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Lighthouse - November, 2021.

VIRTUAL ADMIRALTY CASE: SETS THE RECORD OF MANY FIRSTS IN ITS NAME

The last year 2020 accelerated the concept of “Work from Home” and helped to realize that even the Civil Court Proceedings can also be done virtually. With the pandemic, the Court proceedings had to switch completely to virtual hearings, without any Judges, Lawyers, or the Parties to the suit, being personally present in the courtroom. Many countries even introduced new regulations or rules to regulate remote hearing.

Amid all this chaos, the year 2020 also marked its first virtual admiralty case, and interestingly, its hearing took place by telephone due to the COVID crisis.

In the case, Qatar National Bank (QPSC) vs. The Owners of the Yacht “Force India” (No. 2) [2020] EWHC 719 (Admlty), the claimant bank had a mortgage over the Yacht following a default under an underlying loan agreement and even obtained a judgment for the sale of the Yacht in the Admiralty Court for the sums secured by the mortgages. Interestingly the unusual arrangement, in this case, was that the Mortgage was not in place to secure a loan taken out by the owner of the Yacht. Instead, the loan was taken out by a related company to finance a property purchase in the South of France. The Yacht was mortgaged as additional security concerning that property purchase. However, following the order made by the Admiralty Court for the sale of the Yacht, the claimant bank applied to the Court to have the order for sale set aside, on the final day for bids to be received. The Court declined this request instead gave some time to enable a hearing to take place, allowing the Court to consider the arguments of all the interested parties. The order was set aside on the basis that a third party had paid the sum secured by the Mortgage, and so the judicial sale of the vessel was no longer required. Where the sum secured by the Mortgage has in effect been paid by a third party, the judicial sale of the vessel was no longer required.

Under English Law, there are no specific rules as to how the sale should be organized. In most of the judicial sales, the Marshal invites the potential purchasers to send written tenders that usually include the bidder’s name, its agents, the bid validity period, and the person/company who submits the highest bid above the appraised value purchases the ship. After the highest bid has paid the purchase price into the Court, the person/ company shall sign the conditions of sale. Subsequently, the Marshall will deliver the ship and the documents along with its certificates to the new buyer. This being the normal procedure of “Judicial Sale of the Vessel,” the Court also emphasized that this setting aside of sale should certainly not become a practice because if it becomes a practice, then those willing to incur the time and expense involved in making a bid for a vessel ordered to be sold, might feel disinclined to do so and this might lead to Vessels being sold for a value less than that of its Market Value, which might tarnish the reputation of the Court.

Mr. Justice Teare concluded the judgment of the aforementioned case to be “Special and Perhaps Exceptional” as it was a rare incident where an independent third party would discharge the judgment debt and render the sale unnecessary. That is what happened in this case.

Though there are few instances where application being made to set aside a sale, the Marshall and his Agents, in relation to this case, has commented that in their 40 years of association with the Court for conducting judicial sale of vessels, they have never known such an application being made to halt a sale at such a late stage and the only reported instance appears to be almost sixty years old.

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