THE BLUE BRIDGE

HCAJ136/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO.136 OF 1999

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Admiralty action in rem against the ship or vessel "BLUE BRIDGE"
formerly known as "GREAT POWER"

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REASONS FOR JUDGMENT

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1) By the Notice of Motion dated 18 June 2002, the defendants, downers of the ship Great Power now known as Blue Bridge ("the Vessel"), seek to set aside the Writ in rem and to discharge the Warrant of Arrest of the Vessel on the ground that the Court has no jurisdiction in rem. The arrest of the Vessel took place in April 2002 pursuant to the Warrant of Arrest granted to the plaintiffs.

2) The plaintiffs, cargo owners, opposed the Motion and, at the conclusion of the hearing, I dismissed the Motion with costs and indicated that I will hand down my Reasons for the Judgment later. I now give my Reasons.

Background facts

3) Great Power Shipping Limited, a Cyprus company (hereinafter referred to as "GP Company") was the owner of the Vessel "Great Power" registered in Limassol, Cyprus. A cargo of toasted extracted yellow soybean meal ("Cargo") was shipped on board the Vessel from Mumbai India to Kashima, Japan in 1998. The plaintiffs are the owners of the Cargo.

4) Upon discharge in Japan in November 1998, a joint survey was conducted and extensive cargo damage was found suggesting that the Vessel was liable for causing such damage.

5) Claim was made by the plaintiffs for recovery of the Cargo damage and the claim was initially made to the P & I Club of the Vessel. Liability was denied whereupon the Writ in rem in this Action was issued on 29 May 1999. At the time of the issue of the Writ in rem, the Vessel was registered in Cyprus with GP Company as the owner of the Vessel.

6) Unknown to the plaintiffs, on 20 May 1999, an application was made by Blue Bird Shipping (Belizean) Co. S.A. (hereinafter referred to as "BB Company") to provisionally register the Vessel on the Belize Register under the new name of the ship "Blue Bird". The requirements of provisional registration in Belize was very lax and there was no requirement for proof of ownership of vessel. The Vessel was provisionally registered in the name of BB Company on the Belize Register under the name "Blue Bird" on 20 May 1999. Therefore, on 29 May 1999 when this present Writ in rem was issued, the Vessel was registered on two registers, in Cyprus under the Cyprus Register under the name "Great Power" with the name of owner being GP Company, and in Belize under the provisional Belize Register under the name "Blue Bird" with the name of the owner being BB Company.

7) The Vessel was not deleted from the Cyprus Register until 30 December 1999. The Vessel was not permanently registered on the Belize Register until 26 January 2000. Filed under the Cyprus Register, for the purpose of deletion of the Vessel from the Cyprus Register, was a Bill of Sale and Acceptance of Sale dated 1 July 1999 (hereinafter referred to as the "Bill of Sale") by which the Vessel was sold and transferred on 1 July 1999 by GP Company to BB Company.

8) The Vessel was arrested in Hong Kong pursuant to Warrant issued by the Court, and upon security furnished the Vessel was released. The defendants, however, applied, to set aside the arrest and the in rem proceedings on the ground that there was no jurisdiction in rem because at the time of the issue of the Writ in rem, namely, on 29 May 1999, the ownership of the Vessel had changed and that GP Company was no longer the owner of the Vessel on that day.

Jurisdiction in rem

9) The jurisdiction in rem against a ship in Admiralty is governed by statute, namely by the High Court Ordinance ("the Ordinance"). Section 12B(4) of the Ordinance provides as follows :

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

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

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

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

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

(ii) any other ship ........"

10) It is common ground between the parties that all the conditions for the exercise of the Admiralty jurisdiction in rem are satisfied except in relation to the condition under section 12B(4)(i) as to who was the owner of the ship at the time when the Writ was issued. The plaintiffs contend that there was no change of ownership from the time when the cause of action arose (namely, at the time of damage done to the Cargo in October/November 1988) to the time when the Writ in rem was issued on 29 May 1999. The plaintiffs say that throughout, the owner of the Vessel was GP Company and that if there was any change of ownership it did not take place until 1 July 1999, the date of the Bill of Sale. The defendants contend that the change of ownership took place earlier and that by the time of the issue of the Writ in rem on 29 May 1999, the ownership of the Vessel had changed to BB Company as evidenced by the new provisional registration on the Belize Register on 20 May 1999.

Who was owner on 29 May 1999

11) Mr Sussex, SC for the plaintiffs with his usual confidence says that there is an overwhelming case that on 29 May 1999, the day the Writ was issued the Vessel was still owned by the GP Company. Of the four key documents relating to ownership of the Vessel, Mr Sussex points out that all of them are in the plaintiffs' favour. The four key documents are :

(1) Resolution of GP Company dated 10 April 1999 ("Resolution"),

(2) Power of Attorney dated 10 May 1999 ("PA"),

(3) Agreement on Repayment of Loan dated 19 May 1999 ("Triparte Agreement"); and

(4) The Bill of Sale.

In addition to the above four key documents, there is also the Deed of Sale and Purchase and Acceptance of Sale dated 1 July 1999 ("Sale Deed"). There was reference in the documents to a Memorandum of Agreement dated 1 May ("MOA") but this was never disclosed or exhibited by the defendants.

12) The Resolution [at 2/3] did not pass the property in the Vessel to BB Company although it contemplated a transfer of ownership would occur at some future date. It made reference to the MOA (which has not been seen by the Court) and also to an attorney of the company who will act for GP Company in the contemplated sale. Further reference was also made to a Bill of Sale to be executed, whereby the Vessel would be sold and transferred.

13) By the PA [at 2/5] dated 10 May 1999, GP Company appointed Liu Ke Fu or Teng Zheng Guang to be its true and lawful attorneys to execute a memorandum of agreement and/or a bill of sale. The PA did not effect any transfer of property in the Vessel.

14) The Triparte Agreement [at 2/374] was a most curious document which purported to record an agreement between the three parties, GP Company, BB Company and a third company Xing Hai. It purported to say that :

(a) GP Company owed to Xing Hai some US$822,145.96 as result of loan given by Xing Hai to GP Company for the purchase of the Vessel by GP Power (Xing Hai however was never a mortgagee of the Vessel);

(b) Xing Hai owed to BB Company US$842,000 for unpaid charter hire in relation to a ship owned by BB Company;

(c) GP Company would pay the debt of Xing Hai to BB Company;

(d) GP Company should repay to BB Company the prepaid sale price of the Vessel which together with the balance of the price was to set off the charterhire which Xing Hai owed to BB Company; and

(e) the time limit for the performance was one month from 19 May 1999.

Leaving aside the authenticity of this document and its bona fide, it is at least clear that the Triparte Agreement did not purport in any way to say that the property in the Vessel was thereby transferred by that document. One month was stipulated for performance and until everything was performed there could be no question that the Vessel was to be transferred to BB Company.

15) The Bill of Sale [at 3/120] expressly acknowledges the receipt of US$800,000 and provides :

"We ... hereby ... transfer our whole title to and interest in the vessel above particularly described, and in the boats, tackles and other appurtenances belong to the vessel to the purchasers".

16) By the Bill of Sale, the property in the Vessel passed to the new owner BB Company and that was on 1 July 1999. The Bill of Sale was signed by Liu Ke Fu, the attorney of GP Company pursuant to the PA. On the same day, Liu Ke Fu also signed the Sale Deed [at 3/122]. It is to be noted that the acceptance of sale signed by Kong Fan Tong for BB Company in the two documents were both dated 1 July 1999 : in the Bill of Sale [at 3/120 bottom] and in the Sale Deed [at 3/121, 122 bottom].

17) The MOA has not been produced by the defendants but it would have no doubt also shown the same intention to pass property only upon the signing of the Bill of Sale. This would be in accordance with the usual international practice on sale of vessels using the generally accepted Norwegian Salesform.

18) I have no doubt that Mr Sussex is correct that the Bill of Sale is the most important document in this case, and by this Bill of Sale the property in the Vessel clearly passed out of GP Company only on the 1 July 1999, very much subsequent to the 29 May 1999.

19) Mr Clifford Smith, SC for the defendants in fact does not dispute any of Mr Sussex's propositions set out in Mr Sussex's skeleton argument. Mr Smith relies on a narrow point and contends that notwithstanding the Bill of Sale, for the purpose of section 14B(4)(i) of the Ordinance, the new ownership must be considered by reference only to the ship register at the time of the Writ and that therefore BB Company was the new owner on that day according to the Belize Register. He relied on passages in The Evpo Agnic [1988] 1 WLR 1090 and The Tian Sheng No.8 [2000] HKC 285 in support of his contention that the owner of the ship at the time of the writ is to be ascertained by reference to only the registered owner.

20) It is of course true that generally one looks to the register of the ship to ascertain who was the owner but there are special cases where the register is not conclusive, and this is particularly so when there are good evidence to show who was the owner at the time. Here, we have the relevant documents produced by the parties including the powerful Bill of Sale which show that BB Company was not the owner at the time. On 29 May 1999, the Vessel was still registered in the name of GP Company on the Cyprus Register and therefore it could not be said that GP Company was not a registered owner of the Vessel on 29 May 1999. It was. There happened to be two registered owners on that day on two different registers. Which one should the Court choose? I have no doubt, I prefer the permanent register of Cyprus on the 29 May 1999 to the provisional register of Belize on the 29 May 1999. The virtue of a permanent register is that it generally requires some reliable documentation of ownership, unlike a provisional register. A bill of sale is what is generally expected from a new owner in order to register a ship. It is perhaps for this reason that, generally speaking, permanent registers do not overlap but provisional register does overlap with permanent register. I have no doubt that in the circumstances of this case, the permanent register of Cyprus gives a more reliable data of ownership than the provisional and somewhat unreliable register of Belize.

21) The evidence of the plaintiffs' Cyprus and Belize lawyers clearly show what were required for ownership to pass out of GP Company. The documents in this case do not show any passing of property on or before 29 May 1999 from GP Company to BB Company. In fact they show a passing of property on 1 July 1999, more than one month after the date of the Writ.

22) The Motion of the defendants to set aside the Writ and to discharge the Warrant of Arrest must be dismissed with costs. The costs of the ancillary applications of the plaintiffs in support of the plaintiffs' justified resistance to the defendants' Motion must also be given to the plaintiffs.