ASTROFIEL ARMADORA SA v. THE OWNERS OF THE SHIP "CHONG BONG"

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JUDGMENT

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1. This is an application by the Defendants to set aside:-

2. In March 1980, the Plaintiffs (hereinafter referred to as "Greek Owners") who were at the time owners of the ship Agiaparaskevi (hereafter referred to as "the Greek Ship") voyage chartered the Greek Ship to Korean Foreign Transportation Corporation of Pyongynag, North Korea ("hereinafter referred to as the "Korean Corporation") under a Gencon Charterparty which contained a London arbitration clause. There was dispute between the Greek Owners and the Korean Corporation in relation to delay damages and demurrage. The Greek Owners claimed some £77,000 odd and interests from the Korean Corporation. The dispute was referred to arbitration and by his Award dated 25th October 1989 ("the Award"), the Arbitrator Donald Davies awarded to the Greek Owners against the Korean Corporation the sum of £108,374.58. This Award sum was not paid by the Korean Corporation.

3. From October 1989 onwards, some steps were taken by the Greek Owners to enforce the Award but with little success and on 24th October 1995, on the eve of the 6 years anniversary of the Award, a Writ in Rem in this Action was issued by the Greek Owners against the ship Back Ma Kang and some 37 other ships named in the Schedule to the Writ. Included amongst the names of the 38 ships were Chong Bong and Dae Song San, both of North Korean Flag. The Endorsement on Writ in Rem reads:-

"The Plaintiffs' claim is for sums due under an arbitration award of Donald Davies dated 25th October 1989 arising from a charterparty of 10th March 1980 whereby the Plaintiffs' vessel "AGIAPARASKEVI" was let to Korea Foreign Transportation Corporation, which is part of the Government of Democratic People's Republic of Korea alternatively the Plaintiffs' claim for breach of the said charterparty and the Plaintiff's claim damages. interest and costs."

During the one year validity of the Writ (from 24th October 1995 to 24th October 1996), on a number of occasions a few of the 38 vessels named in the Writ visited Hong Kong and in particular the vessel Dae Song San was in Hong Kong during the following periods:-

The Writ of Rem however was not served during that one year period from 24th October 1995 to 24th October 1996 nor was there any attempt to arrest any of the vessels which came into Hong Kong during that period.

4. By a paper ex parte application to me as the Admiralty Judge supported by Affidavit of May Kit Yi She dated 7th October 1996 ("Renewal Affidavit") to which was exhibited the Affidavit of Mr. Pontikos dated 16th July 1996, the Greek Owners sought a 12 months extension for the validity of the Writ. The Renewal Affidavit stated the following:-

The Award exhibited in the Pontikos Renewal Affidavit showed clearly the nature of the Award and that the Award was made against the Korean Corporation and not against the Korean Republic which was not even mentioned in the Award.

5. The paper ex parte application for renewal of the Writ was put by Messrs Sinclair Roche & Temperley before the Admiralty Judge. There was no request for an oral ex parte hearing and there was no written submission or skeleton argument placed before the Admiralty Judge. By his Order dated 14th October 1996, the Admiralty Judge refused on paper, the paper ex parte application and in the letter dated 14th October 1996 from the Clerk of Waung, J. to Messrs Sinclair Roche & Temperley, the following reasons for the refusal were given:-

"Application refused. Not satisfied sufficient evidence placed before the Court that there is even a right in rem. Also not satisfied with general circumstances of the case sufficiently explained to the Court specialty as to delay or steps taken worldwide to enforce the claim."

6. By Notice of Appeal dated 22nd October 1996, the Greek Owners appealed against the refusal of Waung, J. to renew the Writ. On 16th January 1997, the Court of Appeal consisting of Nazareth V.P., Bokhary and Liu, JJA. allowed the appeal and ordered that the validity of the Writ of Rem be renewed for 12 months. To avoid prejudicing the future disposal of the action, the Court of Appeal said that looking at the whole of the material before them, they were satisfied that they should order the renewal themselves.

7. On the 15th of April 1997 the ship, namely Chong Bong ("the Ship") was arrested and the renewed Writ in Rem was served on the ship Chong Bong. In support of the Greek Owners application to lead to the issue of the Warrant of Arrest was the 1st Affidavit of Michael Brooks dated 15th April 1997 ("1st Brooks Affidavit"). In the 1st Brooks Affidavit, it was said at paragraph 5 that the Greek Owners are entitled to seek enforcement of the Donald Davies Award. At paragraph 3 of that 1st Brooks Affidavit, it was said that the true defendant liable in personam was the government of the Korean Republic because the delegation of the Korean Republic had represented to Mr. Pontikos that the Korean Corporation was in fact the government of the Korean Republic. The 1st Brooks Affidavit was made because a Warrant of Arrest could only be issued which satisfied the requirements of Order 75 rule 5 of the Rules of the Supreme Court.

8. To seek Judgment in default of Acknowledgment of service, the Greek Owners filed the Statement of Claim dated 29th April 1997. The Statement of Claim pleaded the Charterparty between the Greek Owners and the Korean Corporation, the Arbitration Clause in the Charterparty, the dispute between the Greek Owners and the Korean Corporation and the Award against the Korean Corporation and the non payment by the Defendant, Korean Corporation of the money under the Award. Paragraph 6 of the Statement of Claim pleaded that the Defendant Korean Corporation admitted at the meeting held on 8th October 1990 that it was the Government of the Korean Republic or an organ thereof. The Statement of Claim sought the enforcement of the Award and the payment of the Award sum. By the 2nd Affidavit of Michael Brooks dated 29th April 1997, the Statement of Claim was verified as being true.

9. By the Notice of Motion dated 21st May 1997, the Defendants being the Owners of the arrested Ship, Chong Bong sought the setting aside of the renewal of the Writ, the service of the Writ and the arrest of the Ship on a number of grounds. The Motion was supported by the Affidavit of Mark Morrison dated 21st May 1997 ("1st Morrison Affidavit").

10. At the hearing of the Motion on the 26th May 1997 it was clear that two of the issues raised by the Motion would require detailed Affidavit evidence on North Korean law which would take some time for both parties to place before the Court. As some of the legal issues could be heard separately and fairly quickly, I considered it sensible to give directions for the separate hearing of different issues. As part of the case management for the fair and expeditious hearing of the Motion and with the issues being drafted by Counsel, I made the following directions:-

LIST OF ISSUES

11. At the proper hearing of the Motion yesterday and today, with the assistance of Counsel, the issues which require real resolution by the Court became further clarified and refined. I considered that Issues 2, 3 and 5 could also be deferred and for the expeditious disposal of the dispute on the arrest, I invited Mr. Smith and Mr. Chua to make full submissions only on the following two serious Questions, the resolution of which I considered would result in the fair determination of the Motion:-

I will consider each of the above Questions in turn.

(A) ENFORCEABILITY OF THE AWARD IN REM

12. Admiralty Jurisdiction in Hong Kong is statutory and is now to be found in the Supreme Court Ordinance. Admiralty Action could be exercised in personam or in rem. Section 12A(2) of the Supreme Court Ordinance provides a list of claims which can be exercised, pursuant to section 12B(1) of the Ordinance, by Admiralty Action in personam. The claim list of Admiralty jurisdiction under section 12A(2) includes claim at (h) for "any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship".

13. Admiralty Jurisdiction in rem may be exercised as provided in section 12B of the Supreme Court Ordinance. Section 12B(4) of the Supreme Court Ordinance provides:-

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

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-

14. It is to be observed and this point is not capable of any controversy that in order that the Court may exercise an Admiralty jurisdiction in rem (where there was no maritime lien and this is not a case of maritime lien) the following four conditions must be satisfied:-

15. The analysis which has to be carried out to ascertain if the claim under the Award can be exercised in rem is to examine if each of the above 4 Requirements are satisfied. There is no issue between Mr. Smith and Mr. Chua that 1st, 2nd and 4th Requirements (for the limited purpose of deciding this Question (a)) are satisfied. The initial dispute is over the 3rd Requirement namely that the person liable in personam on the Award claim (whether it be Korean Corporation or Korean Republic) at the time when that Award claim cause of action arose (namely in or after October 1989) was not the charterer or owner or person in possession or control of the Greek Ship. However when the full force of the statutory scheme is driven home to Mr. Chua, eventually Mr. Chua admits that the 3rd Requirement was not satisfied and concedes that the Greek Owners could not have any valid claim in rem based on the Award because niether the Korean Corporation nor the Korean Republic (the only 2 candidates for the person liable in persoanm) could possibly be charterer of the Greek Vessel in October 1989. He informs Mr. Smith and the Court that no claim in rem based on the Award would be made.

16. This leaves the question of Order 75 rule 5(4), (8) and (10) which are in the following terms:-

17. As the Greek Owners had conceded that no claim in rem based on the Award could be made or maintained, it is therefore not necessary to dwell on the deficiency of the Plaintiff's Affidavit leading to the Warrant of Arrest. It is however clear and there is no escape from it, that the 1st Brooks Affidavit in support of the issue of Warrant of Arrest did not satisfy the requirements of Order 75 rule 5(8)(b)(ii) of the Rules.

18. What Mr. Chua in his valiant attempt to defend the indefensible did, was to argue that on a fair reading of the Writ, the Renewal Affidavit, the Pontikos Affidavit and the Statement of Claim, the claim of the Greek Owners in rem leading to the renewal of the Writ and the subsequent Arrest of the Ship included a claim for the underlying charterparty cause of action. I certainly accept that in the General Endorsement in the Writ there was a primary claim based on the Award ("Award Claim") and as alternative a claim based on the underlying charterparty breach ("CP Claim"). However, a fair reading of the Renewal Affidavit and the Pontikos Affidavit clearly indicate that when the Renewal was sought, in the Renewal Affidavit there was reference to only an Award Claim and there was no trace of a CP Claim in the Renewal Affidavit. I refer to paragraph 4 of the Renewal Affidavit and paragraph 3 of the Pontikos Affidavit. However the matter is put beyond doubt by paragraph 5 of the 1st Brooks Affidavit (leading to the issue of the Warrant of Arrest) where these were said:-

"The Plaintiffs' claim is for sums due under an arbitration award of Donald Davies dated 25th October 1989 for loss of hire, demurrage and interests and costs and fall within Section 12A(2)(h) of the Supreme Court Ordinance as a claim arising out of an agreement relating to the use or hire of a ship. The Plaintiffs is entitled to seek enforcement of the arbitration award by arrest see The Saint Anna [1983] 1 L.I. L. Rep. 637. Furthermore, the Hong Kong Courts has jurisdiction to enforce the said London arbitration award see The Lady Muriel [1995] 2 HKC 320."

(The reference to The Saint Anna was a misconception of those acting for the Plaintiffs that this case provided the authority for the in rem jurisdiction to enforce an arbitration award. What was not realised was that The Saint Anna turned on not section 12B(4)(b) but section 12A(2)(h) and more critically, it was the charterers award enforcement against the owner's ship and not the owners award enforcement against the charterer's ship.)

Then at paragraph 6 of the Affidavit, Mr. Brooks went on to say that the Award sum remained unsatisfied and invoke the in rem jurisdiction of the Court to enforce the Award.

19. The final conclusive proof however came in the Statement of Claim dated 29th April 1997 which pleaded all the essential causes of action for an Award Claim. There was not a line in that Statement of Claim which could be said to plead a cause of action for a CP Claim.

20. In my view therefore Question (A) must be answered against the Plaintiffs and therefore the question of whether Order 2 rule I discretion should be exercised by the Court because of the non compliance with Order 75 rule 5 does not arise as in my view, the applications for renewal and arrest were made on the basis not of a CP Claim.

21. It follows therefore on my conclusion on Question (A) against the Plaintiffs that the Renewal of the Writ, the Service of the Writ and the Arrest of the Ship must be set aside and that an Order must be made for the immediate release of the Ship.

22. Strictly speaking therefore it is not necessary for me to go on to consider Question (B) but as the matter had been argued and the Plaintiffs wished to persist with resisting the setting aside of the Renewal of the Writ, I will shortly state what are my views on this Question of Renewal.

(B) RENEWAL OF WRIT IN REM

23. Renewal of a Writ in rem in Admiralty has always been regarded as particularly important and presented many unique features not to be found in ordinary actions in personam. The reason for this is that the fundamental nature of action in rem is to obtain security against a ship and that ability to obtain security depends on a number of factors chief of which are the visits if any of a ship into the jurisdiction and the change of ownership of that ship or its sistership after the cause of action had arisen. Monica S. [1960] P. 741 is the foundation in the modern law of legal effect of change of ownership on the statutory right in rem. When a statutory right in rem arises, that right will only be preserved against the offending ship or its sistership if the Writ in rem was issued before the change of ownership otherwise the right in rem against such ships would be lost. It is for these reasons that in Admiralty the need to issue the Writ in rem quickly and to serve it quickly is not dictated only by risk of time bar limitation but powerfully driven by the necessity to obtain early security for the maritime claim, which is the whole raison d'etre of Admiralty Action in Rem.

24. The Berny [1979] 1 Q.B. 80 judgment, by that modern master of Admiralty law, Lord Brandon had always been considered as one of the leading cases in Admiralty and its correctness had never been doubted and of course it addressed itself to the unique problem of renewal of admiralty in rem writs. In Berny, Brandon, J. (as he then was) held the previous practice of renewal on ship by ship basis to be wrong and that renewal should be on an overall basis and only to be granted when it could be demonstrated that there was no sufficient opportunity to effect service (namely obtain security by arrest) during the currency of the Writ. At page 103, Brandon, J. said:-

"In my opinion, when the ground for renewal is, broadly, that it has not been possible to effect service, a plaintiff must, in order to show good and sufficient cause for renewal, establish one or other of three matters as follows: (1) that none of the ships proceeded against in respect of the same claim, whether in one action or more than one action, have been, or will be, present at a place within the jurisdiction during the currency of the writ, alternatively (2) that, if any of the ships have been, or will be, present at a place within the jurisdiction during the currency of the writ, the length or other circumstances of her visit to or stay at such place were not, or will not be, such as to afford reasonable opportunity for effecting service on her and arresting her, alternatively (3) that, if any of the ships have been, or will be, present at a place within the jurisdiction during the currency of the writ, the value of such ship was not or will not be, great enough to provide adequate security for the claim, whereas the value of all or some or one of the other ships proceeded against would be sufficient, or anyhow more than nearly sufficient, to do so."

For the sake of convenience I will hereinafter refer to the three reasons for good cause for renewal as the "3 Berny requirements".

25. What underlies the 3 Berny Requirements is the strong view held by Brandon, J. that it is

"the duty of solicitors, who have issued a writ on behalf of the plaintiffs, to take all reasonable steps to ensure that it is served during its initial currency. If the plaintiffs choose to proceed against a large number of ships concurrently (there is nothing which requires or compels them to do so), they must accept the disadvantages. as well as the advantages of doing so."

Implicit in this statement of Brandon. J. is the assumption that the plaintiff and his solicitor would have satisfied themselves at the time of the issue of the Writ in rem, as to the plaintiff having a good cause of action in rem and being able to effect service of the writ in rem. It follows in my judgment that a plaintiff cannot rely on his own inabilty to satisfy himself that he has a good cause of action in rem as an excuse or justification for not serving his writ in rem and even less so for seeking renewal of the writ. Where inability to seve the writ in rem was self induced, in the sense of being unable to satisfy himself a good cause of action in rem, that inabiltiy cannot in my judgment (subject to possible exceptions which must be very rare) amount to excusable disability, justification or good reason. In my judgment, therefore nothing said in the Affidavits filed by the Plaintiffs therefore show good reason or are capable of amounting to good reason.

26. Mr. Chua placed strong emphasis on the case of Kleinwort Benson v Barbrak Ltd. [1987] A.C. 597. It is of course well known that the Kleinwort judgment and a series of later judgments of the House of Lords laid down the two stage test of requiring good reason to be shown for extending time in stage one and giving the court the discretion to consider the balance of hardship under stage 2. But I do not believe that there is any conflict between Berny and Kleinwort and what was decided in Berny in the context of renewal of admiralty writs in rem is of course of particular relevance to our situation also involving an attempt to renew the writ in rem. Each case must be decided on the individual facts. But I do not believe that applying the Kleinwort principle would yield in any way a different result as I take the primary view that in relation to the renewal of an admiralty writ in rem, the plaintiffs cannot rely on its own inability to prove its own cause of action in rem as a justification for renewing the writ in rem.

27. Based on the above broad principles I have stated in relation to an admiralty writ in rem, it seems to me that I must conclude that no good reasons have been shown for the writ in rem to be renewed and this is by applying either the Berny 3 requirements or the Kleinwort principle.

28. The evidence before the Court shows that:-

29. In the course of the arguments, the question was put as to whether in law it could be right for vessel after vessel to come to Hong Kong and yet for the Plaintiff not to arrest but rely on its inability yet to be satisfied that it had a good cause of action in rem and on that basis obtain from the Court renewal of the writ. In my experience of the admiralty litigation, there has never been such a bold assertion as made in this case that it was perfectly reasonable, 17 years after the original cause of action had arisen, some 9 months after the Writ in rem had been issued and after a number of vessels had come and gone and still for the solicitors to say that it was excusable not to effect arrest because the Plaintiffs had yet to satisfy themselves they had a good casue of action in rem. It seems to me on the facts of this case, even taking into full account the evidence of the Plaintiffs, by the 12th 13th and 14th July 1996, (even if good reasons might have been shown earlier) it could not possibly be said that it was still reasonable for the Plaintiffs not to effect arrest or that it would be right for the Court to grant renewal of the Writ in rem in October 1996, which document the Plaintiffs had seen fit not to serve in July 1996.

30. Accordingly, I conclude both Questions (A) and Question (B) in favour of the Defendants. I therefore order that the Renewal of the Writ, the Service of the Writ, the Arrest of the Ship must all be set aside and that the Ship is to be released immediately. The Plaintiffs must pay the Defendants the costs of the Motion.