The Owners of Cargo Lately Laden on Board the Ship "Artemis" v. Artemis Transportation Corporation and Another

HCAJ000328A/1981

Admiralty Action - Application under 0.12 r.8 for -

Under (i) the Court was required to determine whether the 1st defendant was, at the date of service, carrying on business in the jurisdiction. Under (ii) the Court was required to determine:-

Onus of proof in 0.12 r.8 application was considered. The Court held that:-

1981, Folio No.328

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ADMIRALTY JURISDICTION

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BETWEEM

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Coram: Hon. Power, J.

Date: 19 January 1983

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JUDGMENT

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1. In this matter the plaintiffs, the owners of cargo lately laden on board the ship "Artemis" are suing the 1st Defendants, Artemis Transportation Corporation and the 2nd defendants, Barber Ship Management Limited for damages for breach of contract and/or duty in and about the loading, storage, handling, custody, care and discharge of the plaintiffs' cargo of timber and the carriage thereof upon the ship "Artemis", owned and/or operated by the 1st defendants and/or the 2nd defendants, in the months of November and December 1980.

2. The writ of summons in this matter was issued on the 2nd December 1981 in consequence of an incident which took place on or about the 29th December 1980 when the ship "Artemis" sank off the coast of Japan after having been abandoned by her crew in heavy seas. The plaintiffs were the owners of certain cargo which was loaded on board the ship on or about the 26th November 1980 at San Vicente in Chile for carriage to Nagoya ad Shanghai. The 1st defendant, who is the owner of the vessel, is a Liberian corporation. The 2nd defendant, who is alleged to be the manager of the vessel, is a Hong Kong company.

3. The cargo consisted of pine logs which were shipped under seven separate Bills of Lading. Each of the bills was signed "For and on behalf of the Master".

4. A "Statement of Total Loss", dated the 13th January 1981, sets out the circumstances of the casualty which I summarize as follows:-

5. On Christmas night the vessel faced winds which reached force ten. Some bundles of lumber stewed above No. 1 hold were torn loose and washed overboard and on the next night, when the wind reached force seven, the remaining cargo above hold No.1 was lost and the hold became filled with water. The pumps were started and ballasting was changed; however, on the night of the 26th December, the vessel met winds up to force eight and heavy seas and the vessel came down by the head making steering impossible. The weather continued to deteriorate and the pumps failed due to clogging. In consequence the forepeak as well as No.1 hold became flooded. On the 28th December the spare anchor became loose after, apparently, having been hit by deck cargo, and air pipes leading to the forepeak, a double bottom tank, a top side tank and a fuel oil tank were all broken. On the afternoon of the 29th December, the vessel was in a sinking condition and the Master ordered that she be abandoned and the crew were transferred to a Japanese Coastguard vessel. Despite air and sea search, the vessel was never seen again.

6. As I have already indicated the plaintiffs issued their writ on the 2nd December 1981 almost one year after the date of the casualty and served it on both defendants at the office of the 2nd defendant. On the 9th December 1981, Mr. Registrar Blackwell gave the plaintiffs leave to issue a concurrent writ of summons and to serve notice of the writ upon the 1st defendant in Liberia by post or other means at the plaintiffs' disposal On the 15th December, Ince and Co., in accordance with 0.12 r.3, acknowledged service of the writ on behalf of both defendants. This did not, under 0.12 r.7. constitute a waiver of their right to challenge any irregularity. Ince and Co. did not, however, issue a summons disputing the jurisdiction within 14 days as is required by 0.12 r.8(1) It was not until the 11th January 1982 that the solicitors for the defendants filed their summons asking, inter alia, for:-

"An order in pursuance of Order 12 rule 8 that - 

7. In that summons the defendants also applied for an extension of the time for the making of the application, and asked that the claim against the 2nd defendant be struck out under 0.18 r.19. This matter was initially dealt with by a judge of this Court who hold that the application was out of time but refused to strike out the claim against the 2nd defendant. The matter was then taken to the Court of Appeal which held that the application had been made in time and adjourned the appeal against the refusal to strike out the claim against the 2nd defendant.

8. The summons of 11th January in so far as it relates to the 1st defendant, now falls for determination by this Court.

9. The issues that must be determined are:-

Mr. Chan, who appeared for the 1st defendant, submitted that the onus of proving all of the above matters rested squarely upon the plaintiffs. He submitted that they were not entitled to serve the 1st defendant in the jurisdiction or to leave to serve it out of the jurisdiction unless they established the necessary facts upon the balance of probabilities.

10. Mr. Dicks, who appeared for the plaintiffs, argued that there was a duty on an applicant under 0.12 r.8 to be"full and frank" (See the White Practice 12/7 - 8/7) It certainly seems just that this should be so. It would be clearly wrong if an applicant/defendant, either by outright concealment or by lack of frankness, was able to prevent a plaintiff with an arguable case from pursuing his claim. However that may be I do not consider that a defendant's silence upon a matter can be taken to be an admission thereof. I accept that the Court should be cautious about exercising its power to allow service out of the jurisdiction and that the burden of establishing not only that the case comes under 0.11 r.1(1) but also that it is a proper case under 0.11 r.4(2) is on the party seeking leave to effect such service. (See the "Craiova" 1976 1 L.L.R. 538 at 538).

11. I am nonetheless satisfied that, where, in an application brought under 0.12 r. 8, a defendant is silent as to a material fact sought to be established by the plaintiff, the Court, give that there is some evidence thereon, should be quick to infer the existence of that fact and that this will be particularly so where the fact is one which is solely within the knowledge of the defendant.

12. I turn now to consider the facts. The 1st defendant and the 2nd defendants were parties to a "Management Agreement". This agreement, which was dated the 23rd May 1979, had originally been entered into between the 2nd defendant and the Silverdale Company Limited of Hamilton, Bermuda (Silverdale). That company, which was the original owner of the vessel, transferred it to the lst defendant on the 20th March 1980. On the 23rd May 1979, the date when the agreement came into being, it was signed by the Agence Maritime Transoceanique S.A. (A.M.T.) as agents for Silverdale. On 20th March 1980, the date when the vessel was transferred it was twice signed by A.M.T. once as agent of Silverdale and once as agent of the 1st defendant.

13. It was not contested that the lst defendant was a one vessel operation. The Management Agreement provided that the managers would "attend the dry docking in the port of delivery" and "take over the vessel there". The agreement provides that the managers will "at owners expense man the vessel with competent and qualified officers and crew". It was suggested that, as this provided that the manning would be at the owners' expense, the managers were doing no more than recruiting persons into the employment of the owners. I am quite satisfied that this was not intended. Indeed the next paragraph in the agreement provides:-

"The owners are entitled to request transfer of certain personnel with whom they can show reason of dissatisfaction."

It seems to me perfectly clear from this paragraph that it was contemplated that the crew would be employed by the managers and that all the owners could do, if they were dissatisfied with any crew member, was to request the managers to transfer that person from their ship. It is to be noted that the owners were not entitled to remand that a person be dismissed but only that he be transferred. This was clear recognition of the managers right to retain, if they saw fit so to do, the services of their employee by transferring him to another vessel.

14. The owners did reserve to themselves the right to arrange the "commercial employment and trading of the vessel". In this regard they specified that ''the owners will arrange for the commercial trading of the vessel themselves and will conclude all charter parties, contracts of affreightment, agency contracts  etc. in connection therewith."

15. The agreement provides that the managers would be paid a management fee of US$75,000 per annum to be paid monthly. It also provides that payments as regards operation expenses will, as far as possible, be paid by the owners in advance to the managers. The agreement requires the managers to arrange insurance of the vessel and to maintain it in the joint names of the owners and the managers.

16. Clause 14A, when dealing with the general duties of the managers, provides that "in particular the managers shall act generally in all respects as managers of the ship and agents and attorneys on behalf of the owners as if it would be their own ship within their fleet and to supervise the nautical and technical status and functioning of the vessel and to keep same up to same standard of their own vessels".

17. The owners also reserved certain rights with regard to insurance. As these are of some importance, I will set them out in full. They appear in the agreement at paragraphs 12A, B, C, D, E and F and read as follows:-

As can be seen the amount of premia to be paid for entry into a P. & I. Club had to be agreed between the owners and managers; the owners had to be consulted and agree to the settling of insurance claims; the owners reserved to themselves or their general agents the right to deal with cargo claims when the vessel was employed or their "traditional trade routes".

18. I do not consider it necessary to cite other sections of the management agreement. Suffice to say that the agreement when read as a whole leaves me quite satisfied that it places full control of the management of the vessel in the hands of the managers for the period of the agreement with the owners reserving to themselves the right to make arrangements as to the commercial employment of the vessel and certain matters relating to insurance.

19. There is then no doubt in my mind that the 1st defendant was carrying on business in Hong Kong through its manager, the 2nd defendant, during the currency of the Management Agreement.

20. As to duration of the agreement it was provided that either party could give six months notice in writing of intention to terminate. It was provided in paragraph 13B of the agreement that "the management period may be terminated automatically in the event of vessels' actual or constructive o compromised or arranged total loss or requisition for title or forcible or compulsory acquisition by any governmental authority or in the event that the ship is sold whichever is the sooner, or any event of such or similar nature. In this case the management fee shall continue to be payable for a period of 3 months."

21. There was considerable argument over the use of the word 'may' in this paragraph. Mr. Chan suggested that it should be read "shall". Mr. Dicks suggested that it was a clear and simple word which must be given its usual meaning. This, I am satisfied, is the correct view. I am satisfied that the passage does not mean that there is an automatic termination upon the happening of one of the events mentioned but rather that, upon the happening of such an event, it is at the option of either party to declare that the event has automatically terminated the contract. It neither sees fit to so declare then the contract continues in force. If either does so, then the contract must be regaded as having been terminated by the event.

22. A Mr. A.S. Vijan, the general manager of the 2nd defendant, in an affidavit filed on the 13th January 1982, said, in paragraph 10, that the Management Agreement "was terminated automatically upon the loss of the vessel on or about the 29th December 1980, and the 2nd defendant was paid management fees only up to 29th March 1981 in pursuance of clause 13B of the Management Agreement".

23. It was argued by Mr. Dicks that all Mr. Vijan was doing, was stating what he understood to be the legal effect of clause 13B and that, as he nowhere stated the either party had notified the other that they had elected to terminate the contract, it was still afoot. I accept that Mr. Vijan nowhere stated that either party had elected to terminate the contract however I am unable to accept that it would be proper to treat it as being still afoot. I am satisfied that I must accept the unchallenged evidence of Mr. Vijan that the 1st defendant paid management fees only up until the 29th March 1981 and that the 2nd defendant has accepted this termination of payment. From this it seems to me clear that when the vessel foundered, each party accepted that the Management Agreement had been brought to an end, and that each signified that acceptance to the other by, on the one hand, making and, on the other, accepting the final payment on 29th March 1981. The matter does not rest there, however, as clause 13F provides that "after the termination of this agreement, the managers are obliged to complete all current affairs". `

24. Mr. Chan when dealing with the question of service within the jurisdiction submitted that when a company has not registered under Part 11 of the Companies Ordinance, as was the case with the 1st defendant, then service at the former place of business of the company would not be good service. He cited Deverall v. Grant Advertising Inc. (1955) 1 Chancery 111 as his authority for this. He submitted, without making any admission in this regard that, it worst for his client, what had been shown was that it had been carrying on business through its manager, the 2nd a defendant, at the time when the ship was trading prior to the termination of the contract at the end of March 1981 and that any service on it thereafter at its former place of business would not be good. When considering Deverail's case it must be borne in mind that the plaintiffs had conceded that the defendant company had ceased to have a place of business in the United Kingdom before the date on which the writ was served. There has been no such admission in the present case. Indeed the contention of the plaintiffs is that there has been a continuing place of business in the Colony up until and after the date of service of the writ. Jenkins L.J. at 119 stated:-

"Whether the place at which service is sought to be effected is an existing place of business for that purpose must, no doubt, depend on the facts of any particular case. There might, for instance, be an oversea company which had traded at a particular place and had contracted, and otherwise carried on business by correspondence, on notepaper bearing the address of that place, or had allowed its name to appear in a telephone directory or in some other form of directory as carrying on business at that address. In such a case where a company has held itself out as carrying on business at a given address, it may well be that, if the company has done nothing in the way of giving notice to the contrary to parsons dealing with it, any such person, for the purpose of service, might be entitled to assume that the place thus held out by the company as a place of business established by it was still such a place of business, even if the company had ceased actually to carry on business there."

25. Mr. Dicks argued that, in the present case, not only was the company clearly carrying on business prior to the termination of the contract but that it also, by reason of the Clause 13F, continued to carry on business through the 2nd defendant thereafter. Mr. Dicks pointed out that although Mr. Vijan had indicated that the agreement terminated on the 29th March 1981 in pursuance of Clause 13B. He had nowhere suggested that the 2nd defendant had been relieved of its obligations under Clause 13F. Mr. Dicks submitted that under the Management Agreement there was a considerable number of current affairs, including cargo claims, with which the 2nd defendant was required to deal. He submitted that whether the 2nd defendant had had the obligation to complete these affairs lifted from them and the extent to which such affairs were still outstanding were matters entirely within the knowledge of the defendants.

26. As I understood his submission, which I will refer to as his primary submission, regarding the inferences that might properly be drawn from such circumstances, he was contending that given that the 2nd defendant had an obligation to complete outstanding affair and that the defendants had not suggested either that such obligation had beet lifted or that such affairs had been completed the Court should infer the continuance of the obligation.

27. His further submission was that, even if the Court was not prepared to draw such an inference, there was one affair, i.e. the present claim, which had not been completed. Given that there was no evidence that the obligation to deal with this claim had been lifted, he submitted that it must be regarded as being still be binding upon the 2nd defendant.

28. He submitted that he was entitled both on his primary submission and on his further submission to a finding that, at the date of service of the writ, the 1st defendant continued to carry on business through the 2nd defendant.

29. Mr. Chan argued, as to the primary submission, that, leaving aside the present claim, there was no evidence of any uncompleted affairs and that no inference of a continuing obligation could be drawn from the proved facts. He submitted that after the determination the 1st defendant was in the position of "a sacked manager". I cannot agree that this was so. The 1st defendant was clearly bound by continuing contractual obligations until either the affairs were completed or the other party relieved it from its obligation to complete them.

30. As to the further submission he argued that there was no evidence to establish that the present claim was a current affair that had to be completed by the 2nd defendant as it had not been proved that it was not a claim under Clause 12E i.e. a claim arising out of the employment of the vessel in the "Owners' traditional trade-routes" with which the owners would "deal themselves. The defendants have not sought to rely upon the exclusion in Clause 12E by raising any facts to indicate that it might have application. In such circumstances, given that his is an 0.12 r.8 application, I am satisfied that it is proper to infer that the claim was not one which fell under Clause 12E. Mr. Chan referred to paragraph 15 of the affidavit of Mr. Vijan, in which he said that "since the termination of the Management Agreement, the 2nd defendant had, in no way, been concerned with the affairs of the 1st defendants". It is trite, but nonetheless true, to point out that this was hardly a correct statement of fact as the 2nd defendant was clearly concerned with the affairs of the lst defendant in so far as it was implicated in this action. He went on to say that the 2nd defendant did not handle any cargo claims for the 1st defendant during the currency of the Management Agreement and that cargo claims had been handled by A.M.T. While this may well be true, it may also be that such claims, by virtue of Clause 12E, fell to be dealt with by the owners of their agents.

31. I am satisfied as to the correctness of both of Mr. Dicks' submissions in this regard and hold that, for the purposes of these proceedings it has been established that the owners were still carrying on business in Hong Kong through their managers in so far as the managers were, still by virtue of Clause 13F of the Management Agreement, required to complete all current affairs.

32. Mr. Dicks had a further argument in this regard which was that the 1st defendant was, after the sinking of the ship, holding out the 2nd defendant to be its agent in Hong Kong in the sort of way suggested by Jenkins L.J. in Deverall's case. I consider, as I have indicated above, that Mr. Dicks would be entitled to succeed even if this were not so; however, without coming to any concluded view upon the matter, I feel it appropriate to indicate that, for the following reasons, there appear to be strong ground for contending that the 1st defendant was holding out the 2nd defendant to be its agent in Hong Kong during the 1981, i.e. after the sinking of the vessel. The Lloyds Register of Ships in 1981/1982 showed that the owner of the Artemis was the "Artemis Transportation Company" and their agent was "Barber Ship Management Limited". The Lloyds Register of Ship Owners for the same period showed that "Barber Ship Management Limited" were the the managers of the Artemis. Mr. Chan submitted that his clients were not necessorily responsible for what was put in the Lloyds Register or the Lloyds List and that any appearance in those publications could not be said to be a holding out by them. There is, however, no suggestion any where from the 1st defendant that it was not aware of the entries. According to a further affidavit from Mr. Rooth, the 1981/1982 Lloyds Register of Ships was not published until July 1981 and no deletion was made with regard to that entry in the supplements published in July 1981 and August 1981. It is to be noted also that both in the Lloyds Register of Ships for 1980/81, and in the Lloyds List of Ship Owners for 1980/81, only "Artemis Transportation Company" was listed as the owners of Artemis. Clearly between the publication of the Register and List in 1980/81 and their publication in 1981/82, someone saw fit to insert the name Barber Ship Management Limited. It may be that this was done without the knowledge of the 1st defendant, but what is certain, given that no corrections were made in the supplements of July and August, is that, once it was done and published to the world, the 1st defendant took no steps to correct the position. Was the 1st defendant not in the same position as the person who, in the words of Jerkins L.J., has "allowed its name to appear in a telephone directory or in some other form of directory as carrying on business at that address"?

33. I now turn to the 1st defendant's contention that the Registrar's order giving tic plaintiffs leave to issue concurrent writ and to serve notice thereof by post should be sat aside on the ground that it did not fall within the provisions of 0.11 r.1(1)(c) or r.1(1)(j) of the Rules of the Supreme Court.

34. 0.11 r.1(1)(c) allows service out of the jurisdiction with leave if relief is sought against a person "domiciled or ordinarily resident within the jurisdiction". As we are dealing with the foreign company no argument as to domicile in Hong Kong is tenable; however, it was contended by the plaintiffs that the lst defendant was "ordinarily resident" within the jurisdiction. In order to establish that the 1st defendant was ordinarily resident within the jurisdiction, the plaintiffs must establish that the central management and control of the lst defendant was within the jurisdiction. I am satisfied from the affidavit of Mr. Rooth and from the Lloyds Shipping List and Lloyds Register, which were annexed thereto, that the 1st defendant was a one vessel owner. It is clear from the affidavit of Mr. Vijan and from the Management Agreement that the 2nd defendant had been appointed as and acted as manager of that vessel. I am satisfied, as I have already indicated, that they had complete control of the operation of that vessel except as regards its commercial employment and trading and the other reservations as to insurance set out above. In such circumstances I am satisfied:-

35. What must now be determined is whether this central management and control in Hong Kong survived the termination of the Management Contract after the vessel foundered. The problem with which we are here dealing is very different from that which faced the Court when determining whether or not there had been proper service in the jurisdiction. In that case, it was only necessary to determine whether the 1st defendant was still carrying on business in the Colony. In this case it is necessary to determine whether the central management and control remained in the Colony after the termination of the Management Agreement. It is true that the managers were required by Clause 13F to complete "current affairs" even after the termination of the contract and that the 1st defendant, must, because of this, be held to have continued to carry on business in the Colony. Can central management and control, however, be said to survive after the disappearance of the sole object of such control? I am satisfied that it cannot. The "Statement of Total Loss" indicates that Hull Underwriters (1980) were requested to pay, without prejudice, an amount representing the vessel's value on total loss to the account of Silverdale with a bank in West Germany. The data of the settlement was the 12th February 1981. It is noted that the payment was to be made to the Silverdale and not to the 1st defendants. This probably indicates only that the policy remained in the name of Silverdale after the sale to the 1st defendant and is, therefore, of no real consequence. Upon the evidence before me this money is the sole remaining asset of the 1st defendant and it would appear to have passed into the hands of the 1st defendant.

36. There is no suggestion that the 2nd defendant has any control over this money. All that the 2nd defendant is required to do after the termination of the contract is to complete current affairs. In such circumstances can any part of the element of central management and control, formerly in the hands of the 2nd defendant, be said to have remained therein. Mr. Dicks submitted that as the 1st defendant has not been prepared to place any evidence before the Court indicating that the central management and control is elsewhere in the world it would be proper, given the circumstances obtaining, to infer either that the 1st defendant was the beneficial owner or that at least part of the central control has remained in Hong Kong. I do not consider that either inference is open. The 1st defendant is s company incorporated in Nigeria and must be taken, therefore, to be domiciled in that country. It acts through A.M.T. of Antwerp. It is true that we have no evidence as to where, what might be called, "the brain" of the company resides. It was suggested that the 1st defendant should have revealed in its affidavits the place in which its real direction was situated. This certainly was not done and, if it had, would have been of assistance in resolving this matter. However, given the clear evidence that the Management Agreement, by virtue of which part of the central management and control of the lst defendants came to Hong Kong, was terminated after the sinking of the vessel, I do not consider, even when I bear in mind that there are 0.12 r.8 proceedings in which the applicant has been less than frank, that there is any proper ground for inferring that any part of the central management and control is in Hong Kong. There is simply no factual basis to support such an inference.

37. I am satisfied that leave should not have been given for service of the writ out of the jurisdiction on the ground that the 1st defendants was ordinarily resident in the jurisdiction.

38. I turn now to consider 0.11 r.1(1)(j). Should leave have been given for service of the writ out of the jurisdiction on the ground that the action begun by the writ was properly brought against a person duly served within the jurisdiction and a person out of the jurisdiction was a necessary or proper party thereto. In this regard it was contended that the action was not properly brought against the 2nd defendant. Mr. Dicks advanced a number of arguments as to why the action could be said to have been properly so brought. I do not intend to canvass them all. It is necessary to deal only with his submission that the 2nd defendant was liable as the carrier under the Bill of Lading. The word "carrier" was defined in Clause 1 of the Bill of Lading as including "the ship, her owner, master, operator, demise charterer, agent, and, if bound hereby, time charterer and any substituted carrier, whether the owner, operator, charterer, or master shall be acting as carrier or bailee;".

39. I have already indicated that I am satisfied that the master was the employee and servant of the 2nd defendant. There can be no question that he signed on behalf of the carrier. His employer, being the operator of the vessel, is one of the class of persons who falls within the definition of the word 'carrier' set out above. There being no evidence to suggest otherwise, I am satisfied that a proper inference from these facts is that the master was signing on behalf of his employer. I am satisfied that the 2nd defendant was the carrier of the goods in accordance with the definition of that term in the Bill of Lading and that the 2nd defendant did, therefore, through the master, enter into a contract of carriage with the plaintiffs as shippers. I am satisfied that, given that there has been non-delivery of the goods shipped, this is sufficient, prima facie, to entitle them to bring an action.

40. As to comparative cost and convenience, which fall to be considered under 0.11 r.4, there was nothing placed before me which would indicate that the cost and convenience would comparatively be either greater in Hong Kong or less elsewhere. Indeed, given the reasons set out in paragraphs 17 to 28 of Mr. Rooth's affidavit, it seems to me that Hong Kong has strong claims as a convenient forum for the litigation.

41. The action was therefore properly brought against the 2nd defendant. It was not argued that, if the action was properly brought against the 2nd defendant, the 1st defendant would not be a necessary and proper party thereto. That being so, I am satisfied that leave was properly given under 0.11 r.1(1)(j).

42. In the outcome, then, I am satisfied both that the writ was properly served upon the 1st defendant in the jurisdiction and that the Registrar was right in giving leave for service of the writ out of the jurisdiction under 0.11 r.1(1)(j).

Representation:

Mr. Edward Chan (Ince & Co.) for Applicant/1st Defendants only.

Mr. Anthony Dicks (Clyde & Co.) for Respondent/Plaintiffs.