IN THE HIGH COURT OF SINDH AT KARACHI
Admiralty Appeal Nos. 1 & 2 of 2011
Present:
Mr. Justice Gulzar Ahmed &
Mr. Justice Imam Bux Balouch.
J U D G M E N T
Date of hearing : 8th, 9th & 11th & 15 March 2011.
Appellant through : Mr. Mazhar I. Lari, Advocate
Respondents through : Mr. Khalid Rehman, Advocate.
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GULZAR AHMED, J.:- By these two Admiralty Appeals, the appellant has challenged the common order dated 18.2.2011 passed by the learned single Judge of this Court in Admiralty Suit Nos. 3 & 4 of 2011 dismissing the application of arrest of respondent No.1 ship.
2. Mr. Mazhar Lari, learned counsel for the appellant has contended that respondent No.4, Glory Ship Management Pte. Ltd. (the Glory) is beneficial owner of the ships M.T. Prosperity, M.T. Horizon and respondent No.1 M.T. Galaxy and the companies, who are shown to be registered owners of these three ships are merely sham companies. He has contended that the shareholders of the Glory and the three companies shown as registered owner of three ships are same except their numbers are different. He has contended that three registered owners of the three ships are subsidiaries of Glory. He has further contended that three companies shown as registered owners of three ships have been formed to defraud the creditors and claimants of the ships for that each of company has one ship registered in its name and when ship is sold or scrapped company becomes dormant and new ship is not acquired by the same company but in the name of a new company. He has contended that in 15 years period the Glory had 70 subsidiary companies and it in fact is the owner of ships and not a mere management company. He has further contended that the Glory in fact beneficially owns 100% shares of three companies and the respondent No. 1 was beneficially owned by the Glory when the cause arose and at the time when the action was brought and is liable for the losses caused by M.T. Prosperity and M.T. Horizon as a sister ship. He has further contended that entire case of appellant is based upon the words “beneficially owned as respect majority share” as appearing in Section 4(4) of the Admiralty Jurisdiction of High Court Ordinance, 1980 and has further contended that the word beneficial will be redundant if it is restricted to registered owner only. He has further contended that the word beneficial can be attributed to a person, who has beneficial interest in the shares of the ship and such person can be a registered owner or some one else and in case the claimant is able to prima facie prove that the beneficial owner is some one else other than registered owner then Court will have to pierce veil of incorporation to find out who the beneficial owner is and such piercing of veil of incorporation depends upon particular facts of each case. He has further contended that the case being of fraud and deceit and the carrier by issuing of bill of lading on declaration of shipper and not on actual delivery of consignment on the ship is committing fraud. In support of his submissions he has relied upon the cases of MESSRS V.N . LAKHANI & COMPANY V/S M.V.LAKATOI EXPRESS & 2 OTHERS (PLD 1994 SC 894), CENTRAL INSURANCE COMPANY LTD. & OTHERS V/S M.T. TASMAN SPIRIT & OTHERS (SBLR 2004 Sindh 414), Messrs MARATOS & CO. V/S RICE TRADER & 2 OTHERS (PLD 1989 Karachi 94), UNION COUNCIL, ALI WAHAN, SUKKUR V/S ASSOCIATED CEMENT (PVT.) LIMITED (1993 SCMR 468), NIPPON YUSEN KAISHA (NYK) LINES V/S MESSRS MSC TEXTILES (PRIVATE) LIMITED & 6 OTHERS (PLD 2008 Karachi 244), YUKONG LTD. SOUTH KOREAN COMPANY, SEOUL, SOUTH KOREA V/S M.T. EASTERN NAVIGATOR AND 2 OTHERS (PLD 2001 SC 57), SYED ADIL HUSSAIN V/S MST. MAJDA (2000 CLC 1982), EASTERN FEDERAL: UNION INSURANCE COMPANY LIMITED V/S AMERICAN PRESIDENT LTNES LIMITED & ANOTHER (PLD 1992 SC 291), ABDUL JALIL CHOWDHURY V/S THE MUHAMMADI STEAMSHIP COMPANY, LTD. AND OTHERS (PLD 1961 SC 340), BRITISH INDIA STEAM NAVIGATION COMPANY LTD., LONDON V/S NATIONAL SECURITY INSURANCE COMPANY LTD.(1985 CLC 1720), M/S FATIMA ENTERPRISE LTD. V/S GOVERNMENT OF PAKISTAN & OTHERS (SBLR 2003 Sindh 1643), BRUUSGAARD KIOSTERUDS DAMPSKIBS AKTIESELSKAB V/S SECRETARY OF STATE (AIR 1940 Bombay 294), EAST AND WEST STEAMSHIP Co V/S HOSSAIN BROTHERS & OTHERS (PLD 1968 SC 15), (PLD 1986 Karachi 1599), THE AVENTICUM [1978] Vol:1 LLR 184, THE SAUDI PRINCE [1982] Vol:2 LLR 255 and Amoco Oil Co. V/S Parpada Shipping Co. Ltd. (The “George S”) [1989]Vol:1 LLR 369.
3. On the other hand, Mr. Khalid Rehman, learned counsel for respondents has contended that appellant has no cause of action for filing of the suit as there was no short landing of consignment and that appellant has been delivered the consignment in accordance with law. He has further contended that the appellant has wrongly invoked the Admiralty Jurisdiction of High Court as the Glory is not the owner of three ships rather all the three ships are registered in the name of three different companies who are their real and beneficial owner. He has contended that provision of Section 4(4) of the Admiralty Jurisdiction of the High Courts Ordinance, 1981 qualifies the word beneficially owned with majority shares and the Glory has no share either in the respondent No. 1 or the other two ships. He has contended that the beneficial ownership in three ships is in the name of three companies, who are their registered owners and hold 100% shares in their respective ship. He has contended that having common shareholders/Directors in Glory and three companies will not make Glory the owner of said ships as it has to be shown that Glory is beneficial owner of majority shares in the said ships. He has contended that it is only the registered owner who is real and legal owner of the three ships and further contended that even if it is assumed that Glory has 100% shares in three companies still it will have no property in the three ships as the property of these ships will remain that of its respective company. He has further contended that though fraud is alleged by the appellant but no particulars of fraud have been pleaded and merely there being one company one ship in itself will not give ground for pressing the case of fraud. He has contended that it is common practice in shipping industry of forming companies owing single ship and such companies keep their liabilities limited to the extent of single ship which is not prohibited by law. He has contended that appellant plea of the three companies being sham is altogether unfounded and no case of piercing the veil of incorporation is made out. In support of his submissions he has relied upon the cases of MESSRS V.N. LAKHANI & COMPANY V/S M.V.LAKATOI EXPRESS & 2 OTHERS (PLD 1994 SC 894), CENTRAL INSURANCE COMPANY LTD. & OTHERS V/S M.T. TASMAN SPIRIT & OTHERS (SBLR 2004 Sindh 414), Messrs MARATOS & CO. V/S RICE TRADER & 2 OTHERS (PLD 1989 Karachi 94), UNION COUNCIL, ALI WAHAN, SUKKUR V/S ASSOCIATED CEMENT (PVT.) LIMITED (1993 SCMR 468), YUKONG LTD. SOUTH KOREAN COMPANY, SEOUL, SOUTH KOREA V/S M.T. EASTERN NAVIGATOR AND 2 OTHERS (PLD 2001 SC 57), SYED ADIL HUSSAIN V/S Mst. MAJDA (2000 CLC 1982), BRITISH INDIA STEAM NAVIGATION COMPANY LTD., LONDON V/S NATIONAL SECURITY INSURANCE COMPANY LTD.(1985 CLC 1720), M/S FATIMA ENTERPRISE LTD. V/S GOVERNMENT OF PAKISTAN & OTHERS (SBLR 2003 Sindh 1643), EAST AND WEST STEAMSHIP CO. GEORGE TOWN, MADRAS V/S S.K. RAMALINGAM CHETTIAR (AIR 1960 SC 1058), MESSRS NEW JUBILEE INSURANCE Co. LTD., DACCA V/S THE UNITED ORIENTAL STEAMSHIP Co., KARACHI AND ANOTHER (PLD 1975 Karachi 647), NEWZEALAND INSURANCE CO. LTD. CHITTAGONG V/S M. A. ROUF & OTHERS (PLD 1962 Dacca 31), DEUTSCHE DAMPSCHIFFFAHARTS-GESELLSCHAFT AND ANOTHER V/S CENTRAL INSURANCE Co. LTD., KARACHI (PLD 1975 Karachi 819), CENTERCHEM PRODUCTS, INC. V/S A/S REDERIET ODFJELL AND SKIBS A/S HASSLE AND A/S SPECIAL BANK (1972 AMC 373), NORTHEAST PETROLEUM CORP. V/S PRAIRIE GROVE, HER INGINES, ETC AND MATHIASEN’S TANKER INDUSTRIES, INC.(1977 AMC 2139), COLLECTOR OF CUSTOMS AND ANOTHER V/S MESSRS FATIMA ENTERPRISES LIMITED AND OTHERS (2005 SCMR 1493), PROCEEDING IN REM AGAINS THE VESSEL M.T. PORTOFINO & ANOTHER V/S M.T. PORTOFINO (2003 SBLR 778), FARRED V/S ALAXANDER [1976] Vol:1 ALL ER 129, BAKRI BUNKER TRADING COMPANY LIMITED V/S THE OWNERS OF AND OTHER PERSONS INTERESTED IN THE SHIP NEPTUNE (1985 No. AJ211), ADAMS AND OTHERS V/S CAPE INDUSTRIES PLC AND ANOTHER [1991] 1 All ER 929), GLASTONS SHIPPING LTD AND CONTINENTAL CHARTERING & BROKERAGE LTD. HONG KONG BRACH V/S PANASIAN SHIPPING CORPORATION AND WITHERS (THE GLASTONS) [1991] 1 LLR 482), THE SKAW PRINCE [1994] 3 SLR 379, MESSRS MSC TEXTILES (PRNATE) LIMITED THROUGH EXECUTIVE DIRECTOR V/S ASIAN POLLUX AND 5 OTHERS (2007 CLD 1465), BANGLADESH SHIPPING CORPORATION V/S M. V. NEDON & ANOTHER (PLD 1981 Karachi 246), OWNERS OF THE MOTOR VESSEL MONTE ULIA V/S OWNERS OF THE SHIPS BANCO AND OTHERS (The Banco) [1971] Vol:1 All ER 524, THE MARITIME TRADER [1981] Vol:2 LLR 153, MACAURA V/S NORTHERN INSURANCE (1925) AC 619, (2003 HK LRD 49), THE EVPO AGNIC [1988] Vol:2 Lloyds’ Report 411, ATLANTIC STEAMERS SUPPLY COMPANY V/S M.V. TITISEE & OTHERS (PLD 1993 SC 88), M.V. SEA SUCCESS-I V/S LIVERPOOL & LONDON STEAMSHIP PROTECTION AND INDEMNITY ASSOCIATION LTD. & ANOTHER (AIR 2002 Bombay 151), PAK-AMERICAN FERTILIZERS LTD., MIANWALI V/S AMIR ABDULLAH KHAN (1984 CLC 2170/2175), GHULAM SHABBIR V/S NUR BEGUM & OTHERS (PLD 1977 SC 75), SALOMON V/S SALOMON & CO.LTD. (1895 to 1899 All ELR 33).
4. Both the counsel have also filed their respective written note of arguments. We have considered the submissions of the learned counsel and have also gone through the record.
5. The main issue between the parties is with regard to beneficial ownership of respondent No.1 against whom the appellant has filed two Admiralty Suits claiming short delivery of consignments of crude palm oil and RBD palm olein respectively from ships M.T. Prosperity and M.T. Horizon. With the plaint, the appellant has filed an application for the arrest of respondent No.1 ship claiming it to be a sister ship of M.T. Prosperity and M.T. Horizon and the Glory to be the beneficial owner of these ships. The respondents have filed counter affidavit to which rejoinder affidavit was filed by the appellant. After hearing the counsel for the parties, learned single Judge has passed the impugned order, by which the application for arrest of the respondent No.1 ship was dismissed and the interim order of arresting the said ship was recalled. With this appeal the appellant has filed application for arrest of the respondent No.1 ship. The respondents have filed counter affidavit so also cross-objections to the appeal. Affidavit in rejoinder has been filed by the appellant.
6. The appellant counsel has relied upon overview of M.T. Galaxy the respondent No. 1 filed as annexure ‘A’ showing that it is registered at Panama with Panama Flag. The Description under the title of ownership is given as follows:
Group Owner Glory Ship Management Pte Ltd location Singapore
Shipmanager Glory Ship Management Pte Ltd location Singapore
Operator Glory Ship Management Pte Ltd location Singapore
DOC Company Glory Ship Management Pte Ltd location Singapore IMO Company No(DOC)1648236
Registered Owner Galaxy Maritime Ltd S.A. location Panama IMO Registered Owner No. 5390504
Technical ManagerGlory Ship Management Pte Ltd location Singapore
The overview of ship M.T. Prosperity annexure ‘B’ shows that it is registered at Singapore with Singapore flag. The Description under the title of ownership is given as follows:
Group Owner Glory Ship Management Pte Ltd location Singapore
Shipmanager Glory Ship Management Pte Ltd location Singapore
Operator Glory Ship Management Pte Ltd location Singapore
DOC Company Glory Ship Management Pte Ltd location Singapore IMO Company No(DOC)1648236
Registered Owner Golden Regency Maritime location Singapore IMO Registered Owner No. 1954061
Technical Manager Glory Ship Management Pte Ltd location Singapore
The overview of ship M.T. Horizon filed as annexure ‘B’ in Admiralty Appeal No. 2 of 2011 shows that it is registered at Singapore with Singapore flag and description under the title of ownership is given as follows:
Group Owner Glory Ship Management Pte Ltd location Singapore
Shipmanager Glory Ship Management Pte Ltd location Singapore
Operator Glory Ship Management Pte Ltd location Singapore
DOC Company Glory Ship Management Pte Ltd location Singapore IMO Company No(DOC)1648236
Registered Owner Prosperity Maritime location Singapore IMO Registered Owner No. 1555349
Technical Manager Glory Ship Management Pte Ltd location Singapore
7. The company overview of the Glory filed as annexure ‘K’ shows that is a company registered at Singapore which was founded in 1995. Under heading of Relationship, Galaxy Maritime, Ltd. S.A., Golden Regency Maritime Pte. Ltd. and Prosperity Maritime Pte. Ltd. are shown as subsidiary companies of the Glory. The Shareholders and Directors of the Glory and the three subsidiaries are same persons who are Shareholders and Directors of the Glory except there is variation in their numbers that is in the Glory there are five persons as shareholders and Directors while in Galaxy Maritime Ltd. there are 3, in Golden Regency Maritime Pte. Ltd. there are 4 and in Prosperity Maritime Pte. Ltd. there are 4 persons as shareholders and Directors.
8. In the business profile of the Glory annexure M/1 it has 500000 ordinary shares of Singapore $ 500,000 of which 60,000 ordinary shares are held by Chuat Guat Keow, 360000 shares by NG. Kim Choon, 40000 shares by NG. San San and 40000 shares are in the name of NG. Tie Jin. Fifth Director NG Tee Ghee does not seem to have any share in his name as shares are exhausted among four earlier named Directors.
Business profile of Prosperity Maritime Pte. Ltd, annexure M/3 shows that it has 600000 ordinary shares of Singapore $ 600000 of which 400000 shares are in the name of NG. Kim Choon, 50000 shares in the name of NG. San San and 150000 shares in the name of NG. Tie Jin.
The business profile of Golden Regency Maritime Pte. Ltd. annexure M/4 shows that it has 1000000 ordinary shares of Singapore $ 1000000 of which 740000 shares are in the name of NG Tie Jin and 260000 shares in the name of NG Tee Ghee.
Annexure M/5 is the certificate of registration of the Galaxy Maritime Ltd. S.A. which is a company registered at Panama having capital of US$ 10,000.00 and it shows as its Directors NG Kim Choon, NG Tie Jin and NG San San and names of subscribers as Yvonne Elvira Arias Bell and Jorge Enrique Ram Aryan Rez. Number of shares held by these Directors and subscribers is not given in this document.
9. Copies of Lloyds Register filed by respondents with their counter affidavit in the Suits provide similar information as referred to above with addition of extensive technical information of these ships.
10. The respondents have also filed with the counter affidavit certificate of registration of ship M.T. Galaxy to show that Galaxy Maritime Ltd. S.A. is 100% owner of it, certificate of registration of ship M.T. Prosperity showing Golden Regency Maritime Pte. Ltd. as owner of 64 shares and certificates of registration of ship M.T. Horizon showing Prosperity Maritime Pte. Ltd. as owner of 64 shares.
11. The respondents have also filed copy of management agreement between Galaxy Maritime Pte. Ltd. S.A. and Glory as manager, Golden Regency Maritime Pte. Ltd. as owner and Glory as manager, Prosperity Maritime Pte. Ltd as owner and Glory as manager.
12. In order to appreciate the contentions of learned counsel with regard to beneficial ownership of respondent No.1 by the Glory, same need to be examined in the light of applicable provision, which in the present case is Section 4(4) of the Admiralty Jurisdiction of High Courts Ordinance, 1980 (the Ordinance) which reads as follows:
4.(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.
13. This provision came to be examined by Hon’ble Supreme Court in the case of Messrs V.N Lakhani & Company V/S M.V.Lakatoi Express and 2 others (PLD 1994 Supreme Court 894). The facts of this case were that petitioner imported goods which were shipped under bill of lading on vessel “Commandante Revello” owned by M/S C.N.M. Compagnie De Navigazione Merzario S.R.L. (Merzario). Although transhipment was prohibited but the goods were transhipped on board vessel Lakatoi Express belonging to M/s. Artemis Lines S.A. which was time chartered to Merzario. Petitioner filed Admiralty Suit against M.V. Lakatoi Express its owners and M/S Anchor Shipping & Trading Co. Ltd., a local agent. Petitioner claimed that vessel being owned by same owner at the time when cause of action arose in personam was liable to be arrested. After quoting the provision of Section 4(4) of the Ordinance Hon’ble Court proceeded to discuss the same as follows:
“In applying section 4(4) one has to take into consideration the existing facts at the time when cause of action arose in connection with the offending ship. In order to invoke the jurisdiction, the plaintiff has to establish that:
(1) The claim falls in any of the clauses as mentioned in clauses (e) to (h) and (j) to (q) of subsection (2) of section 3 and arises in connection with a ship.
(2) When the cause of action for action in personam arose.
(3) The person liable in an action in personam at the time when such cause of action arose, was the owner or charterer of or in possession or in control of the offending ship.
(4) The offending ship or any other ship which is sought to be arrested, at the time action is brought is beneficially owned as respects majority shares by the person liable on the claim in an action in personam.
5. The key words in the provision are `beneficially owned as respects majority shares'. The person liable for the claim in an action in personam should beneficially own majority shares. It is on compliance with this condition that action in rem for arrest of a sister vessel can be filed.”
Further-on in para 8, the Hon’ble Court has observed as follows:
“8. In our view the learned Judges have taken correct view by excluding the charterer, be it time charterer or charterer by demise, from the category of persons who beneficially own majority shares in the ship sought to be arrested. The pre‑condition for invoking jurisdiction under section 4(4)(a)(b) is that the person who would be liable on the claim in an action in personam was, when the cause of action arose, should beneficially own majority shares in the ship only then sister‑ship can be arrested. If we take the view that the words “beneficially owned” may include even a demise charterer then words “as respects majority shares” will be completely redundant. The ownership of majority shares may be beneficial or legal is a condition precedent for invoking the jurisdiction. It is a well‑settled principle of interpretation 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. It, therefore, seems clear that the legislature intended to give an effective meaning to the words “as respects majority shares” which can only be attributed to the owners. The petition is dismissed.”
14. In the case of Central Insurance Company Ltd. & others V/S M.T. Tasman Spirit & others (SBLR 2004 Sindh 414) the Hon’ble single Judge of this Court came to consider Section 4(4) of the Ordinance in the light of the fact that Pakistan Refinery Ltd. (PRL) has imported consignment of crude oil which was brought by M.T. Tasman Spirit from Iran to Karachi and while entering harbour at Karachi Port it met with an accident resulting in leakage/spillage of oil into the sea. PRL lodged claim with the plaintiff Central Insurance Company Ltd. under the policy who paid some amount and obtain subrogation and filed suit for the loss of oil and for expenses and sought arrest of two vessels namely M.T. Tasman Spirit and M.T. Endeavour II claiming them to be the sister ships whose registered owner defendant Nos. 3 & 4 were said to be owned by Polemis family. The Court in para 19 of its judgment found many similarities with regard to two vessels except its two registered owners being different and thereafter in para 23 expressed its views as follows:
“23. In view of the above, the irresistible conclusion is that the defendants Nos.3 and 4 i.e. the companies are the respective registered as well as beneficial owners of the defendants Nos.1 and 2 and so the beneficial owners thereof. Being the companies, defendants Nos.3 and 4 have their independent legal entities and can own and disown their properties. The natural persons own the shares of the company whereas the company own the properties. Even if it is traced out as to who owns defendants Nos. 3 and 4 the legal position will be that defendants Nos.3 and 4 are the owners of the defendants Nos. 1 and 2 and not persons/ individuals who own the shares of defendants Nos. 3 and 4. Unveiling of the incorporation would only be required if there is an allegation of fraud and deceit on the part of any of the defendants Nos. 1 to 4. In the present case the plaintiffs have not made any such allegation. The plaintiffs also admitted that the defendants Nos.3 and 4 were the registered owners of the defendants Nos. 1 and 2. In presence of the admission on the part of the plaintiffs and the admission by defendants Nos.3 and 4 that they are the registered owners of the defendants Nos.1 and 2 no further investigation would be required to ascertain the ownership /beneficial ownership of the defendants Nos. 1 and 2. It will not be just and legal to discard and ignore the admitted position and rely upon the common factors of the defendants Nos. 1 to 4.”
15. In the case of M.V. Sea Success I V/S Liverpool & London Steamship Protection and Indemnity Association Ltd. & Another (AIR 2002 Bombay 151), a judgment of Division Bench of Bombay High Court, the Court was dealing with the question whether a claim for unpaid insurance premium in respect of ship amounts to “necessary supplies” within the meaning of section 5 of the Admiralty Courts Act, 1861 so as to constitute maritime claim and in dealing with such question it was also confronted with another question that vessel Sea Success I is sister ship of two vessels Sea Glory and Sea Rangers in view of beneficial ownership management and control of all three vessels having been vested in defendant No. 2. After elaborate consideration of the later question and the case law the Court in paragraph 55 of its judgment observed as follows:
“ “The admiralty jurisdiction could be invoked not only against the offending ship in question but also against a sister ship in regard to which the claim arose", and this legal position is not disputed before us but the question is whether the allegations made in the plaint, particularly paragraphs 1 and 14 which are only relevant paragraphs in that regard by themselves prove that defendant No. 1 vessel "Sea Success I" is the sister ship of the vessel "Sea Glory" and "Sea Ranger". The answer is clearly no as the only pleading in respect of the defendant No. 1 vessel "Sea Success I" being sister ship of ships "Sea Ranger" and "Sea Glory" is that vessel "Sea Success I" is owned/controlled by defendant No. 2 through its 100% wholly owned subsidiary S.S. Shipping Corporation Inc. of Monrovia and we have already indicated above that on that basis defendant No. 2 cannot be held to be owner of the vessel "Sea Success I" since the ownership of a vessel is denoted by the shares in the ship and there is no allegation worth the name in the entire plaint that the defendant No. 2 owns the shares in the defendant No. 1 vessel Sea Success I. The ships are deemed to be in the same ownership when all the shares are owned by the same person or persons (Article 3(2) of 1952 Brussels Arrest Convention). In paragraph 14 of the plaint it is averred that as stated in paragraph 1 of the plaint, the defendant No. 1 vessel is a sister ship of the two vessels "Sea Glory" and "Sea Ranger" in view of the beneficial ownership, management and control of all three vessels having vested in defendant No. 2. The basis of this deduction by the plaintiff in the plaint is that the defendant No. 1 vessel is owned by defendant No. 2 through its 100% subsidiary S.S. Shipping Corporation Inc., Monrovia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A bald statement in the pleading that the defendant ship is the sister ship of offending ship or the inference that the defendant ship is a sistership for the reasons disclosed which is legally not sustainable cannot be held to be sufficient to disclose a cause of action.”
16. The Court of Appeal of United Kingdom comprising of three Hon’ble Judges in the case of EVPO AGNIC ([1988] 2 LLR 411) dealt with the question of beneficial ownership of ship. The judgment was written by His Lordship Donaldson of Lymington, M.R. which was agreed by the other two Members of the Bench. The facts of this case were that plaintiff claimed to be owner of cargo laden on board the ship Skipper I which sank. The plaintiff filed an admiralty action in rem against ship Evpo Agnic and applied for arrest of ship on the basis that the owners of ship Evpo Agnic were at all material time the owners of ship Skipper I on the basis that Skipper I at all material time was owned by Skipper Shipping Co. S.A. of Panama and was managed by Pothitos Shipping Co. S.A. The Shareholders in Skipper Shipping Co. S.A. were Rodolfo Silva Batista and Jose Ignacio de Sedas each holding one share in the company. The President/Director and Vice President/ Director were respectively Evangelos Pothitos and Dimitrios Kapsarachis. The Evpo Agnic at all material time was owned by Agnic Shipping Co. S.A. Panama. The shareholders or those having right to become shareholder in Agnic Shipping Co. S.A. and company’s President/Director, Vice President/ Director were same individuals as was the case with Skipper Shipping Co. S.A. and though Skipper I and Evpo Agnic are owned by separate one ship owning companies and it becomes clear on lifting of veil of incorporation that the shareholders in each of these companies are same and their President/Director, Vice President/Director are also the same and owners of vessel Skipper I on the date of issue of writ were beneficial owners as respects of shares in ship Evpo Agnic and that the two separate companies which are the registered owners according to Lloyd’s Register are part of an arrangement which has the effect of covering up the true ownership of these ships and Court was requested to lift the corporate veil in order to determine the relevant person who will be liable on an action in personam and is also the present beneficial owner of all shares in Evpo Agnic. After considering the arguments, material and law more particularly the provision of section 21(1) to (4) of the Supreme Court Act, 1981 which material sense is similar to our own Section 4 of the Admiralty Jurisdiction of High Courts Ordinance, 1980 except in place of “majority shares” the English Law mentions all shares, it was ruled as follows:
“Second, all maritime nations maintain registers of shipping which record the names of the owners. These registers are of fundamental importance as establishing the flag of the vessel, thereby making it for some purposes part of the floating territory of that country and subjecting it to the laws of that country. I would therefore, regard the concept of a registered owner as being a nominal owner as a contradiction. Third, the Convention clearly looks to ownership and registered ownership as one and the same, although as Mr. Justice Robert Goff pointed out in The I Congresso del Partido (1977) I Lloyd’s Rep.536 at p.562: (1978) I Q.B 600 at p.541, the “trust” concept involving a dichotomy between legal and equitable ownership may be unknown to some, and perhaps most, other jurisdiction. My conclusion is that in relation to a registered ship “owner” in s.21(4)(b) means “registered owner”.
Mr. Kenneth Rokison, Q.C., appearing of the plaintiffs, submits that this cannot be right because, if it were, even the particular ship could not be arrested if it could be shown that the registered owner was not the beneficial owner of all the shares in the ship. If this is so, it is an understandable casus omissus, because in real commercial life, thus far at least, registered owners, even when one ship companies, are not bare legal owners. They are both legal and beneficial owners of all the shares in the ship and any division between legal and equitable interests occurs in relation to the registered owner itself, which is almost always a juridical person. The legal property in its shares may well be held by A and the equitable property by B, but this does not affect the ownership of the ship or of the shares in that ship. They are the legal and equitable property of the company.
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The plaintiffs’ real case is that Mr. Evangelos Pothitos, who describes himself as a Greek shipowner, or his company, Porthitos 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. I am as realistic as most Judges who have served in the Commercial Court, but I really do not see the commercial advantage of the creation of sham registered ownerships. Mr. Pothitos no doubt has a legitimate interest in running these ships, including the two with which we are concerned, as a fleet, but he can do this by running a series of genuine one-ship ship owning companies as a group. He does not need a structure involving a holding company and subsidiaries, and still less sham companies. As governing shareholder in each shipowning company, he can cause them to use their individual assets to the mutual advantage of the members of the group and of Mr. Pothitos.
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The truth of the matter, as I see it, is that s.21 does not go, and is not intended to go, nearly far enough to give the plaintiffs a right of arresting a ship which is not “the particular ship” or a sister ship, but the ship of a sister company of the owners of “the particular ship”. The purpose of s.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 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 (1982) 2 Lloyd’s Rep. 255 and was alleged to be the situation in The Aventicum. (1978) I Lloyd’s Rep. 184.
I would allow the appeal and set aside the writ and the warrant of arrest.”
17. In considering the above law, it emerges that it has to be prima facie established that the respondent No.1, which is sought to the arrested, at the time action is brought is beneficially owned as respects majority shares by the person liable to the claim in an action in personam. The case of the appellant is that Glory is liable to the claim in personam for that it is beneficial owner of the respondent No.1 being the holding company of the respondent No.2, the subsidiary and on lifting of veil of incorporation such would be the result.
18. So far the question of holding company and its subsidiary, although in the documents i.e. company overview of the Glory, under the heading of relationship Galaxy Maritime Ltd. S.A., Golden Regency Maritime Pte.Ltd. and Prosperity Maritime Pte.Ltd. are shown as subsidiaries but business profile of three companies does not show that the Glory in its own name as a company own any share in them rather what emerges is that there are common shareholders/directors of the Glory and three companies. In the absence of any shareholding of Glory itself in the three companies, we do not think that it establishes the relationship that of Glory being holding company and three companies being its subsidiary companies. This relationship of holding companies and of subsidiary companies will also not be established by the fact that Glory and the three subsidiary companies have common shareholders/directors as Glory as a company is not shown to be the shareholder in the three companies. The shareholders/Directors are natural persons who have shares in companies by this relationship the shareholders/Directors do not become owner of company’s property or even acquire share in it. The property in and remains that of the company.
19. Even if there be relationship of a holding company and a subsidiary company between Glory and Galaxy Maritime Ltd. S.A., Golden Regency Maritime Pte.Ltd. and Prosperity Maritime Pte.Ltd., still this in itself will not provide justification to hold that the ships registered in latter three companies belong to or for that matter they are beneficially owned as respects majority shares by the Glory. The respondents have filed documents of registration of the three ships and their certificates of registration to show that there 100% share is held by their registered owners, the companies and no part of share by any one else.
20. As a law, as stated in the case of Tasman Spirit, M.V. Sea Success-I and Evpo Agnic in light of provision of Section 4(4) of the Ordinance the Court is competent to order arrest of the offending ship or a sister ship but the ship of sister company of the owners of the offending ship will not be liable to be arrested for that the legal property in that ship lies in the registered owner even if that registered owner is owned by some other company or individual. The latter two will have no beneficial ownership or any interest in that ship as they are merely shareholders in the registered owners of that ship.
21. Learned counsel for the appellant has referred to Section 17 of Pakistan Merchant Shipping Ordinance, 2001 to canvas the proposition that it recognizes beneficial title in addition to registered owners. Suffice to note that Section 17 deals with entries in the register book and provides that every registrar of Pakistani ships shall keep a book to be called the register book and entries in that book shall be made in accordance with the following provisions, namely; the property in a ship shall be divided into 64 shares and subject to the provisions of this Ordinance with respect to joint owners or owners by transmission not more than 64 individuals shall be entitled to be registered at the same time as owners of any one ship but this rule shall not affect the beneficial title or any number of persons or any company represented by or claiming under or through any registered owner or joint owner. The present controversy is not in respect of Pakistani ship nor the register book shown its owner, thus this provision has no application. Appellant counsel has further relied upon section 57 of this Ordinance to propagate the proposition that it imposes pecuniary penalties on a person where beneficially interested person in any ship or share in a ship registered in the name of some other person. Section 57 of the Ordinance provides that where any person is beneficially interested otherwise than by way of mortgage in any ship or share in a ship registered in the name of some other person as owner, the person so interested shall, as well as the registered owner, be subject to all pecuniary penalties imposed by this or any other Ordinance or the owners of ships or shares therein so nevertheless that proceedings may be taken for the enforcement of any such penalties against both or either of the aforesaid parties with or without joining of them.
22. In the present case we are concerned with provision of Section 4(4) of the Admiralty Jurisdiction of High Courts Ordinance 1980 which requires for arresting of ship that it should be beneficially owned as respects majority shares by the person against whom the claim lies in personam. Same test of beneficial ownership of majority shares is required to be established for a sister ship. This provision being a special law, the same cannot be overreached by provision of Pakistan Merchant Shipping Ordinance, 2001 which seems to be the general law and provision of section 57 only speaks of beneficial interest and not that of a beneficial owner. Still as discussed above, there is no beneficial interest of Glory in the respondent No.1, thus this provision for this reason also has no application to the case.
23. Learned counsel for the appellant has vociferously argued that since the founding of Glory as many as 70 companies were registered who owned one ship and that when the ship was scrapped or sold the company did not acquire any other ship but became dormant and for acquiring of new ship, new company was registered and thus contended that this was being done to defraud the claimants of the ship scrapped or sold and that companies are sham. In the plaint similar allegations have been made by the appellant with addition that the ships of subsidiary companies were in fact sold by Glory for demolition to different ship breaking yards in Bangladesh/India and that more than 1000 suits in respect of shortage in consignment arrived on board, the scrapped ships are pending in various Courts in Karachi.
24. To the first submission of one ship company, it was contended by learned counsel for the respondent that this fact has become a reality in a shipping business all over the world and mostly the ships are operating owned by one company and this phenomenon has also been recognized by the Court. In the case of Evpo Agnic, the Court has considered the question of one ship company and has stated that they are not bare legal owners but they are both legal and beneficial owners of all the shares in the ship. In considering the question that Pothitos Shipping Company S.A. is the real owner of both the ships and indeed of all the ships in the Pothitos fleet, the Court observed that it involves the proposition that the registrations are sham (which in the present case will come to that registered companies are sham). In viewing the matter realistically, the Court as a commercial proposition did not see any commercial advantage in creation of sham registered ownership observed that Pothitos no doubt has legitimate interest in running of ships including two with which it was concerned as a fleet but proceeded to say that he can do this by running a series of genuine one-ship ship owning companies as a group. He does not need a structure involving a holding company and subsidiaries and it was not considered that the two ships or the fleet of ships are sister ships. Thus apparently there seems to be legitimacy in law of having a one ship companies.
25. As regards the question of fraud, the only thing mentioned in the plaint is that there are more than 1000 suits pending against the scrapped ships and this fact establishes that fraud is being committed by the Glory to avoid liability of the claims. It is further averred that ships scrapped were sold by the Glory. Mere pendency of the suits in themselves will not be a sufficient ground to sustain a claim of fraud as such claim has to be supported by pleadings, facts, giving details such as dates, items, suit numbers, the amount claimed, parties names, the name of offending ship and its owners, etc ought to have been given for complying with the provision of Rule (4) of Order VI CPC. Similar details will be required for scrapped ships. In the case of Ghulam Shabbir (supra) Hon’ble Supreme Court has observed as follows:
“ In her written statement the contesting defendant-respondent inter alia pleaded that at any rate the waqf deed was executed fictitiously with the intention to defeat the creditors and was never acted upon. This plea, to say the least, was highly vague. The written statement did not contain any particulars of the alleged creditors and the circumstances which led to the making of the fictitious deal. As a rule the pleadings must contain material facts on which a party relies for his claim or defence. In particular, rule 4 of Order VI of the Civil Procedure Code lays down that in all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, willful default or undue influence, and in all other cases in which particulars may be necessary beyond such as are in the form exemplified aforesaid, particulars (with dates and items if necessary) shall be stared in the pleading. In pleadings general allegations, however, strong may be the words in which they are stated are inefficient even to amount to an averment of fraud of which any Court ought to take notice.”
26. In the case of M/S Dadabhoy cement industries ltd. and 6 others V/S National development finance corporation, Karachi. (2002 SCMR 1761) the Hon’ble Supreme Court has observed as follows:
“ It is settled law that where allegation of fraud is leveled, it must be specified and details thereof should be given.”
27. In the case of Tasman Spirit so also Sea Success-I and Evpo Agnic where ships were shown to be managed, run and operated by group was indeed not considered as commission of fraud and still in the case of Rice Traders cited by counsel for the appellant it was observed that mere possession and control of ship as charterer, manager and operator does not fall within the meaning of words “beneficial owner” as regards majority shares therein.
28. The question of piercing of corporate veil in terms of case of Saudi Prince and Aventicum were also considered in Evpo Agnic case and still the Court in this case did not find any question of fraud but simply laid down the rule that law does not go far enough to give plaintiffs a right of arresting a ship which is not the particular ship or a sister ship but the ship of sister company of the owners of particular ship. Thus even if it is considered that Glory and three companies are the sister companies still a ship of one company cannot be arrested for the wrong done and loss caused by the ship of other company. From all angles we are satisfied that there is prima facie no material to sustain plea of fraud and deceit in the present case.
29. During the course of arguments, learned counsel for the appellant has contended that carrier by issuing bill of lading on declaration of shipper and not on actual delivery of consignment on the ship is committing fraud. It may be noted that no such plea is taken by the appellant in the plaint rather the reason for short delivery in the plaint is given as fault, failure and/or negligence in duty by the carrier. Such plea raised during the course of arguments cannot justifiably be considered without it being raised in the plaint.
30. As regards the question of short landing of consignment, same is the matter of disputed facts which needs to be established by evidence and the owner of offending ship having been joined as defendant in the two Admiralty Suits, therefore, such aspect of the matter can be decided after evidence is led by the parties.
31. For the foregoing reasons we are satisfied that appellant has failed to make out a case for arrest of respondent No.1. We, therefore, dismiss both these appeals so also listed applications and recall the order of arrest of respondent No.1 passed on 24.4.2011.
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