England and Wales High Court (Admiralty Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMIRALTY COURT
Admiralty action in rem against
The ship "OCEAN GLORY 1"

		20th November 2001

1. On 19 October 2001 made an order in this action and other actions concerning

the vessel "Ocean Glory 1" ("the vessel") for the determination of priorities and payment out of the proceeds of sale. At that hearing I also dealt with certain issues as to costs sought by Festive Holidays Limited ("Festive"). However, Festive also applied for an order that the costs that they and their solicitors, Norton Rose, had incurred since 31 July 2001 (when David Steel J ordered that the vessel be appraised and sold) should be awarded to them and should have priority after the Admiralty Marshal's costs. The sum involved was less than £10,000. The application was opposed by the Owners of the

vessel and there were many parties in court who were not interested in the outcome. Accordingly I ordered that the matter should be argued out on paper. I have been provided with a bundle containing the written submissions of both Festive and the Owners of the vessel and certain documents supporting the submissions.

2. I have concluded that I should not award the costs in favour of Festive. I will give my reasons briefly.
3. It is agreed by the Owners of the vessel that, after the costs of the Admiralty Marshal, priority should be given to (i) the costs of the arresting party up to and including the arrest of the vessel concerned; and (ii) the costs of the party who obtained the order for the appraisement and sale of the vessel, for the period up to and including the order itself. The rationale for that priority is that those costs will have been incurred in producing the fund that is for the benefit of all claimants against the vessel that has been arrested and then, eventually, sold.
4. It is also accepted that, in exceptional circumstances where an arresting party has properly incurred costs in the administration of the fund that has been held in Court and that is for the benefit of all claimants, then such costs may be claimed as part of the costs of the arrest. Whether the Court permits such costs to have priority is a matter of discretion: The Leoborg No 2 [1964] 1 Lloyd's Rep 380 at 384 per Hewson J. It is also agreed that the party that claims priority for such costs does not have to prove an actual benefit to the fund in incurring the costs. It is enough that the costs were (i) reasonably

incurred; and (ii) the costs were aimed at producing or preserving the fund for the general benefit of all creditors; and (iii) those costs were incurred because the party incurring them was uniquely able to do something that did or might be for the general benefit of all creditors.

5. However, it was submitted by the Owners of the vessel that if the arresting party

or the one that obtained the order for appraisement and sale incurred costs that

were primarily for the benefit of that party but which, indirectly, benefited other claimants on the fund, then such costs should not be accorded any priority.

6. It was submitted on behalf of Festive that if the arresting party or the party obtaining the order for appraisement and sale incurred further costs subsequent to the sale which also resulted in producing the fund, then those costs should be accorded priority. It was submitted that the test was whether, as a matter of fact, the result of the actions for which priority was claimed for such costs was that there had been a general benefit to those interested to the fund as a whole.
7. In my view the submission of the Owners of the vessel is to be preferred. If a party who had obtained the arrest or the order for appraisement and sale could claim all the costs thereafter (and claim priority), when the incidental result of the actions of that party had benefited all claimants, then it would simply encourage the arresting party (or the one that had obtained the order for appraisement and sale) to incur costs which it would be able to claim against the fund generally. That could mean that the fund would be diminished disproportionately but without any particular benefit accruing to other parties.
8. It is clear from the Leoborg No 2 that the question of priority of such costs is a matter for the discretion of the court. I am sure that this discretion cannot be exercised in favour of the party incurring those costs unless the court is satisfied that the expenditure has been for the general benefit of all claimants on the fund and that the expenditure was primarily for the preservation or enhancement of the fund as a whole, rather than primarily for the benefit of the party incurring the costs.
9. On the facts of this case I am not satisfied that costs incurred by Norton Rose on behalf of Festive were for the benefit of the claimants as a whole. The costs for which priority is claimed principally relate to: (i) the removal of the crew from the vessel, which was a cruise ship; (ii) the costs of maintaining the arrest, particularly berthing and bunkering. But there is no hint in the witness statement of Mr Bruce Macaulay of Norton Rose, that costs were incurred that (i) particularly advanced the repatriation of the crew; or (ii) were

of general benefit to the fund in relation to the costs of maintaining the arrest. Nor can it be said that those costs even might have advanced the benefit of the fund generally. Instead, as I read the evidence, the costs of Norton Rose were incurred in connection with working out Festive's own position in relation to the repatriation of the crew and in deciding whether and for how long Festive would or could afford to maintain the arrest.

10. Generally speaking I think that the costs that Norton Rose incurred were incurred in looking after just their own interests. Therefore I think that the equitable jurisdiction of the Court to grant costs and to accord priority for the costs that have been incurred by Norton Rose since the order for appraisement and sale should not be exercised.
11. Accordingly Festive's Applications numbered (iii) and (iv) in the Application Notice dated 16 October 2001 are dismissed. Applications (i) and (ii) have, I believe, already been covered.
12. The Owners of the Vessel have asked for their costs of the present written application by Festive. I think that, in principle, the Owners of the Vessel must be entitled to those costs. They are stated in Mr Nigel Cooper's Outline Argument to be £850 plus VAT. I am prepared to assess those costs summarily if they are disputed. But before I make that assessment I will give Festive Holidays Ltd and Norton Rose until 4pm on Tuesday 20 November 2001 to agree those costs. If they are still disputed then I must see a properly signed statement of costs before I assess them. If necessary that must be produced to me (by 4pm on Wednesday 21 November 2001). Any further submissions on costs by Festive Holidays Ltd must be sent by 4pm on Thursday 22 November 2001. Once I have dealt with costs I would like the parties to agree and sign an Order that I can initial.