ATA-UR-REHMAN, J.--- This order will dispose of C.M.A. No. 1808/2003, filed by the plaintiff under rule of the Sindh Chief Court Rules (OS) read with Section 4(4) of the Admiralty Jurisdiction of High Courts, Ordinance, 1980 (Ordinance, 1980).
2. By this application the plaintiffs sought an order of arrest of two ships namely, M.T. Tasman Spirit and M.I.
Endeavour II, i.e. The defendants Nos. 1 and 2 currently at. The Port of Karachi.
3. The facts as narrated in the plaint are that the plaintiffs being insurance companies, issued a Marine Cargo Insurance Policy in favour of Pakistan Refinery Ltd. (PRL), inter alia insuring a consignment of 67,532 metric tons of crude oil which was brought by the defendant No. 1 from Iran to Karachi. The defendant No. 1 was chartered by Pakistan National Shipping Corporation (PNSC).
4. On the 27th July, 2003, while entering the harbour at Karachi Port, the defendant No. 1 met with an accident resulting in leakage/spillage of oil into the sea. Defendant No. 2 arrived at Karachi to and as a lighter age vessel but it failed in its mission and so another vessel "Fair Jolly" was engaged for this purpose. Before it could be salvaged approximately 31,000 M.T. Of oil spilled into the sea.
5. The PRL lodged a claim with the plaintiffs under the said policy for an amount of US $ 15 (M) (Rs..
868,296,000/-), being the total value of the cargo and the freight; out of which the plaintiffs have already paid to PRL Rs. 260,000,000/-. The plaintiffs having been subrogated to the rights of PRL filed this suit claiming Rs. 868,296,000/-being the claim of PRL and Rs. 15,000,000/- as other expenses.
6. According to the plaintiffs the defendants Nos. 1 and 2 are the two sister ships owned by the registered owners the defendants Nos. 3 and 4, which in turn are owned by the Polemics family (Adamanatios Polemis & Spyridon Polemis). Thus the beneficial ownership . Of defendants Nos. 3 and 4 and resultantly, the defendants Nos. 1 and 2 is one and the same.
7. Captains/masters of defendants Nos. And 2 filed their counter-affidavits. They inter alia denied that defendants Nos. 1 and 2 were sister ships. The allegations of negligence' on the part of defendant No. 1 were also denied.
8. Karachi Port Trust's (KPT) C.M.A. No. 1893/03 u/o 1 Rule 1Q(2), CPC for impleading it as a party was allowed on 30.9.2003 and it was joined as defendant No. 5; after which the plaintiff accordingly filed an amended plaint.
9. Plaintiffs filed their affidavit-in-joinder and also an additional affidavit. By order dated 6.9.2003 both defendants Nos. 1 and 2 were arrested and could be released only after they had deposited the surety which was equivalent to the suit amount. On 30.9.2003 the defendant No. 2 was directed to hand-over the oil on its board to the PRL for safe custody till further orders. On 7.11.2003 by consent of all the counsel, defendant No. 5 was allowed to remove the wreck of defendant No. 1 from its location then, to any other location for dismantling and subsequently selling it in consultation with the Official Assignee.
10. Heard the learned counsel, Mr. Isa referred to Section 4(4)(b) of the 1980 Ordinance and contended that it enables the arrest of any other ship which, at the time when action is taken, is beneficially owned by the same person who owned the offending ship. He submitted that the defendants Nos. 3 and 4 have not denied that the beneficial owner of defendant Nos. 1 and 2 is the same family. In support of his contention he referred to Rules 3, 4 and 5 of Order VIII of the CPC and stated that every allegation of fact in the plaint if not denied specifically or by necessary implication shall be taken to be admitted. He referred to the case of Trustees of Port of Chittagong Vs. Steam Navigation Co. Ltd. (PLO 1965 SC 352-3550). He also referred to Annexures B-1, B-2 and B- 3 and also averments made on oath in the plaint, affidavit in support of the application and the affidavit-in-rejoinder. He referred to para. No. (2) of the affidavit-in-rejoinder which listed the common factors supporting the beneficial ownership of defendants Nos. 1 and 2 and also defendants Nos. 3 and 4. He stated that defendants Nos. 1 and 2 were "legally" owned by defendants Nos. 3 and 4, which in turn were owned by two brothers namely Adamancies Polemis and Spyridon Polemis. He further stated that both defendants Nos. 1 and 2 were managed/operated by Polembros Shipping, which was owned by the above-mentioned brothers. According to him the very name Polembros Shipping Ltd. Was a reflection of this fact; the word Polembros comprises of Polemis + brothers or Polembros. He contended that the defendants Nos. 3 and 4 also have the same business address. The said earlier mentioned brothers were the beneficial owners of Polembros Shipping Ltd. And the entire fleet under its management, including the defendants Nos. 1 and 2. The common directors established a further link between the defendants. He also relied on articles published in the newspapers showing the Polembros as the owners of both defendants Nos. 1 and 2.
11. According to Mr. Isa no particular test is prescribed under the 1980 Ordinance to determine the beneficial ownership of vessels; the term "beneficially owned" confirms that the veil of incorporation has to be lifted otherwise the use of the word 'beneficially' would ' be redundant. He also referred to the South African Law (Admiralty Jurisdiction Regulation Act 105 of 1983) which also enables the arrest of "associated ships". According to him the concept of "associates ships" in the Act 105 of 1983 is similar to the "beneficially owned" ships in the 1980 Ordinance. He stated that the 1980, Ordinance does not identify what a Court needs to consider to determine "beneficial ownership" but the South African law and the Courts there have identified some factors to that effect. He contended that those factors could be taken into consideration by this Court as well to enable it to ascertain the "beneficial ownership: of the two ships. He referred to a Brochure titled as "Maritime Law in South Africa" prepared by Shepstone & Wylie.
12. Mr. Isa submitted that the factors mentioned at serial Nos. 4, 7, 8, 9, 10, 11, 12, 14, 15, 16 and 18 of the Maritime Law in S.A. (supra) were probably established. He placed reliance on Belfry Marine Ltd.
(appellant) and Paimpasl Maritime SDN BHD (respondent) (Case No. 323/98) in the Supreme Court of appeal of South Africa and, Delray Shipping Corporation (appellant) and Eridiana Spa (formerly Creole(sic) SRL) (respondent) (Appeal Case No. AR 598/97) in the High Court of South Africa Natal Provincial Division.
13. Mr. Isa contended that in addition to the above, the power-of-attorney executed by the defendants in favour of Khalid Salim Ansari, though not produced in Court but forwarded to him was executed by the defendants Nos. 3 and 4, before the Honorary Consul General for Malta at Piraeus, Greece by John Baxivanos. This according to him established nexus of the said company/ MI Tasman Spirit with Greece. He also submitted that the name John is loannis or Yannis in Greek and 'Toannis Baxevanos' and 'John Baxevanos' are believed to be the same persons. The original bill of lading in respect of the subject cargo in addition to other documents which conclusively established that the plaintiffs, held the rights of subrogation in respect of the said cargo were in possession of the plaintiffs.
14. Mr. Naeem, learned counsel for the defendants. 1 to 4 submitted that the suit was misconceived as the defendant No. 1 was now only a wreck and no longer capable of being used in navigation; the claim in rem against the two vessels and claim in personam against defendants Nos. 3 and 4 could not be allowed to proceed simultaneously. He referred to proceedings in rem against the vessel M.T. Pottofino and another Vs. MI "Portofino" (SBLR 2003 Sindh (sic). He admitted that the plaintiffs failed to establish through documents that they held subrogated the claim of the PRL. He denied allegations of negligence on the part of defendant No. 1. Mr. Naeem contended that the defendants Nos. 1 and 2 were not owned by one and the same person/persons nor were they sister ships. Defendant No. 1 flew a Maltese flag duly registered in Malta, the owners thereof being the defendant No. 3, while defendant No.1 flew a Greek Flag registered at Piraeus Greece owners thereof being the defendant No. 4. The defendants Nos. 1 and 2 were not sister ships inasmuch as not being beneficially owned by common share-holders as alleged by the plaintiff. He contended that defendant No. 2 was engaged only under an arrangement with the slavery in the trust shipment of cargo of defendant No. 1 and had nothing to do with the owner of defendant No. 1. He also referred to counter-affidavit filed by Captains/masters of defendants Nos. 1 and 2, in support of his contention. Mr. Naeem referred to para. (4) of the plaint and contended that admittedly the defendants Nos. 3 and 4 were registered owners of defendants Nos. 1 and 2 respectively. He added that the plaintiffs were obsessed with the assumed common Amership of the defendants by the Polemis family and to strengthen the assumption they had claimed further that both the ships were managed by Polembros Shipping and were covered by the same P&I Insurance. He submitted that this argument of the plaintiff did no answer. The requirement of Section 4(4)(b) of the 1986 Ordinance which requires that the owner of both the offending ship as well as the other ship should be the same person in respect of the majority shares in the ship. He referred to Section 17(1) of Merchant Shipping (2001 Ordinance) which provides that a ship is divided into 64 parts and each part is considered a share in the ownership of the vessel and the words "majority shares" therein occurring in Section 4(4)(a) of 1980 Ordinance relate to the share in the ship itself without which action does not lie under clause (b) of Section (4) ibid. He submitted that under Section 2(25) of 2001 Ordinance the definition of the word owner includes companies, which are for the time being shown as owners. Mr. Naeem relied upon page (6) of a book, titled "Principles of Maritime Law" by Susan Hodges and Christopher Hill. He submitted that the proposition propounded by Hodges & Hill is supported by the Evpo Agnic [1988] Vol. 2 of Lloyd's Reports 411.
15. Mr. Naeem contended that the defendants Nos. 3 and 4 were both the legal and beneficial owners of defendants Nos. 1 and 2. The question of groping in the dark to find out the individuals who might have been holding shares in the defendants Nos. 3 and 4 registered as owners of the ship was irrelevant and not contemplated by law unless a case of fraud and deceit in respect of transfer of the ownership of defendants Nos. 1 and 2 was made out. In such case the veil of incorporation was sought to be lifted to find out the real owner of the shares in such company i.e. Defendants Nos. 3 and 4. He referred to Messrs Maratos & Col. Vs. Rice Traders and others (PLD 1989 Karachi 94-99).
16. Mr. Naeem argued that the off shore' Companies were registered as owners of the ships and this practice in the shipping industry is known as "Flags of Convenience". He stated that the great advantage of "open registeries" provided by flag state like Panama, Marshal Irelands, Liberia, Costa Rica, Cayman Irelands, etc. Is that expenses are nominal and there are no strict regulations to be complied with and the advantage is that under the open registry system "genuine land" between the ship and its owner on the one hand and the flage state on the other is basically lacking. He stated that it meant that the real persons who were the share-holders in the company which was registered as owners of the vessels are not required to be disclosed at all and this is perfectly legal and intentionally acceptable in the shipping world. He placed reliance on pages 29 and 30 of the Principles of Maritime Law supra.
17. Mr. Naim also questioned the right of the plaintiff to file the suit on being subrogated by the PRL under Section .135(a)(2) of the Transfer of the Property Act. He, contended that according to law of transfer of property after the full payment is made by the insurer, a conventional instrument called the 'Letter of Subrogation' is issued by the insurer. In this case the plaintiffs had not produced such a letter and it was therefore, not ascertainable as to which of the rights and remedies had been subrogated to them. He also referred to Section (1) of Bills of Lading Act, 1856 and contended that the plaintiffs were neither the consignee under the Bill of Lading into the endorsee thereof and so they were not competent to file this suit. He submitted that the suit under Admiralty jurisdiction could not be requited with an ordinary money suit where the property under Order 38 Rule 5 are attached before the judgment.
He referred. Bangladesh Shipping Corporation, Dacca Vs. NENDN (PLD 1981 Kar. 419-428).
18. I have heard the Counsel and considered their submissions . The moot point in the matter is the relationship between the defendants Nos. 1 and 2. Before proceeding further it is important to review Section 4 of the 1980 Ordinance. It states:-- "4.
(1
(2) (3)
"4(4) In the case of any such claim as is mentioned in clauses (e) to (h) and (j) to (q) of sub- section (2) of Section 3, being a claim arising in connection with a ship where the person who would be liable on a claim in an action to personam was, when the cause of action arose the owner or charter of or the possession. Or in control of the ship, the Admiralty Jurisdiction of the Court may whether the claim give rise to a maritime lien on the ship or not, be invoked by an action in rem against--
(A) that ship, it 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."
(italic for emphasis). . . . And
(9) ."
19. The emphasis of the plaintiffs was on the word "beneficially" owned in clause (b) ibid to show that the two ships were owned by a common owner.
Plaintiffs narrated the common features of the defendants Nos. 1 and 2 in para. (2) of the affidavit- in-rejoinder which read as under Tasman Spirit Endeavour II Managed Operated by: and Polembros Shipping Ltd.Polembros Shipping Ltd Business address: 89, Akti Miaguli Piraeus, Greece89, Akti Miaouli Piraeus, Greece Directors: loannis (or John)
Baxevanosloannis (or John)
Baxevanos Registered Ostensibl) own Assimina Maritime Ltd. Andros Maritime Ltd.
Benofical oweners Admanatios Polemis & Spyridon PolemisAdamantios Polemis & Spyridon Polemis.
Director: John Baxevanos. John Baxevanos.
Business Address: 89, Akti Miaguli Piraeus, Greece.89, Akti Miaouli Piraeus, Greece.
P & I Insurer: American Steamship American Steamship
20. To further strengthen the fact that the commonality of certain factors can lead to the common ownership of the defendants Nos. 1 and 2, certain portions at pages 4 and 5 of Maritime Law in South Africa supra which read as under were referred:-- --------------------------- . It is not possible to establish with certainly who it is that beneficially owns any particular vessel, the South African Courts will decide on a balance of probabilities. This means that there are a number of ways in which a person wishing to establish an associations can go out the task. It may be sufficient, for instance, to demonstrate cross-mortgages between vessels or that a particular person has been the signatory consistently to documents, which would be relevant to the control of the affairs of a company or the like.
In order to establish an association between vessels, it is often not possible to obtain direct evidence of shareholdings of holding and owning companies. In those cases, a picture must be created of the association to satisfy the Court on probabilities that the guilty ship and vessel to be arrested are associated. Some typical evidence other than common share-holders, which can assist to create such picture , would include: (1) Cross-collateralization vessels.
(2) Common signatories to financing or security documentation.
(3) Common signatories to important agreements (e.g. M.O.A.).
(4) Common attorneys in fact.
(5) Similar or related ship names.
(6) Common guarantors of mortgage finance obligations.
(7) Fleet entries with P & I Clubs.
(8) Common manager.
(9) Common operators.
(10) Common Directors and officers.
(11) Common funnel or fleet markings.
(12) Public statements about ownership or group financial results.
(13) Common nominee share-holders.
(14) Shares street business addresses and, telephone numbers.
(15) Public data-base information (e.g. Lioyds, Fairplay, etc.).
(16) Investigators evidence (e.g. MRC reports)
(17) State-owned enterprises.
(18) Same-fleet vessels substituted in charter-parties.
None of these on its own would necessarily be sufficient to discharge the onus of proof, but the more that are available the greater, the probabilities of association.. There is no hard and fast rule about what is sufficient and each case will depend on its own facts."
21. A perusal of the above common factors of the defendants Nos. 1 and 2 and the test laid down in Maritime Law in South African and recorded herein above gives an impression supporting the contention of the plaintiffs. However, at page (6) of Principles of Maritime Law supra referred to by Mr. Naim which read as under:- "Under English Law, a ship is notionally divided into 64 shares or parts. No one has yet adequately traced the origins of this figure. It is of little importance and therefore needs no further comment.
Statutory confirmation of this structural arrangement is to be found in Regulation 2(5) of the Merchant Shipping (Registration of Ships) Regulations, 1993, which reads:-- "(a) the property in ship shall be divided into 64 shares;
(b) not more than 64 persons shall be entitled to be registered at the same time as owners of any one ship;
(c) a person shall not be entitled to be registered as owner of a part of share; but any number of persons not exceeding five may be registered. As joint owners of a ship or of any share or shares in a ship;
(d) joint owners shall be considered as constituting one person only as regards the persons entitled to be registered and shall not be entitled to dispose in severally of any interest in a ship or in any share in a ship in respect of which they are registered."
"What must be clearly understood is that shares in a ship and shares in a company that owns a ship are two distinct and unrelated concepts. The individual share-holders of a company do not own the ship or any part of it, even if the ship is the only asset of it and if the sole and only purpose of the company itself being in existence is to own, manage, control and operate that one ship."
22. This view is supported by Evpo Agnic supra referred by Mr. Naeem wherein para (1) at page 415 ibid. Court while answering to the arguments of the plaintiff observed as under:- " - - - - in real commercial life registered owners, even when they are 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 that does not affect the ownership of the ship or of the shares in that ship. They are legal and equitable property of the company." (Italic for. Emphasis).
23. In view of the above, the irresistible conclusion is that the defendants Nos. 3 and 4 i.e. The companies are tl be 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 owns the properties. Even if it is traced out as to who owns the defendants Nos. 3 and 4 the legal position will be that the defendants Nos. 3 and 4 are the owners of the defendants Nos. 1 and 2 and not the persons/individuals who owns 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.
24. The upshot of the above is that the defendant No 2 is not the sister ship of defendant No.1 , therefore, the application pertaining to defendant No. 2 is dismissed with no order as to cost.
25. The order of arrest of defendant No. 2 is vacated.
26. As far as the arrest order of defendant No. 1 and its implications are concerned those are not discussed here for the reason that it has been turned into a wreck/scrap and has been ordered to be old as observed above. This question is left open to be decided at the time of the final hearing of the suit. . * * *