The Bank of Tokyo-Mitsuibishi UFJ Ltd v The Owners of the MV Sanko Mineral

This is an application by the Defendant, the (former) Owner of the M.V. SANKO MINERAL, (“the vessel”), for the strike out or withdrawal of the caution against release of the proceeds of sale of SANKO MINERAL requested by Glencore Limited (“Glencore”) on 22 August 2014 and for payment out of the proceeds of sale. The application raises interesting questions concerning the Admiralty jurisdiction and the relationship between it and foreign insolvency proceedings.

Before setting out the issues to which this application gave rise it is necessary to describe the circumstances which have led to the Defendant’s application.

Pursuant to a contract of carriage evidenced by a bill of lading dated 8 April 2012 a cargo of 9,998.717 metric tonnes of silicon manganese (of which Glencore claims to have been the owner) was shipped on board the vessel for carriage from Burgas, Bulgaria to New Orleans. The bill of lading was on the CONGEN 1994 form and, it is common ground, incorporated the terms of a charterparty dated 13 March 2012 on an amended Stemmor form between Western Bulk Carriers A/S and Glencore International AG. Clause 28 provided for London arbitration and in particular that:

“Any claim must be made in writing and Claimant’s Arbitrator appointed within twelve months of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred.”

On 7 May 2012 the vessel was made subject to various attachments in Baltimore, Maryland by creditors of Sanko. Whilst the vessel was delayed in Baltimore Glencore filed a claim against her for breach of the contract of carriage in the United States District Court for the District of Maryland under Rule C of the Supplemental Rules for Certain Admiralty and Maritime Claims. Glencore maintains that in consequence and as a matter of US law it obtained a maritime lien over the vessel.

As a result of substantial financial problems Sanko, a company organised and existing under the laws of Japan, filed a petition for the commencement of insolvency proceedings in Japan. On 23 July 2012 Sanko entered into “Reorganisation” proceedings under the Japanese Corporate Reorganisation Act. On 30 July 2012 the reorganisation was recognised by Newey J. in the Chancery Division of the High Court in this jurisdiction as the “foreign main proceeding” under the Cross-Border Insolvency Regulations 2006. The terms of Newey J.’s order provided, inter alia:

“Pursuant to Articles 20(6) and 21(1)(g) of the Model Law, the stay and suspension in Article 20(1) of the Model law is modified as follows and additional relief is granted in the following terms:

(1)

No step may be taken to enforce any mortgage, charge, lien or other security over the Company’s property except with the consent of the Foreign Representative or the permission of the Court.

(2)

……….

(3)

No legal process may be instituted or continued against the Company or its property except with the consent of the Foreign Representative or the permission of the Court. For the purposes of this Order, the term “legal process” includes arbitrations, other legal proceedings, execution, distress, diligence, and all other forms of legal process.

…………”

On 2 August 2012 the vessel was released from the attachments in the US.

On 4 September 2012 the cargo was delivered in New Orleans. It is Glencore’s case that in breach of the contract of carriage the discharge of the cargo in New Orleans was delayed by nearly four months. In consequence Glencore claims to have suffered losses in the sum of (approximately) US$3,850,000 (including interest and costs).

On 14 September 2012 Glencore submitted two claims in the Reorganisation in Tokyo. The first was a Secured Reorganisation Claim for US$3,046,959.50 plus interest in respect of its maritime lien. The second was, in the alternative, an unsecured claim in the same amount. On 5 November 2012 the Trustee of the Defendant rejected both claims and on 17 December 2012 Glencore lodged two petitions with the Tokyo District Court challenging that rejection. These petitions remain pending in Tokyo.

The 12 month period within which an arbitration had to be commenced pursuant to clause 28 of the charterparty elapsed on 5 September 2013. No such arbitration was commenced by Glencore.

The Trustee of the Defendant produced a reorganisation plan which was approved by the Japanese Court on 17 October 2013.

Part of the plan, (chapter 3, section 1, part 1) deals specifically with secured reorganisation claims relating to vessels. Pursuant to that plan the Trustee will sell Sanko’s vessels and the proceeds of sale will be paid in satisfaction of the finalised secured reorganisation claims.

Glencore’s claim is presently unfinalised. The process of finalising (or admitting) the claim is underway pursuant to Glencore’s petitions lodged with the Tokyo District Court. If and when it is finalised as a secured reorganisation claim Glencore will have a right to be paid out of the proceeds of sale of the vessel.

By letter dated 17 April 2014 the Defendant’s Foreign Representative authorised the Bank of Tokyo-Mitsubishi UFJ Limited (“the Bank”) to commence proceedings against the vessel on which it held a mortgage. The Bank issued an in rem claim form in the Admiralty Court in this jurisdiction. On 23 May 2014 the Admiralty Registrar authorised the arrest of the vessel. The vessel was arrested shortly thereafter. On 20 June 2014 the Bank obtained judgment on its claim and Flaux J. ordered that the vessel be sold and that the proceeds of sale be paid into court pending a determination of priorities. Flaux J further ordered as follows:

“5.

The Claimant shall procure that notice of the sale is advertised in Lloyd’s List and Trade Winds, which advertisements shall notify all persons having claims in rem against the Vessel to apply to the Companies Court, or to request the Defendant’s Foreign Representative, for permission to commence such claims forthwith and, in any event, no later than 60 days after the date of such notice.”

The sale of the vessel was advertised on 26 and 27 June 2014 and on 1 July 2014 Glencore became aware of the notice of sale. The vessel was sold by the Admiralty Marshal on 7 August 2014.

Glencore was concerned at these developments because it maintains that in Japanese law its security interest, derived from its maritime lien under US law and/or from the status of its claim in Japanese law as a statutory lien, takes priority over the Bank’s mortgage. On 22 August 2014 Glencore issued an application to the Companies Court in this jurisdiction for permission to commence a claim in rem against the vessel and requested the issue of a caution against the release of the proceeds of sale. The terms of the caution provided as follows:

“The applicant for a caution claims to have an in rem right against the above-mentioned property or proceeds of sale for US$3,009,049.50 and £23,566.60…….This amount is secured by a maritime lien over the MV Sanko Mineral.”

Given that there were sufficient, or at least nearly sufficient, sale proceeds to meet the claims of both Glencore and the Bank, Glencore consented to the Bank’s application for payment out of Court which was expected to satisfy the Bank’s judgment in full or at least in substantial part, whilst leaving sufficient sums in Court to meet Glencore’s claim. Accordingly, on 26 September 2014 Hamblen J. ordered payment out to the Admiralty Marshal of his expenses of the arrest and sale, to the Bank of its costs incurred as producer of the fund before the court and to the Bank in full or partial satisfaction of its judgment debt subject to the requirement that US$3,850,000, which corresponded to the quantum of Glencore’s claim, remained in court. Upon payment out to the Bank, it has become clear that the payment to the Bank has not entirely satisfied the Bank’s claim. Thus there remains a dispute as to priorities between the Bank and Glencore.

On 7 October 2014 the Trustee of the Defendant issued its application seeking an order that the caution be struck out or withdrawn and that the proceeds of sale remaining in court be paid out to the Trustee.

When the application came on for hearing on 14 November 2014 Mr. Smith QC, counsel on behalf of Glencore, stated in his written submissions that Glencore wished to ensure “that the subject matter of its asserted secured claim in the Japanese reorganisation is preserved”. To that end Glencore desired the proceeds of sale to remain in court until the Tokyo court had pronounced upon Glencore’s claim. It was for that reason that I suggested at the outset of the hearing that if, after payment out, the Trustee were willing to undertake to keep the proceeds of sale in a separate account and hold them to abide by the decision of the Tokyo court there could be no prejudice to Glencore’s claim (though some method would have to be found of protecting the Bank’s remaining interest in the proceeds of sale). However, given the time difference between London and Tokyo, counsel for the Trustee was not able to obtain instructions to give such an undertaking.

Mr. Smith then applied, on case management grounds, for a stay of the Trustee’s application pending determination of the proceedings in Japan. For reasons given on that day I did not accede to that application.

Mr. Henderson, counsel for the Trustee, submitted that the caution against release should be struck out or withdrawn for two reasons. First, it was said that Glencore had no claim because, in circumstances where arbitration had not been commenced within 12 months of discharge, its claim was now “absolutely barred” pursuant to clause 28 of the charterparty. Second, it was said that in circumstances where Glencore had not issued an in rem claim form prior to the sale of the vessel it is no longer able to enforce its claim in rem pursuant to section 21(4) of the SCR 1981. That section requires, inter alia, that when the action is brought the person liable in personam is the beneficial owner of the vessel. Sanko is no longer the beneficial owner of the vessel and no action in rem has yet been brought by Glencore. Accordingly, the issue of the caution was inappropriate and it should be struck out or withdrawn. Mr. Henderson had a third argument, that Glencore had no title to sue pursuant to COGSA 1992, but he recognised that that argument depended on the facts, which were in dispute, and so could not be resolved on this application.

Mr. Henderson’s submission was simple. Glencore’s claim is a contractual claim and by the terms of its contract that claim is absolutely barred because arbitration was not commenced within 12 months of discharge.

Mr. Smith’s response to this argument was, in essence, that the contractual dispute resolution clause had been supplanted by the procedure for making and finalising reorganisation claims in Tokyo. The reorganisation of Sanko commenced in July 2012 and, within two weeks of the completion of discharge in September 2012, Glencore had submitted its secured reorganisation claim in Tokyo for damages alleged to have been caused by Sanko’s breach of contract. If and when that claim is finalised (admitted) in Tokyo it can be paid out of the proceeds of sale of the vessel. There is no requirement in Tokyo for the claim to have been made in arbitration in London.

Mr. Smith submitted that this is indeed the effect in English law (with regard to English insolvency proceedings) of Rule 4.73(1) of the Insolvency Rules 1986 which obliges those who claim to be creditors of a company being wound up to submit their claim to the liquidator. Mr. Smith submitted that in English law the procedure which governs the insolvency will, in general, apply to the determination of claims against the insolvent company and to that extent any other dispute resolution procedure agreed by the parties will be displaced. He said that the same must, on the balance of probabilities, be true in Japan.

The question which arises in this case is whether a time bar provision in the parties’ contract is also displaced. Mr. Smith submitted that where the time bar provision is part of the agreed dispute resolution clause it must be displaced along with the rest of the dispute resolution clause. He observed that the time bar point had not been taken in Tokyo and that that was consistent with his submission. That is true, but the explanation may be that the time for taking the point has not yet arisen. In this regard I was told that whilst Glencore’s submissions have been filed in Tokyo, Sanko’s submissions have not yet been filed.

Mr. Henderson responded by pointing out that the Cross-Border Insolvency Regulations 2006, article 20(4), expressly provide that the stay on proceedings imposed by article 20(1) does not affect the right to commence individual actions or proceedings to the extent necessary to preserve a claim against the debtor. He therefore submitted that in English law a contractual time bar is not displaced by an insolvency procedure for the making and proof of claims. If, which he did not accept was the case, article 20(4) did not apply to the additional orders made by Newey J. in July 2012 when he recognised the reorganisation proceedings, Glencore could have sought permission from the court to commence proceedings for the purpose of preserving its claim. He further suggested that the same may be the position in Japanese law. It could not be assumed that the contractual time bar in clause 28 of the charterparty had been displaced by the procedure in Tokyo for making and finalising reorganisation claims.

Mr. Smith replied that article 20(4) did not apply to the additional orders made by Newey J. in July 2012 when he recognised the reorganisation proceedings and all that Glencore was required to do by Flaux J.’s order in June 2014 was to apply for permission to commence its claim in rem which Glencore had done.

In the absence of insolvency there can be no doubt that in English law the claim of Glencore is now barred. Mr. Smith relied upon decisions which establish that the time bar provision in Article III rule 6 of the Hague Rules which requires suit to be brought within 12 months of discharge is satisfied where suit is brought in the jurisdiction in which the claim is ultimately decided. But the Trustee relies upon a time bar provision which requires the claimant to commence arbitration in London within 12 months of discharge. That provision cannot be satisfied by the issue of a claim in Tokyo.

However, there is an insolvency in the present case and Mr. Smith made it plain that Glencore wishes to advance its claim in Tokyo in the insolvency proceedings there. Thus he said that when Glencore’s application comes before the Companies Court on 2 December 2014 for permission to commence an action in rem against the vessel Glencore’s position will be that its application should be stayed or adjourned pending the decision of the Tokyo court on Glencore’s secured reorganisation claim. In those circumstances and bearing in mind the recognition of the insolvency proceedings in Tokyo by the Companies Court it is not appropriate, in my judgment, for this court to seek to determine the question whether Glencore can advance its claim in Tokyo notwithstanding its failure to have commenced arbitration. That is a matter for the Tokyo court and Japanese law. In any event the parties have not adduced any evidence of the Japanese law bearing upon that question. I therefore decline to determine that question.

So far as the position in English law is concerned I consider that where a contractual time bar provision requires arbitration to be commenced in order to preserve a claim, failing which the claim is absolutely barred, that provision must be complied with. If it is not then, as a matter of contract, the claim is barred. Where there is an insolvency procedure in another jurisdiction article 20(4) of the Cross-Border Insolvency Regulations 2006 permits proceedings to be taken to the extent necessary to preserve a claim. Thus arbitration proceedings could have been commenced in London to preserve Glencore’s claim at any time in the 12 months following discharge in September 2012. If the order of Newey J. overrides article 20(4), as Mr. Smith submitted it did, then Glencore could have applied to the Companies Court for permission to commence arbitration proceedings at any time in that 12 month period.

In the event arbitration proceedings were not commenced within 12 months of discharge and so Glencore’s claim was, as a matter of contract, absolutely barred by September 2013. Mr. Smith said that all Glencore was required to do by the order of Flaux J. in June 2014 was to apply for permission to commence its claim in rem which Glencore had done. However, I do not consider that Glencore’s claim can be resurrected by compliance with the order of Flaux J. in June 2014. By that time Glencore’s claim was already barred as a matter of contract. However, whether Glencore’s reorganisation claim can succeed in Tokyo under Japanese law in circumstances where it was advanced in Tokyo within 12 months of discharge, though not in arbitration in London, will be a matter for the court in Tokyo to decide. This court cannot decide that issue.

Mr. Henderson’s submission on this point is, again, simple. Section 21(4) of the SCA 1981 sets out the conditions which must be satisfied in order for a claim to be enforced in rem. One of those conditions is that when action is brought the person liable in personam, in this case, Sanko, must be the beneficial owner of the vessel. No action in rem was issued by Glencore prior to the sale of the vessel. It follows that Glencore’s claim can no longer be enforced in rem.

Mr. Smith’s submission in response was that Glencore had a claim in rem in this, different, sense. If and when its secured reorganisation claim is finalised (admitted) in Tokyo it can be enforced against the proceeds of sale of the vessel. The decision of the Tokyo court to that effect will be recognised by this court pursuant to (i) the principles governing the recognition of insolvency proceedings (see Rubin v Eurofinance SA [2013] 1 AC 236) or (ii) the provisions of the Cross-Border Insolvency Regulations pursuant to which the reorganisation proceedings have been recognised in this jurisdiction or (iii) the ordinary English rules of private international law, with the result that this court will enable Glencore to satisfy its claim from the proceeds of sale held in this court.

I accept that the English court will recognise and give effect to a judgment of the Tokyo court by one or more of the above routes (Mr. Henderson did not suggest that it would not) and would therefore permit Glencore’s claim to be enforced against the proceeds of sale held in court (to the extent that they were sufficient to allow that to be done taking into account other claims against the proceeds which had a higher priority). But the remaining question is whether that makes Glencore’s claim a claim in rem within the meaning of Flaux J.’s June 2014 order or within the meaning of the caution requested by Glencore.

The order of Flaux J. was made in the context of CPR Part 61 which governs Admiralty claims. CPR Part 61 contains a definition of claims in rem, as follows:

“61.1

(1)

This Part applies to admiralty claims.

(2)

In this Part-

(a)

‘admiralty claim’ means a claim within the Admiralty jurisdiction of the High Court as set out in section 20 of the Supreme Court Act 19811;

(b)

‘the Admiralty Court’ means the Admiralty Court of the Queen’s Bench Division of the High Court of Justice;

(c)

‘claim in rem’ means a claim in an admiralty action in rem;

…………..”

In that context the reference in Flaux J.’s order to a person wishing to assert a claim in rem against the vessel must be a reference to a person wishing to assert a claim in an admiralty action in rem. Such a claim is one which can be enforced in rem pursuant to the provisions of section 21 of the SCA 1981. Glencore’s claim is an admiralty claim within section 20(2)(h) of the SCA 1981 but an Admiralty action in rem may only be brought in respect of such a claim if the conditions set out in section 21(4) of the SCA 1981 are satisfied. Mr. Smith’s submission as to the route by which Glencore’s finalised secured reorganisation claim could be enforced against the proceeds of sale paid no regard to the conditions in section 21. In my judgment the claim contemplated by Mr. Smith is not a claim in rem within the meaning of Flaux J.’s order.

The caution was requested by Glencore pursuant to CPR 61.8(2) which provides that any person who “claims to have an in rem right against any property under arrest” may file a request for a caution. Having regard to the definition of a claim in rem in CPR 61.1 it is clear that only those who claim a right to an Admiralty action in rem right within section 21 of the SCA 1981 may request a caution.

Mr. Smith next submitted that the effect of Flaux J.’s order was that if a claimant applied to the Companies Court for permission to bring a claim in rem within 60 days of the notice of the sale he could proceed in rem against the proceeds of sale by complying with the terms of that order. This submission raised an important question, namely, whether a claimant with a statutory right of action in rem may enforce that claim against the proceeds of sale of the vessel notwithstanding that the vessel has been sold by order of the Admiralty Court and no action in rem had been commenced before the sale.

Mr. Henderson submitted that where the claimant had not issued his in rem claim form prior to the sale of the vessel the claimant had lost his right to enforce his claim in rem for the simple reason that if he thereafter issued an in rem claim form the person liable in personam would not, as at the date of issue, be the beneficial owner of the vessel and accordingly, pursuant to section 21(4) of the SCA 1981, the claim could not be enforced in rem.

Mr. Smith did not develop his submission beyond stating that it was sufficient that Glencore had applied to the Companies Court for permission to commence a claim in rem. However, it seems to me that his submission can be developed in this way, as I suggested to Mr. Henderson during argument. When a vessel is sold by the Admiralty Court claims in rem against the vessel are transferred to and can be enforced against the proceeds of sale. In those circumstances the natural construction of Flaux J.’s order is that those with an Admiralty claim in rem may enforce it against the proceeds of sale so long as they comply with the time limit set out in the order. Mr. Henderson’s response was that such an approach is inconsistent with section 21(4) of the SCA 1981. He submitted that, having regard to the effect of that section, it was only those with a maritime lien who could issue a claim form in rem after the sale of the vessel by the court and enforce the claim against the proceeds of sale.

I was not referred to any authority in which this question has been considered.

It seems to me that the answer to this question cannot be decided without regard to the well established principle that when a vessel is sold by the Admiralty Court rights in rem are transferred to the proceeds of sale; see The Optima (1905) 10 Asp.MLC 147 at p.149, The Acrux [1962] 1 LR 405 at p.409, The Queen of the South [1968] P.449 at pp.461-462 and The Union Gold [2014] 1 Lloyd’s Reports 53 at paragraph 2. This principle has an effect on how section 21 of the SCA 1981 works where a vessel is sold by the Admiralty Court. For example, a claimant with a maritime lien on a vessel may bring an action in rem against that vessel pursuant to section 21(3) of the SCA 1981. If the vessel has been sold by order of the Admiralty Court a clean title is given and so the purchaser takes free of the maritime lien. If the holder of the maritime lien has not issued his in rem claim form before the sale of the vessel by the Admiralty Court he may do so afterwards. In such a case his claim is enforced against the proceeds of sale. The claim form is not served on the vessel but is filed at the court; see PD 61 para.3.6(3). Thus the result is that, although section 21(3) of the SCA 1981 entitles the claimant with a maritime lien to bring his action against the vessel, he may do so, where the vessel has been sold by the Admiralty Court, by bringing his action against the proceeds of sale of the vessel. He does not in fact bring his action against the vessel (because the vessel in its new ownership is free of the maritime lien) but he is regarded as doing so by means of a principle long established by the Admiralty Court. Thus the operation of section 21 of the SCA 1981 must be understood in the context of the long established principle that, where the vessel has been sold by the Admiralty Court, claims in rem may be enforced against the proceeds of sale. By contrast where the owner sells his vessel himself a maritime lien can be enforced against the vessel in the hands of the new owner. The maritime lien cannot be enforced against the proceeds of sale in the hands of the previous owner though there will, or will usually be, a claim in personam against the previous owner.

With that in mind it seems to me arguable that where a person has a statutory right of action in rem and the vessel is sold by the Admiralty Court he may thereafter issue his in rem claim form and serve it by filing it with the court. By reference to the long established principle to which I have referred he may be regarded as bringing his action against the vessel just as the maritime lien holder is regarded as doing so for the purposes of section 21(3) of the SCA 1981. Of course, he must still satisfy the conditions of section 21(4) but so long as the person liable in personam is the owner of the proceeds of sale that person may be regarded, by means of the same principle, as the owner of the vessel.

The contrary argument is that the clear words of section 21(4) should be given their natural meaning and not distorted by a fiction. The importance of the date of issue is well known both in the context of sales and of winding up. Thus it has long been established that a statutory right of action in rem cannot survive a change of ownership unless a claim form in rem has been issued prior to the change of ownership; see The Monica S [1968] P. 741 at p.772-773. Similarly, the issue of an in rem claim form in support of a statutory right of action in rem before the commencement of a winding up of the defendant owner will result in the claimant being considered a secured creditor when leave is sought from the Companies Court to continue the action; see In re Aro [1980] 1 Ch. 196 at pp.205-209. These consequences of section 21(4) are well known. Thus the holder of a statutory right of action in rem knows that he may lose his right if, unknown to him, the person liable in personam sells his vessel before he has issued his in rem claim form. Likewise he must know that if there is a court sale of the vessel before he issues his in rem claim form he will lose his right. There is no reason why court sales should be treated any differently from private sales. Section 21(4) draws no such distinction.

Flaux J.’s order, on which reliance is placed by Mr. Smith, reflects the requirement in CPR 61.10(2)(a) that when an order for sale is made the court shall set a time within which claims against the proceeds of sale must be filed. In the present case the owner of the vessel was the subject of insolvency proceedings and so the order did not simply set a time within claims against the proceeds of sale must be filed but set a time within which permission from the Companies Court to commence an action in rem must be sought.

It is instructive to reflect upon the effect of Flaux J.’s order on the assumption that Mr. Henderson’s submission is correct. The order was made on 20 June 2014. It provided that the vessel be sold and that notice of the sale be published in two maritime newspapers. Such notice was published on 26 and 27 June 2014 and the sale took place on 7 August 2014. Thus, on the assumption that Mr. Henderson’s submission is correct, the holder of a statutory right of action in rem had to commence his action before 7 August 2014, some 6 weeks or 42 days after the notice. Yet Glencore was informed by the court that it had 60 days within which to apply to the Companies Court for permission to commence an action in rem. This is, arguably, unsatisfactory and misleading. Moreover, on the assumption that Mr. Henderson’s submission is correct, the notice in reality applies only to those with a maritime lien. For it is only those with a maritime lien who can protect their interests by applying to the Companies Court for permission to commence an action in rem (after the court sale) within 60 days of the notice. This too is unsatisfactory because the notice applies to those having claims in rem, not just to those with maritime liens.

The court’s order is designed to protect the interests of those with claims in rem against the vessel. Yet, if Mr. Henderson’s submission is correct, the earlier part of the order which provides for the sale of the vessel will inevitably lead to those with statutory rights of action in rem losing such rights as a result of the court sale. The part of the order which seeks to protect the interests of those with claims in rem does so in a misleading manner.

Having considered the opposing arguments I have reached the conclusion that where there is a sale of the vessel by the Admiralty Court the holder of a statutory right of action in rem may enforce his right of action in rem by commencing his action in rem within the time provided by the court’s order on the sale of the vessel. Of course, the claimant must satisfy the conditions set out in section 21(4) of the SCA 1981 for enforcing admiralty claims in rem but, by reason of the long established principle that claims in rem may be enforced against the proceeds of a court sale, where the person liable in personam is the beneficial owner of the proceeds of sale he is to be regarded as the beneficial owner of the vessel for the purposes of section 21(4). I reach that conclusion because of (i) the long established principle of Admiralty law to which I have referred, (ii) the reflection of that principle in CPR 61.10(2)(a) and in PD 61 para.3.6(3), (iii) the fact that orders pursuant to CPR 61.10(2)(a) are intended to protect, not harm, the interests of those with rights in rem and (iv) the need to interpret the court’s order pursuant to CPR 61.10(2)(a) in a manner which is not misleading. I also note that my conclusion is consistent with the commentary in the White Book Vol.2 at p.693 paragraph 2D-49, which reminds practitioners of the effect of a sale “by the owner” on statutory rights of action in rem. A sale by the court is not a sale “by the owner”. Indeed such a sale is sometimes opposed by the owner, particularly when the sale is ordered before judgment.

For these reasons I am unable to accept Mr. Henderson’s submission that Glencore has lost its statutory right of action in rem.

However, as a result of my decision on the arbitration point Glencore’s claim for breach of the contract of carriage is absolutely barred. Ordinarily that would lead to an order for payment out to the Trustee (subject to protection of the Bank’s remaining interest in the proceeds of sale). In the present case, however, where the reorganisation in Tokyo has been recognised as the foreign main proceeding in this jurisdiction under the Cross-Border Insolvency Regulations this court would not wish to hinder the proper working out of the reorganisation by the Tokyo court. Glencore maintains that it can make good its claim in contract in Tokyo. Whether it can do so is a matter for the court in Tokyo. I would therefore only be willing to order payment out on terms that the Trustee kept the proceeds of sale in a separate US Dollar account and held them to the order of the Tokyo court. Since I have been told that the Trustee has confirmed that the funds will be distributed “to creditors fairly and in good faith, under the control of the Tokyo District Court and in accordance with the Reorganisation Plan” I would be surprised if such undertakings cannot be given by the Trustee. But if they cannot be given then I would not order payment out.

If the undertakings can be given and payment out is ordered the remaining interest of the Bank in the proceeds of sale must be protected. There is, or may be, a dispute between the Bank and Glencore. The Bank, relying upon The Halcyon Isle [1980] 1 LR 325, maintains that in English law its claim has priority to that of Glencore. Indeed, in the light of this judgment it can say that Glencore has no claim. However, Glencore maintains that in Japanese law it has a secured claim which has priority to that of the Bank. This issue as to the conflict of laws has not been resolved between the Bank and Glencore and, in the absence of agreement, it will have to be determined by the court. If there is no order for payment out (because satisfactory undertakings from the Trustee are not available) then the proceeds of sale will remain in court and the dispute between the Bank and Glencore can be resolved in due course. But if payment out is ordered (because satisfactory undertakings from the Trustee are available) then a sum which is sufficient to protect the interests of the Bank must remain in court pending resolution of the dispute between the Bank and Glencore. I request the parties to agree upon what that sum should be.