Re The Philippine Admiral
Read the full judgment text of HCAJ 94/1973 on BabelCite. This HCAJ judgment.
1. I am here dealing with the case of the Hong Kong United Dockyards Ltd. and the owners of the ship The Philippine Admiral, that is Admiralty Jurisdiction No.94 of 1973. This is one of several cases now before the court and what I have to say is applicable not only to this case, No. 94, but also to Admiralty Jurisdiction Nos. 103, 105 and 139. There has been no order for consolidation of these cases but they were heard together, the parties being represented by counsel individually. The point a
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HCAJ000094/1973 IN THE SUPREME COURT OF HONG KONG ADMIRALTY JURISDICTION FOLIO NOS. 94, 103, 105 AND 139 OF 1973 -----------------
Coram: Briggs, C.J. in Court Date of Judgment: 14th December, 1973. ----------------- JUDGMENT ----------------- 1. I am here dealing with the case of the Hong Kong United Dockyards Ltd. and the owners of the ship The Philippine Admiral, that is Admiralty Jurisdiction No.94 of 1973. This is one of several cases now before the court and what I have to say is applicable not only to this case, No. 94, but also to Admiralty Jurisdiction Nos. 103, 105 and 139. There has been no order for consolidation of these cases but they were heard together, the parties being represented by counsel individually. The point at issue is the same in each case. There is one further case, however, with which I am not concerned, namely, The Telfair Shipping Corporation and the Owners of the ship, that is Admiralty Jurisdiction No. 106 of 1973, that case is not before me. 2. In this case, No. 94 of 1973, the writ was issued on May 2nd, 1973. It was directed to "the owners and others interested in the ship 'Philippine Admiral'". 3. Appearance was entered for the defendants on May 8th, 1973, but this was amended on November 16th, 1973 and the defendant who has entered an appearance is now The Liberation Steamship Company Inc. who claim to be the beneficial owner of the ship. This company also appeared before me and was heard. 4. On October 29th, 1973, a few days before that amendment was made, a notice of motion was filed on behalf of the Republic of the Philippines, for an order that the writ and all subsequent proceedings be set aside on the grounds that the ship The Philippine Admiral is the property of that Government which is, of course, a foreign sovereign state. 5. Order 12 rule 8 was invoked. It appears from that rule that the proceedings should have been brought by summons and not by notice of motion. The parties asked that the notice of motion be treated as a summons and with the consent of all the parties I agreed to adopt that course. The summons, as it now became, was dealt with in Chambers. 6. The plaintiffs brought this action in rem to recover a debt due to them for certain services and repairs which they allege they have carried out on the ship. The ship has been arrested and an order has been made for appraisement and sale. The date of that order was the 26th September, 1973. 7. The Philippine Government has not entered an appearance and it is clear that that is unnecessary. Their case is very simple. It is this: The Government of the Philippines is recognized by the United Kingdom as the legitimate Government of the Philippines, and that Government is the registered owner of the ship The Philippine Admiral. It is an accepted rule of law that an independent sovereign may not be directly or indirectly impleaded in the courts without its consent. The word "implead" is here used in the sense of forcing a foreign sovereign government to forego part of its independent authority or its proprietary rights. It is obvious that if the plaintiff has his way and the ship is sold, the rights of the Government of the Philippines, as owners, if owners they are, will be lost and that Government's independence will be sacrificed to that extent. 8. For a full understanding of this case, it is necessary to deal with the facts at some length. 9. After the last World War, a treaty was entered into between the Japanese Government and the Government of the Philippines under which the former agreed to make certain reparations to the latter to offset in part the ravages of the war in the Philippines. Reparation was to take the form of monetary payment as well as the provision of capital goods and services. 10. The Government of the Philippines passed an Act No. 1789, dated June 21st, 1957, ratifying this treaty which sets forth the policy to be adopted in making use of the reparations and establishes machinery for its distribution. 11. The Act clearly states that the policy shall be to utilize all reparations "in such manner as shall assure the maximum economic benefit to the people of the Philippines and in as equitable and widespread a manner as possible." 12. The Act set up a Reparations Commission as part of the machinery to implement this policy. It consists of a Chairman and four other members who are appointed by the President of the Philippines. The Commission is an organ of the Government of the Philippines and comes directly under the office of the President. 13. As part of the reparations, the Japanese Government made funds available to the Government of the Philippines which the latter used to pay for the construction of a vessel in a Japanese shipyard. This vessel is the subject matter of this action. It is now named The Philippine Admiral but was then known as The Dagohoy. She was constructed for the Government of the Philippines in Japan and paid for out of reparation moneys, the purchaser being the Government of the Philippines. 14. Part of the Act, No. 1789, states that one of the policies of the Government of the Philippines is to give preference to private enterprise when deciding who was to utilize capital goods such as a ship supplied under the reparations treaty with Japan. It was laid down that such private enterprises must be Filipinos or bodies wholly owned by Filipinos. It was also stated that no goods supplied could be re-sold, leased or otherwise disposed of to any person other than a Filipino or to an entity wholly owned by Filipinos. Penalties were to be imposed for any violation of these terms. 15. The proceeds of any sale of capital goods by the Reparations Commission were to be placed in a Special Economic Development Fund which was available for the economic rehabilitation of the people of the Philippines. It was further contemplated that half of such fund should be used for industrial loans. This provision was in implementation of the declared policy that reparations were to be used for the maximum economic benefit of the Filipino people. 16. On November 16th, 1960, the Reparations Commission entered into an agreement for the conditional sale of The Philippine Admiral to the Liberation Steamship Company Inc. I will refer to this company as the "End User". 17. The agreement refers to the Reparations Commission as an entity of Government and throughout the agreement the parties are referred to as Conditional Vendor and Conditional Vendee. 18. The contract clearly states that the title to and ownership of the ship shall remain with the Conditional Vendor, in other words, the Government of the Philippines until it has been paid for, provision being made for payment of the vessel by instalments. The provision that there must be no sale or lease etc. to interests other than Filipino interests is recited in an Annexure to the agreement. There are other restrictions as to the time in which a resale may be made. But a resale cannot be made without the approval of the Reparations Commission. 19. The contract also provides that if the End User fails to pay any instalment due, the agreement automatically comes to an end and the End User must thereupon deliver up possession of the ship to the Conditional Vendor. Any instalments of the purchase price which had already been paid are to be considered as rentals. There is a further provision that if the End User does not deliver up possession of the ship in such circumstances the Conditional Vendor is entitled to his costs for any proceedings in court consequent upon such refusal. 20. The ship was registered in the Philippine Register of Ships and with the Customs Department of the Government of the Philippines on December 15th, 1960, in the name of the Reparations Commission, who are stated to be the owners of the ship. These certificates are still valid. 21. The End User took possession of the ship and paid various instalments under the agreement of Conditional Sale. These sums were credited to the Special Economic Development Fund by the Commission. The End User was responsible for the running of the ship while it was in their possession. This included engaging the crew and the payment of their wages, payment of repairs and the provisioning of the vessel. 22. In 1963, the Reparations Commission interfered with a proposed charter of the ship by the End User to an Indian Company which, I understand, was an organ of the Indian Government. They interfered on the ground that such a charter would violate the purpose for which the utilization of the ship had been handed to the End User. The matter was raised in the courts of the Philippines by the End User. But after the Indian Government and the Government of the Philippines had exchanged views the matter seems to have been compromised or settled. The interest of these facts is that it shows that upon this occasion the Government of the Philippines exercised its rights as the owners of the ship although the ship was under the control and in the possession of the End User. 23. The End User did not pay the instalments of the purchase price in accordance with the terms of the contract of conditional sale of the vessel to them. As at October 9th, 1973, by which time, under the terms of the contract of conditional sale, the whole of the purchase price should have been paid they were indebted to the Reparations Commission in the sum of five million odd pesos. This has been admitted by the End User. 24. On October 10th, 1973, the Reparations Commission, by resolution, ordered the re-possession of the ship on the grounds that the End User was in breach of the contract of conditional sale in that they had not paid the whole of the purchase price. This resolution was passed after the courts in Hong Kong had ordered that the vessel be appraised and sold. The date of that order was the 26th September, 1973. On November 3rd, 1973, the Reparations Commission obtained a preliminary prohibitory injunction in a court in Manila ordering the End User to desist or refrain from performing any act tending to obstruct, delay or interfere with the release of the ship from arrest. 25. The question is: What does a foreign sovereign government have to prove in order to claim immunity successfully? At one time it was thought that all that was necessary was for a government to assert a claim. See The Jupiter(1). This view has not prevailed and the modern and correct principle appears to be stated by Lord Jowitt in the case of Juan Ysmael & Company Inc. and Government of the Republic of Indonesia(2). At page 89 of his judgment he says this:-
26. In that case, the appellants brought an action in rem in the courts in Hong Kong. The Privy Council held that a claim of ownership in that case was not enough to found immunity on the grounds that there was evidence that the title was manifestly defective. 27. What, therefore, is the position in the present case. That the Reparations Commission owns this ship is not really in dispute. The Commission is the registered owners of the ship. It is also not disputed that the Reparations Commission is an organ of the Government of the Philippines. The ownership of the ship therefore lies with the Government of the Philippines. 28. I do not think that it can be disputed that the Reparations Commission have a right to possess the ship. This is clear from the terms of the contract of conditional sale. That contract states, in paragraph 11 of Annexure 'A' which is made an integral part of the contract:-
It is also stated in Annexure 'A':-
29. This clearly shows the right of the Reparations Commission to re-possess the ship arises automatically upon a breach. It is unnecessary for the Reparations Commission to act in any way. The contract also states that when the Conditional Vendor rescinds the contract, the Conditional Vendee is obliged to hand over the possession of the ship. This, the End User has not done. Indeed, it could not have done this since the ship is under arrest in Hong Kong. 30. At the time the Reparations Commission wished to exercise their rights, the ship was in Hong Kong, they therefore passed a resolution to re-possess the ship and brought proceedings against the End User in the Philippines. As I have already said, we have therefore the position that the Government of the Philippines is the owner of the vessel and has a right to immediate possession of the vessel. In my view, this is enough to found a claim to immunity successfully. 31. It was argued that special rules applied to ships. Mr. Arculli, who appeared for the End User, put forward four propositions. He said the case law shows that (1) warships of a sovereign state are entitled to absolute immunity whether they are being used for the purpose for which they were built or not; (2) ships owned by a sovereign state which are being used for state public purposes other than for the purpose of trade are also entitled to absolute immunity; (3) ships requisitioned by a sovereign state are again entitled to absolute immunity; but (4) state-owned vessels operated by them for the purpose of normal commercial transactions are not entitled to immunity. His argument was that The Philippine Admiral came under his fourth proposition that it was a ship owned by the Government of the Philippines but was one that was employed in ordinary trading and not in the public service of the Government of the Philippines. 32. Mr. Litton argued that if I were to hold that no immunity attaches to state-owned vessels engaged in ordinary commercial transactions then I should hold that The Philippine Admiral was operating in the public service of the Philippines. I have stated the terms on which the End User was bound to utilise the ship above. I do not think that those facts warrant me to come to the conclusion desired by Mr. Litton. The ship was in the possession of the End User who was using it for its own purposes. Any profits made as the result of a charter or for carrying freight would be earned not by the Government of the Philippines but by the End User. The only direct benefit for the people of the Philippines came from the instalments of the purchase price. They received nothing from any commercial venture that the ship undertook. 33. But is Mr. Arculli right? Is there a special rule that state-owned ships utilised for private trading do not attract immunity? 34. Many authorities were cited by counsel, including cases from the United States and Canada. I will say at once that I do not intend to take notice of these foreign cases because it seems that there are differences between the law in those countries and the law in Hong Kong. 35. I have been unable to find authority for the proposition that the law as to ships differs from other property. Nor apart from certain dicta, do I find that there is the special rule as to private trading urged by Mr. Arculli. There are cases where immunity has been granted when the ship the subject matter of the dispute was engaged in private trading. In Compania Mercantil Argentina v. United States Shipping Board(3) it was held that a sovereign independent state does not, by entering into a trading contract with a foreigner, lose its immunity from process in British courts as regards matters arising out of the contract. Again, in the case of The Porto Alexandre(4) it was held that a vessel owned by a sovereign independent state which earned freight for the state was not deprived of immunity from the process of arrest by reason of the fact that she was being employed in ordinary trading voyages carrying cargoes for private individuals. It is true that this case was severely criticised in The Cristina(5) but it was not overruled. The Cristina(5) was a case of the requisition of a ship and there is clear authority that such a ship attracts immunity. Again, in an earlier case, The Parlement Belge(6) there was evidence that the ship was partially at any rate engaged in private trade. And yet immunity was claimed successfully. Finally, there is the case of the United States of America and Republic of France v. Dollfus Mieg et Cie. S.A. and Bank of England(7). In this case the Bank of England held as bailee for the Governments of the United States, France and the United Kingdom some gold bars. It was held that the action must be stayed since the doctrine of immunity of a foreign sovereign applied to the case of a claim to recover property in the hands of a bailee for a foreign sovereign. In his judgment, at page 606, Lord Jowitt said this:-
36. In that case the foreign sovereign states did not have possession of the gold bars. What they had was a right to immediate possession. This was, of course, a case of bailment but in my view the position is similar in the present case before me. The Government of the Philippines has the ownership of The Philippine Admiral and also an immediate right to the possession of the ship and this, in my view, is enough to found a claim of sovereign immunity successfully. The Government of the Philippines is therefore entitled to the relief sought by the notice of motion which I have dealt with as a summons. There will be a similar order in Admiralty Jurisdiction Nos. 103, 105 and 139. The Government of the Philippines is entitled to its costs which must be borne equally by the other parties.
Representation: W. Waung (Deacons) for Plaintiffs in A.J. 94, 105 and 139 of 1973. C. Ching (Johnson, Stokes & Master) for Plaintiffs in A.J. 103 of 1973. Litton, Q.C. and Mills-Owens (Peter Mark & Co.) for the Government of the Philippines in all cases. R. Arculli (Brutton & Stewart) for Liberation Steamship Company Inc. in all cases. (1) (1924) P.236. (2) (1955) A.C. 72. (3) (1924) 131 L.T. 388. (4) (1920) P.30. (5) (1938) A.C. 485. (6) (1880) 5 P. 197. (7) (1952) A.C. 582. Appeal allowed: see CACV53/1973 dated 26 April 1974 |