JUDGMENT

Wong Kian Kheong JCA:

A. Introduction

[1] This judgment discusses, among others, a novel question of whether an owner of a vessel (Vessel Owner) could rely on a defence that gambling is illegal, in an admiralty action in rem by a company appointed by the Vessel Owner to operate and maintain the vessel as:

(1) a passenger cruise vessel; and

(2) a casino (when the vessel was in international waters).

B. Background

[2] We shall refer to the parties as they were in the High Court .

[3] The defendant company (Defendant) owned a vessel named "Oriental Dragon" (Vessel).

[4] By way of a letter dated 12 November 2019 [Defendant's Letter (12 November 2019)], the defendant appointed the plaintiff company (Plaintiff) as follows:

"Re: Appointed as Ship Operator to handle Operations Matter of "Oriental Dragon"

We are pleased to appoint your esteemed company on behalf of Shipowner, as the operator to attend and arrange for smooth operation as required at Penang Port, Malaysia.

We look forward to your kind cooperation and smooth handling to arrange the necessary formalities and clearance with the relevant port authorities and department involved."

[Emphasis Added]

[5] Mr Cheah Kah Chye (Mr Cheah)-

(1) owns 50% of the shares in the plaintiff; and

(2) is a director of the plaintiff.

[6] The defendant entered into a Memorandum of Understanding dated 7 December 2019 with Mr Cheah (MOU). According to the MOU, among others:

(1) recital B and cl 1.2 stated that Mr Cheah would provide an "interest-free fund" of HK$30,000,000.00 to the defendant to carry out "certain business operations" on board the Vessel;

(2) cl 2.5 provided that, among others, the defendant "shall be entitled to claim, in accordance with the share apportionment of the joint venture entity, from such fund all its incurred costs and expenses arising from the voyage and operation of the Vessel from Hong Kong (HK) to the Destination" (defined as the Penang Port in cl 2.1);

(3) cl 3.1 stated that subject to cl 3.2, for the first two years from the date of the MOU, the parties shall distribute "dividends" on a "50/50 basis)

(4) cl 5.1 provided that the MOU and "any non-contractual obligations arising from or in connection with" the MOU, "shall in all respects be governed by and interpreted in accordance with the laws of [HK]"; and

(5) both the defendant and Mr Cheah "irrevocably" agreed in cl 5.2 that the HK courts are to have "exclusive jurisdiction over any dispute(s) arising from or in connection with" the MOU or relating to "any non-contractual obligations arising from or in connection with" the MOU.

[7] The defendant sent another letter dated 18 December 2019 to the plaintiff [Defendant's Letter (18 December 2019)]. The contents of the Defendant's Letter (18 December 2019) were the same as in the Defendant's Letter (12 November 2019).

[8] The Vessel was operated and maintained by the plaintiff for the following business:

(1) passenger cruise business (Passenger Cruise Business); and

(2) casino business (Casino Business). The Casino Business was only run in international waters.

[9] The Plaintiff paid for the operation and maintenance of the Vessel [Plaintiff's Payments (Vessel)].

[10] Due to the COVID-19 pandemic (Pandemic):

(1) the Vessel could not continue the Passenger Cruise Business and Casino Business;

(2) the Vessel was docked in Penang port;

(3) the Vessel's crew (Crew) stayed onboard the Vessel;

(4) the defendant did not pay for-

(a) the expenses regarding the Vessel [Expenses (Vessel)]; and

(b) the salaries of the Master and Crew [Salaries (Crew)]; and

(5) the defendant did not reimburse the plaintiff with regard to the Plaintiff's Payments (Vessel).

[11] The Plaintiff sent a letter dated 21 October 2020 to the defendant [Plaintiff's Letter (21 October 2020)] which stated as follows, among others:

(1) due to the Pandemic:

(a) the Vessel could not operate;

(b) the plaintiff had suffered "major losses for the past 8 months", and

(c) the plaintiff terminated its operation and management of the Vessel wit