The Owners of Cargo Lately Laden on Board the Ship or Vessel "Blue Express" v. The Owners of the Ship or Vessel "Blue Victory"

HCAJ000277/1981

Admiralty action for damages for loss of cargo carried by vessel which sank. Arrest of alleged sistership. Application to set aside proceedings on ground that the property in the sistership had passed under a Memorandum of Agreement to new owners prior both to the date of issue of writ and the date of delivery of the ship which was after the date of the issue of the writ. The Court having considered all of the relevant terms of the Memorandum of Agreement and the wording of the "Protocol of Delivery and Acceptance", which was signed on the date of delivery, held that the intention of the parties was that the property in the ship would pass at the time of delivery and that, as the property had not passed at the date of issue of the writ, the motion must be dismissed.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ADMIRALTY JURISDICTION

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Admiralty Action in rem against:
THE SHIP OR VESSEL "BLUE VICTORY"
(now renamed "GHANA EXPRESS")

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Coram: Hon. Power, J.

Date: 23 December 1982

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JUDGMENT

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1. This is an admiralty action in rem in which the plaintiffs are the owners of cargo lately laden on board the vessel "Blue Express" and the defendants are the owners of the vessel "Ghana Express" formerly known as the "Blue Victory". The plaintiffs' claim arises from the carriage of a cargo of 5,677.164 metric tons of steel bars under 32 Bills of Lading, each dated the 24th May 1982, on board the "Blue Express" on a voyage from Tai Chung in Taiwan to Calcutta. The vessel was lost on or about the 10th June 1982 whilst on route to Calcutta. The plaintiffs claimed damages for breach of contract and/or negligence in and about the handling of their cargo and for other consequential relief. The writ of summons in this matter, which was issued on the 24th September 1982, was not served until the 15th November 1982 when the Vessel "Ghana Express" was arrested in Hong Kong. This vessel, under its former name, "Blue Victory", had been a sistership of the "Blue Express", both ships having been in the ownership of the Blue Ocean Lines S.A. (Blue Ocean).

2. Mr. J.M.M. Johnson in his affidavit acknowledged that Sceptre Investments Incorporated (Sceptre) were the defendants as they, at the time of arrest, were the owners of the vessel "Ghana Express". The defendants ask, in the Motion before me, that the proceedings be set aside upon the grounds that:-

The third matter is the only one which is really material as it is not suggested that they are liable in personam or that they were in control of the vessel when the course of action arose. The real issue in this matter is whether the "Blue Victory" was still owned by Blue Ocean at the date of the issue of the writ of summons.

3. Sceptre claims that the property in the vessel was transferred to it by a Memorandum of Agreement dated the 23rd September 1982 between Blue Ocean as sellers and Sceptre as buyers.

4. The plaintiffs relied upon Section 3(4) of the Administration of Justice Act when they arrested the "Ghana Express". It was their contention that this ship was, at the date of the issue of the writ, a sistership of the vessel in connection with which the claim arose and that they were, therefore, entitled to proceed against it. The section provides that in a claim, being a claim arising in connection with a ship, where the person who would be liable on the claim in an action in personam was, when the action arose, the owner of the ship, the admiralty jurisdiction of the High Court may be invoked by an action in rem against any other ship which, at the time when the action is brought, is beneficially owned as respects all the shares therein by the person who would be liable in an action in personam. It is common ground that a change of ownership of a ship or sistership after issue of a writ but before service thereof or arrest of the ship or sistership does not defeat a right of action in rem under the Administration of Justice Act, 1956 (The Monica S. (1968) p.741).

5. What is in issue in the present action is whether the Ghana Express was beneficially owned as respects all the shares therein by Blue Ocean on the date of the issue of the writ namely the 24th September 1982. Mr. Ribeiro, who appeared for the plaintiffs, while not contesting that, if the property in the vessel did pass by reason of the Memorandum of Agreement, Blue Ocean would not thereafter beneficially own the vessel as regards all the shares therein, contented that the property did not pass. Mr. Ma who appeared for the defendants, contented that it did.

6. It was common ground that resort must be had to the Sale of Goods Ordinance, Cap. 26 when determining the time at which the property passed. Section 19 of this Ordinance reads as follows:-

"19(1)   Where there is a contract for the sale of specific or ascentained goods, the property in them is transferred to the buyers at such time as the parties to the contract intend it to be transferred.

(2)    For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case."

Section 20, Rule 1 is also relevant and this reads as follows:-

"20.   Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer -

Rule 1.    Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed."

7. Mr. Ma submitted that the Memorandum of Agreement was a contract for the unconditional sale of specific goods in which, although both the time of delivery and the time of payment had been postponed, no different intention appeared and that the Court should therefore hold that the property in the goods passed to the buyer when the Memorandum was signed.

8. It is clear from Section 19 that what this Court must first look to are the terms of the contract, the conduct of the parties and the circumstances of the case. If a "different intention" can be ascertained from them then S.20, Rule 1 does not come into play.

9. When dealing with a similar problem the Court in Anchor Line (Henderson & Brothers) Ltd. (1937) Ch. 1, made it clear that the terms of the contract must be looked at with great particularity when one is endeavouring to ascertain the intention of the parties. I bear this in mind when considering that question in the present matter as I do, the statement in Benjamin, Sale of Goods, 2nd Edition at 303 which reads:-

"Of course, the parties may agree that the passing of property is conditional on payment or delivery, or both, and such an agreement may be implied as well as expressed; and it has been said that:- 'In modern times very little is needed to give rise to the inference that the property in specific goods is to pass only on delivery or payment."

The latter part of quotation is taken from the judgment of Lord Diplock in Ward (R.V.) Ltd. v. Bignall (1976) 1 Q.B. 534. It is interesting to note that he prefaced that statement by saying: "The governing rule, however, is in Section 17 (which is our section 19)".

10. Both counsel submitted that the Memorandum of Agreement was of fundamental importance and each submitted that it supported his contention. I consider it necessary, therefore, to deal with the parts of the Memorandum to which counsel made particular reference.

11. The Memorandum stated in its opening paragraph that Blue Ocean "have today sold" and Sceptre "have today bought" the "Blue Victory". Mr. Ma submitted that these words spoke for themselves and that they must be taken to show the governing intent of the parties to transfer the property in the vessel on that day. Mr. Ribeiro submitted that the words meant nothing more, when the contract was looked at as a whole, than that the parties had on that day, on one hand, agreed to sell and, on the other hand, agreed to buy the vessel.

12. Clause 2 of the Memorandum of Agreement provided -

"As a security for the correct fulfilment of this contract, the Buyers shall pay a deposit of 10% (Ten percent) of the Purchase Money on signing this contract. This amount shall be placed at the disposal of the Sellers as part of the Purchase Money."

13. Mr. Ma submitted that this clause was significant as it provided for an initial paymert of 10% of the purchase money at the time of the signing of the contract. I find myself unable to agree with this submission. As I read it this clause does no more than require that the buyer put down a security which is in the amount of 10% of the "Purchase Money". It is true that it goes on to state that this amount will "be placed at the disposal of the Sellers as part of the Purchase Money", however, I am satisfied that the only reason that the "Purchase Money" was mentioned in this clause was because the amount of the security was fixed by taking a percentage thereof.

14. Clause 3 provides:-

"The balance of the Purchase Money shall be paid to the Sellers' nominated bank on delivery of the vessel."

It seems to me that when clause 2 and clause 3 are read together they indicate that what was in the contemplation of the parties was that, at the time of delivery, when the balance of the purchase money was paid, what had formerly been a security would become a "part of the Purchase Money".

15. Clause 4 provides:-

Kao	"The vessel shall be delivered and taken over at Kaohsiung afloat not before the 4th October 1982 and not later than the 15th October 1982."

This leaves no doubt that delivery of the vessel was to take place at a date later than the date of the Memorandum of Agreement and it is, of course, the contention of Mr. Ribeiro that the intention of the parties was that the property in the vessel should also pass at that time. Clause 4 goes on to state:-

"In the event the Sellers failing to deliver the vessel within the period specified as above, the Buyers shall have the option of maintaining or cancelling this Agreement, but any delay not exceeding 15 days caused by force majeure or caused by any unexpected event."

I do not consider that this clause assists either party to any significant extent. It is true that, had there been a transfer in the property of the ship, the parties, if they had so wished, could have worded the clause differently. They could, in such case, have said that the buyer shall have the option "of keeping or returning the ship". As they did not it can be suggested that the wording used was a recognition by the parties of an intention to pass the property in the ship at the time of delivery and that the Memorandum of Agreement was, therefore, simply an agreement to sell whereby no transfer of property was effected. I do not think that much weight can be given to this approach however I will bear it in mind when considering the Memorandum as a whole.

16. Clause 7 provides that the buyers shall take over and pay the sellers for the remaining bunkers and the unused lubricating oil at the port of delivery. It also provides that all spare parts and spare equipment belonging to the vessel shall become the buyers' property.

17. Mr. Ma suggested that the fact that the parties had seen fit to deal in a specific way with the transfer of the property in bunkers and the spare parts at the port of delivery indicated a recognition that the property in the vessel itself had already passed. Mr. Ribeiro submitted that this was not so saying that the bunkers and spare parts had to be dealt with separately as it might otherwise be suggested that the pruchasers did not have any right thereto. Again I do not think that this clause is of significant assistance to either party.

18. Clause 8 requires the sellers to furnish the buyers with the following documents at the time of delivery in exchange for payment of the purchase money:-

Mr. Ma submitted that the fact that these documents would be handed over at the time of delivery in no way detracted from the intention of the parties that the property in the vessel would pass at the time they entered into the Memorandum of Agreement. Mr. Ribeiro on the other hand submitted that the parties, as practical commonsense businessmen, could not be taken to have intended to pass the property in the vessel prior to the exchange of these documents which were vital to establish that what was being passed was a viable international trading vessel. While I do not think that too much can be made by either party of this clause, it does seem to me that a buyer might well not intend to have the property in a vessel transferred to him until he was satisfied that the seller was in a position to deliver these essential documents to him.

19. Clause 9 provides that:-

"The Sellers guarantee that the vessel, at the time of delivery, is free from all encumbrances and maritime liens or any other debts whatsoever."

Mr. Ma suggested that this clearly showed that the parties had intended that the property in the vessel should pass as at the date of the Memorandum of Agreement. He suggested that this was a guarantee by the sellers that they would not encumber the vessel after that date and was a recognition by them that the property passed to the buyers on that date. I am afraid I am unable to see that this is so at all. This is simply an undertaking by the sellers to deliver the vessel free of encumbrances. If the vessel was encumbered at the date of the signing of the Memorandum of Agreement, then the sellers had, until the date of delivery, to free it from such encumbrances.

20. Mr. Ma relied heavily upon clause 11 of the contract which readsas follows:-

"The vessel with everything belonging to her shall be at Sellers' risk and expense until she is delivered to the Buyers, but subject to the conditions of this contract, the vessel with everything belonging to her shall be delivered and taken over as she is at the time of delivery, after which the Sellers shall have no responsibility for possible faults or deficiencies of any description."

Mr. Ma submitted that unless it had been the intention of the parties, that the property passed at the date of the Memorandum of Agreement, it would have been unnecessary to stipulate that the vessel, with everything belonging to her, would be at the sellers' risk until time of delivery. Against this it can be urged that clause 11 was simply making it clear that no property passed until delivery; that the parties were, in other words, saying that it was the Sellers' property and the Sellers' responsibility until delivery and that it was the Buyers' property and the Buyers' responsibility after delivery Again I do not think too much can be made by either side of this clause.

21. Mr. Ma also relied upon clause 14 which states:-

"If default is made by the Sellers in the execution of a legal transfer or in delivery of the vessel with everything belonging to her in the manner and within the time herein specified ...." then the buyers are entitled to return of the advanced payment and to compensation.

22. Mr. Ma submitted that the words "legal transfer" must have been used in recognition of the fact that the actual transfer of the property had, by the time of the delivery of the vessel, already taken place. I am not persuaded by this argument. I consider that he is reading much more into the use of the words "legal transfer" than was intended by the parties. Mr. Ribeiro relied upon this clause because he said it showed that the only damages which the sellers would be entitled to under the Memorandum of Agreement would be monetary compensation and that this was a recognition of the fact that no property had passed to them by virtue of the Memorandum. Again I do not think that this contention can be given any real weight as it seems to me that compensation might well have been stipulated for in this way whether or not the property had passed.

23. Clause 16 states:-

"The vessel has been accepted and inspected by Buyers, the vessel shall be deemed ready for delivery and thereupon the Sellers shall tender to the Buyers a Notice of Readiness for delivery. The Buyers shall take over the vessel within above specified days from the day of the receipt of such notice ......"

It is not easy, as Mr. Ma conceded, to know exactly what is meant by this clause. It seems to me that what it is really concerned with is the condition of the vessel. It certainly is an acknowledgment by the buyers that they had "accepted and inspected" the vessel. What, however, does this mean? It seems to me that it be an acknowledgment that the buyers had inspected the vessel and that they were prepared to accept it in the condition which they had seen upon their inspection. The words "the vessel shall be deemed ready for delivery" must, it seems to me, be taken to indicate that if the vessel is in the condition as seen upon inspection, then it will be deemed to be ready for delivery. I find it very difficult to know what is the significance of the words "thereupon the sallers shall tender to the buyers a Notice of Readiness for delivery". I cannot see that it means anything more than that prior to delivery the buyers must produce a Notice of Readiness. It seems to me that all this clause says is that the buyers acknowledge having inspected the vessel and are prepared to accept it provided it is in the condition seen upon inspection and the sellers prior to delivery provide a Notice of Readiness. I do not consider that this clause goes in any way to establish that the property was transferred at the date of the Memorandum.

24. The final clause to which reference was made was clause 20 which reads:-

"The Buyers to have rights to place one Engineer aboard vessel after advanced payment is made until time of delivery for familiarization purpose only without interference to operation of vessel and at their own risks/expenses and under command of Master."

Mr. Ribeiro submitted that this clause was a clear indication that the parties recognized that no property had passed. He submitted that if there had been any passing of property then the buyers would not have had to seek the right to place one of their engineers on board the vessel. I do not consider that it can be said to give any such indication. It seems clear to me, given that the sellers' crew was going to continue to operate the vessel until delivery, that it would be prudent for the buyers, even if the property had passed to them, to require a stipulation enabling them to place one of their own employees on board.

25. Mr. Ribeiro asked me to look at the "Protocol of Delivery and Acceptance" dated the 5th October 1982 which was signed by both the seller and the buyer. There was no suggestion from Mr. Ma that the Court should not look at this protocol when endeavouring to ascertain the contractual intention of the parties. This protocol states:-

"Know all men by these presents, that Blue Ocean Lines S.A. have sold and do grant and deliver at 16.30 hours on the 5th October 1982 at Kaohsiung Harbour up to Sceptre Investments Inc. all right, title and interest in and to One (1) Second Hand Hull Motor Vessel of the name "Blue Victory" together with all stores etc."

It goes on to say:-

"Sceptre Investments Inc. do hereby accept delivery, title and risks of and to the aforesaid vessel and do certify that the same is delivered in accordance with provisions of the Memorandum of Agreement."

26. This protocol is addressed to "all men". It is clearly meant to be a formal declaration of the sale. It states that, "all right, title and interest in and to "the vessel passed at 16.30 hours on the 5th October 1982. It was, I am satisfied, a clear statement to the world that at 4.30 on the 5th October 1982 the property in the vessel was passing from the sellers to the buyers. It was a formal pronouncement that one party's interest in the vessel ceased at that hour and that the other party's interest commenced. When I consider the contract as a whole, bearing in mind the wording of the protocol, I am left in no doubt that the intention of the parties was that the property would pass at the time of delivery. Indeed in the light of the protocol it seems to me extraordinary to suggest that the property in the vessel had, in fact, passed some days before delivery and that what the protocol is really saying is that "all right, title and interest in and to the vessel, except the property therein which has already passed to the buyers, is passing at the stated hour.

27. For the above reason, I am satisfied that the Blue Ocean Lines S.A. remained the legal and beneficial owners of the vessel until 4.30 p.m. on the 5th October 1982.

28. Before leaving this matter I must deal with the time charter party dated the 1st October 1982. Sceptre entered into this time charter party with the AFEA Line Ltd. It was suggested that Sceptre would never have done so unless the intention of the parties was to transfer the property in the vessel at the time of the Memorandum. I do not consider that the action of Sceptre in so doing in any way indicates this. It seems to me that Sceptre, having regard to the Memorandum, would, a business opportunity having presented itself, have been prepared to enter into a time charter party regardless as to whether or not there was an intention to pass the property at the time of signing the Memorandum.

29. As I have already indicated I am satisfied that the Blue Ocean Lines S.A. were still the beneficial owners as respects all the shares of the arrested vessel at the time of the issue of the writ and that, as it was a sistership of the vessel concerning which the course of action arose, it was properly arrested. The Motion must therefore be dismissed.

Representation:

Mr. Ribeiro (Clyde & Co.) for plaintiffs.

Mr. G. Ma (Richard Butler) for defendants.

Mr. Stone (H.F. & Willan) for interveners.

Mr. K.Y. Lee, Asst. Chief Bailiff for Registrar.