Pacific Pearl Co Limited v Osios David Shipping Inc [2022] EWCA Civ 798 | ZFZ Postcard Cases

Following a collision involving their two vessels, Owners of the Panamax Alexander (“the Appellant”) entered into a Collision Jurisdiction Agreement (“CJA”) with Owners of the Osios David (“the Respondent”) in the standard ASG 2 form.

Clause C of the CJA stipulated that “each party will provide security in respect of the other’s claim in a form reasonably satisfactory to the other”. The Appellant accordingly proposed security. This took the form of a LOU containing a sanctions clause, to reflect the fact that the Appellant’s vessel was bound for Iran.

The Respondent rejected the security proposal, on the grounds that they did not find it reasonably satisfactory. The Respondent had instead arrested another of the Appellant’s vessels as security. The Appellant alleged that the Respondent was in breach of Clause C.

At first instance, the claim was dismissed. Although the security offered by the Appellant was objectively satisfactory, the Respondent was entitled to reject it.

The Court of Appeal overturned the judgment at first instance. It was held that where the security tendered was objectively “reasonably satisfactory”, it was not open to the recipient to reject it or to seek alternative security, such as arrest. The purpose of ASG 2 was to operate instead of an arrest.

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