Arina Offshore Jlt v. The Owners of the Ship or Vessel “Almojil 61”
Read the full judgment text of CACV 214/2014 on BabelCite. This Court of Appeal judgment was delivered on 18 June 2015.
1. I have read the judgment of Kwan JA in draft and I respectfully agree with her analysis in respect of questions (1) and (2). I only wish to add this: in the context of question (1), Mr Sussex SC contended that the arrangement between MMG and AMIL could not be a loan as there was no covenant to repay in the Agreement. Whilst it is correct that there is no express general covenant to repay in the Agreement (other than a covenant to repay under clause 3.2(b) in the event of the sale of the Vesse
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CACV 214/2014 AND CACV 215/2014 CACV 214/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 214 OF 2014 (ON APPEAL FROM HCAJ NO. 164 OF 2012) ________________________ Admiralty action in rem against: the ship or vessel “ALMOJIL 61”
________________________ AND CACV 215/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 215 OF 2014 (ON APPEAL FROM HCAJ NO. 9 OF 2013) ________________________ Admiralty action in rem against: the ship or vessel “ALMOJIL 61”
________________________ (Heard together)
________________ JUDGMENT ________________ Hon Lam VP: 1.I have read the judgment of Kwan JA in draft and I respectfully agree with her analysis in respect of questions (1) and (2). I only wish to add this: in the context of question (1), Mr Sussex SC contended that the arrangement between MMG and AMIL could not be a loan as there was no covenant to repay in the Agreement. Whilst it is correct that there is no express general covenant to repay in the Agreement (other than a covenant to repay under clause 3.2(b) in the event of the sale of the Vessel), I do not think the absence of a general covenant to repay is inconsistent with the characterisation of the transaction as a loan instead of an acquisition of partial ownership by AMIL. First, in light of the circumstances leading to this arrangement as discussed by Kwan JA at para 44 below, I do not accept that the rights and obligations of the parties under Clause 3.2(a) and (b) should be construed as 2 separate sets of rights and obligations as contended by Mr Sussex. As explained by Kwan JA, when these clauses were construed together, the substance of the transaction can only be a loan. Second, if the transaction was intended to be AMIL’s acquisition of partial ownership, it would indeed be unusual that there was no provision in the Agreement prescribing for the percentage of ownership acquired by AMIL, for the sharing of income generated from the charterparties of the Vessel or otherwise and the sharing of risk relating to the operation of the Vessel. Third, clause 3.2(a) provides for payment by AMIL on behalf of MMG. It shows that as between the two of them (as this was a term in the agreement between them as opposed an agreement between AMIL and Swissco) it was not intended to treat the payment as payment by AMIL as a co-owner with MMG. Taking these matters and those mentioned by Kwan JA into account, it is clear to me that the true characterisation of the transaction must be a loan as opposed to an acquisition of partial interest in the Vessel pending its sale. In other words, even without a general covenant to repay, if for some reasons the sale of the vessel did not take place as contemplated by the parties, AMIL would be entitled to demand MMG to repay. For these reasons, I agree that the appeal should be dismissed as per para 69 below. Hon Kwan JA: 2.We have two appeals from the judgments handed down by Ng J on 26 June 2014 in two Admiralty actions in rem. The issues in both judgments are identical and the judgments are in substantially similar terms (both reported in [2014] 4 HKLRD 313). Where reference is made to any particular paragraph in the judgments, I will use the judgment in respect of HCAJ 164/2012. 3.These appeals raise issues concerning the Admiralty jurisdiction of the Court of First Instance, and the proper construction of section 12B(4) of the High Court Ordinance, Cap 4. Leave to appeal was granted by the Court of Appeal on 29 October 2014. Background 4.The relevant background matters may be stated as follows. 5.The appellant in both proceedings is Al Mojil Investments Ltd (“AMIL”), a company incorporated under the laws of Dubai, United Arab Emirates. AMIL claims to be the part beneficial owner of a vessel MV Almojil 61 (“the Vessel”). 6.The respondent in CACV 214/2014 (on appeal from HCAJ 164/2012), Arina Offshore JLT (“Arina”), is the plaintiff in that action. Arina issued an in rem writ on 28 September 2012 and arrested the Vessel to enforce its claims of over US$6 million against Mohammed Al Mojil Group (“MMG”) of the Kingdom of Saudi Arabia under five charterparties. Arina invoked the Admiralty jurisdiction pursuant to section 12B(4)(ii) of Cap 4, on the basis that the Vessel was, at the time of the commencement of the action, beneficially owned as respects all the shares in her by MMG. 7.The respondent in CACV 215/2014 (on appeal from HCAJ 9/2013), Allianz Marine Services LLC (“Allianz”), is the plaintiff in that action. On 21 January 2013, Allianz issued an in rem writ and served it on the Vessel the day following to enforce its claims against MMG for breach of a charterparty in the total sum of over US$1.6 million. The Admiralty jurisdiction was invoked on the same basis as in the other action. 8.The Vessel was sold pendente lite on 7 March 2013 and the sale proceeds of US$4.5 million have been paid into court. MMG was at all material times the registered owner of the Vessel as to all her shares (64/64) until the judicial sale. The Vessel was registered in the Commonwealth of Dominica. 9.MMG and AMIL are part of the business interests of the Al Mojil family. In April 2012, MMG contracted with Swissco Holdings Ltd (“Swissco”) to purchase the Vessel at US$7.2 million. Payment was to be made in stages, with the final payment of US$1,593,939.06 payable by 24 September 2012. MMG had approached a number of banks and financial institutions for funds to make the final payment, but all of them declined. MMG then approached AMIL for funds and the latter agreed to pay the final payment on behalf of MMG to Swissco on 20 September 2012 on the terms set out in an agreement dated 18 September 2012 (“the Agreement”). 10.The Agreement contained inter alia these provisions:
11.Shortly after AMIL made payment of the final amount on behalf of MMG, and the Vessel was transferred to and registered in MMG’s name, the Vessel was arrested in Hong Kong on 28 September 2012 by Arina. 12.MMG did not file an acknowledgement of service in either action. Before the applications of Arina and Allianz for default judgment could be heard, AMIL filed an acknowledgement of service in each action as a co-owner of the Vessel. It also brought an action in rem in HCAJ 48/2013 on 6 May 2013 against the sale proceeds of the Vessel, claiming it was part beneficial owner of the Vessel and had a beneficial interest in the sale proceeds paid into court. It claims a declaration that the proceeds are trust moneys to the extent of US$1,593,939 and it is beneficially entitled to that sum. Arina has obtained leave to intervene in HCAJ 48/2013 and has filed a defence in that action. 13.AMIL took out a summons pursuant to Order 12 rule 8 in each of HCAJ 9/2013 (on 17 June 2013) and HCAJ 164/2012 (on 28 October 2013). The summonses seek an order that the court has no in rem jurisdiction, alternatively should not exercise in rem jurisdiction over the Vessel, because the requirements of section 12B(4)(ii) of Cap 4 have not been satisfied. 14.The summons issued earlier in HCAJ 9/2013 was heard by the judge on 19 December 2013. Although the Agreement was expressed to be governed by the laws of the Kingdom of Saudi Arabia, expert evidence on the laws of Saudi Arabia was not adduced by any of the parties. So the case proceeded before the judge on the basis that the laws of Saudi Arabia were no different from Hong Kong law. Judgment was reserved at the end of the hearing. 15.The similar summons issued in HCAJ 164/2012 was heard by the judge on 12 June 2014. Arina adduced expert evidence on the laws of Saudi Arabia on 23 April 2014. On 29 May 2014, AMIL issued a summons for cross-examination of Arina’s experts on the foreign law issues pursuant to Order 38 rule 2 and for directions for the trial of the issues arising on AMIL’s challenge to jurisdiction pursuant to Order 12 rule 8(5). AMIL adduced evidence on the laws of Saudi Arabia from its own expert on 10 June 2014. 16.At the hearing before the judge on 12 June 2014, Mr Smith, SC indicated for Arina that he would not rely on the expert evidence on foreign law and Mr Sussex, SC for AMIL indicated in turn that he would not pursue the application to cross-examine Arina’s experts on foreign law. As before, the case was argued before the judge on the basis that the laws of Saudi Arabia were no different from Hong Kong law. 17.The judge handed down his judgment on the summonses in both actions on 26 June 2014, being the judgments under appeal. The Admiralty jurisdiction 18.The Admiralty jurisdiction of the Court of First Instance is conferred by section 12A of Cap 4. The claims of Arina and Allianz fall within section 12A(2)(h), being “any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship”. 19.The mode of exercise of Admiralty jurisdiction is governed by section 12B. It can be exercised in personam where service can be effected in personam. Arina and Allianz have chosen to issue the writs in rem. The relevant provision is section 12B(4) and this provides as follows:
20.Arina and Allianz have complied with the requirement in section 12B(4)(a) in that their claims arose in connection with the chartered ships or ship. The “relevant person” for the purpose of section 12B(4)(b) is MMG, who was the charterer of the chartered ships or ship when the cause of action arose in each action. Arina and Allianz have chosen to proceed against the Vessel as “any other ship”, pursuant to section 12B(4)(ii). To do so, they must show that MMG was “the beneficial owner as respects all the shares in it” at the time the actions were brought. 21.In The I Congreso del Partido [1978] 1 QB 500, Robert Goff J construed the words “beneficially owned as respects all the shares therein” in section 3(4) of the Administration of Justice Act 1956 (the near equivalent of our section 12B(4)(ii)) as follows:
22.The meaning that has been given to the term beneficial ownership in the present context as analysed in The I Congreso del Partido is the accepted view in nearly all, if not all, maritime jurisdictions (The Convenience Container [2007] 3 HKLRD 575 at 707G, §167(4)). 23.Under section 12 of the Merchant Shipping Registration Ordinance, Cap 415, for the purpose of registration of a ship, the interest in a ship may be divided into any number of shares or parts and any number of persons may be registered as owners of the ship or of a share in any part of the ship, and any number of persons may be registered as joint owners of a ship or of any share in or part of the ship, but any such joint owner is not entitled to dispose of his interest in severalty. 24.Section 52 of Cap 415 is headed “Trusts not recognized” and provides that “Notice of a trust, express, implied or constructive, shall not be entered in the register or be receivable by the Registrar [of Ships].” Notwithstanding this, an equitable interest in a ship can exist, as it is provided in section 53(1) of Cap 415 that subject to sections 47, 51 and 52 of that Ordinance, “beneficial interests may be enforced by or against the owner or mortgagee of a ship in respect of his interest in the ship in the same manner as in respect of any other personal property.” Section 53(2) provides that “beneficial interests” in subsection (1) includes interests arising under contract and other equitable interests. 25.It is the contention of AMIL that the words “beneficial owner” in section 12B(4)(ii) take account of the possibility of a trust and the present situation is precisely such a case. As the Vessel was partially beneficially owned by MMG and partially beneficially owned by AMIL, this is fatal to the attempted exercise of in rem jurisdiction under the provision, because nothing short of beneficial ownership of all the shares in the Vessel would do (The Tychy [1999] 2 Lloyd’s Rep 11 at 20). The two questions 26.The judge identified two questions for the determination of the present applications and answered both in the negative, in favour of Arina and Allianz. The questions are:
27.Mr Sussex argued on appeal that the judge in framing question (1) in the way he did had not properly understood AMIL’s case, which is not simply that of a resulting trust by reason of payment of the final instalment of the purchase price but is one of an agreement, arrangement or understanding reached between MMG and AMIL that the beneficial ownership of the Vessel was to be shared. If the judge had considered AMIL’s case in that light, he should have found in its favour that it had a part beneficial ownership in the Vessel. As to question (2), his position was that the question did not really arise in such stark terms in that the court has merely to form a conclusion on the facts presented to it and there are no presumptions in law that have to be rebutted. Question (1) – part beneficial ownership 28.On appeal, all parties made submissions on the assumption that the governing law of the Agreement was no different from Hong Kong law. There is no reason why this court should not act on this assumption, as the judge had done. The pertinent enquiry is whether, when the writs were issued, MMG was, under the law to which it was subject, what Hong Kong law would regard as the beneficial owner as respects all the shares in the Vessel (The Nazym Khikmet [1996] 2 Lloyd’s Rep 362 at 371). 29.Mr Sussex submitted that provision of part of the purchase money for a ship can give rise to the presumption of a resulting trust, as was held in The Venture [1908] P 218. But in this instance there was no need for AMIL to rely on the presumption, as there is express provision in clause 3.2(a) of the Agreement that “AMIL will pay the Final Payment Amount on behalf of MMG … in consideration for AMIL being part owner of the Vessel with it being understood that … the ownership of the Vessel is to be transferred in the name of MMG.” In Assured Quality Construction Ltd & Anr v Thompson [2006] EWHC 2440 at §23, Lewison J said “it is perfectly well open to parties to regulate the terms on which property will be owned by contract, even where one person contributes to the purchase price.” So it was expressly stipulated that AMIL should become part owner of the Vessel with the Vessel being transferred in the name of MMG. 30.Mr Sussex contended that on a proper construction of the Agreement, two subject matters were covered in clause 3.2. The first was an interest in the Vessel in clause 3.2(a) and the second was a contingent interest in the proceeds of sale in clause 3.2(b). And there was no question of AMIL getting its money twice, as was postulated in In re Sharpe [1980] 1 WLR 219 in which Browne-Wilkinson J said at 223B:
31.Mr Sussex’s argument was that as AMIL’s entitlement to the proceeds of sale was contingent on there being a sale, and it was provided in clause 3.2(b) that the repayment of the final payment amount was to be made out of the proceeds of sale, there was no question of AMIL getting its money twice. If there was depreciation in the price of the Vessel upon a sale, AMIL would be entitled to be paid the full sum of the final payment amount according to the express provision in clause 3.2(b), not a pro rata reduction of the final payment amount by the percentage of depreciation. But if there was appreciation in the sale price of the Vessel, he submitted it is strongly arguable that in addition to the entitlement to be repaid the final payment amount AMIL should receive a pro rata increase by the percentage of appreciation as it was a part owner of the Vessel according to clause 3.2(a). So it was not simply a situation of AMIL claiming the full sum of the final payment amount regardless of depreciation or appreciation in the sale of the Vessel. 32.Mr Sussex contended that the judge had ignored the express words of the Agreement in holding that the final payment amount was provided by AMIL by way of loan[1], and that on its proper construction the Agreement gave rise to an express trust or a common intention constructive trust, as it was demonstrated that there was an agreement, arrangement or common understanding between MMG and AMIL that the ownership of the Vessel was to be shared (Lloyds Bank plc v Rosset [1991] 1 AC 107 at 132E to G). There was also detriment in reliance on the common intention, as AMIL did not register a mortgage or other charge against the Vessel and that would have been the obvious thing to do if the sum AMIL paid as the final payment had been intended by way of loan. 33.Although the judge said he would refrain from expressing any view in the judgments whether and if yes to what extent AMIL is entitled to lay claim to the sale proceeds under sections 12A(2)(b) and (c) in HCAJ 48/2013[2], Mr Sussex recognised that the judge’s decision on question (1) may give rise to an issue estoppel as between AMIL and Arina and AMIL and Allianz, and Arina has joined in HCAJ 48/2013 as an intervener. 34.Mr Smith submitted for Arina and Allianz that a two-stage process is involved in construing whether the Agreement had created a loan or an express trust or common intention constructive trust. The same two-stage process is involved where the court has to decide whether a contract created a licence or tenancy, or whether an instrument of charge is a fixed or floating charge. Lord Millett gave this description of the two stage process in Agnew v Commissioner of Inland Revenue [2001] 2 AC 710 at 725F to 726B §32:
35.See also Lewison: The Interpretation of Contracts (5th ed) §4.03; McMeel: The Construction of Contracts (2nd ed) §§1.24 to 1.26. 36.Thus, the first stage of the process is concerned with the meaning of the contract (in the sense of determining the substance of the obligations the parties have entered into), and that is a question of construction. The second stage of the process is concerned with the legal effect of the contract, and that is determined as a matter of law, not a matter of construction. It is a question of classification, characterisation or categorisation of the contract. The nature of the relationship between the parties is to be determined by the substance of the obligations into which they have entered; and if their contract is described by a label inconsistent with that substance, or if the parties incorrectly state what they believe to be the effect in law of their contract, the label or statement will be rejected (Lewison: The Interpretation of Contracts §9.07). 37.This must be the correct approach. Mr Sussex did not argue to the contrary. And although the judge did not mention the two stages, he had in effect undertaken a similar process. 38.The judge came to the view that the substance of the obligations entered into by MMG and AMIL in the Agreement is that AMIL should be entitled to be repaid the final payment amount out of the sale proceeds of the Vessel. There is “no mention in the Agreement of the separation of legal and beneficial ownership or the apportionment of beneficial ownership between MMG and [AMIL]”, AMIL “is not stated to have a proportionate interest in the Vessel which may appreciate or depreciate with time”, and “Clause 3 as a whole does not specify [AMIL] has any rights over the Vessel other than to be repaid the final instalment from the proceeds of her sale.”[3] 39.In categorising the nature of the relationship under the Agreement, the judge held that the substance of the obligations is inconsistent with AMIL having a beneficial or equitable interest in the Vessel but is entirely consistent with it having made a loan to MMG[4]. The judge also had regard to the decision of the Court of Appeal in The Convenience Container, supra at §§35 and 36, in which it was stated that “beneficial ownership” in section 12B(4) cannot merely be about the enjoyment of the proceeds from the sale of a vessel[5]. 40.The judge also took into account AMIL’s own conduct in claiming the exact sum of the final payment amount in these proceedings and in HCAJ 48/2013 as being consistent with the money having been advanced by way of loan.[6] Evidence of such subsequent conduct is admissible in respect of the characterisation of a contract (McMeel: The Construction of Contracts §1.26, citing Agnew v Commissioner of Inland Revenue at 730B §48). The judge accepted the submission of Mr Smith that it was consistent with a loan and inconsistent with a trust that AMIL was to be repaid the exact sum of the final payment amount regardless of any appreciation or depreciation in the value of the Vessel (Underhill and Hayton: Law Relating to Trusts and Trustees (18th ed) §1.24)[7]. 41.I do not think the judge had ignored or overlooked the express words in clause 3.2(a), or had not properly understood AMIL’s case of an express or common intention constructive trust, as contended by Mr Sussex. The judge expressly mentioned and recognised that what MMG and AMIL had sought to do in the Agreement was to regulate by contract the terms on which property would be owned so there would be no need to rely on presumptions[8]. 42.What the judge did was to decline to give any weight to the words in clause 3.2(a) in characterising the true legal effect of the transaction between the parties as they were inconsistent with the substance of the obligations entered into by the parties. As Lord Herschell LC said in McEntire v Crossley Brothers [1895] AC 457 at 462 to 463, if the words in one part of the agreement point in one direction and the words in another part in another direction, one must look at the agreement as a whole and see what its substantial effect is. The parties cannot, by the insertion of any mere words, defeat the effect of the transaction as appearing from the whole of the agreement into which they have entered. 43.Further, as Lord Walker of Gestingthorpe stated in In re Spectrum Plus [2005] 2 AC 680 at 730E to H §141, there is a public interest which overrides unrestrained freedom of contract in arriving at the correct characterisation of a contract according to its true legal effect. How the Agreement is characterised would affect the right of arrest conferred by statute in section 12B(4)(ii). 44.The effect of the transaction as appeared from the Agreement as a whole is clear. As recited in the background provisions in clause 1 of the Agreement, MMG was obliged to pay the final payment amount to Swissco for the purchase of the Vessel by 24 September 2012, only six days from the Agreement. MMG had approached a number of banks and financial institutions to fund the final payment amount but all of them declined. It was in those circumstances that MMG approached AMIL to fund the payment within two days and AMIL agreed to do so on the basis that it would be repaid the final payment amount out of a particular fund, namely, the proceeds of sale, it being envisaged that that was the source from which the final payment amount was to be repaid. It was part of the factual matrix that when MMG approached AMIL for funding, the chief executive officer of MMG informed AMIL that due to lack of funds MMG’s intention was to sell the Vessel very shortly after its purchase from Swissco[9]. 45.As the monies AMIL paid to Swissco on behalf of MMG were expressed to be repayable, the result must be that the monies were paid by way of loan (In re Sharpe, supra at 222G to H). That AMIL would be repaid the full sum of the final payment amount even if the Vessel was sold at less than its purchase price is consistent with the transaction being a loan and inconsistent with its having a beneficial interest in the Vessel. Mr Sussex sought to answer this by saying that was the entitlement provided for in clause 3.2(b). But that is not an explanation for the inconsistency with having acquired a beneficial interest in the Vessel. His contention that the Agreement stipulated for two different subject matters in clauses 3.2(a) and (b) again does not explain away the inherent inconsistency between a loan and the acquisition of a beneficial interest. 46.Mr Smith made a further point that it would be extraordinary to provide in clause 4.3 of the Agreement that AMIL may assign any of its rights under the Agreement to any person without the prior consent of MMG, if AMIL had indeed acquired a beneficial ownership in the Vessel with MMG as a co-owner. He submitted this provision would make sense if the only right to be assigned by AMIL is the right to be repaid the final payment amount out of the sale proceeds. I think there is substance in this point as well. 47.The judge was right to answer question (1) in the negative. Question (2): going behind the registration in the ship register 48.Having answered question (1) in favour of Arina and Allianz, it is not strictly necessary to answer question (2). And if question (2) is to be raised at all, it should have been considered ahead of question (1). If the judge should answer question (2) to the effect that the registration in the ship register is conclusive of ownership, he may not find it necessary to deal with question (1). 49.Be that as it may, question (2) is apparently premised on what Litton PJ said in Re Resource 1 (2000) 3 HKCFAR 187 at 195G to 196C:
50.Mr Sussex recognised the statement of Litton PJ in Re Resource 1 that the registration of a ship would be “virtually conclusive” of both legal and beneficial ownership cannot be faulted as a matter of commercial reality. He submitted that statement does not give rise to a presumption of law and each case depends on its facts. Properly understood Litton PJ’s reference to a “wholly exceptional case” merely reflects the fact that such cases are factually rare or exceptional and tend not to exist “in the general run of things”. It does not mean they do not or cannot exist. It is a question of looking at the facts and drawing proper conclusions. There is no rule of law that fraud or some similarly compelling circumstances must be proved in order to go behind the registration of a ship for the purpose of identifying the “beneficial owner” for the purpose of section 12B(4)(ii). Besides, the Vessel here was not registered under the name of a one-ship company. If, as the judge accepted, the words “beneficial owner” were inserted in section 12B(4)(i) and (ii) to take account of the possibility of a trust, this is precisely such a case. 51.Mr Sussex also drew our attention to the fact that Re Resource 1 was a case where it was suggested that the party alleged to be the beneficial owner of the ship was the “owner” for the purpose of section 12B(4)(b), although not registered as the owner, the contention being that the person liable in personam for the claim in damages was also the “owner” of the ship under arrest at the time the cause of action arose and when the writ was issued. The Court of Final Appeal, in following The Evpo Agnic,held that “owner” in the earlier part of the section – section 12B(4)(b) – meant “registered owner”, see Bokhary PJ at 209A to F. The statements of Lord Donaldson MR in The Evpo Agnic at 1095H to 1096G quoted by Litton PJ and Bokhary PJ were said in the context of the earlier part of the section being the equivalent of our section 12B(4)(b). The court in Re Resource 1 was not construing “beneficial owner” in the latter part of the provision, in section 12B(4)(i) and (ii). 52.In The Evpo Agnic at 1096B to C, the English Court of Appeal recognised “it is a basic rule of construction that where a statute employs different terminology in different provisions, prima facie a different meaning is intended and this is particularly the case if the different terminology occurs within a single subsection”. So “owner” in section 12B(4)(b) falls to be contrasted with “beneficial owner” in section 12B(4)(i) and (ii). Mr Sussex submitted therefore when the legislature used “owner” in the same section in which it used the words “beneficial owner”, prima facie a different meaning is intended. There was no warrant for construing section 12B(4)(i) and (ii) in a way which limited the ordinary meaning of “beneficial owner”. 53.The judge had placed reliance on the statements of Reyes J in the judgment of the Court of Appeal in The Convenience Container, supra at §§35, 36 and 38[10]:
54.Mr Sussex submitted insofar as the judge had relied on the above statements to construe the words “beneficial owner” in section 12B(4)(i) and (ii) as solely concerned with the ability to sell and convey good title, the judge was in error. Although the ability to sell and pass good title is one of the indicia of ownership, section 12B(4)(i) and (ii) is not solely concerned with that. Section 51 of Cap 415 expressly provides that the owner of a registered ship (which is defined by section 2 to mean the registered owner) has power “absolutely to dispose of the ship and to give effectual receipts in respect of the disposal”. So by statute the registered owner has both the power of sale and the power to confer good title. Mr Sussex contended if the judge is correct that “beneficial owner” in section 12B(4)(i) and (ii) should be in a position to sell and convey good title and hence MMG was the “beneficial owner” for that purpose[11], the effect of section 51 of Cap 415 would be emasculated. Further, there is removed the presumption that when the legislature used “owner” in the same section in which it used “beneficial owner” prima facie a different meaning is intended. 55.I agree with Mr Sussex’s submissions. 56.Mr Smith sought to persuade us that Arina and Allianz, in invoking the Admiralty jurisdiction in rem, were entitled to rely on registered ownership since MMG as the Vessel’s registered owner was taken to be her legal and beneficial owner. There were no exceptional circumstances here so registration should be regarded as conclusive. He submitted that a plaintiff, as the party invoking the court’s jurisdiction, may be permitted to go behind registration if a ship is being operated under the cloak of a trust, citing the statements of Robert Goff J in The I Congreso del Partido at 542A to B as mentioned earlier. But a defendant is not permitted to go behind registration to establish beneficial ownership to deny the right of maritime claimants to arrest ships as there would be little point in having ship registers which do not permit the notice of a trust to be entered. He submitted this is to give a purposive construction to legislation – that plaintiffs may be able to rely on beneficial ownership to invoke the court’s jurisdiction but putative defendants may not do so to deny the right of maritime claimants. 57.In support of the above proposition, Mr Smith relied on various statements in a number of cases. 58.He stressed the fundamental importance of shipping registers in establishing legal and beneficial ownership. He cited these further statements of Lord Donaldson MR in The Evpo Agnic:
59.The importance of maintaining a shipping register cannot be gainsaid, but it is important to bear in mind that the statement of Lord Donaldson in The Evpo Agnic in the first of the two quotations was said in the context of construing “owner” in the earlier part of the section being the equivalent of our section 12B(4)(b), and he had said earlier at 1096B to C that “owner” in the earlier part of the section falls to be contrasted with “beneficial owner” in sub-paragraphs (i) and (ii) in the latter part. 60.I do not read the second quotation at 1097E to F as support for Mr Smith’s submission that “beneficial owner” in section 12B(4)(i) and (ii) should be construed in such a manner for the benefit of plaintiffs and may not be used by defendants to defeat the arrest of a ship. I think there is much to be said for the view that this section operates both ways, it can confer rights on a plaintiff and there is also protection for the defendant. These observations of Clarke LJ in Tychy, supra at 20 are pertinent:
61.Mr Smith relied on the judgment of Reyes J in Tian Xiang 2 Hao, HCAJ 322/2001, 8 October 2003 as support for his proposition that the particulars shown in the ship register are to be relied on not only for ascertaining beneficial ownership for the purpose of section 12B(4)(b) but also for the purposes of beneficial ownership in section 12B(4)(i) and (ii). What Reyes J said in §44 was this:
62.I have no quarrel with the above statements if they are understood in the light of attaching proper weight to the registration of ownership in ascertaining beneficial ownership for the purpose of section 12B(4)(i) and (ii) and they are not elevated to a presumption of law. 63.The issue for decision in Tian Xiang 2 Hao was whether an acknowledgment of service should be set aside and whether service of a writ in rem addressed to the owners of the ship could be acknowledged as of right by a party as the defendant claiming to be the beneficial owner of the vessel or whether that party should seek leave to intervene in the action as an interested party under Order 75 rule 17. Reyes J held at §§29 to 32 that party could not acknowledge service of the writ as a defendant as it was not registered as the owner of the ship. In doing so, the judge referred to the judgments of Litton PJ (at 195G to 196D and 197C to D) and Bokhary PJ (at 208G, 209C to G) in Re Resource 1, in which it was held that “owner” in section 12B(4)(b) means “registered owner”. Reyes J in that case, as was the court in Re Resource 1, was concerned primarily with the earlier part of the section. 64.Mr Smith relied also on the Malaysian case of The Able Lieutenant [2002] 6 MLJ 433, which was quoted and considered by Reyes J at some length in Tian Xiang 2 Hao at §§33 to 42. Particular reliance was placed on these words of Zulkefli J in The Able Lieutenant at 447H to I:
65.Reyes J prayed in aid the above rationale given by Zulkefli J in considering whether the plaintiffs were entitled to treat the registration of the ship at the time of the cause of action as evidencing compliance with section 12B(4)(b), see §§40 to 43. Further, as the Court of Appeal stated in §9 of its reasons for judgment in CACV 327/2003, 16 March 2004 in dismissing the appeal from Reyes J, the judge already had regard to the judgments of Litton PJ and Bokhary PJ in Re Resource 1 and the reference to The Able Lieutenant and other cases was unnecessary. I do not think The Able Lieutenant would really help to advance Mr Smith’s arguments. 66.The judge answered question (2) in the negative, that in the absence of fraud or other similar compelling circumstances, it is not open for AMIL to go behind registration and contend that MMG was not the beneficial owner of the Vessel as to all her shares at the time of the writs[12]. But in doing so, he would appear to have gone further and concluded that it is not open to AMIL to assert in the present case that MMG was not at the time of the writs the beneficial owner as respects all the shares in the Vessel[13]. This must be on the premise there are no compelling circumstances to go behind registration. 67.If the answer to question (2) is understood as a question of fact and not a presumption or rule of law, I would not regard the judge as fallen into error. I would however reject the contention of Mr Smith advanced before the judge and on appeal that in invoking the court’s Admiralty jurisdiction in rem, the plaintiffs are entitled to rely on registered ownership since a ship’s registered owner was taken to be her legal and beneficial owner[14]. And insofar as the judge had held that even if AMIL had established a trust did arise in this instance, this would not have amounted to compelling circumstances for the court to look behind the registration to see if section 12B(4)(ii) was satisfied, I would not uphold this holding. 68.In view of the judge’s conclusions on questions (1), with which I agree, and question (2) did not arise for consideration in light of the answer to question (1), there is no issue arising from AMIL’s applications to challenge the exercise of in rem jurisdiction in these proceedings which remains to be tried[15]. It would not be appropriate to give directions for the trial of any such issue arising from these applications together with the issues in HCAJ 48/2013, as sought in the summons for directions of AMIL in HCAJ 164/2012. Conclusion and order 69.For the above reasons, I would dismiss the appeals of AMIL against both judgments with an order nisi that AMIL should pay the costs of these appeals to Arina and Allianz.
Mr Charles Sussex SC, instructed by Howse Williams Bowers, for the Defendants (Appellants) in Both cases Mr Clifford Smith SC, instructed by Clyde & Co., for the Plaintiff (Respondent) in CACV 214/2014 Mr Clifford Smith SC, instructed by Ince & Co., for the Plaintiff (Respondent) in CACV 215/2014 [1] Judgment, §20 [2] Judgment, §28 [3] Judgment, §§23(1), (2) and (3) [4] Judgment, §§23 and 24 [5] Judgment, §27 [6] Judgment, §25 [7] Judgment, §26 [8] Judgment, §22 [9] Affidavit of Osama As’Ad on 27 March 2014, §8 [10] Judgment, §34 [11] Judgment, §35 [12] Judgment, §§29, 30 [13] Judgment, §49 [14] Judgment, §13 [15] Judgment, §54 |
Cases cited in this judgment
Further hearings and rulings under CACV 214/2014