272 Singapore Academy of Law Journal (1994) IN PERSONAM LIABILITY, BENEFICIAL OWNERSHIP AND THE ACTION IN REM This article examines the right of maritime claimants to arrest ships to obtain security for their claims under section 4(4) of the High Court (Admiralty Jurisdiction) Act. In particular, the article examines the twin requirements of in personam liability and beneficial ownership as stipulated in section 4(4). THE ability to effect an arrest of a ship is that which gives to the maritime claimant the opportunity to obtain security for his claim. The right of the maritime claimant to invoke the admiralty jurisdiction of the Singapore High Court by an action in rem is regulated by the High Court (Admiralty Jurisdiction) Act1 (hereinafter referred to as “the HCAJA”). Under the HCAJA, the maritime claimant’s ability to effect an arrest of a ship is dependent on the fulfillment of two conditions. First, the claim sought to be enforced via the action in rem must be one that falls within the lettered sub-paragraphs of section 3(1) of the High Court (Admiralty Jurisdiction) Act.2 Secondly, the maritime claimant must bring his claim within section 4(2) or (3) or (4) of the HCAJA for these are the provisions which prescribe the mode of exercise of admiralty jurisdiction.3 The object of this paper is to examine the right of arrest as prescribed by section 4(4) of the HCAJA. In particular, this paper examines the twin requirements of in personam liability and beneficial ownership stipulated in the said section 4(4). At this juncture, it is appropriate to state that section 4(4)4 of the HCAJA permits the arrest of ships where the plaintiff’s claim falls within section 3(1)(d) to (q) of the HCAJA. Some of the claims falling within the said 1 2 3 4 Cap. 123, 1985 Rev. Ed. There may be some claims which though not falling within the lettered sub-paragraphs of section 3(1) of the HCAJA may yet be enforced by an action in rem. See section 8(2) of the Courts (Admiralty Jurisdiction) Ordinance, 1961 (Ordinance No. 32 of 1961) and “The Ocean Jade” [1991] 2 M.L.J. 385. See also “The Despina G.K.” [1982] 2 Lloyd’s Rep. 555; “The City of Mecca” (1881) 6 P.D. 106; “The Tubantia” [1924] P. 78 and “The Daien Mam No. 18” [1985] 2 M.L.J. 90. See “The Ocean Jade” [1991] 2 M.L.J. 385 at 389 and “The Permina 108” [1977] 1 M.L.J. 49. The provision reads: “In the case of any such claim as is mentioned in section 3(1)(d) to (q), being a claim arising in connection with a ship, where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, the admiralty jurisdiction of the Court may (whether the claim gives rise to a maritime lien on the ship or not) be invoked by an action in rem against — (a) that ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; or (b) any other ship, which, at the time when the action is brought, is beneficially owned as aforesaid.” 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 273 section 3(1)(d) to (q) give rise to maritime liens while others merely give rise to statutory rights of action in rem. A statutory right of action in rem is the expression used to describe a claim (which does not give rise to a maritime lien) in respect of which statute permits enforcement by way of the action in rem.5 Under section 4(4), a ship beneficially owned by the person who would be liable on the claim in an action in personam may be arrested as security for the plaintiff’s claim. I. THE REQUIREMENT OF IN PERSONAM LIABILITY The expression “person who would be liable on the claim in an action in personam” as used in section 4(4) of the HCAJA seeks to identify the person who would — and not is — liable on the claim in an action in personam. The case in point is “The St. Elefterio”6 where Willmer J. held that the expression “the person who would be liable on the claim in an action in personam” in the context of the English provision equivalent to section 4(4) of the HCAJA merely identifies the person or persons whose ships may be arrested on the assumption that the action succeeds. This is an assumption of all the facts and evidence pertaining to the plaintiff’s cause of action as alleged by the plaintiff against the person alleged to be liable on the claim.7 As Lord Brandon of Oakbrook put it in “The Antonis P Lemos”,8 “it is necessary to assume, without deciding, that the [plaintiffs] have an arguable case in law in respect of their claim.”9 Thus, section 4(4) of the HCAJA does not require the plaintiff to prove on a balance of probabilities that the person alleged to be the person liable on the claim is liable on the claim at the stage of issuance of the writ in rem and the service of the warrant of arrest. It may well be that on examination of the rival contentions at the trial of the action, the in personam liability of the person alleged to be liable is not made out. The person alleged by the plaintiff to be liable for the claim may contend that there are impregnable defences to the plaintiff’s claim but at that early stage of the proceedings, these defences do not arise for examination or scrutiny.10 A local authority for this proposition is “The Wigwam”,11 an unreported decision of the Singapore Court of Appeal which affirmed the first instance decision of Chua J.12 5 See “The Monica S” [1968] P. 741 at 749. 6 [1957] P. 179. See also “The St. Merriel” [1963] P. 247, 258; “The Moschanthy” [1971] 1 Lloyd’s Rep. 37 at 42 and “The Antonis P Lemos” [1985] A.C. 711. 7 See the approach of the courts in “The Wigwam” [1983] 1 M.L.J. 148 and “The Evpo Agsa” [1992] 2 S.L.R. 487. 8 [1985] A.C. 711. 9 Ibid., at 742. See also “The Gulf Venture” [1984] 2 Lloyd’s Rep. 445. 10 See “The Antonis P Lemos” [1985] A.C. 711. 11 Civil Appeal No. 89 of 1982, judgment delivered on 14 September 1984. 12 The instance decision of Chua J. is reported at [1983] 1 M.L.J. 148. 274 Singapore Academy of Law Journal (1994) In “The Wigwam”, the defendants shipowners applied to set aside the writ in rem and warrant of arrest as they contended that the supply of goods and materials to the ship had not been authorised by them and that the contract for the supply of goods and materials had been entered into between the plaintiffs and one P.T. EMKL Fajar Kemenangan of Jakarta. Hence, according to the shipowners, they were not personally liable in respect of the plaintiffs’ claim arising from the supply of the goods and materials. At first instance, Chua J. accepted that the plaintiffs could arrest the ‘Wigwam’ without needing to prove that they had a cause of action substantial in law and as there was no challenge mounted by the shipowners that the proceedings were frivolous or vexatious,13 the court was to assume the facts as alleged by the plaintiffs in their affidavit filed in support of their claim. Being dissatisfied with the decision of Chua J., the shipowners appealed to the Court of Appeal. Thean J., who delivered the judgment of the Court of Appeal,14 stated that Chua J. was plainly correct to have proceeded on the assumption that the facts as alleged by the plaintiffs to have given rise to their claim against the shipowners were true. Thean J. added that: “On the material before us the [shipowners] are the person who would be liable to the [plaintiffs] on the claim in an action in personam on the assumption that the action succeeds. It may well be that the [plaintiffs] might not succeed in their claim but that would be determined after a full hearing of the case.”15 In other words, the court in “The Wigwam” was satisfied on the facts alleged by the plaintiffs, that the defendants were identified as the person who would be liable on the claim in an action in personam. It is interesting to note that the Hong Kong Court of Appeal has also adopted the position taken by Willmer J. in “The St. Elefterio”. In both Sin Hua Enterprise Co. Ltd. v. Owners of the Motor Ship Harima16 and Kingstar Shipping Ltd. v. Owners of the ship ‘Rolita’17, the Hong Kong Court of Appeal declined the invitation to examine the contentious affidavits filed by the opposing parties for the purpose of trying on the merits the matter of in personam liability. Indeed in Kingstar Shipping Ltd. v. Owners of the ship ‘Rolita’, the Hong Kong Court of Appeal led by Kempster J.A. took the view that the approach taken by Willmer J. in “The St. Elefterio” is also applicable to the matter of the existence of the nature of the claim 13 The court has an inherent jurisdiction to halt in limine frivolous and vexatious proceedings. See “The St. Elefterio” [1957] P. 179 and “The Moschanthy” [1971] 1 Lloyd’s Rep. 37. 14 The other members of the Court of Appeal were Wee Chong Jin C.J. and Sinnathuray J. 15 Ibid., at p. 8 of the transcript of the judgment. 16 [1987] H.K.L.R. 770. 17 [1989] 1 H.K.L.R. 394. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 275 advanced by the plaintiff against the defendant. In other words, where the plaintiff advances a claim which ostensibly falls within, say, section 3(1)(h) of the HCAJA, the court will assume, at the stage of issuance of the writ in rem and service of the warrant of arrest, the correctness and veracity of such facts and evidence alleged by the plaintiff as founding the agreement for hire or use of the ship and the breach of such an agreement. In the words of Kempster J.A., “The fact that a claim is made resulting from an alleged breach of an alleged agreement of the nature required suffices.... “The St. Elefterio” approach covers the agreement as well as the breach, the establishment of the cause of action and damages.”18 Thus, it is clear from “The St. Elefterio”, “The Wigwam” and “The Rolita” that the expression “the person who would be liable on the claim in an action in personam” in section 4(4) of the HCAJA does not require the plaintiff to prove at the outset (i.e., at a point in time prior to the actual trial of the action) that he has a cause of action sustainable in law against the relevant person. There is no requirement, on a motion to set aside the writ in rem on the ground of lack of jurisdiction, for the plaintiff to demonstrate that he has a good arguable case on the facts against the relevant person — the relevant person being the person identified by the plaintiff as the person liable on the claim in an action in personam — for the court is to assume that the facts as alleged by the plaintiff are correct. In the words of Brandon J. (as he then was) in “The Moschanthy”,19 the question whether the court has jurisdiction to entertain the plaintiff’s claim in rem: “must ... be answered by reference to the nature of the plaintiff’s claim as put forward, without reference to the further point whether it is likely to succeed or not.”20 On the assumption that the facts alleged by the plaintiff as founding his claim are correct, the facts are to identify the person alleged to be personally liable on the claim. The rationale for the assumption is that unless the assumption is made, the court would be conducting a mini-trial on the affidavit evidence to see whether the plaintiff really has a cause of action. And to so conduct a mini-trial on the contentious affidavits filed by the 18 Ibid., at 398. 19 [1971] 1 Lloyd’s Rep. 37. 20 Ibid., at 42. It is pertinent to point out that in “The Opal 3” [1992] 2 S.L.R. 585 at 590, Selvam J.C. appears to have taken the view that to satisfy the requirement of in personam liability in section 4(4) of the HCAJA, the plaintiff must make out an arguable case. However, in the earlier case of “The Evpo Agsa” [1992] 2 S.L.R. 487 at 490, Selvam J.C. cited “The Antonis P. Lemos” [1985] A.C. 711 for the proposition that the court, where there is a challenge to the jurisdiction of the court in entertaining the plaintiffs’ claim, is to assume that the plaintiffs in an action in rem have an arguable case in law in respect of their claim. The view taken in “The Antonis P Lemos” means that the plaintiffs must allege facts which, if assumed to be correct, give rise to an arguable case in law against the relevant person. 276 Singapore Academy of Law Journal (1994) opposing parties would be to usurp the function of the trial judge, and to produce a trial in chambers, on affidavits only, without discovery and without oral evidence tested by cross-examination in the ordinary way. It is at the trial of the action that the court decides whether or not the plaintiff’s claim is indeed established based on the facts and evidence adduced at the trial. Since the High Court is invested with the jurisdiction to hear and determine claims falling within the lettered sub-paragraphs of section 3(1) of the HCAJA, the court must permit the plaintiff’s claim to go to trial. For unless the court permits the plaintiffs’ claim to go to trial, the court would be denying to itself the opportunity to hear and determine the plaintiff’s claim.21 Hence, on a motion to set aside the writ in rem and warrant of arrest on the ground of lack of jurisdiction, the court does not halt the action in limine where the defendants merely contend that they are not personally liable on the plaintiff’s claim. However, where the facts relied on by the plaintiff as founding his claim do not disclose or identify the beneficial owner22 of the ship sought to be arrested as the person alleged to be liable on the claim, the court will set aside the writ in rem on the shipowners’ application to set aside the writ in rem and warrant of arrest on the ground of lack of jurisdiction. This situation occurred in “The Thorlina”,23 In this case, the plaintiffs’ claim was in respect of unpaid charges arising from ship repairs carried out to the ship, ‘Thorlina’. The facts showed that at the material time when the contract for the repairs to the ship was entered, the ship was demise chartered by the shipowners, Abaris Carriers Ltd., to Denimar Shipping 21 This was the reasoning adopted by the Straits Settlements Court of Appeal in “The Svale” [1929] S.S.L.R. 32 on the defendants’ motion to set aside the writ and warrant of arrest on the ground that they were not personally liable on the plaintiffs’ claim. Admittedly, “The Svale” is a decision on section 35 of the United Kingdom Admiralty Court Act, 1861 (24 Viet., c. 10.) which provided that the jurisdiction conferred by the Admiralty Court Act, 1861 “may be exercised either by Proceedings in rem, or by Proceedings in personam.” In that case, the defendant shipowners contended that as at the time of the supply of necessaries, the ship was under a time charter to Lee Fat & Co. of Hong Kong, the charterers were liable for the payment of the necessaries and as the plaintiffs were aware at the time of the supply of necessaries that the ship was under time charter to Lee Fat & Co. of Hong Kong, the plaintiffs were not entitled to arrest the ‘Svale’ to enforce their claim for the unpaid necessaries. Deane J., with whom Murison C. J. and Stevens J. agreed, stated that as the jurisdiction of the court was clearly established in the sense that the nature of the claim satisfied section 5 of the Admiralty Court Act, 1861, the shipowners could not “merely by alleging that the [plaintiffs’] claim is not well founded oust that jurisdiction; their contention was obviously a matter to be heard and determined at the trial of the cause, it is in fact the very reason for the existence of the Court, which is set up to hear and determine such questions.” See [1929] S.S.L.R. 32 at 37. 22 As to the import of this phrase, see the later discussion under the rubric “The Requirement of Beneficial Ownership”. 23 [1986] 2 M.L.J. 7. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 277 N.V. The contract for the repairs to the ship was entered into between Keppel Shipyard Ltd., the plaintiffs and Denimar Shipping N.V. and in fact, Denimar Shipping N.V. had made part payment of the ship-repair charges to the plaintiffs. The plaintiffs had despatched a receipt for the part payment of the ship-repair charges to Denimar Shipping N.V. There was also a discussion entered into by the plaintiffs and Denimar Shipping N.V. on the payment of the remaining ship-repair charges. It was evident from these facts that in personam liability for the ship repair charges must be that of the demise charterers, Denimar Shipping N.V. and not the shipowners. At the time, the plaintiffs issued the writ in rem against the ‘Thorlina’, the ship was beneficially owned as respect all the shares therein by the shipowners. Given that Denimar Shipping N.V. was personally liable for the ship-repair charges, the shipowners applied by motion to set aside the writ in rem and warrant of arrest. In these circumstances, the Singapore Court of Appeal resolved the matter of in personam liability on the facts and evidence (including the documents relating to the ship-repair contract) disclosed by the affidavits filed in the application. The court took the view that there were sufficient facts in the case to reach a firm decision upon the matter of in personam liability and the court expressed its satisfaction that on any view of the facts, the shipowners could not be said to be personally liable for the ship-repair charges. Thus, the court concluded that the plaintiffs’ arrest of the ‘Thorlina’ was misconceived. In the words of Thean J., who delivered the judgment of the court: “In this case, on the materials before us, the contract for the repair of the vessel was made between the respondents and Denimar and the appellants were not a party thereto, and would not be liable to the respondents on the claim in an action in personam. Accordingly, the admiralty jurisdiction cannot be invoked by the respondents against the appellants under section 4(4) ....”24 By ruling that the defendants, the beneficial owners of the ‘Thorlina’, were not personally liable on the plaintiffs’ claim, the Singapore Court of Appeal was treading on the path taken by Hewson J. in “The St. Merrier” In that case, Hewson J. stated that the purpose of section 4(4)25 is, amongst other things, to identify the person or persons whose ships may be arrested and that such identification is a question of fact.26 Once the court is possessed of sufficient facts (through the affidavits filed by the parties) to reach a firm decision on the identity of the person who would be personally liable on the claim as advanced by the plaintiff, the court is entitled to adjudicate on the matter of in personam liability. In “The St. Merriel”, the court was satisfied on the evidence before it that there was no contract entered into 24 Ibid., at 8. 25 The provision considered by Hewson J. was actually section 3(4) of the United Kingdom Administration of Justice Act, 1956 (4 & 5 Eliz. 2, c. 46). The said section 3(4) is in pari materia with section 4(4) of the HCAJA. 26 [1963] P. 247 at 258. 278 Singapore Academy of Law Journal (1994) between the shipowners and the ship-repairers for the repairs to the ship. That being so, there was no liability on the part of the shipowners for the plaintiffs’ claim for the costs of repairs carried out to the ship. As the facts did not identify the shipowners as the person who would be liable on the claim in personam and as the ship was beneficially owned by the shipowners (who were not the person liable on the claim in an action in personam) at the time the plaintiffs’ action was brought, Hewson J. set aside the writ in rem. It is significant to point out that the court in “The Thorlina” did not adjudicate on the matter of in personam liability based on the merits of the rival contentions advanced by the parties. The court did not evaluate the credibility of the rival contentions and allegations of facts advanced by the shipowners and the plaintiffs. Indeed, it would have been an invidious task for the court to have decided the issue based on the conflicting affidavit evidence. As “The Slyvan Arrow”27shows, where the issue of in personam liability depends on facts, unless and until the facts are determined at trial, the court cannot say whether the plaintiff has a good cause of action. And in such circumstances, the court does not have the power to try the issue of in personam liability upon affidavit on a motion to set aside the writ in rem.28 It is submitted that in “The Thorlina”, the court examined the allegations in the affidavits submitted by both the plaintiffs and shipowners to arrive at the conclusion that the shipowners were not identified as the person who would be liable on the claim in an action in personam. It would appear that the allegations of facts (relating to the identities29 of the parties who had entered into the ship-repair contract) in the affidavits considered in “The Thorlina” were not disputed by the parties and hence the court was able to ascertain the identity of the person who would be liable on the claim in an action in personam without much difficulty. Thus, on a motion to set aside the writ in rem on the ground of lack of jurisdiction, the court would not look behind the plaintiff’s allegations of facts made in support of his claim. However, that is not saying that a plaintiff who makes a bald assertion of facts against a shipowner will always be able to arrest the ship of the shipowner. First, the plaintiff who seeks to arrest a ship would have to file an affidavit in support of the warrant of 27 [1923] P. 14. 28 Ibid., at 18. The Hong Kong Court of Appeal has also taken the position that on a motion to set aside the writ in rem on the ground that the court lacks jurisdiction, the court is not to decide the issue of in personam liability on the strength of competing affidavits filed by the parties. See Kingstar Shipping Ltd. v. Owners of the ship‘Rolita’ [1989] 1 H.K.L.R. 394. 29 Emphasis added by the author to underscore the point that where the affidavit evidence is inconclusive on the identity of the party who would be liable on the claim in an action in personam, the court may have to take the approach of permitting the action to go to trial. See Kingstar Shipping Ltd. v. Owners of the ship ‘Rolita’ [1989] 1 H.K.L.R. 394. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 279 arrest and in such an affidavit, sufficient facts supporting the plaintiff’s claim against the defendants must be disclosed to assist the court in the exercise of its discretion in the issuance of the warrant of arrest.30 Secondly, the plaintiff who causes the arrest of a ship in circumstances where he knows that he does not have the right to invoke the admiralty jurisdiction by an action in rem may be mulcted in damages and costs for wrongful arrest.31 Where the defendant takes the view that the facts as alleged by the plaintiff (such facts would be stated in the affidavit filed in support of the warrant of arrest and/or the writ in rem) do not disclose a cause of action, the defendant may apply to the court for the action in rem to be dismissed. The inherent power of the court to stay or dismiss an action brought vexatiously or frivolously has been acknowledged in several cases, notably in “The Moschanthy”, “The St. Merriel” and “The St. Elefterio”. However, as Brandon J. pointed out in “The Moschanthy”, the court should only stay or dismiss an action on the ground that it is vexatious32 “when the hopelessness of the plaintiff’s claim is beyond doubt.”33 If the plaintiff’s claim on the facts as alleged is not beyond doubt but is arguable albeit posing difficulties in fact and in law, the court must permit the plaintiff’s action to proceed to trial. It follows that where the defendant applies to stay or set aside the writ in rem on the ground that the action is vexatious or frivolous, the plaintiff would have to show that he has an arguable case in fact and in law. Once the plaintiff is able to show that he has an arguable case, the plaintiff is entitled to have his claim tried in the action. The court is entitled to examine the affidavit evidence and submissions of the parties to ascertain whether the plaintiff has an arguable case in fact and in law on his claim against the defendant. The plaintiff is said to have an arguable case where it is a case which, to adopt the words of Mustill J. in “The Niedersachsen”,34 would not be laughed out of court. As long as it is an arguable case, the court would not examine or weigh the merits of the claim and would permit the action to proceed to trial. It matters not that at the trial, the plaintiff fails to prove on the balance of probabilities that the defendant is liable in personam on the claim for the plaintiff is entitled to have his arguable case tried in court. It would only be in cases where it is incontestably clear or unarguable35 that the plaintiff does not have a cause of action against the defendant that the court would set aside the writ in rem and the warrant of arrest. 30 As “The Damavand” [1993] 2 S.L.R. 717 shows, under the statutory framework of Order 70 rule 4 of the Singapore Rules of the Supreme Court (1990 Ed.), the issuance of the warrant of arrest is at the discretion of the court. 31 See “The Evmar” [1989] 2 M.L.J. 460 and “The Ohm Mariana” [1993] 2 S.L.R. 698. 32 An action which has no chance of success is a vexatious action. 33 [1971] 1 Lloyd’s Rep. 37 at 42. 34 [1983] 2 Lloyd’s Rep. 600, 612 at 613. 35 See Lonhro v. Fayed. [1992] A.C. 448 at 469. 280 II. Singapore Academy of Law Journal (1994) THE REQUIREMENT OF BENEFICIAL OWNERSHIP Section 4(4) of the HCAJA stipulates that an arrest may be made of a ship which is beneficially owned by the person who would be liable on the claim in an action in personam. The statutory words are that an action in rem would lie against a ship “beneficially owned as respects all the shares therein” by the person who would be liable on the claim in an action in personam. Thus, section 4(4) requires that there be a nexus between the ship sought to be arrested and the person liable on the claim in personam.36 The nexus is that the beneficial owner of all the shares in the ship sought to be arrested must be the person who would be liable on the claim in personam. The nexus between beneficial ownership in the ship to be arrested and the person who would be liable on the claim in personam (hereinafter referred to as “the relevant person”) must be demonstrated “at the time when the action is brought”. It is sufficient to say that the import of the words “at the time when the action is brought” has been authoritatively settled in Singapore. In Lim Bock Lai v. Selco Pte. Ltd.,37 Lai Kew Chai J. held that the words as used in section 4(4) of the HCAJA meant at the time the writ in rem was issued. Some four years later, the Singapore Court of Appeal in “The Hull 308”38 endorsed the view of Lai J. on the import of the words “at the time when the action is brought”. The statutory expression “beneficially owned as respects all the shares therein” in section 4(4) of the HCAJA has also been the subject of elucidation by the Singapore Court of Appeal. In “The Pangkalan Susu/ The Permina 3001”,39 the Court of Appeal held that the expression refers to the beneficial owner of the ship who has the power to dispose of or alienate all the shares in the ship. In the words of Wee Chong Jin C.J., “The question is what do the words ‘beneficially owned as respects all the shares therein’ mean in the context of the Act. ... Apart from authority, we would construe them to refer only to such ownership of a ship as is vested in a person who has the right to sell, dispose of or alienate all the shares in that ship.”40 36 Section 4(4) of the HCAJA also stipulates that there be a nexus between the person who would be liable on the claim in personam and the ship in connection with which the claim arises. This is the relational requirement in section 4(4) of the HCAJA. In “The Ohm Mariana” [1993] 2 S.L.R, 698 at 710, Thean J., delivering the judgment of the Singapore Court of Appeal, stated that the relational requirement introduced by the words “the owner or charterer of, or in possession or in control of, the ship” has a substantive and not merely a formal or nominal role in relation to the ship in respect of which the claim arose. 37 [1987] 2 M.L.J. 688. In this case, Lai J. applied the principle laid down by the English Court of Appeal in In Re Aro [1980] 1 Ch. 196. 38 [1991] 3 M.L.J. 393. The Court of Appeal comprised Yong C.J., Thean and Chan J.J. 39 [1977] 2 M.L.J. 129. 40 Ibid., at 130. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 281 In other words, beneficial ownership in the context of section 4(4) of the HCAJA refers only to cases of equitable ownership, whether or not accompanied by legal ownership and does not include cases of possession and control without ownership.41 In the words of Goff J. (as he then was) in “The I Congreso Del Partido”,42 “... the natural and ordinary meaning of ... the words [beneficially owned as respects all the shares therein] ... refer only to such ownership as is vested in a person who, whether or not he is the legal owner of the vessel, is in any case the equitable owner ....”43 In Canada, the Federal Court of Appeal has also taken the same view on the import of the words “beneficial owner” in the context of Canadian legislation44 conferring jurisdiction to arrest a ship. In Mount Royal/Walsh Inc. v. The Ship Jensen Star el al,45 Marceau J., writing on behalf of the Federal Court of Appeal, stated that: “... the expression ‘beneficial owner’ was chosen to serve as an instruction, in a system of registration of ownership rights, to look beyond the register in searching for the relevant person. But such search cannot go so far as to encompass a demise charterer who has no equitable or proprietary interest which could burden the title of the registered owner. ... the expression ‘beneficial owner’ serves to include someone who stands behind the registered owner in situations where the latter functions merely as an intermediary, like a trustee, a legal representative or an agent.”46 At this juncture, it is apropos to point out that the concept of beneficial ownership utilised in section 4(4) of the HCAJA caters to the concept of beneficial or equitable ownership which is found in English and Singapore property law. In “The I Congreso Del Partido”,47 Sir Robert Goff J. (as he then was) observed that section 3(4) of the United Kingdom Administration of Justice Act 195648 (which is in pan materia with section 4(4) of the 41 See “The I Congreso Del Partido” [1978] 1 Q.B. 500 at 538E where Goff J. said that “the words ‘beneficially owned as respects all the shares therein’ refer only to cases of equitable ownership, whether or not accompanied by legal ownership, and are not wide enough to include cases of possession and control without ownership, however full and complete such possession and control may be.’ 42 [1978] 1 Q.B. 500. 43 Ibid., at 538G. 44 The legislation is the Federal Court Act, R.S.C., 1985, c. F-7, section 43(3) which provides that “the jurisdiction conferred on the Court by section 22 shall not be exercised in rem with respect to a claim mentioned in ... unless, at the time of the commencement of the action, the ship ... that is the subject of the action is beneficially owned by the person who was the beneficial owner at the time the cause of action arose.” 45 [1990] 1 F.C. 199. 46 Ibid., at 209 and 210. 47 [1978] 1 Q.B. 500. 48 4 & 5 Eliz. 2, c. 46. 282 Singapore Academy of Law Journal (1994) HCAJA) “is concerned with title, the word “beneficial” being introduced to allow for the peculiar institution of the trust.”49 His Lordship went on to elaborate: “As I read section 3(4), the intention of Parliament in adding the word “beneficially” before the word “owned in section 3(4) was simply to take account of the institution of the trust, thus ensuring that, if a ship was to be operated under the cloak of a trust, those interested in the ship would not thereby be able to avoid the arrest of the ship.”50 The question of beneficial ownership of the ship sought to be arrested is a jurisdictional one and as such has to be resolved on the motion to set aside the writ in an action in rem. In the felicitous words of Goff J. in “The I Congreso Del Partido”, the question of beneficial ownership in the ship sought to be arrested: “is one of jurisdiction. Jurisdiction in Admiralty actions is statutory, and is defined by the Administration of Justice Act 1956. Section 3 of the Act lays down the circumstances in which an action in rem may be brought; if the case is not within the section then the court has no jurisdiction in respect of an action in rem, and the writ and all subsequent proceedings should be set aside... It follows as a matter of principle that any question of jurisdiction ... must be dealt with on the motions and cannot be dealt with as an issue in the actions.51 ... the subsection [i.e., 3(4) of the Administration of Justice Act 1956] ... require[s] that, for the purposes of an action in rem against a ship, such ship is when the action is brought beneficially owned by th[e] person [who would be liable in personam on the claim] as respects all the shares therein. This shows clearly, in my judgment, that the question of ownership of the res, if in issue, has to be decided on the motion to set aside the writ in an action in rem.”52 Thus, where the defendant in an action in rem alleges that the writ in rem is to be set aside on the ground that the ship is not beneficially owned by the relevant person, it is incumbent on the court to examine the evidence (based on the affidavit and documents before the court) and conclude one way or another as to who is the beneficial owner of the ship sought to be arrested at the time of the issuance of the writ in rem. If authority be needed for this proposition, it may be found in “The I Congreso Del Partido”, “The Aventicum”53 and “The Andres Bonifacio”. 54 49 50 51 52 53 54 [1978] 1 Q.B. 500 at 539G. Ibid., at 542A & B. Ibid., at 535 and 536. [1978] 1 Q.B. 500 at 536E. [1978] 1 Lloyd’s Rep. 184. [1993] 3 S.L.R. 521. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 283 In “The I Congreso Del Partido”, Goff J. had to conclude on the affidavit evidence before him (both the plaintiff’s and defendants’) that Mambisa were not in any real sense the owners of the ship, ‘I Congreso Del Partido’ at the time when the action was brought but were simply in possession of the ship as her operators and managers. His Lordship said that the question of beneficial ownership had to be decided on the balance of probabilities on the motion to set aside the writ in rem as the defendants had contended that the arrested ship was beneficially owned by the Republic of Cuba and therefore was immune from arrest by reason of the doctrine of sovereign immunity. Further, his Lordship pointed out that in the resolution of the issue of beneficial ownership at the hearing of the motion, evidence may be admitted in the usual way, viz., evidence may be tendered in the form of affidavits and if need be, oral evidence by way of cross-examination of deponents of affidavits may be allowed.55 At this juncture, it is apposite to state that the person registered as the owner of a ship is not necessarily the beneficial owner of the ship. As was eloquently put by Thean J. (as he then was) in “The Ohm Marianna”,56 “... registration of a ship does not determine and is not conclusive as to the true ownership of the ship. It is prima facie evidence that the registered owner is the owner of the ship.”57 Since registration as owner of the ship constitutes prima facie evidence of ownership, it is open for a party to adduce evidence to establish the true ownership of the ship. Indeed, in “The Bineta”,58 Brandon J. (as he then was) held that the prima facie inference of ownership arising from registration as owner of the ship had been displaced by the evidence. From “The Bineta” and “The Opal 3”,59 it is evident that ownership of a ship precedes, as a matter of chronological occurrence, the registration of a ship. In the words of Selvam J.C. (as he then was), “The registration of the ship is effected by her owners. ... Registration and papers issued pursuant to [registration] thus afford prima facie evidence but not conclusive evidence of the true ownership and nationality of the ship.”60 55 In “The Saudi Prince” [1982] 2 Lloyd’s Rep. 255 and “The Saudi Al Jubail”, Admiralty In Rem No. 399 of 1984, Summons-in-Chambers No. 5245/84, judgment delivered 28 August 1987, the court heard oral evidence in the motion to set aside the writ in rem. In “The Saudi Prince”, the person alleged to be the beneficial owner of the arrested ship gave oral testimony at the hearing of the motion to set aside the writ in rem and all subsequent proceedings. In “The Saudi Al Jubail”, Lai Kew Chai J. ordered the deponents of the affidavits to be cross-examined in court failing which the relevant affidavits would not be used as evidence. His Honour also gave liberty to the parties to call any other witnesses at the hearing of the application to set aside the writ in rem and all subsequent proceedings. See also Order 70 rule 29 of the Rules of the Supreme Court. 56 [1993] 2 S.L.R. 698. 57 Ibid., at 710. 58 [1966] 2 Lloyd’s Rep. 419. 59 [1992] 2 S.L.R. 585. 60 See “The Opal 3” [1992] 2 S.L.R. 585 at 589. 284 Singapore Academy of Law Journal (1994) Thus, the ship register is not, for the purpose of section 4(4) of the HCAJA, conclusive proof of beneficial ownership under all circumstances. As Selvam J.C. (as he then was) correctly, it is respectfully submitted, pointed out in “The Opal 3”, section 4(4) of the HCAJA “admits of proof that someone other than the legal or registered owner is the beneficial owner. The principles to be applied to determine beneficial ownership must be extracted from various sources of law and the question approached from different aspects depending on the circumstances of the case.”61 In “The Opal 3”, the court identified some of the relevant principles which may be applicable to the determination of beneficial ownership in a ship; these principles include the principles of equity and trust, the principles relating to avoiding fraudulent conveyances to delay or defeat creditors, the principles relating to piercing the veil of incorporation, the principles of law relating to transfer of title to goods and the principles of estoppel.62 Where an attempt is made to set aside the writ in rem on the ground that the relevant person is not the beneficial owner of the arrested ship, the onus is on the plaintiff to prove on a balance of probabilities that the relevant person is the beneficial owner of the arrested ship. This was made clear in “The Aventicum” where Slynn J. held, on the defendant’s motion to set aside the writ in rem on the ground that the relevant person was not the beneficial owner of the arrested ship, that the plaintiff bore the burden of establishing the necessary connection (i.e., that of beneficial ownership at the time the writ in rem was issued) between the arrested ship and the relevant person. It was also in “The Aventicum” that the court stated that on the motion to set aside the writ in rem on the ground that the ship is not beneficially owned by the relevant person, it is right for the court to investigate the true beneficial ownership. In such an investigation, the court is entitled to “pierce the corporate veil” and/or look behind the registered ownership to identify the beneficial owner. While Slynn J. recognised that where there is a suggestion of trusteeship or a nominee holding, the court may investigate the transactions giving rise to the alleged trust or nominee holding, the court will not conduct such an investigation where the plaintiff’s case is speculative. However, where the plaintiff is able to show at the motion63 that there is some real indication that further facts may exist which will affect the issue of beneficial ownership64 and that these facts are 61 Ibid., at 590. 62 Ibid. For a recent application of these principles, see ST Shipping and Transport Inc. v. The Owners of and Other Persons Interested in the Ship or Vessel “Skaw Prince” [1994] 3 S.L.R. 379. 63 Or summons, that is an application made by summons-in-chambers. See “The Saudi Al Jubail” ibid., “The Andres Bonifacio” [1993] 3 S.L.R. 521 and “The Evpo Agnic” [1988] 1 W.L.R. 1090. 64 These are the words used by Lord Donaldson of Lymington M.R. in “The Evpo Agnic” [1988] 1 W.L.R. 1090 at 1097. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 285 peculiarly within the knowledge of the defendants,65 the court is empowered to order discovery from the defendants to uncover the situation which will confirm or for that matter negative the court’s jurisdiction.66 On the present state of the case law, it is not entirely clear what sort of case would constitute “some real indication”67 that further facts may exist on the issue of beneficial ownership to justify the court to order discovery against the defendants for the purpose of investigating the beneficial ownership in the arrested ship. It was suggested, in argument, in “The Evpo Agnic”68 that the court should order discovery against the defendants where the plaintiffs raise a strong prima facie case of such beneficial ownership being in the relevant person. However, Lord Donaldson of Lymington M.R. remarked that the plaintiffs had pitched the requirement “much higher” than required and the Master of the Rolls stated that “Something less than a strong prima facie case might well suffice in such a situation ....”69 At first instance, Sheen J. had stated that the plaintiffs had shown on “the totality of the evidence ... that there is good reason70 to investigate the true beneficial ownership of the EVPO AGNIC”71 and consequently, his Lordship ordered the defendants to disclose all documents relating to the ownership of the ships ‘Skipper I’ and ‘Evpo Agnic’ and adjourned further consideration of the defendants’ application to set aside the writ in rem and warrant of arrest until such disclosure.72 65 See also section 108 of the Evidence Act, Chapter 97, 1990 Revised Edition of the Singapore Statutes. It is worthy of note that section 108 of the Evidence Act was also relied on by the unsuccessful plaintiffs in “The Andres Bonifacio” [1993] 3 S.L.R. 521 at 527. 66 See “The Evpo Agnic” [1988] 1 W.L.R. 1090 at 1097. 67 In “The Aventicum”, Slynn J. dealt with this point tangentially and merely said that the court is entitled to investigate the beneficial ownership of the arrested ship where “there is a suggestion of a trusteeship or a nominee holding”. His Lordship did not elaborate on what sort of evidence would constitute just that sort of suggestion. See [1978] 1 Lloyd’s Rep. 184 at 187 right-hand column. 68 [1988] 1 W.L.R. 1090. 69 Ibid., at 1097. See also “The Maritime Trader” [1981] 2 Lloyd’s Rep. 153 at 157 where Sheen J. said that the evidence which the plaintiffs had relied on to persuade the court to lift the corporate veil of the registered owners of the arrested ship did “not raise even a prima facie case that the ship ‘Maritime Trader’ was purchased by [the registered owners] in 1976 in order that it would not be available as security for a judgment against [the person who would be liable on the claim in an action in personam].” 70 Emphasis is the author’s. 71 His Lordship’s reason was stated in a note given to counsel, see “The Evpo Agnic” [1988] 2 Lloyd’s Rep. 411 at 413. 72 Presumably, the order for disclosure of the relevant documents was made pursuant to the English equivalent of the Rules of the Supreme Court, Order 24 rule 12. The said Order 24 rule 12 provides that: “At any stage of the proceedings in any cause or matter the Court may, subject to Rules 13(1), order any party to produce to the Court any document in his possession, custody or power relating to any matter in question in the cause or matter and the Court may deal with the document when produced in such manner as it thinks fit.” 286 Singapore Academy of Law Journal (1994) It is evident that “The Evpo Agnic” raises the issue of the requisite standard or degree of likelihood applicable to the court’s preliminary73 appraisal of the plaintiff’s case for the purpose of ordering discovery against the defendants to investigate the beneficial ownership of the arrested ship. It is pertinent to point out that the particular standard — whatever it may be — is the standard to be applied to assess the strength of the plaintiff’s case on the merits on the jurisdictional issue that the beneficial ownership of the arrested ship lies with the relevant person. As the matter is res integra, one may only attempt to “second guess” the standard which the courts will eventually adopt. While there are many possible standards ranging from the arguable case to the probable case, it is submitted that there are really only two standards which might be applicable. One standard is that of the good arguable case which is the standard adopted as the appropriate standard to be met by a plaintiff seeking a Mareva injunction.74 It is sufficient to say that a good arguable case is one that is more than barely capable of serious argument but yet not necessarily one which the judge believes to have a better than 50% chance of success.75 The other standard which might be applicable is that of the prima facie case which in this context means the proof of facts, which unless rebutted by the defendant provide a sufficient foundation for the plaintiff’s assertion that the relevant person is the beneficial owner of the arrested ship. As matters stand, the courts have not had the occasion to rule on the applicable standard which must be satisfied by the plaintiff to persuade the court to order discovery against the defendant on the issue of beneficial ownership of the arrested ship. As for the type of evidence required to persuade the court that there exists “some real indication” that the relevant person is the beneficial owner of the arrested ship as to warrant the lifting of the corporate veil, the cases of “The Evpo Agnic” and “The Skaw Prince”76 are instructive. 73 74 75 76 It suffices to say that Order 24 rule 13(1) states that no order for producton of any documents for inspection or to the Court shall be made unless the Court is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs. Emphasis added by the author. See “The Niedersachsen” [1983] 2 Lloyd’s Rep. 600 and 612. This was the way Mustill J. (as he then was) described the concept of a good arguable case in “The Niedersachsen” [1983] 2 Lloyd’s Rep. 600 at 605. It suffices to say that on appeal, the English Court of Appeal in a judgment delivered by Kerr L.J. agreed with Mustill J.’s view on the threshold burden of proof which the plaintiff applicant for a Mareva injunction had to satisfy. See [1983] 2 Lloyd’s Rep. 600, at 612 and 613. For the latest judicial pronouncement on the import of the words “a good arguable case”, see Seaconsar Far East Ltd. v. Bank Markazi Jomhouri Islamic Iran [1993] 3 W.L.R. 756. ST Shipping and Transport Inc. v. The Owners of and Other Persons Interested in the Ship or Vessel “Skaw Prince” [1994] 3 S.L.R. 379. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 287 In “The Evpo Agnic”, the plaintiffs arrested the ship, ‘Evpo Agnic’ which they claimed was in the same beneficial ownership of the ship, ‘Skipper I’ which was the ship in connection with which their claim arose. The ‘Skipper I’ laden with a cargo of shredded scrap metal which belonged to the plaintiffs had sunk some time in 1987. The plaintiffs relied on the common shareholding and common corporate officers77 of the two companies (both being one-ship companies) owning the ship in respect of which the claim arose, viz., the ‘Skipper I’, and the ship arrested, viz., the ‘Evpo Agnic’. Further the plaintiffs in “The Evpo Agnic” sought to rely on the fact that both shipowning companies were managed as a fleet by the same Panamanian company, viz., Pothitos Shipping Co. S.A. According to Lord Donaldson of Lymington, the “plaintiffs’ real case is that Mr. Evangelos Pothitos ... a Greek shipowner, or his company, Pothitos Shipping Co. S.A., is the real owner of both ships and indeed of all the ships in the Pothitos fleet. This involves the proposition that the registrations are shams.”78 However, the Court of Appeal in “The Evpo Agnic” took the view that as it was legitimate for a person to manage a series of genuine one-ship Panamanian companies as a group, there was no commercial advantage to be gained by the creation of sham registered ownerships. Further, the court pointed out that the plaintiffs were attempting to arrest a “ship of a sister company of the owners of ‘the particular ship’ ” in respect of which their claim arose. This was not permitted by section 21(4) of the United Kingdom Supreme Court Act 1981,79 In the words of the then Master of the Rolls: “The purpose of section 21(4) is to give rights of arrest in respect of ‘the particular ship’, ships in the ownership of the owners of ‘the particular ship’ and those who (sic) have been spirited into different legal, i.e., registered, ownership, the owners of ‘the particular ship’ retaining beneficial ownership of the shares in that ship. This was the situation in “The Saudi Prince” ... and was alleged to be the situation in “The Aventicum” ....”80 77 Agnic Shipping S.A. of Panama, the registered owner of the ‘Evpo Agnic’ and Skipper Shipping Co. S.A. of Panama, the registered owner of the ‘Skipper I’ shared the same president and vice-president. 78 [1988] 1 W.L.R. 1090 at 1096 and 1097. 79 c. 54. It is pertinent to state that section 21(4) of the United Kingdom Supreme Court Act 1981 pemits the arrest of a ship beneficially owned, at the time when the action is brought, as respects all the shares in it by the relevant person or a ship demised chartered, at the time when the action is brought, by the relevant person. Thus, the said section 21(4) is wider in scope than section 4(4) of the HCAJA. 80 [1988] 1 W.L.R. 1090 at 1097. 288 Singapore Academy of Law Journal (1994) It is evident from “The Evpo Agnic” that it is insufficient for cargo claimants to rely on the common shareholding and common corporate officers of the company owning the ship in connection with which the claim arose and the company owning the ship arrested in the action as evidence constituting ‘some real indication’ that further facts may exist which will affect the issue of beneficial ownership such that the court should order a discovery against the defendants to shed light on the matter. In “The Skaw Prince”, the plaintiffs arrested the ‘Skaw Prince’ to enforce their claim as time charterers of the tanker ‘Skaw Princess’. The registered owner of the time chartered tanker was Corsair Holdings Inc., a Liberian Corporation and the time charterparty had been concluded between the plaintiffs and Corsair Holdings Inc. The plaintiffs’ claim was for a sum of approximately U.S.$240,000.00 due to them under the time charterparty in respect of the value of bunkers on re-delivery (of the time chartered tanker), overpaid hire and overpaid owners’ disbursements and other charges and commission. At the time, the writ in rem was issued against the ‘Skaw Prince’, the registered owner of the ship was Filey International Inc., a Liberian company. The plaintiffs alleged that Skaw Shipping A/B, a Swedish company was the person who would be liable on the plaintiffs’ claim in an action in personam and that they were also the beneficial owner of the ‘Skaw Prince’ at the time of the issue of the plaintiffs’ writ in rem against the ‘Skaw Prince’. In advancing their contention that the relevant person and the beneficial owner of the ‘Skaw Prince’ was Skaw Shipping A/B, the plaintiffs sought to rely on the fact that both Corsair Holdings Inc. and Filey International Inc. were 100% owned by Pontina A/S, a Norwegian company which was in turn 100% owned by Skaw Shipping A/B. Further, the plaintiffs adduced evidence to show that Skaw Shipping A/B had mortgaged both the ‘Skaw Princess’ and the ‘Skaw Prince’ under two separate ship mortgage deeds in 1991 to secure a loan granted to Skaw Shipping A/B by a Norwegian bank. As part of the loan documentation, all earnings in respect of the charter of the ‘Skaw Princess’ and the ‘Skaw Prince’ were assigned to the Norwegian bank. Further, under a separate ‘pledge of shares’ agreement, Pontina A/S pledged all the shares in Corsair Holdings Inc. and Filey International Inc. to the Norwegian bank. The loan documentation was signed by one Per Olav Karlsen on behalf of Skaw Shipping A/B and also on behalf of Corsair Holdings Inc. and Filey International Inc. The said Per Olav Karlsen was a director of all three companies and in addition, he was the managing director of Skaw Shipping A/B. In addition, the plaintiffs adduced evidence to show that after Skaw Shipping A/B became bankrupt on 30 June 1992, the Norwegian bank in correspondence with the administrators and receivers of Skaw Shipping A/B in bankruptcy treated the ‘Skaw Princess’ and the ‘Skaw Prince’ as assets of Skaw Shipping A/B. Essentially, the plaintiffs contended that Skaw Shipping A/B had throughout all material times regarded the two ships as their assets and had dealt with the two ships as such including using them as security for a loan to purchase shares in another company. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 289 And, according to the plaintiffs, this attitude of Skaw Shipping A/B towards the two ships reflected the realities of the situation, viz., that Skaw Shipping A/B was the beneficial owner of the two ships. The plaintiffs in “The Skaw Prince” contended that Corsair Holdings Inc. and Filey International Inc. did not have independent existence and that the defendants had not adduced evidence to show that these two companies maintained their own accounts and records.81 On the evidence adduced by them, the plaintiffs invited the court to lift the corporate veils of both Corsair Holdings Inc. and Filey International Inc., and thereafter the corporate veil of the common shareholder, Pontina A/S to (a) determine that the person who would be liable in personam on the plaintiffs’ claim was Skaw Shipping A/B and (b) determine that Skaw Shipping A/B was the beneficial owner of the ‘Skaw Prince’ at the time the plaintiffs’ action was brought. Whereas, the plaintiffs had to show an arguable case in law82 on the in personam liability of Skaw Shipping A/B, the plaintiffs had to establish, on a balance of probabilities, that Skaw Shipping A/B was the beneficial owner of the ‘Skaw Prince’ at the time of issuance of the writ in rem. In declining the invitation to lift the corporate veils of the companies, Amarjeet Singh J.C. stated that the plaintiffs’ argument that the registered owners of the ‘Skaw Princess’ and ‘Skaw Prince’ “were in reality trustees of the two ships for the benefit of Skaw Shipping A/B of necessity meant nothing more than an invitation ... [to] lift the corporate veil, embark on a wide ranging inquiry by examining the structure and arrangements of the various existing companies under the Skaw group.”83 His Honour went on to observe that the plaintiffs were asserting that the court should pierce the corporate veil of the one-ship company structure to identify the beneficial owner of the company and to equate such an owner as the beneficial owner of the ships owned by the one-ship company.84 His Honour stated that it is well-known that businesses engaged in shipping set up and utilise one-ship companies within their corporate structure for the purpose of limiting liability. Indeed, according to his Honour, the device of oneship company has been around and recognised by the Courts as legitimate85 81 The plaintiffs also added that Per Olav Karlsen was involved in every level of control in Corsair Holdings Inc., Filey International Inc., Pontina A/S, Skaw Shipping A/B and Wind Marine A/S, the managers of the ‘Skaw Princess’. 82 In his judgment, Amarjeet Singh JC stated that “it was clear ... that all the applicants had to show was they had a good arguable case ...” See [1994] 3 S.L.R. 379 at 384. It is respectfully submitted that the epithet “good” is not sanctioned by the authorities. See the discussion above under the rubric “The Requirement of In Personam Liability”. 83 See [1994] 3 S.L.R. 379 at 386. 84 Ibid. 85 At [1994] 3 S.L.R. 379 at 386. See also SSAB Oxelosund AB v Xendral Trading Pte. Ltd. [1992] 1 S.L.R. 600 at 607 where Lai Siu Chu J.C. (as she then was) stated that it was the norm for shipowning businesses to employ the one-ship corporate structure. 290 Singapore Academy of Law Journal (1994) and the Court’s view has been that the Courts will not lift the corporate veil unless the circumstances are exceptional.86 His Honour concluded that he was satisfied on the evidence (some of which were not disputed by the defendants) that Corsair Holdings Inc. and Filey International Inc. were not nominee companies and that there was no sham in the defendants’ employment of the one-ship company structure.87 The learned Judicial Commissioner stated that: “Having regard to the principles in the various cases and the evidence adduced, I found that the corporate structure of the Skaw Group was already firmly in place before the Plaintiffs’ claim arose and that the creation of Corsair [Holdings Inc.] and Filey [International Inc.] as wholly owned subsidiaries within the Skaw corporate structure was entirely legitimate. I find Corsair, Filey and Pontina [A/S] as genuine companies having their separate existence. I further find that the Skaw Group was well entitled to make operational and management decisions in respect of the aforesaid one-ship companies Corsair and Filey and the assets of these one-ship companies could legitimately be utilised for the benefit of the group and that the corporate veil should only be lifted if the ship or ships the subject of the claim have since been transferred to a new ownership and with a view to ascertaining whether the beneficial owners remain the same or where a facade or situation is shown where deliberate fraud has been perpetrated through fictitious transactions or through the vehicle of non-existent companies. None of these situations arose in the present case on the evidence adduced by the Plaintiffs. I could also not discern any incidence of trust and equity as arising from the circumstances which conferred beneficial ownership on Skaw Shipping A/B of the ship ‘Skaw Princess’ and ‘Skaw Prince’. The law is plain. A parent company or a shareholder has no property in the assets of its subsidiary or of the company itself.” Thus, the court in “The Skaw Prince” refused to lift the corporate veils of the companies concerned with the result that the plaintiffs’ writ in rem and warrant of arrest were set aside.88 The learned Judicial Commissioner took 86 See “The Andres Bonifacio” [1993] 3 S.L.R. 521 at 531 where Lai Kew Chai J., delivering the judgment of the Singapore Court of Appeal, stated that “there must be special circumstances to exist before lifting the corporate veil, such as the presence of a facade or sham set up to deceive the [plaintiffs]. One could not lift the corporate veil just because a company made subsidiaries in order to avoid future liabilities ... Hence, the [plaintiffs’] suggestion of an intention to evade debts was insufficient ....’ 87 At [1994] 3 S.L.R. 379 at 386. 88 It appears that the plaintiffs have lodged an appeal against the decision of Amarjeet Singh J.C. See [1994] 3 S.L.R. 379 at 382. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 291 the view that the plaintiffs in “The Skaw Prince” had not shown that there existed ‘special circumstances’ for the lifting of the corporate veils of Corsair Holdings Inc., Filey International Inc. and Pontina A/S. From “The Evpo Agnic” and “The Skaw Prince”, it is evident that considerable difficulties confront a cargo claimant who attempts to prove that the arrested ship, despite being registered under a different owner, is nonetheless in the same beneficial ownership as the ship in respect of which his claim arises. Evidence showing that the companies concerned are one-ship companies and share common corporate officers are in themselves, insufficient to lead to the piercing of the corporate veil or veils for the purpose of investigating the beneficial ownership of a ship. Having said that, it is an accepted principle that in an appropriate case, the court is entitled to pierce or lift the corporate veil of the registered owner and/or the shareholders of the ship to ascertain the identity of the beneficial owner as respects all the shares of the arrested ship.89 The cases where the courts have lifted the corporate veils to identify the beneficial owner of the ship are instructive. In “The Saudi Al Jubail”,90 the Singapore High Court pierced the corporate veil to reveal that the relevant person was, at the time the action was brought, the beneficial owner of the ship arrested. In this case, the plaintiffs who had chartered the ship, ‘Fidelity’ to one Mohammed Abdul Rahman Orri (hereinafter referred to as “Orri”) claimed that by reason of the charterer’s breaches of the charterparty, there was owing monies and damages to the plaintiffs. To secure its claim against Orri, the plaintiffs caused the ‘Saudi Al Jubail’ to be arrested. The purported owners of the ‘Saudi Al Jubail’ applied to set aside the writ in rem and all subsequent proceedings on the ground that the person liable in personam to the plaintiffs was not the owners of the arrested ship. According to the defendants the owners of the ship at the time the writ in rem was issued was Omega Shipping Company Ltd. Additionally, the defendants asserted that the person liable in personam to the plaintiffs in respect of the breaches under the charterparty relating to the ‘Fidelity’ (hereinafter referred to as “the Fidelity charter”) was Saudi Cargo Carriers Co. Ltd. 89 See “The Aventicum” [1978] 1 Lloyd’s Rep. 184, “The Andres Bonifacio” [1993] 3 S.L.R. 521, “The Saudi Al Jubail” and “The Skaw Prince”. As Slynn J. observed in “The Aventicum” [1978] 1 Lloyd’s Rep. 184 at 187, “it is plain that section 3(4) [of the United Kingdom Administration of Justice Act, 1956, 4 & 5 Eliz 2, c. 46] intends that the Court shall not be limited to a consideration of who is the registered owner or who is the person having legal ownership of the shares of the ship; the directions are to look at the beneficial ownership.” 90 Admiralty In Rem No. 399 of 1984, Summons-in-Chambers No. 5245/84, judgment delivered by Lai Kew Chai J. on 28 August 1987. 292 Singapore Academy of Law Journal (1994) The defendants’ application to set aside the writ in rem and all subsequent proceedings fell before Lai Kew Chai J. who found that although at the time the Fidelity charter was entered into, the charterer had been described as ‘Cargo Carriers Co. Ltd. of Jeddah’, that entity did not have a legal existence anywhere. The learned judge agreed with the plaintiffs that Orri was the person who had entered into the Fidelity charter with the plaintiffs and that Orri had used the trading names of ‘Saudi Cargo Carriers Co. Ltd.’ and ‘Cargo Carriers Co. Ltd.’ indiscriminately. Having found that the person who would be liable on the claim in respect of the Fidelity charter in an action in personam was Orri, the learned judge dealt with the issue of beneficial ownership of the arrested ship. The plaintiffs had contended that Omega Shipping Company Ltd. was a mere corporate name which Orri had wrongfully used for his trading and shipowning activities and that at all material times, he was the beneficial owner of the ‘Saudi Al Jubail’. This contention was an invitation to the court to lift the corporate veil of Omega Shipping Company Ltd. Evidence was adduced to show that the shareholders of Omega Shipping Company Ltd. were Orri and various members of the Orri family. However, despite the court’s invitation to the defendants to call witnesses, these other members of the Orri family did not give evidence as to whether they were the beneficial owners of their respective shareholdings in Omega Shipping Co. Ltd. Indeed, the court remarked that Mrs. Orri who was in Singapore at the time of hearing did not give evidence as to her shareholding in Omega Shipping Company Ltd. Be that as it may, the defendants contended that the ‘Saudi Al Jubail’ had been purchased by them from Nedlloyd, Holland. However, the evidence showed that the alleged purchase price for the ship had been remitted out of the bank account of ‘Saudi Europe Line’91 and the same sum was credited to Orri’s personal account. The court was satisfied that “the evidence was overwhelming that... Orri purported to dispose of the ‘Saudi Al Jubail’ to Saudi Al Jubail Navigation Co. Ltd. of Jeddah failing which he was setting about to sell the vessel as scrap to Taiwan before it was arrested in Singapore.” Lai J. further stated that he was satisfied that Orri ran the Orri Group of companies and used these companies to suit his purposes. According to the learned judge, Orri: “was not only the mind and management of the Orri Group but also the beneficial owner ... of the [Saudi Al Jubail]. He dealt with and 91 It is interesting to note that in “The Winner” [1986] 1 Lloyd’s Rep. 36 a decision of the English Commercial Court, it was held by Evans J. that ‘Saudi Europe Line’ was not a corporate entity but a mere trading name used by Orri in his trading and shipowning activities and whenever such a name was used in the making of contracts, it meant that Orri personally was the contracting party. As “The Winner” was decided some 22 months before “The Saudi Al Jubail”, Lai J. was probably aware of the legal significance of the entity ‘Saudi Europe Line’ and indeed, counsel for Orri in “The Saudi Al Jubail” referred to “The Winner” as he had been Orri’s counsel in the earlier case. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 293 purported to dispose of the vessel as his own. There was also ample evidence to show that whenever it suited his purposes, he would perpetuate any misapprehension of the parties who traded with him. He indulged in suppressio veri, expressio falsi.” While Lai J. accepted that a truly parent company or a genuine shareholder has no property in the assets of its subsidiary or of the company, in the case before him, Orri had abused the corporate name of Omega Shipping Company Ltd. “as a cover for his own trading and shipowning activities”. Thus, the court concluded that Orri was the beneficial owner of the ‘Saudi Al Jubail’. It is evident that in “The Saudi Al Jubail”, the court pierced the corporate veil of Omega Shipping Company Ltd. because it was satisfied that the name of the corporate entity was abused by the person who would be liable on the claim in an action in personam as a cloak for his own92 trading and shipowning activities. The principle is that if a person uses the name of a corporate entity to mislead other parties as to the identity of the party with whom they have contracted and conveniently uses corporate names to conduct his own trading activities, the court will lift the corporate veil. Another case where the court lifted the corporate veil to reveal the beneficial owner of the arrested ship is “The Saudi Prince”.93 In this case, Orri — the same Mohammed Abdul Rahman Orri involved in “The Saudi Al Jubail” — applied to set aside the writ and arrest of the ship ‘Saudi Prince’ on the ground that the person who would be liable on the plaintiffs’ claim in an action in personam was not the beneficial owner in respect of all the shares in the ‘Saudi Prince’. The plaintiffs were cargo owners whose cargo were damaged while carried on board the ship ‘Al Dhahran’. At the material time, the ‘Al Dhahran’ was owned by Orri who traded under the business name of ‘Saudi Europe Line’.94 At the time when the ‘Saudi Prince’ was arrested, viz., 24 August 1979, the Lloyd’s Register of Shipping showed that the ship was owned by Saudi Europe Line. Orri claimed that while he was the owner of the ‘Saudi Prince’ before 30 May 1979, he had transferred ownership of the ship to Saudi Shipping and Sea Transport Co. Ltd. (hereinafter referred to as “SSTT”). It turned out that the shareholders of SSTT were Orri who held 80% of the shareholding, Adil Orri and Houda Orri who each held 10% of the shareholding. The plaintiffs contended, inter alia, that both Adil Orri and Houda Orri held the shares on behalf of their father, Orri and that the corporate veil of SSTT should be lifted and if it were lifted, the beneficial owner of the ‘Saudi Prince’ would be none other than Orri, the person who would be 92 Emphasis added by the author. 93 [1982] 2 Lloyd’s Rep. 255. 94 See, supra, note 91. 294 Singapore Academy of Law Journal (1994) liable in personam in respect of the plaintiffs’claim. Sheen J. took the view that Adil and Houda Orri did not pay for the shares they held in SSTT and indeed the learned judge remarked that neither Adil nor Houda gave any evidence orally or by affidavit to support the suggestion that they had paid for the shares in SSTT with their own money. His Lordship further added that: “If, in fact, [Adil and Houda Orri] became shareholders in SSTT I am satisfied on the balance of probabilities that the shares were put in their names by Mr. Orri as his nominees merely to divest himself of shares in name only. He remained the beneficial owner of them.”95 Having found that Orri was the beneficial owner of all 100% of the shares in SSTT, Sheen J. lifted the corporate veil of SSTT and concluded that Orri was the beneficial owner as respects all the shares in the ‘Saudi Prince’. His Lordship took the view that Orri had engaged in obnubilations to conceal his beneficial ownership of the ‘Saudi Prince’ and that SSTT was merely a convenient instrument for Orri to carry out his own trading activities.96 For every case where the courts pierced or lifted the corporate veil of the registered owner and/or holder of the shares of the arrested ship to identify the beneficial owner, there are many more cases where attempts to lift the corporate veil to justify arrest of a ship have foundered. The cases of “The Maritime Trader”,97 “The Asean Promoter”98 “The Skaw Prince”, “The Aventicum”, “The Mawan”,99 “The Sri Phen Sinn” and “The Andres Bonifacio” bear testimony to the difficulties which confront a maritime claimant who contends for the lifting of the corporate veils of the registered owner of the arrested ship and/or of the relevant person. An examination of the facts and contentions involved in “The Maritime Trader” and “The Asean Promoter” would serve to illustrate some of the difficulties encountered by a maritime claimant who seeks to lift the corporate veil to justify the arrest of a ship. In “The Maritime Trader”, Sheen J. was unpersuaded that the corporate veil of the registered owners, namely, Maritime Trader Ship Holding G.m.b.H, should be lifted on account only of the fact that all the shares of the company were owned by the person who would be liable on the claim 95 [1982] 2 Lloyd’s Rep. 255 at 260. 96 Ibid., at 256 and 257 where the learned judge said: “It is ... quite clear ... that, despite [Orri’s] intelligence and knowledge of the business world, he carries on business either in the name of a limited liability company or by using quite indiscriminately one of his registered business names. I have been left in no doubt that Mr. Orri selected the names of his companies for the purpose of obnubilation.” 97 [1981] 2 Lloyd’s Rep. 153. 98 [1982] 2 M.L.J, 108. 99 [1988] 2 Lloyd’s Rep. 459 especially at 461. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 295 in an action in personam, viz., Maritime Transport Overseas G.m.b.H. His Lordship pointed out that in English law100 the shareholder of a company has no property — whether it be legal or equitable title — in the assets of the company.10 1 Thus, Maritime Transport Overseas G.m.b.H., though they be the owners of all the shares in the company registered as the owners of the ‘Maritime Trader’, had no property in the ‘Maritime Trader’ which was one of the assets of Maritime Trader Ship Holding G.m.b.H. The learned judge added that there was no evidence from which it could be suggested that the use of the corporate entity of Maritime Trader Ship Holding G.m.b.H. to own the ‘Maritime Trader’ was to obscure a mask of fraud. “The Asean Promoter” illustrates an attempt by cargo claimants to effect a ‘sister ship’102 arrest under section 4(4)(b) of the HCAJA. In this case, the plaintiffs’ cargo which was shipped on board the ‘Asean Promoter’ suffered damage and/or loss during the voyage to Karachi. At the time when the ‘Asean Promoter’ carried the plaintiffs’ cargo, the ship was owned by M & G Maritime Services Pte. Ltd. (hereinafter referred to as “M & G”). To secure their claim, the plaintiffs arrested the ‘Asean Progress’ which was a ship owned by a sister company of M & G. At the time, the plaintiffs’ writ in rem was issued and at the time of arrest, the ‘Asean Progress’ was owned by Straits Maritime Leasing Pte. Ltd. (hereinafter “Straits Maritime”). Both M & G and Straits Maritime were wholly owned subsidiary companies of Haw Par Brothers International Ltd. (hereinafter referred to as “Haw Par”). Straits Maritime being the registered owners of the ‘Asean Progress’ filed a motion to set aside the writ in rem and all subsequent proceedings against their ship as the plaintiffs’ had arrested a ship not beneficially owned by the relevant person, viz., M & G. In response, the plaintiffs contended that as M & G was only a shell company of Haw Par and as the company had a paid up capital of $2, the court should lift the corporate veil of the registered owners of the ‘Asean Promoter’, viz., M & G. In support of this contention, the plaintiffs relied on the fact that Straits Maritime’s directors were also the directors of 100 As is the position in Singapore law. 101 See Macaura v. Northern Assurance Co. Ltd. [1925] A.C. 619. 102 Strictly speaking, section 4(4)(b) of the HCAJA is not confined to situations where the ship sought to be arrested is a ‘sister ship’, in the sense of being in the same ownership, of the ship in connection with which the plaintiffs claim arose. The right to arrest under section 4(4) (b) extends to a ship beneficially owned by the relevant person irrespective of whether that ship sought to be arrested is in the same ownership as the ship in connection with which the plaintiff’s claim arose. In “The Evpo Agnic” [1988] 2 Lloyd’s Rep. 411 at 412, Lord Donaldson of Lymington M.R. referred to such an arrest is the arrest of “a putative sister ship”. 296 Singapore Academy of Law Journal (1994) M & G and Haw Par. In effect, the plaintiffs alleged that Haw Par, was the beneficial owner of both the ‘Asean Promoter’ and the ‘Asean Progress’ and that Haw Par as parent company had used both M & G and Straits Maritime as its agents for conducting its shipping business. Abdul Wahab Ghows J., who heard Straits Maritime’s application to set aside the writ in rem, held that on the facts, the plaintiffs had proved that the subsidiary company of M & G was carrying on Haw Par’s shipping business as the subsidiary company was under-capitalised to conduct its own business. Consequently, the learned judge lifted the corporate veil of M & G and concluded that Haw Par being the holder of all the shares in the subsidiary company was the beneficial owner of all the shares in the ‘Asean Promoter’. That being so, the learned judge stated that the person who would be liable on the plaintiffs’ claim in an action in personam would be Haw Par. It is apropos, at this juncture, to point out that in “The Skaw Prince”,103 Amarjeet Singh J.C. opined that Wahab Ghows J.’s view on Haw Par being the beneficial owner of the shares in the ship ‘Asean Promoter’ by reason of M & G’s under-capitalisation was erroneous. The learned Judicial Commissioner stated that Wahab Ghows J.’s view has “since been superseded by the later decisions amongst which are “The Evpo Agnic” ..., “The Andres Bonifacio”104 ... and “The Neptune”105 ....”106 Returning to “The Asean Promoter”, Wahab Ghows J. pointed out that the plaintiffs had arrested the ‘Asean Progress’ which was beneficially owned by Straits Maritime and not Haw Par. Haw Par did not hold a single share in the ship ‘Asean Progress’ and nor was there evidence that Haw Par was the equitable owner of the ship. The mere fact that the defendants was a wholly owned subsidiary company of Haw Par did not mean that the asset of the subsidiary company, namely, the ship ‘Asean Progress’ was beneficially owned by Haw Par. Indeed, the defendants’ paid up capital was $3 million which, unlike M & G, was ample for a company to carry out its own shipping business. Thus, since the ‘Asean Progress’ was not beneficially owned by Haw Par, the plaintiffs could not arrest the ship under section 4(4)(b) of the HCAJA. In the words of Abdul Wahab Ghows J., “it is clear that the ‘Asean Progress’ was not liable to arrest as there is no evidence that it is the property of the person liable ‘in personam’ on the Plaintiffs’ claim arising in connection with the ship ‘Asean Promoter’.”107 103 ST Shipping and Transport Inc. v. The Owners of and Other Persons Interested in the Ship or Vessel “Skaw Prince” [1994] 3 S.L.R. 379. 104 [1993] 3 S.L.R. 521 at 531. 105 [1986] H.K.L.R, 346. 106 At [1994] 3 S.L.R. 379 at 387. 107 [1982] 2 M.L.J. 108 at 110. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 297 Apart from lifting corporate veils to identify the beneficial owner of the arrested ship, the courts are empowered, in their investigation of the beneficial ownership of the ship, to ignore sham transactions involving purported sales of the arrested ship from the relevant person to other entities. In the felicitous language of Lai Kew Chai J. who delivered the judgment of the Court of Appeal in “The Enfield”,108 the court is: “entitled to look at the transactions and determine the true beneficial ownerships of the vessel... The evidence amply confirm that Barbury did not carry the true face of a corporate bona fide purchaser and [the court] find[s] Enfield Shipping Corporation S.A. was at all material times the beneficial owner of the vessel.”109 In “The Enfield”, the person who would be liable on the claim in an action in personam, viz., Enfield Shipping Corporation S.A. contended that it, before the issuance of the plaintiffs’ writ in rem, had sold the ship to a Panamanian company by the name of Barbury Panama S.A. The court examined the evidence adduced in court by the respective parties to ascertain the beneficial owner of the arrested ship. From the evidence, the court was satisfied that one Richard Hwa Eng Lai owned both Enfield Shipping Corporation S.A. and Barbury Panama S.A. and manipulated both the corporate entities to achieve his own ends. The evidence showed that Richard Hwa had signed a document in the name of the President of the Panamanian company, Barbury Panama S.A. It was also proved that the said Richard Hwa was the de facto manager of Enfield Shipping Corporation S.A. In addition, the court found the evidence purporting to show the payment of the purchase price from Barbury Panama S.A. to Enfield Shipping Corporation S.A. “most unsatisfactory”.110 In these circumstances, the court stated that it “was satisfied that the purported sale of the vessel by Enfield Shipping Corporation S.A. to Barbury was a device and sham designed to defraud claimants such as the Respondents so that the vessel as a security was put out of their reach.”111 One of the most significant decisions of the Singapore Court of Appeal112 on the issue of beneficial ownership of the arrested ship is “The Andres Bonifacio”. In this case, the plaintiffs arrested the ‘Andres Bonifacio’ on the ground that it was beneficially owned by Philippine National Oil Company (hereinafter referred to as “PNOC”), the person who would be 108 109 110 111 112 [1982] 2 M.L.J. 106. Ibid. [1982] 2 M.L.J, 106 at 108. Ibid. For other decisions of the Singapore Court of appeal on the issue of beneficial ownership of the arrested ship, see“The Pangkalan Susu/The Permina 3001” [1977] 2 M.L.J. 19, “The Enfield” [1982] 2 M.L.J. 106 and “The Sri Phen Sinn”, Civil Appeal No. 21 of 1985, in the matter of Summons-in-Chambers No. 1861 of 1985 in Admiralty In Rem No. 3 of 1985. 298 Singapore Academy of Law Journal (1994) liable in an action in personam on the plaintiffs’ claim. However, the defendants namely, PNOC Oil Carrier Inc. (hereinafter referred to as “POCI”), contended that at the time of the issuance of the writ in rem against the ‘Andres Bonifacio’ they were the owners of the ship. The Court of Appeal, in a judgment delivered by Lai Kew Chai J., held that on the evidence, PNOC held the legal title of the ‘Andres Bonifacio’ for POCI. Consequently, the court set aside the writ and all subsequent proceedings against the ‘Andres Bonifacio’. The decision of the Court of Appeal in “The Andres Bonifacio” is highly significant because of the ruling that the lex fori is the law to be applied in determining beneficial ownership of the arrested ship for the purpose of the invocation of admiralty in rem jurisdiction. Relying on “The Halcyon Isle”113 and “The T.S. Havprins”,114 the court held that the jurisdictional issue relating to the beneficial ownership of the arrested ship is governed by Singapore law as the lex fori. At first blush, one would question the application of the lex fori to determine the issue of beneficial ownership in the ship sought to be arrested. The approach taken by the Court of Appeal appears to be out of line with the general rule in conflict of laws that the lex situs of the transaction which purportedly transferred the ownership in the chattel is the governing law in the determination of beneficial interests in chattels. It will be recalled that in Cammell v. Sewell,115 the Court of Exchequer Chamber applied the law of the place where the sale of the cargo of deals took place, i.e., the lex situs, to determine whether the purchaser under such a sale had acquired proprietary rights over the cargo of deals. The court endorsed the view that “if personal property is disposed of in a manner binding according to the law of the country where it is, that disposition is binding everywhere.”116 If one were to adopt the principle in Cammell v. Sewell, it may be said that since a ship is personal property, the court should apply the law of the 113 [1980] 2 M.L.J. 217. The Court of Appeal in “The Andres Bonifacio” referred to a passage in Lord Diplock’s judgment which appears at [1980] 2 M.L.J. 217 at 220. The relevant passage from Lord Diplock’s judgment is set out in the text to note 124 infra. 114 [1983] 2 Lloyd’s Rep. 356. In this case, Straughton J. applied English law as the lex foxi to determine the applicable connecting factor and added that it is the lex fori which defines the content of the connecting factor and whether as defined, the connecting factor links a given issue with one legal system or another. Indeed, his Lordship applied the lex fori to determine whether the English court had jurisdiction to grant leave to the plaintiffs to issue the writ and serve it out of the jurisdiction. Specifically, the lex fori was applied to determine the import of Order 11 rule 1(1)(f)(iii) of the English Rules of the Supreme Court which was, on the facts of that case, the relevant provision conferring jurisdiction on the English court to grant leave to issue and serve the writ out of the English jurisdiction. 115 (1860) 5 H. & N. 728. 116 This view was expressed by Pollock C.B. in the Court of Exchequer. See (1858) 3 H. & N. 617 at 638. 6 S.Ac.L.J. In Personain Liability & Beneficial Ownership 299 place where the disposition of the ship took place to determine the nature of that disposition and whether the disposition created proprietary rights including beneficial ownership rights in the ship. However, in “The Andres Bonifacio”, the Court of Appeal saw the issue of beneficial ownership as one inextricably linked with the question of a claimant’s right to bring a particular kind of proceedings, viz., the action in rem, in the Singapore court and hence governed by the lex fori.117 The link being that unless the ship is beneficially owned by the relevant person, there was no right to bring an action in rem against the particular ship. For good measure, the court took the view that as the issue of beneficial ownership is jurisdictional in nature, in the sense that it determines whether the court could exercise its admiralty jurisdiction in rem against a ship, it is a connecting factor and according to Singapore conflict of laws rules, the lex fori governs the definition of the connecting factor.118 The definition of the connecting factor is the definition of beneficial ownership of the arrested ship. Thus, the lex fori governs the matter of the type of ownership which would be regarded as falling within the concept of beneficial ownership as used in section 4(4) of the HCAJA. The first ground adopted by the court in “The Andres Bonifacio” as mandating that the lex fori is to be applied to determine the beneficial ownership of the arrested ship is founded on the conflict of laws rule that “whatever relates to the remedy to be enforced is to be determined by the lex fori.”119 The rule that matters pertaining to the remedy available to enforce legal rights is to be decided by the lex fori is as ancient as it is venerable.120 It was applied by the House of Lords as early as 1837 in the case of Don v. Lippmann.121 The rule was referred to with approval in “The Halcyon Isle”, a decision of the Judicial Committee of the Privy Council hearing an appeal from Singapore. Indeed, in “The Halcyon Isle”, Lord Diplock observed that: “... any question as to who is entitled to bring a particular kind of proceedings in an English court,122 like questions of priorities in 117 In so framing the issue, the court relied on Lord Diplock’s judgment in “The Halcyon Isle“ [1980] 2 M.L.J. 217 at 220, see, infra, text to note 124. 118 The court applied “The T.S. Havprins” [1983] 2 Lloyd’s Rep. 356. See, supra, note 114. 119 Per Lord Brougham in Don v. Lippmann (1837) 5 Cl. & Fin. 1 at 13. It suffices to say that Singapore courts adopt English rules of conflict of laws as part of the local law, see “The Asian Plutus” [1990] 1 M.L.J. 449 and Pacific Electric Wire & Cable Co. Ltd. & Anor. v. Neptune Orient Lines Ltd. (Toko Kauin Kaisha Ltd., third party and Prima Shipping Sdn. Bhd., fourth party) [1993] 3 S.L.R. 60. 120 The law reports are replete with cases where the rule was applied, see inter alia, Williams v. Jones (1811) 13 East 439; The British Linen Company v. Drummond (1830) 10 B. & C. 903 and Huber v. Steiner (1835) 2 Bing. (N. C.) 202. 121 (1837) 5 Cl. & F. 1. 122 Emphasis added by the author. 300 Singapore Academy of Law Journal (1994) distribution of a fund, is a question of jurisdiction. It, too, under English rules of conflict of laws falls to be decided by English law as the lex fori. Their Lordships therefore conclude that, in principle, the question as to the right to proceed in rem against a ship as well as priorities in the distribution between competing claimants of the proceeds of its sale in an action in rem in the High Court of Singapore falls to be determined by the lex fori,123 as if the events that gave rise to the claim had occurred in Singapore.”124 As the ability to effect arrest of a ship to obtain security for one’s claim is remedial in character, the availability of an action in rem under section 4(4) of the HCAJA is properly characterised as a remedy. The right to arrest a ship to secure a claim under section 4(4) of the HCAJA is a specific remedy available in the Singapore court for the enforcement of maritime claims. The right to arrest a ship is but a means of enforcing — by way of obtaining security — a claim. In this regard, the early 19th century case of De La Vega v. Vianna125 is particularly relevant as it concerns the remedy of arrest of a person to enforce a contract at a time when English law as the lex fori permitted such a remedy. The facts of the case fall within a narrow compass. De La Vega, the plaintiff who was a Spaniard entered into a contract with the defendant, a Portuguese. The contract was made in Portugal. As the defendant failed to pay the plaintiff as required under the contract made in Portugal, the latter took the opportunity to cause the defendant to be arrested when both parties visited England. The defendant adduced evidence to show that by Portuguese law — the law which governed the contract giving rise to the defendant’s indebtedness to the plaintiff — the person of a debtor was not liable to arrest at the suit of the creditor. However, the court held that a foreigner who had brought an action in an English court may arrest another foreigner in England to enforce a contract made between the two foreigners in Portugal, The fact that Portuguese law did not permit an arrest of one contracting party as a means of enforcing rights under the contract did not prevent the remedy of arrest available in the English forum wherein the action had been commenced. As Lord Tenterden C.J. (later to become Lord Abbott C.J.) pointed out: “A person suing in this country must take the law as he finds it; he cannot, by virtue of any regulation in his own country, enjoy greater advantages than other suitors here, and he ought not therefore to be deprived of any superior advantage which the law of this country may confer.”126 123 124 125 126 Emphasis added by the author. [1980] 2 M.L.J. 217 at 220. (1830) 1 B. & Ad. 284. Ibid., at 288. 6 S.Ac.L.J. In Personam Liability & Beneficial Ownership 301 It is submitted that De La Vega v. Vianna provides the closest analogy to the exercise of the court’s admiralty jurisdiction in rem. Indeed, De La Vega v. Vianna supports the view that the right of arrest under section 4(4) of the HCAJA is to be characterised as a remedy of the forum. As the availability of an action in rem to enforce (by way of obtaining security) a maritime claim turns on the issue of beneficial ownership in the ship, the lex fori must perforce govern the issue of beneficial ownership in the ship sought to be arrested. The point being that since the lex fori determines whether an action in rem may be brought against a particular ship, the lex fori must also determine the issue of beneficial ownership in the ship for only where the requirement of beneficial ownership has been satisfied would the plaintiff be entitled to bring an action in rem against the particular ship. In other words, the lex fori governs all questions relating to the availability of the action in rem (in the context of section 4(4) of the HCAJA) against any particular ship. Hence, the lex fori determines whether any given person is vested with beneficial ownership of the ship. Thus, the application of the lex fori by the Court of Appeal in “The Andres Bonifacio” to determine beneficial ownership of the arrested ship is, it is respectfully submitted, entirely correct. Indeed, it has been said that “forum rei sitae ... has jurisdiction to determine the title to movable property”127 and this is founded on the right of the state in which the movable property is situate to authorise its courts to determine the title to movable property situate within its borders. In any event, after “The Andres Bonifacio”, it is clear law that the lex fori shall be applied to ascertain whether beneficial ownership in the ship is vested in the person who would be liable on the plaintiff’s claim in an action in personam. By lex fori, it is meant that body of law — both common law and statutory law — existing in the forum which is relevant to the determination of beneficial or equitable interests in ships. The application of the lex fori to investigate the beneficial ownership of the arrested ship may result in the application of legal concepts which are alien to the law of the place where the ship is registered. This occurred in “The Andres Bonifacio” where the court concluded that beneficial ownership of the ship was in POCI notwithstanding that Filipino law, the country of registration for the ’Andres Bonifacio’, did not recognise the concept of beneficial ownership.128 127 See Pollak on Jurisdiction, 2nd Ed. (1992) at 101. The statement of principle was applied by Bristowe J. in Dias Campania Naviera SA v. MV Al Kaziemah & Ors. (1994) (1) SA 570 at 577. 128 See [1993] 3 S.L.R. 521 at 525F where counsel for PNOC argued that the concept of beneficial owner was not known or recognised in Philippines law. 302 Singapore Academy of Law Journal (1994) III. CONCLUSION Maritime claimants would do well to remember that merchant ships move freely all over the world and in some parts of the world, the ownership of these ships may change hands at the drop of a hat. And the change in ownership of a ship may take place secretly. Of course, the ownership of a ship may be transferred to another with the object of making the ship “arrest-proof” as against claims which do not give rise to maritime liens.129 Since ownership of ships may be transferred without much difficulty, and given that section 4(4) of the HCAJA requires that the ship sought to be arrested be beneficially owned by the person who would be personally liable on the claim, maritime claimants must act swiftly130 to issue a writ in rem against the relevant ship in order to preserve the right to obtain security for their just claims when the opportunity arises. The requirement of in personam liability in section 4(4) of the HCAJA does not require the plaintiff to prove at the outset that he has a sustainable cause of action against the beneficial owner of the ship sought to be arrested. A plaintiff in an action in rem is entitled to pursue his claim to trial however implausible and however improbable his chances of success. However, where an application to set aside the writ in rem is before the court, the plaintiff must show that he has an arguable case. That is to say the court would not set aside the writ in rem unless the defendant can demonstrate shortly and conclusively that the plaintiff’s claim is bound to fail. Under section 4(4) of the HCAJA, the requirement of beneficial ownership in the arrested ship means that the plaintiff has to prove, on a balance of probabilities that the arrested ship is, at the date of issuance of the writ in rem, beneficially owned by the person who would be liable on the plaintiff’s claim in an action in personam. The cases on section 4(4) of the HCAJA show that the courts have drawn a distinction between questions relating to liability on the substantive claim and questions relating to jurisdiction. When the action in rem is defended, the question of liability on the substantive claim may only be decided at the trial of the action. For the purposes of arrest of a ship under section 4(4), the court assumes the correctness of the plaintiff’s allegations of facts 129 The transfer of ownership in the ship must, however, take place, prior to the date of issuance of the writ in rem. Otherwise, the plaintiff may still invoke the admiralty in rem jurisdiction of the court against the ship named in the writ. See In Re Aro [1980] 1 Ch. 196; “The Monica S” [1968] P. 741; Lim Bock Lai v. Selco (Singapore) Pte. Ltd. [1987] 2 M.L.J. 688 and “The Hull 308” [1991] 3 M.L.J. 393. 130 Of course, there may be difficulties in identifying the contracting carrier or the party who has undertaken liability for the supply of goods and/or services to the particular ship. These difficulties may impede the ability of claimants to act with expedition. With regard to the difficulties associated with identifying the contracting carrier, see David Chong Gek Sian, “Unravelling the Identity of the Carrier” [1994] 6 S. Ac. L.J. 182. 6 S.AcL.J. In Personam Liability & Beneficial Ownership 303 relied on as founding his claim against the relevant person.131 In contradistinction, questions relating to the court’s admiralty jurisdiction132 such as the beneficial ownership of the ship must be resolved before the trial of the action whenever an application133 is made to challenge the exercise of the in rem jurisdiction against a ship. Where there is a challenge to the court’s exercise of in rem jurisdiction against a ship on the ground that the arrested ship is not beneficially owned by the relevant person, the court is entitled to investigate the beneficial ownership of the arrested ship. In investigating beneficial ownership of a ship under arrest, the court may, in appropriate circumstances, pierce or lift the corporate veil of the registered owners of the ship, the corporate veil of the relevant person and, if need be, the corporate veil of the corporate shareholders of the registered owners of the ship. However, as was pointed out by the Singapore Court of Appeal in “The Andres Bonifacio”, “there must be special circumstances to exist before lifting the corporate veil, such as the presence of a facade or sham set up to deceive ....”134 In the determination of beneficial ownership in the ship for the purpose of invoking the court’s admiralty jurisdiction in rem, the law applicable is that of the lex fori. The twin requirements of in personam liability and beneficial ownership in section 4(4) of the HCAJA mean that only ships beneficially owned by the person who would be personally liable on the plaintiff’s claim are subject to arrest. The court is empowered to exercise its admiralty jurisdiction in rem against such ships and jurisdiction asserted by means of an arrest of a ship is not an exorbitant jurisdiction. To adopt the language of Goff J. (as he then was), shipowners who permit their ships to trade in foreign territories must be taken to have exposed their ships to the possibility of arrest.135 And the arrest of a ship to secure a maritime claim is a procedure widely accepted by the maritime nations of the world. DAVID CHONG GEK SIAN* 131 Different considerations obtain where an application is made to set aside the action in rem under Order 18 rule 19 of the Singapore Rules of the Supreme Court (1990 Edition) and/or under the inherent jurisdiction of the court on the ground that on the facts as alleged, no reasonable cause of action (in the sense that the hopelessness of the plaintiffs claim is beyond doubt) is disclosed. 132 It is also pertinent to point out that the question of whether a claim as alleged is one that falls within the lettered sub-paragraphs of section 3(1) of the HCAJA is a jurisdictional one. 133 Under Order 12 rule 7 (read with Order 70 rule 2) of the Singapore Rules of the Supreme Court (1990 Edition), the defendant may enter an appearance to the action in rem and apply to set aside the writ in rem on the ground of lack of jurisdiction and/or improper invocation of the in rem jurisdiction of the High Court. 134 [1993] 3 S.L.R. 521 at 531. 135 See “The I Congreso Del Partido” [1978] 1 Q.B. 500 at 534G. * LL.B. (NUS); LL.M. (London); Senior Lecturer, Faculty of Law, National University of Singapore; Advocate & Solicitor of the Singapore Supreme Court.