INTERNATIONAL TRANSPORTATION SERVICE INC. v. THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL "CONVENIENCE CONTAINER"

CACV 234, 235, 236, 237, 238, 239, 240/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 234, 235, 236, 237, 238, 239, 240 OF 2006

(ON APPEAL FROM HCAJ NOS. 150, 151, 153, 268, 270, 271, 272 OF 2003)

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CACV 234/2006

ADMIRALTY ACTION IN REM AGAINST THE SHIP OR VESSEL

“CONVENIENCE CONTAINER” (SINGAPORE FLAG)

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CACV 235/2006

ADMIRALTY ACTION IN REM AGAINST THE SHIP OR VESSEL

 “KINGDOM CONTAINER” (SINGAPORE FLAG)

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CACV 236/2006

ADMIRALTY ACTION IN REM AGAINST THE SHIP OR VESSEL

“LIBERTY CONTAINER” (SINGAPORE FLAG)

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CACV 237/2006

ADMIRALTY ACTION IN REM AGAINST THE SHIP OR VESSEL

“CONVENIENCE CONTAINER” (SINGAPORE FLAG)

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CACV 238/2006

ADMIRALTY ACTION IN REM AGAINST THE SHIP OR VESSEL

“KINGDOM CONTAINER” (SINGAPORE FLAG)

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CACV 239/2006

ADMIRALTY ACTION IN REM AGAINST THE SHIP OR VESSEL

“LIBERTY CONTAINER” (SINGAPORE FLAG)

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CACV 240/2006

ADMIRALTY ACTION IN REM AGAINST THE SHIP OR VESSEL

“MANDARIN CONTAINER” (SINGAPORE FLAG)

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J U D G M E N T

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Reyes J:-

I. INTRODUCTION

1.  Powick Marine(S) Ptd Ltd. is a Singapore company.  It is registered in the Singapore Ship Register as the owner of the 4 ships involved in these proceedings.  It went into voluntary liquidation in Singapore on 13 May 2003.

2.  On 10 May 2003 International Transportation Service Inc. (ITS) issued an in rem writ against the “Mandarin Container,” one of the 4 ships.  On 16 May 2003 ITS issued in rem writs against the 3 remaining ships.  Each of the writs claimed unpaid charges for stevedoring, wharfage and dockage.

3.  On 18 September 2003 Oetker issued 4 identical in rem writs against the 4 ships.  The writs were amended on 24 October 2003 so that each writ alleged the breach of a specific charterparty in respect of a particular vessel.  Powick acknowledged service of Oetker’s writs on 30 September 2003.

4.  The 4 ships had been arrested in Hong Kong by creditors of Powick (other than Oetker and ITS) on dates between 16 May and 2 June 2003.  Following an order of the Admiralty Court dated 13 June 2003, the 4 ships were sold on 7 July 2003.

5.  In July 2003 and January 2004 respectively, Powick applied for the ITS and Oetker writs to be set aside.  Waung J dismissed Powick’s applications on 5 June 2006.  Powick now appeals against that dismissal.

6.  Of the various grounds for setting aside the writs which Powick argued at first instance, two primarily are pursued on appeal.  They are as follows:-

(1)	Argument 1: “The Liquidation Point”
	Since Powick went into voluntary liquidation before all of the Oetker and most of the ITS writs were issued, Powick was no longer the “beneficial owner” of the 4 vessels when ITS and Oetker brought such actions by the issue of the relevant writs.  Neither ITS nor Oetker could bring in rem claims against the particular vessels under High Court Ordinance (Cap.4) (HCO) s.12B(4).  This is because the section requires that, at the time when a claim is brought, the beneficial ownership of the vessels should have remained in the person (Powick) alleged to be liable at the time when the cause of action arose.  It was argued that under both Hong Kong and Singapore law Powick had ceased to be the “beneficial owner” by reason of its voluntary liquidation.  Singapore law is said to be relevant because the vessels are registered and the liquidation is taking place in Singapore.
(2)	Argument 2: “The Judicial Sale Point”
	Since the sale of the 4 vessels on 7 July 2003 transferred title to a third-party buyer, Oetker could not have brought an in rem claim against the 4 vessels in September 2003.  This is because Oetker could not meet the requirement of continuing beneficial ownership in HCO s.12B(4).  This ground (which only applies to Oetker) was raised as a fallback position in the event that the Liquidation Point failed.

7.  Underlying Powick’s application is a contest between the general body of Powick’s unsecured creditors on the one hand and ITS and Oetker on the other.  To the extent that ITS or Oetker can assert in rem claims against all or some of the 4 vessels or their sale proceeds, there will be fewer (if any) monies available from the sale of the vessels for distribution among Powick’s unsecured creditors. 

8.  Powick (acting by its liquidators) essentially contends that ITS and Oetker cannot invoke in rem jurisdiction to secure themselves against all or some of the 4 vessels or their proceeds.  To the extent that Powick is right, ITS and Oetker will only have unsecured personal claims against Powick.

II. DISCUSSION

A. Argument 1: “The Liquidation Point”

A.1 Background

9.  The claims advanced by ITS and Oetker come within the Admiralty jurisdiction of this Court defined in HCO s.12A. 

10.  Oetker’s action is a claim “arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship” within the terms of HCO s.12A(2)(h). 

11.  ITS’ action is a claim “in respect of the construction, repair or equipment of a ship or in respect of dock charges or dues” within the terms of HCO s.12A(2)(m).

12.  Consequently, ITS and Oetker may bring claims in rem if they meet the criteria in HCO s.12B(4).  That 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 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.”

13.  Mr. Charles Sussex SC (appearing for Powick) submits that ITS and Oetker cannot bring in rem claims because, at the time of the writs, Powick (the “relevant person” for the purposes of HCO s.12B(4)) had ceased to be the “beneficial owner” of the 4 vessels.

14.  The question is what is meant by the expression “beneficial owner” in s.12B(4)(i).  The HCO being a domestic statute, that expression is to be construed in accordance with Hong Kong law.  I shall deal later with the relevance of Singapore law.

A.2 The meaning of “beneficial owner”‘

A.2.1 Case law

15.  In The “Andrea Ursula” [1973] QB 265 Brandon J construed the equivalent expression in s.3(4)(a) of the English Administration of Justice Act 1956 (AJA 1956) as not just encompassing legal or equitable ownership, but as including such “ownership” as may be said to reside in a demise charterer.  More specifically, Brandon J thought that a vessel could be “beneficially owned” by someone who, although not the legal or equitable owner of the ship, had full possession and control of the vessel in the way that a demise charterer might.

16.  But in The “I Congreso del Partido” [1978] 1 QB 500 Robert Goff J disagreed. 

17.  Robert Goff J thought (at 538E-F) that the words “beneficial ownership” in AJA 1956 referred “only to cases of equitable ownership, whether or not accompanied by legal ownership, and are not wide enough to include cases of possession and control without ownership, however full and complete such possession and control may be”. 

18.  He rejected the suggestion that a demise charterer could be a “beneficial owner” merely by reason of its control over a vessel.

19.  He finally observed (at 541B) that the word “beneficial” may have been added to “ownership” in AJA 1956 “very possibly to take account of the special English institution of the trust”.

20.  When “Andrea Ursula” and “Congreso” were decided, the AJA 1956 equivalent to the conditions in HCO ss.12B(4)(i) and (ii) authorised the bringing of in rem claims against:-

“	(a)	that ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; or
	(b)	any other ship which, at the time the action is brought, is beneficially owned as aforesaid.”

21.  Following “Congreso”, the foregoing conditions in AJA 1956 were amended by the Supreme Court Act 1981 (SCA 1981).  SCA 1981 s.21(4) introduced identical wording to that in HCO ss.12B(4)(i) and (ii). 

22.  The SCA 1981 thereby permitted claims against a particular ship which was either within the beneficial ownership of the relevant person or chartered by demise to such person.  That express distinction in SCA 1981 between a beneficial owner and a demise charterer has since been consistently regarded as a vindication of Robert Goff J’s conclusion in “Congreso” that a charterer by demise was not a beneficial owner.

A.2.2 Powick’s critique

23.  Mr. Sussex contends that “Congreso” was wrong or, at least, imprecise.  He suggest that “beneficial ownership” in HCO s.12(B)(4) cannot simply mean “equitable ownership” as Robert Goff J decided.

24.  Mr. Sussex begins his argument by pointing out that, when someone is the absolute owner of a chattel (such as a ship), there is no separate identifiable equitable estate. 

25.  In support of his proposition, Mr. Sussex notes a dictum of Lord Browne-Wilkinson in West-Deutsche Landesbank Girozentrale v.Islington Borough Council [1996] AC 669 (at 706F):-

“

A person solely entitled to the full beneficial ownership of money or property, both at law or in equity, does not enjoy an equitable interest in that property.  The legal title carries with it all rights.  Unless and until there is a separation of the legal and equitable estates, there is no separate equitable title.”

26.  Mr. Sussex then points out that trusts of ships are rare. Typically, in real life, “ownership” of a vessel will be commensurate with absolute ownership.  The legal and equitable interests will not have been separated in such situation.

27.  It follows (Mr. Sussex submits) that “beneficial ownership” in HCO s.12B(4) must denote something other than “equitable ownership”.  This is because, the paradigm situation of ownership being one where the legal and equitable interests in a ship have not been separated, it will be meaningless (and wrong) to speak of there being an “equitable” owner.

28.  Indeed, Mr. Sussex argues that by itself the word “owner” in s.12B(4) can refer to a legal or equitable owner.  The word “beneficial,” on the other hand, must add something more.  It should (the argument runs) connote some quality or attribute that is distinctive of the “bundle of rights” constituting full ownership. 

29.  Mr Sussex suggests that a key element of the bundle of rights associated with ownership must be the ability to enjoy the proceeds from the sale of an asset.  If a person is not free to use such sale proceeds as one wishes, then it cannot be (Mr. Sussex submits) that such person is a “beneficial owner” of the asset.  He does not “own” or hold the asset for his “benefit” but for the benefit of others.  It is therefore in this sense that (according to Mr. Sussex) the concept of beneficial ownership in s.12B(4) should be construed.

30.  Here (Mr. Sussex concludes), although it is the registered owner of the 4 vessels, Powick cannot be the “beneficial owner”. This is because Powick, in liquidation, cannot use the proceeds from the sale of any of its assets (including the 4 vessels) as it wishes.  Such proceeds are subject to the statutory regime imposed by the Singaporean insolvency law.  The proceeds from the sale of Powick’s assets must be held by its liquidators for the benefit of the company’s creditors and not for Powick’s own enjoyment.

A.2.3 Evaluation of Powick’s critique

31.  I am not persuaded by Mr. Sussex’s argument.  I would make three observations.

32.  First, one construes the meaning of “beneficial ownership” in HCO s.12B(4) by reference to the purpose of the provision.

33.  The section allows claimants to treat ships (among other property) as security for certain types of Admiralty claim.  But ships should not be subject to such jurisdiction unless they are the property of a relevant person. 

34.  As a matter of general principle, in the absence of compelling reason, property belonging to X (a stranger) should not be used to secure a claim on which Y (a relevant person) is liable.  The conditions in s.12B(4) are meant to ensure that, subject to an expressly recognised exception covering demise charters, a stranger’s property is not used to discharge someone else’s liability.

35.  Thus, as far as “beneficial ownership” is concerned, HCO s.12B(4) must be concerned with title to property.  “Beneficial ownership” cannot merely be about the control or administration of a vessel or even the enjoyment of the proceeds from the sale of a vessel. 

36.  A person can control a ship but have no title in it. By the same token, a person may for a variety of reasons (including mortgage, charge or assignment) have put out of his hands the full enjoyment of the proceeds of sale from an asset.  But that would not necessarily mean that the person is unable to pass good title in the asset to third parties.

37.  By themselves, considerations of administrative control or beneficial enjoyment of the proceeds of sale do not answer the key question that needs to be addressed in determining whether in rem jurisdiction exists. I accept, of course, that factors such as administrative control and enjoyment of the proceeds of sale may provide evidence which can assist in answering the key question that needs to be addressed (see, for example, The “Nazym Khikmet” [1996] 2 Lloyds Law Rep 362).

38.  And that key question is purely one about title.  It is whether a particular ship is an asset in which a relevant person holds a proprietary interest against which a claimant can enforce his claim.  To put it in another way, the question is whether a relevant person can sell or dispose of a ship and, in so doing, convey good title in the asset to a third party purchaser.

39.  I am fortified in my view by authority. 

40.  For instance, in The “St. Merriel” [1962] P 247, Hewson J stated:-

“

‘Beneficially owned’ is not defined in [AJA 1956]; and there are circumstances where a ship is owned by one person -- that is true ownership -- where that person is the only person with a right to sell and yet where the same ship is beneficially possessed -- if I may use that expression -- or beneficially controlled, by some other person, such as in this case, where the ship is under charter by demise.  But the words of the Act are ‘as respects all the shares therein,’ and I conclude that the words are there for some purpose and that that purpose is to indicate the true owner, that is, the only person with a right to sell all the shares.”

41.  In The Pangkalan Susu/ Permina 3001 [1975-77] SLR 252, the Singapore Court of Appeal construed the expression “beneficial ownership” in s.4(4) of the Singapore High Court (Admiralty Jurisdiction) Act in similar fashion.  The latter section is identical to that from AJA 1956 considered by Brandon J in “Andrea Ursula” and Robert Goff J in “Congreso”.

42.  At 254 F-H, Wee CJ said (echoing Robert Goff J in “Congreso”):-

“

The question is what do the words ‘beneficially owned as respects all the shares therein’ mean in the context of the Act.  These words are not defined in the Act.  Apart from authority, we would construe them to refer only to such ownership of a ship as is vested in a person who has the right to sell, dispose of or alienate all the shares in that ship.  Our construction would clearly cover the case of a ship owned by a person who, whether he is the legal owner or not, is in any case the equitable owner of all the shares therein.  In our opinion, it would be a misuse of language to equate full possession and control of a ship with beneficial ownership as respects all the shares in a ship.  The word ‘ownership’ connotes title, legal or equitable whereas the expression ‘possession and control’, however full and complete, is not related to title. Although a person with only full possession and control of a ship such as a demise charterer, has the beneficial use of her, in our opinion he does not have the beneficial ownership as respects all the shares in the ship and the ship is not ‘beneficially owned as respects all the shares therein’ by him within the meaning of s.4(4).”

43.  In my judgment, contrary to what Mr. Sussex submits, the expression “beneficial ownership” in HCO s.12B(4) focuses simply on matters of title, namely, the right to sell or dispose of a ship.

44.  Second, I have no difficulty in understanding Robert Goff J’s reading of “beneficial ownership” as covering the case where an owner is absolute owner and the legal and equitable interests have not been separated.

45.  All Robert Goff J was saying was that a “beneficial owner” is one of whom it could either be said that:-

(1)	he is the owner of a particular ship at law or in equity; or,
(2)	at the very least, he is the owner of the particular ship in equity.

46.  Robert Goff J may have put it more succinctly by referring to “cases of equitable ownership, whether or not accompanied by legal ownership”.  But, teased out, his words are equivalent to what I have just set out. 

47.  The first limb of that expanded statement covers the common situation where a ship’s registered owner is its full owner.  The second limb deals with the case where a nominee holds a vessel as trustee for and on behalf of a relevant person.  The latter situation may be rare, but it remains a possibility.

48.  I do not accept that there is the imprecision which Mr. Sussex asserts.

49.  Third, if one takes “beneficial ownership” to refer to the person who has title to sell the 4 ships here, the answer to the question who is the “beneficial owner” here is self-evident.  The “beneficial owner” within the meaning of HCO s.12B(4) can only be Powick.

50.  Liquidation simply has meant the disposition of the vessels, including the decision whether or not to sell them, rests with Powick’s liquidator and not with its board.  But there is no question that full title to the ships remains vested in Powick.

51.  Just as any other assets of Powick, the 4 vessels are subject to the insolvency regime detailed in Singapore’s Companies Act (Cap.50).  By that regime any proceeds from the sale of assets not standing as security for particular claims must go towards paying off creditors and cannot be used for a company’s benefit.

52.  But that does not make Powick’s liquidator a trustee (as opposed to a mere fiduciary).  A sale of Powick’s assets by the liquidator is executed in Powick’s name, not that of the liquidator. 

53.  Nor does liquidation impress Powick’s assets with a trust (in the traditional sense) in favour of the body of its creditors.  There has been no separation of the legal and equitable estates in the 4 vessels as a result of the liquidation.  At law and in equity Powick remains their owner.

54.  It follows that at the time when writs were taken out by ITS and Oetker the beneficial ownership in the vessels remained with the “relevant person”, namely, Powick.  There is no basis to set aside the writs on the ground the by the time the writs were issued beneficial ownership (in the sense identified above) had changed.

A.3 Ayerst versus Lintner

55.  Much of the discussion before Waung J (and some of the argument on appeal) considered the differing approaches to the construction of the term “beneficial ownership” in Ayerst (Inspector of Taxes) v. C & K (Construction) Ltd. [1976] AC 167 (HL) and Linter Textiles Australia Ltd. (in liquidation) v. Commissioner of Taxation (2005) 20 CLR 592 (H Ct of Aust.).

56.  I doubt that these 2 cases are more than peripherally relevant. Nonetheless, in deference to counsel’s submissions, I propose to deal briefly with the approaches in the two cases, if only to articulate my doubt.

A.3.1 Ayerst

57.  In Ayerst a taxpayer bought the business of M Ltd., a company in liquidation.  The taxpayer then sought to set off against its taxable profits the losses and claims to capital allowances which M had accrued.  Under the Finance Act 1954, the taxpayer could do so if, despite liquidation, M’s assets (namely, the trading losses and claims to capital allowances just mentioned) remained within M’s “beneficial ownership”.

58.  Lord Diplock (with whom the other Law Lords agreed) held that M’s assets ceased to be under its “beneficial ownership” upon liquidation.  Following a line of authority (relating to companies in liquidation) starting with In re Oriental Inland Steam Co. (1874) 9 Ch App 557, he held that as a result of winding up M lost “the right of [an] owner to enjoy the fruits of [its property] or dispose of [its property] for [its] own benefit”.

59.  Although M’s liquidator was not a “trustee” and M’s property was not held on “trust” in the sense that such words are normally understood, Lord Diplock observed (at 178F) that:-

“

It is no misuse of language to describe the property as being held by the trustee [that is, the liquidator] on a statutory trust [that is, the insolvency regime set out in the Companies Acts] if the qualifying adjective ‘statutory’ is understood as indicating that the trust does not bear the indicia which characterise a trust as it was recognised by the Court of Chancery apart from statute.”

60.  M’s property could thus no longer be said to be within its “beneficial ownership”.  The effect of the statutory regime of insolvency was (at 180F):-

“	to give to the property of a company in liquidation that essential characteristic which distinguished trust property from other property, viz., that it could not be used or disposed of by the legal owner for his own benefit, but must be used or disposed of for the benefit of other persons.”

61.  Lord Diplock then concluded his speech as follows (at 180G-181D):-

“	My Lords, the expression ‘beneficial owner’ in relation to the proprietary interest of a company in its assets was first used in a taxing statute in 1927.  Section 55 of the Finance Act 1927 provided for relief from capital and transfer stamp duty in cases of reconstruction or amalgamation of companies where shares in a transferee company were issued as consideration for the acquisition of the undertaking of the transferor company.  Subsection (6)(a) (b) and (c) made provision for three exceptions to the right to this relief.  The exception provided for in paragraph (b) is expressed to depend upon whether within a period of two years from a specified date the ‘... [transferor] ... company ceases, otherwise than in consequence of reconstruction, amalgamation or liquidation, to be the beneficial owner of the shares so issued to it.’  From this can be inferred a recognition by Parliament that when a company is in liquidation it ceases to be the ‘beneficial owner’ of its assets within the meaning of that expression as used by the draftsman in a taxing statute.
	The expressions ‘beneficial owner’ and ‘beneficial ownership’ appear again in section 42(2)(b) of the Finance Act 1930 in connection with what companies were to be treated as associated companies for the purpose of relief from transfer stamp duty, and in section 42 of the Finance Act 1938.  This dealt with the grouping of profits of parent and subsidiary companies for the purpose of national defence contribution.  The definition of subsidiary company, which incorporates the reference to the requirement of ‘beneficial ownership’ of its shares by its parent company, is in the same words as the corresponding definition in section 17(6) of the Finance Act 1954.
	So when those words were repeated in the Finance Act 1954 not only was there a consistent line of judicial authority that upon going into liquidation a company ceases to be ‘beneficial owner’ of its assets, as that expression has been used as a term of legal art since 1874, but also there has been a consistent use in taxing statutes of the expressions ‘beneficial owner’ and ‘beneficial ownership’ in relation to the proprietary interest of a company in its assets which started with the Finance Act 1927, where the context makes it clear that a company upon going into liquidation ceases to be ‘beneficial owner’ of its assets as that expression is used in a taxing statute.”

62.  It will be noticed that Lord Diplock was at pains to tie his understanding of the meaning of “beneficial ownership” to the specific contexts of liquidation and the Finance Acts.  Since then, Ayerst has been frequently relied upon as authority for the proposition that on winding up a company loses the “beneficial ownership” of its assets.  Two recent dicta may serve as examples.

63.  In Mitchell v. Carter [1997] 1 BCLC 673, which considered whether the Court could decide priorities in relation to the fruits of garnishment proceedings brought against a company in liquidation, Millett LJ said (at 636f-h):-

“

The making of a winding-up order divests the company of the beneficial ownership of its assets which cease to be applicable for its own benefit.  They become instead subject to a statutory scheme for distribution among the creditors and members of the company.  The responsibility for collecting the assets and implementing the statutory scheme is vested in the liquidator subject to the ultimate control of the court.  The creditors do not themselves acquire a beneficial interest in any of the assets, but only a right to have them administered in accordance with the statutory scheme.  These principles were established in Ayerst...  They apply to all the assets of the company, both in England and abroad, for the making of a winding-up order is regarded as having worldwide effect.”

64.  In Buchler v. Talbot [2004] UKHL 9, which concerned the Court’s power to order that liquidators be paid out of assets subject to a floating charge, Lord Hoffmann said (at §28):-

“

The winding up of a company is a form of collective execution by all its creditors against all its available assets.  The resolution or order for winding up divests the company of the beneficial interest in its assets.  They become a fund which the company thereafter holds in trust to discharge its liabilities: Ayerst...  It is a special kind of trust because neither the creditors nor anyone else have a proprietary beneficial interest in accordance with the provisions of the Insolvency Act 1986:  see In re Calgary andEdmonton Land Co. Ltd. [1975] 1 WLR 355, 359.  But the trust applies only to the company’s property.  It does not affect the proprietary interests of others.”

65.  However widely Ayerst has been cited in relation to what constitutes a company’s “beneficial ownership” in a winding-up, no case has applied Ayerst to the Admiralty context.  As we have seen, even in Singapore, the Courts have followed Robert Goff J in “Congreso”.

A.3.2 Linter

66.  In Linter the majority of the High Court of Australia (Gleeson CJ, Gummow, Hayne, Cullinan and Heydon JJ) were critical of the Ayerst approach.  Linter involved the question whether a taxpayer could claim a certain deduction.  It could do so, under the Income Tax Assessment Act 1936, if a company “beneficially owned” its assets although in liquidation.

67.  The majority thought (at §48) the trust analogy employed by Lord Diplock in Ayerst was “of no utility, and indeed is misleading”.  Instead they approved the following dictum of Menzies J in Franklin’s Selfserve Pty Ltd. v. Federal Commissioner of Taxation (1970) 125 CLR 52 (at 69-70):-

“

Even if a company, being insolvent, goes into liquidation, I find difficulty in regarding the company itself as trustee for anybody, notwithstanding that it can no longer employ its assets in its business, nor dispose of them.  The assets must be held for the purpose of its own liquidation in accordance with statute.  Of course its assets have to be realized by the liquidator and distributed among the company’s creditors but this is done in accordance with elaborate statutory provisions for bringing about the result for which the statute provides. The matter is not left to the application of general law relaying to trustees and cestuis que trust....”

68.  See also to similar effect the concurring analysis of McHugh J in Linter (at §§121-130).

69.  The majority therefore held that a company in liquidation remained the “beneficial owner” of its assets within the meaning of the 1936 Act.

70.  In his lone dissenting judgment, Kirby J in Linter nonetheless rejected (as unnecessary) Lord Diplock’s recourse to a trust analogy in Ayerst.  The important question for Kirby J was whether, on the facts, the relevant company could be said to be the “beneficial owner” of its assets within the meaning of the 1936 Act.  That was wholly a matter of a consideration of the latter statute’s history and purpose and “the consistent meaning given to overseas equivalent statutory expressions”.

71.  Kirby J’s view may be seen from the following passage:-

“	241.	It was that notion of beneficial ownership of the company’s property after the commencement of winding up that was given effect in In re Oriental Inland Steam..., the 1874 decision that Lord Diplock regarded as establishing the principle applicable in Ayerst.  In that case, James LJ had said of the effect of liquidation:-
		‘	The English Act of Parliament has enacted that in the case of a winding-up the assets of the company so wound up are to be collected and applied in discharge of its liabilities.  [That makes the property of the company clearly trust property.]  It is property affected by the Act of Parliament with an obligation to be dealt with by the proper officer in a particular way.  Then it has ceased to be beneficially the property of the company.’
	242.	The introduction of analogies, taken from the law of trusts, which occasions the attempt, in the joint reasons in this Court, to distinguish the settled line of authority on this aspect of revenue law in the United Kingdom, is, with respect, a forensic red-herring.  It appears to have been introduced into these proceedings in a not unfamiliar reaction to keep the Australian waters of equity and trust law unsullied by foreign and supposedly deleterious intrusions, even where (as here) the intrusions originated in the country from which the law of equity and trusts itself derives.  I have no sympathy for such parochial inflexibilities.
	243.	The reference to ‘trust property’ in the earlier English authorities was not, as such an attempt to import all of the features of the law of trusts into defined statutory relationships following a company liquidation. Self-evidently, that could not have been intended by the knowledgeable and experienced judges involved.  Instead, it was an attempt (in effect in an aside in the course of reasoning) to explain the construction and operation of a statute in terms that would have been understood by lawyers in the English Court of Chancery in 1874, who had the responsibility of applying the pertinent statute.  The analogy was not the essence of the reasoning of the English judges. This can be seen by the simple expedient of deleting the reference to the analogy of trust property (shown in brackets in the foregoing quotation) from the reasons of James LJ.  His Lordship’s reasons remain coherent and convincing without the words in brackets.  The essence of those words was an attempt to draw on a familiar analogy to help explain the operation which the Act of Parliament had upon the property in question.  By that operation ‘it has ceased to be beneficially the property of the company’.
	244.	In Ayerst, Lord Diplock noted that the holding in Oriental Inland Steam Co, based on the relevant United Kingdom legislation, had been repeated in successive editions of Buckley on the Companies Acts ‘from 1897 to the present day’.  As such, it had clearly passed muster before a great many English lawyers of high distinction and experience, who fully understood the law of company liquidation.  Lord Diplock recorded the invitation before the House of Lords to say that the reasoning was wrong ‘because it was founded on the false premise that the property is subject to a “trust” in the strict sense of that expression as it was used in equity before 1862’.  His Lordship rejected that sterile argument.  Instead, he grounded his interpretation of the phrase in the settled meaning of beneficial ownership in this context which was to be take as incorporated in revenue law when the notion of ‘beneficial ownership’ was first used in a United Kingdom taxing statute in 1927.  He thus expressly considered, and rejected, the reasoning which prevailed in the Federal Court in this case and now finds favour with a majority in this Court.  Not a single Law Lord dissented from Lord Diplock’s speech.
	245.	I can see no reason of legal authority, principle or policy to justify this Court’s taking a different course from that adopted by the unanimous opinion of the House of Lords on a precisely identical point of revenue law.  Only an elaborate reasoning, founded on metaphors, similes and analogical references (and based on a somewhat parochial antipodean inflexibility concerning the law of trusts), could persuade this Court to impose, on similar Australian statutory language, a construction opposite to that which has been followed for one and a quarter centuries in the United Kingdom.  There is no reason why we should take such a course.  There are many reasons why we should not.”

72.  I have quoted Kirby J at length, because Mr. Sussex relies heavily on his dissenting judgment.  But, properly understood, I do not consider that the judgment of Kirby J assists Powick.  

73.  Kirby J did not dissent by reason of an adherence to Lord Diplock’s trust analogy.  Instead, he thought that, within the special context of revenue law statutes, in light of a line of authority following Ayerst, the expression “beneficial ownership” had acquired a settled meaning in England and elsewhere in the Commonwealth.  This meaning treated a company in liquidation as having ceased to be the “beneficial owner” of its assets, whatever the strict position in equity and the law of trusts.  Kirby J felt (at §246) that “[t]his fact should ... make this Court pause before striking out on the opposite approach in what, clearly, is a common problem of revenue law arising in many like jurisdictions”.

A.3.3 Relevance to present case

74.  I do not think that the debate which emerges from the judgments in Ayerst and Linter is pertinent to the outcome of this appeal.  I have 2 reasons for this view.

75.  First, plainly the expression “beneficial ownership” can mean different things in different contexts or statutes.  Merely because the words mean X in one context does not mean that the words will have the same meaning in other contexts.

76.  In Ayerst, at the end of his speech Lord Diplock went out of his way to explain how in the specific context of the Finance Acts and liquidation, the phrase “beneficial ownership” has become a term of art. Kirby J expressly recognised this in his dissenting judgment in Linter and so confined himself to construing “beneficial ownership” within the field of revenue law.

77.  It follows that the construction of “beneficial ownership” in the particular area of revenue law canvassed in Ayerst and Linter can only be of marginal interest in the wholly different context of Admiralty.  Whether the approach in Ayerst or that in Linter is ultimately to be preferred, is neither here nor there in the present situation.  The phrase “beneficial owner” in the HCO s.12B(4) must be construed in light of the purpose and history of the Admiralty in rem jurisdiction.

78.  Second, before Waung J, it was suggested by Powick that for a variety of reasons the Singapore Courts would prefer the Ayerst to the Linter approach.  I propose to ssume for the purpose of argument that such indeed would be the case.

79.  By itself such assumption will not take the analysis very far.  If context is everything, such assumption still would require an identification of the specific circumstances in which the Singapore court would treat a company as having retained or lost a “beneficial ownership” in the Ayerst sense. 

80.  Nevertheless, let me proceed on the basis that generally in a winding-up the Singapore Court would follow the Ayerst approach.  I shall make this assumption despite the actual position in Singapore not being so clear-cut.  See, for example, Low GimHar v. Low Gim Siah [1992] 2 SLR 593 (Chan Sek Keong J), Ng Wei TeckMichael v. Oversea-Chinese Banking Corporartion [1998] 2 SLR 1 (CA), Kuok (Singapore) Ltd. v. Commissioner of Stamp Duties [2003] 4 SLR 43 (Woo Bih Li J). I note that Mr. Sussex accepted that, insofar as “beneficial ownership” in the liquidation context was concerned, the position under Hong Kong and Singapore law was unlikely to be different. 

81.  Even then, a preference for Ayerst by the Singapore Courts in the liquidation context would not benefit Powick’s argument.

82.  In light of my conclusion about the meaning of “beneficial owner” in HCO s.12B(4), if the writs here are to be set aside, Mr. Sussex must show that, under Singapore law, as a result of liquidation the equitable ownership of Powick’s assets have become vested in some person other than Powick.  However, Ayerst does not go so far.

83.  This is because, as Lord Diplock repeatedly acknowledges in Ayerst, there is no trust (in the strict general law sense) of a company’s assets upon liquidation.  Thus, even if Ayerst is wholly right and Linter somehow wrong, the legal and equitable ownership of assets still would remain with Powick.  Demonstrably, there has been no change in that ownership, although the company’s assets are now to be administered by the liquidator for the benefit of its creditors. The company (acting through its liquidator) retains the power to sell (and to give good title to) its assets.

A.4 Conclusion on the “Liquidation Point”

84.  Powick fails on this point.

B. Argument 2: “The Judicial Sale Point”

85.  Mr. Sussex argues that, as result of the judicial sale of the 4 vessels, their beneficial ownership must have changed.  The Oetker writs not having been issued until after that sale, Oetker should not be entitled to invoke the Admiralty in rem jurisdiction under HCO s.12B(4).

86.  I disagree.

87.  In HCO ss.12B(4)(a) and (b) the references to “ship” clearly indicate a ship in connection with which an in rem claim is being made.  This is because, at the time when a cause of action arises, there cannot yet have been an arrest and judicial sale of a relevant vessel.

88.  But the word “ship” in HCO ss.12B(4)(i) and (ii) must refer to a particular “ship or the proceeds from the judicial sale of a ship”.  This is because, by time-honoured tradition in the Admiralty jurisdiction, the proceeds from the judicial sale of a res (such as a ship) are treated as equivalent to the res itself.

89.  Mr. Sussex submits that HCO s.12B(4) cannot reasonably be read in the way which I have just set out.  But I do not see why. In particular, it seems to me that the reference to “shares” in ss.12B(4)(i) and (ii) can be construed without any awkwardness as referring to “all the shares in the ship or the proceeds from the judicial sale of the ship”.

90.  The purpose of a judicial sale following arrest is to prevent wastage of an asset.  For example, in the case of a ship, the expenses of maintaining her (including the employment of a skeleton crew) pending resolution of a dispute, would diminish whatever value the ship may eventually fetch at the end of the day.

91.  It would be strange if the right to bring an in rem claim (especially one involving a statutory lien) were to be dependent on the timing of a judicial sale.  Yet that would be the result if Mr. Sussex’ argument is right.

92.  In On Demand plc. v. Michael Gerson plc [2003] 1 AC 368 (at §7), Lord Hobhouse explained the rationale behind a judicial sale as follows:-

“

An order for a sale pendente lite does not deprive parties of their rights.  It simply, for purely practical reasons, provides a mechanism for allowing the parties’ rights as they existed immediately before the making of the order to be ascertained without in the meantime damaging the value of whatever those rights were.  Thus perishable goods may be ordered by a master of the Queen’s Bench Division to be sold and the proceeds paid into court or a ship or cargo under arrest may be ordered to be sold by the Admiralty judge or registrar without affecting what were the rights of the parties and other potential claimants over the property sold....”

93.  Mr. Sussex accepts that, within the body of Admiralty law, the proceeds from the judicial sale of a res are treated as the res. He also accepts the above dictum of Lord Hobhouse.  But he contends that the conversion of the res and the dictum just cited are beside the point. He says that, by analogy with the situation of a private sale between 2 persons, following judicial sale a person who otherwise would have a statutory lien loses the right to bring an in rem claim as a result of a change in the beneficial ownership of the res.

94.  I do not think that that submission is right.  As Lord Hobhouse noted, a judicial sale “does not deprive parties of their rights”.  It is done purely as a matter of expediency to preserve a wasting asset.  A private deal between 2 persons does not have that effect.  In that case, the beneficial ownership would truly pass from one person to another.  In contrast, since a res once judicially sold is treated as equivalent to its proceeds, it is wrong to say that the beneficial ownership in the res has been transferred to someone else.

95.  Consequently, Powick also must fail on this point.

III. CONCLUSION

96.  I would dismiss Powick’s appeal.  I would also make an Order Nisi that Powick pay the costs of ITS and Oetker in this appeal, such costs to be taxed if not agreed.

Hon Stone J:

97.  I have had the advantage of reading in draft the judgments of Reyes J and that of Ma CJHC.

98.  I respectfully agree with the views expressed therein, and gratefully adopt the recitation of the facts and the case citations referred to in the judgment of Reyes J.

99.  In deference to the quality of the argument from all parties before the court, I wish to add a few words of my own.  I take the issues in this case in the order in which they were advanced.

(i) ‘The Liquidation Point’

100.  At bottom, the thesis advanced by Mr Sussex SC, for the appellants, was straightforward.  It proceeded thus:

101.  In order to establish in rem jurisdiction requirement within the terms of section 12B(4) of the Supreme Court Ordinance, Cap 4, it must be demonstrated that the target otherwise liable to the plaintiff in personam also must be the ‘beneficial owner’ of the vessel in question.

102.  In the present instances there was no doubt but that the defendants indeed were potentially so liable in personam; however, where these actions fell down in jurisdictional terms, said Mr Sussex, was that there was a clear lack of coincidence of such beneficial ownership.

103.  Such lack of coincidence, he argued, was because at the material time, which was the date of issuance of in rem proceedings, defendant owners, Powick Marine (S) Pte. Ltd, had entered into creditors’ voluntary liquidation in Singapore on 13 May 2003; pursuant to section 291(1)(a) of the Singapore Companies Act, the directors of Powick had made a formal declaration of the company’s inability to continue its business by reason of its liabilities, a provisional liquidator had been appointed, and a declaration to that effect had been lodged with the Court Registrar and the Singaporean Official Receiver on the following day.

104.  The ineluctable result of this state of affairs, Mr Sussex submitted, was that the jurisdictional criteria within section 12B(4) no longer was able to be satisfied, because at the material time Powick could not properly be said to be the ‘beneficial owner’ of the vessels in question.

105.  Hence, the writs in question, all filed after Powick had entered into voluntary liquidation, should have been set aside, and the learned judge below had been in error in failing so to order.  Hence this appeal.

106.  The concept of ‘beneficial ownership’, maintained Mr Sussex, “meant different things in different contexts”, and in the present context this term denoted an “adjunct” to full ownership or a “bundle of rights co-extensive with full ownership”.

107.  Thus, he said, where, as in the present cases, a right co-extensive with full ownership had been lost in the sense that the company, now in voluntary liquidation pre-dating the issuance of Hong Kong proceedings, no longer had the unrestricted right to use and/or dispose of the vessels in question; thus, ‘beneficial ownership’ in the true sense could not be said to vest in Powick, and hence the disconnect which sufficed to remove the basis of the purported exercise of the Admiralty jurisdiction.

108.  This argument necessarily involved a revisionist interpretation (Mr Sussex delicately termed it a “refinement”) of the celebrated, and widely adopted, judgment of Goff J (as he then was) in “1 Congreso, op cit., wherein Goff J had equated the term “beneficial ownership” within the Administration of Justice Act 1956 with “equitable ownership”, his submission further seeking to drive a conceptual wedge between the terms “equitable ownership” (which could not be separated from “legal ownership”) on the one hand and on the other “beneficial ownership”, which, he said, must connote “something different”.

109.  Accordingly, Mr Sussex continued, once the unrestricted right to use/dispose of the vessels had been lost, Powick no longer possessed “beneficial ownership” properly so-called, and for present purposes it mattered not to whom such ‘beneficial ownership’ had passed, since it was sufficient merely to identify the fact that ‘beneficial ownership’ no longer vested in Powick.

110.  With respect to an ingenious argument persuasively delivered, in my view this contention suffered from the twin defects of being both artificial and wrong.

111.  As Reyes J has emphasised in his citation of a passage from the judgment of Hewson J in The “St. Merriel”, (op cit, at para 40), and as Mr Haddon Cave also submitted (“what the law of Admiralty jurisdiction is all about”), such jurisdiction fundamentally is concerned is the concept of the “true ownership” of the vessel(s) the subject of the exercise of such jurisdiction, and for my part I fail to grasp why pursuant a form of Singaporean statutory liquidation procedure the fact that administrative decisions involving the activities of Powick (including the right of disposal of the vessels owned by Powick) now are to be exercised by the provisional liquidator acting in accordance with directions of the Singaporean court – as opposed to the Board of Directors of Powick – should be regarded as having the effect of divesting that company of the  ‘beneficial ownership’ of the arrested vessels.

112.  This was a theme addressed both by Mr Wright and by Mr Haddon Cave, wherein it was emphasised that Powick had not  “at any stage” been divested of the right to dispose of the vessels consequent upon the voluntary liquidation procedure. 

113.  To the contrary, it was stressed that any sale/disposition would be performed in the name of Powick in accordance with the statutory scheme and the directions of the supervising court; in this sense, therefore, the liquidator, qua agent of the company, constituted merely a change in management structure, and there could be no doubt but that the company, Powick, at the time of arrests, had remained the legal and beneficial owner of the vessels.

114.  Nor, submitted Mr Haddon Cave, was there any justification for bifurcating “equitable ownership” and “beneficial ownership”, as for the purpose of his argument Mr Sussex had attempted to do, whilst the suggestion that, in effect, Goff J had been wrong or had been misinterpreted in “1 Congreso”, op cit., was, he remarked, a somewhat surprising submission to advance, given that the approach of the learned judge in that case subsequently had been adopted in maritime cases by virtually the entirety of the common law world, and it was inherently unlikely that the true meaning of that judgment universally had been misunderstood.

115.  I accept this submission.  For my part, I have no difficulty in agreeing with the conclusion of Reyes J (infra, at paras 43, 44) that the term “beneficial ownership” within section 12B(4) is an expression connoting title vesting in an owner with the right to sell or dispose of a vessel, and that the expression connotes a situation wherein the legal and equitable interests have not been separated; in addition to the judgment of Wee CJ in The Pangkalan Susu/Permina 3001, op cit., to which Reyes J has drawn attention (infra, at para 42), I note, for example, that this approach also has been adopted in the High Court of New Zealand: see Columbo Drydocks Ltd v. The ship “Om Al-Quora” [1990] 1 NZLR 608, wherein Gallen J held that the words “beneficially owned as respects all the shares therein” in section 5(2)(b)(i) of the equivalent legislation, the Admiralty Act 1973 (the wording of which substantially follows that of section 3(4) of the Administration of Justice Act 1956, since superseded in like terms by section 21 of the Supreme Court Act 1981) refer to title to rather than possession of a ship.

116.  I further accept the contention that the ‘legal owner’ of a vessel, who possesses proprietary rights of title, also may be not inappropriately described as the ‘beneficial’ owner or the ‘legal and equitable’ owner, and that the phrase “beneficial owner of that ship as respects all the shares in it” in section 12B(4) emphasises the issue of title; it seems clear that the addition of the word ‘beneficial’ before the term ‘owner’ simply was to take account of the institution of the trust, thus ensuring that in the (admittedly rare) instance of a ship being operated under cloak of a trust, those interested in the ship could not thereby avoid the arrest of the ship – as indeed was recognized by Goff J in Congreso, op cit.

117.  If the foregoing analysis be correct, it is difficult to see why in this case there is any need to dwell upon a comparison of Ayerst, op cit., the tax case decided in 1976 in the House of Lords in which Lord Diplock held that the beneficial assets of M Ltd, a company purchased by the taxpayer had ceased to be “beneficially owned” upon liquidation, with that of the approach of the High Court of Australia in Lintner, op cit., wherein, as Reyes J has pointed out (at para 66 et seq.) the majority of that court declined to follow the approach of Lord Diplock in Ayerst, expressly rejecting Lord Diplock’s trust analogy when a company was placed in liquidation, and holding that a company in liquidation remained the ‘beneficial owner’ of its assets within the meaning of the Australian Income Tax Assessment Act, 1936.

118.  In the course of his argument Mr Sussex naturally placed great reliance upon the speech of Lord Diplock in Ayerst, and also on the dissenting judgment of Kirby J – whom, he said, was the only judge in Lintner who had understood the “true position” as to the meaning and effect of ‘beneficial ownership’ – but it is clear that within the context of Lintner Kirby J had framed his remarks solely in terms of “a precisely identical point of revenue law” which had attracted the unanimous agreement of the House of Lords in Ayerst, and equally that it was this existence of such commonality which had caused him to take the view that he did.

119.  In considering/construing the statutory ambit of Admiralty jurisdiction in Hong Kong, and in particular the meaning to be attributed to the phrase “beneficial owner” within section 12B(4), Cap 4, I do not find citation of tax jurisprudence in other jurisdictions of particular assistance, nor can I divine any reason as to why such assistance should be thought to be in any sense determinative; as Kirby J himself observed (Lintner, op cit., at 661), “the meaning of beneficial ownership of property and rights in property obviously depends on the context”, and in differing from the majority in Lintner – and in holding that the interposition of a liquidator diminished, to the extent of the liquidator’s powers, the beneficial ownership of the shares in the relevant companies – Kirby J took pains to explain that he had reached his dissenting conclusion “for reasons of the statutory language; the statutory history; the statutory purpose and the consistent meaning given to overseas statutory expressions.”

120.  For my part, therefore, I have no difficulty in considering the meaning to be attributed to statutory language framing the establishment of in rem jurisdiction in Hong Kong untrammelled by the views of those eminent judges in the highest courts of England and Australia whose focus solely was upon the concept of ‘beneficial ownership’ within the context of the construction of particular tax statutes.

121.  If and in so far as this primary stance be incorrect, however, and should this matter go further, I would also say that were it necessary (and I do not believe that it is) for purposes of the present argument to come down on one side or the other in the Ayerst/Lintner debate as to the meaning of “beneficial ownership” – as a matter of precedent this court is bound by neither decision – then on the basis that the law of Singapore has not been demonstrated to be different in this regard from that of Hong Kong (to the contrary, it is common ground between the experts that on a winding up legal title to the company’s assets remains vested in the company), I should have preferred the approach propounded by the majority in Lintner, which decided that the change in control of the affairs of the company by reason of the introduction of a liquidator (and thereby a change in control of the affairs of his company) had, for the purpose of the legislation under consideration, no impact upon the ‘beneficial ownership’ of that company’s assets.

122.  Accordingly, I share the view of Reyes J and Ma CJHC that the ‘liquidation point’, as so characterised throughout this appeal, is not well-founded and must be rejected.

(ii) The ‘Court Sale’ point

123.  In practical terms Mr Sussex’s second point potentially was the more far-reaching; by way of introduction he observed that this was a point which he had never seen taken and upon which there appeared to be no authority.

124.  This, he said, purely was a construction argument, which culminated in the proposition that the term “that ship” within section 12B(4)(i) must mean precisely that, and not ‘the proceeds of sale of that ship’.

125.  On the present facts, it was accepted by all parties that this was an argument which applied only to the claims by Oetker, which had not issued its writs until 18 September 2003, whereas following an order of the Admiralty Court, the ships in question had been sold prior to that date, on 7 July 2003, and the sale proceeds duly paid into court.

126.  Accordingly submitted Mr Sussex, given the well established principle that the sale of a ship has the effect of defeating a claim in rem unless such claim already had been protected by issuance of a writ in rem (see, for example, The “Monica S” [1968] P 741) there was no reason in principle why a judicial sale should not have the like effect.

127.  It was clear, he said, that section 12B(4) was concerned with the ship before it was sold, when the cause of action arose; plainly in this context ‘ship’ meant the vessel itself, and could not mean the ‘proceeds of sale’, words which themselves appeared (in contrast to ‘ship’) within section 12B(6), and on ordinary principles of statutory interpretation the word ‘ship’ necessitated a consistent reading throughout the section.

128.  Thus, the argument continued, a claimant such as Oetker in the present case (albeit not ITS, which had issued its writs in May 2003, well before the court sale) plainly was not in a position to satisfy the jurisdictional benchmark within section 12B(4) because the judicial sale had had the effect of transferring the beneficial interest in ‘that ship’ to the purchaser thereof.

129.  A decision on this point had significant commercial ramifications in the instant cases, said Mr Sussex, for if Oetker were to be permitted to invoke the Admiralty jurisdiction of this court, the size of its claims effectively would exhaust such funds as were available consequent upon sale, whereas if Oetker – which it was common ground had issued its writs late in the day and subsequent to the judicial sale – were to be precluded from maintaining its in rem claim, the liquidator of Powick would be successful in recovering the bulk of such funds for the benefit of Powick’s creditors.

130.  In the present circumstances, therefore, he contended that the learned judge below had been incorrect to construe the words “that ship” in section 12B(4) to mean, in effect, “that ship or the proceeds of sale of that ship”.

131.  On behalf of Oetker Mr Haddon Cave in response was moved to characterize this argument as Mr Sussex’s “second heresy”, the first presumably being that put forward in context of the ‘liquidation point’, and the argument as to the change in “beneficial ownership” of the vessel co-terminus with the appointment of a liquidator within a foreign court winding up.

132.  He emphasized the existing established practice within the exercise of Admiralty jurisdiction, stressing that the sale of the res flowed from the inherent jurisdiction of the court to preserve the subject-matter of the case and as far as possible was to preserve what essentially was a wasting asset, given the monies necessarily and continually to be expended upon a vessel which had been placed under arrest.

133.  In the course of his submission Mr Haddon Cave made reference to a number of cases and authoritative texts on Admiralty practice and procedure, a review demonstrating that it was not unusual for writs in rem to be issued subsequent to a court ordered sale – see for example, The “Leoborg” (No 2), [1963] 2 Lloyd’s LR 441, in which Hewson J held, inter alia, that there must be a reasonable limit to time in which claims, a number of which were raised post-sale, could be brought against the fund standing in court; and The “Silia”, [1981] 2 Lloyd’s LR 532, a case which decided that in the context of an action in rem the world “ship” in section 3 of the Administration of Justice Act, 1956, included all property on board other than that owned by someone other than the shipowner, and wherein Sheen J (as he then was) observed (at 536) that:

“

…For plaintiffs who issue a writ after the sale of a ship process is available against the fund in court which represents the res.  In such circumstances a writ in rem is served on the Admiralty Registrar. (See The Eva, (1949) 84 LL.L.Rep.20).  Judgments in rem are satisfied so far as possible out of that fund.  If, after all claims have been met, there is further money remaining in Court, it will be paid to the shipowner.”

134.  The judgment of Reyes J (at para 92) aptly has cited the extract from the speech of Lord Hobhouse in On Demand plc, op cit, also prayed in aid by Mr Haddon Cave, wherein his Lordship explained the soundly practical effect of a sale of an arrested vessel pendente lite – “a mechanism for allowing the parties’ rights as they existed immediately before the making of the order to be ascertained without in the meantime damaging the value of whatever those rights were” – and I respectfully agree with the observations of Reyes J (infra, at para 91) that it would be strange indeed if the right to mount an in rem claim were to be dependent upon the timing of a judicial sale.

135.  Nor do I consider determinative Mr Sussex’s argument focusing upon comparison of the position in a court-ordered sale with that of a private sale, wherein he submitted that since in a private sale a potential claimant otherwise in possession of a statutory lien (in contradistinction to a maritime lien, which ‘follows’ the vessel in any event) loses the right to bring an in rem claim by reason of the change in beneficial ownership of the res, there is no good reason in principle why a judicial sale should not be regarded as having the like effect.

136.  Initially plausible, this argument fails in my view because in the instance of a private sale between owners and third party purchaser, upon payment the beneficial interest in and physical possession of the vessel immediately vests in the new owner with the seller divested of all interest therein, in contrast to the ‘judicial sale’ wherein the vessel notionally continues to exist in the form of the fund representing the sale proceeds standing in court, a fund in which owners possess a residual interest in the (often unlikely) event of there being surplus monies after satisfaction of all proven claims as have been brought in actions against the res.

137.  Although canvassed by Mr Sussex purely as an argument of statutory construction of section 12B(4), I would also observe that I am far from sure that this is a correct classification of the position, although if properly a construction issue, I should be prepared to construe the word “ship” as “ship or the proceeds of sale thereof”.

138.  It seems to me, however, that in cases of a sale pendente lite, wherein a fund in court has replaced the floating steel plate, the established juridical fiction (which has its origin in the inherent jurisdiction of the court to preserve the subject-matter of the action) continues to regard the fund representing the sale proceeds (less expenses) of “the ship”, and for my part I see no necessary to become embroiled in nice arguments of statutory interpretation to the effect that the term “that ship” may only connote the physical entity.

139.  Were the situation to be otherwise, and were the validity of in rem claims to be dependent upon the timing of the sale of the vessel or vessels, this would be a recipe for patent unfairness, and I see no reason why potential valid claimants should thus be made to miss the boat, so to speak, a result which in my view would conform neither with the intention of the legislature nor with established and hitherto unquestioned admiralty practice.

140.  In my judgment, therefore, Waung J was right to reject this submission, which must have been anathema to a judge steeped in Admiralty law and practice.  Perhaps the learned judge was a little harsh in his observation that this was a point which never should have been taken; in light of the fact that Mr Sussex has informed this court that he had been aware of and had been waiting to take this point for fully thirty years, more appropriate, perhaps, would have been the conclusion that Mr Sussex’s patience in this regard has proved entirely justified.

(iii) The ‘extraterritoriality’ point 

141.  This point was taken essentially as a ‘fall back’ position on the part both of Mr Wright and Mr Haddon Cave.

142.  As I understood it, the argument was thus: winding up orders do not have extraterritorial effect, and properly understood the power of the foreign court seized of the winding up process to impose the ‘statutory trust’ on assets of the entity the subject of such winding up necessarily is limited to its own territorial jurisdiction, with the result that the vessels anchored in the Hong Kong harbour were not susceptible to claim by the Singapore liquidators of Powick.

143.  At the outset it should be borne in mind that this is not an Irish Shipping case [Irish Shipping Ltd [1985] HKLR 423] in that the appellants did not commence parallel insolvency proceedings in Hong Kong – to the contrary, the ships in question appear to have continued to trade after 14 May 2003, the date of the formal commencement of the liquidation in Singapore.

144.  Accordingly, it was submitted, the doctrine of comity does not require creditors in foreign insolvency proceedings to be preferred to local creditors, and, as Waung J held below, as a matter of policy there was very good reason why Hong Kong maritime creditors should not be deprived of their remedies in rem at the behest of a foreign liquidator. 

145.  Were the position to be otherwise, submitted Mr Haddon Cave, this would “fundamentally undermine” the efficacy of the right of arrest of sea-going ships, an ancient and well-established right in maritime law, whilst Mr Wright observed that what was being attempted in the present case was “unprecedented”: he argued that the liquidator of Powick was attempting now to take advantage of the successful execution by those who had arrested the vessels and to “take the fruits” of such execution many months later, and that the judge below was entirely correct to hold that there was no good reason for thus seeking to deprive the rights of Hong Kong maritime creditors; moreover, he said, in effect (and most unjustly) should any funds remain in court after claimants asserting in rem rights had been paid, the plaintiffs would be obliged to prove in the Singapore liquidation in the same manner as other unsecured creditors who possessed no rights in rem. 

146.  In response, Mr Sussex made light of the point, observing that the “complete answer” thereto was to be found in the speech of Millett LJ (as he then was) in Mitchell and another v. Carter and another, Re Buckingham International plc [1997] 1 BCLC 673, wherein the fundamental question in dispute was whether under English law the company’s judgment creditors or its liquidators were entitled to debts sought to be attached in the United States by garnishment proceedings, notwithstanding the existence of an English winding up order.

147.  Re Buckingham International was not a case involving maritime jurisdiction, although it did involve conflict between the rights of judgment creditors when set against the rights of liquidators wherein commencement of the liquidation in question had occurred after the relevant judgments. 

148.  What had happened in that case was that writs of garnishment in respect of sums owed to Buckingham by seven of the company’s US subsidiaries had been issued in Florida at the behest of judgment creditors of the company, Buckingham, and were applied to be stayed by liquidators of that company appointed before the garnishment process in Florida could be completed, the liquidators obtaining a temporary restraining order in the United States preventing the judgment creditors from commencing or continuing any proceedings against Buckingham in the United States. 

149.  Accordingly, the judgment creditors/applicants applied in the company’s English winding up for an order that in the event of a winding up the rights conferred on the liquidator by section 183(1) of the Insolvency Act 1986 in respect of the writs of garnishment obtained in Florida be set aside in favour of the applicants pursuant to section 183(2)(c), and a declaration that the applicants be at liberty to retain the benefit of those writs of garnishment notwithstanding the winding up order.

150.  The matter arose for decision in the form of a preliminary issue as to whether the court had the jurisdiction to determine the application under section 183(2)(c).  At first instance Blackburne J held that the court had no such jurisdiction to make the order the applicants sought, holding that section 183 did not extend to attachments in foreign jurisdictions, and further that it was not appropriate for the applicants to seek to establish in England, by declaration or otherwise, the propriety of that which they were seeking by due process to achieve in the foreign jurisdiction.

151.  An appeal against this decision as to jurisdiction was allowed, the Court of Appeal holding that whilst it was accepted that the court had no jurisdiction under section 183 of the Insolvency Act to make the order sought as that section had no extraterritorial effect, nevertheless the court did have jurisdiction to decide the question of priorities in an English liquidation, and thus whether the judgment creditors/appellants could retain the fruits of the garnishment proceedings, if awarded to them, and to act by way of declaration, was a matter of English law.  The court had jurisdiction over liquidators, and had the power to act by declaration or injunction to restrain any act which would not be lawful, and thus if the court decided that the respondent liquidators were not entitled to any sum awarded by the United States court, the court could prevent the liquidators from pursuing their proposed proceedings under section 304 of the US Bankruptcy Code and seeking to recover that sum.

152.  It was against this background that Millett LJ stated (op cit., at 686-687), in the particular passage upon which Mr Sussex relies:

“

The making of a winding-up order divests the company of the beneficial ownership of its assets which cease to be applicable for its own benefit.  They become instead subject to a statutory scheme for distribution among the creditors and members of the company.  The responsibility for collecting the assets and implementing the statutory scheme is vested in the liquidator subject to the ultimate control of the court.  The creditors do not themselves acquire a beneficial interest in any of the assets, but only the right to have them administered in accordance with the statutory scheme.  These principles were established in Ayerst (Inspector of Taxes) v C & K (Construction) Ltd [1976] AC 167. They apply to all the assets of the company, both in England and abroad, for the making of a winding-up order is regarded as having worldwide effect. (Emphasis added)

153.  It was this latter sentence upon which Mr Sussex specifically relied in response to the so-called ‘extraterritoriality’ point as taken against him.  However, Millett LJ continued thus:

“	The powers of the court are, of course, more limited.  But it has power to take whatever steps are open to it within the territorial limits of its own jurisdiction to enable the liquidator (one of its own officers) to get in and realize for the benefit of the creditors all the assets of the company which are the subject of the statutory scheme, wherever in the world they may be.  Where the assets are overseas and are subject to an uncompleted process of execution, they are nevertheless subject to the statutory scheme.  Once the execution is complete, however, and the assets have been successfully seized by the execution creditor, then they cease to be subject to the statutory scheme and the liquidator’s ability to collect them for the benefit of the creditors is defeated.  This is because section 183 of the Insolvency Act applies only to execution proceedings in England and because the liquidator and the other creditors have no beneficial interest in the assets which could sustain a restitutionary claim.
	Accordingly, a creditor who successfully completes a foreign execution is able to gain priority over the unsecured creditors.  To prevent this, the English court has jurisdiction to restrain creditors from bringing or continuing the foreign execution process…But although the English court has jurisdiction to grant what amounts to an anti-suit injunction in order to restrain execution proceedings in a foreign court which would restrain the liquidator from getting in the assets, it has often been said that it is a jurisdiction to be exercised with caution.
	The position today is that stated by Hoffmann J in Barclays Bank plc v Homan [1993] BCLC 680.  There must be a good reason why the decision to stop foreign proceedings must be made here rather than there.  The normal assumption is that the foreign judge is the person best qualified to decide if the proceedings in his court should be allowed to continue.  Comity demands a policy of non-intervention…”

154.  It is proper to record that this ‘extraterritoriality point’ was but lightly argued: I apprehend that both Mr Wright and Mr Haddon Cave considered that they had bigger fish to fry.  It is also fair to say that, although specifically raised, in light of the decision of this court upon the two primary points it is strictly not necessary for this court to decide this particular issue.  In the circumstances, however, I consider it to be an argument worthy of comment.

155.  In my view this is not an issue of ‘extraterritoriality’ properly so-called, nor, on the facts, is this truly a matter of ‘recognition’ of the Singaporean winding up proceedings; there seems no question but that these proceedings are ‘recognised’ in Hong Kong, but that said, this does not take the analysis very far.

156.  It seems to me that Mr Sussex is correct in his contention that it is not open to the plaintiffs merely to assert that, since the vessels in question were/are in Hong Kong, they are thus outwith the reach of the Singaporean provisional liquidator, and that prima facie they are not susceptible or potentially subject to purported collection by the liquidator of the worldwide assets of Powick.  Accordingly, if and in so far as this is the way this argument is framed by the plaintiffs, I am unable to agree with it.

157.  The better argument, in my view, is that absent ancillary winding up proceedings in Hong Kong, the mere fact of a liquidation of Powick in Singapore in itself does not impact upon the legitimate exercise of in rem jurisdiction by Hong Kong creditors of Powick.

158.  This, it seems to me, is the very short point.  In this context, I leave open the interesting additional question as to whether, on the present facts, wherein the vessels have been arrested and sold pendent lite, it may properly be said that by virtue of such arrest and sale such constitutes a “successful seizure” by the execution creditor amounting to a “completed process of execution” so as to remove these vessels from the potential reach of the Singaporean provisional liquidator in any event.

159.  An incidental point, as taken by Mr Wright in the course of this aspect of the argument – although more appropriate perhaps in the context of the primary ‘liquidation point’ – was that there is a patent inconsistency in the fact that this an application to set aside the in rem writs was brought in the name of Powick. 

160.  Mr Wright submits that Powick has acknowledged service and has been defending these in rem actions on the basis that it is the party entitled to recover the proceeds of sale of the vessels, and that Powick’s application to set aside the writs – which is the application the subject of the judgment in the court below and of this appeal – properly could be brought in Powick’s name only if Powick had retained the beneficial rights to the vessels (or their sale proceeds) after payment of creditors entitled to assert rights in rem; thus, said Mr Wright, thus gave the further lie to the jurisdictional argument mounted on behalf of the liquidators in terms of the alleged lack of coincidence between in personal liability and beneficial ownership.  I agree.

161.  It follows that, in so far as the so-called ‘extraterritoriality point’ is ‘live’ in this appeal, I would hold in favour of the plaintiffs, albeit upon a basis somewhat different from the way in which I understood the argument was framed.

Conclusion

162.  It also follows from the foregoing that for my part I too would dismiss this appeal, with costs to the respondents to be taxed if not agreed.  

Hon Ma CJHC :

163.  For the reasons contained in the judgment of Reyes J, I would dismiss the appeals.  I wish, however, to highlight a number of matters in relation to what Reyes J has called the Liquidation Point.

164.  The ability to proceed against a ship (involving therefore in rem proceedings) is perhaps the single most distinctive feature of the Admiralty jurisdiction in Hong Kong as well as in many other countries.  Section 12B of the High Court Ordinance, Cap.4 deals precisely with this aspect.  Within that section is the provision with which these appeals are concerned, namely, section 12B(4), which provides for a statutory right in rem in relation to various categories of maritime claims (as set out in sections 12A(2)(e) to (q) of the Ordinance).

165.  The objective of an action in rem is an obvious one but bears repetition :  it provides security for maritime claims that may be made, whether these involve maritime liens (in the true sense) or merely maritime claims for which statute has provided rights in rem.

166.  The right to proceed against a ship (thereby obtaining security for a claim) under section 12B(4) is, however for the purposes of the present appeals, conditional upon two matters : that the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the relevant ship and secondly, that when the action is brought the person who would be liable in personam is either the beneficial owner of the relevant ship (or a sister ship) as respects all the shares in it or the charterer of it under a charter by demise.  Powick was undoubtedly the person who would be liable in a claim in personam.  But was Powick the person who was at the time the actions were brought in the present case the beneficial owner of the relevant ships that were arrested?  This was the focus of the arguments on the Liquidation Point.

167.  The concept of beneficial ownership in section 12B(4) has been acknowledged in numerous cases to refer to the legal or equitable ownership of a ship.  The analysis of Robert Goff J in “I Congreso del Partido” [1978] 1 QB 500 has been accepted in numerous jurisdictions, including Hong Kong.  There is little doubt in principle that this analysis must be correct and I would reject the submissions advanced by Mr Charles Sussex SC (for the Defendants) that the concept of beneficial ownership meant only the enjoyment of rights associated with ownership of a ship including the right to dispose of and to enjoy the proceeds of sale if the ship were to be sold : -

(1)	It is first important to bear firmly in mind that when construing statutory provisions, a court must look at the statutory language, the statutory history, the statutory purpose and meanings given to the term in cases from equivalent jurisdictions : - see Commissioner of Taxation of the Commonwealth of Australia v Linter Textiles Australia Ltd (In Liquidation) [2005] 220 CLR 592 at paragraph 223 per Kirby J.
(2)	The statutory language of section 12B(4) refers to the beneficial ownership of a ship “as respects all the shares in it”.  The quoted words are inapt merely to describe the enjoyment of the ship but are singularly appropriate in context to refer to legal or equitable ownership.  The existence of these words was regarded as significant by Robert Goff J in Congreso : - at 539D-E.
(3)	As to statutory history and purpose, as stated earlier, the purpose of the right to proceed in rem is to enable a maritime claimant to obtain security against the person who would be liable in an action in personam.  That security takes the form of a ship that is owned by such person.  Ownership in this context must therefore mean the title to the ship in question, whether this be legal or, where the circumstances dictate (for example, a trust), equitable.  It makes little sense in the context of a maritime claim and in rem proceedings if beneficial ownership meant something along the lines that the Defendants have submitted.
(4)	The meaning that has been given to the term beneficial ownership in the context with which we are concerned is that as analyzed in the Congreso.  This, as has already been stated, is the accepted view in nearly all, if not all, maritime jurisdictions.

168.  The debate both in the court below and on appeal over the cases of Linter and Ayerst (Inspector of taxes) v C & K (Construction) Ltd [1976] AC 167 has to be seen in the context of the particular statutes considered in them (revenue legislation).  The construction of section 12B(4) must be seen using the principles I have referred to earlier.

169.  I make one final observation.  In the winding-up of a company, while the enjoyment of its assets no longer vests in the shareholders of the company and instead the assets become subject to the statutory scheme regarding liquidation, those assets are still owned by the company if it has the title to them.  Indeed, it is precisely because a company has title to assets that those assets become subject to the statutory liquidation scheme.  A liquidator, when dealing with such assets, does so in the name of the company (unless somehow assets have been vested in the liquidator’s own name, for example, section 198 of the Ordinance, Cap.32).  Just as in a winding-up, a company’s assets will be distributed for the benefit of creditors under the statutory scheme, so in an action in rem, the ship that is owned by the person who would be liable in an action in personam is liable to be arrested to provide security.  In both situations, the creditor (or potential creditor) is looking to assets which truly belong to the company (in the case of a winding-up) or to the person who would be liable in an action in personam (in admiralty proceedings where a maritime claim is made) to provide the necessary security or assets to satisfy their claim.

170.  For the above reasons, it is ordered that the appeals be dismissed.  There will also be an order nisi that the Defendants (Powick) pay the costs of the Plaintiffs in the appeals, such costs to be taxed if not agreed.