TNAG-2308-FCO40-3345-Future-of-Hong-Kong-shipping-register-1991 — Page 230

3

The first is the fact that, at present, it is not

possible to alter the priority of two mortgages on the same ship once they have been registered. It is always possible for the mortgagees to enter into a deed of priorities, altering the respective ranking of the mortgages, but such a deed will take effect only as a matter of contract or in equity: it does not alter the priority of the mortgage at law.

In view of the frequent need to restructure mortgage security in connection with refinancing arrangements, we think that consideration should be given to the introduction of a provision allowing such a deed of priorities to be registered, as is permitted, for example, in Panama, in order to alter the registered priorities of the mortgages with effect from the registration of the deed.

The second problem is that of tacking. The recent Conveyancing and Property Ordinance apparently abolishes entirely the ability of a mortgagee of personal property (such as a ship) to tack further advances to his security in priority to a subsequent mortgagee, since it prohibits tacking save as provided in the Ordinance, which only specifies cases where tacking is permissible in relation to mortgages of land.

We think it unlikely that the Legislative Council intended to abolish the doctrine of tacking completely for personal property when it passed the Conveyancing and Property Ordinance, but this is something which needs to be clarified. If indeed the doctrine of tacking for personal property (including ships) is to survive, consideration should in any event be given to the instances in which tacking should be allowed. We think that there is a great deal to be said for assimilating the law of tacking for personal property to that for land, so that a mortgagee may tack where he is under an obligation to make further advances even though he has notice of a subsequent mortgage. At common law there was, in these circumstances, no right to tack.

(4) Mortgage Amendments

The frequent need to restructure ship mortgage security has been mentioned above in the context of refinancing. It may also arise from a reorganisation of a shipping group, where ships are transferred from one subsidiary to another, perhaps requiring the novation of existing loans and/or the amendment or replacement of cross-guarantees.