THE HALLA LIBERTY (South Korean flag)

HCAJ400/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY JURISDICTION NO.400 OF 1997

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J U D G M E N T

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The Application

1. This is an application by the Intervener herein, Donghwa Leasing Company Limited ("Donghwa"), by Notice of Motion under the provisions of Order 12 rule 8, RHC, to set aside the Writ of Summons dated 8th December 1997, and to dismiss the claims brought by the Plaintiff, Dongnama Shipping Company ("Dongnama") against the vessel Halla Liberty, on the basis that this Court has no jurisdiction.

The Factual Background

2. On 6th December 1996 Halla Merchant Marine Company Limited, a Korean registered company ("Halla"), entered into a Memorandum of Agreement for the purchase of the Halla Liberty from Steamers Kinabalu Shipping Pte. Ltd. ("Kinabalu") for the sum of US$18,885,000, thereafter becoming registered as owner in the Korean ship register on 19th February 1997. Before Halla paid the purchase price, however, on 21st January 1997 it entered into a Lease Agreement with Donghwa as Lessor and itself as Lessee. Upon execution of this Agreement, Donghwa paid the price for the vessel in two instalments, on 23rd January 1997 and 5th February 1997 respectively. As will become evident, this Lease Agreement, together with a Revised Lease Agreement of 19th March 1997, played a significant role in argument in this case.

3. But to return to the immediate chronology. On 9th January 1997 Halla entered into a time charter for 24 months whereby it chartered the Nordbeach from Nordbeach Shipping Company Limited. On 30th December 1996 and 9th January 1997 respectively, Halla, as owner and charterer, chartered to Dongnama under a time charter the Halla Liberty and the Nordbeach for 12 months, with up to one month more or less at Dongnama's option.

4. Dongnama used these ships, together with other ships chartered from other owners, in the operation of two container liner services. By a Slot Charter Agreement dated 1st February 1997 entered into between Dongnama and Halla :-

(1) Dongnama agreed to provide to Halla the number of slots specified in Dongnama's two container liner service lanes, namely the KBX Service and the KHX Service, for a period of one year as thereafter automatically extended, unless terminated by either party giving two months' written notice;

(2) Dongnama agreed to employ three vessels for each of these Services :

(a) KBX Service : (i) Nordisle, (ii) Nordbeach and (iii) Halla Liberty; and

(b) KHX Service : (i) Bangkok Glory; (ii) Bauhinia and (iii) Hanjin Jakarta.

5. Pursuant to this arrangement Halla agreed to pay charter hire to Dongnama for the Slot Charter.

6. In the event, pursuant to Clause 3.2 of this Slot Charter Agreement, Dongnama substituted the Bangkok Glory with the Noble and the S.S. Singapore. It followed therefore that a total of seven ships had been used pursuant to this Agreement.

7. Halla failed to pay any slot charter hire for the months of October, November and December 1997. As a consequence, Dongnama brought a claim for unpaid monthly charter hire due under the Agreement for those months in the total sum of US$2,610,720, and also for damages.

8. On 6th December 1997, Dongnama and Halla agreed to terminate the time charterparties for the Halla Liberty and the Nordbeach, which were redelivered to Halla on 9th December 1997 and 11th December 1997 respectively.

9. On 8th December 1997 Donghwa took out what is known in Korea as a kun-mortgage, this I understand being a form of mortgage which under Korean law is permitted to be taken out by a person already the owner of the subject property, and thereafter registered itself as mortgagee on the Korean ship register.

10. On 10th December 1997, Halla gave notice to Dongnama of the termination of the Slot Charter Agreement on the ground of Halla's insolvency, and on 11th December 1997, Dongnama accepted Halla's repudiation.

The Hong Kong Litigation

11. The Writ in rem commencing this action was issued on 8th December 1997, the Indorsement of Claim pleading "Amounts due from the Defendant to the Plaintiff under a Slot Charter Agreement" between the Plaintiff and the Defendant dated 1st February 1997 and/or "damages... for breach of contract and/or duty and/or negligence arising out of and in connection with the Agreement".

12. The Halla Liberty was arrested in Hong Kong on 9th December 1997. The Affidavit leading the Warrant of Arrest was that of Mr Andrew John Cutler which was sworn on 8th December 1997. Paragraph 10 of that Affidavit reads as follows :

"10. Pursuant to Order 75 rule 5(8)(b)(i), (ii) and (iii) I believe that:

(a) for the reasons set out above, the person who would be liable in respect of the Plaintiffs' claims in personam is Halla Merchant Marine Co., Ltd. ('Halla');

(b) Halla were, when the cause of action arose, either the owners of or charterers of, or in possession or control of, inter alia, the ship or vessel 'HALLA LIBERTY' and the other vessel (or their substitutes) identified in the Agreement; and

(c) as at the time of the issuance of the writ herein, namely 8th December, 1997 Halla are the owners, inter alia, of the ship or vessel 'HALLA LIBERTY'."

13. On 10th January 1998, an Order was made permitting Donghwa to intervene in this action ("the arrest action"), and on 14th January 1998, an Order was made for the appraisement and sale of the vessel. The Halla Liberty was sold by the Court on 25th February 1998, and the proceeds of sale of approximately US$12.5 million paid into Court, wherein these monies remain pending determination of in excess of some 30 actions in rem which had been brought against the vessel, together with the determination of priorities as between such competing claimants.

14. Of these numerous other actions, perhaps the one which otherwise requires specific mention at this stage is that commenced by Donghwa, as alleged mortgagee, against Halla Liberty, by Writ issued on 13th February 1998 in HCAJ60/98 ("the mortgage action"). The Statement of Claim in that action recites (at paragraph 5) that pursuant to a Lease Agreement dated 21st January 1997 between the Plaintiff as lessor and the Defendant as lessee, together with amendments thereto by way of a Revised Lease Agreement dated 29th March 1997, the Plaintiff agreed to purchase the vessel and lease it to the Defendant. And further (at paragraph 6) that pursuant to a Kun-Mortgage Agreement dated 6th December 1997 and duly registered in accordance with the Korean Vessel Registration Act at 0900 hrs on 8th December 1997, the Defendant as registered owner mortgaged their interest in the vessel to the Plaintiff as mortgagee, as security for the obligations of the Defendant under the Lease Agreement and the Revised Lease Agreement.

15. No Acknowledgement of Service has been filed on behalf of Halla in that action, Dongnama filing its Intervener's Defence therein on 9th October 1998. The thrust of this Defence, as presently pleaded, is that the so-called kun-mortage is liable to cancellation on the application of the Intervener pursuant to Article 406 of the Korean Civil Code (which provides for cancellation of such disposition of assets to the prejudice of the creditor's interest and restoration of these assets to the status quo), alternatively that the so-called kun-mortgage is a disposition of property made with intent to defraud creditors and which is liable to be avoided at the instance of the Intervener pursuant to section 60 of the Conveyancing and Property Ordinance, Cap.219.

16. To revert, however, to the sequence of events in the present proceedings, the arrest action. Arbitration proceedings were commenced in Korea by Dongnama against Halla, which in turn provoked Halla's application to stay this action on the grounds of the arbitration agreement. On 24th July 1998, this Court handed down judgment granting a stay of the present proceedings in favour of the Korean arbitration. Such arbitration duly took place, and on 5th December 1998, the arbitrators in Seoul published their award in favour of Dongnama in the sum of US$3,397,004, together with interest accruing thereon.

17. Thereafter, on 18th December 1998, Dongnama were given leave by the Court to amend the Writ in this action to plead an additional cause of action upon such arbitral award, so that the way in which the Plaintiff's claim is now framed is thus : first, a claim based upon the Seoul arbitration award in the principal sum of US$3,397,004, together with interest and costs; and second, the claim for unpaid charter hire, for the months of October, November and December 1997, in the amount of US$2,610,720, together with a claim for a further US$786,284 representing loss of future charter hire (calculated up to 3rd February 1998), in each instance together with interest and costs.

18. Whether the claim be put on the basis of the arbitral award, or in terms of damages, the pleading itemizes the claim in each case as per each of the seven individual vessels.

The Relevant Statutory Provisions

19. Section 12A of the High Court Ordinance provides :-

"(1) The Admiralty jurisdiction of the Court of First Instance shall consist of -

(a) jurisdiction to hear and determine any of the questions and claims mentioned in subsection (2);...

(2) The questions and claims referred to in subsection (1)(a) are -

......

(h) any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship;"

20. Section 12B(4) provides :-

"In the case of any such claim as is mentioned in section 12A(2)(e) to (q), where -

(a) the claim arises in connection with a ship; and

(b) the person who would be liable on the claim in an action in personam ('the relevant person') was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship,

an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against -

(i) that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise; or

(ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respect all the shares in it."

21. Section 12B(8) provides :-

"(8) Where, as regards any such claim as is mentioned in section 12A(2)(e) to (q), a ship has been served with a writ or arrested in an action in rem brought to enforce that claim, no other ship may be served with a writ or arrested in that or any other action in rem brought to enforce that claim; but this subsection does not prevent the issue, in respect of any one such claim, of a writ naming more than 1 ship or of 2 or more writs each naming a different ship."

The Intervener's Argument

22. For the Intervener, Donghwa, Mr Sussex takes four main points, three of which are construction arguments and the fourth a mixed question of law and fact requiring consideration of expert evidence as to Korean law.

23. Mr Sussex conceded at the outset that the claim under the Slot Charter Agreement brought by Dongnama fell within section 12A(2)(h) or the Ordinance in that it is within the rubric "any claim arising out of an agreement relating to the carriage of goods in a ship or to the use or hire of a ship".

24. I take the four issues in turn.

(1) "Ship" or "Ships" : Separate writs for separate claims?

25. The proposition here put forward is that it was impermissible for Dongnama to plead claims with regard to seven ships within one writ, as had been done in this case, and that the requirements of Hong Kong's admiralty jurisdiction necessitated a separate writ in rem for its claims in respect of each of the seven ships under the slot charter.

26. The argument ran thus : The term 'a ship' as used in section 12A(2)(h) must be given the like meaning as that term when used within section 12B(4), namely 'a ship', 'the ship', 'that ship'. Moreover, section 12B(8) draws a clear distinction between 'a ship' and 'any other ship', so that it would not be permissible to read 'a ship' as meaning 'ships' in that context either. The same is true of section 12B(4), so that 'that ship' (in (i)) must refer back to 'the ship' (in (b)) and 'a ship' (in (a)).

27. It followed from this, so the submission ran, that upon the face of the statute, it is not possible to ascribe plurality to the phrase "the claim arises in connection with a ship" and thus if a claim relates to two or more ships (such as here, where it relates to seven), such claims must be made the subject of separate actions, and cannot be combined within a single action.

28. In mounting this argument Mr Sussex accepted that in many cases there would be little point pedantically to put the Plaintiff to the trouble of issuing a separate writ. But, he maintained, the point had significance on the present facts because in the mortgage action brought by Donghwa as mortgagee, Dongnama was seeking to establish the invalidity of the mortgage, relying, inter alia, upon the fact of the issuance of the present proceedings on 9th December 1997. Thus, in this case, the point represented substance as well as form.

29. Whatever the motive behind the argument, this is a matter of statutory construction, and Mr Sussex is either right or wrong in his contentions. For his part, Mr Thomas SC says that he is wrong. Mr Thomas SC submitted that a broad and liberal construction should be given to a statute giving effect to an international convention authorizing actions in rem. He further argued that, pursuant to section 7(2) of the Interpretation and General Clauses Ordinance, Cap.1, words in the singular are to include the plural. Moreover, if in section 12A(2) 'ship' means 'ships', accordingly it must follow that 'ship' means 'ships' in section 12B(4)(a) and (b) and that, if this be correct, then 'ship' in section 12B(4)(i) is capable of meaning 'those ships'.

30. Mr Thomas SC further submitted that the statutory language compelled such a conclusion because it is expressly linked to those categories of claims set out in section 12A(2); in the same way 'owner' and 'charterer' within section 12B(4)(a) and (b) includes 'owners' and 'charterers'. And in any event, it would be pointlessly restrictive to exclude claims that involve 'ships' rather than 'a ship'. The Intervener's argument, said Mr Thomas, as founded upon the decision in The Banco [1971] Probate 137 (to which statutory effect had been given by section 12B(8)), was flawed and did not support the Intervener's position. The decision in The Banco, op.cit. was that only one ship could be served and arrested to answer for a claimin rem; the identification of the ship or ships against which the Plaintiff could bring an action in rem (by the issuance of a writ naming ships) constituting an entirely different point.

31. As a matter of general approach, I do not think that assistance is to be derived from the Interpretation and General Clauses Ordinance, Cap.1 in light of the provisions of section 2 thereof, wherein the provisions of Cap.1 do not apply "where the contrary intention appears ... from the context of any other ordinance ...", so that, if Mr Sussex's construction argument be right, such contrary intention would indeed be clear. Nor do I consider that the point is directly governed by authority. In The Tychi, (English CA, Transcript of Judgment dated 31st March 1999), the point does not appear to have been taken, although, as Mr Thomas S.C. pointed out, for many relevant purposes this case can be seen to be on all fours with that presently before the Court. In any event, in the context of whether the claim made in that case arose in connection with the ship, that is The Tychi, Clarke LJ observed :-

"It is now accepted that the answer to this question is 'yes'. The claims as put forward, as I understand it, are said to arise in connection with five of the ships referred to in the indorsement on the writ .... It is not suggested that the five claims cannot be joined on one writ, although the relevant criteria in sections 20 and 21 of the 1981 Act must be separately satisfied in the case of each ship." (emphasis added)

32. At the end of the day, what appears to have happened in this case is that, in effect, the Halla Liberty has been arrested both as 'that ship' within section 12B(4)(i), and as 'any other ship' within section 12B(4)(ii), although the Affidavit sworn in support of the Warrant of Arrest appears successfully to elide these aspects. This particular battle, however, is fought on more doctrinal grounds.

33. A distinction is clearly drawn on the face of the statute between a claim in connection with 'that ship' and a claim in connection with 'any other ship', the latter attracting more restrictive criteria for arrest. At the time the action is brought, the ship the subject of the actual claim can be arrested if the 'relevant person' is either the beneficial owner or the demise charterer thereof, whereas in respect of 'any other ship' (often referred to as the 'sister ship' provision) such requirement is confined to beneficial ownership. Nevertheless I find it difficult to understand, in terms of the existence of primary jurisdiction, why the necessity to clarify the jurisdictional basis of each distinct claim underpinning the arrest of a particular vessel in the exercise of in rem jurisdiction should preclude joinder of the separate causes of action within one writ. In my judgment, so long as the jurisdictional basis for the arrest is satisfied and clearly can be seen to be so, I do not consider that jurisdiction per se is negated by reason solely of the fact that but one writ has been issued and not seven.

34. My conclusion on the point, therefore, is thus : in the words of the statute 'that ship' does not mean 'those ships', but that nevertheless, if jurisdiction is otherwise made out pursuant to the statutory benchmark, the existence of such primary jurisdiction is not to be assailed solely by reason of the fact that the claim has not been expressed in terms of the issue and service of seven separate writs. Mr Sussex's argument appears to accept, by necessary implication, that Dongnama has seven separate causes of action in respect of each ship employed under the slot charter of which Halla was either owner or charterer, and, on the basis that the facts justify the primary jurisdiction asserted, I do not accept that Donghwa can mandate the issuance of seven different writs in rem against the Halla Liberty by breaking down the claim as between each of those seven ships.

35. If this conclusion be correct, it follows that this first line of attack must be rejected.

(2) Is "charterer" within section 12B(4)(b) limited to 'charterer by demise'?

36. The precise wording of section 12B(4)(b) of the HCO requires :-

"(b) the person who would be liable on the claim in an action in personam ('the relevant person') was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, ..." (emphasis added)

37. Mr Sussex submitted that "charterer" in this subsection is limited to mean a charterer by demise, and does not encompass other types of charterers, and that, therefore, Dongnama cannot maintain its action in rem against the "Halla Liberty", because, in his submission, Halla (being the relevant person) was, at the time the cause of action arose, merely a slot charterer and not a charterer by demise of the "Halla Liberty".

38. This is an echo of argument which found fashion in the admiralty courts during the 1980s, and which I confess I had thought, for all practical purposes, was long buried. Nevertheless Mr Sussex emphasised that this Court was not bound, stricto sensu, by any of these previous decisions. He fairly pointed out that "the big battalions", as he put it, were against him on the point, but nevertheless invited reconsideration of the matter on principle.

39. During the course of argument the Court was taken to each of the ten relevant decisions on the point in various jurisdictions, which for convenience of reference it is perhaps useful to list at the outset :-

The Permina 108 [1978] 1 Lloyd's Rep.211 (Sing. CA); The Ledesco Uno [1978] 1 Lloyd's Rep.211 (Li J.); The Maritime Trader [1981] 2 Lloyd's Rep.153 (Sheen J.); The Span Terza [1982] 1 Lloyd's Rep.255 (CA); The Sextum [1982] 1 Lloyd's Rep.532 (Penlington J.); The Djatianom [1982] 2 HKLR 427 (Power J.); The Fua Kavenga [1987] NZLR 550 (NZ High Court); The Evpo Agnic [1988] 1 WLR 1090 (CA); Laemthong Internaitonal Lines Co. Ltd. v. BPS Shipping Limited [1997] 149 ALR 675 (Aust. High Court); The Tychi (unrep. English CA, 31.03.99).

40. Mr Sussex's argument stems from, and took as its reference point, the dissenting judgment of Donaldson JA in The Span Terza, op.cit., the circumstances of which, he pointed out, were unfortunate in that in that case the English Court of Appeal delivered judgment upon an ex parte application by the Plaintiffs (a difficulty referred to in the speech of Lord Donaldson, op.cit., at p.228). Nevertheless, he invited the Court to follow the dissent of Lord Donaldson and to adopt a construction consistent with the wording of the International Convention Relating to the Arrest of Sea-Going Ships of 10th May 1952 (which, as Lord Donaldson himself remarked "... is not only somewhat eccentrically drafted, but eccentrically laid out on the paper..."), and not to extend the word "charterers" to "non owner-like charterers", that is, beyond the scope of the demise charterer. To do this, said Mr Sussex, would be "to go outside the regime of the Convention".

41. I decline his persuasive invitation. I find it difficult to construe the unqualified term "charterer" in section 12B(4) as limited to charterer by demise. Sir David Cairns succinctly expressed this sentiment in The Span Terza, op.cit., at page 227 :-

"... If only a demise charterer were meant, one would of course have expected the word 'demise' to have been inserted before the word 'charterer'. Alternatively the word 'charterer' could have been omitted altogether, because a demise charterer would be included in the words 'the person in possession or control' ..."

and this line of thought consistently appears in the other authorities which have attributed a wider meaning to the term 'charterer' (see The Permina 108, The Span Terza, The Sextum, The Djatianom, The Fua Kavenga, Laemthong International Lines Co. Ltd. v. BPS Shipping Ltd., The Tychi, op.cit.). In The Tychi, Clarke JA observed :

"... The purpose of the statute was, as I see it, to ensure that before a person's ship could be arrested in respect of a maritime claim, that person had some relationship with the ship in connection with which the maritime claim arose. I can see no reason in principle why a time or voyage charterer of the ship should not have been regarded as having a sufficient relationship. There is no reason to narrow the scope of that relationship by giving the words of section 21(4) other than their ordinary and natural meaning. The protection for the defendant is to be found in the last part of the subsection. Thus it is important to note that in the case of a sister ship the ship being arrested must be wholly beneficially owned by the person liable in personam. Nothing less will do. For these reasons, I agree with the judge that the expression 'charterer' in section 21(4) is not confined to a demise charterer. That is now conceded, but I have analysed the position in some detail because, in my opinion, the analysis throws considerable light on the answer to question (1)(b) which asks whether the expression 'the charterer' in section 21(4) can include a slot charterer. ..."

(emphasis added)

42. The disinclination linguistically to qualify the word 'charterer' is further buttressed, if buttress be required, in light of the statutory amendment to section 12B(4)(b)(i), when the legislature added the words "... or the charterer of it under a charter by demise ...", whilst leaving unamended 'charterer' within (b), and in this regard I am unpersuaded by Mr Sussex's suggestion that this amendment constituted "a strained form of words" and that the adoption of this rubric tended to support his primary argument. In this context, also, the wider construction of 'charterer' within section 12B(4)(b) is in my view justified, given the differing temporal requirement within subsection (b)(i), namely that the relevant person should be the charterer "when the cause of action arose", whereas the legislative qualification within subsection (b)(i) imposed by the amendment limiting the relevant person to "charterer of [the ship] under a charterer by demise" governs the position "when the action is brought".

43. I therefore decline to circumscribe this legislative provision in the manner now urged by Mr Sussex. Not only is there a preponderance of authority against the point, but also as a matter of primary statutory construction the wording of the subsection is, in my view, clear and renders unnecessary recourse to the 1952 Convention. In this latter context Clarke JA in The Tychi, op.cit. dealt with this aspect thus :-

"... There is a further point. The Administration of Justice Act 1956 was based upon the International Convention Relating to the Arrest of Sea Going Ships 1952 ('the Convention'). The Act did not follow the Convention precisely so that there is perhaps only limited assistance which can be derived from it.

Sir David Cairns describes the position as follows :

'Article 3 of the Convention contains provisions about what ships may be arrested. In the first four numbered paragraphs there, there is nothing which would enable a charterer or a shipowner to be brought in, other than a charterer by demise, a charterer by demise being expressly referred to in par.(4). But then, at the end of the article, these words appear :

'The provisions of this paragraph shall apply to any case in which a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship ...

'- words which seem to be far wider than s.3(4) because they do not include the limitation of any such person as the charterer.

'In the circumstances, I do not find that the provisions of the Convention are of assistance to me in deciding this case; I prefer to go on my interpretation of the words themselves.'

He thus concluded that the provisions of the Convention were of no assistance. However, it can at least be said that there is nothing in the Convention to suggest that a narrow interpretation should be given to what was then section 3(4) of the 1956 Act and is now, with some amendment, section 21(4) of the 1981 Act. The 1956 Act was narrower than the Convention but there is nothing in the Convention to Suggest that 'charterer' should be given an unnaturally narrow meaning. Moreover, Mr Kendrick relies upon the following opinion expressed by Professor Jackson in the second edition of his book Enforcement of Maritime Claims at 203 :

'The majority view provides further English adherence to the Convention as well as accords with a policy of making ships owned by those liable on maritime claims available to claimants ...'" (emphasis added)

44. With respect, I agree with these sentiments. In my judgment this second construction argument fails also.

(3) Jurisdiction as a function of capacity?

45. Under this head Mr Sussex puts forward what appears to be an entirely novel point. His thesis is that, in order to found jurisdiction, a link is required between the Plaintiff's claim and the capacity in which the relevant person is alleged to have become liable.

46. Accordingly, submitted Mr Sussex, in order to be able to bring an action in rem, the relevant person's liability in personam must arise and be the result of the capacity in which he was, in relation to the ship, at the time the cause of action arose, viz. either "... owner or charterer of, or in possession or in control of, the ship, ..." per section 12B, and that 'charterer' here is limited to mean charterer by demise. So that, Dongnama is not entitled to bring an action in rem against the "Halla Liberty" based on Halla's liability under the Slot Charter, because a slot charterer was not within the meaning of 'charterer' in section 12B(4)(b), and Halla did not fall into any of the other categories of 'owner' or 'in possession or control' of the ship. My earlier finding as to the meaning of 'charterer', of course, renders this argument academic, but lest I be wrong on that point, I must decide this issue also.

47. I have difficulty with the submission that if there was not required to be such a connection between the relevant person's relationship to the ship and his in personam liability for the claim, it would be unfair that a claimant could bring an action in rem purely because, by some "fortuity", as Mr Sussex put it, arising by reason of something higher up the chain of charterparties, the relevant person also fell within some other category within section 12B(4)(b).

48. I hope that I have understood the argument correctly, which appears to represent an overly-sophisticated approach to the plain words of the statute. It also seems to me, with respect, to be plainly wrong. Jurisdiction is not a divisible entity. Either the statutory requirements are met, or they are not. If the primary facts fit the statutory bill, an action in rem is permitted to be brought; if they do not, it is not. The supposed "fortuity" arising in this case, namely, that Halla happened to own one of the ships in which slots had been chartered back to them, is no reason to defeat the plain meaning of the statute if the statutory criteria for the assertion of jurisdiction are satisfied.

49. In this regard I accept the submission of Mr Thomas S.C. that if the legislature had intended there to be a fetter of this type, the appropriate words would no doubt have been employed, and that it followed, therefore, that this concept of capacity was redundant. It was always, said Mr Thomas, a matter of chance whether the liability of a person, "the relevant person" who would be liable in personam, would be capable of enforcement through in rem proceedings, which themselves were susceptible to a variety of chance factors such as for example the loss of ships, the trading pattern of ships, the lack of sisterships, transfer of ownership of ships prior to the issuance of a writ, and the existence and value of prior claims upon the res at the time the action was brought.

50. In my judgment the argument, ingenious but unsupported by any authority, fails in limine. I fail to understand why a 'relevant person' should be able to avoid an action in rem by means of a complaint that it was but by chance that he happened to be in the required capacity at the required time. As earlier indicated, the point does not presently arise if it be correct to hold (as I have) that 'charterer' does not mean 'demise charterer', and that, to the contrary, Halla was a 'charterer' of the seven ships provided by the Plaintiff under the Slot Charter Agreement. Had it been necessary to do so, however, I would have declined relief upon the basis of the 'capacity' argument also.

(4) Beneficial ownership of the Halla Liberty

51. Donghwa accepts that at the date of the issue of the writ Halla, was the registered owner of the Halla Liberty; indeed, it is common ground that the vessel was registered at the Pusan Ship Registry under the ownership of Halla on 19th February 1997. Donghwa further accepts that at the time the action was brought, Halla was at least a charterer by demise, the Lease Agreement possessing the essential elements to constitute a demise charter, so that at the least the requirements of section 12B(4)(i) are satisfied.

52. However, Donghwa contends that as at 8th December 1997, by reference to Korean law and to the Leasing Agreement, Donghwa rather than Halla was the beneficial owner of the vessel on that date.

53. In the context of this argument, Donghwa relies upon the terms of the Lease Agreement between Donghwa, as Lessor, and Halla, as Lessee, dated 21st January 1997, together with amendments thereto by way of the Revised Lease Agreement dated 29th March 1997, pursuant to which agreements Donghwa agreed to purchase the Halla Liberty and lease her to Halla. The period of this leasing arrangement was to be 84 months from the date of the issuance of a Certificate of Acceptance, which Halla so issued on 29th March 1997. In accordance with the terms of the Lease Agreement and the Revised Lease Agreement, Donghwa paid the purchase price of the vessel, and also paid the Acquisition Tax on the vessel in addition to arranging for import permits to bring her into South Korea.

54. The details are many and various. Suffice to say, for present purposes, the debate on this application revolved around the construction of these Lease Agreements, together with the meaning and effect of Article 743 of the Korean Commercial Code.

55. In terms of this debate, evidence of Korean law is relevant both as the proper law of the Leasing and Revised Leasing Agreements, under which it is said that Halla agreed to transfer to Donghwa ownership in the Halla Liberty which Halla had acquired from Steamers Kinabalu, and as the lex situs to determine the proprietary effects of such alleged unregistered transfer. In connection with both heads of argument, the Court has had the assistance of viva voce evidence from two experts on Korean law, Mr Choi for the Intervener and Mr Kang for the Plaintiff.

56. At the outset, it is worth noting that there is, in fact, considerable common ground between these two gentlemen. There is no dispute, for example, that the Halla Liberty is a Korean ship, and that Halla, a Korean corporation, is registered in the Korean Ship Register as her one and only owner. It is accepted by both experts that Korean law does not distinguish between beneficial ownership and other forms of ownership, and that Halla was apparently the owner of the Halla Liberty, being in possession and control of the vessel, and trading her and chartering her out. It is also undisputed that any transfer of ownership of the Halla Liberty by private agreement between Halla and Donghwa was not registered and was subject to Halla's right under Korean law to recover ownership upon payment of specified sums to Donghwa. Where, then, is the primary difference of opinion between the two experts?

57. In Mr Choi's view the Lease Agreement can be regarded either as operating as an assignment for the benefit of the Memorandum of Agreement earlier concluded by Halla with the former owners of the vessel, or alternatively could be construed as a purchase and leaseback arrangement. For his part, however, Mr Kang found nothing in the Lease Agreement which constituted an agreement for the sale and purchase of the Halla Liberty. Indeed, the Plaintiff submitted that in the circumstances as revealed, there had been no proof of any agreement between Halla and Donghwa to transfer ownership of the Halla Liberty from Halla to Donghwa, nor any proof that there was any legal act by way of transfer to give effect to that agreement. The Plaintiff's position was that the Leasing Agreement, without a transfer of ownership to Donghwa, amounted to an agreement for deferred repayment of funds loaned by Donghwa, placing obligation on Halla with agreed curbs on its ownership of the Halla Liberty during the period of the debt.

58. Both experts were cross-examined on their affidavits, and both struck me as learned men whose views were entitled to respect. In terms of the way in which the Lease Agreement is to be classified, however, I prefer the evidence of Mr Choi. The Lease Agreement contains words to the effect that Donghwa is entitled to acquire title to the Halla Liberty (see, for example, Article 1), and unless there was a purchase by Donghwa it is not easy to ascribe any realistic meaning to this document. In my judgment, an objective intention to convey title from Halla to Donghwa is discernible from the terms of the Lease Agreement and the Revised Lease Agreement, and I so hold.

59. This then leaves the second issue which divided the experts, which goes to the effect of Article 743 of the Korean Commercial Code. This reads :-

"Transfer of title to a vessel shall be effective simply by an agreement between the parties thereto. However, unless registered in the ship registry and stated in the certificate of the ship's nationality, such title shall not be insisted upon against any third party."

60. The first sentence is, of course, relied upon by Mr Choi as authority for his opinion that provided that a sufficient expression of intention can be found in the Lease Agreement, a bare agreement is sufficient to pass property in a ship. Mr Kang does not disagree with this basic proposition; he merely expresses the opinion that, in this instance, no such intention can be found in the Lease Agreement. And I have already adjudged that it can.

61. The second sentence to Article 743 is relevant because Donghwa was never the registered owner of the "Halla Liberty". The two experts are in disagreement as to whether the second sentence has any relevance in foreign proceedings : Mr Kang expresses the view that Article 743 is substantive, whilst Mr Choi considers that it takes effect as an estoppel, with the consequence that it is to be regarded as procedural.

62. Mr Sussex submitted that whilst it is clear that if these proceedings were taking place in South Korea, Article 743 would operate to prevent either Halla or Donghwa from setting up an unregistered title as against a third party, this factor could have no relevance in proceedings in Hong Kong. This was because Article 743 did not operate so as to strip the unregistered owner of his title to the vessel, but operated as an estoppel : the unregistered owner could not set up a title which was not registered with the ship registry. As a matter of characterisation, he said, estoppel is to be regarded as a rule of evidence and must therefore be considered procedural. As such, the Hong Kong Court will not apply foreign procedural rules. However, Korean law is plainly relevant to the question of who in fact owned the Halla Liberty at the time these proceedings were commenced, and that question is to be resolved by construing the Lease Agreement. Accordingly, once that issue has been resolved, the submission was that the second sentence to Article 743 has no relevance to these proceedings.

63. In response to this submission, Mr Thomas SC submitted that if, which was disputed, the Intervener acquired rights of ownership over the Halla Liberty by reason of an 'agreement' falling within the first part of Article 743, nevertheless the second element of that Article was just as important a part of the lex situs as the first in determining the proprietary effects of the transfer. In the circumstances, Donghwa could not 'cherry pick', abstracting to its advantage part of Article 743 but ignoring other aspects of less assistance. It was, argued Mr Thomas, incumbent upon Donghwa to show that by reason of Korean law in its entirety, a Hong Kong Court would regard it as being the beneficial owner of the Halla Liberty contrary to the terms of the official Korean Register of Ships. And, he maintained, under Korean law the rights of Donghwa as transferee from Halla in an unregistered transaction fell short of that which a Hong Kong Court would regard as rights of 'ownership', in which regard he noted particularly that Article 743 precluded Donghwa from asserting against anyone but Halla (or those privy to the transfer) any rights of ownership as long as the transfer remained unregistered, so that for these purposes Donghwa enjoyed no rights of ownership "valid against the world", but merely enjoyed personal rights against Halla arising from the Agreement. This position was exemplified, he said, by the Korean concept of "external ownership" as being vested in the registered owner Halla, when compared with "internal ownership", which appeared to be the legal status of ownership as maintainable only against a particular person. So that if Donghwa did become legal owner of the Halla Liberty by transfer from Halla, it was, suggested Mr Thomas, but a bare legal title devoid of the characteristics of "beneficial ownership" such as would be discerned in Hong Kong law. It followed that the Plaintiff relied upon the second part of Article 743 not to found an estoppel, but to show that, by Korean law, the lex situs (or law of the flag), Donghwa did not enjoy those rights of "ownership" that correlated with Hong Kong's concept of "beneficial ownership".

64. Further, with specific reference to Mr Sussex's estoppel argument, Mr Thomas argued that Article 743 was not a statutory estoppel. To the contrary. It was, he suggested, an important and substantive provision of law which circumscribed the rights of an unregistered transferee, much as in the case under our law wherein an assignment not duly notified to the obligor takes effect only in personam as between the parties. Nor, he said, should the provision in the second part of Article 743 necessarily be regarded as a rule of evidence as opposed to a rule of substantive law; but that if it was a rule of evidence, it ought not to be treated as a rule of procedure. Within the conflicts of law, therefore, it was not to be treated simply as a provision of foreign procedural law, thus falling to be disregarded by the lex fori by reason of the operation of Rule 17 of Dicey & Morris (12th Ed., at page 169).

65. I have not found this final element of the case easy to evaluate, notwithstanding the excellence (and ingenuity) of the submissions on the point. However, after reflecting on the evidence and upon the arguments, in my judgment Donghwa has not succeeded in establishing the existence of its beneficial ownership of the Halla Liberty.

66. In my view Mr Thomas is correct in his submission that in the case of a foreign ship, the Hong Kong Court admits evidence of the relevant foreign law to enable it to determine who, in its eyes, is to be regarded as the beneficial owner of the vessel (applying the dictum of Sir Thomas Bingham MR in The Nizam Khikmet [1996] 2 Lloyds 362, at 371), and that after due consideration of the relevant foreign law to which the vessel was subject, Donghwa enjoyed no more than what would be regarded under our system as a bare legal title to the Halla Liberty, devoid of the characteristics of beneficial ownership as we understand that concept.

67. I further specifically reject the argument that the second sentence of Article 743 should be regarded by the lex fori as procedural rather than substantive; in my view the latter element of Article 743 possesses real substantive effect in that, notwithstanding transfer by Halla to Donghwa, it enables creditors of Halla to attach the ship and third parties to obtain good title from Halla, and that, as such, this is to be regarded as a substantive provision of the relevant foreign law. In my judgment, it is inappropriate to approach this issue by praying in aid the first sentence of Article 743 in isolation and to divorce it from the remainder of that Article, and I accept the argument that the Intervener's submission as to the effect of Article 743 seeks unjustly to deflect the impact of that Article upon the nature of Donghwa's proprietary interest in the vessel - and this in a situation in which, as Mr Choi frankly accepted, Donghwa would fail in such an argument had this issue been debated in Korea. The commercial and legal reality, in my view, is that at the time of the commencement of the action herein Halla enjoyed the beneficial interest in the Halla Liberty, subject to Donghwa's bare legal title held for the purpose of security for the debt in a manner analogous, for example, to the assignment of legal title of property to a mortgagee.

Order

68. The result of the foregoing, therefore, is that the Intervener has been unsuccessful upon each of its four heads of assault upon the admiralty jurisdiction of this Court as exercised over the Halla Liberty.

69. Given the decisions which have been made upon the respective issues, it becomes unnecessary for the Court to consider any of the various permutations as to result which were the subject of submissions by Counsel, and which themselves were dependent upon which points ultimately found favour with the Court and which did not.

70. Accordingly, the Order on the Motion is as follows :-

(1) The Intervener's Motion dated 23rd December 1998 is dismissed;

(2) There will be an Order nisi that the costs of and occasioned by this application are to be paid by the Intervener to the Plaintiff, to be taxed if not agreed.

71. I thank all Counsel for their considerable assistance.