Admiralty Jurisdiction over Ships and the Importance of the Shipping Register

Steven Wise, Partner, Smyth & Co in association with RPC

In the October 2014 edition of Industry Insights, we reported on The Almojil 61 [2014] 4 HKLRD 313 ("Jurisdiction and the Shipping Register"). The plaintiffs successfully invoked the admiralty jurisdiction of the court to arrest the vessel as "any other ship" in order to enforce its in personam claim against the defendant; a so-called "sister ship" action, pursuant to s. 12B(4)(ii) of the High Court Ordinance (Cap. 4) (the “Ordinance").

At first instance, the judge held (among other things) that a ship's registration was virtually conclusive as to her legal and beneficial ownership, save for exceptional circumstances (for example, where registration has been procured by fraud). Therefore, applying established case law, a plaintiff or the court need normally look no further than the particulars of ownership in the Shipping Register to determine whether the court's admiralty jurisdiction was engaged at the time the action was commenced for the purposes of s. 12B(4) of the Ordinance.

Many ships are registered to a one-ship company and the company is the legal and beneficial owner, irrespective of whether the shares in the company are held by different persons or on trust for others. The fundamental importance of the particulars of ownership in the Shipping Register becomes immediately apparent.

The appellant's appeal to the Court of Appeal was recently dismissed (CACV Nos. 214 and 215 of 2014). The appellant's claim to have a part beneficial or equitable interest in the ship, so as to defeat the exercise of the court's admiralty jurisdiction over the ship, failed on the facts. That part of the decision raised interesting questions as to the relative importance of the label the parties gave to their transaction and the true nature of their rights and obligations.

Of more interest, perhaps, to admiralty practitioners are the Court of Appeal's observations (for that is what they are, given the above finding of fact) concerning the circumstances in which the particulars of registered ownership should not be taken at face value.

The Court of Appeal appears to have considered that, as a matter of statutory interpretation, a distinction should be made between: (i) the meaning of "owner" for the purpose of ascertaining against whom an in personam claim can be made (pursuant to s. 12B(4)(b) of the Ordinance) and (ii) the meaning of "beneficial owner" for the purpose of determining whether to invoke the court's power of arrest over a ship (pursuant to s. 12B(4)(i) and (ii) of the Ordinance).

The respondents relied upon a number of Hong Kong and English authorities as establishing the principle that the particulars shown in the Shipping Register are conclusive as to ownership in respect of both parts of s. 12B(4) of the Ordinance, in the absence of fraud or other compelling circumstances. The Court of Appeal appeared to accept that argument as regards the in personam element of s. 12B(4)(b) of the Ordinance. However, the Court of Appeal observed that, insofar as s. 12B(4)(i) and (ii) of the Ordinance and the court's in rem jurisdiction are concerned, case law did not go so far as to give rise to a presumption of law that registered ownership was conclusive of beneficial ownership.

As noted in our previous Industry Insights, absent exceptional circumstances, a ship's registration is in practice virtually conclusive as to her legal and beneficial ownership and a court need not look behind the registration in order to decide whether to exercise its admiralty jurisdiction over a ship. To the extent the Court of Appeal is merely observing that there is no such presumption of law and/or exceptional cases are to be determined as a question of fact, then that reflects the orthodox position. However, it is to be hoped that the Court of Appeal's obiter comments do not encourage speculative attempts to persuade the courts to look behind or outside of the Shipping Register as a matter of course.