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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.”
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Singapore Academy of Law Journal
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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.
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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.
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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.
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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.
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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.
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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.”
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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”.
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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.
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(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.
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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.