is no suggestion that the
g group as a whole has failed to weather the storm. If the group has
absorbed losses of nearly $100 m. on these two ships, why should the
court assume that it will let the company go to the wall for a further
loss of less than one-hundredth of this amount? (I should add that,
since the buyers were, on their own evidence, ready to accept a
corporate guarantee for the amount claimed, they can scarcely be
heard to assert that the group is not able, as distinct from willing, to
F meet the claim.)
"More than this, however, there is the evidence that the other
Oldendorff companies have always paid their debts. There is no
evidence the other way. No guilt by association can be attributed to
the sellers.
"In all these circumstances, I consider that the buyers have failed
G to prove a degree of risk sufficient to justify the maintenance of the
injunction."
On this appeal Mr. Griffiths, on behalf of the plaintiffs, criticised the
passages which we have emphasised and submitted that they showed that
the judge had exercised his discretion on a wrong basis. He submitted
that these placed the burden of proof exclusively or excessively upon the
plaintiffs and that this approach is incorrect once the matter comes to be
heard inter partes. If the emphasised passages are taken out of their
context, we think that there would be substance in this criticism. Thus,
while it is obviously up to the defendants what evidence they put before
the court, the plaintiffs are equally clearly entitled to comment adversely
upon any evidence which the defendants may adduce. However, immedi-
ately before the first of the emphasised passages, the judgment correctly
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Ninemia Corpn. v. Trave G.m.b.H. (C.A.) [1983]
stated that "the judge who hears the proceedings inter partes must decide A
on all the evidence laid before him," and this is clearly what the judge did
in this case. Whether the inter partes hearing takes the form of an
application by the defendants to discharge the injunction, as is usual in
the Commercial Court, or whetheras in the Chancery Divisionthe
injunction is only granted for a limited time and there is then an inter
partes hearing as to whether or not it should be continued, the judge _
must consider the whole of the evidence as it then stands in deciding
whether to maintain or continue, or to discharge or vary, the order
previously made.
On the present appeal we have been mainly concerned with the tests
to be applied in answering the two questions posed by the judge. However,
other matters may often also have to be borne in mind. The ultimate test
for the exercise of the jurisdiction is whether, in all the circumstances, the C
case is one in which it appears to the court "to be just and convenient" to
grant the injunction: see section 37 of the Supreme Court Act 1981 which
we have already set out. Thus, the conduct of the plaintiffs may be
material, and the rights of any third parties who may be affected by the
grant of an injunction may often also have to be borne in mind: see
Galaxia Maritime S.A. v. Mineralimportexport [1982] 1 W.L.R. 539.
Further, it must always be remembered that if, or to the extent that, the
grant of a Mareva injunction inflicts hardship on the defendants, their
legitimate interests must prevail over those of the plaintiffs, who seek to
obtain security for a claim which may appear to be well-founded but
which still remains to be established at the trial. There is no need to
repeat here what was said in that connection in Z Ltd. v. A-Z and AA-
LL [1982] Q.B. 558, 585, 586. If the plaintiffs are in a position to contend E
that their claim is not open to doubt, then they must satisfy the require-
ments of an application for summary judgment under R.S.C., Ord. 14.
But if they apply for aMareva injunction on the ground that they have
"a good arguable case," then the balance should be weighed as we have
indicated above.
In the present case the judge correctly applied the two tests which fell
to be considered on the facts, and there is no basis for criticising the *
conclusion which he reached in exercising his discretion. Accordingly, this
appeal must be dismissed.
Appeal dismissed with costs.
Application for leave to appeal refused.
G
Solicitors: Ince & Co.; Holman, Fenwick & Willan.
M. I. H.
H