London bank Close Brothers has won a UK admiralty court case entitling it to reclaim unpaid mortgage instalments from a collapsed domestic shipowner.
Admiralty registrar Jervis Kay said in a ruling that Close was trying to reclaim £220,600 ($290,000) plus interest and costs from AIS (Marine) and its director Paul Chandler, who had provided a guarantee.
The sum is the shortfall arising out of a marine loan and mortgage from 2015 relating to the wind farm support vessel Ocean Wind 8 of Hartlepool.
AIS was placed into compulsory liquidation by a court order last November.
The shares in the vessel were mortgaged to Close to secure the terms of a loan agreement for EUR 2.25m ($2.62m) to help buy the ship for EUR 3.21m.
AIS failed to pay instalments under the mortgage as they fell due and the account fell into default, the court said.
The vessel was repossessed and sold by the bank in January, 2017, for £1.7m.
AIS accepted it was in default and that shipbroker Braemar ACM Offshore, which handled the sale, was entitled to be paid the reasonable sum of £47,000.
But it was also claimed that Close failed to sell the vessel at the best price reasonably obtainable.
AIS contended that its value, by comparison with two older Damen ships which were on the market at the time, was no less than EUR 2.5m and the bank chose to sell the vessel to one of its own clients, C-Wind, without advertising it and below its true value.
Series of collapsed businesses
The court said Chandler has had a series of failed and inoperative businesses and by the time of repossession, AIS was in arrears, had been given its final chance and had no satisfactory plan to get back on track.
"Further, it was alarming the bank with its lack of management control, the second defendant [Chandler] had disastrously fallen out with his joint venture partner Chris Church and the vessel was unemployed with no future business lined up," Kay said.
"The bank had simply and justifiably lost all confidence in the defendants," he added.
The ruling found the ship was sold in an appropriate price band and that Braemar did a good job of selling it quickly in a weak market.
The only offer higher than that of the eventual buyers, CWind, was from JR Shipping, which offered "EUR 2.2 to EUR 2.3m" on the condition that the bank funded the purchase with a EUR 2.3m loan.
This was rightly considered to be unacceptable by the bank. As was the offer from AIS itself at £1.4m.
Kay said: "Having been involved, during my time at the bar, in a very large number of cases which required consideration of ship valuations, I think that it is appropriate to observe that not only is it a difficult operation requiring a wide and intimate knowledge of the relevant markets which have been known to fluctuate rapidly and significantly, but that opinions may differ markedly between brokers as to the true value of a vessel at any given time."
He added: "I conclude that there should be judgment for the claimant in a sum to be assessed upon consideration of any further submissions to be made as to the appropriate deductions from the sale price."
