The Tian Sheng No. 8

CACV000103/1999

CACV 103/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 103 OF 1999

(ON APPEAL FROM HCAJ 370 OF 1996)

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Coram: Hon. Nazareth, V.-P., Mayo, J.A. and Suffiad, J. in Court

Date of hearing: 29 & 30 July & 21 October 1999

Date of handing down judgment: 12 November 1999

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J U D G M E N T

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Mayo, J.A.:

1. This is an appeal from a judgment of Waung, J. who heard a summons taken out by the Defendants to strike out the Plaintiffs' statement of claim. It was based on the ground that the Court had no Admiralty jurisdiction in Rem to hear the case.

2. For the reasons he gave the Judge dismissed the application. As a matter of convenience the Judge divided his judgment into two parts. The first dealt with what he described as being the time issue and the second was the jurisdiction issue.

3. The Plaintiffs' claim is made in connection with a cargo of 30,000 metric tons of bagged cement. The cargo was shipped in the vessel "Tian Sheng No. 8" in October 1996 from Rizhao, China to Bangladesh. The vessel deviated from its course and the cargo was discharged and sold in Haikou, China.

4. The Plaintiffs issued their writ on 23rd November 1996. The vessel arrived in Hong Kong on 9th February 1997 and was arrested. A Bail Bond was posted on 2nd April 1997 and the vessel was released from arrest.

5. The main point which arises on the time issue is whether Order 12 rule 8 of the Rules of the High Court is all embracing on an application of this nature or whether, as contended for by Mr. Sussex for the Defendants, it is open to him to make his application pursuant to Order 75 rule 13 of the Rules.

6. Order 12 rule 8 of the Rules of the High Court, Cap. 4 sub. Leg. A reads:

"8. Dispute as to jurisdiction (O. 12, r. 8)

(1) A defendant who wishes to dispute the jurisdiction of the court in the proceedings by reason of any such irregularity as is mentioned in rule 7 or on any other ground shall give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the Court for -

(a) an order setting aside the writ or service of the writ on him, or

(b) an order declaring that the writ has not been duly served on him, or

(c) the discharge of any order giving leave to serve the writ on him out of the jurisdiction, or

(d) the discharge of any order extending the validity of the writ for the purpose of service, or

(e) the protection or release of any property of the defendant seized or threatened with seizure in the proceedings, or

(f) the discharge of any order made to prevent any dealing with any property of the defendant, or

(g) a declaration that in the circumstances of the case the court has no jurisdiction over the defendant in respect of the subject-matter of the claim or the relief or remedy sought in the action, or

(h) such other relief as may be appropriate.

(3) An application under paragraph (1) must be made -

(a) in an Admiralty action in rem, by motion;

(c) in any other action, by summons or motion,

and the notice of motion or summons must state the grounds of the application.

(4) An application under paragraph (1) must be supported by an affidavit verifying the facts on which the application is based and a copy of the affidavit must be served with the notice of motion or summons by which the application is made.

(5) Upon hearing an application under paragraph (1), the Court, if it does not dispose of the matter in dispute, may give such directions for its disposal as may be appropriate, including directions for the trial thereof as a preliminary issue.

(6) A defendant who makes an application under paragraph (1) shall not be treated as having submitted to the jurisdiction of the court by reason of his having given notice of intention to defend the action; and if the Court makes no order on the application or dismisses it, the notice shall cease to have effect, but the defendant may, subject to rule 6(1), lodge a further acknowledgement of service and in that case paragraph (7) shall apply as if the defendant had not made any such application.

(7) Except where the defendant makes an application in accordance with paragraph (1), the acknowledgement by a defendant of service of a writ shall, unless the acknowledgement is withdrawn by leave of the Court under Order 21, rule 1, be treated as a submission by the defendant to the jurisdiction of the Court in the proceedings."

7. What has to be said immediately is that the Defendants did not comply with the time limit in the Order and have made no application to the Court for the time to be extended. Mr. Sussex submits that it is not necessary for his clients to make any such application as the application is not made under the Rule. He argued that it was necessary to differentiate between two different kinds of application in relation to jurisdiction.

8. The first was jurisdiction to entertain substantive proceedings which he referred to as "merits jurisdiction". The second was jurisdiction to decide the existence and limits of its own jurisdiction. He referred to this as being "jurisdiction jurisdiction". He claimed that his application was a "merits jurisdiction" application. This was clearly the case as the High Court Admiralty jurisdiction in Rem was a limited jurisdiction.

9. S.12B(4) of the High Court Ordinance, Cap. 4 provides:

"(4) In the case of any such claim as is mentioned in section 12A(2)(e) to (q), where -

(a) the claim arises in connection with a ship; and

(b) the person who would be liable on the claim in an action in personam ('the relevant person') was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship,

an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the Court of First Instance against -

(i) that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise; or

(ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it."

10. The case of Wilkinson v. Barking Corporation [1948] 1 K.B. 721 was a good illustration of how the Court dealt with a situation concerning a "merits jurisdiction" situation. Asquith, L.J. had this to say at p. 725:

"Before this court the principle laid down in this passage was not seriously challenged. What was said for the plaintiff was that even though s. 35 of the Act of 1937 deprives the ordinary law courts of jurisdiction in the case of claims or questions covered by the section, yet the defendants, by entering an unconditional appearance to the writ, had submitted to the jurisdiction of those courts and could not be heard to challenge it. One corollary of this argument, if it were sound, would be that the House of Lords decided Pasmore v. Oswald-twistle wrongly, since there is no suggestion that an unconditional appearance was not entered in that case, or that any steps were taken to set aside the writ, yet the House had no hesitation in saying to the plaintiff-appellants, 'you' have no remedy in the courts of law: your only remedy is 'to make a complaint to the Local Government Board.' The real answer to the plaintiff's contention under this head can be put in several ways: No act of the parties can create in the courts a jurisdiction which Parliament has said shall vest, not in the courts, but exclusively in some other body. Nor again can a party submit to, so as to make effective, a jurisdiction which does not exist: which is perhaps another way of saying the same thing. The argument we are here rejecting seems to be based on a confusion between two distinct kinds of jurisdiction: The Supreme Court may, by statute, lack jurisdiction to deal with a particular matter - in this case matters including superannuation claims under s. 8 - but it has jurisdiction to decide whether or not it has jurisdiction to deal with such matters. By entering an unconditional appearance, a litigant submits to the second of these jurisdictions (which exists), but not to the first (which does not). We are not here concerned with irregularity in the service or issue of the writ which raises other considerations which are here quite out of place. I think the argument for the plaintiff under this head quite impossible to sustain, and leading counsel for the plaintiff, when fairly confronted with the difficulties in his way, did not press it."

11. What is clear from this passage is that the situation which was being considered was entirely different to the application which was heard by Waung, J. Asquith, L.J. was considering the simple question whether it was open to a litigant to essentially contract out of a statutory provision. What Waung, J. was being asked to consider was whether on the facts before him the Plaintiffs had satisfied him that the requirements of s.12B(4) had been complied with.

12. Mr. Sussex also placed reliance upon a passage at p. 375 from the judgment of Mustill, J. (as he then was) in Rothmans Ltd. v. Saudi Airlines (C.A.) [1981] 1 Q.B. 368:

"The next issue is whether a party can, by waiver, concede to the court the jurisdiction to entertain actions which by virtue of article 28 ought properly to have been instituted elsewhere. For this purpose, two situations must be distinguished. The first exists where an action is brought in respect of a matter which in the ordinary way the court would have no jurisdiction to entertain, but where it is not precluded from doing so if no objection is taken. Thus, for example, if a plaintiff obtains leave under R.S.C., Ord. 11, in a case where it should not have been granted, the action can properly proceed unless an application is made to set aside the writ and service. The objection is one which can be waived, and the entry of an unconditional appearance is an example of such a waiver.

The second situation exists where the objection is not simply that the matter lies outside the jurisdiction of the court, as conferred by the common law or by statute, but is one in respect of which jurisdiction has been actively withdrawn from the court and conferred on another tribunal. The position in such a case is stated by Asquith L.J. in Wilkinson v. Barking Corporation [1948] 1 K.B. 721, 724:

'It is undoubtedly good law that where a statute creates a right and, in plain language, gives a specific remedy or appoints a specific tribunal for its enforcement, a party seeking to enforce the right must resort to that remedy or tribunal, and not to others.'

Where the statute is of this kind, it is immaterial whether the parties wish the court to try the action. It must disclaim jurisdiction, since to continue with the action would be contrary to law. Still less can one party by unilateral act confer on the court a jurisdiction which Parliament has said it should not have. Entry of an unconditional appearance does not preclude the defendant from raising the objection at a later stage, since it is the duty of the court not to entertain the dispute."

13. He submitted that this passage supported his contention that where an application was a merits application it could be made otherwise than in accordance with Order 12 rule 8.

14. As was pointed out by Mr. Bunting for the Plaintiffs if this passage is read as a whole and in context the opposite conclusion can be reached. I agree.

15. When Mustill, J. is referring to the two situations which can arise he is making a similar comparison to the one made by Mr. Sussex referred to earlier in this judgment. What is clear however is that where the first situation referred to by Mustill, J. arises then Order 12 rule 8 is the route which has to be taken.

16. I have no doubt that the situation which arises in the present case is to adopt the nomenclature of Mr. Sussex a "jurisdiction jurisdiction" application.

17. S.12B(4) of the High Court Ordinance, Cap. 4 does confer the necessary jurisdiction on the Court. What was necessary for the Court to determine was whether on the evidence which was before it the requirements of the section had been complied with. This is exactly the type of situation which Order 12 rule 8 is designed to meet.

18. Mr. Bunting placed considerable reliance upon Wo Fung Paper Making Factory Ltd. v. Sappi Kraft (Pty.) Ltd. [1988] 2 HKLR 346 and in particular a passage from the judgment of Fuad, V.-P. at p. 352:

"It seems to me clear that unless a defendant has made an application under Order 12, rule 8(1) within the time limited, he cannot dispute the jurisdiction of the court on the ground (a) that the plaintiff's case does not fall within one or other of the provisions of Order 11, rule (1) or (b) that the plaintiff had not established, for the purpose of Order 11, rule 4, that his case was a proper one for service outside the jurisdiction.

What then is the result? By virtue of Order 12, rule 8(7) Sappi's acknowledgement of service must be treated as a submission by them to the jurisdiction of the court in the present proceedings.

In the circumstances, Sappi were not entitled to submit that Wo Fung had not shown that they had a 'good arguable case' before leave was granted under Order 11 or that they had not discharged the burden of satisfying the Court that Hong Kong was the forum conveniens, both issues which were decided in favour of Sappi.

Was Sappi permitted, outside the time allowed by Order 12, rule 8(1), which could not be extended in view of the provisions of rule 8(2), to apply to have the master's ex parte Order of 13th March 1987 set aside under Order 32, rule 6 or the inherent jurisdiction? Mr. Litton submits that such an application is not caught by Order 12, rule 8(1). In my judgment, on a fair reading of Order 12, rule 8 and on a proper understanding of the new scheme it introduced, Sappi were not permitted to do so. Although relying on material non-disclosure, they were asking, in effect, for an order under Order 12, rule 8(1)(c) to discharge the order giving leave to serve the writ out of the jurisdiction. The words with which rule 8(1) begins, make reference to reliance on irregularities mentioned in Order 12, rule 7 but immediately afterwards the rule says: 'or on any other ground'.

Once service has been effected, even where non-disclosure of material facts is relied upon, it is essentially the jurisdiction of the court that is being challenged. It cannot, I think, be right to allow Sappi to maintain: 'We are not in terms disputing the jurisdiction. We are invoking quite another power in the court, to set aside the ex parte Order giving leave to serve on the ground of material non-disclosure, so we are not caught by Order 12, rule 8(1) and (2).' In my judgment, this would be unreal. It seems clear that the rule-making authority intended every application which, if successful, would result in the defendant avoiding the jurisdiction of the Hong Kong courts to be made under Order 12, rule 8 and within the time allowed, by the same simple procedure. Unless Order 12, rule 8(1) is complied with, the order giving leave to serve outside the jurisdiction must be treated as valid and every irregularity waived. This is the effect of Order 12, rule 8(7). Sappi was properly before the court for all purposes and they must be left to dispute the action on the merits."

19. Waung, J. accepted the validity of the conclusions of the Court of Appeal in Wo Fung Paper Making Factory Ltd. In my view he was entirely correct in doing so.

20. It was incumbent upon the Defendants to invoke the provisions of Order 12 rule 8. They did not do so. The Judge was right to hold that the jurisdiction of the Court could not be challenged in any other way.

21. This should be decisive of this appeal. However as Waung, J. also dealt with the jurisdiction issue and as Counsel made submissions to us I consider it to be appropriate to make short observation on this aspect of the matter.

22. Unfortunately as the appeal took longer to be heard than was anticipated it was necessary for there to be a fairly lengthy adjournment of the hearing. During this period the Defendants lodged an application for further evidence to be adduced. We indicated that we would reserve making an adjudication and proceed on a de bene esse basis.

23. The additional evidence sought to be adduced were three certificates dated respectively 8th February 1996, 17th May 1996 and 19th August 1996 issued by the Consul General of Panama in Hong Kong.

24. These certificates took the Form of Patentes which enable an owner prior to formal registration of a Bill of Sale to comply with various requirements. The purpose of adducing these certificates as evidence was to endeavour to establish that Hainan Tiansheng Ocean Shipping Co. Ltd. ("Ocean") was not the owner of the vessel in October 1996 when the cause of action arose.

25. In my view this application should be refused for two reasons. The first is that it has by no means been satisfactorily demonstrated that the evidence could not have been readily available before Waung, J.

26. During his submission to us Mr. Sussex informed us that the reason why a decision had been made to obtain this evidence was that Mr. Bunting had submitted during the early part of the appeal that the Patentes only covered the period up to February 1996. Mr. Sussex wanted to correct this. It cannot be satisfactory to permit litigation to proceed on the basis of the parties adding to their cases as the case goes forward unless exceptional circumstances obtain. They do not in the present case. In addition to this the reasons given for not obtaining the evidence at an earlier date by the instructing solicitor Mary Thomson are of a very general and unspecified nature.

27. The second reason for refusing the application is that the second condition in Ladd v. Marshall has not been met. It cannot be said that if the evidence was adduced and believed its effect would be conclusive or have an important influence on the result. A Patente is by no means conclusive evidence of the ownership of a vessel. For these reasons in my view the leave sought should not be granted.

28. So far as the jurisdiction issue is concerned it is immediately evident from a perusal of Waung, J's judgment that he has dealt with the issue in a meticulous manner.

29. He was mindful of the fact that in accordance with the wishes of the parties the application was proceeded with on the basis of affidavit evidence.

30. He proceeded correctly to consider the entries in Lloyd's Register of Ships and Lloyds Confidential Index. He was also impressed by the fact that the Defendants' case to a large extent was dependant upon internal documents.

31. The reasons given by the Judge for concluding that Ocean was the owner of the vessel were impeccable. Indeed Mr. Sussex has not advanced any constructive criticisms of the Judge's reasoning and I can see no reason to interfere with his findings of fact.

32. For all these reasons I am of the view that this appeal should be dismissed and that we should make an order nisi that the Plaintiffs should have their costs.

Suffiad, J.:

33. I have had the benefit of reading the judgments of both Mayo, J.A. and Nazareth V.-P. and am in total agreement with both their judgments.

34. For the reasons given by them, I too would dismiss the appeal with costs of the Plaintiffs to be paid by the Defendants.

Nazareth, V.-P.:

35. I also agree.

36. On the "time" issue, the court below had jurisdiction under s.12B of the High Court Ordinance; Order 12 rule 8 does not affect that. To dispute jurisdiction the Defendants had to comply with O12r8. They have chosen not to do so. For the reasons given by Mayo JA, and, indeed, the judge below, their appeal on the time issue fails.

37. Likewise on the jurisdictional question, I am satisfied for the reason given by Mayo JA and the judge, that the latter was on the facts correct in finding that the Defendants were the owners of the vessel through Ocean.

38. Accordingly the appeal is dismissed with costs of the Plaintiffs to be paid by the Defendants.

Representation:

Mr. Michael Bunting instructed by M/S Richards Butler for Plaintiffs

Mr. Charles Sussex instructed by M/S Ng & Partners for Defendants

Remarks:
On appeal by the Defendant to the Court of Final Appeal: Appeal allowed. Please refer to FACV000006/2000.

(I) On appeal by the Defendant to the Court of Final Appeal: Appeal allowed. Please refer to FACV6/2000 dated 12 July 2000 (II) Defendant's application for leave to appeal to Court of Final Appeal dismissed by Court of Appeal. Please refer to CACV103/1999 dated 26 January 2000