The High Court has ruled that Zealand Holdings Inc. had no standing to defend proceedings concerning the sale of the M.V. Clipper Faith, holding that a shareholder does not own a company’s assets. It ordered that Zealand’s appearance in the case be struck out.
Amsterdam Trade Bank N.V. brought the proceedings against the owners and all persons claiming an interest in the vessel. In its application, the bank sought a declaration that Zealand could not defend or intervene and an order striking out the memorandum of appearance entered for it.
The judgment says the vessel was registered to Afternoon Maritime Corporation, a Libyan company wholly owned by Zealand. Afternoon Maritime agreed to borrow US$54.2 million from the bank, with Zealand jointly and severally liable alongside Afternoon Maritime and Machiko Carrier Inc. for the companies’ liabilities under the loan agreement. Mortgages over their vessels and four other vessels owned by Zealand subsidiaries provided security. The bank called in the loan after default, and the proceedings began on 13 March 2013.
The vessel’s crew had separately obtained judgment for a substantial sum. An order for sale of the vessel was made on 14 May 2013. The vessel’s owners did not intend to defend the proceedings.
Zealand had also charged its shares in Afternoon Maritime to the bank. The bank took possession of those shares in June 2013, obtaining control of the company. After the defence was discontinued, Zealand sought and received permission in July 2013 to enter an appearance. The Supreme Court later allowed the bank to bring a motion to determine whether Zealand had an interest in the vessel or funds held by the court, and therefore standing to participate.
Zealand argued that payments of about US$15 million by subsidiaries that owned the four other mortgaged vessels gave it a charge over the vessel’s ownership and the right to defend and counterclaim. The bank submitted that those payments were made to meet the subsidiaries’ obligations and did not give them a beneficial interest in the vessel; it said Zealand was seeking an interest in a subsidiary’s assets.
The High Court accepted the bank’s application. It found that Zealand had never had an interest in the vessel or, by extension, the funds held by the court, and ordered that its appearance be struck out. The judgment does not set out any further order about the sale proceeds.