MIRUVOR LTD v. PANAMA-GLOBE STEAMER LINES S.A. AND OTHERS

cacv 225/2006 AND CACV 226/2006

CACV 225/2006

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 225 of 2006

(on appeal from HCCL NO. 138 of 1996)

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BETWEEN

CACV 226/2006

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 226 of 2006

(on appeal from HCCL NO. 169 of 1996)

______________________

______________________

J U D G M E N T

______________________

Hon Rogers VP:

1.  This was an appeal from a decision of Mr Justice Stone given on 31 March 2006.  The decision related to two actions the facts of which were so similar that the matters were heard and decided together.  The matter before the judge was an application by the 3^rd defendant for an order setting aside the previous orders extending the validity of the writs as well as an order to set aside the service of concurrent writs which had been made on 23 April 2005 in each action.  The judge dismissed the application.  At the conclusion of the hearing of this appeal, the judgment of this court was reserved.

Background

2.  These actions arose because of the loss of various shipments of electronic goods made by the plaintiff to the Paranaguayan buyer, namely Danson SrL.  The plaintiff’s primary claim was against the 1^st defendant, who was the insurer under marine policies of insurance.  The actions proceeded in September 2001 against the 1^st defendant alone and in October 2001 judgment was given in favour of the plaintiff in respect of the claims arising from all the shipments save one.  It is noteworthy that the judge held in paragraph 8 of his judgment:

“What actually happened in this case is that the goods the subject of this action were all stolen by Dansun at either Santos or Paranagua.  It appears that forged bills of lading were produced to the carrier’s agents by Mr Medlej or his staff, so that Dansun was able to obtain each of these particular eight shipments absent payment therefor.”

3.  There was then an appeal to this court and in a judgment handed down in February 2003 this court dismissed the 1^st defendant’s appeal and allowed the plaintiff’s cross appeal in respect of the claim arising from the one shipment which had been disallowed.  The 1^st plaintiff intimated that it would seek leave to appeal to the Court of Final Appeal but did not proceed with its application.  In June 2003 it settled the judgment sum together with interest.

4.  In the meantime, however, the plaintiff had not only in these proceedings but in addition in others that had been commenced, joined some 23 different defendants who were resident outside Hong Kong in fulfilment of their obligations under the marine cargo policies to enable the 1^st defendant to pursue subrogated claims against those parties should they so wish.  One of those parties was the 3^rd defendant who is the relevant party in these proceedings.  Commencing in May 1997 in respect of one of these actions and in June 1997 in respect of the other, the plaintiff applied for and obtained extensions of the writs and, ultimately in July 2004, leave to serve a concurrent writ in each action against the 3^rd defendant.  In this application the 3^rd defendant has applied to have those orders set aside.

5.  Service of the concurrent writ in each action was effected on 29 October 2004.  It was not, however, until 29 August 2005 that an order was made to allow filing the Points of Claim out of time.  The Points of Claim were filed on the following day.  Following that on 26 September 2005 the 3^rd defendant filed defences in the actions.  Those documents were short but complete.  They both commenced with identical first paragraphs which read:

“For the avoidance of doubt, this Defence is made strictly without prejudice to be Third Defendant’s applications (i) to have the writ served against it set aside and/or (ii) to have the Plaintiff’s claim dismissed for want of prosecution.”

6.  Two days later, on 28 September 2005, summonses were issued to discharge the orders extending the validity of the writs under the rubric Order 12 rule 8.  The judge below considered the various applications for renewal of the writs and reached the view that there was insufficient reason to have granted the orders and concluded that the court should not have exercised its discretion to grant the extensions.  However, he held that the 3^rd defendant had failed to follow the procedure prescribed in Order 12, rule 8 for the purpose of taking objection to the jurisdiction.  He said at paragraph 51 of his decision:

“Furthermore, the 3rd defendant had filed this ‘Defence’ on 26 September 2005, but did not choose to make its applications to challenge the jurisdiction until two days later, on 28 September 2005.  When the plaintiff received this ‘Defence’, what was it to do?  Was it to assume that a challenge to the jurisdiction thereafter was to be mounted, and thus do nothing to begin preparing a response to the substantive issues raised in that document?  And, should this be the position, when was time to begin to run?”

This appeal

7.  On this appeal Mr Whitehead SC, who appeared on behalf of the 3^rd defendant, submitted that the filing of the two defences should not have been taken to have been fatal to the 3^rd defendant’s challenge to the jurisdiction.  He drew with this court’s attention in particular to the decision of Patten J in the case of SMAY Investments Ltd v Sachdev [2003] 1 WLR 1973 and the passage at paragraphs 40-1which included a citation from the decision of Colman J in Spargos Mining NL v Atlantic Capital Corporation The Times, 11 December 1995.  The passage reads:

“[40] One would have thought that, with the advent of the CPR, we could finally have adopted an all-embracing and exhaustive code for dealing with challenges to jurisdiction and assigned to history arguments about implied waiver and submissions to jurisdiction, which seem to me to be an affront to any mature legal system.  As it is, it still appears to be open to argument (an has been argued in this case) that by placing a tick in the wrong box and by obtaining,(necessarily or unnecessarily, an extension of time for a defence, the first defendant has waived his right to apply for a stay.

[41] It seems to me that when a defendant has complied with CPR Pt 11 with a view to challenging the jurisdiction of the court, and the time for making his application under CPR r 11(4) has not yet expired, then any conduct on his part said to amount to a submission to jurisdiction, and therefore a waiver of that right of challenge, must be wholly unequivocal.  That was also the view of Colman J in relation to the provisions of the old Rules of the Supreme Court. In Spargos Mining NL v Atlantic Capital Corporation The Times 11 December 1995 he said:

“In approaching the question of submission, I have in mind the following authorities.  In Astro Exito Navagacion SA v W T Hsu, otherwise known, more pronounceably, as The ‘Messiniaki Tolmi’, [1984] 1 Lloyds Reports, 266, Goff LJ (as he then was) at page 270, said:

‘Now a person voluntarily submits to the jurisdiction of the Court if he voluntarily recognizes, or has voluntarily recognized, that the Court has jurisdiction to hear and determine the claim which is the subject matter of the relevant proceedings.  In particular, he makes a voluntary submission to the jurisdiction if he takes a step in the proceedings which in all the circumstances amounts to a recognition of the Court’s jurisdiction in respect of the claim which is the subject matter of those proceedings.  The effect of a party’s submission to the jurisdiction is that he is precluded thereafter from objecting to the Court exercising its jurisdiction in respect of such claim.  Whether any particular matter, for example an application to the Court, amounts to a voluntary submission to the jurisdiction must depend upon the circumstances of the particular case.’ ”

In Sage v Double A Hydraulics Ltd, [1992] Times Law Reports, 165, Farquharson LJ said (and this is a report of the judgment which is not reported in oratio recta):

‘A useful test was whether a disinterested bystander with knowledge of the case would have regarded the acts of the Defendant, or his solicitors, as inconsistent with the making and maintaining of his challenge.’

In arriving at the view to be imputed to the disinterested bystander, it seems to me that one has to bear in mind that there will be an effective waiver, or a submission to the jurisdiction, only where the step relied upon as a waiver, or a submission to the jurisdiction, cannot be explained, except on the assumption that the party in question accepts that the court should be given the acceptance of jurisdiction, is a step which can be explained also because it was necessary or useful for some purpose other than acceptance of the jurisdiction, there will, on the authorities, be no submission.. . ….If the well-informed bystander had been left in doubt because what the defendants had done was equivocal, in the sense that it was explicable on other grounds in addition to agreement to accept the jurisdiction of the court, then the conclusion must be, on the authorities, that there would have been no submission to the jurisdiction. The representation derived from the conduct of the party said to have submitted must be capable of only one meaning.”

8.  Although, of course, the SMAY case was concerned with the CPR, the citation and references were in respect of the pre-existing law.  In approaching the matter I do not lose sight of the fact that Order 12 rule 8 does not in itself provide a complete code of practice.  One matter, which is not wholly unimportant, is that Order 12 does not provide that the making of an application to set aside the service of a writ absolves a defendant from serving a defence.  In contrast, Rule 11(9) of the CPR provides that where a defendant makes an application under the rule he need not file a defence before the hearing of the application.  It is true that the notes to the Hong Kong Civil Procedure state that a defendant who makes an application should not serve a defence and that the plaintiff should not seek to enter judgment in default of defence whilst the application is pending and continues “although there is no express extension of the time for defence, it would be quite inconsistent with the rules to do so and any such judgment would be set aside”.  The fact that the matter has to be dealt with in notes to the Rules emphasises the point that the Rules by themselves are incomplete.

9.  The question which appears to me to be relevant, therefore, is whether looked at fairly and sensibly has what the defendant has done constituted a submission to jurisdiction.  In my view, when the defences are considered it is abundantly clear from the first paragraph that the 3^rd defendant intended to challenge jurisdiction and was to make an application to that effect.  When the absence of a rule suspending time for service of a defence, such as is contained in the CPR, is borne in mind, it is not wholly incomprehensible that a cautious legal adviser might consider it appropriate to have a defence ready on file whilst at the same time making it clear that jurisdiction was being challenged.

10.  I therefore differ with the judge below on this point on the basis that I do not consider that Order 12 rule 8 sets out a complete procedural regime, as was said in paragraph 52 of the judgment.  What has to be considered is whether the step which the defendant took should indeed be regarded as a submission to jurisdiction.  When looked at realistically and fairly I do not consider that that can be said to have happened.  In coming to my conclusion on this aspect of the case I have ignored the fact that the application to challenge jurisdiction came only a short time after the filing of the defence.  It is the defences themselves which I have considered.

The respondent's notice

11.  The kernal of the argument on behalf of the subrogated plaintiff on the respondent’s notice was that the judge had not taken into consideration the difference between the 1^st defendant as the subrogated plaintiff and the plaintiff itself.  Whilst, at first, this argument appeared attractive it was, as is pointed out in the judgment below, clear on the evidence that the 1^st defendant had required as part of its rights as the insurer that proceedings should be kept on foot against the other defendants.  The judge said at paragraph 29 of his Judgment:

“The plaintiff would sue the 3rd defendant regardless of the outcome of the insurance action.  If the plaintiff won (as indeed it did), the insurer would step in to run the claim against the 3rd defendant (as indeed it has done).  On the other hand, if the plaintiff had lost, it would itself continue with the claim.”

12.  In my view the judge was wholly justified in taking this view.  Given his conclusion, the judge did not find it necessary to consider whether there had been any prejudice or hardship caused to the 3^rd defendant by the delay.  Whilst it was not necessary for the judge to do so, I consider that had he gone on to consider the matter, he would have come to the conclusion the delay would cause considerable difficulty to the 3^rd defendant if it had to proceed to trial.  It is now some 12 years since the events took place which give rise to the claims in these actions.  The actions have not been prosecuted with any degree of dispatch.  Although there is no identification of witnesses who left the 3^rd defendant’s employment and are untraceable it would be by no means surprising if that had happened.  As already pointed out in the trial between the plaintiff and the 1^st defendant the judge held that the loss had been caused because forged documents had been used.  It would be highly surprising if the relevant facts as to that could be the subject of proof some 12 years later.

13.  In summary I would not disturb the judge’s finding on this aspect of the case.

14.  In the circumstances I would allow the appeal and dismiss cross-appeal on the respondent’s notice.  I would make an order nisi that the costs of this appeal and below be to the 3^rd defendant.

Hon Le Pichon JA:

15.  I agree.