The Ruby Star

Court of Appeal
Civil Appeal No. 133 of 2014
Cheung and Barma JJA
23 December 2014

Admiralty – action in rem – jurisdiction – claim by vessel manager against demise charterer for sums due under ship management agreement – court had no in rem jurisdiction over vessel – High Court Ordinance (Cap. 4) s. 12A(2)(l)

D was the demise charterer of a vessel (the “Vessel”) pursuant to a bareboat charter (the “Charter”) with X, the registered owner of the Vessel. P was the ship manager of the Vessel under a ship management agreement (the “SMA”) with D. P used the Vessel’s receipts to pay for the hire due from D to X under the Charter and the balance (the “Net Funds”) to meet operating costs and management fees. P commenced an action in rem for management costs and fees due and owing by D under the SMA in the sums of USD3,593,902 and USD769,593 (the “Sums”). P stated by way of further and better particulars (“FBP”) that the Sums represented bunker costs after P used the Net Funds to pay for management fees, insurance, general expenses, brokerage, port DA expenses, crew salaries, and technical expenses. X, as the intervener, challenged the Court’s jurisdiction in respect of P’s claim under O.12 r.8 of the Rules of the High Court (Cap. 4A, Sub.Leg.). The Judge dismissed X’s application on the basis that P’s claim for the Sums fell within the Court’s in rem jurisdiction under s.12A(2)(l) of the High Court Ordinance (Cap. 4) as being one “in respect of goods or materials supplied to a ship for her operation or maintenance”. X appealed.

Held, allowing the appeal, setting aside the writ and granting a declaration that the Court had no jurisdiction in rem over the Vessel, that:

  • Where the jurisdiction of the Court was challenged, a plaintiff had to show by evidence on a balance of probabilities that jurisdiction existed. The mere fact that the claim was one on a general account did not by itself lead to the conclusion that the claim was not in respect of goods or materials supplied to a ship, provided that the claim could properly be so regarded. Here, it was not shown that the Net Funds were used to defray non-in rem expenses first leaving the balance to cover in rem expenses and specifically in respect of bunker costs. Instead, the Net Funds were used to deduct expenses which included claims within s.12A(2)(l) of the Ordinance and also outside of it. It could not be shown that the bunkers in rem claims had not already been discharged using the Net Funds.
  • The Admiralty jurisdiction must exist at the time of the commencement of the action, namely, the issuance of the writ. Here, appropriation of the Sums to the bunker claims was not exercised at the commencement of the action but only afterwards by the service of the FBP.

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