The Decurion

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DMC/SandT/12/19

Hong Kong

The “Decurion”

Hong Kong Court of First Instance: Reyes J: HCAJ No.141 of 2010: 4 May 2012

Mr Clifford Smith SC, instructed by Messrs Clyde & Co, for the plaintiff, Chimbusco Pan Nation Petro-Chemical Co Ltd

Mr Charles Sussex SC, instructed by Messrs Kennedys, for the Defendants, Owners of the vessel “Decurion”

ADMIRALTY: IN REM JURISDICTION: CLAIM AGAINST VESSEL OWNED BY DEFENDANT: PAYMENT OUTSTANDING FOR BUNKERS SUPPLIED TO DEFENDANT FOR VESSELS CHARTERED BY RELATED COMPANY: STRIKING OUT: WHETHER DEFENDANT “IN POSSESSION OR IN CONTROL” OF CHARTERED VESSELS WITHIN SECTION 12B(4) OF HIGH COURT ORDINANCE

Summary

The plaintiff, Chimbusco, commenced an in rem action against a vessel owned by the Defendant to recover the cost of bunkers supplied to the Defendant for ten other vessels. Reyes J held that such claim should be struck out as the Defendant did not exercise the requisite degree of control over the ten other vessels as required under Section 12B(4) of the High Court Ordinance (the equivalent of Section 21(4) of the Senior Courts Act 1981(UK)). Those vessels were time-chartered to another company, albeit closely connected with the Defendant but the Defendant was not able to tell the person in possession of those vessels what was to be done with them.

This note has been contributed by Ken T.C. Lee, LLB(Hons), PCLL (University of Hong Kong), BCL(Oxon) and barrister-at-law in Hong Kong.

Background

The Defendant, Maruba Sociedad en Comandita por Acciones (“Maruba SCA”), was the owner of the vessel “The Decurion” (“the Vessel”).

The Plaintiff, Chimbusco Pan Nation Petro-Chemical Co Ltd (“Chimbusco”), commenced the present in rem action against the Vessel to recover the price of bunkers supplied to the Vessel and to ten other vessels. The total claim was for US$4.2m, but that for bunkers supplied to the Vessel alone was US$85,000. Those ten other vessels were time chartered to Clan SA, a company related to Maruba SCA, to which the latter supplied bunkers as a result of several inter-connected agreements.

Chimbusco arrested the Vessel.

Maruba SCA accepted that Chimbusso had an in rem claim against the Vessel for the bunkers supplied to that ship. However, it did not accept that Chimbusso had an in rem claim against the Vessel for bunkers supplied to the ten other vessels, and applied to strike out those parts of the claim.

Section 12A(2)(1) of the High Court Ordinance (Cap.4, Laws of Hong Kong) (the equivalent of s.20(2)(m) of the Senior Courts Act 1981 (UK)) provided that the Court had Admiralty jurisdiction in respect of claims for goods supplied to a ship for her operation or maintenance.

Section 12B(4) (the equivalent of s.21(4) of the Senior Courts Act 1981) provided that where there was a personal claim in relation to goods supplied to a ship for her operation against a defendant who was, “when the cause of action arose, the owner or charterer of, or in possession or in control” of that ship, the Court may also have in rem jurisdiction against any other ship of which, when the action was brought, the defendant was “the beneficial owner as respects all the shares”.

Judgment

Reyes J allowed the application by Maruba SCA.

It was clear that Maruba SCA beneficially owned all the shares in the Vessel when Chimbusco commenced the present action. The only question before the Court, therefore, was whether the defendant was “when the cause of action arose, the owner or charterer of, or in possession or in control” of the ten other vessels. Only if this condition were satisfied would the in rem claim against the Vessel with respect to bunkers supplied to the ten other vessels be valid.

Maruba SCA was not the registered owner of the ten other vessels. Neither was it the charterer of them, as the vessels were under time charter to Clan.

As to whether Maruba SCA was “in possession or in control” of the ten other vessels within the meaning of Section 12B(4) of the High Court Ordinance, the Court noted there was little authority on the meaning of that expression. Cases like The Laemthong Pride (1997) 149 ALR 675 and The Giuseppe Di Vittorio [1998] CLC 149 suggested that one could be described as being “in possession or in control” of a ship without being its owner or charterer. Somervell LJ in Dolfus Mieg et Compagnie DSA v Bank of England [1950] Ch 333 had explained that “control” must denote something more than the control which normally comes with possession of a ship, and that was the ability to tell the person in possession of a vessel what was to be done with it.

As the ten other vessels were chartered to Clan, they were under the control of Clan and not Maruba SCA. Pursuant to Clause 8 of the time charters, the master would be under the orders and directions of the charterer, namely Clan, as regards employment and agency.

While Maruba SCA was in close connection with Clan, Reyes J held that Chimbusco had failed to establish that Maruba SCA had control of the ten other vessels. Documents provided by Maruba SCA to Chimbusco at the time the contract was made had described the Maruba Group as proceeding to service trade between the Far East and South America “under the brand name CLAN”, but they did not go so far as to claim that Maruba SCA was in a position to instruct Clan or the owners of the vessels as to their navigation. That “Sea-Web Ship Overviews” described Maruba SCA as the “operator” of six of the ten other vessels was too vague to indicate that Maruba had the sufficient degree of control over them.

The Court also rejected other factors relied upon by Chimbusco, including the fact that Maruba SCA had guaranteed certain obligations for Clan and had paid charter hire due from Clan. That evidence demonstrated that there was a close relationship between the two companies but it did not establish that Maruba had the requisite degree of control for the purposes of s.12B(4) of the Act.