Arina Offshore Jlt v The Owners Of The Ship Or Vessel “Almojil 61

Judgment Date18 June 2015
Year2015
Citation[2015] 3 HKLRD 598
Judgement NumberCACV214/2014
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV214/2014 ARINA OFFSHORE JLT v. THE OWNERS OF THE SHIP OR VESSEL “ALMOJIL 61”

CACV 214/2014 AND CACV 215/2014

CACV 214/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 214 OF 2014

(ON APPEAL FROM HCAJ NO. 164 OF 2012)

________________________

Admiralty action in rem against: the ship or vessel “ALMOJIL 61”
(IMO No.9622124)

BETWEEN
ARINA OFFSHORE JLT Plaintiff
and
THE OWNERS OF THE SHIP OR VESSEL
“ALMOJIL 61”
Defendants

________________________

AND

CACV 215/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 215 OF 2014

(ON APPEAL FROM HCAJ NO. 9 OF 2013)

________________________

Admiralty action in rem against: the ship or vessel “ALMOJIL 61”
(IMO No.9622124)

BETWEEN
ALLIANZ MARINE SERVICES LLC Plaintiff
and
THE OWNERS OF THE SHIP OR VESSEL
“ALMOJIL 61”
Defendants

________________________

(Heard together)

Before: Hon Lam VP and Kwan JA in Court
Date of Hearing: 2 June 2015
Date of Judgment: 18 June 2015

________________

JUDGMENT

________________

Hon Lam VP:

1. I have read the judgment of Kwan JA in draft and I respectfully agree with her analysis in respect of questions (1) and (2). I only wish to add this: in the context of question (1), Mr Sussex SC contended that the arrangement between MMG and AMIL could not be a loan as there was no covenant to repay in the Agreement. Whilst it is correct that there is no express general covenant to repay in the Agreement (other than a covenant to repay under clause 3.2(b) in the event of the sale of the Vessel), I do not think the absence of a general covenant to repay is inconsistent with the characterisation of the transaction as a loan instead of an acquisition of partial ownership by AMIL. First, in light of the circumstances leading to this arrangement as discussed by Kwan JA at para 44 below, I do not accept that the rights and obligations of the parties under Clause 3.2(a) and (b) should be construed as 2 separate sets of rights and obligations as contended by Mr Sussex. As explained by Kwan JA, when these clauses were construed together, the substance of the transaction can only be a loan. Second, if the transaction was intended to be AMIL’s acquisition of partial ownership, it would indeed be unusual that there was no provision in the Agreement prescribing for the percentage of ownership acquired by AMIL, for the sharing of income generated from the charterparties of the Vessel or otherwise and the sharing of risk relating to the operation of the Vessel. Third, clause 3.2(a) provides for payment by AMIL on behalf of MMG. It shows that as between the two of them (as this was a term in the agreement between them as opposed an agreement between AMIL and Swissco) it was not intended to treat the payment as payment by AMIL as a co-owner with MMG. Taking these matters and those mentioned by Kwan JA into account, it is clear to me that the true characterisation of the transaction must be a loan as opposed to an acquisition of partial interest in the Vessel pending its sale. In other words, even without a general covenant to repay, if for some reasons the sale of the vessel did not take place as contemplated by the parties, AMIL would be entitled to demand MMG to repay. For these reasons, I agree that the appeal should be dismissed as per para 69 below.

Hon Kwan JA:

2. We have two appeals from the judgments handed down by Ng J on 26 June 2014 in two Admiralty actions in rem. The issues in both judgments are identical and the judgments are in substantially similar terms (both reported in [2014] 4 HKLRD 313). Where reference is made to any particular paragraph in the judgments, I will use the judgment in respect of HCAJ 164/2012.

3. These appeals raise issues concerning the Admiralty jurisdiction of the Court of First Instance, and the proper construction of section 12B(4) of the High Court Ordinance, Cap 4. Leave to appeal was granted by the Court of Appeal on 29 October 2014.

Background

4. The relevant background matters may be stated as follows.

5. The appellant in both proceedings is Al Mojil Investments Ltd (“AMIL”), a company incorporated under the laws of Dubai, United Arab Emirates. AMIL claims to be the part beneficial owner of a vessel MV Almojil 61 (“the Vessel”).

6. The respondent in CACV 214/2014 (on appeal from HCAJ 164/2012), Arina Offshore JLT (“Arina”), is the plaintiff in that action. Arina issued an in rem writ on 28 September 2012 and arrested the Vessel to enforce its claims of over US$6 million against Mohammed Al Mojil Group (“MMG”) of the Kingdom of Saudi Arabia under five charterparties. Arina invoked the Admiralty jurisdiction pursuant to section 12B(4)(ii) of Cap 4, on the basis that the Vessel was, at the time of the commencement of the action, beneficially owned as respects all the shares in her by MMG.

7. The respondent in CACV 215/2014 (on appeal from HCAJ 9/2013), Allianz Marine Services LLC (“Allianz”), is the plaintiff in that action. On 21 January 2013, Allianz issued an in rem writ and served it on the Vessel the day following to enforce its claims against MMG for breach of a charterparty in the total sum of over US$1.6 million. The Admiralty jurisdiction was invoked on the same basis as in the other action.

8. The Vessel was sold pendente lite on 7 March 2013 and the sale proceeds of US$4.5 million have been paid into court. MMG was at all material times the registered owner of the Vessel as to all her shares (64/64) until the judicial sale. The Vessel was registered in the Commonwealth of Dominica.

9. MMG and AMIL are part of the business interests of the Al Mojil family. In April 2012, MMG contracted with Swissco Holdings Ltd (“Swissco”) to purchase the Vessel at US$7.2 million. Payment was to be made in stages, with the final payment of US$1,593,939.06 payable by 24 September 2012. MMG had approached a number of banks and financial institutions for funds to make the final payment, but all of them declined. MMG then approached AMIL for funds and the latter agreed to pay the final payment on behalf of MMG to Swissco on 20 September 2012 on the terms set out in an agreement dated 18 September 2012 (“the Agreement”).

10. The Agreement contained inter alia these provisions:

3.Final Payment Amount

3.1 AMIL hereby acknowledges and agrees that it shall on behalf of MMG pay to Swissco on 20 September 2012 the Final Payment Amount.

3.2 MMG hereby acknowledges and agrees that:

(a) AMIL will pay the Final Payment Amount on behalf of MMG to Swissco in consideration for AMIL being part owner of the Vessel with it being understood that on payment of the Final Payment Amount the ownership of the Vessel is to be transferred in the name of the MMG; and

(b) AMIL shall at all times be entitled to the proceeds of any sale of the Vessel, the proceeds of which will be used to repay the Final Payment Amount to be paid by AMIL.

4. Miscellaneous

4.3 MMG may not assign or transfer any of its rights and obligations under the Letter without the prior consent of AMIL. AMIL may assign any of its rights or transfer by way of novation any of its rights or obligations under this Letter to any person without the prior consent of MMG.

5. Governing Law

This Letter and any non-contractual obligations arising out of, or in connection with, it shall be governed by, and construed in accordance with, the laws of Kingdom of Saudi Arabia.”

11. Shortly after AMIL made payment of the final amount on behalf of MMG, and the Vessel was transferred to and registered in MMG’s name, the Vessel was arrested in Hong Kong on 28 September 2012 by Arina.

12. MMG did not file an acknowledgement of service in either action. Before the applications of Arina and Allianz for default judgment could be heard, AMIL filed an acknowledgement of service in each action as a co-owner of the Vessel. It also brought an action in rem in HCAJ 48/2013 on 6 May 2013 against the sale proceeds of the Vessel, claiming it was part beneficial owner of the Vessel and had a beneficial interest in the sale proceeds paid into court. It claims a declaration that the proceeds are trust moneys to the extent of US$1,593,939 and it is beneficially entitled to that sum. Arina has obtained leave to intervene in HCAJ 48/2013 and has filed a defence in that action.

13. AMIL took out a summons pursuant to Order 12 rule 8 in each of HCAJ 9/2013 (on 17 June 2013) and HCAJ 164/2012 (on 28 October 2013). The summonses seek an order that the court has no in rem jurisdiction, alternatively should not exercise in rem jurisdiction over the Vessel, because the requirements of section 12B(4)(ii) of Cap 4 have not been satisfied.

14. The summons issued earlier in HCAJ 9/2013 was heard by the judge on 19 December 2013. Although the Agreement was expressed to be governed by the laws of the Kingdom of Saudi Arabia, expert evidence on the laws of Saudi Arabia was not adduced by any of the parties. So the case proceeded before the judge on the basis that the laws of Saudi Arabia were no different from Hong Kong law. Judgment was reserved at the end of the hearing.

15. The similar summons issued in HCAJ 164/2012 was heard by the judge on 12 June 2014. Arina adduced expert evidence on the laws of Saudi Arabia on 23 April 2014. On 29 May 2014, AMIL issued a summons for cross-examination of Arina’s experts on the foreign law issues pursuant to Order 38 rule 2 and for directions for the trial of the issues arising on AMIL’s challenge to jurisdiction pursuant to Order 12 rule 8(5). AMIL adduced evidence on the laws of Saudi Arabia from its own expert on 10 June 2014.

16. At the hearing before the judge...

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    ...at the point of closing also did not affect the substantive rights of parties: at [48] to [50]. Case(s) referred to Almojil 61, The [2015] 3 HKLRD 598 (refd) Andres Bonifacio, The [1993] 3 SLR(R) 71; [1993] 3 SLR 521 (folld) Enfield, The [1981–1982] SLR(R) 527 (refd) Evpo Agnic, TheWLR [198......

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