Cross-border insolvency and shipping companies
This article examines the Hong Kong Court of Appeal’s decision in The Convenience Container, where the court refused to set aside in rem writs even though the shipowner company was in liquidation in a foreign jurisdiction. In view of the principle of “modified universalism”, recently endorsed by the English Supreme Court and approved by the Hong Kong Court, the author doubts the correctness of the reasoning in the case and argues that, upon liquidation, the shipowner company ceased to be the beneficial owner of the relevant vessels. Hence, the plaintiffs should not have been allowed to jump the queue of the shipowner’s unsecured creditors by bringing statutory in rem proceedings against the vessel.
In the Hong Kong case of The Convenience Container
Powick was a Singapore shipowning company that went into voluntary liquidation in Singapore on 13 May 2003. ITS issued in rem
writs against the Mandarin Container
on 10 May 2013, and against the Convenience Container
, Liberty Container
and Kingdom Container
on 16 May 2003. The writs claimed unpaid stevedoring, wharfage and dockage charges. Powick owned all four ships.
On 18 September 2003 Oetker issued four in rem writs against the four ships. On 30 September 2003 Powick acknowledged service of Oetker’s writs.
The four ships had already been arrested in Hong Kong by other claimants on dates between 16 May and 2 June 2003. By Order of the Admiralty Court dated 13 June 2003, the four ships were sold on 7 July 2003. In January 2004, Powick’s liquidator applied for the three ITS writs issued on 16 May 2003 and all four Oetker writs to be set aside. Waung J dismissed the liquidator’s applications.2
The liquidator appealed unsuccessfully to the Court of Appeal against Waung J’s decision. The appeal was heard by Ma CJHC (as he then was), Stone J and myself.
At Ma CJHC’s invitation, I delivered the first judgment of the Court of Appeal. Ma CJHC and Stone J delivered concurring judgments with similar reasoning. I will focus