CHIMBUSCO PAN NATION PETRO-CHEMICAL CO LTD v. THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL “DECURION”

CACV 97/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 97 OF 2012

(ON APPEAL FROM HCAJ NO. 141 OF 2010)

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Admiralty action in rem against:
the ship or vessel “DECURION” (IMO no. 8302545)

BETWEEN

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J U D G M E N T

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Hon Fok JA:

A. Introduction

1.  This is an appeal from a judgment of Reyes J dated 4 May 2012.  The issue in this appeal is whether the Admiralty jurisdiction in rem of the High Court has been properly invoked by the plaintiffs (Chimbusco) against the vessel “DECURION” in respect of claims for the supply of bunkers to that and 10 other vessels. Subject to a preliminary question of whether it is open to the defendants (Maruba SCA) to challenge jurisdiction, the appeal involves, as a matter of law, an examination of the circumstances in which a party may be said to be “in control of” a ship for the purposes of the exercise of Admiralty jurisdiction in rem and, as a matter of fact, whether those circumstances are satisfied in this case.

B. Procedural background and judgment below

2.  Between April 2008 and August 2010, Chimbusco supplied bunkers to 11 ships, including the “DECURION”.  The contractual arrangements under which the bunkers were supplied are described later in this judgment (in Section E).  Chimbusco claims that it has not been paid the price of US$4,217,419.89 for the bunkers supplied.

3.  On 20 August 2010, Chimbusco issued a writ in rem in this action naming the Owners and/or Demise Charterers of the ship or vessel “DECURION” as defendants and obtained a warrant for the arrest of that vessel in Hong Kong.

4.  On 25 August 2010, solicitors previously acting for the defendants filed an acknowledgment of service on behalf of the defendants.  On 10 September 2010, the action was stayed by agreement but the stay was terminated by Chimbusco on 20 January 2011.

5.  On 31 May 2011, the vessel was sold pursuant to order of the court.  The proceeds of sale amounted to US$5,208,107 but there are some 7 other in rem judgments and claims or caveats pending against that security said to total in excess of US$12 million.

6.  On 29 June 2011, Chimbusco filed its statement of claim in the action.  On 27 July 2011, the defendants applied for an extension of time in which to serve their defence.  On 1 September 2011, Reyes J refused to extend time for the service of the defence and, consequently, on 6 September 2011, Chimbusco applied for judgment in default of defence.  On 16 September 2011, Reyes J entered judgment in default against the defendants for US$4,217,419 plus interest and costs.

7.  On 31 January 2012, the Court of Appeal[1] allowed the defendants’ appeal, set aside the refusal to extend time for the defence and the judgment in default of defence and granted the defendants 14 days to file their defence.

8.  On 14 February 2012, within the time limited for the filing and service of their defence, the defendants applied pursuant to O.12 r.8 for a declaration that the Court has no in rem jurisdiction over the defendants in respect of Chimbusco’s claim insofar as it related to claims other than for the price of unpaid bunkers supplied to the “DECURION” on the ground that Chimbusco did not bring itself within the requirements of s. 12B(4) of the High Court Ordinance (Cap. 4).

9.  The defendants’ summons under O.12 r.8 was heard by Reyes J on 30 April 2012.  By his judgment dated 4 May 2012 (the Judgment), Reyes J declared that the Court had no jurisdiction in rem in respect of Chimbusco’s claim insofar as it related to claims other than for the price of unpaid bunkers supplied to the “DECURION”.  He also made an order striking out those parts of the statement of claim which related to the claims for the price of unpaid bunkers to those 10 other vessels.

C. This appeal

10.  Chimbusco appeals contending that the Judgment should be set aside and that instead the defendants’ summons under O.12 r.8 should be dismissed.

11.  At the outset of the appeal, Chimbusco applied to amend the notice of appeal to advance certain other arguments including preliminary jurisdictional arguments.  We heard argument on the proposed amended grounds of appeal contained in the amended notice of appeal dated 12 March 2013 on a de bene esse basis.

D. Have the defendants submitted to the jurisdiction of the court?

12.  As a preliminary matter, it was contended by Mr Michael Thomas SC for Chimbusco that the defendants had submitted to the in rem jurisdiction of the court so that the Judge was wrong to entertain the defendants’ O.12 r.8 summons.  There are a number of bases on which it was said that the defendants had submitted to jurisdiction.

(1) First, it was contended that, on the defendants’ own case, Chimbusco was entitled to proceed in rem against the “DECURION” in respect of the supply of bunkers to that vessel, so that, upon the defendants’ acknowledgment of service of the writ on 25 August 2010, the proceedings became in personam proceedings against the defendants and in rem against the “DECURION”.  Thereafter, Chimbusco was entitled to proceed to claim in personam against the defendants for the full amount of the claim including the bunkers supplied to the other 10 vessels.

(2) Secondly, it was contended that the defendants’ O.12 r.8 summons was defective because none of the various orders available under that rule was sought.

(3) Thirdly, the orders that were in fact sought under the O.12 r.8 summons amounted to a submission to the jurisdiction if there was a lack of jurisdiction.

D.1  The effect of the defendants’ acknowledgment of service

13.  The first preliminary argument requires an examination of the nature of an in rem action, the procedure by which such an action can be pursued and how jurisdiction is exercised or challenged. It would seem that, if good, this point did not occur to the Court of Appeal which heard the appeal against the Judge’s refusal to extend time for the service of the defence and the consequential entry of default judgment, the Judge below (who was the Judge in charge of the Admiralty List at the time), as well as Chimbusco’s solicitors and counsel appearing on its behalf on that previous appeal and below (not Mr Thomas).  That, of course, does not reflect on the legal merits of the point but it would, at the very least, be relevant to the question of costs.

14.  Admiralty jurisdiction is statutory, being conferred by s. 12A of the High Court Ordinance. In the present case, there is no dispute that Chimbusco’s claim for the price of the bunkers supplied to the “DECURION” and the other 10 vessels is within s. 12A(2)(l), being a “claim in respect of goods or materials supplied to a ship for her operation and maintenance” and therefore is one within the Admiralty jurisdiction of the Court of First Instance pursuant to s. 12A(1)(a).

15.  The mode of exercise of the Admiralty jurisdiction is dealt with by s. 12B: see Re Resource 1 (2000) 3 HKCFAR 187 per Sir Anthony Mason NPJ at p. 210G.  In the present case, s. 12B(4) is relevant and provides:

“12B. Mode of exercise of Admiralty jurisdiction

…

(4) 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 Court of First Instance 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 respects all the shares in it.”

In addition, one must also look to the procedural rules laid down in the Rules of the High Court.

16.  The writ issued by Chimbusco on 20 August 2010 was an in rem writ in the prescribed form (O.75 r.3(1)) and it was that writ that was served on the vessel “DECURION” in accordance with the procedure for the service laid down by O.75 r.8.  The writ was not an in personam writ,[2] which is a different prescribed form (O.75 r.3(2)).  As noted in Hong Kong Civil Procedure 2013 Vol. 1 at Note 75/1/7 (p. 1286):

“Action in rem and in personam – If it is desired to commence proceedings both in rem and in personam separate writs must be issued.”

17.  The submission by a shipowner to the jurisdiction of the Court in an Admiralty action in rem renders him personally liable (in personam) on the claim.  See, The Gemma [1899] P. 285 per A.L. Smith LJ at pp. 291-292:

“… when persons, whose ship has been arrested by the marshal of the Admiralty Court, think fit to appear and fight out their liability before the Court, the form of the proceedings in the Admiralty Court shew – … – that the persons so appearing, as the defendants have done in the present case, become parties to the action, and thereby become personally liable to pay whatever in the result may be decreed against them; and the action, though originally commenced in rem, becomes a personal action against the defendants upon appearance.”

(Emphasis added)

See, also, The August 8 [1983] 2 AC 450 per Lord Brandon at p. 456A-B (quoted below).

18.  The action then continues in a hybrid form being both in rem against the vessel (or, if sold after arrest, the proceeds of sale representing the vessel) and in personam against the shipowner (and this claim may be for more than the value of the vessel).  The hybrid form of the action is clearly explained in the judgment of Neill LJ in The Maciej Rataj [1992] 2 Lloyd’s Rep. 552 at p. 559:

“… after an acknowledgment of service has been given an action in rem then continues as a hybrid. The action becomes in personam but it does not lose its previous character of being an action in rem. I should refer to a short passage in the speech of Lord Brandon in the August 8^th, [1983] 1 Lloyd’s Rep. 351 at p.355, col.1; [1983] 2 A.C. 450 at p.456:

… By the law of England, once a defendant in an Admiralty action in rem has entered an appearance in such action [under the present practice this means ‘has acknowledged service’], he has submitted himself personally to the jurisdiction of the English Admiralty Court, and the result of that is that, from then on, the action continues against him not only as an action in rem but also as an action in personam: (The Gemma, [1899] P. 285, 292 per Lord Justice A.L. Smith).

I should also refer to the judgement of Mr. Justice Hobhouse in The Nordglimt, [1987] 2 Lloyd’s Rep. 470 at p.483, col.2; [1988] Q.B. 183 at p.203, where he said:

… proceedings in rem to which the shipowner has entered an appearance, although they can continue as proceedings in personam, are not deprived of their character as proceedings in rem and can still give rise to a judgment in rem against the res.

Further support for the view that an action instituted in rem retains its in rem nature in part, even after an acknowledgement of service has been given is provided by the rule that an unsatisfied judgment in personam is no bar to proceedings in rem (The Cella, (1888) 13 P.D. 82 at p.85 per Sir James Hannen P.)”

19.  The procedure for the acknowledgment of service of a writ or originating summons (formerly, entering an appearance in an action – per Lord Brandon supra) is provided for under O.12.  O.12 r.8(7) provides:

“Except where the defendant makes an application in accordance with paragraph (1) or (2), the acknowledgment by a defendant of service of a writ shall, unless the acknowledgment is withdrawn by leave of the Court under Order 21, rule 1, be treated as a submission by the defendant to the jurisdiction of the Court in the proceedings.”

20.  O.12 r.8(1) provides:

“A defendant who wishes to dispute the jurisdiction of the court in the proceedings by reason of any such irregularity as is mentioned in rule 7 or on any other ground shall give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the Court for [amongst other things]

…

(g) a declaration that in the circumstances of the case the court has no jurisdiction over the defendant in respect of the subject-matter of the claim or the relief or remedy sought in the action, …”.

21.  Thus, if a compliant[3] summons under O.12 r.8 is taken out to challenge jurisdiction, the mere filing of an acknowledgment of service does not constitute a submission by a defendant to the jurisdiction of the Court.

22.  As Sir Anthony Mason NPJ held, in Re Resource 1 (supra) at p. 211D-F:

“Order 12 r.8, under the heading ‘Dispute as to Jurisdiction’, prescribes a procedure according to which such disputes are to be resolved. This procedure requires a defendant who wishes to dispute the jurisdiction of the court on any ground to give notice of intention to defend the proceedings and, within the time limited for service of a defence, to make an appropriate application to the Court (r.8(1)). The critical element in the procedure is that, except where the defendant makes such an application as prescribed, the acknowledgment by a defendant of service of a writ shall, unless the acknowledgment is withdrawn by leave of the Court, be treated as a submission by the defendant to the jurisdiction of the Court in the proceedings (r.8(7)).”

23.  That a defendant who issues a summons challenging jurisdiction under O.12 r.8 is not submitting to the jurisdiction of the Court is made clear by O.12 r.8(6) which provides:

“A defendant who makes an application under paragraph (1) or (2) shall not be treated as having submitted to the jurisdiction of the court by reason of his having given notice of intention to defend the action; but if the Court makes no order on the application or dismisses it, the notice shall stand unless otherwise directed by the Court and the defendant shall be treated as having given notice of intention to defend the action.”

24.  What the terms of O.12 r.8(6) also make clear, in my view, is that it is only on the Court’s disposition of the O.12 r.8 summons to challenge jurisdiction that the defendant may then be taken to have submitted to the jurisdiction, although even then it may be possible for the defendant to seek leave from the Court to withdraw the acknowledgement of service previously given (pursuant to O.12 r.8(7)).

25.  Returning to the present case, I have already noted that the writ that was issued was an in rem writ and it was that writ that was served on the vessel “DECURION” in Hong Kong.  It has not been suggested that service of an in personam writ within the jurisdiction would have been possible or was purportedly effected on the defendants by service on the vessel.  Since the defendants are a company incorporated in Argentina and it has not been asserted that they have a presence in Hong Kong, if an in personam writ had been issued, Chimbusco would have required leave to serve that writ on the defendants out of the jurisdiction under the provisions of O.11.  No such application for leave to serve out of the jurisdiction has been made.  Moreover, an in personam writ would have been valid in the first instance for 12 months beginning with the date of its issue (O.6 r.8(1)) and so, if not served before 20 August 2011, would have had to be renewed to remain valid.

26.  So far as the exercise of Admiralty jurisdiction in rem was concerned, Chimbusco alleges that the requirements of s. 12B(4) are satisfied in that:

(1) the claim for the supply of bunkers to the “DECURION” was one which arose in connection with that vessel (s. 12B(4)(a)), Maruba SCA (the defendants) owned that vessel when the cause of action arose (s. 12B(4)(b)) and also owned that vessel when the action was brought (s. 12B(4)(i)); and

(2) the claims for the supply of bunkers to the other 10 vessels were claims which arose in connection with those ships (s. 12B(4)(a), of which Maruba SCA was either the charterer or was in control when the cause of action arose (s. 12B(4)(b)), and Maruba SCA was the owner of the “DECURION” when the action was brought (s. 12B(4)(ii)).

27.  Whilst the defendants do not challenge the exercise of in rem jurisdiction in respect of the claim for the supply of bunkers to the “DECURION” (see §26(1) above), they dispute that jurisdiction is properly to be exercised in respect of the claim for the supply of bunkers to the other 10 vessels (see §26(2) above).  Was it open to the defendants to challenge the exercise of the Court’s jurisdiction under O.12 r.8 without being held to have submitted to the jurisdiction by their acknowledgment of service?

28.  Although Reyes J refused the defendants’ application for an extension of time to serve their defence and then entered judgment in default of defence, the Court of Appeal set that judgment aside and granted an extension of time to the defendants in which to file their defence. The intent[4] of the Court of Appeal’s judgment was that the defendants be given an opportunity to invoke the procedure under O.12 r.8 to challenge jurisdiction.  It is the defendants’ case that they duly did this by their summons under O.12 r.8(1) issued on 14 February 2012, which (it is common ground) was issued within the time limit for filing and service of their defence.  The defendants contend that the effect of the issue of that summons was that the defendants’ acknowledgment of service was not treated as a submission by the defendants to the jurisdiction of the Court in the proceedings (see O.12 r.8(7) above).

29.  Mr Thomas disputed this contention of the defendants.  He pointed out that, in the affidavit to lead the warrant of arrest, Chimbusco had supplied all the due particulars, including the grounds for believing that the claims in respect of all 11 ships were well-founded and were within the in rem jurisdiction of the Court.  His argument was that, since it was conceded by the defendants that there was in rem jurisdiction over the “DECURION” in respect of the claim for the price of the bunkers supplied to that vessel, the Court plainly had in rem jurisdiction and there was no purpose to be served by the defendant’s challenge to that jurisdiction.  The vessel was plainly properly arrested and no application for its release from arrest was ever made.  He relied on The Cella (1888) LR 13 PD 82 per Lord Esher MR at p. 87 in support of the proposition that the moment an arrest takes place, the ship is held by the Court as a security for whatever may be adjudged by it to be due to the claimant.  The issue of whether there was in rem jurisdiction over the vessel in respect of the claim for the supply of bunkers to the other 10 vessels was a matter that fell to be tried in due course and not on affidavit: see per Hill J in The Sylvan Arrow [1923] P. 14 at pp. 16-18.

30.  Thus, it was submitted, the steps taken before Reyes J under O.12 r.8 to assert a lack of jurisdiction were misconceived.  Mr Thomas prayed in aid what Stone J said in The Halla Liberty [2000] 1 HKC 659 at p. 672I that:

“Jurisdiction is not a divisible entity. Either the statutory requirements are met or they are not.”

Hence, by way of analogy, he submitted that the Court could not be only partially pregnant and thus jurisdiction was plainly established and could not be (and had not been) challenged by the defendants.  In effect, a challenge to jurisdiction must be an “all or nothing” challenge and there could not be a partial challenge to jurisdiction.

31.  I do not, with respect, agree with Chimbusco’s submissions in this regard.

32.  The Court of Final Appeal held in Re Resource 1 that O.12 r.8 applies to objections as to the exercise of jurisdiction under s. 12B(4).  Sir Anthony Mason NPJ described that rule as “a comprehensive and exclusive code for the taking of jurisdictional objections” (p. 211G) and observed (at p. 213B-D):

“As it is for the Court of First Instance to determine, in the exercise of its jurisdiction, the question whether the conditions stipulated in s.12B(4) are satisfied, there is no basis on which it could be held that O.12 r.8 in its application to this case exceeds the rule making power. The rule prescribes a procedure which is appropriate for the resolution of issues, even if they are ‘jurisdictional’, which are, to be determined in the exercise of jurisdiction.”

It therefore follows that O.12 r.8 provides an opportunity to a shipowner defendant to ask the Court to determine the propriety of the exercise of its own jurisdiction.  Furthermore, an acknowledgment of service prior to the disposition of such a challenge under O.12 r.8(1) is not treated as a submission to the exercise of jurisdiction under s. 12B(4).

33.  I also do not accept that a challenge to jurisdiction must be an all or nothing challenge to be a valid challenge to jurisdiction within O.12 r.8.  The types of orders an applicant may seek under O.12 r.8 do not, in my view, support the all or nothing approach.  So far as O.12 r.8(1)(g) is concerned, the wording of that paragraph is wide and enables a defendant to apply for a declaration as to a lack of jurisdiction in respect of the subject-matter of the claim or the relief or remedy sought in the action.  There is, in any event, a catch-all provision in O.12 r.8(1)(h) whereby a defendant can seek “such other relief as may be appropriate”, again suggesting a wide ambit to the rule.

34.  Here, Chimbusco was seeking to assert multiple and discrete claims against the “DECURION” under s. 12A(2)(l) for bunkers supplied not just to the “DECURION” but to 10 other vessels.  In my view, it was open to the defendants under O.12 r.8 to challenge the exercise of the in rem jurisdiction under s. 12B(4) against the “DECURION” in respect of the separate claims arising from the supply of bunkers to the other 10 vessels, on the basis that this was an exercise of in rem jurisdiction over a vessel in respect of claims for which the elements of s. 12B(4) were not all satisfied.[5]

35.  If that were not the case, it would otherwise mean that a plaintiff could simply “piggyback” speculative claims[6] onto a good claim (i.e. one which satisfied all the elements of s. 12B(4)) and thus seek to invoke the exercise of the in rem jurisdiction in respect of the whole, larger, claim.  Such an approach is not permissible in respect of the Court’s “long-arm” jurisdiction under O.11: a plaintiff who has obtained leave to serve a defendant out of the jurisdiction on one head of O.11 r.1 cannot amend to bring a claim falling outside that head on which leave to serve out was granted (see Waterhouse v Reid [1938] 1 KB 743).  As Mr Sussex SC submitted, on behalf of the defendants, the procedure in rem being “a means of bringing the owner of the ship to meet his personal liability by seizing his property”[7], it would be an exorbitant exercise of the in rem jurisdiction to require the owner to meet his personal liability for a claim for which his property could not be seized.

36.  I do not regard the dictum from The Halla Liberty as supporting the argument advanced by Chimbusco that a challenge to jurisdiction has to be an all or nothing challenge.  It is clear that was not the context of Stone J’s remark which was directed instead to an argument that had been advanced as to the need for the relevant person’s liability in personam to 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, either the owner or charterer of, or in possession or in control of, the ship. Furthermore, I am not persuaded that the pregnancy analogy is apt in the present context: as was pointed out in the course of argument, that analogy begs the question of the all or nothing nature of the concept of jurisdiction and breaks down if one seeks to examine the position by reference to a pregnancy involving multiple foetuses.

37.  Thus, in my view, it was proper for the Judge to determine the question of whether Chimbusco was entitled to invoke the in rem jurisdiction in respect of the claims for the supply of bunkers to the vessels other than the “DECURION” on the hearing of the defendants’ O.12 r.8 summons.  This he did, with the agreement of counsel before him, “on the balance of probability in light of the affidavit evidence adduced”.[8]  This was the appropriate approach in the circumstances: see The Rolita [1989] 1 HKLR 394 at p. 396G-I and see, also, The Maritime Trader [1981] 2 Lloyd’s Rep. 153 at p. 157 and The Guiseppe di Vittorio [1998] 1 Lloyd’s Rep. 136 at p. 137 and I do not think that Chimbusco’s reliance on The Sylvan Arrow, which is distinguishable in that it was a case involving a specific free-standing question of sovereign immunity which required to be tried as a preliminary issue, affects that conclusion.  In the light of those authorities, particularly The Rolita (which is binding on us), I do not agree with Chimbusco’s contention that, analogous to an application under O.11 (see Seaconsar (Far East) Ltd v Bank Markazi [1994] 1 AC 438), it was only necessary for it to make out a good arguable case that the facts support a right to proceed in rem and, having pleaded the issue of control, that was a matter that should simply go to trial.  Further, although there is power under O.12 r.8(5) for the Court to direct the trial of a preliminary issue, no such direction was sought or made in this case.

38.  Subject to the questions of whether the defendants’ summons under O.12 r.8(1) was defective or whether the orders sought amounted to a submission to jurisdiction (as to which see below), I consider that the acknowledgment of service served by the defendants did not amount to a submission to jurisdiction and it was only when the Judge made his order determining the extent to which the in rem jurisdiction could properly be exercised by Chimbusco against the “DECURION” that there was a submission to jurisdiction by the defendants.

39.  Finally on this issue, I would add that I do not think there is any basis for Chimbusco’s suggestion that the Court of Appeal might, instead of setting aside the whole of the default judgment entered by the Judge, have upheld the judgment as an in personam judgment against Maruba SCA for US$4,217,419.89 and as an in rem judgment for US$85,460 against the “DECURION”.  The writ was not an in personam writ, it had not been served in accordance with O.11 and, in any event, by the date of the default judgment, its period of validity had already expired.  In any event, as the Court of Appeal held at §12:

“… the defendants have shown a real prospect of success if they are allowed to defend the case. In respect of the claim which includes the sum of US$85,460 which is the amount of bunkers delivered to Decurion, the issue is whether the defendants should be held liable when the sale of the bunkers were made to South Atlantic.”

D.2    Was the defendants’ O.12 r.8 summons defective?

40.  The second preliminary argument advanced by Chimbusco is that the defendants’ O.12 r.8 summons was defective on its face because it did not seek any of the various orders available under O.12 r.8. The summons stated that it was “an application by the Defendants for an Order pursuant to Order 12, Rule 8 of the Rules of the High Court”.  Paragraph 1 of the summons sought an order:

“1. declaring that this Court has no in rem jurisdiction over the Defendants in respect of the Plaintiff’s claim or the relief or remedy sought, in so far as it relates to claims other than for the price of unpaid bunkers supplied to the “DECURION” as set out in the Statement of Claim filed herein on 29 June 2011 on the ground that the Plaintiff did not bring itself within the requirements of section 12B(4) of the High Court Ordinance (Cap.4)”.

41.  I do not agree that the summons was defective as alleged.  On its face, the summons sought a declaration that the Court had no in rem jurisdiction in respect of the claims for bunkers supplied to vessels other than the “DECURION”.  Since I have rejected Chimbusco’s argument that a challenge to jurisdiction must be an all or nothing challenge, I consider that the relief claimed was an order properly within the terms of O.12 r.8(1)(g).

D.3  Did the orders sought in the O.12 r.8 summons amount to a submission to the jurisdiction?

42.  The third preliminary argument advanced by Chimbusco is that the defendants’ summons, in seeking the striking out of certain paragraphs of the statement of claim went beyond a mere challenge to jurisdiction and amounted to an invocation of the jurisdiction of the Court so that the defendants had, by making the application, submitted to the jurisdiction even if (contrary to Chimbusco’s primary position) there was a lack of jurisdiction.

43.  Paragraph 2 of the defendants’ summons continues from paragraph 1 set out above as follows:

“2. accordingly, that [the numbered paragraphs in the statement of claim wherein the claims in respect of bunkers supplied to the 10 vessels other than the ‘DECURION’ were pleaded] be struck out”.

44.  Mr Thomas cited廣東里水鮮果批發市場有限公司v Yip Lai Fong (葉麗芳), unrep., HCA 2559/2003, 9.12.2003 in support of Chimbusco’s argument on this point.  In that case, a defendant had issued a summons under O.18 r.19 and O.12 r.8 and Deputy Judge Muttrie held that the defendant had, by the application to strike out, voluntarily submitted to the jurisdiction by her application to strike out or stay of the action. There, the defendant had made it clear in her affirmation that it was her intention to apply first for relief in respect of striking out or stay and only in the alternative to raise the issue of jurisdiction (see §21).  It was for that reason that Deputy Judge Muttrie held (at §22):

“But to seek by way of primary relief, i.e. as a first choice to strike out the plaintiff’s name, or to have the issue of authority tried as a preliminary issue, or to have the matter stayed pending the outcome of other proceedings must in my view amount to submission to the jurisdiction.”

45.  In my view, that case is distinguishable from the present case.  Here, the defendants’ summons was not issued pursuant to O.18 r.19 and paragraph 2 of the summons is merely consequential upon the declaration sought in paragraph 1.  If paragraph 2 had not been in the summons at all, the consequence of the grant of the declaration sought in paragraph 1 would have been that those paragraphs in the statement of claim would have to be deleted in any event.  I therefore reject Chimbusco’s argument that the defendants have, by their summons, submitted to the jurisdiction of the Court.

E. Did the Judge apply too narrow a meaning to the phrase “in control of” the ship in s.12B(4)?

46.  Having rejected the preliminary jurisdiction point sought to be raised by Chimbusco, the next issue on the appeal concerns an examination of the circumstances in which a party may be said to be “in control of” a ship for the purposes of the exercise of Admiralty jurisdiction in rem and, specifically, whether the Judge applied too narrow a meaning to that phrase.

47.  To put this issue in context, it is convenient here to set out the background facts in paragraphs 4 to 19 of the Judgment which record:

“4. Maruba SCA entered into a Services Agreement with South Atlantic Container Ltd. (a Cayman Islands company) in April 2004. Maruba SCA (among other companies within the Maruba Group) then entered into an Agency Agreement with Maruba Asia (a Hong Kong company) in June 2004.

5. Maruba SCA thereafter provided the contractually agreed services to South Atlantic through Maruba Asia. Among such services was the supply of bunkers in Hong Kong to vessels chartered by Clan SA (an Uruguayan company). South Atlantic made the bunkers available to Clan pursuant to an agreement between South Atlantic and Clan. Clan is related to Maruba SCA, but is a different legal entity.

6. Under High Court Ordinance (Cap.4) (HCO) s.12A(2)(l), the Court can exercise Admiralty jurisdiction in respect of claims for goods (such as bunkers) supplied to a ship for her operation.

7. HCO s.12B(4) provides that, where goods are supplied to ship X for her operation, the Court may exercise in rem jurisdiction against ship Y if two conditions are met. First, the defendant was ‘when the cause of action arose, the owner or charterer of, or in possession or in control’ of ship X. Second, at the time when the action is brought, the defendant is ‘the beneficial owner as respects all the shares’ of ship Y.

8. There is no difficulty here with the second condition. Maruba SCA beneficially owned all shares in the ‘DECURION’ when the Writ was issued.

9. The problem lies with the first condition. On this, to resist strike-out, Chimbusco must show that, when it supplied bunkers to the 10 other vessels, Maruba SCA owned those vessels or had chartered them or was ‘in possession or in control’ of them.

10. At the time when bunkers were supplied to the 10 other vessels, Maruba SCA was not their registered owner.

11. Nor were the 10 vessels chartered to Maruba SCA. At the relevant time, the 10 vessels were under time charter to Clan. The charters were all in NYPE Form (1946 edition). They provided as usual in cl.8 that ‘[t]he Captain (although appointed by the Owners), shall be under the orders and directions of the Charterers [that is, Clan] as regards employment and agency’.

12. Chimbusco’s case is that, at the time when the bunkers were supplied to the 10 other vessels, they were under Maruba SCA’s ‘control’ as that term is used in HCO s.12B(4). As evidence of ‘control,’ Chimbusco relies on a number of facts and matters.

13. First, when entering into a contract with Chimbusco for the supply of bunkers, Maruba Group personnel gave a Power Point presentation to Chimbusco. That presentation stated that the Maruba Group ‘proceeded to service trade between Far East and South America under the brand name CLAN’.

14. More specifically, in a Power Point slide on the Maruba Group, Maruba SCA was characterised as the:-

‘Mother company of the group, currently concentrating on the tug boat business, it retains the ownership of these tug boats. Besides which it retains the ownership of other assets (ships and real estate), earning rent over them.’

15. Second, ‘Sea-Web Ship Overviews’ which Maruba SCA has exhibited to its affidavits in these proceedings, describe Maruba SCA as having been the “Operator” of 6 of the 10 other vessels at material times.

16. Third, there is evidence that Maruba SCA guaranteed and paid charter hire due from Clan.

17. Fourth, name cards provided to Chimbusco by personnel of the Maruba Group, display the logos of Clan and Maruba SCA.

18. Fifth, in a press release issued in January 2009 concerning its financial difficulties, the Maruba Group stated that ‘[a]t Maruba/Clan we guarantee in all earnest that ours is a reversible impasse’.

19.       Sixth, there is evidence that Maruba SCA guaranteed certain of South Atlantic’s obligations.”

48.  While the meaning of the terms “owner or charterer” in the relevant phrase in s. 12B(4) are relatively well-settled, the meaning of the expression “in possession or in control of” a ship in that sub-section is less clear.  Thus, “owner” means the legal owner of the ship and where registered the legal owner is the registered owner (see The Resource 1 (supra) at pp. 195J-196C and 209C) and “charterer” is not limited to a demise charterer (under which possession of the ship passes to the charterer) but may include a person who has entered into a contract for the use or hire of a ship such as a time, voyage or slot charter (under which possession of the ship is retained by the owner): see The Halla Liberty (supra) at pp. 669C-672C and The Tychy [1999] 2 Lloyd’s Rep 11.

49.  As the Judge noted, there is little authority as to what the expression “in possession or in control” of a ship in s. 12B(4) means.[9] Chimbusco’s case is that the meaning of “possession” and “in control of” do not engage legal concepts and so should be given their ordinary and natural meaning.  Chimbusco also maintained that different meanings should be given to the different words used in the phrase.  The Judge would appear to have accepted these contentions in the Judgment where he said:

“22. When considering the UK equivalent of HCO s.12B(4), the English Court of Appeal in The ‘TYCHY’ [1999] 2 Lloyds Law Rep 11 (at 20) suggested that the words in the provision should simply be given ‘their ordinary and natural meaning’.

23. When construing the expression ‘in possession or control’ in s.19 of the Commonwealth Admiralty Act 1988 in The ‘LAEMTHONG PRIDE’ (1997) 149 ALR 675 (at 688), the High Court of Australia pointed out that ‘there may be control without possession’ and ‘one party may have possession and another control’. To come within the expression, it was not necessary for a person to be an owner or charterer. By way of example, the High Court suggested that a salvor or mortgagee could, in taking over a vessel pursuant to a salvage contract or mortgage agreement, be said to be ‘in possession or control’ to the exclusion of an owner or charterer.

24. The English Court of Appeal said much the same thing in The ‘[GUISEPPE] DI VITTORIO’ [1998] CLC 149 (at 157).  There, again considering the English equivalent of HCO s.12B(4), Evans LJ noted that the provision ‘extends expressly to any case where the person concerned does have either possession or control, apparently regardless of whether that person is or can be described as a charterer, or not’.”

50.  Chimbusco’s criticisms of the Judge’s reasoning focused on the fact that he sought to define the meaning of “control” solely by reference to the dicta of Somervell LJ in Dollfuss Mieg et Compagnie SA v Bank of England [1950] 1 Ch 333.  That he did attach weight to the approach in that case appears from the following passages in the Judgment:

“25. Mr. Sussex has further drawn my attention to Dolfus Mieg et Compagnie SA v. Bank of England [1950] Ch 333. The question there was whether certain foreign governments retained ‘possession’ or ‘control’ of gold bars deposited in the Bank of England.

26. In their discussions of ‘control’ all 3 judges of the English Court of Appeal referred to The ‘CRISTINA’ [1938] AC 485 (HL). In the latter, the Spanish Government was held ‘to have de facto possession of the ship, because the master and crew, who were in fact in actual control and charge of the ship … asserted they so ‘held’ the ship as servants or agents on behalf of the Spanish Government’ (see summary of The ‘CRISTINA’ by Evershed MR in Dollfus at 352). Nonetheless, the judges in Dollfus differed on whether as a matter of fact the gold bars were under the ‘control’ of the foreign governments. In light of further evidence (not material to the discussion here), they eventually held that the bank could not assert that the foreign governments had been in possession or control of the gold bars.

27. Putting to one side the additional late evidence, Somervell LJ in Dollfus (at 359) explained the concept of ‘control’ thus:-

‘I am assuming … that the bars were held by the bank for the three governments so that, through the agreed machinery of the Tripartite Commission, the bank would on demand deliver the bars in accordance with any instructions which they might receive. I would have said that the three governments retained control. Some meaning must be given to the word ‘control’. Some person other than the foreign government has ex hypothesi possession and that measure of control which goes with possession. Control would therefore, as it seems to me, cover the right to tell the possessor what is to be done with the property….’

…

39. Somervell LJ’s dictum has the merit of providing a simple, clear and rigorous test for ‘control’ within HCO s.12B(4).”

51.  Mr Thomas submitted that the Judge ought instead to have directed his mind to the ordinary meaning of the relevant words, and to their context.  He submitted that the ordinary meaning of “control” means the power of directing, commanding or restraining, exercisable directly or indirectly.  He submitted that, as a matter of context, just as someone in possession, not being the owner or charterer, could be included in the section so too someone else who was de facto or de jure “in control” of the ship could be within the section.  He submitted that to limit the words “in control” to the form of control ordinarily enjoyed by the owner or by a charterer would be to deprive the additional words of any meaning.  Also in relation to context, he submitted that the purpose of s. 12B was to facilitate claims falling within s. 12A to be brought in rem so that “control” should be given a broad commercial meaning not limited to control of navigation, movement, course and speed.  It was noteworthy, for example that claims for loss from wrongful acts could be made against persons in control of the ship in the “loading, carriage or discharge of goods” (s. 12A(2)(f)) and these persons might not be owners or charterers.

52.  In support of his submissions, Mr Thomas drew attention to what was said to be the only reported case where an Admiralty court has decided that the ship connected with the claim was in the “control” of the owners of the ship arrested, namely Euroceanica (UK) Ltd v The Ship “Gem of Safaga” (2009) 263 ALR 68 a decision of the Federal Court of Australia. That case was not cited to the Judge below having only been located by counsel previously instructed for Chimbusco after the Judgment.  Mr Thomas relied on it as authority for the proposition that a time-chartered ship may be in the “control” of a company that directs the charterers how that ship should be commercially operated and the words “in control of” should be given a practical business-like meaning.

53.  In that case, claims were sought to be made against two vessels.  Side letters had been given by the parent company (West Asia Maritime) of the charterer (WAMS) of those vessels.  It was held by Rares J[10] that, on their proper construction, the side letters indicated West Asia Maritime’s control of WAMS and that, although WAMS was the charterer of the ships, it operated them as West Asia Maritime directed.  Therefore, West Asia Maritime was in control of the two ships (which were in common ownership with the “GEM OF SAFAGA” which had been arrested) within the meaning of the relevant section of the Admiralty Act 1988 (Cth).  Rares J held:

“98. In contrast, the side letters involve West Asia itself being responsible to fulfil the charterer’s obligations, not merely to cause its subsidiary to do so. And, here West Asia did have control of and power to influence what WAMS did, including causing it to enter into the charterparties in the first place. The side letters demonstrate the reality of West Asia’s control of WAMS. And, West Asia was in control of the ‘JBU Opal’ and ‘JBU Onyx’ in a practical, business sense. As the instructions of 21 April 2009 to the master of the ‘JBU Opal’ said, the commercial operations of the ship would be handled by West Asia on behalf of WAMS. I infer that this recognised the business reality that, although WAMS was the charterer, it caused the two chartered ships to operate as West Asia directed.

…

101. As a practical matter, West Asia had and exercised control of the commercial operation of the ships, and, by its Indian employer, Capt Venkat, giving voyage instructions to the masters, decided the ports of call and cargoes to be carried. I am satisfied that West Asia was ‘in control of’ each of the ‘JBU Opal’ and ‘JBU Onyx’. The side letters provide a clear admission of that control. And the evidence establishes that West Asia exercised it. The fact that WAMS also had responsibilities under the charterparties and exercised some of them does not mean that its parent did not have control of the chartered ships for the purposes of s 19(a). It is not decisive that WAMS was the charterer of the ships. This does not exclude, for the purposes of s 19(a), there simultaneously being an owner of them, such as [Euroceanica]. …”.

54.  Mr Thomas also referred to a South African Admiralty case on the meaning of “control”, albeit in a different statutory context which provided that “a person shall be deemed to control a company if he has power, directly or indirectly, to control the company”: Belfry Marine Ltd v Palm Base Maritime (the Heavy Metal) (1999) (3) SA 1083.  There Smallburger JA held (see §[8] at p. 1105) that control in that context could be the power to manage the operations of the company or it could be the power to determine its direction and fate.  He also held (see §[10] at p. 1106) that direct power referred to de jure authority over the company by the person who according to the register of the company was entitled to control its destiny, and indirect power to the de facto position of the person who commanded or exerted authority over the person recognised as having the de jure power.  This, he held, was in line with the statutory objective of preventing the true owner from concealing his assets from attachment and execution by his creditors by presenting a false picture to the outside world.

55.  Finally, in this context, Mr Thomas submitted that an alternative analysis, applying agency principles,[11] was that the party who was commercially behind the chartering company might be the undisclosed principal of the charterer and thus a party to the charterparty contract.

56.  Despite the persuasive manner in which these points were argued, I am not persuaded that the Judge applied too narrow a meaning of the phrase “in control of” in s. 12B(4).

57.  As a matter of context, the sections of the High Court Ordinance dealing with the Admiralty jurisdiction of the Court of First Instance replicate ss. 20 to 24 of the Supreme Court Act 1981, which had previously been extended to Hong Kong by Order in Council.  The purpose of the English Act was to bring the right of action in rem in the English (and, by its extension, the Hong Kong) courts into conformity with the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-going Ships 1952: see The Evpo Agnic [1988] 1 WLR 1090 at p. 1094D-E.

58.  Article 3 of that Convention only provides a right of arrest over an owner’s ship in respect of claims against the registered owner or a demise charterer of the ship and a right of arrest over a ship under a demise charter (or over another ship in the ownership of the demise charterer) in respect of claims against the demise charterer.[12]  Nevertheless, as already noted above, the word “charterer” in s. 12B(4)(b) has been construed more widely to include charterers other than demise charterers and “charterer” in s. 12B(4)(b) includes a charterer under other forms of charterparty, even if that charterer does not have possession of the ship.

59.  Thus, although not having possession of the ship, a charterer under a time or voyage charterparty has control of it.  See, The Guiseppe di Vittorio [1998] 1 Lloyd’s Rep 136 at p. 156, where Evans LJ said:

“The sub-section distinguishes between a person who is a ‘charterer of, or in the possession or control of, the ship’ in sub-s.4(a), and the ‘charterer of it under a charter by demise’ in sub-s.4(i). The former clearly includes time and voyage charterers, although they do not have possession of the ship, and it extends expressly to any case where the person concerned does have either possession or control, apparently regardless of whether that person is or can be described as a charterer or not.”

(Emphasis added)

Further, as the words underlined in the above passage indicate, the description of the person with possession or control of the ship is not critical and he need not be described as a charterer.

60.  However, notwithstanding the extension of the meaning of the word “charterer” to a party not having possession of the ship, and of a party having “control” of the vessel to a party not necessarily described as charterer, I accept the submission of Mr Sussex that the language of the Convention and the language of s. 12B(4) suggest that a person’s connection with the ship must involve either full possession or a contractual right of control and that the relationship to the ship cannot be merely casual.  As Mr Sussex observed in the course of his submissions, the statutory requirement is that the person be in control of the ship, not that he be in control of the company which was the charterer of the ship.

61.  In my view, it is giving the words “in control of” the ship their natural and ordinary meaning to look to see if the party said to be in control of the ship is in the position of a charterer (even if not described as such) with a contractual power of control over that ship. Such a power of control would involve having the right to direct the master as to how the ship was to be employed and its existence would not be consistent with some other party having a superior contractual power of control.  Thus, where a ship is on time charter under the NYPE form of contract, clause 8 of which gives the named charterer a contractual right to determine how the ship is to be controlled,[13] there is no warrant, unless the charterparty is a sham or the corporate veil is lifted so that some other party is held to be the contracting charterer, to hold that another party is in control of the vessel.  To do so would be to ignore the fact that there is already a party (the charterer) who is contractually in control by virtue of the charterparty.

62.  This was the approach of the Judge and I therefore do not consider that he was in error in applying too narrow a test to the words “in control of” the ship.  On the contrary, I consider he applied the correct test, one which, as he observed, provided a simple, clear and rigorous test for control of a ship.

63.  I do not think the decision in The Gem of Safaga relied upon by Chimbusco affects this conclusion.  The facts in that case were unusual and the critical circumstance there was the effect of the side letters that had been entered into by West Asia.  The legal consequence of the side letters was described thus by Rares J:

“[96] Here, the side letters contain admissions by West Asia concerning its relationship to WAMS. What is the natural and ordinary meaning of a person agreeing that he is ‘ultimately responsible for the true fulfilment of’ another’s obligations under charterparty between the latter and a third party? The quoted words refer to a positive role in relation to performance of the charterparty. They are consistent with West Asia assuming a primary, or at least a joint and several, liability to [Euroceanica]. …”

(Emphasis added)

64.  It is therefore clear that West Asia were also in a contractual relationship with the owners of the two ships under charter and thus in a position to give voyage instructions to the masters, decide the ports of call and cargoes to be carried (see §[101] quoted above).  As such, notwithstanding that there was another party which was the charterer of the two ships in question, West Asia was also in the position of having a primary, or at least the same, contractual right of control over the ships and did in fact exercise it for that purpose.

65.  In the circumstances, I do not regard that case as requiring a wider meaning to be given to the words “in control of” the ship than the Judge did here.

66.  Nor do I regard The Heavy Metal as supporting the contention that the Judge’s approach here was wrong.  The statutory context of that case was very different.  More importantly, even in that context, Smallburger JA considered that power to control a company was manifested by power to manage the operations of the company or to determine its direction and fate.  In the context of a ship under charterparty, it would be the charterer who was thus in control of the ship (by virtue of its contractual rights under e.g. clause 8 of the NYPE form of charterparty) and not some other party.

67.  This also provides the answer, in my view, to Mr Thomas’ reliance on the agency concept of an undisclosed principal.  In the present context, the court is not looking to see if a party is exercising control over a company which is the charterer but to see if it is exercising control over the ship itself.  Unless the corporate veil is lifted, the separate corporate identity of the contracting party in the charterparty relationship cannot simply be ignored.

68.  Finally, I would add that I agree with Mr Sussex’s submission that Chimbusco’s submissions on this issue should be considered with circumspection.  One is here considering the concept of control of a ship in a context in which, notwithstanding the widespread use of one-ship shipowning companies controlled by a parent company, courts do not as a general course lift the corporate veil (no case was cited to us in which that had been done so that another party behind the veil was thereby held to be the owner or charterer of a ship).  As the Judge observed, introducing a looser test equating control with “having a say (but not necessarily a complete say) in the operation of a vessel” would widen the possibilities for maritime arrest but at the cost of introducing a high degree of uncertainty in shipping matters which would require time-consuming factual assessments and would be commercially undesirable.[14]  Like the Judge, I do not think this was the intention of s. 12B(4).

F.  Was the Judge wrong in his finding that the defendants were not in control of the other 10 vessels?

69.  The Judge concluded that Chimbusco was unable to demonstrate on the available evidence and the balance of probability that Maruba SCA was in “control” of the 10 other vessels at the material time.[15]  Although this Court is in as good a position as the Judge to draw inferences from the evidence which was all given by way of affidavit, it is nevertheless necessary that we be satisfied he was wrong in order for the appeal to succeed since this conclusion of the Judge was a finding of fact reached by him after considering the evidence.

70.  In support of the appeal, Mr Thomas referred us to the evidence relied on by the defendants, which he identified as being largely of four kinds, namely (a) a bundle of unsigned working copies of 10 time charterparties on the NYPE form naming Clan SA of Montevideo as charterers of the 10 other vessels; (b) written agreements dated 2004 showing (i) Clan employing a Cayman company, South Atlantic Containers Lines Ltd, to perform various shipping services for 7.5% of freight revenue, (ii) South Atlantic employing Maruba SCA (the defendants) to perform similar shipping services in return for 5% of the vessel’s revenue and (iii) Maruba SA Empresa de Navigacion Maruba SA and its affiliates appointing Maruba Asia Ltd of Hong Kong as its agent to perform port and cargo handling services; (c) evidence that each of the above companies had its own separate and distinct legal personality; and (d) a statement (described by Mr Thomas as “opaque”) from the remaining director of Clan denying the defendants’ control of the 10 other vessels.

71.  Mr Thomas noted in respect of the bundle of charterparties that, in several of them, there was agreement to change the name of the vessel in question to include the name “MARUBA” and that the bundle included Sea-web searches naming Maruba SCA Empresa, which was another company related to the defendants, as the “Operator” of the ships during the relevant charter periods.  Moreover, Mr Thomas drew attention to the absence of the sort of evidence one might have expected if it was in fact the case that Clan operated its own chartering business.

72.  As to the evidence relied upon by Chimbusco in support of the appeal, Mr Thomas identified that as being of five kinds, namely: (a) the contents of a power-point presentation given to Chimbusco by representatives of Maruba SCA in contemplation of the supply of bunkers; (b) the contents of a Lloyd’s MIU report showing Maruba SCA was a holding company in the shipping business with a substantial share capital and strong balance sheet; (c) a report of an inquiry agent, Gray Page, reporting on Clan and South Atlantic and also on US litigation involving Maruba SCA; (d) certain documents filed in US litigation indicating that Maruba SCA paid charter hire payable by Clan for a number of Maruba vessels and various other statements supportive of Maruba SCA being identified with Clan; and (e) evidence from Chimbusco that it contracted with Maruba SCA to supply the bunkers on credit to all 11 ships.

73.  The power-point presentation included slides showing that Maruba SCA ran a large shipping operation to service trade between the Far East and South America “under the brand name CLAN”; that this was resourced by a fleet of container vessels, which listed 5 of the 10 other vessels relevant to this action; and that CLAN served as a “vehicle” for time chartering vessels and the purchase of bunkers.

74.  The Gray Page report noted that CLAN had a paid up capital of only US$2,500, was registered in a tax free enclave in Uruguay, had no management operations in Montevideo and that its chartering operations were controlled through the head office of the Maruba group in Buenos Aires and that Maruba SCA used CLAN to carry out its own business and operations. Visiting cards used by Maruba SCA’s personnel also carried Clan’s logo.  As for South Atlantic, Gray Page reported that its paid up capital was only US$100, that its address in the Cayman Islands was that of an incorporating agent, that its management operations were controlled through the head office of the Maruba group in Argentina and that in US litigation concerning a container leasing agreement it was alleged that Maruba SCA had unconditionally guaranteed all its operations.  Gray Page also reported on the use by Maruba SCA of a number of subsidiary companies to carry out its vessel operations and a market perception that Clan was simply another trading name for Maruba SCA.

75.  Mr Thomas submitted that, on the evidence, the Court should draw the inference that it was far more likely than not that the orders for the carriage of goods in the 10 ships in question were given by or on behalf of the defendants, as the only person actively operating the business.  He submitted there was no evidence Clan or South Atlantic in fact carried out (or was capitalised to carry out) any significant business.  He submitted that it was apparent that the arrangements put in place in 2004 were no more than simple constructs for legal and tax purposes to create a false impression of Clan’s dominant position and Maruba SCA’s role as subordinate sub-agents. There was no evidence they had been implemented or performed.

76.  It is clear from the Judgment that these matters of evidence were drawn to the Judge’s attention and he took them into account and evaluated them[16] in reaching his conclusion that the defendants were not in control of the 10 other vessels for the purposes of s. 12B(4). Since he applied what I have held to be the proper test for determining when a party is “in control of” a ship, I am not satisfied that his conclusion that the defendants were not in control of the 10 other vessels is one which this Court should disturb on appeal.

77.  The 10 other vessels were at all material times in the possession of their registered owners (who were not the defendants). They were not demise chartered so possession would have remained with their owners.  They were chartered by Clan under time charterparties in the NYPE form.  These charterparties gave Clan the exclusive contractual right to determine how the vessels were to be employed.  In contrast, it was not demonstrated that Maruba SCA had any contractual right to do so.  The power-point presentation did not, as the Judge held, assert a claim on the part of Maruba SCA to be in a position to instruct Clan or the owners of the 10 other vessels on their navigation.  Nor, in my view, does the loose description of Maruba SCA as the “operator” of some of the vessels indicate this.

78.  The fact that Maruba SCA guaranteed certain of the payment obligations of Clan and South Atlantic, and paid charter hire due from Clan does not, in my view, alter the fact that Maruba SCA did not have a contractual right to control the vessels.  The charterer of the vessels was Clan and it was the company contractually entitled to direct the operation of the vessels and to whom the owners owed contractual duties under the charterparties.  As against this, the reference to statements about the Maruba Group’s relationship with Clan in its press releases and on its representatives’ name cards and reliance on third party perceptions in the market adds little to the debate.

79.  The 2004 service and agency agreements support the conclusion that Maruba SCA, through Maruba Asia (which was not one of its subsidiaries), was acting for South Atlantic in ordering the bunkers.  Although the evidence indicates they are plainly associated with one another and that Clan and South Atlantic are not substantial companies, each of Maruba SCA, Maruba Asia, South Atlantic and Clan are separate legal entities and there is no basis to lift the corporate veil between each of the companies (nor was it submitted on behalf of Chimbusco that the Court should do so).  Similarly, there is also no basis for ignoring the 2004 service and agency agreements: this was a commercial agency and there is nothing particularly unusual in it.  Even if the service and agency agreements were executed for reasons of tax efficiency, it was not contended that these should be regarded as being, in law, a sham.  Mr Thomas may be right in saying the arrangements were a legal construct but, as Mr Sussex pointed out, so is a one-ship shipowning company used to take advantage of limits of liability arising from the ownership of a ship.

80.  It is telling that all but one of the sales confirmations for the bunkers supplied to the 10 other vessels was in the name of South Atlantic and all of the ensuing invoices were in the name of South Altantic.  Chimbusco’s demand note for the bunkers supplied, which was dated 11 August 2010 and thus only nine days before the issue of the writ in this action, was addressed to South Atlantic and not the defendants.

81.  In agreement with the Judge below, I therefore accept Mr Sussex’s submission that, on the evidence as a whole, Chimbusco fell short of proving that the defendants were “in control of” the 10 other vessels.

Conclusion

82.  For the above reasons, I would refuse leave to amend the notice of appeal and dismiss the appeal.

83.  I would make an order nisi that Chimbusco shall pay the defendants’ costs of the appeal, to be taxed if not agreed.

Hon Chu JA:

84.  I agree with the judgment of Fok JA and the orders proposed.

Hon McWalters J:

85.  I agree with the judgment of Fok JA and the orders proposed.

[1]  CACV 198/2011 and CACV 214/2011; Yeung VP, Cheung and Yuen JJA.

[2]  I would respectfully disagree, therefore, with the statement of the Court of Appeal (in §11(6)(1) of their judgment in CACV 198/2011 and CACV 214/2011) that Chimbusco had invoked both the in personam and in rem jurisdiction of the Admiralty jurisdiction of the High Court.

[3]  As to this, see the discussion below as to Chimbusco’s second argument on jurisdiction.

[4]  See §11(6)(10) of the Court of Appeal’s judgment in CACV 198/2011 and CACV 214/2011.

[5]  Specifically, the requirement that, when the cause of action arose, Maruba SCA was the charterer of, or in control of, the other 10 vessels (s. 12B(4)(b)).

[6]  Speculative in the sense that the in rem jurisdiction could not be exercised in respect of the claim because all the elements of s. 12B(4) were not satisfied.

[7]  See per Scrutton LJ in The “Tervaete” [1922] P. 259 (at p. 270).

[8]  Judgment §20.

[9]  Judgment §21.

[10]  Although successfully appealed on other grounds (see The Ship Gem of Safaga v Euroceanica (UK) Ltd (2010) 182 FCR 27), this part of Rares J’s judgment was not overturned.

[11]  See Bowstead and Reynolds on Agency (19^th Ed, 2010) §§8-070 to 071 and Chitty on Contracts (31^st Ed) Vol.2 §31-089.

[12]  See Article 3(4) of the Convention which provides:

“When in the case of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claims.  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.”

[13]  Clause 8 of the NYPE forms as adapted for the charterparties in respect of the 10 other vessels in the present case provided: “That the Captain shall prosecute his voyages with the utmost dispatch, and shall render all customary assistance with ship’s crew and boats.  The Captain (although appointed by the Owners), shall be under the orders and directions of the Charterers as regards employment and agency; and Charterers are to load, stow, trim, tally, dunnage, lash, secure, unlash, unsecure and discharge the cargo at their expense under the supervision of the Captain, who is to sign Bills of Lading for cargo as presented, in conformity with Mate’s or Tally Clerk’s receipts, and without prejudice to this Charter Party.”

[14]  Judgment §§40 to 42.

[15]  Judgment §38.

[16]  See Judgment §§31 to 37.