The Owners of Cargo Lately Laden on Board the Ship or Vessel "Tian Sheng No. 8" v. The Owners and/or Demise Charterers of the Ship or Vessel "Tian Sheng No.8" Now Named "Resource 1" and The Oweners of the Ship or Vessel "Tian Sheng No.1"
Read the full judgment text of HCAJ 370/1996 on BabelCite. This HCAJ judgment was delivered on 15 February 1999.
1. On 19 th September 1996, the vessel "Tian Sheng No. 8" (hereinafter referred to the "Vessel") commenced loading a cargo of cement at the Chinese port of Rizhao. The Vessel left Rizhao loaded with 30,000 metric tons of bagged cement sailing for Chittagong or Mongla, Bangladesh. Three Freight Collect Bills of Lading were issued on behalf of the Vessel. The Vessel instead of sailing to the destination port deviated to Haikou, Hainan Island, China where the cargo under the aforesaid three Bills o
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HCAJ000370/1996
IN THE HIGH COURT OF THE HONG KONG SAR COURT OF FIRST INSTANCE ADMIRALTY JURISDICTION ----------------- Admiralty Action in Rem against the Ship "TIAN SHENG NO.8"
----------------- Coram: The Hon. Mr. Justice Waung in Chambers Date of Hearing: 17 November 1998, 6, 7, 8, 13 and 14 January 1999 Date of Handing Down of Judgment: 15 February 1999 ----------------- JUDGMENT ----------------- 1. On 19th September 1996, the vessel "Tian Sheng No. 8" (hereinafter referred to the "Vessel") commenced loading a cargo of cement at the Chinese port of Rizhao. The Vessel left Rizhao loaded with 30,000 metric tons of bagged cement sailing for Chittagong or Mongla, Bangladesh. Three Freight Collect Bills of Lading were issued on behalf of the Vessel. The Vessel instead of sailing to the destination port deviated to Haikou, Hainan Island, China where the cargo under the aforesaid three Bills of Lading were discharged and sold, purportedly pursuant to an Order of the Maritime Court of Haikou, China. 2. The Plaintiffs were at all material times the owners of the Cargo under the three Bills of Lading and were also the holders of the said three Bills of Lading. Claim was made by the Plaintiffs against the Vessel by the issue of the Writ in Rem on 23rd November 1996. On the 9th of July 1997, the Vessel was arrested by a Warrant of Arrest which was issued pursuant to an Affidavit of Mr. Eyre dated 5th February 1997 ("1st Eyre Affidavit"). By an Acknowledgement of Service, Sinclair Roche and Termperly as Solicitors for the Defendants acknowledged service of the Writ in rem. By a Notice of Motion dated 15th March 1997, the Plaintiffs sought the appraisement and sale of the Vessel pendente lite and an Affidavit of Mr. Eyre dated 15th March 1997 ("2nd Eyre Affidavit") was filed in support of the Motion for sale. On the 18th of March 1997, Waung, J. made the Order for sale and appraisement of the Vessel pendente lite. Bail Bond of US$1.01 million was posted by Ming An and China Insurance Co. Ltd. on 1st April 1997 to secure the release of the Vessel. The Vessel was therefore released from arrest and the Admiralty Action then proceeded by the Plaintiffs serving "Points" of Claim on 3rd of October 1997. On the 24th of November 1997 (before the expiry of the time for the Defendants to serve and file their Defence as time for the service of the Defence had been extended by agreement to 24th November 1997), the Defendants applied by Notice of Motion for a stay of all further proceedings in favour of Panama on the basis of the jurisdiction clause in the Bills of Lading or alternatively in favour of the Kaikou Maritime Court, China on the ground of forum non conveniens. In support of the Stay Motion, the Defendants filed an Affirmation of Chi Yao Xu dated 24th of November 1997 ("Chi 1st Affirmation"). On 10th of January 1998, the Plaintiffs in opposition to the Stay Motion, filed the Affirmation of Fazle Azim dated 10th January 1998 ("Azim 1st Affirmation"). On the 15th of January 1998, the hearing of the Stay Motion was fixed for 30th April 1998. 3. 5 days before the hearing of the Stay Motion, on 25th of April 1998 the Defendants issued a Summons under Order 12 Rule 8 for an order that the Warrant of Arrest be set aside and the Bail Bond be returned on the ground that at the time when the Writ was issued the party who would be liable in personam was neither the owner nor the demise charterer of the vessel. This set aside Summons was supported by the 1st Affidavit of Mary Thomson dated 27th of April 1998. The Plaintiffs opposed the Summons to set aside by the 2nd Affirmation of Azim dated 13th July 1998. There then followed for the Plaintiffs the 3rd Affidavit of Eyre dated 12th August 1998, for the Defendants the Affirmation of Ji Guizhi dated 22nd September 1998, the 1st Affirmation of Ng Kwok Ying dated 7th November 1998 and the 4th Affidavit of Mary Thomson dated 14th November 1998. To complete the picture, there were finally the Summons dated 2nd January 1999 of the Defendants for leave to file Further Affidavits and the 2nd Affidavit of Ng Kwok Ying dated 2nd January 1999. 4. The two applications of the Defendants, namely the Motion for stay of the proceedings and Summons to set aside the Warrant of Arrest came before this Court on the 17th November 1998 when the Court was informed that the Motion for stay of proceedings had been abandoned by the Defendants and that there was therefore only one application of the Defendants namely the Summons to set aside the Warrant of Arrest based on the ground that the Court had and has no Admiralty jurisdiction in rem in this Action. Mr. Coleman on behalf of the Plaintiffs took a preliminary point that the application of the Defendants under Order 12 rule 8 of the Rules of the High Court was out of time and therefore the application of the Defendants must fail in limine. I gave directions for the proper hearing of the Summons involving two issues and the hearing was then adjourned. When the hearing proper commenced on the 6th of January 1999, the parties agreed that there were two Issues before the Court, namely:-
TIME ISSUE 5. The dispute under this Time Issue is that in the light of the Defendants being totally out of time to apply under Order 12 rule 8 for the setting aside of the proceedings on the ground that the Court has no jurisdiction in rem, whether the Defendants are bound to make the application under Order 12 rule 8 as contended by Mr. Coleman for the Plaintiffs or could be made outside Order 12 rule 8 and therefore at any time, according to Mr. Sussex for the Defendants. This is substantially for me a question of construction of Order 12 rule 8. 6. Order 12 Rule 8 of the Rules of the High Court with the heading "Dispute as to Jurisdiction" provide:-
For ease of reference I will hereinafter referred to the present Order 12 rule 8 as the "Dispute Rules". 7. The Dispute Rules of Order 12 rule 8 of the Rules of the High Court came into force in Hong Kong in the early 1980s soon after the coming into force in the United Kingdom of the English Order 12 rule 8. Like in England, the Hong Kong Order 12 rule 8 replaced the former provisions of Order 12 rule 8 with its revealing heading "Application to set aside writ etc." which was in the following terms:-
I will hereinafter call these former Order 12 rule 8 as the "Old Rules" which were revoked in 1981. 8. It can be readily seen that these Old Rules are very different from the Dispute Rules and this substantial change came about as part of the radical change relating to entering appearance and waiver of irregularity as result of entering appearance. Goff, J. (as he then was) explained the difference between the two sets of rules in Carmel Exporters v Sea-Land Inc. [1988] 1 W.L.R. 1068 at page 1071 onwards:-
9. The Hong Kong Court of Appeal considered in great detail the Dispute Rules in the case of Wo Fung Paper Making Factory Ltd. v Sappi Kraft (Pty.) Ltd. [1988] HKLR 346. This is a case where by a misfortune, the application to set aside the ex parte order to serve out under Order 11 was made one day too late and under the then existing paragraph (2) of the Order 12 rule 8 (which paragraph (2) restricting the power of the court to extend time only when application for time extension was made before expiry of the time limit has subsequently been revoked and deleted) the Court of Appeal held that there was no power to extend time because of the nature of Order 12 rule 8. Fuad, V.P. said at page 352E onwards:-
Hunter, J.A. said at page 355H:-
Penlington, J.A also agreed with the two judgments. Wo Fung is binding on me as a Judge of the Court of First Instance and there is simply no escape for the Defendants as all applications which dispute the jurisdiction of the Court have to be made under Order 12 rule 8 and by the procedure and time table set out therein. 10. The consequence of this is then spelt out in Order 12 rule 8(7), namely that the Defendants are treated as having submitted to the jurisdiction of the Court in the proceedings and therefore not capable of challenging the jurisdiction. As explained by Goff, L.J. (as he had then become) in The Messiniaki Tolmi [1984] 1 Lloyd's Rep. 266 at page 270:-
11. Mr. Sussex has submitted that a party cannot submit to jurisdiction which does not exist and he called in aid authorities such as Wilkinson v Barking Corp. [1948] 1 K.B. 721, 725 and Williams & Glyn's Bank v Astro Dianamico Cia Nav. S.A. [1984] 1 WLR 438, 443. But this is a circular argument and it is begging the question, for unless the application is allowed to be made and is seen to be successful after it was allowed to be made, the court does has jurisdiction on the material before the court or it cannot be shown that the court has no jurisdiction. In this case, as in cases disputing the jurisdiction with service out under Order 11, the defendants have to put in evidence which will have to be accepted by the court before the court can reach any conclusion that it might not have jurisdiction. The question is whether there is a mode of controlling the procedure for challenging jurisdiction so that if the procedure is not followed then the party which otherwise would be able to challenge the jurisdiction cannot do so. The authorities relied on by Mr. Sussex does not touch that question or the scope of Order 12 rule 8. The Astro Dinamico case turned on the facts where the defendant was asking for both the stay as well as disputing the jurisdiction and the House held that asking for a stay on the facts did not amount to submission to jurisdiction. It was argued by Mr. Sussex that it was the duty of the court to entertain a dispute as to jurisdiction in rem at any time, even after acknowledgement of service, even when there was no Order 12 rule 8 application and even in the middle of the Trial itself. The argument is so extreme that I cannot find any precedent for it nor can Mr. Sussex refer me to any previous decision where an Admiralty Court has entertained a fundamental attack on jurisdiction requiring extensive evidence months after the Defendants had submitted to the jurisdiction. As I see it, if Mr. Sussex is correct then the Wo Fung case must have been wrongly decided but this was neither argued by him nor open to me to so decide. I am bound by Wo Fung and in the circumstances, the Time Issue must be decided against the Defendants. JURISDICTION ISSUE 12. Strictly speaking it is not necessary for me to decide the second Issue but for the sake of completeness, I will briefly indicate my conclusion which is also in favour of the Plaintiffs. The issue is that the Court has no jurisdiction in rem under Section 12B of the High Court Ordinance because the Vessel was not owned at all material times by Hainan Tian Sheng Ocean Company Ltd. ("Ocean"). 13. Section 12B(4) of the High Court Ordinance provides as follows:-
14. It is common ground between the parties that the Court may exercise an Admiralty jurisdiction in rem (where there was no maritime lien and this is not a case of maritime lien) when the following four conditions are satisfied:-
There is no dispute between the parties as to Conditions (1) and (2). The dispute is over the Conditions (3) and (4) with the Plaintiffs saying that the person liable on the claim in an action in personam is Ocean and Ocean is also the owner of the Vessel at the time of the cause of action arose and at the time when the writ was issued whereas the Defendants while not disputing that the person liable in personam is Ocean, contended that Ocean was neither the owner of the Vessel at the time of the cause of action arose nor at the time of the issue of the Writ. As there had been not even an alleged change of ownership, whether legal or beneficial, between the date of the cause of action (October 1996) and the date of the issue of the Writ (November 1996), the factual dispute is a narrow one of whether Ocean could be said to be the owner of the Vessel in late 1996 or was the Vessel owned by someone other than Ocean. 15. It is not disputed by the Defendants that Ocean is part of a group of Tiansheng companies comprising of Tian Sheng Shipping Inc. ("TSI"), Hainan Tiansheng Transportation & Rent Co. ("T & R") and Ocean itself, namely Hainan Tiansheng Ocean Shipping Co. Ltd. The dispute is whether there were genuine transactions amongst these companies and what was the true relationship of these companies to the Vessel. I am conscious that there had been no cross-examination and that much of the contested materials are not tested by cross-examination or oral evidence but the broad picture I have come to on the totality of the evidence is that the owner of the Vessel in late 1996 was Ocean and not some of these minor companies in the Tiansheng group. That Ocean was a key company in the group and was the company in control of what went on in the group was clear from the totality of the evidence. It seems to me that certain evidence is far more weighty or worthy of consideration than others and in this category I place value on the evidence that according to Lloyd's Register of Ships and Lloyd's Confidential Index the owner of the Vessel was Ocean. Lloyd's had based its information on the Classification Society and the Classification Society is known to be a most reliable source, as it obtained its information directly from the owners of the Vessel. Class normally has in their possession all the essential documents relating to a ship and its ownership to enable a Classification Society to say who was the owner of a ship. There was not even an attempt by the Defendants in this respect to explain how the Classification Society came to have the information or why it was not correct and this lack of explanation powerfully for me reinforces the value and accuracy of the Classification Society's description of Ocean as the owner of the Vessel. 16. As I see it, the weakness of the case of the Defendants is its heavy reliance on internal documents. These documents could not be objectively proved as having been in existence at the particular time or that they were genuine or that they were not created after litigation had started. Important and vital non-internal documents such as the Bill of Sale to TSI (the alleged owner), the payment by TSI for the purchase of the Vessel were never shown to the Court. The Defendant were driven to rely on two essential aspects, namely the so called Panamanian registration of TSI and the internal documentation of the alleged Bareboat Charter dated 12th November 1995 from TSI to T & R, the alleged Time Charter dated 18th September 1996 between T & R and Ocean, the Management Agreement dated 10th November 1996 between T & R and Ocean. But these are weak evidence. The Panamanian registration is a provisional one which was based on no documentation or proof, merely the say so of the applicant. It is in fact not even a proper registration. The internal documentation is even worse because as pointed out by Mr. Coleman there are so many internal inconsistencies and conflicts with more question marks than logical answers. 17. The undoubted genuine documents such as the Voyage Charterparty dated 9th September 1996 between Ocean and Royal Pacific Lines Ltd. and the Crewing Agreement and Chinese Court Proceedings documents and related documentation all point to Ocean as being the owner of the Vessel. 18. Even the affidavit evidence of Chi Yao Xu suggests and gives the overall impression that he himself regards Ocean as the owner of the vessel. How otherwise could it make sense for him to seek the stay of proceeding on the exclusive jurisdiction clause of Ocean's Bill of Lading. Much authorities and legal argument had been presented to me by Mr. Sussex to persuade me that legally and factually, that the Plaintiffs' position is wrong and that the owner of the Vessel was not Ocean. I regret I cannot accept the submission. It is not necessary to go into any elaborate analysis of authorities or of the complex facts to determine this issue. For me there is more than sufficient and persuasive material to convince me that Ocean was at the relevant time the owner of the vessel within the meaning of the expression in Section 12B and it therefore follows that I find in favour of the Plaintiffs on this second Issue. 19. The Summons of the Defendants is therefore dismissed with costs and the Action must proceed to Trial.
Representation: Mr. Russell Coleman for the Plaintiffs on the instructions of Messrs Richards Butler Mr. Charles Sussex for the Defendants on the instructions of Messrs. Ng & Partners Defendant's appeal to Court of Appeal dismissed. Please refer to CACV103/1999 dated 12 November 1999 |
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