The respondent bank had the appellant vessel arrested for defaulting on a first preferred mortgage of JPY 996,600,000 provided by the respondent bank for the acquisition of the vessel. The appellant appealed, submitting, among other things, that it did not obtain any loan from the respondent bank; that the loan agreement filed and relied upon by the respondent bank was forged; and that the Court did not have admiralty jurisdiction over the loan agreement.

Held: Appeal dismissed.

Section 3(2)(c) of the Admiralty Jurisdiction of the High Courts Ordinance 1980 (the Ordinance) provides: 'The Admiralty jurisdiction of the High Court shall be as follows, that is to say, jurisdiction to hear and determine any of the following causes, questions or claims :- ... (c) any claim in respect of a mortgage of or charge on a ship or any share therein'. Section 3(5)(c) provides: 'The preceding provisions of this section apply ... (c) so far as they relate to mortgages and charges, to all mortgages or charges, whether registered or not and whether legal or equitable, including mortgages and charges created under foreign law'. Section 4(1) provides for an action in personam in the admiralty jurisdiction of High Court. Sections 4(2) and 4(3) provide:

(2) The Admiralty jurisdiction of the High Court may in the cases mentioned in clauses (a) to (d), (i) and (r) of subsection (2) of section 3 be invoked by an action in rem against the ship or property in question.

(3) In any case in which there is a maritime lien or other charge on any ship, aircraft or other property of the amount claimed, the Admiralty jurisdiction of the High Court may be invoked by an action in rem against the ship, aircraft or property.

The respondent bank's claim is a claim in rem against the appellant vessel under ss 3(2)(c), 3(5)(c), 4(2) and 4(3) of the Ordinance. Therefore, there is no infirmity in the finding of the single Judge that the respondent bank does have a claim against the appellant vessel which can be pursued in rem against it under s 3(2)(c) of the Ordinance.

The appellant submitted that there was nothing on the record regarding beneficial ownership of the vessel. The single Judge discussed this objection and held it to be without substance. The Judge specifically observed that the respondent bank is pursuing a claim in rem against the appellant vessel on account of the mortgage created in its favour over the vessel, and that the respondent's claim in rem falls under the relevant provisions of the Ordinance. There is nothing wrong in this finding. Where a right to an action in rem is created, such right can be invoked without any restriction as to ownership.

Finally, the appellant argued that the respondent bank's suit was time-barred under s 6 of the Ordinance as the limitation for bringing an action before the High Court to enforce a maritime lien is two years from the date of arising of the maritime lien. This objection was raised by the appellant in view of the assertion that the respondent bank's suit is based on a maritime lien and that the respondent bank itself mentioned that its cause of action arose for the first time on 3 September 2002, whereas the suit was filed in the year 2010. This raises two issues: first, whether s 6 is applicable in this case and the suit is time-barred; and second, whether the respondent bank's claim as a mortgagee against the appellant falls within the definition of a maritime lien.

Section 6 of the Ordinance provides: 'No action shall be brought before the High Court to enforce a maritime lien for the damage sustained in consequence of collision wheresoever occurring or any other maritime lien unless proceedings therein are commenced within two years from the date of the damage occurring or the maritime lien arising, subject to the discretion of the High Court to extent this period.'

The single Judge rightly held that s 6 of the Ordinance is applicable only in respect of maritime liens, and observed that it has to be seen what categories of claim come within the scope of maritime liens. The Court agrees that s 6 of the Ordinance has no application in respect a mortgage which, not being a claim in respondentia, is not a maritime lien; and that a suit based on a claim that falls under s 3(2)(c) of the Ordinance cannot be regarded as barred by limitation on account of s 6. However, we disagree with the Judge's observation that this is not a case of bottomry, although the finance was provided by the respondent bank to the appellant for the vessel's acquisition. It appears that when a loan is obtained by offering the ship itself or the cargo/freight etc thereon as security, it is called bottomry. This case does fall within the definition of bottomry, as the appellant vessel was mortgaged as a security for repayment of the loan. Whenever a loan is obtained for any purpose against a mortgage of a ship, the transaction is that of bottomry. In such an event, an action in rem shall be enforceable against the ship under the admiralty jurisdiction under s 3(2)(q) of the Ordinance. This does not affect the merits or maintainability of the respondent bank's suit as it is a claim in rem against the appellant vessel under ss 3(2)(c), 3(5)(c), 4(2) and 4(3) of the Ordinance. The suit is also maintainable under s 3(2)(q) as bottomry.

Claims of a maritime lienee are superior to those of a mortgagee; a mortgagee’s claim is always subject to satisfaction of the maritime lien; and a mortgage cannot be equated with maritime lien. This reason alone is sufficient to establish that maritime liens and mortgages are distinct and unrelated rights having altogether different privileges, rights and liabilities of maritime lienees and mortgagees. The single Judge was, therefore, right in holding that the respondent banks’s claim based on the mortgage was not that of a maritime lien, and as such was not hit by s 6 of the Ordinance.