Stellar Ocean Transport Llc v. The Owners and/or Demise Charterers of the Ship or Vessel “Ruby Star”
Read the full judgment text of CACV 133/2014 on BabelCite. This Court of Appeal judgment was delivered on 23 December 2014.
13. The above claims in debt or, alternatively, damages give rise to statutory liens on the vessel because :
Cites 2 cases
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CACV 133/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 133 OF 2014 (ON APPEAL FROM HCAJ NO. 126 OF 2013) ________________________
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_______________ J U D G M E N T _______________ Hon Cheung JA : The appeal 1.1The intervener, Asset Wonder Limited (‘Asset Wonder’), challenged the jurisdiction of the Court in respect of the claim lodged by the plaintiff Stellar Ocean Transport LLC (‘Stellar Ocean’) pursuant to Order 12, rule 8 of the Rules of the High Court. Ng J dismissed the challenge. The intervener now appeals against the judgment. 1.2Ng J had also separately refused an application by the Stellar Ocean seeking judgment in default of acknowledgment of service. This is not the subject matter of the appeal. The parties 2.1Stellar Ocean was the ship manager of the vessel ‘Ruby Star’ (‘the vessel’) under a ship management agreement dated 20 December 2009 (‘SMA’) (‘the contract’) with the defendants Stellar Shipping Corporation Limited (‘Stellar Shipping’) the demise charterers of the vessel. 2.2Asset Wonder is the registered owner of the vessel. Stellar Shipping became the demise charterers of the vessel pursuant to a bareboat charter dated 14 January 2010 (‘Charter’) entered into with Asset Wonder. Source of the Admiralty jurisdiction 3.1The Admiralty jurisdiction of the Court of First Instance of the High Court is conferred by section 12A(1) of the High Court Ordinance (Cap 4) (‘HCO’) in respect of questions and claims set out in section 12A(2). The relevant ones for the purpose of this appeal are sections 12A(2)(l) and (o) :
3.2Section 12B provides :
Stellar Ocean’s claim 4.1I will go into the details of Stellar Ocean’s claim as this is relevant to Asset Wonder’s challenge to the Court’s jurisdiction. 4.2By a letter dated 9 April 2013, Stellar Ocean informed Stellar Shipping that,
4.2.1The letter demanded payment of this sum and the detailed statement of accounts is said to be attached to the letter. 4.3By another letter dated 3 July 2013, Stellar Ocean demanded payment of US$769,593 from Stellar Shipping on the same basis as the previous letter but for the period as on 30 June 2013. 4.4In the Indorsement of Claim of the writ, Stellar Ocean claimed against Stellar Shipping for :
4.5The Statement of Claim identified the monies ‘due and owing’ by Stellar Shipping in the sums of US$3,593,902 and US$769,593. Paragraph 9 of the Statement of Claim set out the particulars of the claim :
4.6Paragraph 13 of the Statement of Claim identified Stellar Ocean’s right to an action in rem :
4.7The Further and Better Particulars of the Statement of Claim dated 3 January 2014 stated that :
4.8Similar particulars were provided of the other sum of US$769,593. The grounds of objection to jurisdiction 5.The grounds of objection to jurisdiction set out in Asset Wonder’s summons on jurisdictional challenge are :
Ng J’s decision 6.In addressing the grounds relied upon by Asset Wonder, the Judge held that :
Asset Wonder’s ‘new’ grounds 7.1In this appeal Mr Sussex no longer relies on the running account ground. Further, contrary to his position below, he no longer contends that there had been appropriation to such an account. Instead, relying on the Judge’s finding, he contends that there was no appropriation of the money to the bunker claim prior to the issuance of the writ and it was only made some time prior to the service of the Further and Better Particulars. 7.2Mr Sussex submitted that the breakdown of the two sums claimed did not show the ‘net funds’ were applied to any specific claims. All that the particulars can show is that the two sums are debts owing by Stellar Shipping to Stellar Ocean. One simply cannot tell from these two sums the claims fall within section 12A(2)(l) as a ‘claim in respect of goods and materials supplied to a ship for her operation or maintenance’ which brings the claim within the Admiralty jurisdiction of this Court. He argues that the Court cannot assume jurisdiction because the ‘bulk of the claim is within the Court’s in rem jurisdiction’ as the Judge said in paragraph 31 of the judgment. 7.3He further accepts that if the plaintiff’s claim does in fact fall within the Admiralty jurisdiction conferred by Section 12A of the HCO, then that jurisdiction can be exercised in rem by virtue of Section 12B(4). But the issue on this appeal is whether the claim as advanced fell within the Admiralty jurisdiction at all. Stellar Ocean’s position 8.Mr Coleman SC, counsel for Stellar Ocean opposes the appeal on these grounds :
Order 12, rule 8 9.1Order 12, rule 8 provides the means for a ship owner to challenge jurisdiction without submitting to the jurisdiction. Re Resource 1 (2000) 3 HKCAFR 187 at page 211 makes clear that the rule ‘is intended to be a comprehensive and exclusive code for the taking of jurisdictional objections’. 9.2There is no controversy that the Admiralty jurisdiction is statutory. It is conferred by section 12A of the HCO. It is also, as Mr Sussex submitted exorbitant, because section 12A(7) provides that it exists ‘in relation to all ships … whatever the residence or domicile of their owners may be’ and ‘in relation to all claims, wherever arising’. Scrutton LJ stated in The ‘Tervaete’ [1922] P 259 that ‘it is now established that procedure in rem is … a means of bringing the owner of the ship to meet his personal liability by seizing his property’. 9.3The consequence is that, provided that a claim falls within the Admiralty jurisdiction of the Court of First Instance, a ship owner is constrained by an action in rem to come before the Hong Kong Court if he wishes to protect his property. But the in rem jurisdiction cannot be used to force a ship owner to come before the Court to answer a personal liability which does not fall within the Admiralty jurisdiction. 9.4Where the jurisdiction of the Court is challenged, a plaintiff has to show by evidence on a balance of probabilities that jurisdiction existed : see The Rolita [1989] 1 HKC 160 at 163. My view 1) Challenge not based on new ground 10.1Although Mr Sussex no longer pursues the case of running account and appropriation before action, I do not consider Asset Wonder’s jurisdictional challenge is now based on an entirely new ground. The essence of the original objection is that Stellar Ocean has not able to show that the two sums are in respect of in rem claims within the ambit of section 12A(2)(l). What Mr Sussex has done is to use a different route to reach this conclusion. 10.2In my view what Mr Sussex advances in this appeal comes within the ambit of the objections set out in the summons. I do not consider Sir Anthony Mason’s statement in Re Resource 1 at 214 that ‘save perhaps objections on the ground that the Court of First Instance has no Admiralty jurisdiction at all’ after referring to Order 12, rule 8 as the comprehensive code for taking jurisdictional objections, would assist Mr Sussex. That case was concerned with challenge to jurisdiction lodged after the prescribed time. The issue here is simply whether the grounds now advanced by Asset Wonder falls within the ambit of the objection or not. In my view Mr Sussex is entitled to take this point, particularly when the matter goes to something as fundamental as jurisdiction. If there is no jurisdiction, the Court should decline to hear the case. 2) The claims are for debts 11.1The details of the two sums claimed by Stellar Ocean can be better seen from the following tables attached to the Further and Better Particulars :
11.2There is no dispute that of the Item B operating costs and management fees, the following items are non in rem claims, namely, insurance, brokerage and Port DA, general and management fees. The in rem claims are crew salary and bunker. It is not clear what ‘technical’ is. Specifically bunkers clearly come within the definition of goods in section 12A(2)(l) : see Berlingieri on Arrest of Ships (5th Ed) at page 101, The Neptune [1985] HKCFI 236 and Halsbury’s Laws of Hong Kong - Maritime Law (2nd Ed) at paragraph 250.028 (footnote 3). 11.3Mr Coleman referred to Table 1 and argues that although the insurance, brokerage and Port DA, general and management fees (totalling US$2,321,039) are non in rem claims, applying the balance of US$2,780,399 (US$5,101,438 – 2,231,039) available to be set off against the remaining items resulted in the balance of US$3,593,902 (which is less than the bunker claim alone). Therefore, the balance of US$3,593,902 comprised only in rem claims. He adopts the same argument in respect of Table 2. 11.4I have difficulties with Mr Coleman’s submission. From Table 1, one fails to see how the ‘net funds’ of US$5,101,438 were deployed to defray the various expenses. It does not show this US$5 million was used to defray other non in rem expenses first leaving the balance of US$3,593,902 to cover the in rem expenses and specifically in respect of the bunker claim. The same applies to the figures in Table 2. In fact this is contrary to the finding of the Judge. It is not helpful to describe the two sums as a mixed claim in the sense that they encompass both claims in rem and claims in personam. The reality is that the two sums are simply debts and from which one cannot tell whether they constitute in rem claims. 11.5In The ‘Kommunar’ [1997] 1 Lloyd’s Rep 1 the plaintiffs claimed US$726,369.55 against the defendants. The plaintiff’s claim was made up of items referred to in a whole series of invoices and were alleged to arise out of supplies by sub-agents or entities in South America to a number of named vessels said to be owned by the defendants. The defendant raised jurisdictional challenge on the ground that the plaintiff’s claim did not fall within section 20(2)(m) of the Supreme Court Act 1981 (the equivalent of our section 12A(2)(l). Clarke J (as he then was) held at page 5 that :
11.6Clarke J referred to the long line of authorities beginning from West Friesland, The (1859) Sw. 454 and Comtesse de Frègeville, The (1861) Lush. 329 which had been used to support the proposition that a claim on a general account was outside the Admiralty jurisdiction. These cases were decided on statutes which related to necessaries. Previously the Admiralty jurisdiction of the Court had been a jurisdiction in respect of the supply of necessaries. Clarke J explained that these cases were decided on some other basis and these cases did not support such a general proposition. In The ‘Kommunar’ the invoices showed that the underlying nature of the claim relates to the costs of supplying goods to the ship. 11.7In The ‘Skulptor Konenkov’ (1999) 161 ALR 131, Tamberlin J of the Federal Court of Australia at page 137 referred to The ‘Kommunar’ and commented that :
11.8I have no difficulty with Clarke J’s view. So long as the general account shows the claim is in respect of goods and materials supplied to a shop, the matter is within the Admiralty jurisdiction. The real issue here is really whether Stellar Ocean’s claim is simply a debt and from which one cannot tell if it is in the nature of a claim in respect of goods or materials (i.e. bunker), supplied to the vessel. In this case one cannot tell its nature because of the way the US$5.1 million had been used to deduct the expenses of US$8.6 million which included claims which are within section 12A(2)(l) and also outside of it leaving a balance of US$3.5 million. In other words, the evidence did not show that the bunkers in rem claims had not already been discharged with the utilization of the US$5,101,438. Hence Mr Coleman has to resort to the argument there was appropriation of the claim to the bunker costs which I disagree and will address later. The same reasoning applies to the other claim of US$769,593. 3) Appropriation 12.1The Judge held that there was no appropriation by Stellar Ocean of the two sums specifically to the bunker claims until it served the Further and Better Particulars. The Judge then relied on The ‘Mecca’ [1897] AC 286 which states that the creditor has the right of appropriation and may exercise the right up to the last month, by action or otherwise and also a passage in Chitty on Contracts 31st Ed Vol 1, paragraph 21–062 which expressed the view that what is ‘the very last moment’ depends on the circumstances of each case and the creditor may declare it by bringing an action or in any other way that makes his meaning and intention plain. The Judge held that Stellar Ocean’s intention to appropriate was made plain by the Further and Better Particulars. 12.2The difficulty with this argument is that the Admiralty jurisdiction must exist at the time of the commencement of the action, namely, by the issuance of the writ. In The ‘Mecca’ the appropriation was made by the arrest of the vessel (per Lord Macnaghten at pages 293 and 298). This was at a time when the Admiralty actions in rem were commenced by the arrest of the vessel. The view expressed in Chitty is not focused on an issue like the present case which is about the existence of the jurisdiction at the commencement of the action. Hence the Judge had focused on a wrong point in time. 12.3Mr Coleman does not dispute that the Court must have Admiralty jurisdiction at the time when the action commenced. However, he argued that the appropriation of payments towards the non in rem claims occurred before the action was commenced. He referred to the two demand letters and the breakdown of the two sums and he submits that the two sums comprised only in rem claims. He argued that this is consistent with Stellar Ocean’s conduct in making demands which expressly reserved its right to exercise a maritime lien over the vessel. 12.4He further argues that from Indorsement of Claim of the writ, it can be seen that Stellar Ocean had appropriated the funds it had on account prior to the issuance of the writ to pay off the non in rem claim. The Statement of Claim could only have been an expansion of description within the claim indorsed in the writ and the causes of action there identified. The particulars at paragraph 9 of the Statement of Claim also show that the appropriations had occurred prior to the issue of the writ, for if the appropriation had occurred after the action was commenced, the amount claimed in the Statement of Claim would be less (or different) to the amounts claimed in the various demand letters, whereas the amounts claimed are in fact the same. 13.Mr Coleman argued that the Further and Better Particulars merely clarified which in rem claims had been set off by the appropriation. He said the Judge accepted this when he approached the issue by finding that Further and Better Particulars were an explanation of the amounts: ‘Stellar Ocean has elected to appropriate the “Net Funds” on account to expenses other than bunker costs’ and the Judge did not find that Stellar Ocean appropriated only by way of the Further and Better Particulars. Mr Coleman argued that if the Judge did, that was not correct by reason of the matters he had argued. 14.I am unable to accept this submission. In my view the Judge had made plain by his discussion on Stellar Ocean being able to exercise its right of appropriation up to the last moment, that the appropriation was not already exercised at the commencement of the action but only afterwards by the service of the Further and Better Particulars. I refer to my earlier discussions. Further if there was appropriation of the bunker costs which covers the whole of the claim, there was no need (and no point) to plead in the Statement of Claim other claims in respect of section 12A(2)(m), (n) or (o) of the HCO. Is Stellar Ocean entitled to bring the action? 15.There is a separate point raised by Mr Sussex on whether the claim by Stellar Ocean, as an agent of a demise charterer to recover disbursements fall within section 12A(2)(l). Mr Sussex says that he would reserve this point for argument if this matter goes further. As such it is not necessary for me to deal with this point. Conclusion 16.Accordingly I will allow the appeal and set aside the judgment below. I will set aside the writ and grant a declaration that this Court has no jurisdiction in rem over the vessel. Costs 17.There will be an order nisi that Asset Wonder is to have the costs of the appeal and below. Hon Barma JA : 18.I agree with the Judgment of Cheung JA.
Mr Russell Coleman, SC, instructed by Ince & Co., for the plaintiff Mr Charles Sussex, SC, instructed by Reed Smith Richards Butler, for the intervener |
Cases cited in this judgment
Further hearings and rulings under CACV 133/2014