The Nazym Khikmet
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,I,V |
| Judgment Date | 23 May 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0523-13 |
| Date | 23 May 1996 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | QBADI 96/0177/B |
[1996] EWCA Civ J0523-13
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION (ADMIRALTY COURT)
(MR JUSTICE CLARKE)
Royal Courts of Justice
Strand
London WC2
The Master of the Rolls
(Sir Thomas Bingham)
Lord Justice Evans
Lord Justice Thorpe
QBADI 96/0177/B
MR I MILLIGAN QC (Instructed by Clyde & Co, London EC3M 1JP) appeared on behalf of the Appellants.
MR N TEARE QC (Instructed by Lawrence Graham, London WC2R 1JN) appeared on behalf of the Respondents.
In this appeal by the plaintiffs against a decision of Clarke J made on 30 November 1995 there is one issue: whether the defendants were the beneficial owners as respects all the shares in the ship ZORINSK on 10 January 1995 when the writ in these proceedings was issued.
The plaintiffs claim as owners or parties interested in a cargo of tobacco damaged (as they claim) in the course of carriage from India to the Ukraine in 1993 on board the ship NAZYM KHIKMET.
The defendants are sued as the parties liable on that claim in an action in personam. They are the Black Sea Shipping Company, known in these proceedings as Blasco.
The plaintiffs issued their writ in this action on 10 January 1995 and arrested the ship ZORINSK at Newport, Gwent, on 27 October 1995. She was not the ship involved in the carriage giving rise to the plaintiffs' cargo claim, so the validity of the arrest depends on the ZORINSK having been, when proceedings were issued, in the beneficial ownership of Blasco. Both Blasco and the State of Ukraine contended before the judge that the ZORINSK had not, on 10 January 1995, been beneficially owned by Blasco, and he accepted this contention. The plaintiffs appeal.
By section 20 (1)(a) of the Supreme Court Act 1981 the Admiralty jurisdiction of the High Court includes jurisdiction to hear and determine any of the questions and claims mentioned in section 20(2). Those claims include "(g) any claim for loss of or damage to goods carried in a ship" and "(h) any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship". Section 21(1) of the Act provides that subject to section 22 (which is not here relevant) an action in personam may be brought in the High Court in all cases within the Admiralty jurisdiction of that court. Section 21(4) provides:
"In the case of any such claim as is mentioned in section 20 (2) (e) to (r), where —
(a) the claim arises in connection with a ship ; and
(b) the person who would be liable on the claim in an action in personam ("the relevant person") was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship,
an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against —
(i) that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise ; or
(ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it."
In the present case it is common ground that the plaintiffs' claim arises in connection with a ship, the NAZYM KHIKMET. It is also common ground that Blasco is the party who would be liable on such claim in an action in personam, since when the cause of action arose it was in possession or in control of that ship. It follows that under subsection (4), an action in rem may be brought against any other ship of which, at the time of bringing the action, Blasco was the beneficial owner as respects all the shares in it. So it is that the question arises whether, at the time of action brought, Blasco was the beneficial owner as respects all the shares in the ZORINSK.
II
The predecessor of section 21 (4) of the 1981 Act was section 3(4) of the Administration of Justice Act 1956. That section was, subject to immaterial differences of wording, to the same effect as section 21(4), save that in the provision equivalent to subsection (4)(i) the words "or the charterer of it under a charter by demise" were not included.
Section 3(4) of the 1956 Act gave rise to two important decisions: The Andrea Ursula [1973] QB 265 and I Congreso del Partido [1978] QB 500. In the earlier case ship repairers arrested a vessel to recover the cost of work which they had done on it. The order for the work had been given by the demise charterers of the vessel, who were still the demise charterers at the time when the cause of action arose and when the arrest took place. The question was whether the demise charterers were, as such, beneficial owners of the vessel as respects all the shares therein within the meaning of the subsection. For reasons very helpfully summarised by Goff J in the later case at 537 G to 538 D, Brandon J held that they were, rejecting the suggestion that the word "beneficially" had been included before the word "owned" in section 3(4) simply to make plain that equitable as well as legal owners of a vessel were intended to be covered. In the later case, cargo owners arrested a vessel other than that in connection with which their claim arose, alleging that the party liable to them in an action in personam was, although not the owner of the arrested vessel, the beneficial owner of her. Thus Goff J had to reconsider whether the expression "beneficially owned" bore the expanded meaning given to it by Brandon J or whether it bore the more restricted meaning which he had rejected. Goff J concluded (at page 542 A):
"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."
It was following these decisions that Parliament enacted section 21 of the 1981 Act, making the amendment already noted in subsection (4)(i). This made plain that the ship giving rise to the claim could be the subject of an action in rem if, at the time when the action was brought, that ship was beneficially owned or demise-chartered by the party against whom the claim in personam lay. To that extent, Parliament gave effect to the decision of Brandon J on the facts before him, and so corrected a discrepancy which he pointed out between the language of the subsection and the language of the Convention to which the subsection was intended to give effect. The amendment was, however, limited to inclusion of a demise charterer ; the expression "beneficially owned" was not amended ; and Parliament continued to restrict claims against sister ships to ships of which the party liable in an action in personam was at the relevant time the "beneficial owner". In our judgment the effect of the amendment made, and the amendments not made, in the 1981 Act is clear: Parliament accepted the view of Goff J that an amendment was necessary if demise charterers were to be covered by subsection (4)(i), and accordingly made that amendment to give effect to the Convention ; it did not intend demise charterers to be covered by subsection (4)(ii), which indeed the Convention did not require ; and it must be taken to have endorsed the ruling of Goff J on the meaning of "beneficial ownership", since otherwise it would have been bound to legislate to reverse his conclusion on that point.
For purposes of this case, we conclude that the court must give subsection (4)(ii) the meaning which Goff J gave to it. It is accordingly necessary to enquire whether, when action was brought, Blasco was, under the law to which it was subject, what English law would regard as the beneficial owner as respects all the shares in the vessel ZORINSK.
III
The evidence before the judge made reference to several legal provisions and instruments relevant to the issue between the parties. The more important are the following.
The Merchant Shipping Code of the USSR remained in force at all material times without substantial amendment. Among its provisions were the following:
"Article 4.
The main organisations having operative management of seagoing ships used for carriage of goods, passengers, luggage, and mail shall be the Sea Shipping Lines subordinated to the Ministry of the Merchant Marine of the USSR …
Article 10
Within the meaning of this Code a shipowner is the person who exploits the ship in his own name, whether as the owner or on any other legal basis.
Article 19
In the USSR ships shall be in the ownership of the State or in the ownership of collective farms or other co-operative or social organisations …
Article 20
No arrest of, or levy of execution on, ships which are in the ownership of the Soviet State may be effected without the consent of the Council of...
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