Nanpo Ringyo Kaisha Ltd v. The Owners of and All Persons Interested in the Ships or Vessels "Jelau", "Biak", "Senyiur", "Long Tesak" and "Kong Fat" (All Panamanian Flag) and "Pangempang" (Indonesian Flag) and Others

HCAJ000201/1979

Coram: Zimmern, J.

Date of Judgment: 22th October 1980

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DECISION

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1. The Plaintiffs by their writ in rem claim, as owners or indorsees or holders of a bill of lading covering a cargo of logs for carriage to Japan aboard the vessel Jelau, against the Defendants in damages for breach of contract and/or breach of duty and for negligence in respect of the total loss of the logs resulting from the total loss of the vessel at sea in October 1979.

2. The claim in rem is against the owners of the vessel "Senyiur" and other ships and in personam against Kiem Gwan Shipping Co. H.K. Ltd. and Samarinda S.A. At the instance of the Plaintiffs the vessel Senyiur was arrested.

3. The owners of the arrested ship now apply to the Court to set aside the warrant of arrest on the ground that it was issued on the basis of an insufficient affidavit.

4. Leading counsel's arguments in support of the application may be summarised as follows:-

5. Power to issue a warrant to arrest a sister ship is given to the Court under the provisions of Section 3(4) of the Administration of Justice Act 1956. The mode of issue is provided by the Rules of the Supreme Court and Order 75 r.5(4) reads:-

"a warrant of arrest shall not be issued until the party applying for it has filed a praecipe in Form No. 4 in Appendix B requesting issue of the warrant together with an affidavit made by him or his agent containing the particulars required by paragraphs (7), (8), (9) and (11) so, however, that the Court may, if it thinks fit, allow the warrant to issue notwithstanding that the affidavit does not contain all those particulars."

The complaint of the applicants is that the affidavit filed under (4) does not comply with (8)(b) and (c) which reads as follows:-

6. On the first point Mr. Mills-Owens argues that Order 41 rule 5(2) which provides "An affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds therefore" applies. This may well be so but Order 75 r.5 also makes express provisions. The deponent under that rule must depose that in his belief with the grounds on which his belief is founded that the party who was liable in personam to the Plaintiffs for the loss of the logs at the time of the loss of the Jelau was the beneficial owner of the Senyiur at the time of the issue of the writ provided that party was the owner or charterer or in possession of the Jelau.

7. I now turn to the affidavit impugned. It is sworn by a solicitor of the firm acting for the Plaintiffs. He says quite categorically that the facts and matters deposed to are not within his personal knowledge but are based on instructions received from his clients and the evidence furnished to him on their behalf.

8. Under paragraphs 3 and 4 he sets out the loading of the logs aboard the ill-fated "Jelau" in Indonesia and traces its passage to Hong Kong and sailing for Tokyo and her sinking on or about 16th October 1979. He exhibits copies of the two Bills of Lading of the 2nd Defendants a Hong Kong company, signed as agents on behalf of the Master covering the logs from Hong Kong to Japan.

9. Under paragraph 6 he deposes that there is evidence available to him that those responsible under the contracts of carriage evidenced by and contained in the said bill of lading and those responsible for the care and custody of the goods laden on board "Jelau" and for the management operation and maintenance of the vessel are liable for breach of contract or in tort for the facts or matters following:-

10. Mr. Mills-Owens castigates this paragraph as most objectionable but I cannot agree with him. The deponent is casting a wide net for the various parties who could be liable in personam for the loss, though he has as yet not named any party specifically. Under paragraph 11 he deposes

The deponent deals with other ships. I do not intend to go through the whole affidavit but on the totality of the contents I find it impossible to say that he has not given sufficient grounds for his belief that Kiem Gwan Shipping Co. H.K. Ltd. are liable in personam for the reasons given in paragraphs 12 and 13 and that they were the beneficial owners of the Jelau and the Senyiur at relevant times alternatively they were the nominees of beneficial owners who were also beneficial owners of the two ships. The affidavit is long and perhaps cumbersome but it was intended to cover wide grounds including four other ships in which the six named persons had some connection.

11. The form of the affidavit is certainly open to criticism for non-compliance with Order 41 r.5(2) in that the sources of information and belief have in respect of certain hearsay evidence not been disclosed though not to the extent suggested by Mr. Mills-Owens. In a few instances if one were minded to look for them they were there and in a few others where the deponent being a solicitor it is fairly obvious where the sources of the information came from without them being mentioned.

12. Mr. Michael Thomas leading counsel for the Plaintiffs put in a supplementary affidavit sworn to by the same deponent setting out the sources of information. I do not have to decide whether this is possible by reason of the view I take.

13. This leaves the burden of proof point. Does the affidavit have to show a prima facie case as contended.

14. Mr. Mills-Owens says the vessels are owned by different companies with different shareholders. Only thing common between them are the directors. This leaves out the Hong Kong company which has the same board. He further says there is no sufficient proper evidence that the Senyiur is beneficially owned by any person who could be liable in personam for the loss of the logs on the Jelau therefore no prima facie case has been made out for the issue of the writ to arrest.

15. While it is true that there is no direct evidence shown in the affidavit that the Senyiur is beneficially owned by a person who could be liable for the loss of the logs, I do not see how this can help the applicants. What they are saying is this "In your application for the warrant you have failed to prove directly what you say I am", whereas what the Plaintiffs have to do is to satisfy the court for the warrant to issue is "I for grounds given genuinely believe you are what I say you are." The corporate veil in shipping is public knowledge and may I respectfully cite the words of Slynn J. in the "Aventicum"⁽¹⁾ at page 187:

"I have no doubt that on a motion of this kind it is right to investigate the true beneficial ownership. I reject any suggestion that it is impossible 'to pierce the corporate veil'. I of course remember, as Mr. Howard urges, the case of Saloman v. Saloman & Co., [1897] A.C. 22, but of course it is plain that s.3(4) of the Act intends that the Court shall not be limited to a consideration of who is the registered owner or who is the person having legal ownership of the shares in the ship; the directions are to look at the beneficial ownership. Certainly in a case where there is a suggestion of a trusteeship or a nominee holding, there is no doubt that the Court can investigate it. I think that it may well be, without having to resolve the difference of opinion expressed by Mr. Justice Brandon and Mr. Justice Goff in the two cases to which I have referred that the Court has the power and should in some cases look even further. The view I have come to on the evidence before me is such that it is not necessary for me to say any more about that divergence of view."

16. The corporate veil is obviously a serious issue in this matter which ought not be dealt with in an application in limine without any evidence before the Court other than the affidavit filed in support for the warrant to issue. The applications have the right to take the objection but I do not think it is one of substance. In my view they are well aware of the case they have to meet and the matter ought to proceed (see The St. Elefteric [1957] P 179) in spite of the irregularities contained in the affidavits. The application is dismissed, with costs.

17. Certificate for a counsel.

Representation:

Michael Thomas Q.C. & W. Waung (Deacons) for Plaintiffs

R. Mills-Owens Q.C. & R. Ribeiro (Holman, Fenwick & Willan) for Defendants

(1) [1978] 1 L1. L R. 184

Coram: Zimmern, J.

Date of Judgment: 22th October 1980

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DECISION

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This matter concerns the action in rem against inter alia the owners of the vessel Senyiur as a sister ship of the vessel Jelau which sank in October 1979 enroute from Hong Kong to Japanese ports while carrying a cargo of logs. The plaintiffs' claim is in damages as the holders of the documents of title to the logs against the defendants for their loss.

On the 13th February 1980 the owners of the Senyiur, the 2nd defendant Kiem Gwan Shipping Co. H.K. Ltd., (Kiem Kwan) the 3rd defendant Samarinda S.A. issued a summons for orders:-

Before O'Connor, J. the summons was by consent adjourned to date to be fixed and has not been restored pending the outcome of this the present plaintiffs' summons against all the defendants for orders for attendance for cross-examination of named persons who have filed evidence on behalf of the defendants and for production of documents.

The plaintiffs believe that all the defendants are beneficially owned by the same person cloaked behind corporate veils at all material times and they are asking the court for orders which if granted may assist in lifting those veils to review the position they believe to be true. Mr. Michael Thomas for the plaintiffs put this thus - if the orders sought were granted then the court hearing the 1st summons will have full facts before it to determine the matters which pass to jurisdiction. If then the plaintiffs were found to be wrong in their belief that would be the end of the matter and the plaintiffs would have to pay the costs of a wrongful arrest. If the court were to not to so find then the matter will go to trial and justice will then be done between the parties. The defendants say all the parties have filed their affidavits and the defendants have sworn to the beneficial ownership in issue and there are no veils to be lifted. The orders sought by the plaintiffs are no more than a great fishing expedition.

As it is the defendants' case that the plaintiffs' application is only a great fishing expedition it will be of assistance to set out some of the evidence sworn to in the affidavits filed on behalf of the three defendants. First from the two affidavits of Kang Wibisono:

Second the affidavit of Fong Yuk Lam.

Third Mrs. Erna Megawati.

Fourth. Mutatis mutandis Mr. Thio Tjou Bie swears the same in respect of Samarinda S.A. Panama and the Jelau.

To the above all I need to add is that all three corporations have the same board and Mrs. Megawati and Mr. Thio are not members.

The defendants' application to strike out the writ is founded on their assertion that the plaintiffs had no right to invoke the jurisdiction of the Court by reason that the identity of the person who would be liable on their claim in personam was not at any time the same person as the beneficial owner of the Senyiur. The defendants have every right to bring the application and the Court is bound to decide the issue of jurisdiction on the evidence before it. As Goff J. said in The "I Congreso"⁽¹⁾ -

"It follows as a matter of principle that any question of jurisdiction, such as the question in the present motions, must be dealt with on the motions, and cannot be dealt with as an issue in the actions. Of course, on the hearing of such a motion, evidence will be admitted. Usually, that evidence will be in the form of affidavits, though in theory oral evidence, for example by cross-examination of deponents of affidavits, might be allowed. There has however been no application in the present case for any such oral evidence to be admitted. On the evidence so admitted, which in the present case is purely affidavit evidence, the question of jurisdiction has to be decided, and it cannot be right for the decision on that question to be allowed to depend on the decision of some issue to be tried in the actions. If there is no jurisdiction as against Mambisa, they should not be troubled with the actions at all; indeed it cannot be decided whether the actions can be allowed to proceed until the question of jurisdiction has been determined."

I deal first with orders for the cross-examination of Mr. Kang Wibisono, Mr. Fong Yuk Lam, Mr. Thio Tjou Bie, Mrs. Megawati. Under Order 38 r.2(3) on any application made by summons evidence may be given by affidavit unless otherwise provided for or the Court otherwise directs "but the Court may, on the application of any party order the attendance for cross-examination of the person making any such affidavit and where, after such an order has been made the person in question does not attend his affidavit shall not be used as evidence without leave of the Court". The power is discretionary and generally will be exercised where there is conflict in the affidavit evidence and the court has to resolve the issue on such evidence. As Reece J. said in the S.S. "Tasikamlaja."⁽²⁾

"I am satisfied that there are certain questions of fact to be determined on the motion to set aside the writ before the order sought can be granted, and it seems to me undesirable, where there is such evident conflict on the facts alleged, that the Court should be required to draw inferences from the affidavits alone. I have stated earlier in the hearing of this application that as a result of my experience in these courts I dislike having to rely on affidavit evidence alone and in a matter of such obvious importance as is now before me I am of the opinion that the veracity of the deponents should be tested by cross-examination. I allow the application to cross-examine Mr. Kwee Djee Ho and Major Pamoerahadjo and order that they do attend for that purpose."

Here save for the deponent Fong Yuk Lam it is not so much a matter of conflict of evidence as the veracity of the deponents. Firstly have they and each of them told the truth and secondly have they and each of them told the whole story. A court is not bound to accept every fact sworn to in an affidavit as true nor will it reject any such fact lightly or capriciously. In my view where any such fact is challenged then if the interest of justice and the circumstances of the case so warrant the court will in its discretion allow the veracity of that fact to be tested within the rules. The main issue is the beneficial ownership of the two vessels. In the "Merriel"⁽³⁾ Hewson J. defined the beneficial owner under section 3(4) of the act as "the true owner, that is, the only person with a right to sell all the shares." In "The Andrea Ursula"⁽⁴⁾ Brandon J. differed from the view expressed by Hewson J. and said the term included a demise character. Goff J. in The "I Congreso"⁽¹⁾ at 560 refused to allow "The Andrea Ursula" and said:-

"I have reconsidered the matter and having done so I have reached the conclusion that the words 'beneficially owned as respect all the shares therein' refer only to cases of equitable ownership whether or not accompanied by legal ownership and are not wide enough to include cases of possession and control without ownership however full and complete such possession and control may be".

Then Slynn J. in The "Aventicum"⁽⁵⁾ said:-

"I have no doubt that on a motion of this kind it is right to investigate the true beneficial ownership. I reject any suggestion that it is impossible 'to pierce the corporate veil'. I of course remember, as Mr. Howard urges, the case of Saloman v. Saloman & Co., [1897] A.C. 22, but of course it is plain that s.3(4) of the Act intends that the Court shall not be limited to a consideration of who is the registered owner or who is the person having legal ownership of the shares in the ship; the directions are to look at the beneficial ownership. Certainly in a case where there is a suggestion of a trusteeship or a nominee holding, there is no doubt that the Court can investigate it. I think that it may well be, without having to resolve the difference of opinion expressed by Mr. Justice Brandon and Mr. Justice Goff in the two cases to which I have referred that the Court has the power and should in some cases look even further. The view I have come to on the evidence before me is such that it is not necessary for me to say any more about that divergence of view."

The latest comes from the Court of Appeal in Singapore which refused to follow Brandon J. It is the case of The "Permina 3001"⁽⁶⁾ wherein at p.329 the Chief Justice said:-

"The word 'ownership' connotes title, legal or equitable title whereas the expression 'possession and control' however full and complete is not related to title."

I respectfully agree with the opinion expressed by Slynn J.

On an analysis of the evidence filed on behalf of the defendants one cannot entirely close one's mind to the possibility that the timber business referred to by Mr. Kang Wibisono and the shipping required for the servicing of the export of the timber might be a business wholly owned by a person or persons perhaps a family. Whether it is so or not is in the exclusive knowledge of the deponents save perhaps Mr. Fong an employee.

This is an application in limine in which the plaintiffs may be liable to have their writ set aside. The interest of justice and the circumstances of the case commend and warrant that the veracity of the deponents be tested. As for two of them being residents without the jurisdiction, Indonesia in this age is not so far away. They have allowed their respective ship to be controlled by a Hong Kong company and it would appear from the evidence that most of the records are here. No good reason has been advanced why they cannot come. There shall be orders for cross-examination accordingly.

I now turn to the matter of production of documents. In my view the same principles apply. The defendants say it is a fishing expedition but there is no suggestion that the plaintiffs will be unable to formula a Statement of Claim before discovery. This application is the consequence of the defendants' application to set aside without which discovery would be automatic after the close of pleadings. I am in no doubt in the circumstances of this case the plaintiffs should have their orders but not to the extent sought. There will be orders in terms of (3) for production and inspection and the taking of copies at the offices of Messrs. Holman, Fenwick & Willan within 42 days from to-day of the documents set out in the schedule limited to paragraphs 1 to 7, (inclusive), 10 and 11 and only in relation as to vessels "Pangempang", "Jelau", "Senyiur" as to companies Kiem Gwan Shipping Co. H.K. Ltd., Samarinda S.A. Senyiur S.A.

It is further ordered that within seven days after inspection of the documents, the 1st summons be restored for dates to be fixed for hearing in consultation with counsel's diaries.

There will be liberty to apply.

Costs of the application costs in the cause Certificate for a counsel.

Representation:

Michael Thomas Q.C. & W. Waung (Deacons) for plaintiffs

R. Mills-Owens Q.C. & R. Ribeiro (Holman, Fenwick & Willan) for defendants

(1) [1977] 1 L.L.R. at 559

(2) [1952] H.K.L.R. 241

(3) [1963] P @ 258

(4) [1973] 1 Q.B. 265

(5) [1978] 1 L.L.R. at 187

(6) [1979] 1 L.L.R. 329