TTMI LTD OF ENGLAND v ASM SHIPPING LTD OF INDIA [2005] EWHC 2666 (Comm)

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
[2005] EWHC 2666 (Comm)Case No Case No: 2005 FOLIO 45Venue Royal Courts of Justice, Strand, London, WC2A 2LL
Between
TTMI LTD OF ENGLANDApplicantASM SHIPPING LTD OF INDIARespondent
Before
Mr Justice Christopher ClarkeMr Simon Croall (instructed by Waterson Hicks) for the ApplicantMiss Geraldine Andrews Q.C. (instructed by Zaiwalla & Co) for the RespondentHearing date: 18th November 2005
[1]MR JUSTICE CHRISTOPHER CLARKE: This is an application by TTMI Limited, ("the Charterers"), to set aside or vary an order made by Aikens J on 16th August 2005, and to obtain a freezing order. Aikens, J's order gave to ASM Shipping Ltd, ("the Owners"), permission to enforce an arbitration award, less £ 25,000 or its dollar equivalent. That order was made following an order that I made on 23rd May 2005 on an application by Charterers for security of costs.[2]In paragraphs 2 – 8 of my judgment of 23rd May I set out the background to the application then before me. That background is this:
"2. ….On 11th December 2002 TTMI Ltd chartered from ASM Shipping Ltd of India the AMER ENERGY to carry a cargo of gas oil from one or two safe ports in the Arab Gulf to one or two safe ports in the Red Sea or Egyptian Mediterranean. The vessel was described in the fixture recap as "expected ready around 20th December all going well" and the laycan dates were 25th December to 27th December. The vessel was at this time anchored at Fujairah undergoing repairs. Whilst there, she was arrested by Shell on 7th November for bunkers and on 26th November by Inchcape for services, those arrests being in respect of very modest sums. 3. The arrests were not lifted until 2nd January 2001 and she departed from Fujairah the next day. She arrived at the nominated load port of Mina al Ahmadi only on 6th January 2001. The charterers claimed that by reason of the vessel's late arrival they suffered substantial losses because of an increase in the price of cargo and because they lost their intended purchase contract. The dispute was referred to arbitration in March 2001. The owners counterclaimed that they were entitled to substantial unpaid freight and demurrage. The cargo was in the end carried to Indonesia. 4. During the course of the still unconcluded arbitration, the arbitrators have made a number of awards. On 26th April 2001 the Tribunal made an award in owner's favour in respect of freight in the sum of US$640,100 together with interest at 7.5 per cent to be compounded at three monthly rests and costs. By an agreement between the parties a sum of $707,500 was paid into a joint interest-bearing escrow account at the Royal Bank of Scotland on 28th June 2002. On 23rd October 2002 owners applied to the Tribunal for an immediate award in their favour in respect of the demurrage claimed of $202,390. On 18th November 2002 the Tribunal dismissed that application and ordered the owners to pay to the charterers their costs of the application for such an award. 5. There has been a substantial dispute as to whether the owners had properly complied with their obligations to give disclosure. The Tribunal made serious criticism of the owner's behaviour in this respect and on 16th July 2004 ordered them top pay all the charterers' costs relating to the charterers' application for disclosure of owners' files within 14 days of the amount of those costs being fixed. 6. On 24th September the Tribunal made another award in which they declined to review or withdraw their July award and in which they determined that the charterers' costs covered by that July award were £14,825.09. They ordered the owners to pay those costs plus interest together with £9,085.00, the costs of the September award, making £23,910.59 in all. They also ordered owners to pay the charterers' costs of the application to review the earlier award. 7. On 23rd December 2004 the Tribunal determined a number of preliminary issues largely in the charterers' favour holding, amongst other things, that the owners had been obliged to ensure that the vessel embarked upon her approach voyage within such time that it was reasonably certain that she could arrive at the load port so as to comply with the laycan of 20th to 27th December and holding that an exceptions clause in the charter did not avail the owners for their failure so to do. The owners took up this award in January 2005 paying the cost of the same, that is to say, £43,600. 8. The charterers seek permission to challenge the award on the grounds that it is erroneous in law and they say (this being their principal ground of complaint) that there has been a serious irregularity in the proceedings of the Tribunal within the meaning of section 68 of the Act. What is said in respect of the latter is that the third arbitrator was involved as counsel instructed by the charterers' solicitor in an earlier case seeking the disclosure of a file from the owners' broker in the instant case. It is in relation to those challenges that the application for security for costs comes before me. "
[3]The escrow agreement of 28th June 2002 provided that the amount due under the award of 26th April 2001("the freight award") at the date of payment in should be paid, as it was, into an escrow account. The parties have thus proceeded on the basis that the freight award has in part been complied with by payment into the escrow account. The escrow agreement contained advantages and disadvantages for both parties. So far as the Owners were concerned, it provided security for the payment of freight. At the same time it precluded the m from claiming the freight without deduction for any set off or counterclaim. It also postponed any recovery of the monies in escrow until the conclusion of the arbitration by virtue of clause 4 (b) which provided that: "No payment out of the Account shall be made until all aspects of all claims and counterclaims in the Arbitration and any appeals therefrom have been finally determined including those relating to liability for and quantum of any Awards or Orders as to costs".[4]The amount that is now due to the Owners in respect of the freight award exceeds the amount in the escrow account. This is because under the freight award interest accrues at 7.5% compounded at 3 monthly rests whereas the money in the escrow account accumulates simple interest at, I assume, varying rates. In consequence at and from an early stage there has been, as there was always going to be, an amount due under the freight award which was not covered by the escrow.[5]The application before me in May was for security for the Charterers' costs of the section 68/69 applications ("the 68/69 costs"). I concluded that the Charterers would face great problems in obtaining payment of any costs that were awarded in India in view of the huge difference between the Owners' reported assets and their reported liabilities. I took the view that the amount in the escrow account ought not to be regarded as an asset of the Owners against which the Charterers could recover the 68/69 costs because no payment fell to be made out of the escrow account unt il the conclusion of the arbitral proceedings, whereas the 68/69 costs would be due well before then. But I took the view that the debt owed by the Owners pursuant to the freight award, insofar as it exceeded the amount in the escrow account ("the excess") was an asset from which the Charterers could recover their costs, provided that Owners agreed that the Charterers could deduct from that debt the appropriate figure, which was fixed at £ 25,000 – a sum that has proved to be 50% too low. The Owners gave an irrevocable undertaking to tat effect. That course appeared to me to be a convenient method of securing the Charterers whilst avoiding the expense of a guarantee. I awarded the Charterers their costs in the figure of £ 10,000.[6]Following my judgment the Charterers through Waterson Hicks ("WH"), their solicitors, on 26th May 2005 offered to pay into the escrow account, to be held on the terms of the escrow agreement, the excess as at the date of payment less(i) the £ 25,000 that I had ordered for security for costs and(ii) the dollar equivalent of the sum due under the award of 24th September 2004 ("the interim costs award"). They also sought payment of the costs of £ 10,000 that I had awarded. That offer was rejected. On 1st June WH notified Zaiwalla & Co ("Zaiwalla") for the Owners that if any proceedings were brought by Owners they would be met by an offer to pay the balance due into an escrow account and that, if such offer was not accepted, Charterers would have to incur the costs of seeking a freezing order and that the costs of doing so would be sought from Owners. They also offered to provide security for Owners' demurrage claim provided that Owners provided security for all of Charterers' claims.[7]In a letter of 15th June Zaiwalla invited Charterers either(a) to agree to pay the balance of the freight award to Owners less £ 10,000 with £ 25,000 to be paid into a designated account or(b) to agree to both sides securing each other's claim by the Charterers providing security for Owners' demurrage claim and Owners agreeing to the balance of the freight award being paid into a separate account.[8]After intervening correspondence, by a letter of 5th July 2005 WH offered to pay into the escrow account $ 60,000 together with $ 250,000. The $ 60,000 represented slightly more than the difference between the excess and(i) £ 25,000 for security for costs,(ii) £ 25,000 being the approximate sum due under the interim costs award, and(iii) £10,000, being the costs that I had awarded to Charterers in May 2005.[9]On 15th August 2005 Owners applied without notice for permission to enforce the freight award as an order or judgment to the same effect. The claim form stated that the application was made " on the basis of the judgment of Mr Justice Christopher Clarke given on 23rd May 2005, the Defendant's (sic) have clear liability to pay the Claimant US $ 124,398.56 ". The witness statement of Mr Zaiwalla in support made it clear that the contention was that the freight award had not been complied with to the extent o f " the present quantum due under the Freight Award less(i) the current amount of the escrow and(ii) the maximum sum of £ 25,000 governed by ASM's undertaking and the judge's order dated 23 May 2005". In paragraph 20 of his witness statement Mr Zaiwalla stated that the Owners did not claim the current balance of the escrow account as sums due under the freight award as at the date of the application. In paragraph 24 he made it clear that Owners sought to recover the "present quantum" to which he had previo usly referred. He then produced a calculation which showed that that amount, less, also, £10,000 for costs, was $ 124,398.56. He went on to request the Court " to enter judgment in terms of the Freight Award".[10]The order made was that permission be granted to enforce the freight award " in the same manner as an order or judgment to the same effect, save for £ 25,000 or its dollar equivalent ". The order does not on its face reveal, save in respect of the £ 25,000 that any part of the freight award is not to be treated as due and recoverable under the order.[11]The section 68/9 applications were heard in late September 2005 by Morrison, J. The section 69 application was abandoned. The section 68 application was dismissed on the ground that, although there had been a serious irregularity giving rise to apparent bias, the Owners had waived it by taking up the Award. Permission to appeal was refused and no further appeal is possible. The Charterers were ordered to pay cost which Morison J assessed at £ 50,000.[12]It is convenient to summarise the present state of play in respect of awards and claims:(i) Owners have in their favour the freight award of April 2001. whose value, including interest is just over $909,000. The amount in the escrow is nearly $720,000.(ii) Charterer s have in their favour: (a) the interim costs award of September 2004 in the sum of £23,910.59; (b) my costs order of 23rd May 2005 in the sum of £ 10,000.(iii) Owners have an outstanding claim for damages n respect of breach of charterparty; liability has been decided in their favour by the award of December 2004.(iv) Charterers have an outstanding demurrage claim of about $ 310,000. The application to set aside[13]Charterers' application is that the order of Aikens J should be set aside for three reasons, one technica l and the other two substantive, or that it should be varied. The substantive reasons are, firstly, that the order grants permission to enforce the award less £25,000 when it should have also deducted(a) the amount in the escrow account;(b) £10,000, and(c) the interim costs award of £23, 910.59. Secondly it is said that the Owners did not disclose facts material to the exercise of the discretion namely (i) the fact of the September costs award and what was said to be Owners agreement that the amount of that award could be set off against what was due under the freight award, and (ii) Charterer's offer to provide security. The technical reason is that the Order failed to comply with CPR Rule 62.18 (10) in that it did not contain a statement of (a) the right to make an application to set the order aside and (b) the restrictions on enforcement under CPR Rule 62.18 (9) (b).[14]Mr Simon Croall for the Charterers made it clear that his primary application was for a freezing injunction but, that notwithstanding, I propose to deal with the application to set aside first. The order of 16th August 2005[15]There are, in my view, two separate questions(a) what was the amount for which, as at 16th August 2005, the Owners could execute the award, if that was to be enforced as a judgment and(b) whether, in the light of the answer to (a) the order was defective.[16]As to (a), as at that date there was due to the Owners pursuant to the freight award the amount due in terms of the award less(i) the amount in the escrow account;(ii) the £25,000 in respect of which the Owners had given an irrevocable undertaking that the Charterers might make such a deduction; and(iii) the £10,000 in respect of which they had requested them to make such a deduction. So much is now commo n ground.[17]What is in dispute is whether there also falls to be deducted the amount awarded under the interim costs award. As to that, in his third witness statement, made for the purpose of the security for costs application, Mr Sarosh Zaiwalla said, in reference to that award:
"Owners have not paid the cost Award because they have an outstanding Judgment (the freight Award) against the respondent Charterers for a much larger sum. They have sought to set off the sums due from them under the costs Award against the monies due from (Charterers) under the freight Award which [Charterers] have not paid. They are entitled to do so"
[18]Mr Croall submits that Owners thereby agreed that the interim costs award could be set off against the freight award. Miss Geraldine Andrews, Q.C., submitted that what Mr Zaiwalla was referring to was the fact that the interim costs award would fall to be set off against the amount in the escrow account. I doubt whether Mr Zaiwalla intended to say that, not least because he does not refer to the escrow account, and, if he did so intend, he would have been wrong. The amount due under the interim costs award was payable in accordance with its terms, and payment could not be delayed because of the escrow account, from which no payment would fall to be made until the conclusion of the arbitration proceedings. The true position was that there were at that time two awards, the freight award and the interim costs award, both of which were due and payable. The interim costs award was not capable of being set off, save by agreement, against the freight award. Further the contentions in Mr Zaiwalla's witness statement do not appear to me to constitute an offer to Charterers to agree that the interim costs award can be set off against the freight, and, even if they do, that offer, as Mr Croall conceded, has never been accepted. On the contrary, in paragraph 24 of his fourth witness statement in the security for costs application, Mr Wisdom disputed the entitlement that Mr Zaiwalla had claimed.[19]There was accordingly no need for Owners to disclose the existence of the interim costs award in their favour. Mr Croall also refers to the failure of Owners to refer to the correspondence about security, although some of it was exhibited, and their failure to refer to or exhibit Zaiwalla's letter of 15th June 2005 to which I have referred.. I do not regard that omission as material since it would not afford a ground for refusing to grant permission to enforce. If I am wrong on that, I do not regard the omission as sufficient to justify setting the order aside. I, also, decline to set aside the order because it failed to comply with the provisions of the CPR to which I have referred. That is an irregularity but it has caused no prejudice. It would be disproportionate and unjust to set the order aside on that ground alone and Mr Croall did not suggest that I should do so.[20]So far as the form of the order is concerned, both parties accept that it should be varied so as to make clear what it is in respect of which execution may issue. The order, which I presume to have been the draft tendered to Aikens, J., does not confine itself to providing that the award may be enforced " in the same manner as an order or judgment to the same effect ". An order to the same effect as the freight award could be enforced to the extent that, at the time of enforcement, it had not been satisfied by payment or other arrangement. It might therefore have been legitimate for the order to be made in those broad terms, following the language of the Arbitration Act, leaving for further consideration what exactly was the extent to which it could be enforced. It is, however, in my view, markedly preferable that the order giving permission to enforce should, in a case such as this, make clear what falls to be deducted from the current value of the award so far as any enforcement is concerned. This was partly done in the order in respect of the £25,000 costs. But no reference was made either to the amount in escrow or to the £10,000 costs, despite the fact that in his witness statement Mr Zaiwalla indicated, plainly in the case of the escrow amount, and obliquely in the case of the £10,000, that Owners did not seek to recover in respect of either of those amounts. As a result the order that the learned judge was invited to make was neither in purely general form nor did it deal specifically with all of the deductions. It was, on that account, misleading.[21]Accordingly the order must be varied so as to make clear that enforcement is to be in respect of the amount of the freight award less(i) the amount in escrow;(ii) £25,000 by way of security for costs;(iii) the £10,000 costs ordered by me. I invite Counsel to draft an appropriate form of order. The application for a freezing order[22]The Charterers seek an order freezing the balance of the sums due under the freight award and any other assets of Owners within the jurisdiction. They contend(i) that they have, as they have, a good arguable claim against the Owners for an amount which is put at $ 753,860.93 plus interest and costs, making in all approximately $ 1.3 million or alternatively $ 467,481.34 plus interest and costs making approximately $ 1 million;(ii) that the English Court has, as it has, jurisdiction;(iii) that there is evidence that the Owners have, as they have, assets upon which the order could bite, namely the excess due under the freight award. Most importantly of all they contend that in the light of my findings on the security for costs application it is apparent that there is a real risk that the refusal of an injunction would mean that any award in their favour would remain unsatisfied. They point to the fact that neither the interim costs order nor my order of 23rd May have been satisfied despite the fact that, when required, Owners are able to come up with funds either to take up the Award of 23 December 2004 (£ 43,600) or to pay their own lawyers.[23]The Owners contend that no such order should be made. They submit that to grant a freezing order would be inconsistent with the underlying rationale of the jurisdiction to do so; and that they need the money due under the freight award in order to pay costs. The rationale of freezing orders[24]In the light of the difference between the parties it is necessary to examine the underlying rationale of what used to be called the Mareva jurisdiction.[25]The purpose of the Mareva jurisdiction is sometimes referred to as the prevention of the "dissipation of assets". Without explanation that phrase is, itself, obscure. As Colman J stated in Gangway Ltd v Caledonian Park Investments (Jersey) Ltd (2001) 2 Lloyd's Rep 715 the underlying purpose of the jurisdiction is not to provide a claimant with security for its claim but to restrain a defendant from evading justice by disposing of assets otherwise than in the ordinary course of business so as to make itself judgment proof with the result that any judgment or award in favour of the claimant goes unsatisfied. The purpose is not to provide security for the claimant in respect of his claim. It is well established that it is not necessary to establish that the defendant is likely to act with the object of putting his assets beyond reach. What has to be shown is that there is, absent an injunction, " a real risk that a judgment or award in favour of the plaintiffs would go unsatisfied ": The "Niedersachsen": [1983] 2 Lloyd's Rep 600. That formulation cannot, however, be regarded as a complete statement of the law. A defendant may be likely to make perfectly normal dispositions, such as the payment of ordinary trading debts, the effect of which may be that, when any award is made, it is, in whole or in part unsatisfied when, absent those payments, it might have been satisfied or satisfied to a greater extent. Something more than a real risk that the judgment will go unsatisfied is required.[26]Thus in a case in the Court of Appeal of Ontario – Chitel v Robart [1982] 39 O.R. (2d) 513, 532-3 – the Court said: "The applicant must persuade the court by his material that the defendant is removing or there is a real risk that he is about to remove his assets from the jurisdiction to avoid the possibility of judgment, or that the defendant is otherwise dissipating or disposing of is assets, in a manner clearly distinct from his usual or ordinary course of business or living , so as to render the possibility of future tracing of the assets remote, if not impossible in fact or in law".[27]To similar effect, in Ketchum International Plc v Group Public Relations Holdings (1997) 1 W.L.R. 4 Stuart Smith, L.J. referred to the jurisdiction of the Court of Appeal to ensure that its judgments on appeal were not rendered valueless "by an unjustifiable disposal of assets". The background to the application for a freezing order[28]The circumstances of the present case are unusual. I referred to some of them in my judgment of May 23rd 2005:
" 13. The owners no longer own or operate any vessels but they say that they have substantial assets in India. However, their latest accounts reveal an excess of liabilities over assets of some 543 million rupees, a deficit of something in the order of US$12 million, and an accumulated loss on profit and loss account of very nearly 700 million rupees. With the exception of 2003 when a vessel was sold, the company's expenditure appears to have been eight or nine times its income from 2001 onwards. For the year ending March 2004 (that being the latest year up to which the accounts have been provided) operating expenditure exceeded operating income. 14. Included in the fixed assets in these accounts is a written down value of the company's property in Mombai on which they have a 999-year lease and on which stands a building known as ASM House. The property which is said to be in proximity to the airports is encumbered by a charge. In the 2004 accounts the property is written down to just over 30 million rupees (whose approximate value in US dollars is something of the order of $700,000). The charge is said to be of the order of $350,000 with a residual equity of the same approximate amount. It is now, however, said to be worth between 60 to 65 million rupees (that is to say an approximate value of between US $1 and 1.08 million). 15. Even, however, if that is so (the valuation that has very lately been provided does not come from a Government-approved valuer), the deficiency in the company's accounts appears to be so large that it must be highly doubtful whether charterers would ever recover, let alone in full, from the company's Indian assets. It would certainly be in competition with creditors holding a very large quantity of debt such that if they were all paid rateably there would be only a small proportion of any amount ordered that would come the way of the charterers. 16. The suggestion was made in the course of argument that I should not place too much store by these accounts upon the footing that one of the debts of the company that is in the accounts is a debt of some 40 million rupees which subsists in the accounts for some purpose connected with the payment of tax but which will be irrecoverable in 2007. As to the remaining debts it was suggested that there are prospects of settlements with those creditors. 17 It seems to me, however, that I should take these accounts at their face value and certainly should do in the absence of being provided with either the note to the accounts (which has not been exhibited to the statement) or any evidence which indicates that the picture given by those accounts is in some way misleading. It is said that the company is engaged in a profitable crewing business but, if that be so, it is not yet reflected in any accounts that have been published. "
[29]The Owners are, therefore, to all appearances, in a parlous financial state. The arbitration proceedings appear to be being funded by an unknown third party. That that is so appears from the following:(a) The Owners' latest accounts reveal a significant excess of liabilities over assets;(b) In an affidavit of 31st August 2005 Mr Wisdom, on behalf of the Charterers, expressed the belief that the Owners were continuing the proceedings for the ultimate benefit of a third party who was funding the proceedings and that any sums paid to the Owners would be dissipated by being paid to him(c) In his witness statement in reply Mr Zaiwalla markedly failed to deal, much less to gainsay, Mr Wisdom's suggestion other than to say: "Owners accept that they have serious financial constraints …Consequently they have had to borrow to pay their lawyer's fees to defend Charterer's claims… They need the funds to pay their lawyers to pursue their Defences against the Charterers' damages claims".[30]The inference that I draw from this evidence is that the Owners are, indeed, being financed in respect of the arbitration proceedings and any High Court proceedings relating thereto, by somebody who has an interest in securing that the Charterers' claim fails and that the Owners' claim succeeds, although the former may be, more important than the latter. It seems to me improbable, in the light of the revealed financial position of the Owners, that the financier is a wholly independent third party. Further, the proceeds of the judgment will in all probability either go to pay the lawyers in respect of past or future work in relation to the arbitration or to the financier in respect of his past payments therefore.[31]In those circumstances is a freezing order appropriate? Mr Croall submits that, if an injunction is not granted, there is a risk that any award will go unsatisfied and that a freezing order is, therefore, appropriate. As to the latter he relies on the fact that, to date, the proceedings have been financed by a third party, not on a minimalist scale, and that the Owners have been prepared and able to expend money, e.g. in taking up the award of December 2004, when it suited them. There is, he submits no reason to believe that that source of funds will cease or that, in practice, Owners will in any way be impeded in their defence of the Charterers' claims or the pursuit of their own, if a freezing order is made.[32]In this respect he refers me to the decision of the Court of Appeal in Atlas Maritime S.A. v Avalon Maritime Ltd (No 3), The "Coral Reef", in which Lord Donaldson, M.R., indicated that the proviso to the standard Mareva allowing for payment of debts in the ordinary course of business:
"..only applies in cases in which the operation of the injunction would impede the person enjoined from defending himself against the claim"
[33]In The "Coral Reef" the facts were of an exceptional character. The defendant company's affairs were and always had been conducted by its ultimate parent. It had no bank account of its own and its outgoings including its legal costs were discharged by the parent company on an ad hoc basis. Its funds were taken by the parent once received. An application to discharge the original Mareva was refused. Thereafter, Phillips J, as he then was, allowed a variation of the injunction to enable the defendant to meet the legal expenses of the claim. The Court of Appeal allowed the appeal. Lord Donaldson observed that, " leaving aside this unusual, and possibly unique, financial relationship, the fact that the variation of the injunction to enable legal costs to be paid would be likely to render any award in favour of Atlas less effective is not itself a fatal injection because of the proviso built into what I have described as the fundamental principle" . He then went on to make the observation that I have quoted in paragraph 32 above. On the facts he was satisfied that the parent company – Marc Rich – would go on making funds available to Avalon to defend the claim unless it decided that this would be throwing good money after bad.[34]Nicholls, L.J., regarded the case as a special one on account of a combination of factors:(i) the unusual manner of the financial dealings between Avalon and March Rich whereby March Rich controlled the purse strings of Avalon;(ii) payment of the sale price of the "Coral Rose", Avalon's only asset, in accordance with March Rich's direction which he did not regard as a repayment of a loan in the ordinary course of business;(iii) the fact that the payment was made on Marc Rich's direction when it was known that it would leave nothing to enable Avalon to fight the action. In those circumstances he considered that justice required that Avalon should not be free to have recourse to the balance of the price remaining with it. Having denuded Avalon of money it could fairly be expected to replenish it when it was necessary for Avalon's defence.[35]Mr Croall also relies on the decision of Goff, J., as he then was, in AvC [1981] 1 Q.B. 961. In that case an application was made to vary a Mareva injunction to permit the payment out of the assets caught by the Mareva of £ 65,000 in order to pay legal expenses. Goff J proceeded on the basis that the defendant had or might have other assets from which the payment of the costs might be made. He applied what he described as " the basic principle " that he could only permit a qualification to the injunction if the defendant satisfied the court that the money was required for a purpose that did not conflict with the policy underlying the Mareva jurisdiction. He gave the example of a small account that was subject to the injunction and a larger one that was not. In that case it would not be sufficient for the defendant to say that he wanted to use the smaller account to pay debts because he would not be able to satisfy the court that the payment out of the smaller account would not conflict with the principle underlying the Mareva jurisdiction since the purpose of selecting the smaller account might be to prevent the money in that account from being available to satisfy a judgment. The defendant in that case had failed to establish that that was not their intention. Mr Croall submitted that, in this case, the Owners had not adduced the evidence necessary to show that they Owners did not intend to dispose of their assets in a manner inconsistent with the underlying purpose of the jurisdiction.[36]In both of those cases the application was to vary a Mareva injunction that had previously been granted inter parties. So the Court had been satisfied that there was a real risk of an unjustifiable disposition of assets and the defendant was seeking a variation of the order to allow payment of legal expense[37]The present case is different. I am not being asked to vary a freezing order that has already been made. I am asked to impose one on the basis that the Owners may make an unjustifiable disposal of the proceeds of the judgment of 16th August, that being the only asset which it is realistic to suppose the Owners will have within the jurisdiction. I am not persuaded that that is so. I see no reason to doubt that the proceeds of the judgment will be used to pay for future or reimburse for past legal expenses; but I do not consider it inconsistent with principle that Owners should be able to do so. Moreover I do not regard it as just that the Owners should be restrained from receiving and making use of those proceeds. The amount due under that judgment is in respect of freight. The whole amount of the freight should have been paid by the Charterers when it fell due regardless of any cross claims that they might have. As it has turned out, they have secured, by agreement, a position whereby most, but not all, of it is kept as security for their claims. So that amount has not been available to finance Owners' defence of those claims. But that is not a ground for allowing the Charterer's to continue to fail to pay the freight without deduction or to restrain them in their disposition of it. On the contrary. It seems to me to point in the other direction and to render it just that the Owners should receive a proportion of their freight without strings attached. Further, whilst there are some similarities between the present case and "The Coral Reef" , I do not regard it as containing such a combination of factors as would make it right to grant a freezing order in respect of the residual freight.[38]I recognize, of course, that the effect of refusing to make a freezing order may render an award in favour of Charterers less effective than would have been the case if a freezing order is granted. But that is not a fatal objection, as Lord Donaldson observed in the passage to which I have referred. Mr Croall submitted that all that the Charterers sought was to reproduce the position as it was when the escrow agreement was made and the then outstanding freight was paid into the account. But that position was only ever secured by agreement. The effect of the agreement was that a portion of the freight and interest due was, increasingly, not to be covered by the escrow account, and the Owners have never agreed that it should be. In the light of the principle in The Aries (1977) I Lloyds Rep. 334, the Owners are entitled to receive the freight without deduction. Whilst it is open to the Court at one and the same time to give judgment for freight and to restrain the disposition of the proceeds the circumstances in which it should do so must be exceptional.[39]Accordingly I decline to grant the freezing order; but I will vary the terms of the judgment to the extent that I have indicated.[40]Mr Croall submitted that Owners should not have their costs of the application for judgment because Charterers had offered to secure the amount due und er the freight agreement and Owners' further claims on terms similar to the escrow agreement and this proposal appeared at one stage to be acceptable. If this offer had been accepted the costs incurred in seeking the order of 16th August could have been avoided. I do not think it right to alter Aikens. J's order in respect of costs on that ground, since Owners were entitled to seek a judgment which would, in the absence of a freezing order, entitle them to the proceeds free of deduction.[41]The order that they obtained, which was, I presume, the one proffered to Aikens J, was, however, defective. In those circumstances I am minded to disallow the costs of the application and to leave Owners to bear them. Since this is a ground other than that put forward at the hearing I shall hear Counsel before making any such order.

Cited in 9 later judgments