The plaintiff, a company incorporated under the laws of Panama, is the owner of the MV Sam Dragon (the vessel), which was previously known as the MV Pretty Flourish. The defendant is a company incorporated in Ireland which provides financial services to the global transportation industry. On 30 September 2006, the defendant entered into a USD 35,000,000 loan facility agreement with a South Korean company, Samsun Logix Corp (Samsun) which was at that time the owner of the MV Pretty Flourish. The defendant registered a ship mortgage over the vessel on the South Korean register.

On 2 February 2009, Samsun filed a petition to enter a rehabilitation process in South Korea. The MV Pretty Flourish was arrested in the port of Ghent by various creditors of Samsun who were owed an aggregate amount of USD 51,500,000. The vessel was advertised for sale. The plaintiff’s bid of USD 17,000,000 for the vessel was successful. The vessel was thus sold to the plaintiff by way of judicial sale in Belgium. The parties agreed that the effect of the judicial sale was that the plaintiff purchased the vessel free from encumbrances. The judicial sale had the effect of discharging the defendant's mortgage. In addition, the defendant's claim as mortgagee was transferred to the proceeds of sale.

The defendant's ship mortgage on the South Korean Register was not deleted until 31 August 2010. The plaintiff claimed for damages and expenses incurred in registering the vessel on the Hong Kong register. The plaintiff also claimed for the additional charges and expenses that arose as a result of the failure of the defendant to comply with the plaintiff’s request to remove the entry of the mortgage from the South Korean register on time.

The plaintiff alleged that the defendant was liable in tort for two reasons. First, the defendant failed to disclose prior to the holding of the judicial auction that it did not intend to delete the entry of its mortgage on the South Korean register. Secondly, the defendant failed to delete the mortgage after it was requested to do so by the plaintiff.

The defendant argued that the plaintiff could not have had any expectation that the mortgagee would delete the registration of the mortgage following the judicial sale of the vessel and accordingly denied liability.

Held: The plaintiff's claim failed.

In order to determine the defendant's liability, the Court must decide whether there was a legal duty on the mortgagee of a vessel to take affirmative steps to delete the entry of a mortgage on the ship's register in circumstances where there has been a judicial sale in a country other than the country of the ship's registration.

It was agreed that Belgian law applied to the plaintiff’s first argument. As to the plaintiff’s second argument, the Court found that the country most connected with the alleged wrong arising out of the failure by the defendant to delete the entry of the mortgage is South Korea, since the vessel was entered in the South Korean register, and that the consequences in other jurisdictions were 'indirect consequences' within the meaning of art 4.1 of the Rome II Regulation. Therefore, the Court held that South Korean law was applicable to the plaintiff's second argument.

Before applying Belgian and South Korean law to the issues which have been raised, the Court noted that evidence had been given by a number of witnesses on issues relating to international custom and practice in maritime law where the judicial sale of a vessel takes place by a mortgagee. Such evidence was relevant as maritime affairs, by their nature, have an international dimension and are governed to a significant extent by international Conventions which have been widely adopted and, in many cases, form part of the domestic laws of countries. For example, in Ireland, the Jurisdiction of Courts (Maritime Conventions) Act 1989 provides that the Arrest Convention 1952 shall have the force of law in the State and judicial notice shall be taken of it. The court heard evidence from a number of competent witnesses with extensive experience in international maritime trade on the effect of a judicial sale of a vessel and the extent of a mortgagee's liability to clear the entry of a mortgage from a ship's register.

It is widely agreed in the international maritime world that the judicial sale of a vessel will give the purchaser title free from all liens and encumbrances. This is an important statement of the law in this jurisdiction and most other jurisdictions, including South Korea.

Having considered the evidence from three witnesses with extensive experience of international maritime trade, the Court found that a mortgagee would never be asked to delete its mortgage from a shipping register in circumstances where there was a judicial sale. The Court was further convinced by the witnesses that under South Korean law, in the circumstances of a judicial sale, a mortgagee would not be expected to co-operate in removing entries from the register where the ship had formerly been registered. This would be a matter for the new owner to sort out since the mortgage would have been extinguished by the judicial sale. Therefore, in this case, the defendant was not obliged to voluntarily delete the mortgage entry either before it received payment out of the proceeds of sale of the vessel or otherwise.

In addition, the continued entry of the mortgage on the register was not a false or inaccurate statement since the mortgage entry no longer reflected the subsequent changes of ownership that had occurred and the fact that the mortgage had now been extinguished. Once the vessel was sold, the mortgage was extinguished and the rights of the mortgagee vested in the proceeds of sale subject to the fixing of priorities by the Belgian court in accordance with South Korean law.