The Decurion on Appeal
Hong Kong Court of Appeal: Fok, Chu JJA and McWalters J: CACV No.97 of 2012: 12 May 2012
Mr Michael Thomas 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
Chimbusco commenced an in rem action against a vessel owned by the Defendant to recover the cost of bunkers supplied to the Defendant for that vessel and ten other vessels. The Court of Appeal affirmed the decision of Reyes J that the claim in relation to the ten other vessels should be struck out as the Defendant did not exercise the requisite degree of control over those 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; and the Defendant did not have the contractual right to control those vessels.
For a note on the first instance judgment, see http://www.onlinedmc.co.uk/index.php/The_Decurion
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.
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 Other Vessels”). The total claim was for some US$4.2m, and that for bunkers supplied to the Vessel alone was US$85,000. The Other Vessels were time chartered to Clan SA (“Clan”), a company related to Maruba SCA, but to which the latter supplied bunkers as a result of several inter-connected agreements.
Chimbusco arrested the Vessel.
After Maruba SCA filed its defence, it applied under O.12, r.8 of the Rules of High Court (Cap.4A, Laws of Hong Kong) (“the RHC”) for a declaration that the Court had no in rem jurisdiction over it insofar as Chimbusco’s claim related to bunkers supplied to the Other Vessels. Reyes J held that Maruba SCA was not able to tell the person in possession of the Other Vessels what was to be done with them and thus was not “in control of” the Other Vessels. The application by Maruba SCA was allowed and the part of the claim of Chimbusco relating to the Other Vessels was struck out.
Chimbusco appealed to the Court of Appeal against the striking out decision, contending that Reyes J had applied too narrow a meaning to the phrase “in control of” the ship in s.12B(4) of the High Court Ordinance (Cap.4, Laws of Hong Kong) (“the HCO”) (the equivalent of s.21(4) of the Senior Courts Act 1981 of the UK).
Section 12A(2)(l), HCO (the equivalent of s.20(2)(m) of the Senior Courts Act 1981) 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”.
The Court of Appeal, with Fok JA giving the leading judgment, dismissed Chimbusco’s appeal.
As regards the meaning of “control”, the Court noted that the Admiralty jurisdiction of the Court of First Instance replicated ss.20 to 24 of the Supreme Court Act 1981, which was previously extended to Hong Kong by Order in Council. The purpose of the English Act was to bring the right of action in rem in English courts into conformity with the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-going Ships 1952: see The Evpo Agnic  1 WLR 1090.
The language of the Convention and of s.12B(4) suggested that a person’s connection with the ship must involve either full possession or a contractual right of control and that the relationship to the ship could not be merely casual. The statutory requirement was that the person must be in control of the ship, not that he be in control of the company which was the charterer of the ship. In The “Guiseppe di Vittorio”  1 Lloyd’s Rep 136, Evans LJ noted that the phrase “charterer of, or in possession or control of, the ship” clearly included time and voyage charterers, although they did not have possession of the ship; and the phrase extended expressly to any case where the person concerned did have either possession or control, apparently regardless of whether that person was or could be described as a charterer.
In giving the words “in control of” the ship their natural and ordinary meaning, the Court would look to see if the party in question was in the position of a charterer (even if not described as such) with a contractual power of control over that ship. Such power would involve having the right to direct the master as to how the ship was to be employed and its existence would not be consistent with some other party having a superior contractual power of control.
The Court of Appeal affirmed the approach taken by Reyes J as providing a simple, clear and rigorous test for control of a ship. The Court further agreed with the observation of Reyes J that it could not have been the intention of s.12B(4) to introduce a looser test equating control with “having a say in the operation of a vessel”; this would widen the possibilities of maritime arrest at the cost of introducing a high degree of uncertainty in shipping matters which would require time-consuming factual assessments and be commercially undesirable.
Further, Reyes J was correct in holding that Maruba SCA was not “in control of” the Other Vessels. The Other Vessels were at all material times in the possession of their registered owners. They were chartered by Clan under time charterparties in NYPE form, and Clan had the exclusive contractual right to determine how the vessels were to be employed.
It was not asserted in documents supplied to Chimbusco in contemplation of the supply of bunkers that Maruba SCA was in a position to instruct Clan or the owners of the Other Vessels on their navigation. Nor did the loose description of Maruba SCA as the “operator” of the ships indicate this. The fact that Maruba SCA guaranteed some payment obligation by Clan, paid hire due from Clan or ordered the bunkers did not alter the fact that Maruba SCA did not have a contractual right to control the vessels.