The bunker supplier Chimbusco Pan Nation Petro-Chemical claimed over US$4 million for unpaid bunkers supplied to 11 vessels which they stated belonged to a fleet controlled by Argentinean shipping giant Maruba SCA ("Maruba"). Chimbusco argued that Maruba was liable for the unpaid invoices despite the fact that:
- It was Maruba’s subsidiary who placed the orders
- All the invoices were issued to a different company South Atlantic, not Maruba
- 10 of the 11 vessels were on time charter to yet another company Clan S.A., not Maruba
Against this backdrop, Chimbusco nevertheless successfully arrested the Decurion in Hong Kong. The Decurion was the only ship registered to Maruba at the time. Chimbusco subsequently secured an order for sale of the Decurion.
The in rem action
Maruba, represented by Kennedys, intervened before distribution of the sale proceeds and applied to the court, under Order 12 Rule 8 of the Rules of the High Court (Cap. 4A), for a declaration that the Court had no in rem jurisdiction over Chimbusco’s claims in respect of bunkers supplied to the 10 vessels other than the Decurion.
Section 12B(4) of the High Court Ordinance (Cap. 4) stipulates that, in order for a Hong Kong Court to exercise its in rem jurisdiction over a vessel, i.e. to arrest the vessel, in this particular case Chimbusco would have to show that:
- Maruba was the company liable on the claim in personam
- At the time when the claim was brought, Maruba was the owner or charterer, or in possession or control, of the 10 vessels (other than the Decurion) to which bunkers were supplied
The in rem jurisdiction
On appeal, Michael Thomas SC on behalf of Chimbusco made three main arguments on jurisdiction, they were:
- Maruba had, by filing an acknowledgement of service, became bound by the jurisdiction of the Hong Kong Court such that the proceedings became both in personam against Maruba and in rem against the Decurion, such that Chimbusco was entitled to proceed to claim in personam against Maruba and that such jurisdiction was not divisible
- Maruba's application under Order 12 Rule 8 itself amounted to a submission to the jurisdiction of the Hong Kong Court
- Maruba had not pleaded for proper relief under Order 12 Rule 8 of the Rules of the High Court
The Court of Appeal rejected all three arguments. The Court of Appeal held that the filing of an acknowledgement of service, and an application under Order 12 Rule 8 clearly did not amount to any submission to the Court's jurisdiction by Maruba. A wide range of relief can be granted by the Court under Order 12 Rule 8, and such jurisdiction can indeed be divisible in the particular circumstances of this case. If that were not the case, stated Mr Justice Fok, "it would otherwise mean that a plaintiff could simply "piggyback" speculative claims onto a good claim and … thus seek to invoke the exercise of the in rem jurisdiction in respect of the whole, larger, claim".
The meaning of control
There was no dispute that Maruba was neither the owner nor charterer, and was not in possession of the 10 vessels. Therefore, the only issue was whether or not Maruba was in control of those vessels at the material time.
Mr Thomas SC submitted on behalf of Chimbusco that the meaning of "control" given by Mr Justice Reyes at the first instance was too narrow, and submitted authorities from Australia and South Africa which he says were not previously considered by Mr Justice Reyes. The Court of Appeal had no problem in distinguishing those authorities on the facts, and considered that Mr Justice Reyes applied the correct test:
"In the present context, the court is not looking to see if a party is exercising control over a company which is the charterer but to see if it exercising control over the ship itself. Unless the corporate veil is lifted, the separate corporate identity of the contracting party in the charterparty relationship cannot simply be ignored."
Mr Justice Reyes held, in May 2012, that the meaning of "control" of a vessel under section 12B(4) of the High Court Ordinance means the person who is legally in control of the vessel, for example, by virtue of being a contractual time charterer. No further enquiries or fact-finding will be carried out by a court in order to determine who is in control of a vessel. In determining this, Mr Justice Reyes observed that a looser test equating control with having a say (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 commercial undesirable. This view is endorsed by the Court of Appeal, which commented that Mr Justice Reyes' interpretation of "control" is consistent with the statutory intention of section 12B(4).
The meaning of "control" is now endorsed by the Hong Kong Court of Appeal, and provides a clear, simple and rigorous test for "control" in the context of ship arrests. This finding is the first decision on the issue, and is likely to have a significant impact in all jurisdictions in which an arrest may be carried out against a party who is in control of a vessel.