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Court of Appeal upholds High Court ruling on shipping dispute involving CPC
View(s):The Court of Appeal has upheld a ruling by the Colombo High Court directing a Marshall Islands based shipping company to furnish a US$ one million bank guarantee in the case of a counterclaim filed by the owners of a ship for wrongful arrest.
The vessel, “MT Agros”, belonging to Agros Shipping Company Ltd. in Liberia, had been detained after the Colombo High Court granted an arrest warrant requested by Luna Shipping and Enterprises Ltd. of the Republic of Marshall Islands.
The claim had been filed for breach of chartership after the Ceylon Petroleum Corporation (CPC) claimed damages from Luna Enterprises, which had chartered MT Agros to exercise ship-to-ship transfers of crude oil cargo in 2014, after the Sapugaskanda Oil Refinery closed its operations following damage to the buoy mounted pipeline that transferred crude oil from ships to the Orugodawatte Oil Storage Terminal.
The High Court had subsequently released MT Agros on US$ one million as security. Agros Shipping in turn had filed an application for a counterclaim in the Colombo High Court for the wrongful arrest of the vessel and seeking security for their counterclaim.
In October 2017, the High Court had delivered an order of inquiry in favour of Agros Shipping and ordered Luna Enterprises to deposit US$ one million or to furnish a bank guarantee in court. Luna Enterprises had then appealed the decision to the Court of Appeal. As the High Court Judge had observed, since the plaintiff is not a resident of Sri Lanka, it is a precaution to order the plaintiff to furnish security, the two-judge Court of Appeal bench comprising Judges Prashantha de Silva and K.K.A.V. Swarnadhipathi noted. In calculating the security, the Judge had also considered the period the vessel was under arrest and the loss of income and expenses incurred by Agros Shipping during the period of the arrest of the ship.
The Court of Appeal had observed that the US$ one million security that the High Court Judge had ordered Luna Enterprises to furnish was not an arbitrary amount and the Judge had come to the decision at his discretion according to the law. Luna Enterprises, the plaintiff-petitioner, had not shown the reasons for the court to decide otherwise and as such, refused to grant them leave to proceed.
Nihal Fernando PC with Murshid Maharoof instructed by Julius & Creasy appeared for MT Agros and Agros Shipping Company Ltd. while Faiz Musthapha PC with Niranjan Abeyrathna appeared for Luna Shipping and Enterprises Ltd.
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