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Yukong Line Ltd of Korea v Rendsburg Investments Corporation of Liberia [1996] 2 Lloyd’s Rep 604

MAREVA INJUNCTION, CROSS-EXAMINATION, AFFIDAVIT, AFFIDAVIT OF ASSETS, ORDER FOR CROSS-EXAMINATION, SAFEGUARDS AGAINST ABUSE

Facts

In 1995, the plaintiffs, Yukong Line, who were owners of vessels, chartered the vessel Rialto to the first defendants, Rendsburg, for a period of three years. The second and third defendants – Ladidi Corporation and Mr. Dimitrios Yamvrias, acted as the undisclosed principals of Rendsburg. In January 1996, Rendsburg, informed Yukong Line that they were unable to perform the charterparty at the agreed rate due to deterioration of their financial position. In February 1996, Yukong Line purported to accept repudiation of the charterparty by Rendsburg.

The third defendant was subjected to a Mareva (asset-freezing) injunction and swore an affidavit of assets. The plaintiff, Yukong Line, applied to cross-examine the third defendant on the affidavit and the application was successful. The third defendant appealed against this court order and another order, which allowed substantive issues to be raised during this cross-examination.

Issue

(1) Could a defendant be cross-examined on an affidavit during Mareva proceedings?

(2) If so, could substantive issues be raised during this cross-examination?

(3) What safeguards are available to prevent cross-examinations from becoming a routine part of Mareva proceedings?

Held

Both appeals were dismissed.

(1) A defendant could be cross-examined on an affidavit during Mareva proceedings where it is just and convenient to do so. However, cross-examination remains exceptional during Mareva proceedings and there can be no question of it becoming a routine part of Mareva proceedings.

(2) Although substantive issues can be raised during cross-examination, by virtue of  Ord.29 r.1A Rules of the Supreme Court the plaintiffs could be prevented from improperly using cross-examination to obtain evidence for use in the substantive action as the court had jurisdiction to an application to use the evidence at trial. This is an important safeguard against plaintiffs who attempt to abuse the Mareva process by building their case on evidence obtained by cross-examination.

(3) As it is a considerable imposition to subject a defendant to cross-examination, prior to allowing cross-examination, the court must consider alternative less burdensome means of achieving the same end.


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