China Steel Corporation and Another v. Virginia Panama S.A.

HCCL000063/1980

1980, No. CL-63

Practice and procedure - application to strike out service of writ - defendant Panama Company not shown to have "established a place of business" in Hong Kong and so service under Part XI of Companies Ordinance could not be made - even if evidence established that company had been "resident" or carrying on business in Hong Kong at one time (which the Court doubted) service could not be effectual unless they were "here" at the date of the service of the writ.

1980, No. CL-63

IN THE SUPREME COURT OF HONG KONG

HONG KONG

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BETWEEN

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Coram: Fuad, J.

Date: 24 March 1982

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JUDGMENT

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1. This is an application to strike out service of the writ in this action against the only remaining defendant, Virginia Panama S.A. The writ was issued on the 22nd November 1980 with the following endorsement: "The Plaintiff's claim is for damages for breach of contract and/or duty against the defendants as Owners/Charterers of the ship or vessel "Virginia Moon" in and about the loading, handling, custody care and discharge of the plaintiffs' cargo on board the ship "Virginia Moon" in the year 1979." Almost one year later the plaintiffs wholly discontinued the action against the 2nd defendant Fairmont Shipping (H.K.) Ltd. but, as will be seen, Fairmont Shipping still features in the case in a different way for the writ was served on Virginia Panama by leaving a copy of it enclosed in a letter addressed to "The Head Officer, Virginia Panama S.A., c/o Fairmont Shipping (H.K.) Ltd., 26th floor, Bank of American Tower, 12 Harcourt Road, Hong Kong."

2. In support of their application, Fairmont Shipping filed an affirmation made by their company secretary. It says that Fairmont Shipping is the Hong Kong agents of Maglines Shipmanagement, Inc. of the Philippines, who are the former managers of the vessel "Virginia Moon" which was owned by Virginia Panama S.A. of Panama. Speaking as at the 16th November 1981, it continues by stating that Fairmont no longer had any connection with Virginia Panama S.A. nor did it have any connection with the "Virginia Moon". Fairmont's involvment with Virginia Panama S.A. and with the "Virginia Moon" ceased on or about 21st July 1980. The affirmation concludes: "In view of the above Fairmont had no connection whatsoever with either Virginia Panama S.A. or the "Virginia Moon" when the writ and accompanying documents were delivered to Fairmont's offices on 20th October 1981."

3. An affidavit sworn by a partner in the solicitor's firm acting for the plaintiffs begins by stating that the claim arises out of loss and damage to cargo carried on board the "Virginia Moon" from Kobe, Japan to Kaoshiung, Taiwan in October 1979. The vessel encountered heavy weather during the voyage up to Force 8 and started to roll. Eventually, deck lashings gave way and deck cargo, valued at US$363,700, and consisting of hatch covers fell overboard. In addition, other hatch covers were damaged and the cost of repairing these amounted to US$211,832. A cargo of ramming mass carried under deck was damaged by seawater and the surveyors advised that damage had been caused during transportation by sea. As a result of his investigations, the deponent says, he believes that the plaintiffs have a good claim against the defendants for failing to take adequate care of cargo, alternatively for providing a ship and equipment which was not fit for the conditions which were reasonably to be expected.

4. He explains that it was decided to commence proceedings in Hong Kong because investigations in Panama showed that there would be little purpose in proceeding in Panama and also because it was impossible to say that Virginia Panama S.A. had positively established a place of domicile at any one place. All the indications were that Hong Kong was where effective control and management of the company was to be found. He had been informed that proceedings under Panamanian law had to be served on the President/Director of the Panamanian company. Virginia Panama S.A. did not maintain an office in Panama but simply had "a legal agent" there which maintained the legal fiction that Virginia Panama S.A. had an address in Panama. That agent was not authorised to accept service and could only pass documents on to the company. Further investigations revealed the identity of the President/Director but details of the place of domicile of none of the Directors of the company could be ascertained.

5. The affidavit goes on to say that further investigations into public records such as Lloyd's Register had shown two addresses for Virginia Panama S.A., one at the offices of Magsaysay Lines Inc. a company incorporated in the Philippines and controlled by a Mr. Robert Chao-Feng Ho. Other records showed the offices of Virginia Panama S.A. as being care of Fairmont Shipping (H.K.) Ltd. which was also under the control of Mr. Robert Chao-Feng Ho. The Companies Register in Hong Kong indicated that Mr. Robert Chao-Feng Ho lived at an address in Kowloon.

6. The affidavit then speaks, at some length and in general terms, of the benefits of flags of convenience, and then continues by stating that the proceedings had been served on Virginia Panama at the offices of Fairmont Shipping as being a place where a substantial part of the business of the company was carried on.

7. There were a number of other factors which caused the deponent to believe that Virginia Panama could be found in Hong Kong. Certain agreements exhibited purported to appoint Maglines Shipmanagement Inc. as Manager and Fairmont Shipping (H.K.) Ltd. as agents. In the deponent's view an examination of the agency agreement confirmed that a large part of the business of operating the "Virginia Moon" was carried on by Fairmont Shipping on behalf of Virginia Panama. He also relied on the fact that the report of the Master following the loss of the deck cargo had been addressed to the General Manager of Fairmont Shipping at their former offices. Finally he exhibited a letter from a Mr. Houghton (a director of Roger Houghton Recoveries Ltd.) which said "We confirm the Assistant Operations Manager of Fairmont Shipping, Mr. G. Vergava, told us that Fairmont Shipping managed/operated the Virginia Sun and Virginia Moon at the time this claim arose."

8. For the plaintiffs, Mr. Mumford invites me to recognize the problems created by flags of convenience for those who have claims involving them and to take what he called a "benevolent view" of the situation here. He also puts forward the proposition that since the object of service is to bring notice of an action to the defendant's attention so that he can defend if he wants to, and this had been achieved, no possibility of injustice could arise in this case. While the court must, no doubt, approach the issue in a practical and common sense way, it would be wrong to base a decision on considerations of the kind urged upon me. It is for the legislature, if thought desirable, to make provision for the special difficulties revealed in a case such as the present.

9. It seems clear that "a company incorporated outside the Colony" (to use the terminology of Part XI of the Companies Ordinance (Cap. 32)) may be served with process of the Hong Kong courts under one or other of the following provisions, as the circumstances dictate -

10. Under Part XI of the Companies Ordinance if a foreign company establishes a place of business in Hong Kong, among the documents it is required to deliver to the Registrar of Companies for registration is one which contains the names and addresses of one or more persons resident in Hong Kong authorized to accept service of process on behalf of the company (s.333(c)). Alterations in these particulars must be notified to the Registrar (s.335(c)). Process is sufficiently served on the company if it is left at, or sent by post to, an address notified to the Registrar. If the company has failed to register the name and address of a person authorized to accept service, or if all the persons named are dead or have ceased to reside in Hong Kong (or if any of them refuse to accept service or for any reason cannot be served) then service is effectual if it is left at, or posted to, any place of business established by the company in Hong Kong (s.338). The expression "place of business" is defined to include a share transfer or share registration office (s.341).

11. Can it be contended that Virginia Panama S.A. has ever "established a place of business" in Hong Kong within the meaning of that expression in Part XI of the Ordinance? On the material before me, it would be doing violence to the language employed to so hold. But Mr. Mumford submits that the evidence before me sufficiently establishes that Virginia Panama S.A. carried on business in Hong Kong. He refered me, inter alia, to paragraphs 65/3/9 and 65/3/10 of the Supreme Court Practice (1982) and took me through the two agreements exhibited in the affidavit filed in support of the plaintiffs' stand.

12. In answer to the submission made by Mr. Faulkner that even if it had been established that Virginia Panama S.A. at one time "carried on business" or was "resident" in Hong Kong for the purpose of O.65 r.3, the position had to be looked at at the time the purported service had been effected, Mr. Mumford argued that since Virginia Panama S.A. still existed and had not been shown to be operating elsewhere, the Court should infer that it was still carrying on business in Hong Kong through the agency of Fairmont Shipping.

13. If, contrary to my view, it could reasonably be argued that Virginia Panama S.A. had at one time "established a place of business" in Hong Kong, then there is very clear authority that this fact would not assist the plaintiffs unless it could be shown that Virginia Panama still had a place of business in Hong Kong at the time of the service of the writ. (Deverall v. Grant Advertising Inc. [1955] 1 Ch. 111). Mr. Mumford suggests that a good deal of reasoning of the Court of Appeal in the Deverall case had been undermined by the later decision of that Court in A/S Cathrineholm v. Norequipment [1972] 2 W.L.R. 1242 where it was held that the service of a writ on a company, by properly addressing and posting it to its registered office, is deemed to have been duly effected in the ordinary course of post and a judgment obtained in default will be regular since there had been service under s.437 of the (U.K.) Companies Act, even though the company may in fact have changed its registered office. The defendant company had brought about the situation by failing to notify the change of address to the Registrar of Companies in accordance with s.107 of the Act. I do not read this decision as affecting the weight of the authority of the Deverall case which was not cited or referred to. In the 1972 decision the company was an English company and no considerations of the kind before me arose.

14. Whatever may be the effect of the agreements relied upon by Mr. Mumford, and however reasonable the inference to be drawn from the fact that the Master of the "Virginia Moon" reported the incident out of which the plaintiffs' claim arises to the General Manager of Fairmont Shipping, to show that Virginia Panama S.A. had at one time carried on business in Hong Kong (and I am by no means satisfied that the plaintiffs have discharged the onus of establishing this fact) there is no evidence whatever that this was the still position when the writ was served on the 20th October 1981. On the contrary it is common ground that the "Virginia Moon" was sold to West Pacific Maritime Co., S.A. in July 1980 and it is the management and control of this vessel by Fairmont Shipping that forms the foundation for the contention that, through Fairmont, Virginia Panama S.A. was carrying on business in Hong Kong. The decision of Brandon J., which I respectfully consider should be followed, in The "Theodohos" [1977] 2 Lloyd's Rep. 428 establishes that even where service of process under O.65 r.3 is sought to be effected, the question whether a foreign company is carrying on business within the jurisdiction (see for example, Okura & Co. Ltd. v. Forsbaka Jernverks Aktiebolag [1914] 1 K.B. 715) falls to be determined at the date of the service of the writ.

15. This is what Brandon J. had to say at p.431 -

16. For these reasons, while I have sympathy for the difficult position in which the plaintiffs find themselves, I have no doubt that the service of the writ on Virginia Panama S.A. was irregular, and I make an order setting it aside; in "handing-down" this judgment I make an order nisi (under O.42 r.5A) in favour of Virginia Panama S.A. that the costs of this application and any costs occasioned by the abortive service be borne by the plaintiffs, in any event.

Representation:

E. C. Mumford (Robertson, Double and Boase) for the Plaintiffs.

R. Faulkner (Johnson, Stokes and Master) for the Defendant.