A writ in rem was issued by the plaintiffs, the owners of the Neptunia, against the defendant, the owners of the Span Terza, and other vessels claiming damages and charges pursuant to a time charter of Neptunia to the defendants.

The Admiralty Registrar refused the plaintiffs' ex parte application for the arrest of Span Terza. The plaintiffs appealed. Sheen J dismissed the appeal.

The plaintiffs appealed to the Court of Appeal contending that this was a claim which arose under s 1(1)(h) of the Administration of Justice Act 1956 (UK) (the Act). The defendants were the charterers of Neptunia and would be the person who would be liable in personam. The claim arose in connection with the ship and since the defendants were at all material times the charterers of the vessel Neptunia and were the beneficial owners of Span Terza at the time the action was brought, the action in rem could be invoked against Span Terza.

Held: By a majority (Donaldson LJ dissenting), appeal allowed.

The issue centred on the construction of the word 'charterer' in section 3(4) of the Act:

In the case of any such claim as is mentioned in paragraphs (d) to (r) to 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 ... 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.

The majority held that the words of s 3(4) had to be given their natural meaning unless there was good reason to limit them, or unless there was binding authority requiring the Court to limit them; and the natural meaning of the word 'charterer' includes a time charterer within those whose vessels could be arrested; there was no authority or sufficient reason to limit the words to charterer by demise. If only a demise charterer were meant, one would 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'.

The decisions of the Courts in The Eschersheim (CMI2166) and The Maritime Trader (CMI2342) were not followed in this case. Sir David Cairns said that the only previous English case dealing with the matter was The Maritime Trader, in which the Judge felt bound to follow The Eschersheim, by which he could only have meant to follow the dicta of Lord Diplock which could in any way be regarded as relevant. The considerations of the Judge in The Maritime Trader did not apply in this case because in The Maritime Trader the plaintiff had already elected to go to arbitration and the attempt to arrest was purely in aid of the arbitration award which it was hoped to secure. However, in this case the Court had no means of knowing whether the plaintiffs intended to go to arbitration. Donaldson LJ stated that the only assistance that he got from the dicta of Lord Diplock in The Eschersheim is that he thought it shows what most people would always have regarded as being the intention of s 3(4) of the Act, namely, to extend the ability to arrest from the primary ship to sister ships. But it was not a decision to that effect; it only stated that in 99 cases out of 100 that was the position.

The Judges also considered whether assistance could be derived from the Arrest Convention 1952, s 3(4) of the Act having been enacted in pursuance of that Convention, though not adhering to its language or its substance in every respect. Article 3 of the Arrest Convention 1952 contains provisions about which ships may be arrested:

(1) Subject to the provisions of para (4) of this article and of article 10, a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship, even though the ship arrested be ready to sail; but no ship, other than the particular ship in respect of which the claim arose, may be arrested in respect of any of the maritime claims enumerated in article 1, (o), (p) or (q).

(2) Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons.

(3) A ship shall not be arrested, nor shall bail or other security be given more than once in any one or more of the jurisdictions of any of the Contracting States in respect of the same maritime claim by the same claimant: and, if a ship has been arrested in any of such jurisdictions, or bail or other security has been given in such jurisdiction either to release the ship or to avoid a threatened arrest, any subsequent arrest of the ship or of any ship in the same ownership by the same claimant for the maritime claim shall be set aside, and the ship released by the Court or other appropriate judicial authority of that State, unless the claimant can satisfy the Court or other appropriate judicial authority that the bail or other security had been finally released before the subsequent arrest or that there is other good cause for maintaining that arrest.

(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 claim.

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.

Sir David Cairns: In the first four numbered paras, there is nothing which would enable a charterer or a shipowner to be brought in, other than a charterer by demise, a charterer by demise being expressly referred to in para 4. But, the words of the final sentence of the article seem to be far wider than s 3(4) of the Act, because they do not include the limitation of any such person as the charterer. In the circumstances, I do not find that the provisions of the Arrest Convention 1952 are of assistance to me in deciding the case.

Stephenson LJ: I have not found any sufficient reason to limit the words of s 3(4) of the Act to a charterer by demise. It seems possible, or even probable, that the Act, following in some respects the Arrest Convention 1952, did extend the right of arrest, and extend it thus far.

Donaldson LJ (dissenting): It seems to me that in the context of the phrase 'the owner or charterer of, or in possession or in control of, the ship', the proper construction of the word 'charterer' is to confine it to somebody who is an owner-type charterer - in other words, a demise charterer.

I find some support for that view in the wording of the Arrest Convention 1952, which is not only somewhat eccentrically drafted, but eccentrically laid out on the paper. Article 3.1 of the Convention deals with the primary ship and sister ships; paras 2 and 3 do not help. Paragraph 4 extends para 1 to the quasi-owner, the demise charterer. The extraordinary final sentence is set out into the margin, suggesting that it applies to the whole article, whereas it plainly does not from its own internal wording.

I do not regard that as an authority for extending the word 'charterer' to 'non-owner like charterers'. I think it refers to the mortgagees in possession of a ship, and possibly to salvors, because under most traditional ship mortgage deeds it is possible for a mortgagee to enter into possession of a ship and trade the ship as his own; he becomes a quasi-owner analogously to the position of the demise charterer.