Oceanic Group Pte Ltd And Another v The Owners And/or Demise Charterers Of The Ship Or Vessel “Oriental Dragon

HCAJ 162/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 162 OF 2012

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J U D G M E N T

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I. Introduction

1. Capital Dragon Global Holdings Limited (“the Defendant”) was at the material time the sole owner of the cruise ship “Oriental Dragon” (“the Vessel”). It had bought the Vessel and intended to start a cruise line under the Oriental Dragon brand and engaged the Plaintiffs to prepare, implement and operate the cruise line under a Consultancy Agreement (“Consultancy Agreement”) and an Appointment Letter (“1^st Appointment Letter”), both dated 1 January 2011, another Appointment Letter dated 15 March 2011 (“2^nd Appointment Letter”) together with an Annex dated 1 April 2011 (collectively “the Contract”).

2. Clause 2 of the Consultancy Agreement provided for the payment of inter alia a lump sum consultancy fee (“Lump Sum fee”) of US$38,000 per month (subsequently increased to US$40,000) commencing 1 April 2011 as fees for the strategy implementation under Part II of it and for the provision of ship management services. It also provided for the reimbursement by the Defendant of the Plaintiffs’ business class travel, accommodation, legal and out-of- pocket expenses at actual costs, payment of which should be monthly in advance within 7 days upon receipt of the invoice from the Plaintiffs.

3. The Plaintiffs complained that from September 2011 onwards, the Defendant began to fall into arrears in paying the Plaintiffs’ invoices. A typical invoice would demand the payment of the Lump Sum fee plus some travelling, accommodation expenses, salaries of the Plaintiffs’ own staff etc. The Plaintiffs also complained that the Defendant had failed to reimburse the Plaintiffs for disbursements expended on the operation and management of the Vessel. From the invoices and contemporaneous emails provided, it would appear that these included management/agency fees for crew, insurance premium, telecommunication services, spare parts and so on.

4. On 14 September 2012, the Plaintiff issued an in rem Writ in this action. In the endorsement of claim, the Plaintiffs’ claims were described as monies due and owing for “goods and materials supplied to the Vessel” and “services rendered to the Defendant and/or the Vessel”, such goods materials and services were “supplied to a ship for her operation or maintenance” within the meaning of section 12A(2)(l) of the High Court Ordinance, Cap. 4 (“HCO”) and “disbursements made by an agent on account of a ship” within the meaning of section 12A(2)(o) HCO.

5. As at 25 September 2012, when the Plaintiffs applied ex parte for a warrant of arrest against the Vessel, the Plaintiffs’ claims were in the sum of US$1,729,596.73. According to an undated Statement of Account issued by the 2^nd Plaintiff (“Statement of Account”), 1 out of almost 300 pages of documents exhibited to the affirmation dated 25 September 2012 in support, the claims were broken down into about 20 items. For reasons which would become apparent later, only three need be mentioned here:

6. In the affirmation in support, the Plaintiffs simply described the nature of their claims as follows:

“5. At all material times the Plaintiffs are the consultant and/or advisor and/or manager and/or goods and services provider of the Defendants in respect of the ship technical management, marine planning, recruitment and procurement for the Vessel.

6. Pursuant to Clause 2 of the Agreement, the fees and disbursements expended by the Plaintiffs on behalf of the Defendants for goods and services provided to the Vessel and for the Plaintiffs’ management of the Vessel shall be payable monthly in advance at the beginning of each calendar month within 7 days upon receipt of the invoice from the Plaintiffs. Such disbursements include, inter alia, renovation, first fitting and conversion of the Vessel, fuel and port, hotel and food, safety and operational equipment on board the Vessel, their maintenance and repair, consumables, dry-dock, upgrading and refurbishment, overheads etc. In short, supply of goods and services required by the Vessel is its intended operation.

7. As can be seen from Part II of Annex I to the Agreement, outgoings relating to “technical, crew, fuel and port, hotel and food, entertainment, insurance, maintenance and consumables, dry-dock, upgrading and refurbishment, overheads, sales and marketing” are “expenses” which the Plaintiffs had already paid or had incurred liability for payment to third party suppliers for the management of the Vessel. Such ‘expenses’ were included in the invoices issued by the Plaintiffs for reimbursement by the Defendants. Goods and materials such as fuel and port, hotel and food, consumables, dry-dock, refurbishment, equipment etc. had been supplied to the Vessel for her management and operation.

8. The Plaintiffs rendered invoices to the Defendant in respect of the ‘expenses’, outgoings, disbursements and fees incurred for the management and operation of the Vessel…

9. The Defendants also failed to reimburse the Plaintiffs for disbursements expended on the operation and management of the Vessel on behalf of the Defendants…”

7. The warrant of arrest was granted on 25 September 2012.

8. By a letter dated 7 October 2012 from the Defendant’s then solicitors to the Plaintiffs, the Defendant terminated the Contract by reason of the Plaintiffs’ alleged repudiation. The Plaintiffs said it was they who terminated the Contract by reason of the Defendant’s repudiation.

9. On 8 October 2012, the in rem Writ and Warrant of Arrest were served on the Vessel.

10. On 15 October 2012, the Defendant by its solicitors acknowledged service of the Writ.

11. By the time of the Statement of Claim dated 12 November 2012, the Plaintiffs had added further claims against the Defendant so that the total amount of the claims was increased to about US$2.5 million. One of the added claims was in respect of payment in lieu of 3‑month notice.

12. Also on 12 November 2012, the Defendant’s solicitors wrote to the Plaintiffs’ solicitors stating that the arrest was wrongful and demanding the immediate release of the Vessel on the grounds that inter alia the claims were not maritime claims and that there was material non‑disclosure in the ex parte application before the Court.

13. By 12 December 2012, the Defendant had made partial payment in the sum of over US$1.4 million. This amount consisted of manning fees, Lloyd’s service fees, supplies to the Vessel and crew wages. As a result, the Plaintiffs agreed to deduct the amount from their total claims figure.

14. On 13 December 2012, after a contested hearing, Barma JA assessed security at US$2,000,000 and ordered that the Vessel be released within 48 hours after payment of the said amount into Court.

15. On 2 January 2013, Barma JA made a further order by consent that the security be varied to US$2.4 million and that the Vessel be released forthwith upon payment of the sum into Court. On 3 January 2013, upon the said security being paid into Court, the Vessel was released.

16. There were seven applications in this action before the court:

a. The Defendant’s Summons dated 10 December 2012 pursuant to RHC Order 12 r 8 for a declaration of the Court declining jurisdiction it may have over the action or a stay of the action on the ground that the action should be conducted in Singapore and/or that the Defendant was entitled to rely on an agreement excluding the jurisdiction of this court (“Stay Application”);

b. The Defendant’s Notice of Motion dated 28 December 2012 to discharge the warrant of arrest under RHC Order 75 rr 12 & 13 (“Discharge Application”);

c. The Plaintiffs’ Summons dated 6 March 2013 for Mareva relief against the Defendant up to US$847,492.00 out of the sum of US$2.4 million paid into Court by the Defendant on 3 January 2013 (“Mareva Application”);

d. The Plaintiffs’ Summons dated 30 May 2013 for:

i. leave to amend the Statement of Claim and to withdraw certain claims in this action (“Amendment Application”);

ii. summary judgment under RHC Order 14 r 1 in the sum of US$785,183.11 (“Summary Judgment Application”);

e. The Defendant’s Summons dated 5 June 2013 to:

i. set aside the Amended in rem Writ and service of it pursuant to RHC Order 12 r 8 (“Setting Aside Application”) on the ground that the court had no in rem jurisdiction over the Vessel/the Defendant and there be a declaration to that effect;

ii. alternatively, strike out the Amended in rem Writ pursuant to RHC Order 18 r 19 on the ground that the Plaintiffs had improperly invoked the in rem jurisdiction of this court and/or on the merits (“Striking Out Application”).

17. In the course of the hearing, Mr Smith SC indicated to the court that he would not be pursuing the Striking Out Application on the merits.

18. In addition, there were also before this court:

(1) the Plaintiffs’ draft summons yet to be issued in HCCL 22 of 2013, a fresh in personam action instituted by the Plaintiffs on 18 June 2013 against...