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Bakri Bunker Trading Company Limited v The Owners Of And Other Persons Interested In The Ship "Neptune"

Judgment Cited authorities 15 Cited in Precedent Map Related
Vincent
Judgment Date03 October 1985
Subject MatterAdmiralty Action
Judgement NumberHCAJ211/1985
CourtHigh Court (Hong Kong)
HCAJ000211/1985 BAKRI BUNKER TRADING COMPANY LIMITED v. THE OWNERS OF AND OTHER PERSONS INTERESTED IN THE SHIP "NEPTUNE"

HCAJ000211/1985

HEADNOTE

Admiralty jurisdiction. Section 3(4) Administration of Justice Act 1956. Court invited to lift veil of incorporation to establish sister-ship relationship on ground of fraud. Order for existence of fraud to be tried as preliminary issue refused. One-ship companies in the particular circumstances accepted as equally consistent with legitimate limitation of liability.

Per curiam, that:-

(i)

 having already obtained security for the same claim in another jurisdiction by arresting a vessel claimed to be a sister-ship, it was a breach of faith to arrest the subject vessel. The bare possibility that the vessel first arrested was not a sister-ship did not enable a second arrest to be made

(ii) non-disclosure by the Defendants of the security obtained would not in the particular circumstances warrant the court exercising its discretion against them.

1985 No. AJ211

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Admiralty Action in Rem against the ship "NEPTUNE" (Cyprus Flag)

BETWEEN

BAKRI BUNKER TRADING COMPANY LIMITED Plaintiffs

and
THE OWNERS OF AND OTHER PERSONS INTERESTED IN THE SHIP "NEPTUNE" Defendants

------------------

Coram: Hon. Nazareth, J, in Court

Dates of Hearing: 24th & 25th September 1985

Date of Delivery of Judgment: 3rd October 1985

___________

JUDGMENT

___________

1. The Neptune was arrested on 11th September 1985 on the application of the Plaintiffs. The Plaintiffs' claim is for US$87,922.05 in respect of the supply of bunkers to 2 vessels, the Teviotban and the Dumbaia, which it is claimed are sister ships of the Neptune. The Defendants now apply for an order that the writ of summons and the warrant of arrest and all subsequent proceedings be set aside or dismissed. They rely upon the 3 following grounds:-

2. First that the Neptune at all material times was not in common beneficial ownership with the Teviotban and the Dumbaia as respects all the shares therein.

3. Second that having already obtained security for the debt pursuant to the arrest of the m.v. Dynasty in Sri Lanka, the Plaintiffs are barred from arresting the Neptune for the same claim.

4. And third, that there has been material non-disclosure on the part of the Plaintiffs.

5. To begin with the first ground, the underlying statutory provisions are sections 1 and 3(4) of the Administration of Justice Act 1956 which applies to Hong Kong by virtue of the Admiralty Jurisdiction (Hong Kong) Order in Council, 1962. (see Societe Anonyme des Petroles Mory and The Owners of the ship or vessel "Union Darwin" (Panamanian Flag)(1983) HKLR 248)

6. Section 1(1) for present purposes provides -

"

 The Admiralty jurisdiction of the High Court shall be as follows, that is to say, jurisdiction to hear and determine any of the following questions or claims -

(a) ...........

...........
(m) any claim in respect of goods or materials supplied to a ship for her operation or maintenance;

............."

Section 3(4) provides -

"

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

7. As to section 1, it is abundantly clear and in any case, common ground that the bunkers supplied fall within subsection (1)(m).

8. Section 3(4) can conveniently be dealt with in the 3 steps adopted by Slynn J. in The Aventicum (1978 Lloyd's Rep. 184). First the claim for the costs of supply of bunkers to the alleged sister ships must be a claim "arising in connection with a ship". That it is, is abundantly clear and not disputed.

9. The second matter that has to be shown is that the person who would be liable on the claim for supply of bunkers was, when the cause of action arose, the owner or charterer of, or in possession or in control of the ships bunkered.

10. The third matter to be established is that the ship arrested is beneficially owned as respects all the shares therein by that person.

11. The onus of showing that the person against whom it is sought to invoke the admiralty jurisdiction by arresting his ship is the person who beneficially owns all the shares in that ship and that he is the person who is liable in an action in personam lies upon the Plaintiff (The Aventicum 1978 Lloyds Rep. 184 at 186; The Maritime Trader 1981 Lloyds Rep. 154 at 157).

12. Proceeding then to the facts, the cost of the bunkers supplied by the Plaintiffs at Jeddah in February 1984 to the Teviotban and the Dumbaia was US$87,922.05.

13. The Teviotban was owned by Alexander Properties Ltd., a company registered in the Isle of Man, with only 2 issued shares, one held by a Captain Vazeous and the other by his wife. They are also shown by the register as the directors. The Teviotban is said now to be detained by one of the warring parties in the Persian Gulf.

14. The Dumbaia was owned by Tara Maritime Services Ltd as agents for Questworth Ltd. whose shareholders are Tara Maritime Services Ltd an Isle of Man company which holds one share, the remaining 1,999 shares being held by Dafnoussa Co. Naviera S.A. of Panama. A Questworth resolution of February 1985 shows that the single Tara Maritime share was transferred "back to the beneficial owner Captain Vazeous". The Panamanian register does not disclose the shareholders, but Captain Vazeous, his wife and one Fotini Dexana are shown as directors. The Dumbaia is said to have since been sold for scrap.

15. The Neptune is owned by Molars Shipping Co. Ltd., a Cyprus Co. of which Captain Vazeous holds 99 shares and Specova Co. Naviera S.A. of Panama one share.

16. The Teviotban and Dumbaia were managed by Specova Co. Naviera S.A. Two brothers of Captain Vazeous en behalf of Specova ordered the bunkers supplied to those vessels through Specova's bunker brokers. As in the case of Dafnoussa, the directors of Specova are Captain Vazeous, his wife and Fotini Dexana.

17. The Plaintiffs claim that Captain Vazeous is the alter ego of all the companies concerned, controls the operation of all the vessels, and is the beneficial owner of all the shares in them. In his affidavit in support of the Plaintiffs, the manager of Specova's bunker brokers, who have acted for Specova for six years and have offices very close to the Suecova and Vazeous offices in Piraeus, deposes that Captain Vazeous is the alter ego and principal shareholder of the various companies. He adds that throughout the bunker brokers' meetings with Captain Vazeous, the vessels were spoken of and treated as though they were owned by Captain Vazeous personally. Although his brothers and various employees assisted with management of the vessels, all decisions of importance were taken by Captain Vazeous.

18. Assuming that Captain Vazecus was indeed the person in control of the Teviotban and Dumbaia when the bunkers in question were supplied, unless the corporate veils of Dafnoussa and Specova are lifted, the beneficial ownership of the Neptune and Dumbaia cannot be established.

19. The principle of corporate identity is now trite law, well established since Salomon v. Salomon, (1897) AC 22, notwithstanding that there are certain situations in which the courts are willing to lift the veil of incorporation. For instance, the courts will not permit corporate form to be used for the purpose of fraud (Re Darby (1911) 1KB 95).

20. Furthermore section 3(4) of the Administration of Justice Act 1956 obviously contemplates, not nominal or other ownership of that sort, but beneficial ownership where it is of the nature described. As Slynn J. observed in The Aventicum -

"It is plain that section 3(4) of the Act intends that the court shall not be limited to a consideration of who is the registered owner or who is the person having legal ownership of the shares in the ship; the directions are to look at the beneficial ownership. Certainly where there is a suggestion of a trusteeship or a nominee holding, there is no doubt that the court can investigate it. I think that it may well be ..... that the court has the power and should in some cases look even further."

21. But it is not clear if section 3(4) extends to the lifting of corporate veils, nor do I consider it necessary to decide that question for the Plaintiffs have chosen to rely upon fraud. The onus is therefore upon them to show fraud and to do so, in my view, to such degree as would warrant the courts' intervention by lifting the veil of incorporation. That seems to me to be implicit in the following passage in the judgment of Sheen J. in The Maritime Trader (1981) 2 Lloyd's Rep. 153 at 157 -

"I would not hesitate to lift that veil if the evidence suggested that it obscured from view a mask of fraud rather than the true face of incorporation."

I apprehend that the standard of proof required of the Plaintiff would be the usual balance of probability though it is not inconceivable that grave suspicion of fraud may prompt a court to...

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