Ship Managers Find Port Of Refuge Before The Hong Kong Courts

Like London buses, you wait an age for one and none come; but when they do, three come along at once. This is what happened in Hong Kong with the Hong Kong court recently handing down three important decisions affecting a ship manager's right of arrest under Hong Kong law.

Ship managers' fees – a development in Hong Kong?

The Oriental Dragon [2014] 1 HKLRD 649

In The Oriental Dragon [2014] 1 HKLRD 649, the Admiralty Judge decided that a manager was entitled to arrest for a Lump Sum fee which included a fee payable for "ship management". Whilst the reasoning behind the decision is not entirely clear, he appears to have relied upon the case of The Westport No. 2 [1966] 1 Lloyd's Rep 342, which held that a ship's agent is entitled to include a reasonable figure for his own services in his claim for disbursements made on account of a ship. If the claim that arose related to services provided in respect of a named ship, for her operation or maintenance, it could fall within either section 12A(2)(l) (i.e. a claim in respect of goods or materials supplied to a ship for her operation or maintenance) or (12A(2)(o) (i.e. any claim by a master, shipper, charterer or agent in respect of disbursements made on account of a ship) of the High Court Ordinance. Although the Lump Sum fee in The Oriental Dragon was payable under a Consultancy Agreement, some of the services being rendered by the "consultant" were ship management services.

In Hong Kong, it has until now been generally accepted that managers have no right of arrest in respect of unpaid management fees since management fees are essentially remuneration payable to the ship managers for services rendered to the shipowners and not related to a ship. The decision in The Oriental Dragon represents a departure from this generally accepted position and gives managers grounds (in some cases) to argue at least that they are entitled to arrest for unpaid management fees in Hong Kong.

Running accounts – a potential trap?

The Ruby Star [2014] HKCU 205

A running account is essentially an active account running from day to day which is predicated upon a continuing relationship of creditor and debtor between the parties to the running account. Payments in are reflected as a credit in the account and set-off against an earlier debit regardless of that debit's characterisation.

There is a long line of English cases flowing from The West Friesland (1859) Sw 454 and The Comtesse de Frègebille (1861) Lush 329, which...