Between April 2008 and August 2010, Chimbusco (plaintiff) supplied bunkers to the Decurion belonging to an Argentinian company, Maruba SCA (defendant), and 10 other ships which were time chartered on the NYPE form to an Uruguayan company, Clan SA. Clan SA was related to the defendant. The defendant was neither the registered owner nor the charterer of the 10 other ships at the relevant time. Additionally, a Cayman Islands company, South Atlantic Container Ltd, was contractually involved in making the bunkers available from the defendant’s Hong Kong agents, Maruba Asia, to Clan SA.

The plaintiff issued a writ in rem claiming that US$4,217,419.89 had not been paid for bunkers supplied to all 11 ships and obtained a warrant for the arrest of the Decurion. The defendant acknowledged service. The Decurion was eventually sold pursuant to a court order with the proceeds of sale amounting to US$5,208,107 but with encumbrances on this sum. The defendant applied for a declaration pursuant to O 12 r 8 that the court had no in rem jurisdiction over the defendant for the claims, except for the price of unpaid bunkers supplied to Decurion, as the plaintiff's claim did not meet the requirements of s 12B(4) of the High Court Ordinance. The trial judge granted the declaration.

Article 3 of the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-going Ships 1952 (Arrest Convention 1952), which provides for a right of arrest over an owner’s ship in respect of claims against the registered owner or a demise charterer of the ship and a right of arrest over a ship under a demise charter (or over another ship in the ownership of the demise charterer) in respect of claims against the demise charterer, is given effect in Hong Kong via s 12B(4)(b) of the High Court Ordinance which allows the court to exercise in rem jurisdiction if the defendant was ‘when the cause of action arose, the owner or charterer of, or in possession or in control’ of that ship or any other ship that the defendant was ‘the beneficial owner as respects all the shares’ of at the time when the action was brought. However, s 12B(4)(b) of the High Court Ordinance goes further than the Arrest Convention 1952 to construe ‘charterers’ more broadly to include charterers other than demise charterers - ‘charterer’ in s 12B(4)(b) includes a charterer under other forms of charterparty, even if that charterer does not have possession of the ship. The heads of claim that trigger s 12B(4)(b) are set out in s 12A(2)(e) to (q) of the High Court Ordinance; claims for bunkers supplied to a ship for her operation fall under s 12A(2)(l).

Three issues formed the subject of the plaintiff’s appeal.

First, whether the Admiralty jurisdiction in rem of the High Court has been properly invoked by the plaintiff against the Decurion in respect of claims for the supply of bunkers to that ship and the 10 other vessels.

Second, whether it was open to the defendant to challenge the exercise of the court’s jurisdiction under O 12 r 8 without being held to have submitted to the jurisdiction by its acknowledgement of service.

Third, whether, at the time when the bunkers were supplied to the 10 other vessels, the vessels were under the defendant’s 'control' within the meaning of s 12B(4) of the High Court Ordinance, and what was the correct test for 'control'? 

Held: The trial judge applied the correct test for control and did not err in finding that the defendant was not in control of the other 10 vessels. Accordingly, the appeal was dismissed.

On whether the in rem admiralty jurisdiction of the High Court had been properly invoked, the plaintiff argued that it was entitled to an in personam claim against the defendant for the full amount of the claim including the bunkers supplied to the other 10 vessels. When the defendant acknowledged service of the writ in rem, the proceedings continued in personam against the defendant and in rem against the Decurion. The court reviewed a series of cases that supported this position, but held that mere filing of an acknowledgement of service pursuant to O 12 r 8 would not constitute submission to the jurisdiction unless the court disposed of subsequent challenges to the jurisdiction. Hence, there was no in personam proceeding against the defendant by virtue of the defendant’s acknowledgement of the service of writ pursuant to O 12 r 8. If the plaintiff chose to proceed against the defendant in personam, it would have to apply for leave to serve an in personam writ under O 11, which it did not. The plaintiff could not consider the in rem writ as equivalent to an in personam writ as the latter had a different prescribed form.

The court rejected the plaintiff’s other arguments that the summons was defective (on the basis that the summons sought a declaration that the court had no in rem jurisdiction in respect of the claims for bunkers supplied to vessels other than the Decurion) and that the defendant’s summons in seeking striking out of certain paragraphs of the statement of claim went beyond a mere challenge of jurisdiction which amounted to an invocation of the jurisdiction of the court (on the basis that the plaintiff’s supporting authority could be distinguished).

Accordingly, it was proper for the trial judge to determine the question of whether the plaintiff was entitled to invoke the in rem jurisdiction in respect of the claims for the supply of bunkers to the vessels other than the Decurion on the hearing of the defendant’s O 12 r 8 summons, on the balance of probabilities, and in light of the affidavit evidence adduced.

On the issue of whether it was open to the defendant to challenge the exercise of the court’s jurisdiction, the plaintiff sought to assert multiple and discrete claims against the Decurion under s 12A(2)(l) for bunkers supplied, not just to the Decurion, but also to 10 other vessels. The plaintiff went on to submit (in essence) that a challenge to jurisdiction must be an all or nothing challenge. The court rejected this submission, stating that a partial challenge to jurisdiction was possible. The court was of the view that it was open to the defendant under O 12 r 8 to challenge the exercise of the in rem jurisdiction under section 12B(4) against the Decurion in respect of the separate claims arising from the supply of bunkers to the other 10 vessels because this was an exercise of in rem jurisdiction over a vessel in respect of claims for which the elements of s 12B(4) were not all satisfied. If that were not the case, it would mean that a plaintiff could simply ‘piggyback’ speculative claims onto a good s 12B(4) claim and thus seek to invoke the exercise of the in rem jurisdiction in respect of the cumulative claims.

As for the test for control, the trial judge had held that the test for control was whether the defendant had the ability to tell the person in possession of a vessel what was to be done in relation to the vessel. The plaintiff relied on Powerpoint slides alluding to the defendant having control (in the ordinary and natural meaning) over Clan SA and that the test of control applied by the trial judge was too narrow. The court rejected the plaintiff’s submissions and was not persuaded to lift the corporate veil. The language of the Arrest Convention 1952 and s 12B(4) of the High Court Ordinance suggested that a person’s connection with the ship had to involve either full possession or a contractual right of control, and that the relationship to the ship could not be merely casual. As the 10 ships were chartered on the NYPE form, the contractual relationship determining how the ship was to be controlled had been set out in cl 8 of the charterparty and therefore there was no warrant for holding that another party was in control of the vessel. The court pointed to and agreed with the observations of the trial judge that introducing a looser test equating control with ‘having a say (but not necessarily a complete say) in the operation of a vessel’ would widen the possibilities for maritime arrest but at the cost of introducing a high degree of uncertainty in shipping matters which would require time-consuming factual assessments and would be commercially undesirable.

The court observed that the person under s 12B(4)(b) of the High Court Ordinance is the person in control of the ship and not the person in control of the company which is the charterer of the ship. The court was of the view that the natural and ordinary meaning of ‘in control of’ is when this party said to be in control of the ship was in the position of a charterer (regardless of whether described as a charterer or not) with a contractual power of control over that ship. This power of control would involve having the right to direct the master as to how the ship was to be employed and its existence would not be consistent with some other party having a superior contractual power of control. In addition, it was not contended that the charterparty and service and agency agreements were a sham. Hence, the trial judge had applied the correct test for control and accordingly the defendant was not in control of the other 10 ships.