Judge Rules Against Supplier for $4 Million Unpaid Bunkers

Hong Kong court ruling is a landmark case

A judge in Hong Kong has ruled against Chinese bunker supplier Chimbusco Pan Nation Petro-Chemical (Chimbusco) in its attempt to recover what it claimed was over $4 million in unpaid bunker fuel bills from Argentinian shipping company Maritima Maruba SCA (Maruba).

The landmark ruling by the Hong Kong court defined for the first time in common law the meaning of 'control' in the context of a vessel, finding it to be the person who is legally in control of a vessel, which could be for example, via a time charter.

By that definition, the court found Maruba to be in control of only 1 of the 11 vessels involved in the case, the Decurion, and therefore only liable for the cost of bunker fuel supplied to that vessel.

Unpaid Bills

Believing Maruba was responsible for the unpaid bills of all 11 vessels, Chimbusco successfully arrested the Decurion in Hong Kong and an order for sale of the vessel was secured.

Maruba's legal team Kennedys Law LLP (Kennedys) said their legal intervention was made before the proceeds of the sale were distributed.

They said that the bunker fuel orders were all placed by a subsidiary and invoiced to a company called South Atlantic, and the 10 vessels not registered to Maruba were on time charter to another company, Clan S.A..

Kennedys argued that in order for a Hong Kong court to arrest the vessel, Chimbusco would have to show that Maruba was the owner or charterer, or in possession or control, of the 10 vessels which were not registered to the Argentinian company.

The only fact in dispute was who was in control of the vessels, and Chimbusco argued that despite South Atlantic, Clan S.A., and Maruba being 3 legally distinct entities, Maruba was in ultimate control of the group of companies as well as certain shipping operations of the fleet.

Kennedys argued that Clause 8 of the NYPE time charter that it had entered into with the owners of each vessel meant the person in control of the vessel must be the time charterer of that vessel, and that being in control of a group companies who are in control of a ship is not the same as having control of the ship itself.

Commenting on his ruling, the Honourable Mr. Justice Reyes said that assessing all relevant circumstances in such cases would mean shipowners would never be certain whether their ship was in danger of being arrested as a result of their vessel’s operation by another entity.

Adoption of a test, looser than that of the person who is legally in control of a vessel would therefore be commercially undesirable, with the Justice believing it could not have been what the legislation intended.