The MV Phoenix was registered in the Saint Vincent and the Grenadines Register of Ships in 1999. In the same year the vessel became the subject of a registered mortgage taken in favour of the appellant bank. The vessel was subsequently sold to several purchasers by voluntary sales as well as judicial sales in North Korea and China. The vessel was also registered in jurisdictions other than Saint Vincent and the Grenadines. The first respondent applied for an order compelling the court to deregister the vessel in the Saint Vincent and the Grenadines Register. The second respondent also sought deregistration and an order that it was the owner of the vessel free from encumbrances.

The court below made various orders including that the second respondent was the owner of the vessel free of all encumbrances; that the vessel was not entitled to remain on the Register of Ships as it no longer satisfied the requirements of the Shipping Act 2004; and that an undischarged mortgage was no bar to deregistration of the vessel. The appellant appealed against the orders of the judge. The second respondent filed a counter-notice of appeal against the judge’s refusal to admit affidavit evidence of deponents. The first respondent also appealed against the judge’s order dismissing its claim and ordering it to pay the appellant’s costs.

The critical issues were whether the appellant’s maritime lien has been extinguished as a consequence of the judicial sales in North Korea and China and whether the vessel should remain registered in the Saint Vincent and the Grenadines Register of Ships. The appellant argued that its maritime lien in the vessel subsists and that the vessel should not be deleted from the registry while the maritime lien subsists. The appellant stated that it had not consented to the deregistration of the vessel, as stipulated by art 3 of the International Convention on Maritime Liens and Mortgages 1993 (MLM Convention 1993) before deregistration could take place. The appellant contended that, notwithstanding the various transactions involving the vessel, under the laws of Saint Vincent and the Grenadines, it continued to have a legal proprietary interest in the vessel in the form of a registered mortgage. Such a registered mortgage could only be treated as discharged if it had been so noted in accordance with the procedure set out in s 70(1) of the Shipping Act 2004 and there had been no such discharge of its mortgage in this case.

The appellant relied on the MLM Convention 1993 incorporated into the laws of Saint Vincent and the Grenadines by s 74F of the Shipping Act 2004. Article 3.1 of the MLM Convention 1993 provides that, with the exception of cases provided for in arts 11 and 12 (judicial sales), in all other cases that entail deregistration of a vessel from the register of a State Party, such State Party shall not permit the owner to deregister the vessel unless all registered mortgages or charges are previously deleted or the written consent of all holders of such mortgages or charges is obtained. However, where the deregistration of the vessel is obligatory in accordance with the law of a State Party, otherwise than as a result of a voluntary sale, the holders of registered mortgages or charges shall be notified of the pending deregistration in order to enable such holders to take appropriate action to protect their interests; unless the holders consent, the deregistration shall not be implemented earlier than after a lapse of a reasonable period of time which shall not be less than three months after the relevant notification to such holders.

The appellant contended that, unless a foreign judicial sale takes place in accordance with the procedures set out in arts 11 and 12 of the MLM Convention 1993, the sale should not be given any legal effect. The respondents argued that the appellant’s proposition cannot be correct where the foreign judicial sale has taken place in countries like North Korea and China, which are not State Parties to the MLM Convention 1993.

Held: Appellant’s appeal dismissed, second respondent’s cross-appeal allowed, first respondent’s counter-appeal dismissed.

By reason of the judicial sales and the intervening private sales, the vessel had ceased to be eligible for registration in Saint Vincent and the Grenadines according to the requirements of s 6 of the Shipping Act 2004 and there was no other basis on which on which the vessel was eligible for registration in Saint Vincent and the Grenadines.

The failure to meet the requirements of s 6 of the Shipping Act 2004, allied with the effect of the judicial sales, made it legitimate to secure the termination of the vessel’s registration. In the circumstances the judge below rightly directed the registrar to deregister the vessel.

In circumstances where a vessel is no longer entitled to remain on the Register of Ships, the registration of a mortgage does not act as an indefinite bar to deregistration.

On a proper interpretation, arts 3, 11 and 12 of the MLM Convention 1993, as enacted into the law of Saint Vincent and the Grenadines, cannot apply where the relevant legal act or judicial sale took place in a country which was not a party to the Convention. It is clear from the wording of art 11 that it applies only where the sale takes place in a State which is a contracting party to the MLM Convention 1993. This would exclude China and North Korea as they are not State Parties to the 1993 Convention. There are references in arts 3, 11 and 12 which repeatedly speak to events taking place in or in accordance with the law of a 'State Party'. The MLM Convention 1993 is clearly intended to apply in respect of judicial sales taking place in State Parties to the Convention. Where the judicial sale takes place in a country which is not a party to the Convention, the common law rules apply. Thus such a sale would be recognised under the law of Saint Vincent and the Grenadines and given the legal effect of transferring title to the purchaser free from encumbrances.