A Hong Kong judge has granted an application by Huangpu Wenchong Shipbuilding to freeze the assets of Dry Bulk Services, formerly known as KC Maritime, in its dispute over the cancellation of four bulker newbuilding contracts. The Chinese yard first went to the court seeking a Mareva injunction to the value of $13,742,916 in support of its London arbitration proceedings in June 2016.

The row dates back to November 2013, when companies associated with KC Maritime placed an order for four 64,000-dwt bulkers at the Chinese yard. However, the yard claimed default when the Hong Kong owner failed to come up with the second and third scheduled payments.

KC Maritime contended there were “serious defects” with the first in the series of four ships. According to the court judgment, KC Maritime claimed it had “excessive fuel consumption, faulty stern tube design and excessive torsional vibration.” The same problems were claimed to affect the second vessel.

In his ruling, High Court Deputy Judge Nicholas Cooney said Huangpu had “a good arguable case that instalment payments are due and payable”. He pointed to evidence that a second sea trial had shown the first newbuilding met fuel consumption specifications. Tests on the stern tube also showed it to be “satisfactory”. There was no reference to vibration problems in a readiness for delivery report from Lloyd’s Register, Cooney pointed out.

He also raised the matter of KC Maritime’s decision to change its trading name to KC Maritime Hong Kong and Dry Bulk Services. KC Maritime said the move was part of a long-planned reorganisation and that it had no connection with the timing of the arbitration claim.

Cooney commented in his ruling: “A restructuring or reorganisation may dispose of assets. The question is whether the disposal is otherwise than in the ordinary course of business.” He later added: “I consider there is a real risk that the defendant [KC Maritime] will dispose of its assets to avoid the possibility of judgment or render the possibility of future tracing of assets remote in fact or in law.” The court order allows the company to use funds for ordinary and proper business expenses.

Two of the four ships ordered by KC Maritime were never built. The two that were constructed were sold to Celsius Shipping, one of which, the CH Citation, broke down shortly after delivery with suspected stern tube problems in October last year and had to return to the yard for repairs.