Ciel Y Cia S.A. v. The Owners of the Vessel "Sextum" Ex "Ercole Lauro"

HCAJ000132/1982

Headnote

Admiralty - power of arrest - action in rem - construction of Section 3(4) of the Administration of Justice Act 1956 and Article 3 of the Convention Relating to the Arrest of Seagoing Ships 1952 - whether "charterer" means only "demise charterer" - power to arrest ship which is not a sister ship of offending ship.

Admiralty Action in rem against the vessel
"SEXTUM" ex "ERCOLE LAURO" (Italian Flag)

BETWEEN

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Coram: Penlington J.

Date: 28 May 1982

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JUDGMENT

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1. This was an application by the Defendants, the owners of the vessel "SEXTUM" ex "ERCOLE LAURO" (Italian Flag) for the release of that vessel from arrest at the suit of the Plaintiffs, CIEL Y CIA S.A. Writs of Summons were issued by the Plaintiffs on the 13th May in Actions 132 and 138 of 1982 in respect of alleged non-payment of amounts owing by the Defendants to the Plaintiffs under the terms of Charterparties in respect of two vessels namely the "RIA SOL" and the "RIA MAR", owned by the Plaintiffs and time-chartered to the Defendants.

2. The matter was one of urgency due to the very cost of keeping the vessel in detention and time for serving the motion was abridged by consent. Certain matters were also agreed for the purposes of this motion which may not be so agreed or conceded in other proceedings. It was also agreed that I should not concern myself at this stage with the question of damages.

3. The matter raised are by no means the easiest to decide and I am most grateful for the very helpful and able arguments addressed to me by Counsel for both parties.

4. It is the case for the Defendants, as I understand it, that the "SEXTUM" has been arrested under an action in rem. There is no claim against that ship itself and the Plaintiffs must therefore rely on Section 3(4) of the Administration of Justice Act 1956 ("Section 3(4)"). It reads as follows :

"(4)     In the case of any such claim as is mentioned in paragraphs (d) to (r) of subsection (1) of section one of this Act, 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 cause of action arose, the owner or charterer of, or in possession or in control of, the ship, the Admiralty jurisdiction of the High Court and (where there is such jurisdiction) the Admiralty jurisdiction of the Liverpool Court of Passage or any county court may (whether the claim gives rise to a maritime lien on the ship or not) be invoked by an action in rem against -

(a) that ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; or

(b) any other ship which, at the time when the action is brought, is beneficially owned as aforesaid."

5. It is the Defendants' case that the Plaintiffs cannot so rely. Section 3(4) was, they say, intended to allow the arrest only of the sister ship of a ship against which there is a claim. Both ships must be owned or controlled by the same person and control is not given by a time-charter. A time-charter, it is submitted, is nothing more than the transfer of the cargo space in a ship to a purchaser of that space. The responsibility for the payment of all the expenses of running the ship and all other matters relating to the actual running of the ship remains the responsibility of the owner. A demise-charter on the other hand means that virtual ownership of the ship is transferred to the charterer. It is not disputed that the "RIA SOL" and the "RIA MAR" are beneficially owned by the Plaintiffs themselves. Clearly the Plaintiffs could not arrest their own ships. If that is the case the Defendants argue that it must be quite wrong to allow non-offending ships owned by the Defendants to be arrested when there is no offending ship owned by the Defendants which is so liable to arrest. Counsel for the Plaintiffs prefers the phrase "claim ship" but I do not think there is any great difference in the terminology. In either case it is the ship in respect of which the claim has arisen. Counsel for the Defendants submits that an action in rem is against the offending ship. It was only after the passing of the 1956 Act that there could be any question of such an action being brought against any other ship apart from the offending ship. Section 3(4) allows, in certain circumstances, for that right to be extended to sister ships of the offending ship but if the power of arrest cannot be exercised against the offending ship then it cannot be exercised against any other ship whether or not it is a sister ship.

6. Mr. Waung submits that you cannot go straight to sub-clause (b). You must go to sub-clause (a) first and see if there is a right of arrest there. If there is then you may go further to see if there is a similar right under sub-clause (b). Here there is clearly no claim under (a) because the ship is the Plaintiffs' own ship. Therefore you cannot go any further and seek to use sub-clause (b). He says that such would be totally contrary to the whole history of actions in rem. An action in rem is essentially one against the ship itself. Here the action is not against the ship but it is against the parties who have chartered that ship i.e. it is an action in personam.

7. It is not disputed that the "SEXTUM" is not a sister ship of the "RIA SOL" or the "RIA MAR" in the normal meaning of that phrase and that, it is argued, is fatal to the Plaintiffs' claim.

8. There have been some persuasive authorities cited on both sides. Most of those were considered in a Hong Kong decision of Li J. in "The Ledesco Uno" ⁽¹⁾ when he decided, on very similar facts, in favour of the defendants. There have, however, been two recent decisions, one which favours the defendants and one the plaintiffs. I will refer to those decisions later.

9. The decision on which the defendant places considerable reliance, as did Li J., is "The Eschersheim" ⁽²⁾. That was an unanimous decision of the House of Lords delivered by Diplock L.J. There are dicta in it which, while they are obiter, it is argued are nevertheless very clear and should be regarded as having the highest persuasive authority. At p.436 Diplock L.J. having set out section 3(4) goes on to say :

"It is clear that to be liable to arrest a ship must not only be the property of the defendant to the action but must also be identifiable as the ship in connection with which the claim made in the action arose (or a sister ship of that ship).

10. The "SEXTUM" clearly does not fall within either of those two categories and that dicta would on the face of it appear to be strong authority for the Defendants indeed. I do however think that the attention of the House of Lords was in any way directed in that case to the question which I have to decide here. It was not in dispute that, within the normal meaning of the phrase, the "SEXTUM" is not a sister ship of the "RIA SOL" or the "RIA MAR" in that they are not owned or demise-chartered by the same person. What the Plaintiffs however say, is that Section 3(4) makes them sister ships for the purposes of that section in that, a time-charter is a charter and has the same effect for those purposes as a demise-charter. The section does not seek to make any difference. The House of Lords was in no way concerned with the question of charters. They were concerned with whether a salvage agreement fell within paragraph (h) of Section 1(1) of the Act as being "an agreement relating to the use of a ship". They were in no doubt that it did fall within that meaning and so far as the question of jurisdiction was concerned that was an end of the matter. There was no dispute that "The Jade", which was the ship which had been arrested, was a sister ship of "The Rotesand" which was the ship which was alleged to have been negligence in the salvage operations.

11. I have also considered the decisions in "The Banco" ⁽³⁾ and in "The Andrea Ursula" ⁽⁴⁾. I do not think either of those cases carries the plaintiffs' case any further.

12. It is further argued for the Defendants that if there is any doubt as to the meaning of the word "charterer" then I should look at the Convention Relating to the Arrest of Seagoing Ships 1952 because the Act was based on that Convention. (Salmon v. Customs and Excise Commissioners ⁽⁵⁾) They submit that if one does so the position becomes clear because the Convention refers only to demise-charters. Article 3(4) of that Convention reads as follows :

"(4)    When in the case of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claims.

The provisions of this paragraph shall apply to any case in which a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship."

13. It would therefore seem that under the terms of the Convention the attention was that two ships must be either owned or under demise-charter to the same person before one can be arrested for the fault of the other. I do, however, confess to some difficulty in understanding the wording of that Article.

14. In the recent decision of "The Maritime Trader" ⁽⁶⁾, Sheen J., with considerable reluctance, said that he felt bound to follow "The Eschersheim" ⁽²⁾ although he personally preferred the reasoning of the Singapore Court of Appeal in "The Permina 108" ⁽⁷⁾. However the decision is on virtually identical facts as we have here and is clearly in the defendants' favour.

15. The Plaintiffs rely on "The Permina 108" ⁽⁷⁾ and also on the recent Court of Appeal decision in "The Span Terza" ⁽⁸⁾. That is once again on very similar facts and would clearly be very highly persuasive indeed except that it was an ex parte application and there is a dissenting decision of Donaldson L.J. Notwithstanding that I find the decision most helpful. At p.227, Sir David Cairns said :

"The only way of escaping from it is by interpreting the word "charterer" in s.3(4) to mean 'demise charterer'. If it is to be supposed that Parliament meant to be included as the 'person' mentioned in the sub-section only a person who, like the owner or one of the types of person mentioned after 'charterers', was at the time in question a person in possession or control of the ship, then that interpretation would give effect to that contention.

For my part, as a matter of construction I find it impossible to construe the words in that way. If only a demise charterer were meant, one would of course have expected the word 'demise' to have been inserted before the word 'charterer'. Alternatively the word 'charterer' could have been omitted altogether, because a demise charterer would be included in the words 'the person in possession or control' "

16. He then goes on to deal with the dicta of Diplock L.J. in "The Eschersheim" ⁽²⁾ and says :

" The problem with which we are concerned did not in any way arise in The Eschersheim. The issues to which their Lordships were directing their attention were several, but none of them came anywhere near to what we are considering today. What Lord Diplock said was clearly obiter, and it does not seem to me that he could possibly have had in mind the kind of problem with which we are dealing.

I therefore consider that it is open to this Court to hold, and that we should hold, that in the very special circumstances of this case Span Terza is liable to arrest although not a sister ship."

17. With the greatest respect I find that reasoning impossible to fault even allowing for the fact that there was no argument before the Court to the contrary.

18. There has also been considerable argument before me concerning the interpretation in this particular section of the word "or" as it appears between the word "owner" and the word "charterer". I consider that I should follow the wording of the Interpretation Ordinance Cap. 1 and construe it disjunctively i.e. owner and charterer must be meant to be different classes and not similar ones.

19. I prefer the reasoning behind "The Permina 108"⁽⁷⁾ and "The Span Terza" ⁽⁸⁾. I consider that I should give the word "charterer" its ordinary meaning and it should not be restricted to demise-charterer. I do not think that even if the Convention is worded differently from the Act that is sufficient reason to put such a restrictive meaning on it. Indeed I feel that as the Convention must have been before the House when it was considering the legislation and they apparently declined to use the word "demise" that is an argument for saying that such a decision must be taken to have been deliberate. I think the clause is clear and unambiguous. Nor do I think the consequences of so constrning it will be as dramatic as Mr. Waung suggests. The number of times this sort of situation arises must be small and in any event I do not see that the consequences are unjust.

20. Like the Court of Appeal in "The Span Terza" ⁽⁸⁾ I regret I have not had longer to consider the authorities in greater depth but I am satisfied that if I had the opportunity to do so I would still come to the same conclusion although I might have an opportunity to express myself in greater detail and mere elegantly.

21. I also regret that I must come to a different conclusion to that of Li J. but I do consider that there has been authority since this decision, in particular "The Span Terza" ⁽⁸⁾, which does put further light on this difficult point. But I also take comfort from the fact that I am informed the matter will certainly be going before the Court of Appeal in the very near future no matter which way I was to decide.

22. The application is therefore refused. The Plaintiffs are entitled to their costs.

(1)    (1978) L.L.R. 99

(2)    (1976) 1 W.L.R. 430

(3)    (1971) Probate 137

(4)    (1973) 1 Q.B. 265

(5)    (1976) 2 Q.B. 116

(6)    (1981) 2 Lloyd's Rep. 153

(7)    (1978) 1 Lloyd's Rep. 311

(8)    (1982) 1 Lloyd's Rep. 225

Representation:

Robert Ribeiro Esq. instructed by (J.S.M.) for the Plaintiffs.

William Waung Esq. instructed by (Deacons) for the Defendants.