Stellar Ocean Transport Llc v The Owners And/or Demise Charterers Of The Ship Or Vessel “Ruby Star

Judgment Date24 January 2014
Citation[2014] 1 HKLRD 1154
Judgement NumberHCAJ126/2013
Subject MatterAdmiralty Action
CourtHigh Court (Hong Kong)
HCAJ126/2013 STELLAR OCEAN TRANSPORT LLC v. THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL “RUBY STAR”

HCAJ 126/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 126 OF 2013

____________________

Admiralty action in rem against: the ship or vessel “RUBY STAR” (Hong Kong flag)

BETWEEN

STELLAR OCEAN TRANSPORT LLC Plaintiff

and

THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL “RUBY STAR” Defendants
ASSET WONDER LIMITED Intervener

____________________

Before: Hon Ng J in Court
Date of Hearing: 17 January 2014
Date of Judgment: 24 January 2014

_______________

J U D G M E N T

_______________

Introduction

1. This is a rather unusual case.

2. Stellar Ocean Transport LLC (“Stellar Ocean”), the Plaintiff in these proceedings, were the ship managers of the vessel “Ruby Star” (“vessel”) under a ship management agreement dated 20 December 2009 (“SMA”) with the demise charterers, Stellar Shipping Corporation Limited (“Stellar Shipping”), the Defendant in these proceedings.

3. Stellar Shipping became the demise charterers of the vessel pursuant to a bareboat charter dated 14 January 2010 (“Charter”) entered into with Asset Wonder Limited (“Asset Wonder”), the registered owner of the vessel.

4. Stellar Ocean’s claim in these proceedings is against Stellar Shipping for sums due under the SMA. The Writ of Summons was issued on 15 July 2013 and served on the vessel on 2 September 2013. Stellar Shipping has not filed an acknowledgement of service in these proceedings. Stellar Shipping has admitted the claim.

5. Stellar Ocean has no claims against Asset Wonder. Nevertheless, Asset Wonder filed an acknowledgement of service in this action in its capacity as owner on 11 September 2013 and subsequently on 22 November 2013, as a matter of abundant caution, also obtained leave to intervene in these proceedings. Meanwhile, Stellar Ocean made it clear it had no claims against Asset Wonder by serving a notice of discontinuance of its action against Asset Wonder on 7 November 2013.

6. Separately, Asset Wonder has made claims against Stellar Shipping for breaches of the Charter in HCAJ 129 of 2013. It has arrested the vessel in July 2013 and obtained judgment on admissions as well as summary judgment for parts of their claims against Stellar Shipping: see Asset Wonder Limited v Stellar Shipping Co LLC unrep., HCAJ 129 of 2013, 2 December 2013.

7. There are before this court two applications:

(1) First, Stellar Ocean’s notice of motion dated 7 November 2013 for judgment in default of acknowledgement of service.

(2) Second, Asset Wonder’s summons dated 13 January 2014 under RHC O 12 r 8 for an Order setting aside the Writ in this action and for a declaration that the court has no jurisdiction in rem over the vessel in respect of the subject matter of the claim herein.

8. I shall deal with them in reverse order.

Challenge to jurisdiction

9. Mr Sussex SC for Asset Wonder submits that Stellar Ocean’s claim is not an in rem claim at all.

10. While some of the specific items of Stellar Ocean’s claim, taken alone, may fall within the admiralty jurisdiction of the court under section 12A(2) of the High Court Ordinance, in reality, their claim is for the balance of a mercantile account which does not: The “West Friesland” (1859) Sw 454 at 460; The “Comtesse de Frègebille” (1861) Lush 329 at 333-4; The “Underwriter” (1870) 1 Asp Mar LC 127 at 128-9; The “El Salto” (1908) 25 TLR 99 at 99-100.

11. In The “Skulptor Konenkov” (1998) ALR 131, the Federal Court of Australia held that the balance of a running account did not give rise to a general maritime claim against the proceeds of sale in circumstances where the balance was arrived at after the parties had indiscriminately offset both in rem and in personam claims and there had been an admixture of such debits and credits. It was thus inappropriate for an in rem claim to be brought for the general balance of mercantile account, following The “Comtesse de Frègebille” supra.

12. In support of his contention that in reality the Plaintiff’s claim is for the balance of a running account, Mr Sussex SC refers this court to two letters dated 9 April and 3 July 2013 from Stellar Ocean to Stellar Shipping and the summary of accounts annexed to the Further and Better Particulars of the Statement of Claim. In the letters, Stellar Ocean demanded payment of outstanding operating costs and management fees for the periods of 1 January 2011 to 31 December 2012, as well as 1 January to 30 June 2013. The operating costs set out in the summary of accounts include crew salary, “technical”, “brok/port DA”, bunker, insurance and so on. The claims were in the sum of US$3,593,902 and US$769,593 respectively.

13. Mr Sussex SC submits that by sending these demand letters, Stellar Ocean has made an appropriation generally to the running account between Stellar Ocean and Stellar Shipping. Stellar Ocean’s claims in the demand letters, by the way they were drafted, must be claims in respect of the balance of a running account which falls outside the court’s admiralty jurisdiction. Alternatively, Mr Sussex SC submits that at least as late as the issue of the Writ of Summons herein, Stellar Ocean, by claiming only the balance due on the account with Stellar Shipping, must have made such an appropriation – this is borne out by the way paragraph 9 of the Statement of Claim is pleaded. As a matter of law, such an appropriation, once made, is irrevocable.

14. With respect, this court is unable to accept Mr Sussex SC’s submissions.

15. Firstly, as Mr Coleman SC submits, Stellar Ocean’s ledgers show that there is no running account between Stellar Ocean and Stellar Shipping of the debits and credits with regard to the vessel. Instead, they contain only an itemised breakdown of the outgoings and receipts for the vessel during the relevant periods – in other words, they are just a historical representation of what transactions occurred in relation to the operation and management of the vessel. As far as outgoings are concerned, as I say earlier, they comprise several items, some of which are clearly within the in rem jurisdiction of the court e.g. provision of crew services: The Edinburgh Castle [1999] 2 Lloyd’s Rep 362; TheNore Challenger [2001] 2 Lloyd’s Rep 103, and bunkers: The Riga (1872) LR 3 A & E 516, 522; The Decurion (No.2) [2013] 2 HKLRD 930 para. 14, and some clearly outside it e.g. insurance: The Sea Friends [1991] 2 Lloyd’s Rep 322.

16. Secondly, the summary of accounts show that what actually happened was that Stellar Ocean used the receipts in respect of the vessel to first pay off “Bank Payments”, being the hire due from Stellar Shipping to Asset Wonder under the Charter, and left the balance ie “Net Funds” to meet all operational expenses and management fees. The summaries of accounts do not show that Stellar Ocean has indiscriminately offset both in rem and in personam claims in the course of its dealings with Stellar Shipping during the periods in question – historically, there was no offset of any claims for operational expenses, whether in rem or in personam.

17. Thirdly, the claims stated in the demand letters are for the sums of US$3,593,902 and US$769,593 respectively, being the difference between the “Net Funds” and the totality of the operating expenses and management fees. Similarly, in paragraphs 9.1 and 9.2 of the Statement of Claim, Stellar Ocean is claiming the same two lump sums without attributing the claim to any particular item(s) of operating expenses in question. In my view, claiming a lump sum without attributing it to any particular item(s) of operating expenses is consistent with Stellar Ocean not having made any appropriation, and not the other way round. A fortiori, when Stellar Ocean have made clear its intention to assert a maritime claim against the vessel in the letters, although they have wrongly described their maritime claim as “maritime lien”.

18. In this regard, Mr Coleman SC refers this court to The “Mecca” [1897] AC 286 which appears to be directly on point.

19. In The “Mecca”, the House of Lords held that when a debtor paid money on account to his creditor and made no appropriation to particular items, the creditor had the right of appropriation and might exercise the right up to the last moment, by action or otherwise; the application of the money was governed, not by any rigid rule of law, but by the intention of the creditor, expressed, implied or presumed. The rule in Clayton’s Case, (1816) 1 Mer. 585, did not apply to a case where there was no account current between the parties, or where from an account rendered or other circumstances it appeared that the creditor intended, not to make any appropriation, but to reserve the right.

20. On the available evidence, it seems to this court that there is no account current between Stellar Ocean and Stellar Shipping and what happened was this: Stellar Ocean did not intend to make and has not made any appropriation of the “Net Funds” to any particular item(s) of operating expenses, rather it intended to reserve its right up to the last moment. Hence, its claim for the lump sums without attributing them to any particular item(s) of unpaid operating expenses at the time of the Writ or the Statement of Claim. The rule in Clayton’s Case, (1816) 1 Mer. 585, has no application to this case.

21. In Chitty on Contracts 31st Ed. vol. 1 para. 21-062, the learned editors explain “the last moment” in these terms:

“What is “the very last moment”...

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