HANDYTANKERS KS v. THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL M/V “ALAS” SUBSEQUENTLY RENAMED AS “KOMBOS” AND THOSE OTHER VESSELS NAMED IN SCHEDULE “A” ANNEXED HERETO

HCMP 2315/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 2315 OF 2014

(ON AN INTENDED APPEAL FROM

ADMIRALTY ACTION NO HCAJ 241 OF 2009)

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REASONS FOR DECISION
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Hon Barma JA (giving the Reasons for Decision of the Court):

1.  This was an application by the defendant shipowners seeking leave to appeal against the order of Ng J dated 21 July 2014, by which he dismissed their application to set aside the arrest of their vessel, the “DEWI UMAYI”, and the service of the in rem writ upon them. That application was made on the grounds that the court had no Admiralty jurisdiction in respect of the claim, and, alternatively, on the basis that the proceedings were an abuse of process.

2.  At the end of the hearing, we dismissed the application with an order for costs in favour of the plaintiff, with reasons to be handed down later.  These are our reasons for doing so.

3.  The factual background can be briefly stated.  The plaintiff chartered its vessel “BETH” to PT Arpeni Pratama Ocean Line Tbk (“APOL”) for a period of five years by a charterparty dated 9 January 2008.  According to the plaintiff, APOL repeatedly failed to pay the charter hire on time or in full.  In the result, the plaintiff commenced an arbitration against APOL pursuant to an arbitration clause in the charterparty, obtaining a substantial final award in its favour on 1 March 2013.  That award has gone unpaid.  Faced with that situation, the plaintiff (which had earlier issued an in rem writ in December 2012), applied for and executed a warrant of arrest in respect of the defendant’s vessel.  In its supporting affidavit, the plaintiff made it clear that the arrest of the vessel was not for the purpose of enforcing the award in its favour, but in order to provide security for the judgment it expected to obtain in these proceedings.

4.  In the court below, Mr Alder, appearing for the defendant, submitted that the proceedings and arrest of the vessel were an abuse of process as they were in the nature of an attempt to enforce the arbitration award, which is not something which falls within the recognised heads of Admiralty jurisidiction. Ng J rejected this argument, holding that it was clear from the writ that the plaintiff’s claim was brought on the basis of the original cause of action which led to the arbitration (i.e. the claim for unpaid hire) and not on the award itself.

5.  Ng J went on to hold that although that original cause of action might ordinarily have merged in the arbitral award so as to bar a fresh action upon it, it did not do so here as a result of the “no bar rule” recognised in The Rena K [1979] QB 337, by which a cause of action in rem does not merge in a judgment in personam, so long as (and to the extent that) that judgment remains unsatisfied.  The Rena K also established that the “no bar rule” applies to arbitral awards in the same way as it applies to judgments.  The judge rejected a submission by Mr Alder to the effect that in the light of the decision of the House of Lords in The Indian Grace (No. 2) [1998] AC 878, The Rena K and the “no bar rule” should no longer be regarded as good law, save in relation to situations involving maritime liens.

6.  Before us, Mr Alder put forward two arguments, which were basically those rejected by the judge.

7.  In the defendant’s statement in support of the application for leave to appeal, Mr Alder argued first that the arrest in this case was fundamentally an application to enforce, and obtain post-trial security in respect of, the arbitral award obtained by the plaintiff.  However, at the hearing, he did not press this point.  In our view, he was right not to do so, as it is clear from the terms of the writ that these proceedings are brought to enforce the original liability for non-payment of charter hire, and not for the purpose of enforcing the arbitral award.  Whether or not this is permissible depends on whether or not the “no bar rule” applies so as to permit the plaintiff to proceed with this action in rem notwithstanding the arbitral award it has already obtained.

8.  Mr Alder focussed his efforts on his second argument, which was that, in the light of the judgment in The Indian Grace (No. 2), it was arguable that the “no bar rule” should henceforth be restricted to situations involving a maritime lien, and that, to this extent, The Rena K should no longer be followed.

9.  The question that arose in The Indian Grace (No. 2) was whether the plaintiff in that case, who had obtained an in personam judgment in proceedings in India, was thereby prevented by section 34 of the Civil Jurisdiction and Judgments Act 1982 (“the 1982 Act”) from pursuing an in rem action in England, based on the same underlying cause of action.  Section 34 prevents a person from bringing proceedings on “a cause of action in respect of which a judgment has been given in his favour in proceedings between the same parties, or their privies” in a foreign judgment, unless that judgment is not enforceable or entitled to recognition in England.  It was held in the House of Lords that the parties in both the Indian in personam proceedings, and the English in rem action, were “the same parties”, and that section 34 operated to prevent the in rem action being pursued, thereby abrogating the “no bar rule” to this extent.  The provision has its Hong Kong equivalent in section 5(1) of the Foreign Judgments (Restriction on Recognition and Enforcement) Ordinance, Cap 46.

10.  In the course of his judgment, Lord Steyn commented on the “no bar rule” in the following terms (at p.911H-912A):

“Counsel were agreed that the [‘no bar rule’] was established in cases involving maritime liens. The House was not referred to authority extending the rule beyond maritime liens. It is an ancient and strange rule which I would not wish to extend beyond the limits laid down by authority”.

11.  Mr Alder submitted that this statement fatally undermined the authority of The Rena K.  With respect, like the judge, we are unable to agree with this proposition.  The Rena K was cited in argument before the House of Lords, and it would be surprising for it not to be explicitly addressed by Lord Steyn in his judgment if he were intending to express disapproval of it.  To our mind, all that Lord Steyn was saying in the passage set out above, was that the “no bar rule” should not be further extended, not that it should in some way be scaled back.  In this connection, we note that The Rena K was expressly approved by the English Court of Appeal in The Tuyuti [1984] QB 838, and in The Bazias [1993] QB 673.  It has also been followed in Hong Kong in The Brittania [1998] 1 HKC 221, and in New Zealand in The Irina Zharkikh [2001] 2 Lloyds Rep 319.  It has also been accepted as good law in England after The Indian Grace (No. 2), in The Bumbesti [2000] QB 559 (although it does not seem that the argument Mr Alder put forward was raised in that case, and The Indian Grace (No. 2) does not appear to have been referred to).  Having regard to the long history of the “no bar rule”, we do not think that it is reasonably arguable that it should be regarded as having been cut back as a result of Lord Steyn’s observations in The Indian Grace (No. 2).  As we have said, we do not read those observations as expressing any disapproval of The Rena K.  We also note that it was in any case unnecessary to do so, as the decision in The Indian Grace (No. 2) was based on the construction of section 34 of the 1982 Act, and did not require consideration of the scope of the “no bar rule”.

12.  It was common ground that section 5 of Cap 46, like section 34 of the 1982 Act, applies only to foreign judgments, and not to arbitral awards.  This being the case, it has no application here, and the “no bar rule” applies so that the plaintiff is not prevented from bringing these in rem proceedings, given that the arbitral award it has obtained remains unsatisfied.

13.  For the foregoing reasons, the plaintiff’s application for leave to appeal was dismissed.