MODES OF EXERCISE OF ADMIRALTY JURISDICTION

MODES OF EXERCISE OF ADMIRALTY JURISDICTION <!--[if gte mso 10]> MODES OF EXERCISE OF ADMIRALTY JURISDICTION By Aga Faquir Muhammad, Advocate, Supreme Court of Pakistan, Karachi The Jurisdiction The High Court of Sindh and High Court of Baluchistan have jurisdiction to grant such relief as are provided under Admiralty Jurisdiction of the High Court Ordinance, 1980 (hereinafter referred to as the Ordinance, 1980), Merchant Shipping Ordinance, 20011* or under any other law and any other jurisdiction connected with ships in respect of things done at sea. Some of the other laws connected with the ships are Ports Act 1908, Karachi Port Trust Act, 1886, Port Bin Qasim Authority Act, 1973, Customs Act, 1969, Carriage of Goods by Sea Act, 1925: *1. PLD 2002 Supplement Federal Statutes 1; Gazette of Pakistan (Extraordinary) Islamabad dated 3rd October, 2001 [F.No.2(1)/2001 Pub.]. The two major ports i.e. Karachi and Bin Qasim lie within the territorial jurisdiction of the High Court of Sindh. The principal seat of Sindh High Court is at Karachi. Gaddani ship breaking yard is situated within the territorial domain of High Court of Balochistan. The proposed Gawador Port shall lie within the domain of Baluchistan High Court. Quetta is the principal seat of Balochistan High Court. All foreign merchant ships and persons fall under the jurisdiction of a coastal State as they enter its waters, subject to the right of "innocent passage". The coastal State is free to exercise jurisdiction over such ships in respect of matters, the consequences of which extend beyond the ships. Such ships are subject to the local jurisdiction in criminal, civil and administrative matters Assuming jurisdiction, in respect of maritime claims, the foreign merchant ships lying in the territorial waters of Pakistan, can be arrested and detained for the enforcement of maritime claims. The Ordinance, 1980 is not applicable and cannot be construed to arrest, detain or sale any of the ships or aircrafts of the Pakistan Navy or the Pakistan Air Force or of any cargo or other property belonging to the Federation of Pakistan. Admiralty Jurisdiction is a special jurisdiction and can only be invoked for the causes, questions or claims as stated in section 3 subsection (2) of the Ordinance, 1980. Suits filed under the Admiralty Jurisdiction of the High Court, if do not fall under the Ordinance, 1980 are transferred to the ordinary civil original vide of the High Court and may be transferred to the Courts having pecuniary jurisdiction. The Courts in such cases discharge the warrant of arrest and may also dismiss the suit if a wrong vessel or person has been sued. The power of the Court is plenary and unlimited unless it is expressly or by necessary implication curtailed. The Jurisdiction under the Ordinance, 1980 is limited and restricted to the claims specified under the Ordinance. Claims and entitlements cannot be enlarged by adding words which do not find place in the Ordinance, 1980. Even the parties by any private agreement cannot undertake to submit jurisdiction to a Court. It is a well‑settled law that parties cannot by agreement submit to the jurisdiction of a particular Court when the law does not empower such Court to adjudicate the type of claim made. In an unreported case (Masoomi Enterprises Pakistan (Pvt.) Ltd v. Ping Tan Fishery Company2), Mr. Justice Sabihuddin Ahmed of Sindh High Court, while dismissing the appeal, stated that:‑ 2 . Admiralty Appeal No.8/2000. "The jurisdiction to proceed against a vessel in rem is a special jurisdiction conferred upon the High Courts under the Admiralty Jurisdiction of High Courts Ordinance, 1980 and can only be invoked under the circumstances clearly stated in the Ordinance. Moreover, it may be added that even the penalty clause relied upon by learned counsel only purports to enable the appellant to seek arrest of the Trawlers which were the subject‑matter of the agreement and not any other vessel even if it belonged exclusively to the respondent No. 1." Types of Admiralty actions. Actions in admiralty are of two types: in personam and in rem. The action in rem and action in personam are distinct. In case of former, it is the proceeding against ship, whereas in the latter it is the proceedings inter parties. In personam actions, suits are typical of any other jurisdiction or branch of law. In rem actions are little known outside of admiralty law. It is important to note that, while a suit in personam can be brought to the Court having jurisdiction, in rem actions can only be brought in the High Court as a Court of admiralty or in a special Court authorized under the law. Mode of exercise of Admiralty jurisdiction under the Ordinance 1980 Admiralty actions can be against the vessel or res, i.e. the action in rem or directly against the person allegedly at fault i.e. action in personam. Section 4 of the Ordinance, 1980 states the two modes of the exercise of Admiralty jurisdiction. Section 5 of the Ordinance, 1980 spells out when action in personam is sustainable. Action in Rem The action in rem is action against a ship. Under the Admiralty law, action may be against the rem or more particularly against the res. The vessel itself is not the only res against which action may be taken; cargo, freight and the sale proceeds are instances of other res. Under admiralty proceedings, in some cases action may be against cargo or freight to enforce maritime and other claims in rem against a ship. In rem actions, the ship and in some cases, the cargo bunkers and freight, or the proceeds of the judicial sale is the defendant. Action in rem can also be exercised against the sister ship. It provides pre‑judgment security for the claim against the defendant ship and to secure the appearance of the person interested in the ship. It is enforced by the arrest of the res. Action in rem is, however, not permitted in respect of a ship belonging to a foreign State, unless a foreign State owned ship is in use or intended for use for commercial purposes when the cause of action arose. The flag, registry, ownership of the ship or the place where the claim arose, do not restrict Admiralty jurisdiction in rem of the High Courts. It is an alternative action. In rem actions may have advantages which are lacking in an action in personam for the reason that instituting a suit in personam against the owner of a ship is expensive and time consuming and it is difficult to serve personal summons outside the jurisdiction of the Court where the suit is instituted. To issue a writ in rem and to wait for arrest of that ship to come within the issuing Courts territorial jurisdiction is an excellent method of getting the owner of the res within the control of the Court. It is the lien resulting from the personal liability of the owner of the res. It cannot be brought to recover damages for injury caused to a ship by the malicious act of the master of the co-defendant ship3 or for damage done at a time when the ship was in the control of third parties by reason of compulsory requisition. If the ship is allowed by her owner to be in the possession and control of charterer, action in rem can be proceeded to enforce maritime liens which arose whilst the ships were in control of such third parties. Action in rem has been defined by the Courts in a number of cases. In a recent decision of the Supreme Court of Pakistan (Yukong Ltd vs. m.t. Eastern Navigator4), Mr. Justice Nazim Hussain Siddiqui held that: 3.[1897) AC 97. 4. PLD 2001 SC 57. "Action in rem primarily is against the property which eventually may be arrested and sold out to satisfy the claim. Such action is resorted to in respect of any claim or question within the Admiralty Jurisdiction irrespective of the fact that it is in the nature of a maritime lien or not. In fact, it is a proceeding against the ship. In the words of Lord Watson the act on is a remedy against the corpus of the offending ship. Sir George Jessel M.R. described the process in rem in the following terms: You may in England and in most countries proceed against the ship. The writ may be issued against the owner of such a ship, and the owner may never appear, and you get your judgment against the ship without a single person being named from beginning to end. That is an action in rem, and it is perfectly well‑understood that the judgment is against the ship." To understand the nature of action in rem, we have to go through the two theories relating with action in rem i.e. the personification theory and the procedural theory. According to the `personification' theory, ship is herself a `person'. The ship herself is considered as 'wrongdoer'. The ship is regarded as both the source and limit of liability. It is an action against the "wrongdoing ship" as a person. The liability of the defendant is limited in rem actions and such is limited to the value of res. If no appearance in an action in rem is made, the only remedy is sale of the arrested res without right to obtain any unsatisfied balance claim amount. This theory speaks out that action in rem is against the property, which eventually may be arrested and sold out to satisfy the claim. Such action is resorted to in respect of any claim or question within the Admiralty Jurisdiction irrespective of the fact that it is in the nature of a maritime lien or not. It is a proceeding against the ship. Action in rem is targeted against the ship considering it as a person. The ship, rather than the ship-owner, is the true defendant in an action in rem5. On the other hand the second theory, the `procedural' theory says that action in rem is in fact against the owners of the ship and the writ issued against a ship is merely a mean of enforcing the presence of the owner of the ship. It is a procedural device to secure defendant's personal appearance in the suit. It is not the institution that makes it a proceeding in personam but the appearance of the defendant. This theory is dominant and is fast emerging; it says that in rem actions on the appearance of the owner of the res for defending on the merits transform it into an action in personam. In such a case the judgment also modifies into a judgment in personam i.e. such liability is not limited to the value of the res6 and can be enforced against the party appearing. It should be well understood that the nature of the claim in rem has been a matter of controversy. Both the theories work in their own domains and are not overlapping. The personification theory is true till the owner of the vessel appears. It was first explained in The Dictator7 and followed in The Gemma8 wherein the Court held that the persons appearing before the Court become parties to the action, and thereby become personally liable. The decision in The Burns9 further clarified the position regarding the appearance of the ship-owner. Similar decision was given in The August10. In Bangladesh Shipping Corporation us. m.v. Nedon11, the divisional bench of the High Court relying on The Banco12, labeled the ship-owners as the true defendants in Admiralty Actions, relevant para is quoted as under:‑ 5. The Longford (1889) 14 P.D. 34 (C.A.); The Burns (1907) P. 137 (C.A.); The Johanms Vatis (1922) P. 213. 6. The Gemma (1899) P.285 (CA). 7. (1892) P.304; (1891‑1894) All ER 360. 8. (1899) P.285; (1895‑1899) All ER 596. 9. [1907] P 137. 10. (1983) 2 AC 450. 11. PLD 1981 Kar.246. 12. (1971) P.137; (1971) 1 All ER 524; (1970) 1 Lloyd's Rep. 49. "The real defendants are described as owner of or persons interested in the ship, and the writ of arrest may be effected by serving it on the ship which may be accepted by the Master, owner or by nailing or pasting it on the Mast or other conspicuous part of the ship. As a consequence of such service if the owner or any person interested in the res enters appearance and puts up the defence then the person so appearing becomes party to the action and thereby becomes personally liable for whatever may be decreed against him. If no appearance is entered the action remains as an action in rem operating only against the ship arrested and if a judgment is passed in favour of the plaintiff it can be enforced by sale of the ship but not against the owner personally or any of his property." Similar view, relying on the The Banco is taken by the Supreme Court in Yukong Ltd vs. m.t. Eastern Navtgator13. Lord Denning made following observations in the appeal:‑‑ I ought to pause here to add a word so as to avoid confusion. If the defendant enters an appearance, the action in rem proceeds just as an action in personam. If judgment is entered against the defendant, it can be executed against any of his property within the jurisdiction, be it his other ships or any other goods. A writ of fieri facias, or other writ of execution, can be issued against his property, but only after judgment has been obtained. The presence, for the purpose of defending the res, of the Master of the vessel, mortgagees, persons having possessor, liens, or competing maritime liens or any other person interested in res not claiming to be the owner/charterer, cannot be treated as attendance by the owner and in such case the action remains an action in rem. `Procedural' theory is dominant The House of Lords in the Republic of India and others vs. India Steamship Company Ltd14, popularly known as The Indian Grace case, held that `procedural theory' is the prevailing and dominant theory. House of Lords in The Indian Grace while discarding `personification theory' held that:‑‑ 13. PLD 2000 SC 57. 14. Republic of India vs. India Steamship Co. Ltd. (1998) A.C.878; [1997] UKHL 40; (1997) 4 All ER 380; (1997) 3 WLR 818. "This was the procedural theory which subsequently became dominant. The historical analysis in The Dictator has been criticised: Wiswall, The Development of Admiralty Jurisdiction and Practice since 1800, 1970, Chapter 6. On the other hand the foremost historian of Admiralty history has supported it: Select Pleas in the Court of Admiralty, ed., by R.E. Marsden for the Selden Society, 1894, 1xx1‑‑1xx11. The Dictator was followed and endorsed by the Court of Appeal in The Gemma (1899) P 285. It is true that a few years later, in The Burns (1907) P. 137, at 149, Fletcher Moulton L.J. appeared in effect to be repudiating the procedural theory by saying that "the action in rem is an action against the ship" and by acknowledging only that "the action indirectly affects them (the owners)": 149. That observation was made on a point of statutory construction and did not reflect the reasoning of the majority. The reasoning in the, The Dictator prevailed. In The Tervaete [1922] P. 259, Scrutton L.J. said 'that it was established that an action in rem was not based upon the wrongdoing of the ship personified as an offender but was a means of bringing the owner of the ship to meet this personal liability by seizing his property: 270. Atkin L.J. expressed a similar view: at 274. See also The Jupiter [1924] P. 236. In The Cristina [1938) A.C. 485 the House of Lords unambiguously rejected the personification theory, and adopted the realist view that in an action in rem the owners were the defendants. This historical account of the evolution of the procedural theory must be qualified Thomas; op cit, at 7 (n. 40) and 8 (n. 48) has pointed out that the procedural theory does not explain why a maritime lien may be enforced against a bona fide purchaser and that it is not entirely consistent with the fact that certain maritime liens accrue independently of personal liability of the ship-owner. These may be regarded as distant echoes of the personification theory But this case is not concerned with maritime liens. That is a separate and complex subject which I put to one side. Given this general historical perspective, counsel for the plaintiffs acknowledged that the procedural theory became dominant but argued that it tells us nothing about the answer to the question before the House. He said that the procedural theory is a neutral fact. That is unrealistic. The procedural theory stripped away the form and revealed that in substance the owners were parties to the action in rem." To understand the above observations made by the Lord Steyn, it is better to go through the facts of the case. Briefly the facts are that in June, 1987 the vessel Indian Grace belonging to India Steamship Company Limited (Respondent) loaded a cargo of munitions from Sweden for carriage to Cochin, India to deliver to the Indian Government (Appellant). While enroute to Cochin fire occurred in one of the hold of the vessel. Fire was extinguished with water and the crew also has to jettisoned artillery shells etc. The vessel was surveyed at Cherbourg. The cargo was repacked. The vessel arrived at Cochin in early September. The Indian Government filed a suit in Cochin against the ship-owner, seeking damages for the 51 shells and 10 charges which had not been delivered. The owners defended the suit. On 25th of August, 1989 the Indian Government brought an action in rem against same ship-owner in England. When the English action in rem was launched no judgment in personam in India had been obtained. The judgment in the Indian court was delivered on 16th of December, 1989 and the ship-owner was held liable. On May 4, 1990 the claim form was served on Indian Grace's sister ship Indian Endurance and she was arrested in England. The defendant applied to strike out the English action on the ground that the dispute is between same parties and cause of action is same (principle of res judicata) plaintiff can not bring an action in another court. The plaintiff argued that the section 34 Civil Jurisdiction and Judgments Act, 1982, U.K. c. 27 does not apply because they are not same parties Le action in India is in personam against the owner of the vessel and action in English in rem against the wrongdoing ship. The House of records teas held, for purposes of section 34 of English Lau, (principle of res judicata) that action in rem, when the owner submitted to the jurisdiction of English courts is infact against the owners of the ship. In reaching this conclusion Lord Steyn said that orthodox analysis of the action in rem put forward over a century can no longer be supported. Some writers, criticised that the decision failed to apply settled principles of the action in rem, It is said after the decision the established rules are open to debate. Couples of things are to be kept in mind before applying the observation in the above case. Firstly the ship-owner submitted to the jurisdiction of the Court and as such the action become action in personam i.e. the plea of limited liability to the extent of the value of the res was not available to the owners and if any decree would have been issued against the vessel, the plaintiff can execute for the balance of the same if not satisfied from the value of the res. Secondly the action was for a simple maritime claim and not for a maritime lien which travels with the ship. In the above case, if the action in rem which was instituted in England was defended by any other person than the ship-owner, like the Master or any other person interested in res, perhaps the observations by Lord Steyn may have been different. Similarly the decision would have been more interesting if the maritime claim was of the nature of maritime lien. The decisions of the House of Lords (after the partition of Pakistan) are not binding on the Pakistani courts but only a good source for deciding cases. `Quasi' in rem claims A new concept contrary to what is termed as true `in rem' claims has emerged recently, termed as `quasi' in rem claims. In first type of action in rem a plaintiff actually enforces a maritime lien whereas in the other type of in rem claim the plaintiff simply enforces a personam liability. Maritime claim are `quasi' in rem claims. Ordinary maritime claims are enforced under a statute like the Ordinance, 1980 and usually for enforcing such claims the plaintiff has to show that the claim arise in connection with a ship and the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner of charterer of, or in possession or in control of the ship and the ship arrested is beneficially owned with respect to majority share therein by that person. `Quasi' in rem actions require in personam connection between the claim and the ship at the time when action is brought. In `quasi' in rem claims the plaintiff firstly has to establish personal liability in connection with the ship and only after that his claim is sustained by the Courts. On the other hand, under the `true' in rem actions, plaintiff is under no obligation to establish personal liability in personam between the ship and claim. Even in The Indian Grace, Lord Steyns left untouched actions in rem enforcing maritime lien, the one which is recently known as `true' in rem actions, which can be well judged from the following lines of the judgment‑‑ "This historical account of the evolution of the procedural theory must be qualified. Thomas; op cit, at 7 (n. 40) and 8 (n. 48) has pointed out that the procedural theory does not explain why a maritime lien may be enforced against a bona fide purchaser and that it is not entirely consistent with the fact that certain maritime liens accrue independently of personal liability of the ship owner. These may be regarded as distant echoes of the personification theory. But this case is not concerned with maritime liens. That is a separate and complex subject which I put to one side." In `true' in rem actions there is no need to establish the personal liability of the ship-owner, claim is enforceable regardless of the ownership. In other words in `true' in rem actions, no personal liability is introduced and the claim is actually against the ship itself. The thin line of distinction between the `quasi' and `true' in rem actions is in fact the concept of maritime lien. Action in Personam Section 4 of the Ordinance, 1980 deals with the mode of exercise of Admiralty jurisdiction. Subsection (1) clearly says that Admiralty jurisdiction may (subject to section 5), in all cases, be invoked by an action in personam. Subsection (6) of section 5 says that the section 5 applies only to the cases enumerated therein. The said provisions of law can be recapitulated as under:‑ The Admiralty jurisdiction may, in all cases, be invoked by an action in personam, except:‑ (a) in cases of claim for damage, (b) loss of life, personal injury caused by ship or arising out of collision between ships or out of carrying out of or omission to carry out a manoeuvre, in case of one or more of two or more ships or out of non‑compliance, one the part of one or more of two or more ships with the regulations made under the Merchant Shipping Ordinance, 2001 unless:‑ (i) the defendant has his ordinary residence or place of business in Pakistan, or (ii) the cause of action arose within the internal or territorial waters of Pakistan, or (iii) action arising out of incident or series of incidents is proceeding in the Court or has been heard and determined in the Court. As stated above, in personam actions are typical of ordinary civil jurisdiction. Much has also been said along with action in rem supra. The Court shall not entertain an action in personam to enforce a claim until any proceedings previously brought by the claimant in any Court outside Pakistan against the same defendant in respect of the same incident or series of incidents have been discontinued or otherwise came to an end, as such is hit by the principle of res judicata. If a proceeding is initiated against the owner and for the same cause of action, another against the res of the same owner, the appearance by the owner of the res in the second case would attract of principle of res judicata, as the action in rem on owner's appearance would be treated as action in personam. In fact, even in actions in rem the real defendants are the owners of the vessels. In action in personam the liability of the owners is not limited. The decree can be executed personally. If the relevant contract, bill of lading etc‑ stipulates that the dispute to be decided in a country in which the carrier had its principal place of business, the ship in rem can be arrested and in such cases stay of further proceedings may be granted subject to satisfactory arrangement of security to the satisfaction of the Admiralty Court. Judgment in rem and judgment in personam Actions in rem are actions against the res and judgment of such operates solely in rem i.e. it may be enforced only against the res. Judgment in rem means a judgment which does not affect anyone who does not have any interest in the res and if he does have such an interest the judgment only affects him to the extent of that interest. Judgment in rem is binding on anyone who has an interest even if he is not served with the process or that he took no part in the proceedings being not informed of the proceedings. Judgment in rem operates and binding on the whole world unlike judgment in personam which operates and binding on the parties to the claim. Judgment in rem as envisaged in Article 55 of the Qanun‑e‑Shahadat Order, 1984 is conclusive proof of the fact decided. A judgment in rem is conclusive against the world as to the status of the res. A judgment in personam can only be evidence but cannot be used for the purpose of preventing the other side from proving facts which he sets up. The common jurisdictions in which judgment operates as judgment in rem are Admiralty, Probate, Matrimonial, Insolvency and Company Jurisdictions. The judgments in rem, may it be a final order e.g. an order for sale of the vessel, are conclusive proof of a right, legal character, entitlement to a person. Judgments in rem are limited in scope but unlimited in effect. They determine the status of person or thing and such judgment is conclusive evidence for and against all persons, whether privies or strangers to matters actually decided. Generally speaking notices of such proceedings are caused to be published and it is open to the party affected to appear and contest such proceedings.15 15. PLD 1975 Kar 978. Judgment in rem is final and binding being conclusive proof contrary to evidence. Such judgments confer or declare legal right or character., and the existence of such legal character, or title of person to anything is obligatory and compulsorily binding upon the entire world. Courts therefore, have to take more care and attention before passing a judgment in rem. The usual modes of such precautions are publication of notice in newspapers having wide circulations, pasting of notice on court notice board, sending individual notices to concerned parties etc. Other precautionary measure that Courts take is to provide an opportunity to the parties who are desirous to cross‑examine other parties whose claims are on higher side. Under Admiralty law the practice is that all suits/claims are heard together and same are decreed only after setting priorities. Such is done by providing opportunity to cross- examine each other so that the claims lower in rank in priority may not be deprived of their due claim on account of exaggerated claims. All such procedures are adopted as the judgments under Admiralty Jurisdiction are judgments in rem and as written earlier are binding on anyone who has an interest even if he is not served with the court process. Arrest of sister ship In certain circumstances, instead of the offending ship, any of the sister ship of the offender ship can be arrested under section 4 subsection (4) of the Ordinance, 1980. `Sister ship arrest' is also known as `alternative ship arrest'. The statutory provision sanctions arresting of sister ship as opposed to the seizure of the ship involved in the wrongdoing. The provision is commonly known as `sister ship' clause. However, it is better to call 'sister ship arrest' as `alternative ship arrest' as it is not necessary that the offender ship) and the arrested ship are really `sister ships'. There may be situations where the cause of action arose against the charterer of a ship (offender ship) and the writ of arrest is issued against another ship beneficially owned by the charterer Undoubtedly the relationship between the offender ship and the ship arrested is not that of sister ships. Before filing a suit for the claim on an offending ship against her sister ship one has to take into consideration the existing facts at the time when the cause of action arose in connection with the offending ship and the fact at the time when action is brought. In order to invoke the jurisdiction against a ship within its jurisdiction as a sister ship of the offending ship, one has to establish that:‑ (1) the claim falls in any of the clauses as mentioned in clause (e) to (h) and (j) to (q) of subsection (2) of section 3 of the Ordinance arising in connection with the offending ship, namely:‑ ‑‑ claim for damage received by a ship [clause (e)] ‑‑ claim for personal injury etc. [clause (9)] ‑‑ claim for loss of or damage to goods carried in a ship [clause (g)] ‑‑ claim arising out of any agreement relating to the carriage of goods etc. [clause (h)] -- claim of towage [clause (j)] ‑‑ claim of pilotage [clause (k)] ‑‑ claim for necessaries [clause (1)] ‑‑ claim of the repair, dock charges, due etc. (clause (m)] ‑‑ claim for wages (clause (n)] ‑‑ claim in respect of disbursements [clause (o)] -‑ claim of general average act [clause (p)] ‑‑ any claim arising out of bottomry or respondentia [clause (q)] (2) at the time of presentation of suit; the sister ship is beneficially owned as respects majority shares by the person (owner, charterer, in possession or in control of the ship) who, at the time when cause of action arose, was liable in an action in personam. For initiating an action against the sister vessel, it must be shown that an action in personam arose against a person who was the owner or charterer or having possession or control of an offending ship at that time and that such person now beneficially owns another ship against which an action in rem is proposed. For determination of the person would be liable on a claim in an action in personam under subsections (4) and (5); subsection (9) of section 4 states that it shall be presumed that such person has his ordinary residence or a place or business within Pakistan. The key words in sister ship clause are `beneficially owned in respect to majority shares'. These words are also discussed under the heading `beneficially owned' Historically it is important to mention that in England, prior to section 21(4) of the Supreme Court Act, 1981, section 3(4) of the Administration of Justice Act, 1956 dealt with sister ship arrests. The old English law has not fully appreciated clause 3(4) of the International Convention Relating to the Arrest of Sea‑Going Ships (Brussels) 1952, upon which the said section is based16. The said clause 3(4) of the Convention, 1952 prohibits the arrest of the vessels of the registered owner in the case of demise charter. It states that the charterer and not the registered owner is liable. The said clause reads as under:‑ 16. (1967) 3 All E R 663. `When in the case of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claim. The provisions of this paragraph shall apply to any case in which a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship." The English Judges adopted restricted interpretation instead of liberal. Certain conflicting opinions were pronounced by the worthy Judges. For instance Justice Brandon17 held that a demise charterer was a temporary owner and held him to be beneficial owner in respect of all the shares, whereas another Judge18 did not agree with this view and held that the expression does not include the time charterer. The Pakistani Court accepting the later view, affirmed that the charterer, be it time charterer or charterer by demise, are excluded from the category of persons who beneficially own majority shares in the ship sought to be arrested. Justice Ajmal Mian and Justice Saleem Akhtar in the Supreme Court case of LV.N. Lakhani & Co. v. akatoi Express19, Justice Saeeduzzam Siddiqui in the case of M/s Sunline Agencies Ltd. v. m.v. Psiloritis and others20 and Justice Saleem Akhtar in the case of M/s Arshad Corporation (Pvt.) Ltd. v. m.v. Maersk Astro and others21 concur with the decision of Justice Robert Goff. 17. The Andra Ursula Medway Drydock Co. Ltd. vs. Beneficial Owners of Ship "Andrea Ursula" (1971) 1 All ER 821. 18. I Congreso del Partido (1978) 1 All ER 1169; (1977) 1 Lloyd's Rep 536. 19. PLD 1994 SC 894. 20. 1984 CLC 1553. 21. PLD 1988 Kar. 515. The Pakistani law i.e. Ordinance, 1980 can be termed as nearer to the old English law i.e. Administration of Justice Act, 1956. The new British law i.e. Supreme Court Act, 1981, is different to Pakistani law at-least on account of two things. The section i.e. section 21(4) is reproduced hereunder (underlined for better understanding):‑ "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 1. 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 its shares or the charterer of it under a charter by demise; or 2. any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respect all the share in it." Under new English law the vessel under demise charter can also be arrested. . Similarly the beneficial ownership requirement is coupled with the condition `all' its shares unlike majority (more than 50%) shares under the Pakistani statute. Article 3 of the new International Convention on the Arrest of Ships (Geneva), 1999 (not ratified by Pakistan yet) is also relevant for understanding the concept of sister ship arrest, same is reproduced hereunder:‑ ARTICLE 3 EXERCISE OF RIGHT OF ARREST 1. Arrest is permissible of any ship in respect of which a maritime claim is asserted if: (a) the person who owned the ship at the time when the maritime claim arose is liable for the claim and is owner of the ship when the arrest is effected; or (b) the demise charterer of the ship at the time when the maritime claim arose is liable for the claim and is demise charterer or owner of the ship when the arrest is effected; or (c) the claim is based upon a mortgage or a "hypotheque" or a charge of the same nature on the ship; or (d) the claim relates to the ownership or possession of the ship; or (e) the claim is against the owner, demise charterer, manager or operator of the ship and is secured by a maritime lien which is granted or arises under the law of the State where the arrest is applied for. 2. Arrest is also permissible of any other ship or ships which, when the arrest is effected, is or are owned by the person who is liable for the maritime claim and who was, when the claim arose: (a) owner of the ship in respect of which the maritime claim arose; or, (b) demise charterer, time charterer or voyage charterer of that ship. This provision does not apply to claims in respect of ownership or possession of a ship. The purpose of section 4 (4) of the Ordinance, among other things, is to identify the person or persons whose ship may be arrested. Such identification is a question of fact. The persons referred in the said section are the owners or charterers or the persons having possession or control of the sister ship. The `common ownership' is the important thing that Courts consider. There should be some linkage for affecting an arrest and such linkage should be in accordance with the clauses (a) and (b) of subsection (4) of the Ordinance, 1980 only. In Azhar Ahmed Khan v. m.v. Ashar and others22 it was contended on behalf of the defendants (a new purchaser of the vessel) that clause (a) of subsection (4) of section 4 of the Ordinance, 1980 does not apply as the new purchaser could not have been sued in personam by the plaintiff in respect of his claim of past wages and therefore, suit be, dismissed. The Quetta High Court held that since the claim was for wages, maritime lien was attached with the vessel and for maritime liens subsection (4) of section 4 was not relevant but the proper provision of law is 4(3) of the Ordinance. 22. PLD 1985 Quetta 278 The limitations of subsection (4) would not operate and would not to be inapplicable to rights in rem which accrue under maritime liens. Subsections (3) and (4) of section 4 of the Ordinance, 1980 are quite independent. The question of personal liability of the owner of the vessel does not exist in case of maritime lien attached to a particular vessel. Even after change of hands when there clearly exists no personal liability on the part of the subsequent purchaser but this fact does not absolve the right of a maritime lienee. Where an offending ship is not readily available a maritime lienee may alternatively proceed in rem against another ship in the same beneficial ownership. However, where a maritime lien is attached to a particular vessel and if the litigant wants to arrest any alternative vessel, the condition precedent as manifested by the words whether the claim gives rise to a maritime lien on the ship or not, would operate. The litigant in such case can only arrest the alternative vessel in beneficial ownership within the ambit of subsection (4). It is also to be kept in mind that not all maritime liens authorise sister or alternative ship arrests. Only the maritime liens falling under clauses (e) to (h) and (j) to (q) of subsection (2) of section 3 of the Ordinance authorizes sister ship arrest. Summarily, followings points are to be strictly kept in consideration before arresting a vessel:‑ Where there is maritime lien Condition Which vessel to be arrested? General [subsection (2) of section 3) Only that particular offending vessel Claims falling under (e) to (h) and (j) to (q) of subsection (2) of section 3 i. Particular offending vessel ii. any other ship which, at the time when the action is brought, is beneficially owned as respects majority shares therein by the person who would be liable on the claim in an action in personam and that person, when the cause of action arose, is either the owner or charterer or in possession or in control of the ship Only one ship may be arrested If two ships under the same beneficial ownership of a person came into the jurisdiction and the plaintiff make an application for the arrest of the small ship or ship less in value. .the owner might not appear and in such case the plaintiff will receive the claim limited to the value of the ship. It is thus a practice to bring action against a vessel having more value so that the claim of the plaintiff is satisfied in case the owner does not enter appearance. The plaintiff may mention the names in the writ in rem of the offending ship and all other ships which at that time Le at the date the action is brought belong to the same owner. He may then wait until he finds the ship which is most suitable to arrest keeping in view her age, weight, make and other factors. But it must be subsequently be amended by deleting the names of all the other ships. It is however, essential to note two things;‑ (1) Only one ship may be arrested (2) One ship may be the offending ship or alternatively any other ship in same ownership Two cases are relevant in this context; The Banco23 and The Berny24. 23. (1971) P.137; (1971) 1 All ER 524; (1970) 1 Lloyd's Rep. 49. 24. [1977] 2 Lloyd's Rep. 533. In The Banco, the plaintiff arrested all seven vessels of the defendant including the Banco the offending ship which as claimed by the plaintiff was negligently navigating. Justice Lane discharged the warrants of arrest on the six other vessels and held that only one vessel can be arrested and that too the offending vessel. It was held that the plaintiff may arrest one ship of the defendants only, which may be the offending ship or alternatively, any other ship in same beneficial ownership of the person. The plaintiff preferred appeal which was also dismissed. The value of the Banco was reportedly lower in comparison with the other vessels, which is evident from the statement of the plaintiffs that, "We do not want the Banco; we much prefer, if we can only have one, another of your vessels." While in The Berny it was held that the Admiralty jurisdiction is invoked when the writ is served or where it is `deemed to be served'. Plaintiff may institute proceedings in rem against one or more ships however, it is to be noted that though words in singular include the plural under the law of interpretation, only one ship can be arrested i.e. the warrant of arrest can only be served on a single ship. It would be wrong to force plaintiff to continue an action against one of the ships rather than against the actual offending ship merely on the ground that the sister ship writ was issued prior in time. The provision or the concept of `one ship arrest' is enunciated in clauses (a) and (b) ‑of subsection (4) of section 4 of the Ordinance, 1980. Which is reproduced for ready reference;‑ "(4) In the case of any such claim as is mentioned in clauses (e) to (h) and (j) to (q) of subsection (2) of section 3, 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 of charterer of, or in possession or in control of the ship, the Admiralty jurisdiction of the High 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 majority shares therein by that person; or (b) any other ship which, at the time when the action is brought, is beneficially owned as aforesaid." The words `that ship' authorise the plaintiff to arrest that particular offending ship. Due to non‑availability of the ship at the desired port or for other reasons the plaintiff has a right to seek for the arrest of some other ship under the same beneficial ownership. However, such is alternative as can be well deduced from the word `or' at the end of the clause (a). Such `or' cannot be construed to mean 'and/or' Following para of The Banco is very relevant:‑ "The important word in that subsection is the word `or'. It is used to express an alternative as in the phrase `one or the other'. It means that Admiralty jurisdiction in rem may be invoked either against the offending ship or against any other ship in the same ownership, but not against both. This is the natural meaning of the word `or' in the content." Again in the words 'any other ship' of clause (b), ship is used in the singular form. The word used is `ship' which undoubtedly means `ship' and not 'ships'. In certain countries, but not England arrest of more than one ship is permissible. Beneficially owned There is no definition in the Ordinance of the expression "beneficially owned" as used in section 4(4). It could mean owned by someone who, whether he is the legal owner or not, is in any case the equitable owner. Section 4, subsection (4) clearly indicates that a ship beneficially owned, with respect to majority shares by a party who would be liable to an admiralty action in personam may be arrested. Beneficial ownership is, therefore, a key concept of the law of ship arrest. It refers 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 owner25. Under the Ordinance such person should own as respect of majority shares. The charterer, be it time charterer or charterer by demise are excluded from the persons who beneficially owned majority shares in the ship sought to be arrested. If the view that the word "beneficially owned" may include even a demise charter then the words "as respects majority shares" will be completely redundant. It is well‑settled principle of statute that each and every word of a statute has to be given its meaning and no part of a statute can be treated as redundant or surplus. In Sun Line Agences Ltd. v. m.v. Psiloritis26, time charterers or charterers by demise are excluded from the category of person who beneficially owned as respect majority shares of the ship. They only beneficially possess the ship for the time being subject to the terms of the charter party contract. They do not possess shares in the ship. They do not acquire any right of ownership in the majority shares of that ship. The expression `beneficially owned as respect to majority shares therein' refers 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. The ownership of majority shares may be beneficial or legal is a condition precedent for invoking the jurisdiction under section 4(4). In The St. Merriel27 it was held as under:‑ 25. I Congreso del Partido (1978) 1 All ER 1169; (1977) 1 Lloyd's Rep 536. 26. 1984 CLC 1553. 27. [1963] 1 All ER 537. "If the Administration of Justice Act, 1956 had said "beneficially owned" and stopped there, counsel for the defendants admitted that it might have been arguable that it might have embraced the charterers by demise. "Beneficially owned" is not defined in the Act of 1956; and there are circumstances where a ship is owned by one person that is, true ownership‑‑‑where that person is the only person with a right to sell and yet where the same ship is beneficially possessed, or beneficially controlled, by some other person, such as in this case, where the ship is under charter by demise. But the words of the Act of 1956 are "as respects all the shares therein28", and I conclude that the words are there fur some purpose and that that purpose is to indicate the true owner, that is, the only person with a right to sell all the shares. So that, under this section also I find that, when the action was brought, the defendants were the persons who beneficially owned the ship as respects all the shares therein." 28. As per Ordinance, 1980; 'as respects majority shares therein'. The words 'majority shares therein' and 'by that person' in section 4(4) are of immense importance while deciding the person against whom cause of action arise for invoking the Admiralty Jurisdiction under sub‑clause (a) or (b) of the said section subsection (4). The words 'therein' clearly denote that majority shares should be in the 'ship'. Under the Merchant Shipping Ordinance, 2001 ship is divided into sixty‑four shares29. The shareholders of such ship may be a company30. Each company incorporated under the law, has a distinct legal entity like perpetual succession and a common seal. The shareholders of a company are owners of the shares in such company. However, they are not the owners of the assets of the company. The assets are undoubtedly owned by the company. The shareholders or the members are only liable to contribute to the assets of the company in the event of the company being wound up. The shareholders who buy shares do not buy any interest in the assets of the company, which is a juristic person different from the shareholders. Similarly the words, by that person' indicate that particular person who is liable in personam. To be brief, we can say that if the cause of action arose in personam against a company A and if the action is brought against a ship X owned by the subsidiary31 or associated32 company B, the action would fail as the action is not against 'that person' (company A) but against another person, as two different legal entities cannot be termed as same person. In the recent case of Central Insurance Co. Ltd, v. m.t. Tasman Spirit33, Justice Ata ur Rehman held that the companies have independent legal character. The natural person owns the shares of the company whereas the company owns the properties. From the Indian Jurisdiction, we have the famous case of m. v. Sea Success I vs. Liverpool & London Steamship P & I Association Ltd.34., wherein the Divisional Bench of Bombay High Court, reversed the order of the single Judge and allowed the application for rejection of plaint (Order VII Rule 11 CPC). The single Judge was of the opinion that the averments made in the plaint are sufficient to indicate existence of cause of action which needs to be investigated at the trial and therefore, did not allow the application for rejection of plaint. Though. the plaintiff specfically pleaded in the plaint that defendant vessel is the sister ship of `Sea Ranger' and 'Sea Glory' and is owned controlled by defendant No.2 through its 100% wholly owned subsidiary S.S. Shipping Corp, the Court rejected the plaint and held that S.S. Shipping Corp. is a separate and distinct entity which hold the share in defendant vessel and even if the allegation in the plaint is assumed to be true, the claim of the plaintiff is not legally supported and cannot be said to be showing sustainable right of the plaintiff to sue against the defendant vessel. In The Nazym Khikmet35 the Court held that if some of the attributes and rights of an owner are possessed by someone such never makes that person the legal and beneficial owner of the same. 29. Section 17(a) of Merchant Shipping Ordinance, 2001. 30. Section 17(e) of Merchant Shipping Ordinance, 2001. 31. See Companies Ordinance, 1984 section 3 for meaning of 'subsidiary' and 'holding'. 32. See Companies Ordinance, 1984 section 2(2) for meaning of 'associated'. 33. SBLR 2004 Sindh 414. 34. AIR 2002 Bombay 151. 35. (1996) 2 Lloyd's Rep. 362 (C.A.). Lifting of Corporate Veil To understand the concept of lifting of veil in Admiralty law, the following passage of the judgment in The Aventicum36 by Mr. Justice Slynn would be advantageous: 36. (1978) 1 Lloyd's Rep. 184. "I have no doubt that on a motion of this kind it is right to investigate the true beneficial ownership. I reject any suggestion that it is impossible `to pierce the corporate veil'. I of course remember, as Mr. Howard urges. the case of Saloman v. Saloman & Co., (1897) AC 22, but of course it is plain that section 3(4) of the (Administration of Justice) Act (1956) intended that the Court should not be limited to a consideration of who was the person having the legal ownership of the shares in the vessel. The Court in all cases can and in some case should look behind the registered owner to determine the true beneficial ownership." Courts have applied the theory of appearance to lift the corporate veil', so as to determine where the true beneficial ownership lies. Courts have customary powers to lift the corporate veil when the conception of corporate entity is used for perpetrating of fraud. Where the device of incorporation is used for some illegal or improper purpose, the Courts are always inclined in lift the corporate veil. The Courts have power in some cases to look even further. There are instances where in order to defraud the creditors, the ship-ownerp incorporate one company each for one ship and the shares of such `one ship companies' are handled by a `ship management company' owned by the same ship-owner. Where a `community of interests' is found between the legal entities concerned, where they lack genuine operational autonomy and particularly where the reality of related ship-owners and ships has been concealed behind the mask of `one ship companies', the judicial discretions are used by Courts To be precise, in general, for meeting the ends of justice and to prevent the corporate entities being used as an instrument, Courts lift the veil of such legal entities to find out the true owners. Similarly where a transfer of the vessel is in a sense a sham or facade, the Court will hold the original owners retain the beneficial ownership. In The Saudi Prince37 and The Tjaskemolen38 the Courts have lifted the corporate veil. 37. (1982) 2 Lloyd's Rep. 255. 38. (1997) 2 Lloyd's Rep. 465. Conservative approach on the application of this theory is taken sometimes to respect the law of corporate personality. It must be noted that corporate veil is only lifted when there is considerable evidence that the corporate facade is being manipulated as part of a sham in order to perpetrate a fraud on creditors. Courts would certainly disallow the prayer of lifting corporate veil when no such sham is being found. The Maritime Trader39 and The Evpo Agnic40 are good examples where the Courts were not inclined to go deeper into the construction of the corporate personality. In Maritime Trader, it was held that the evidence produced does not raise even a prima facie case. The onus is upon the plaintiffs to show that the person against whom it is sought to invoke the Admiralty jurisdiction is the person who beneficially owns the majority shares. In The Evpo Agnic though the request was piercing veil was rejected, it was held that something less than a strong prima facie case might well suffice in a situation. 39. (1981) 2 Lloyd's Rep. 152. 40. (1988) 2 Lloyd's Rep. 411. Pakistani Courts, like those of the England, are prepared to lift the corporate veil' to determine where true beneficial ownership lies, but will generally do so only where they have evidence that the corporate structure is being manipulated to create a sham or fraud designed to avoid arrest and in rein liability. In Tasman Spirit case cited above, the Court refused to lift the corporate veil as no specific allegation was made and furthermore there was admission that the two vessels were owned by different companies.