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HCAJ000147A/1985
| IN THE SUPREME COURT OF HONG KONG |
1985, Folio No. 147
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ADMIRALTY JURISDICTION
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BETWEEN
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Aleena Shipping Inc. |
Plaintiffs |
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and
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The Owners of and other persons interested in the ship "ATHENIAN ZOE" |
Defendants |
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Coram: Mortimer, J.
Date of hearing: 5th November 1985.
Date of handing dowm of Ruling: 19th November 1985.
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RULING
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1. The Plaintiffs move the Court for an order that the 'Athenian Zoe' be appraised and sold pendente lite and the proceeds be paid into Court. Her arrest was ordered by this Court on 11th June 1985. It was a 'sister ship' arrest.
2. The Plaintiffs own the 'Zelia' which was under time charter to Athenian Management S.A. Their claim is for breach of the charter. They seek damages for the loss of the hire of the vessel together with damages for consequential loss. In all they claim about U.S.$5.5 million which is more than the value of the 'Athenian Zoe'. They allege a Mr. Kyriakou is personally liable on the basis that (a) Athenian Management S.A. was his agent in the charter and (b) that he personally guaranteed the performance of the charter party.
3. The arrest of the 'Athenian Zoe' is justified by a complicated route. The evidential basis of which is that at some stage Mr. Kyriakou is said to have claimed ownership of her. The route is this:
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(a) |
The claim arises in relation to a ship ("The Zelia").
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(b) |
The person who would be liable 'in personam' is Mr. K.
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(c) |
The 'Athenian Zoe' was wholly beneficially owned by Mr. K at the time when the action was brought in that:
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(i) |
Her registered owner is Blue Emblem Shipping Co. (a Cypriot Company)
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(ii) |
Blue Emblem is owned by Helmin Inc. (a Panamanian Company) as to 99 shares and by Mr. K as to 1 share.
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(iii) |
Helmin Inc. has 4 shareholders. Those other than Mr. K hold their shares as his nominee.
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(d) |
Mr. K was either 'a charterer of, or in possession or in control of the ship' ('the Zelia') when the cause of action arose because he is and was the controlling shareholder in Athenian Management - the Charterer.
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(e) |
In the circumstances 'the Athenian Zoe' was another ship beneficially owned by Mr. K at the time when the action was brought.
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See Administration of Justice Act 1956 Sec. 3(4)(h) which is specifically applied to Hong Kong. |
4. The arrest of 'the Athenian Zoe' was ordered on 11th June 1985. By a summons dated 21st June 1985 the Defendants challenge the validity of the arrest. On 27th June 1985 Hunter J. ruled on a preliminary point allowing the arrest to continue. There were then hearings before Master Betts and Mantell J. in which orders for discovery and the attendance of witnesses for cross-examination were made against the Defendants. It was hoped that the hearing of the Defendants' summons of 21st June would take place on 2nd September. It did not.
5. The Plaintiffs contend that the court should now order the sale of the vessel and contend that this is necessary because:-
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The vessel is a wasting asset and the value of the security is diminishing substantially by reason of:
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(a) |
a falling market.
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(b) |
Reduction in value due to lack of maintenance and being held in port.
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(c) |
Maintenance costs borne by the Plaintiffs over a long period (past and future).
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2. |
The vessel is insufficient security to cover the claim
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The Defendants have no present use for the vessel because of the depressed shipping market and therefore:
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they decline to put up alternative security, and,
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they are dragging their feet in their application to set aside the arrest. |
6. The Defendants resist such an order. They submit that a draconian order of this nature should not be made on the grounds:-
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That there are substantial issues to be tried as to the validity of the arrest and whether the arrest should be set aside.
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That they are now ready for trial and have not been deliberately delaying.
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That there is no reason why they should put up security in a very large sum when the validity of the arrest is challenged on obviously arguable grounds.
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That although the arrest is costing the Plaintiffs considerably the Defendants are spending about 10 times as much in keeping crew aboard and in routine maintenance.
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That the Defendants have not abandoned the vessel. |
7. It is obvious from the way in which the Plaintiffs put their claims to the validity of the arrest that there are substantial issues of law and fact to be resolved upon the Defendants' summons to set it aside. This is not in dispute.
8. In the course of argument, I encouraged Mr. Mumford to submit that in a case where there are substantial issues to be resolved as to the validity of the arrest and therefore whether 'the property' is property which is validly 'the subject matter of the cause in dispute or as to which any question arises therein' (see Order 29 & 4 R.S.C.) the Court has power to order the sale. I am satisfied, however, that the Court does have such power. The vessel 'Athenian Zoe' is property which the Court can order to be sold provided good reason is shown because the arrest is valid unless and until set aside by the Court.
9. The exercise of the poorer of sale is within the discretion of the Court which is not absolutely fettered by the fact that the Defendants are seeking to set aside the arrest or that they (and/or Mr. K) will defend the action. See The "Myrto" 1977 L1 L.R. 243
10. The Court will not order the appraisement and sale of a vessel except for good reason. (0.29 r.4 authorises the sale of property for 'any other good reason'.)
11. In deciding whether to exercise the discretion to sell the Court must consider the amount of the security provided by the vessel, the manner in which that security is diminishing and the length of time involved in bringing (a) the issues relating to the arrest to trial and (b) the claim itself to trial.
12. I am satisfied or the Affidavits before me that the Defendants have not been dragging their feet in preparing for trial of their release summons. I accept that they are now in a position to serve a list of documents they have obtained and that there is every chance that the issues relating to the arrest will be resolved in about 2½ to 3 months. There is no evidence as to when the claim will be heard. It is more likely to be years than months.
13. These times have to be considered in relation to the diminishing value of the security. The fact that the owners have failed to provide alternative security to release the vessel is, of itself, unimportant when they have not abandoned the vessel and have crew aboard routinely maintaining her.
14. Where there are substantial issues to be decided concerning the validity of arrest (therefore whether the vessel is valid security in the action at all) and that those issues are likely to be tried within such period of time that no further substantial and comparative diminution of the value of the vessel as security is likely to occur (as I find in this case) the Court will be slow to order an immediate appraisement and sale. Indeed in additional circumstances where the Defendants are themselves spending considerable sums on maintenance and the Court accepts that if they succeed on their release summons they are likely to be prejudiced by an immediate, enforced, 'as is', sale (as I do) an order for sale will be made only if the Court is convinced that an immediate sale is necessary in the interests of all the parties including third parties. I am not so convinced.
15. For these reasons therefore I exercise my discretion against ordering an immediate appraisement and sale.
16. A significant factor in my decision is that I accept the Defendants' evidence that they are now ready for trial of the issues relating to the validity of the arrest together with a reasonable forecast that these issues will be tried within 2½ to 3 months provided the parties co-operate. However, as circumstances may change with the passage of time my order is:-
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That the motion be adjourned generally.
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That each party should have liberty to apply to restore the motion to the list on 7 days notice.
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That the parties should have general liberty to apply.
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That I reserve the motion to myself until further order. |
I propose that the costs so far should be reserved to be decided on the final determination of the motion unless any party wishes to be heard on them. Any application for an appointment to be made to be heard on costs should be made to my clerk.
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(J.B. Mortimer) |
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Judge of the High Court |
Representation:
Geoffrey Ma (Richards Butler) for Plaintiffs
E.C. Mumford, Q.C. & Mrs. Lorna Wu (Ince & Co.) for Defendants
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