ALAN SOH v. THE OWNERS OF THE VESSEL "COLUMBUS CARAVELLE"

HCMP 5887/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 5887 OF 2000

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J U D G M E N T

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History

1. The Plaintiff is a Singaporean Citizen who was employed in 1995 on board the ship Columbus Caravelle ("the Ship") pursuant to a contract of employment dated 12 March 1995 made with the bareboat charterer of the Ship, Mozzen Ltd. ("Mozzen"). The bareboat charter was assigned in August 1995 to Fiaco International Ltd. ("Fiaco") but the Plaintiff continued his employment on board the Ship and was paid by Fiasco in August and September 1995. However in October 1995, the employment of the Plaintiff on board the Ship was suddenly terminated by letter of Fiasco dated 26 October 1995. On 30 November 1995 the Plaintiff commenced an admiralty in rem action (No. 27-10-1995-I) in the Malaysian High Court against the Vessel for outstanding wages and termination compensation ("Malaya Action").

2. At the time of the commencement of the Malaya Action, the Ship was in Malaysia. But the Plaintiff was not successful in effecting arrest of the Ship due to a technical defect in that the Assignment of Bare Boat Charter was not produced to the presiding Judge. Apparently the Ship shortly afterwards left the Malaya jurisdiction and did not return thereafter. The Writ in Rem in the Malaya Action was however properly served on the Defendants in the Malaya Action by service effected and accepted on 1 December 1995 on Messrs Chong Brothers, Solicitors for the Defendants Owners and Solicitors for Fiaco. A Memorandum of Conditional Appearance dated 5 December 1995 (page 43) was entered for the Owners of the Ship and for Fiasco by Messrs Chong Brothers ("Malaya Lawyers") as their lawyers. There was an attempt to challenge the Malaya Action but the application to strike out (on the ground that the Plaintiff's claim did not constitute maritime lien) failed and the appeal from the failed strikeout application was dismissed in 1998.

3. Pleadings in the form of Defence & Counterclaim and Reply & Defence to Counterclaim were all properly served in the Malaya Action. In February 1998 a Summons was issued by the Malaya Lawyers to come off the record as lawyers for the Defendants and an order was granted around the 16 March and on the same day, notice of Trial to take place on 21 October 1999 was given to the Defendants. The Malaya Action came on for trial on 21 October 1999 and the Defendants were served with notice of the trial date by letter dated 29 March 1999. The Defendants were however absent at the Trial which then proceeded in the absence of the Defendants and after hearing oral evidence from the Plaintiff, the Judge entered Judgment in favour of the Plaintiff in the sum of some US$1 million. The Judgment [83] of 21 October 1999 in the Malaya Action ("Malaya Judgment") was expressed to be a Judgment in rem of an Admiralty court of Malaysia.

Application to Register the Malay Judgment

4. The Plaintiff did not obtain payment on the Malaya Judgment and on the 13th of November 2000 pursuant to section 4 of the Foreign Judgments (Reciprocal Enforcement) Ordinance ("the Ordinance"), applied to the Hong Kong High Court ex parte that the Plaintiff be at liberty to register in Hong Kong the Malaya Judgment in the same manner as a Hong Kong Judgment. The application was granted and such an order was made ("Registration Order").

5. Pursuant to the Registration Order, Judgment in Hong Kong was entered on the 14th of November 2000 [100]. An Admiralty Action in rem was issued against the Vessel on the same day and the Vessel was thereupon arrested but she was subsequently released upon security being given.

Application to Set Aside Registration

6. On 28 November 2000, the new owners of the Vessel purporting to act as defendants in the present Hong Kong Action ("New Owners") applied to set aside the registration in Hong Kong of the Malaya Judgment and for a declaration that the Malaya Judgment is not enforceable in Hong Kong against the Vessel. Four grounds, all based on the express provisions of the Ordinance, are advanced for the setting aside of the Registration Order. The four Grounds are firstly that the Malaya Court had no jurisdiction because the Ship was not in Malaya at the time of the Malaya Action, secondly that no appearance was entered by the Defendants in the Malaya Action, thirdly that it was against public policy of Hong Kong to enforce the Malaya Judmgent and fourthly that execution of the Malaya Judgment was not possible in Malaya.

7. Section 4(1) of the Ordinance provides:-

"A person, being a judgment creditor under a judgment to which the provisions of this Ordinance apply, may apply to the Court of First Instance at any time within 6 years after the date of the judgment, or, where there have been proceedings by way of appeal against the judgment, after the date of the last judgment given in those proceedings, to have the judgment registered in the Court of First Instance, and on any such application the court, shall, subject to proof of the prescribed matters and to the other provisions of this Ordinance, order the judgment to be registered:

Provided that a judgment shall not be registered if at the date of the application---

(a) it has been wholly satisfied; or

(b) it could not be enforced by execution in the country of the original court."

Section 6 of the Ordinance provides:-

"(1) On an application in that behalf duly made by any party against whom a registered judgment may be enforced, the registration of the judgment---

(a) shall be set aside if the registering court is satisfied---

(i) that the judgment is not a judgment to which the provisions of this Ordinance apply or was registered in contravention of any of the foregoing provisions of this Ordinance; or

(ii) that the courts of the country of the original court had no jurisdiction in the circumstances of the case; or

(iii) that the judgment debtor, being the defendant in the proceedings in the original court, did not (notwithstanding that process may have been duly served on him in accordance with the law of the country of the original court) receive notice of those proceedings in sufficient time to enable him to defend the proceedings and did not appear; or

(iv) that the judgment was obtained by fraud; or

(v) that the enforcement of the judgment shall be contrary to the public policy in the country of the registering court; or

(vi) that the rights under the judgment are not vested in the person by whom the application for or registration was made;

(b) may be set aside .......

(2) For the purposes of this section, the courts of the country of the original court shall, subject to the provisions of subsection (3), be deemed to have had jurisdiction -----

(a) in the case of a judgment given in an action in personam ----

(i) if the judgment debtor ...... submitted to the jurisdiction

(ii) if the judgment debtor ..... counterclaim

(iii) if the judgment debtor ...... agreed to submit to the jurisdiction

(iv) if the judgment debtor ....... was .... resident in ...

(v) if the judgment debtor .... had an office or place of business ...

(b) in the case of a judgment given in an action of which the subject matter was immovable property or an action in rem of which the subject matter was movable property if the property in question was at the time of the proceedings in the original court situate in the country of that court;

(c) in the case of a judgment ........

(3) Notwithstanding anything contained in subsection (2), the courts of the country of the

original court shall not be deemed to have had jurisdiction ---

(a) if the subject matter of the proceedings was immovable property outside the country of the original court; or

(b) ....

(c) if the judgment debtor ...... was entitled to immunity ....."

Ground 1 - Malaya Court had no Jurisdiction because Ship not in Malaya

8. The 1st Ground relied on by the New Owners applicant to set aside is that the Malaya court has no jurisdiction in the circumstances of the case under Section 6(1)(a)(ii) of the Ordinance. Section 6(2)(b) provides that the Malaya Court is deemed to have jurisdiction in respect of action in rem if the subject matter of the action being movable property in question was at the time of the proceedings situate in Malaya. The Ship in question was in Malaya at the time when the proceedings started although not at the time of the judgment and the point taken by Mr. Smith for the New Owners is that the Ship was not the subject matter of the action in rem and that therefore there was no Judgment in Rem. I do not accept these submissions.

9. The defence raised of no in Rem Judgment in Malaya can be examined on two basis. Firstly (without reference to Section 6(2)(b)), whether the Malaya Action was of a class of action known as admiralty action in rem under Malaya law and under Hong Kong law, Secondly whether on a proper construction of Section 6(2)(b), there was deemed to be jurisdiction by the Malaya Court because the Ship was in Malaya at the time of the proceedings.

10. On the first question, it seems clear that the papers put before this Court of the Malaya proceedings are all the usual admiralty in rem court documents which our Hong Kong Admiralty Court sees everyday where the action was expressed to be in rem against the Ship, the subject matter of the action. Mr. Smith says that an admiralty action in rem only came into existence if there was an actual arrest of the ship and a sale of the ship. Most admiralty actions in rem these days do not have such characteristics, as often the vessel was only served (or service was accepted by solicitors without requiring service on the vessel itself) and the vessel is not arrested because security is given. In fact only a minority of the Admiralty in rem actions in Hong Kong (and there is no reason to believe that the position in Malaya or Singapore would be any different) involve the actual arrests and sales of the vessels by the Admiralty Court. As far as I can see all the usual characteristics of the court having admiralty jurisdiction in rem are present in the Malaya Action and in the Malaya Judgment.

11. Mr. Smith however relies on various authorities to support his contention that without arrest of the vessel and sale of the vessel there could be no true admiralty action in rem. It is to be observed firstly that none of the authorities cited by him decided that sale of vessel is essential for the existence of the admiralty action in rem. Secondly these authorites also did not require the arrest of the vessels for the existence of the admiralty action in rem. The authorities he cited however referred to the necessity of service of the writ in rem. The decision of Freccia del Nord [1989] 1 Lloyd's Rep. 388 at 391 with the dictum "that the Court cannot have jurisdiction over a ship which does not come within the jurisdiction" is not to be read literally. The question addressed there was different, but in any event it was decided at page 392 first column of that judgment, that action in rem could be brought by service on the ship and without arrest. Sheen, J. there of course was not even addressing his mind to the common situation of action in rem properly commenced by acceptance of service of writ in rem by solicitors for the owners without the writ being ever served on the ship or the ship ever having been in the jurisdiction. Such an action, without service on the ship or arrest of the vessel and without sale of the vessel by the Court, would be nonetheless a perfectly valid and often seen action in rem. The decision of The Anna H [1995] 1 Lloyd's Rep 11 with dictum at 19 is to the same effect as Freccia del Nord and therefore does not advance the case of Mr. Smith further. The decision of the Singapore Court of Appeal in the case of The Fierbinti [1994] 3SLR 864 is a judgment of learning. The opinion there expressed is that service on solicitors is not equivalent to service on ship and therefore deemed service does not commence an action in rem. The dispute in that case was very different and the Singapore Court was dealing with a different point. There is no general principle laid down in The Fierbinti that a deemed service cannot properly commence an action in rem and if there is then I cannot accept the principle. The general understanding amongst admiralty practitioners is that deemed service is as good as an actual service on the vessel and that it would be an abuse of the process to insist on actual service on the vessel when there is a deemed service situation under Order 10 rule 1(3) and (4). If deemed service is to be regarded as a "second class citizen" service because it doe not give rise to the proper commencement of an Admiralty Action in rem, then many plaintiffs and defendants had been misled into believing that the judgment which the plaintiffs will obtain following deemed service is judgment in rem and not some judgment in personam disguised as judgment in rem. I do not believe that the admiralty practioners have been wrong all these years in regarding deemed service as good as actual service. I am therefore of the view that none of the authorities cited to me assist Mr. Smith in his argument that the Malaya Action was not an Action in Rem. The Malaya Court certainly regarded the Malaya Action as being an admiralty action in rem and a foreign court such as Hong Kong should be very slow to hold otherwise.

12. The second consideration which we must now examine under the 1st Ground is whether the proper construction of Section 6(2)(b) requires the Ship to be present in Malaya at the time of the Malaya Judgment being entered. The words of Section 6(2)(b) are "the property .... was at the time of proceedings .... situate in the country of that court". If the words are to be given a liberal and generous or even neutral reading then the requirement of Section 6(2)(b) is met if the property was within Malaya at any time of the proceedings. A construction requiring the time of the property to be in Malaya as the time of judgment seems to go against the very language of the subsection. If that was the intention then the expression used should be "at the time of the judgment". After all the very word "judgment" was used in the opening expression of Section 6(2)(b). There is furthermore no compelling reason why that narrow construction should be given. I am therefore of the view that this is a case falling within Section 6(2)(b) of the Ordinance.

Ground 2 - No Appearance entered in the Malaya Action

13. The 2nd Ground of objection is that under Section 6(1)(a)(iii) the Defendants/Judgment Debtor did not have notice of the proceedings to enable him to defend and did not enter any appearance. There was in fact appearance by the Defendants. I must therefore conclude from the appearance, that the Defendants had notice of the proceedings, had time to defend and in fact gave instructions to the solicitors to enter appearance. The appearance was never withdrawn and no affidavit evidence had been put before the Malaya Court to impeach the appearance or to contend that the solicitors did not act pursuant to instructions from the Defendant Owners. In the absence of credible evidence from either the Defendants Owners and/or the Malaya Lawyers who entered the appearance on behalf of the Defendants, it is simply not possible for this Court to set aside the registration based on finding under Section 6(1)(a)(iii) that there was no appearance. The affidavit material put before this Court is really too slim and unreliable as to overcome the positive contemporaneous evidence of appearance. But it is also to be noted that after the appearance, there was the additional step taken in the form of the application by the Defendants to strike out, followed further by an unsuccessful appeal in the Malaya Court by the Defendants. When the appeal failed, there was service of the Defence and Counterclaim by the Defendants and then there was the service of the Reply. I do not see how it is possible in these circumstances, for a case of no appearance by the Defendants in the Malaya Court to be made out.

Ground 3 - Public Policy

14. The 3rd Ground of objection is that enforcement of the Malaya Judgment would be contrary to public policy of Hong Kong under Section 6(v) in that it would deprive the New Owners of the Ship the opportunity to defend the claim on the merits. This is a novel ground which has never received any previous judicial consideration. It is inherent in the scheme of maritime claims that new owners of a vessel will find itself being burdened by a claim for liability incurred by the previous owner. In many ways that is the essence of maritime lien which is what gives maritime claim its unique feature of being able to obtain security for the claim and even when the security is in the hand of new owners. The common remedy for the new owners in such situations is to rely on the indemnity given by the previous owners. I do not therefore regard the fact that the New Owners having to face a claim against the Ship as being in anyway worthy of strong disapproval by the Hong Kong Court. Nor do I find the fact that the New Owners will have no chance to defend the claim on its merits a sufficient reason for the Admiralty Court to decline to enforce what otherwise is a legitimate and good claim. In this case the Plaintiff had already undergone a Trial in Malaya so the opposite question could be posed as to why should the Plaintiff be forced to go through another trial in Hong Kong. I do not therefore accept that there is any compelling public policy, which must only be resorted to with restraint by the courts, requiring this Court to set aside the Registration Order.

Ground 4 - Execution of Malaya Judgment not possible in Malaya

15. The 4th Ground of objection made pursuant to Section 4(1) is that at the date of the registration in Hong Kong, the Malaya Judgment could not be enforced by execution in Malaysia. The first observation which must be made on this 4th Ground is that there is simply no evidence that subsequent to the entering of the Malaya Judgment, anything has happened in Malaya which rendered the said Malaya Judgment not enforceable by execution in Malaya. In fact the evidence from the Malaya lawyers is to confirm that the Malaya Judgment is a type of judgment enforceable by execution in the Malaya Courts [88]. Further, the statutory restriction in Section 4(1) is in general terms and envisages a situation where the Hong Kong court should refuse to enforce Malaya Judgment if that judgment at the time of application for registration was not executable or was incapable of being executed. Examples of these might be a time bar period in Malaya for execution of judgments or change of law of Malaya which renders this particular judgment not capable of being executed unless certain conditions etc. are satisfied. None of these situations apply.

16. The thrust of Mr. Smith's argument on the 4th Ground of objection is that it is unfair to allow registration of judgment carrying with it the consequence of arrest and sale of the Ship because the New Owners are deprived of the chance to defend the proceedings on the merits and it was stuck with the Registration of the Malaya Judgment. I have earlier expressed my view why this is not a valid argument in relation to the objection based on public policy. Nor do I believe that the law prohibits execution after judgment when there was no previous arrest of the vessel and this is specially so in the case of a judgment in rem based on a maritime lien as in this case. The argument put forward by Mr. Smith under this 4th Ground is based on the dictum in The Alletta [1974] 1 Lloyd's Rep. 40 at page 50 to the effect that it would be unjust to allow an in rem judgment to be enforced against new owners who had no notice of the claim. In The Despina [1983] 1 Q.B. 214 at 219F Sheen, J. obiter seemed to share that opinion. In the powerful judgment of Mr. Justice Thean in The Daien Maru No. 18 [1986] 1 Lloyd's Rep. 387 the fallacy of the reasoning in The Alletta was exposed. I agree with the reasoning and the conclusion reached in The Daien Maru and I cannot do better than by quoting the following passage at page 392:-

"On these authorities it is clear that a maritime lien gives a right to the ship enforceable by an action in rem. This being the case, it seems to me logical and right that a plaintiff who has instituted an action in rem against a ship to enforce a maritime lien thereon, must be entitled to arrest the ship in the same action even after he has obtained judgment, provided always that in such a case no bail has been previously put up for the ship in that action. If such right of arrest is said to have been lost by virtue of the judgment having been obtained, then it must follow that the lien is extinguished or discharged by such judgment in the same action instituted to enforce it. Such a conclusion in my view is a non sequitur. For all these reasons which I have given I decline, with respect, to follow the decision of Mr. Justice Mocatta , in The Alletta.."

17. The weight of learning subsequent to The Daien Maru is in favour of The Daien Maru as can be seen in Jackson on Enfrocement of Maritime Claims, 3rd edition at 14.83-4, Meeson on Admiralty Jurisdiction and Practice, 2nd edition at page 134 and the English CPR 49 F PD 6.1 declaring that arrest is available to a judgment creditor in rem.

18. The value of an action in rem is that once a vessel had been properly served or deemed to have been served, then the vessel is bound to answer the judgment which might be entered against it including the right of the plaintiff for that vessel to be arrested and sold, at any time. This is the essence of an action in rem and the value of an action in rem, namely giving security to the plaintiff that the vessel is bound and whether arrested or not, is obliged as the security to the plaintiff to be answerable to the claim. If Mr. Smith is correct that a new owner can be heard to say after the judgment in rem that the vessel cannot be the subject of execution or enforcement by arrest and sale because it would be unfair to deprive the new owner of a chance to defend the claim, then the plaintiff will have an admiralty in rem security of doubtful value and will have to constantly deal with a succession of new owners all wanting to have another chance to defend. In my judgment, the test of the enforcement of in rem judmgent is not whether it binds the new owners or not, but whether it binds the ship irrespective of whether there had been a full trial on the merits and irrespective of whether the ship has been arrested or not and irrespective of any change of ownership. If judgment in rem was obtained (after proper service), then the plaintiff in my view should be able to keep his judgment and not having to face challenges again and again by new owners. The new owners on purchase of the vessel assumed the risk that the vessel might be the subject of either a maritime lien or statutory lien or in rem judgment. No special privileges should be given to new owners. In my judgment there is no substance in the 4th Objection.

19. It follows therefore that the application of the Defendants to set aside the Registration Order fails and the Summons therefore must be dismissed with costs to the Plaintiff.