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Swedish Club v. V8 Pool Inc.

The Division Bench of the Bombay High Court in the case of Swedish Club v.V8 Pool Inc., has considered whether post arrest of a vessel, crew wages and P & I Club’s payment towards crew wages can be treated as Sheriff’s expenses and/or a maritime lien.


Brief facts


In a nutshell, GP Asphalt- I (“Vessel”) was arrested by an order of the Bombay High Court. Post the arrest of the Vessel the:

i. P&I Club (“Club”) sought leave form the Court to pay the wages of the crew on board and for an order that such payments be treated as Sheriff’s expenses and/or in priority as a maritime lien;

ii. Crew on board the Vessel sought an order from the Court for treating their wages (which have accrued post the arrest) as Sheriff’s Expenses,


The Ld. Single Judge vide orders under appeal, rejected both the applications holding that the Club cannot equate its contractual obligation to pay crew wages to the status of Sheriff’s expenses and that the Crew ought to file a separate suit for recovery of it’s wages. The Club and Crew appealed the aforesaid orders


Issues:


1. Whether crew wages accrued on a vessel post the arrest could be treated as Sheriff’s Expenses?

2. Whether a party approaching the Court for leave to pay for supplies and provisions and crew wages can stand in the crew member’s shoes and claim the amounts from the sale proceeds as Sheriff’s Expenses?

3. Whether a party approaching the Court for leave to pay crew wages accrued prior to the arrest of the vessel could stand in the crew member’s shoes and be entitled to claim the same as a maritime lien?


Arguments advanced by the parties:


The Club submitted that:

a. The Single Judge erred in holding that, the Club shall not be entitled to expenses incurred post arrest as Sheriff’s Expenses, and would have to file a suit to prove its claim;

b. Since the Club had obtained leave for payment of expenses such as wages and supply of provisions from the Court [under Rule 1084 of the Bombay High Court (Original Side) Rules, 1980 ("Rule")], all such expenses incurred by the Club post-arrest of the Vessel ought to be treated as Sheriff's Expenses;

c. As per the MLC, the Club on making requisite payments towards wages/repatriation of a crew member is entitled to stand in the shoes of the crew member once the payment has been made, which is an accepted worldwide practice.


The crew concurred with the submissions made by the Club.


The arresting party whilst opposing the Club’s application submitted that:

a. The Club’s claim pertaining to the crew wages post arrest of the Vessel cannot be treated as Sheriff’s Expenses, because the Club is under obligations to pay such wages. Although, the arresting party agreed to the Club’s claim being granted the status of a maritime lien;

b. A clear distinction ought to be made between the Club’s Obligations under MLC and requisitions of the Sheriff;

c. Engaging crew members on board a vessel and paying their wages post arrest is not the Sheriff’s responsibility.


Held


Regarding the first issue, in accordance with the Rule, to ensure the well-being and safety of the crew and vessel during the period of arrest, crew wages accrued post the arrest of the Vessel, will have to be treated as Sheriff’s Expenses. Accordingly, a party putting the Sheriff in funds in accordance with an order can claim the said expenses as Sheriff's Expenses.


Concerning the second issue, the Court held that, the Club (although obligated under the MLC to make such payments), can rightfully stand in the shoes of the crew members by way of subrogation/assignment/other modes of transfer of rights, to claim such amounts as Sheriff’s Expenses.


On the third issue the court held that, liens cannot be transferred in favour of a Club, for the wages paid to crew members by the Club, that accrued prior to the arrest of a vessel. However, in the event that prior leave has been obtained by the Court, payment of such wages shall be given the privilege of a maritime lien and such lien can thereafter be made transferrable.


The Division Bench of the Bombay High Court by way of its order also enlists guidelines which shed light on:

a. When is vessel said to be abandoned;

b. Necessary actions to be taken by:

  1. The arresting party;

  2. Third Parties;

  3. The Sheriff;

  4. The Crew.

A detailed overview of the said guidelines can be found attached below.


Conclusion

The Order comes as a relief for crew members and a positive development for parties who come forward and supply necessary provisions and wages to the abandoned crew members. Although, the guidelines are suggestions for subsequent cases, it is ideal that such parties ensure that prior leave is taken by the Court before making any payments/supplies. This would safeguard the interest aforesaid parties of the and cover all the expenses incurred by it to be treated as Sheriff’s Expenses.



Guidelines 30.03.2022
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