Ship Arrest Law Update: Decurion - meaning of control

 

Background

The Hong Kong Admiralty Court has recently provided further guidance on the scope of sister vessel arrests under Hong Kong law. The question asked was: what constitutes being “in possession or in control” of a ship?

 

Facts

In “The Decurion”, the court was faced with a situation whereby a bunker supplier, Chimbusco, had extended credit terms to Maruba, the defendant. Chimbusco had an in rem claim against Maruba, who acknowledged the claim but challenged the basis of the in rem claim in relation to the 10 other sister vessels.

 

Under Hong Kong statutory law, where goods are supplied to a ship for its operation, the court may exercise in rem jurisdiction against its sister vessels subject to two conditions:

1) the defendant must have been “the owner or charterer of, or in possession or in control” of the relevant sister vessels at the time when the cause of action arose; and

2) the defendant must be the “beneficial owner as respects all the shares” of the sister vessels.

 

The dispute

The dispute largely concerned the application of facts. Maruba was not a registered owner or charterer of the other 10 sister vessels. Furthermore, the 10 sister vessels were under time charter to Clan which, whilst associated with Maruba, was a different legal entity.

 

The charterparties were drafted on NYPE form and contained a standard provision that “the Captain (although appointed by the Owners), shall be under the orders and directions of the charterers as regards employment and agency”.

 

Claimant’s arguments

Chimbusco argued that, at the time the bunkers were supplied to the 10 sister vessels, they were under Maruba’s control. Arguments were made on the basis that:

  • Maruba used “Clan” as the brand name for the Maruba group;
  • Maruba was described as being the “operator” of a number of the vessels;
  • Maruba had guaranteed and paid charter hire due from Clan; and
  • Group personnel name cards contained both Clan and Maruba’s logos.

 

Court findings

The Hong Kong Admiralty Court considered the question of what it means to be “in possession or in control” in this context. It found that it was not necessary for a person to be an owner or charterer to have possession and used the example of a salvor or mortgagee who could take over a vessel (and consequently said to be in possession or control of the vessel).

 

The court further stated that a company can be in possession of a ship if it employs the Master and crew. However, it considered that something else must be involved when determining whether or not the company is in control despite not being in possession. It concluded that “control” should be evidenced by the ability to tell the person in possession of a vessel what is to be done to it.

 

Conclusion

Therefore, whether or not one has the ability to direct the Master and crew of a vessel is a significant factor in deciding whether or not there is control. In this case, because the sister vessels were under charter, the charterer – not Maruba – had control. As a result, Chimbusco’s claim against the 10 sister vessels was rejected.

 

The court was reluctant to expand the scope for maritime arrests in Hong Kong. Whilst this creates certainty as to the legal position, it must be emphasized that bunker suppliers can still protect themselves if they are going to extend credit terms to owners by having a well drafted contract which grants a direct right to vessel arrest in the event of a non-payment.