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The Sparti

Judgment Cited authorities 6 Cited in Precedent Map Related
Vincent
Judgment Date27 July 2000
Year2000
Citation[2000] 3 HKLRD 561
Judgement NumberHCAJ269/1998
Subject MatterAdmiralty Action
CourtHigh Court (Hong Kong)
HCAJ000269/1998 THE SPARTI

HCAJ000269/1998

HCAJ 269/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 269 & 373 OF 1998

Admiralty Action in Rem against the ship "SPARTI" of the Panamanian Flag

____________

HCAJ 269/98

BETWEEN
MACEDONIA THRACE BANK S.A. Plaintiff
AND
THE OWNERS OF THE SHIP 'SPARTI' Defendants

____________

HCAJ 373/98

BETWEEN
T.R.F. PONAHENEDIGE, D.C.J. PATTIYAGE, M.E.U. Plaintiffs
DHARMASENA, S.M.F. MADDUMAGE, VICTOR
SINNADURAI, S. NANAYAKKARA, P.F.
ICHACHAMPULIGE, R. RATNASINGHAM, S.W.R.
PRASANTHA SILVA, S.D. MALAPAGE, A.K.
DEWAMUNI, R.P.G. MANAMARAKALAGE, S.P.F.
ARUMAPURAGE, A.N.N.K.S. SINGAPULI, M.R.S.
COORAY, M.H.M. RILA, R.A.D. EDWARD, K.W.S.K.
FONSEKA, M.F. HAMZA, I.A.N.S.EATHIGE, S.
PERIYASAMY, PETROS PETROU, SURAWEERA
ANIL, ANNA MARINE CONCERN (PYT) LTD.

AND
THE OWNERS OF THE SHIP 'SPARTI' Defendants

____________

Coram: The Hon. Mr. Justice Waung in Court

Dates of Hearing: 23 September, 20 - 22 December 1999

Supplementary Written Submissions: 16 and 25 February 2000

Date of Handing Down of Judgment: 27 July 2000

_______________

J U D G M E N T

_______________

1. By Judgment dated 10th November 1998 in AJ 269/98, the sum of US$6,460,392.16 plus interests was awarded against the Defendant ship SPARTI ("the Vessel") to Macedonian Thrace Bank ("Bank"), the mortgagee of the Vessel. By Judgment dated 5th January 1999 in AJ 373/98, the sum of US$74,829.38 plus interests was awarded against the Vessel to the 24th Plaintiff in that Action, Anna Marine Concern (PVT) Ltd. ("the Assignee") which was the assignee of wages due to 23 members of the crew of the Vessel who are also the 1st to 23rd Plaintiffs in that Action. The Vessel was sold by order of the Court but the proceeds of sale is not sufficient to cover the Bank's Judgment and the Assignee's Judgment. By the respective Motions of the Bank and of the Assignee, each asked the Court for determination of priority in its favour, ranking it higher against the other party. The normal rule in admiralty is that crew wages rank higher than mortgagee claim. The unusual question raised by the parties is whether in this case, by contract of Assignment the Assignee could enjoy the same high priority as the crew against the Bank mortgagee.

FACTS

2. The Assignee was the Manning Agent of the Vessel and the 1st to 23rd Plaintiffs in AJ 373/98 ('the Crew") were signed on as crew by the Assignee. In October 1997 while on a voyage from Brazil to Korea, by way of Singapore, the Vessel was diverted to Colombo because of the threat of strike by the Crew over outstanding wages. In Colombo the Crew went on strike and there was sit-in with the result that no new crew could be taken on and the Vessel could not leave Colombo. The Owners of the Vessel ("Owners") at the time was in financial difficulties and could not pay the Crew. The Assignee was acting as agent of the Vessel in Colombo. The Owners asked the Assignee to pay the Crew and although the Assignee was under no legal duty to do so, the Assignee agreed to pay the Crew because it felt that its reputation as Manning Agent was at stake and because it took the appropriate assignments from the Crew. Each of the Assignments from the members of the Crew to the Assignee was in the same form and it reads:-

"In consideration of the payment by you to me of US$.... In respect of wages and other amounts due for my employment on board M/V Sparti I hereby assign to you all my rights against the Owners of the Vessel or the Vessel itself."

3. In each case, it was an equitable assignment to the Assignee as no written notice of the Assignment was given by the Crew or the Assignee to the Owners of the Vessel.

GENERAL RULE OF PRIORITY IN ADMIRALTY

4. The foundering of any sea adventure normally would result in a number of claims being made in rem against a ship. When the court sells the ship, the proceeds of sale is often insufficient to satisfy all in rem claimants. Question of priority then becomes important. Unfortunately, maritime countries of the world do not apply in their courts a uniform rule of priority. The Courts of the Untied States of America give the highest possible priority to wages claim. The law on priority in England and in Hong Kong is somewhat different from that applicable in the United States. As described in Tetley on Maritime Liens and Claims, 2nd edition at pages 884 onwards and in McGuffie on Admiralty Practice (1964) at pages 742 onwards, the general order of priority for maritime claims usually seen in the Admiralty Courts of the United Kingdom and of Hong Kong is as follows:-

1. Costs of arrest;

2. Possessory lien of repairer;

3. Salvage (maritime lien);

4. Collision (maritime lien);

5. Wages (maritime lien);

6. Mortgage;

7. Statutory rights in rem such as necessaries claims, agent claims, cargo claims, charterer's claims, towage claims, etc.

ISSUES

5. The Bank and the Assignee agree that the general rule of priority is that maritime lien of wages ranks higher than mortgage. There is also agreement that if sanction is obtained from the Admiralty court before payment is made to the crew then the person who pays off the crew will enjoy the same high priority of the crew, if not higher priority by way of the Bailiff's expenses. The difficulty here is that the Assignee made payment without the sanction of the Admiralty Court (which of course was not possible because in October 1997 when payment and Assignment took place the Vessel was in Colombo and the arrest in Hong Kong was in August 1998). The legal difference between the parties in this case is the following:-

1. Whether the maritime lien of wages is capable of being assigned;

2. If maritime lien of wages is capable of being assigned whether the assignment here is invalid being prohibited by Section 93(1) of the Merchant Shipping (Seafarers) Ordinance.

ASSIGNABILITY OF MARITIME LIEN

6. For a long time, it was generally thought that maritime lien was not capable of being assigned. The leading textbook writers all took that view:-

(1) Roscoe on Admiralty Practice, 5th edition pages 28-9;

(2) Price on Law of Maritime Liens, Chapter 8, pages 72-82;

(3) Thomas on Maritime Liens, Chapter 10, pages 278-9;

(4) Tetley on Maritime Liens and Claims, 2nd edition, pages 1221 onwards.

In the new book by Toh Kian Sing on Admiralty Law and Practice at pages 244-6, where there is emphasis on Singapore decisions, doubt is expressed as to the correctness of non assignability of maritime lien. In Jackson on Enforcement of Maritime Claims, 2nd edition, pages 408-410, it was also argued that there are good ground in favour of assignability of maritime liens.

7. There is a lot of old learning on this subject which supports the basic submission (which I accept) of Mr. Sussex for the Bank that maritime lien as understood by the British and Hong Kong Courts is regarded as a personal privilege which enured to the sole benefit of the maritime lienee. This personal right of maritime lien is not capable of being transferred and therefore not withstanding the wide wording of Section 9 of the Law Amendment and Reform Consolidation Ordinance providing for the legal assignment to transfer "legal right to ..... debt or chose in action and .... legal remedies" maritime lien cannot be voluntarily transferred. It is for this reason that we do not see any decision where well known maritime liens such as salvage or collision claims had ever been the subject of assignment to third party volunteers. Bottomry bonds have always been an exception to this general principle because of the transferable nature of this particular maritime right.

8. Mr. Smith for the Assignee argues that there is in law a right to assign maritime lien and he relies on various old decisions which suggest the existence of this right.

9. First in time is the case of The William F. Stafford (1860) Lushington 69. This is a case on priorities where the competing interests were the bottomry bond and necessaries in the form of Da Costa paying the crew by directions of the master on behalf of the ship. The contest before Dr. Lushington was whether what Da Costa paid was necessaries (not maritime lien) which would of course rank behind bottomry bond or in the nature of wages which being maritime lien would rank ahead of the bottormry bond. In one sentence Dr. Lushington gave priority to Da Costa by saying:- "I am of opinion that Da Costa's claim is in the nature of wages, and must therefore be the first paid." The point of assignment of maritime lien was not argued but the point was decided on the basis strictly of priority in the sense that because the necessaries of Da Costa was in the nature of wages therefore it enjoyed a higher priority than bottomry bond.

10. The next decision is again that of Dr. Lushington in The Wasp (1867) LR 1 A & E 367. The Plaintiff in that action being shipbuilders sued the ship in rem but that was not a claim based on maritime lien because there was no maritime lien for shipbuilders or repairers only a statutory right in rem. There was a strike-out application by the defendant on the basis that the plaintiff had no claim against the defendant vessel because its cause of action as well its other properties had passed to its trustee in bankruptcy under the composition deed. The reply of the plaintiff to this is that it had assigned its cause of action to a bank and that therefore what was assigned under the composition deed did not include the cause of action based on the shipbuilding claim. The plaintiff therefore had a right to sue...

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