JINGJIN SHIPPING CO LTD v. THE OWNERS OF THE SHIP OR VESSEL "TIAN XIANG 2 HAO" (PRC FLAG) AND ANOTHER

HCAJ 322/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY JURISDICTION

ACTION NO. AJ 322 OF 2001

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Admiralty action in rem against
the ship or vessel "TIAN XIANG 2 HAO" of the PRC flag

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J U D G M E N T

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1. The Plaintiffs apply by Notice of Motion ("the Motion") dated 3 July 2003 for Orders that:-

(1)	the Acknowledgment of Service ("the Acknowledgment") filed herein on 13 December 2001 be struck out or set aside on the ground that Messrs Ince & Co ("Ince"), who filed the Acknowledgment, had no authority to act for the 1st Defendants; and,
(2)	the costs of the Plaintiffs' application and all costs incurred by them in consequence of the filing of the Acknowledgment be paid by Ince on a common fund basis.

2. By Summons dated 22 September 2003 the Plaintiffs applied to amend the Motion to include an additional ground for setting aside the Acknowledgment, namely, that the same:-

"does not specify an address for service in Hong Kong following Ince & Co. having ceased to act pursuant to Order of the Court dated 17th May 2003".

I allow the amendment.

Background

3. The Plaintiffs claim indemnity or contribution for loss of or damage to a consignment of 17 containers of newsprint on 20 September 2001. At that time 10 containers fell into the sea after loading on board the ship "TIAN XIANG 2 HAO" ("the vessel"). Seven containers (and their contents) loaded on board the vessel were also found to be damaged.

4. The writ was issued on 13 November 2001 and amended on 15 November 2001. The vessel was arrested in Hong Kong on 4 December 2001.

5. The Affidavit of Philip Mo Wan Yiu leading arrest identified the vessel as the ship in connection with which the claim arose and stated Mr Mo's belief, based on a certificate of registration of ownership of the vessel, that:-

"... the person who would be liable in an action in personam is Guangzhou Salvage who were the registered owners and operators of the Vessel at the time of the incident...."

Mr Mo further deposed that:-

"... at the time when the writ was issued on 13th November 2001 and when the cause of action arose on 20th September 2001, Guangzhou Salvage were the beneficial owners of all the shares in the Vessel...."

6. Ince filed the Acknowledgment on 13 December 2001. Against the words "State the description of the Defendant, as named in the Writ of Summons, by whom or on whose behalf the service of the Writ is being acknowledged", Ince typed the following (corresponding with the description of the 1st Defendant on the writ):-

"(1) THE OWNERS OF THE SHIP OR VESSEL

'TIAN XIANG 2 HAO' (PRC FLAG)

Defendant"

The Acknowledgment gave Ince's Hong Kong office as the address for service.

7. In December 2001 negotiations ensued between the Plaintiffs solicitors, Messrs Holman Fenwick & Willan ("HFW"), and Ince on provision of security for release of the vessel. Ince initially conducted such negotiations on the basis that they were acting for the "owners" of the vessel, without specifically naming them. HFW continued to identify the owners as Guangzhou Salvage ("Salvage"), including in a draft letter of undertaking sent to Ince for consideration on 13 December 2001. During this period, HFW pressed for confirmation of the identity of Ince's clients.

8. On 21 December 2001 Ince responded to such inquiries as to its clients as follows:-

"Finally, we find it odd that you keep pressing for the identity of our clients, knowing well that we are instructed by Owners of the arrested vessel. We trust you had done the relevant searches before you applied for the arrest of the vessel. Please let us know what you are after in this regard."

9. By fax dated 22 December 2001 HFW replied:-

"As to your penultimate paragraph, we assume that you have a purpose in repeatedly declining to provide an unequivocal confirmation of the identity of your clients, the owners of the 'Tian Xiang 2 Hao'. You are obliged to provide the identity of your clients to us on the basis of the provisions in Order 81 Rule 4/4 of the Hong Kong White Book. The Registry of the Vessel evidences that the owners of the 'Tian Xiang 2 Hao' are Guangzhou Salvage. Perhaps you should have the privilege if appropriate of denying that Guangzhou Salvage are your clients in this matter. Until you do so, we have no reason to doubt that the ownership as recorded in the registry of the Vessel is correct."

10. On 11 January 2002 Ince faxed HFW, stating:-

"As to the identity of our clients, we confirm that we act for Tian Xiang Warehousing & Transportation Co. Ltd. of Guangzhou who instructed that they are the owners of the vessel Tian Xiang 2..."

By fax of the same date HFW asked Ince for a copy of an ownership registration certificate evidencing Tian Xiang Warehousing & Transportation Co. Ltd. ("Warehouse") "as the owners of the vessel at the material time".

11. On 30 January 2002 HFW filed a Statement of Claim.

12. Although no certificate of the type requested by HFW on 11 January 2002 has ever been produced, on 5 February 2002 Ince wrote to HFW:-

"So far as ownership of the vessel is concerned, we confirm that there has been no change of ownership since the incident on 20 September 2001 and that at all material time, our client Guangzhou Tian Xiang Warehousing and Transportation Co. Ltd. was the owner of the Tian Xiang 2. As requested, we now attach a copy of the agreement between our client and Guangzhou Salvage Association showing that our client is the true owner of the vessel who is in charge of its day-to-day operation."

Enclosed with its letter, Ince sent copies of 2 Chinese agreements:-

(1)	an Agreement for Agency of the Vessel ("the Agency Agreement") dated 27 July 1999; and,
(2)	a Contract for Employment of Seafarers ("the Employment Contract") dated 12 August 1999.

13. The Agency Agreement provided (among other terms) as follows (in translation¹):-

(1)	(Recital)	"Guangzhou Huangpu Tian Xiang Warehousing and Transportation Company Limited (hereinafter 'Party A') and Guangzhou Maritime Rescue and Salvage Bureau (hereinafter 'Party B') contract for the vessel's agency of the Vessel in the following terms:-...."
(2)	(Clause 1)	"Party A agree to place its MV 'Tian Xiang 2 Hao' in the agency of Party B and shall pay the agency fees as according to this agreement. Party B agrees to manage Party A's Vessel and perform the agency obligations as according to this agreement."
(3)	(Clause 4)
	"Party A's Liabilities
	(i) Responsible for the vessel's transportation and agency arrangement and dispatch; and ensuring the Vessel is used for the purposes of legitimate transportation of cargoes for the routes between the People's Republic of China, Hong Kong and Macau.
	(ii) Responsible for payment of the operating costs (e.g. fuel charges, lubricant oil charges, expenses for the necessities of the seafarers and engine room and port charges etc.), repair costs in ensuring the seaworthiness of the vessel and other maintenance charges, insurance premiums of the vessel, regular inspection and other expenses related to the vessel;
	(iii) Render the agency fees in full to Party B punctually;
	(iv) Render agency transportation charges for the vessel, computed on the basis of turnover as according to the government's regulation, and other related charges;
	(v) Provide the agent with the actual status and circumstances of the vessel and related diagrams and particulars; and
	(v) In Party A entrusting Party B to manage the 'Tian Xiang 2 Hao', Party B's crew must be employed to work on board the 'Tian Xiang 2 Hao', failing which Party B would be entitled to withdraw all the certificates of the vessel."
(4)	(Clause 5)
	"Party B's Liabilities
	(i) Responsible for arranging approvals in relation to the vessel's seaworthiness whilst running in the routes between Pearl River Delta and Hong Kong and Macau.
	(ii) Assisting Party A to arrange replenishing and acquiring of the nec(ii)essary fuel, lubricants, material and accessory items necessary to the vessel while on voyage."
(5)	(Clause 7)
	"Liabilities for breach of contract
	(A) Party A's liabilities for breach of contract
	(i) Party A shall be liable for all unsatisfactory consequences caused by Party A's breaches of Clause 4 of this Agreement;
	(ii) Party A shall be responsible for all losses caused by the detention of the vessel resulting from Party A's delay or refusal to pay any of the charges listed in this Agreement;
	(iii) Party B shall be entitled to 'damages for breach of contract' equal to 5/1000 the sum owed per day [in] the event that Party A has failed to render full management charges punctually.
	In the event of the above, the agent is simultaneously entitled to cease performing this agreement and inform the Head of the Transportation Department to cancel the Ship's Trading Certificate, Certificate of Inspection and the Certificate of the Ship's Nationality.
	(B) Party B's Liabilities
	In the event that Party B does not duly perform its management obligations or maliciously impair Party A's interests, Party A is entitled to terminate this Agreement and seek recourse against Party B for the legal and financial liabilities.
	(C) Neither do Party A nor Party B shall bear the liabilities for non-performance caused by natural disaster or other reasons beyond control."
(6)	(Clause 8)
	"Other Matters
	....
	5. Party B shall not be responsible for any rights or liabilities in connection with any debt matters and disputes leading to the arrest of the ship in the course of Party A's operation of the vessel.
	6. The vessel belongs to Party A. Without consent of Party A, Party B shall not mortgage the vessel to the bank or transfer the ownership of the vessel.
	...."

14. The Employment Contract (among other terms) provides as follows:-

(1)	(Clause 1)
	"Party B [Salvage] will assign 8 seafarers to work on board Party A's [Warehouse's] designated vessel, MV 'Tian Xiang 2 Hao'. The 8 seafarers must pass for and hold valid certificates."
(2)	(Clause 3)
	"Party A employs Party B's seafarers to work between the Pearl River Delta and Hong Kong. Party A will be responsible for centralised control and safety of the vessel whilst on voyage. Party A will also be responsible for any damage or collision damage done to the Vessel during the course of operations, irrespective of the causes."
(3)	(Clause 6)
	"Party A must pay hire to Party B, whether or not the Vessel would be on a voyage (including repairs, safety inspection and investigation etc.)."
(4)	(Clause 7)
	"Party A has absolute control over the master and seafarers employed. In the event that the master or the seafarers do not obey instructions of Party A or the charterers, Party A is entitled to request Party B to replace the seafarers."
(5)	(Clause 8)
	".... Other than ordinary wear and tear, Party B will be liable for all damages in relation to damage rendered to the devices and equipment on board the vessel, caused by the seafarers' negligence or non-performance of duties."
(6)	(Clause 9)
	"Party A would be responsible for the vessel's repairs and safety management."
(7)	(Clause 10)
	"Party B will be responsible for arranging the requisite valid certificates for the vessel, Hong Kong and Macau Certificates, Inspection copy, Customs Inspection copy and Deratisation [?] Certificate etc., whereas would be responsible for all such expenses."

15. By fax of 7 February 2002 HFW, following a Court hearing relating to the sale of the vessel pendente lite, stated:-

"We have also asked the Court to note at the hearing today that the registered owners of the vessel remained in Guangzhou Salvage. We therefore reserve the rights to progress this matter as we deem appropriate given that you do not act for the owners of the vessel."

16. Ince replied on the next day:-

"As to the identity of the Owners of the Tian Xiang 2, we have already provided you with copies of the agreement between our clients and Guangzhou Salvage to prove that our clients is the owner of the vessel. Your clients are of course free to progress this matter as they wish and at their own peril."

17. HFW answered by fax of 11 February 2002:-

"As to the last paragraph of your fax [of 8th February], we can only reiterate that the registered owners of the vessel are Guangzhou Salvage and if Guangzhou Tian Xiang Warehousing wish to claim beneficial ownership of the Vessel, they should be able to produce documents including the new building contract, evidence of payment thereof, the related management accounts and the tax returns to evidence their beneficial ownership of the Vessel. Given that we have asked for supporting documents which your clients have declined to provide to date, we can only assume that your clients are unable to do so or they have declined to produce the documents on your advice, as you have put it, at your clients' peril."

18. Ince filed a Defence on behalf of the 1st Defendant on 15 February 2002.

19. On 20 February 2002 Ince replied to HFW's fax of 11 February 2002:-

"As regards the identity of the owners of the vessel, our clients have provided you with sufficient evidence to advise your clients as to the identity of her owners. At this stage, our clients have no intention to provide early discovery of other documents to your clients."

20. On 6 June 2002 HFW sent the following letter to Ince:-

"We write further to our fax of 17th April. We refer also to our letter of 18th December 2001 and your response on 11th January 2002 in which you confirmed that you acted for Tian Xiang Warehousing and Transportation Co. Ltd. of Guangzhou.

Given that the registered owners of the 'Tian Xiang 2 Hao' at all material times, as evidenced by the copy certificate of nationality dated 27th August 1999, were Guangzhou Salvage of 536, Binjiang East Road, Guangzhou, we assume, unless we hear from you to the contrary by return, that you have filed the acknowledgment of service in the action on 12th December 2001 on behalf of Tian Xiang Warehousing and Transportation Co. Ltd. rather than Guangzhou salvage.

As the acknowledgment of service purports, on its face, to have been filed on behalf of the registered owners of the vessel, Guangzhou Salvage, rather than your clients, Tian Xiang Warehousing and Transportation Co. Ltd., we invite you to have it withdrawn forthwith on the basis that the acknowledgment that you have filed is inaccurate on the basis of your confirmation as provided in your fax of 11th January 2002. The withdrawal of the acknowledgment of service would be made pursuant to Order 21 Rule 1 of the rules of the High Court.

Alternatively, you may confirm within the next 5 days that you acknowledged service on behalf of Guangzhou salvage, the registered owners of the vessel.

Should you fail to respond to us positively or at all within the next 5 days from the date of this letter, we shall have no alternative but to take steps in the proceedings with the foreseeable consequences against all the relevant parties."

21. To this letter, Ince faxed a holding reply on 13 June 2002. On 26 June 2002 it replied substantively:-

"We write further to our fax of 13 June 2002.

We do not agree that only registered owners of the vessel can file an Acknowledgment of Service in an in rem proceeding. The essence of an in rem proceedings is that the 'res' itself becomes the defendant and that its owners or other parties who have an interest in the 'res' may come forward to defend it by filing an Acknowledgment of Service and thus become party to the proceedings.

The entry in the port of registry is only prima facie evidence of ownership and is displaceable by proof to the contrary. The documents which we had disclosed to you clearly indicate that our clients were the true owner of the vessel at the relevant time who were involved in the operation of the vessel and therefore have a right to defend your clients' claim."

Ince did not say anything about whether it had also acknowledged service on Salvage's behalf.

22. On 17 May 2003 Ince obtained an Order from Waung J that it cease to be "the Solicitors acting for the Defendant in this action". The Order describes Ince as "Solicitors acting for the Defendant, Guangzhou Tian Xiang Warehousing and Transportation Co. Ltd" and recites that notice of Ince's application had been served on Warehouse. The Order states that "the address of the Defendant for service shall be the last known address at 50 Guangjiang Road, Huangpu, Guangzhou, China". The Order was not served on HFW until 3 July 2003, after the Motion had issued.

Discussion

23. There are 2 principal issues:-

(1)	whether the Acknowledgment should be set aside; and,
(2)	if the Acknowledgment is set aside, whether Ince should bear the costs occasioned by the Plaintiff as a result of the filing of the Acknowledgment.

Issue (1): Whether the Acknowledgment should be set aside

24. At the hearing of the Motion Mr Stokes appeared on the Plaintiff's behalf, Mr Wright on Ince's behalf. Neither Warehouse nor Salvage were represented before me. I was informed by both counsel that Warehouse knew of the hearing of the Motion, but it was unclear whether Salvage knew of this. Mr Wright told me that a Warehouse representative had gone from Hong Kong to the Mainland to discuss matters with Warehouse and Salvage officers. But Mr Wright could not say whether Salvage had been informed of the Motion in the course of any discussion.

25. As to the application to set aside the Acknowledgment, Mr Wright told me that Ince had not received instructions from Warehouse and accordingly adopted a neutral position.

26. The Court's Admiralty jurisdiction was invoked here under High Court Ordinance (Cap.4) ("HCO") s.12A(2)(g). HCO s.12A states:-

"	(1)	The Admiralty jurisdiction of the Court of First Instance shall consist of:-
		(a) jurisdiction to hear and determine any of the questions and claims mention in subsection (2);....
	(2)	The questions and claims referred to in subsection (1)(a) are:-...
		(g) any claim for loss of or damage to goods carried in a ship;...."

27. The claim being made under HCO s.12(2)(g), the Plaintiffs commenced an action in rem against the ship based on HCO ss.12B(4). That states:-

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

(a)	the claims arise 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)	the 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."

28. Admiralty procedure allows the parties to an action in rem to be described (rather than named) in the title to the action. Thus, plaintiffs are conventionally identified in a writ as "The owners of cargo lately laden on board the ship or vessel 'X'", while defendants are typically sued as "The owners and/or demise charterers of the ship or vessel 'X'". In the writ, the Plaintiffs identified themselves by name, but (as they were entitled to do) described the 1st Defendants as "The Owners of the Ship or Vessel 'Tian Xiang 2 Hao' (PRC Flag)".

29. The question is whether Warehouse, which claims to be the beneficial owner of the vessel, was entitled to acknowledge service of the writ as the 1st Defendant. There is no dispute that at all material times Salvage was registered in the relevant Mainland registry as owner of the vessel.

30. In The "TIAN SHENG No.8" [2000] 3 HKC 285 the Court of Final Appeal held that, absent exceptional circumstances such as fraudulent procurement of a registration, the registration of a person as owner of a ship in the port of registry was "virtually conclusive" of the ownership of the vessel "in the general run of things". Absent an allegation of fraud or possibly egregious error, the unqualified word "owner" in HCO s.12B(4)(b) should normally be understood as a reference to a ship's registered owner. See 292G - 293E, 294D-E (Litton PJ); 305G, 306C-G (Bokhary PJ).

31. It is consequently difficult to see how Warehouse, which is not the registered owner of the vessel, could be entitled to acknowledge a writ addressed to "The Owners of the Ship or Vessel 'TIAN XIANG 2 HAO' (PRC Flag)" and appear as 1st Defendant.

32. The Plaintiffs by their writ claim that Salvage, not Warehouse, would be liable as 1st Defendant. If there was any doubt whom the Plaintiffs were intending to sue as 1st Defendant, the Affidavit leading arrest makes it plain that the Plaintiffs are not suggesting any discrepancy between the registered and beneficial ownership of the vessel. Neither error nor fraud in registration is alleged by the Plaintiffs. In those circumstances, it seems to me, Warehouse cannot assert a right to acknowledge service of the writ as 1st Defendant purely because (regardless of whom the Plaintiffs claim would be liable in a personal action) Warehouse regards itself as the beneficial owner of the vessel with a right to be heard on the disposition of the same.

33. I am strengthened in this conclusion by the judgment of Zulkefli J of the Malaysian High Court in The "ABLE LIEUTENANT" [2002] 6 MLJ 433. There the vessel was arrested. The registered owner, Able Shipping, entered a conditional appearance as defendant. It applied to set aside the writ and warrant of arrest. Pan Ocean, claiming to be beneficial owner of the vessel, also put in an appearance as defendant and it too applied to set aside the writ and warrant of arrest.

34. Zulkefli J held that Pan Ocean was not entitled to acknowledge service of the writ as defendant. He reasoned as follows (at 444B - 445D):-

"Pan Ocean also argues that the writ does not identify the defendant and that any one claiming to be not a defendant can enter appearance as of right. I could not agree with Pan Ocean's contention. I am of the view that in an admiralty action in rem, it is the practice not to identify the defendant by name on the face of the writ, but to identify the defendant simply as owners of the ship or vessel against whom the claim is made. The writ in this action follows this practice (see Form 155 of the RHC)². The identity of the defendant in this case nevertheless has been clearly disclosed by reference to the indorsement on the writ which identifies the charterparty with the defendant, Able Shipping. It is also not disputed that Able Shipping is the registered owner of the ship 'Able Lieutenant' and that they would be liable on the plaintiff's claim.

The test to determine whether a person can be a proper defendant is to consider if that person would be liable for the plaintiff's claim should the plaintiff succeed in the action. Not anyone can jump in as a defendant. On this ground alone, Pan Ocean has no basis to be the defendant. Learned counsel for Pan Ocean argued that owners include beneficial owners. To my mind, this is plainly wrong because Pan Ocean is not liable on the claim. Pan Ocean has relied on a few case authorities where alleged beneficial owners have appeared as of tight. However, in all the cited cases by Pan Ocean, I find there is only one defendant. That alone distinguished those cases from the present situation. In The 'Temasek Eagle' [1999] 4 SLR 250 and in The 'Andres Bonifacio' [1993] 3 SLR 521, cited by counsel for Pan Ocean, appearance was entered for the owners of the vessel such that if they failed to set aside the writ, the defendants would be liable for the claim. It is also noted that in The 'Andres Bonifacio', the beneficial owners furnished bail bonds for the plaintiffs' claims, so that if they did not succeed to set aside the writ, these bail bonds could be used to satisfy a judgment of the court. In the present case, appearance has been in a special way, with no precedent in the history of admiralty actions -- Able Shipping 'as registered owners' and Pan Ocean 'as beneficial owners'. It is noted that Pan Ocean has refused to furnish bail bond which will not answer to plaintiff's claim. In The 'Tian Sheng (No.8)' [2002] 2 Lloyds Rep 430, the defendant who entered appearance was the registered owner of the vessel, not the beneficial owner as alleged by Pan Ocean. The case has therefore been wrongly cited.

I am of the view that if Pan Ocean is right in its contention, then in each admiralty case, there will always be several defendants -- legal owner, beneficial owner, part owner, etc. Obviously this cannot be right because Pan Ocean cannot and has not produced a single authority where there are two defendants or a case where one defendant appears as 'registered owner' and the other as 'beneficial owner' in the same action. On the other hand, I find that learned counsel for the plaintiff has cited a clear authority in the Malaysian case of The 'Ting Yin Shen' where both the registered owner and the alleged beneficial owner appeared in a different capacity. The owners liable on the claim were the defendants and the party claiming beneficial ownership appeared as interveners. Faced with this unarguable position, learned counsel for Pan Ocean says that the objection is technical. She argued, if Pan Ocean had intervened, this court would have made it a defendant. I do not see the logic of this argument as an intervener and a defendant are two different persons. A defendant would be liable on the claim but an intervener is not. It is my view that Pan Ocean's appearance as a defendant, when the real defendant has appeared, is not a mere irregularity but a nullity because it affects the substantive right of the plaintiff and is prejudicial to the plaintiff. Further it is confusing to the court due to uncertainty of the proper defendant.

Based on the above mentioned grounds, it is my finding that because its status in this action is invalid, pan Ocean does not have the right to apply to set aside the writ and to seek other orders as in its notice of motion. I hereby dismissed with costs Pan Ocean's application in encl.29. For the same reasons, I hereby allowed the plaintiff's application in encl 39 [that Pan Ocean's appearance be set aside] and grant the orders sought for prayers 1 and 2."

35. Zulkefli J rejected the submission that Pan Ocean's stance was justified by 2 Singaporean authorities. However, since the judge's remarks on those 2 cases are somewhat compressed, I briefly digress to consider them in more detail.

36. In "ANDRES BONIFACIO" [1993] 3 SLR 521, POCI³ appeared as defendant to set aside the writ in rem and the warrant of arrest on the ground that it was not the person who would be liable in an action in personam. The plaintiff sought to justify arrest on the basis that the vessel was beneficially owned by PNOC. At 1st instance, the plaintiff failed to establish PNOC's beneficial ownership and Karthigesu J set aside the writ. The Court of Appeal upheld the judgment. Given the facts of "ANDRES BONIFACIO", Zulkefli J rightly concluded that the case does not support a proposition that a beneficial owner may acknowledge service as defendant. The case did not involve a claim by a beneficial owner to be entitled to acknowledge service.

37. In "TEMASEK EAGLE" [1999] 4 SLR 250, the defendant applied to set aside an arrest on the ground that the relevant vessel was beneficially owned by it and not by the party (Maritime Malaysia) whom the plaintiff was alleging would be liable in an action in personam. The evidence showed that Maritime Malaysia had sold the vessel to the defendant on 5 March 1998, prior to the vessel's arrest on 17 November 1998⁴ The plaintiff adduced evidence that both Lloyds Register and the Labuan Ships Registry still recorded Maritime Malaysia as owner of the vessel at the time of the hearing. Choo Han Teck JC held that the defendant was the beneficial owner and dismissed the plaintiff's appeal against the setting aside of the writ and arrest by the registrar. The case appears to have concerned a change of ownership between the time when a cause of action arose and that when a claim was made. Given such change of ownership, it is open to a new owner to acknowledge service and apply to set the writ aside on the ground that the party alleged to be liable in personam has ceased to be beneficial owner at the time when the claim is made. Accordingly, as Zulkefli J held in "ABLE LIEUTENANT", "TEMASEK EAGLE" is not authority that a person who has at all material times been beneficial (but not registered) owner may acknowledge service solely on the basis of his claim to beneficial ownership.

38. The Plaintiffs here make no claim against Warehouse. That does not mean that Warehouse cannot take steps to protect its alleged beneficial ownership in the vessel. The proper course (as Zulkefli J suggests in the passage just quoted) would have been for Warehouse to apply to intervene in the action under RHC Order 75, Rule 17 as an interested party. This is not a mere matter of procedural pedantry. A defendant is entitled to appear as of right to defend against a plaintiff's claim. But, as Mr Stokes points out, the Court will not necessarily give leave for a would-be intervener to be joined as a party. The Court retains a discretion on the matter. It can, for instance, impose conditions on any joinder of the intervener, including payment of security for costs occasioned by intervention. See, for an example of the imposition of a condition as to payment of security, The "HALLA LIBERTY" HCAJ 60/1998, 28 June 2002 (Waung J)).

39. Following the passage which I have just cited, Zulkefli J enters into a detailed consideration of the procedure by which ships are arrested and writs acknowledged in actions in rem. To conclude on the 1st issue in this case, I think it is helpful to set out the learned judge's analysis (which I respectfully adopt) and then to apply that analysis to the present circumstances to see whether my conclusions make sense from a wider perspective. In the passages which I cite below it will be seen that Zulkefli J was commenting on in rem procedure under s.21(4) of the UK Supreme Court Act 1981. That section is to all intents and purposes identical with HCO s.12B(4).

40. As with the Court of Final Appeal in "TIAN SHENG", Zulkefli J's starting point is that registration of ownership is virtually conclusive of the legal and beneficial ownership of a ship. He explains the rationale for this (at 447H-I):-

"I am of the view that the law places the burden on the plaintiff to prove beneficial ownership of a registered ship only in those cases when the defendant is not the registered owner at the time when the action is brought and the vessel arrested. In all other cases, the said UK Act enacted to give effect to the [1952] Arrest Convention, follows the ship register. Considering there is no public register for beneficial ownership of ships, if the view of the law by Pan Ocean and the defendant is to hold, then all maritime nations might as well close down their shipping registries. The provisions for registration in our Merchant Shipping Ordinance 1952 would then appear to have no regulatory purpose. Also, the Arrest Convention which is only concerned with legal ownership, would have no effect. For these reasons, it is my view that the law cannot be stated by Pan Ocean and the defendant."

41. Zulkefli J then examines different types of arrest situations (at 448G - 449E):

"[I]t can be said that there are three rights of ship arrest provided for by s.21(4) of the UK Act. Firstly, it is the arrest of the particular ship (category 1), secondly, arrest 'of the sister ship' (category 2) and thirdly, arrest of a particular ship spirited away into different legal ownership (category 3). In the case of categories 1 and 2, it is my view that the burden of proof is on the plaintiff to show that the defendant is the registered owner of the vessel when the writ is issued. This follows the [1952] Arrest Convention where only legal ownership matters. Article 3.1 and 3.2 of the Arrest Convention reproduced below states as follows:-

Article 3.1

Subject to the provisions of s.4 of this Article and of art.10, a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship, even though the ship arrested be ready to sail; but no ship, other than the particular ship in respect of which the claim arose, may be arrested in respect of any of the maritime claims enumerated in art.1(1)(o), (p) or (q).

Article 3.2

Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons. (Emphasis added.)

The issue of beneficial ownership dies not arise in categories 1 and 2 because the registered owner of a ship registered in a recognized port registry under the laws of a maritime nation is also its beneficial owner. The English Court of Appeal case of The 'Evpo Agnic' and the case if The 'Tian Sheng (No.8)" can be cited as authorities for such a proposition. The case of The 'Tian Sheng (No.8)' is a decision of the highest appellate court in Hong Kong, equal to our Federal court. Even in the Singapore High Court case of The 'Kapitan Temkin' [1998] 3 SLR 254, the Court therein at p.257 said:-

'... the certificate of registration is important documentary evidence in deciding who the beneficial owners of a ship for purposes of jurisdiction are ...'

Learned counsel for Pan Ocean and the defendant in their reply have not countered the abovementioned case authorities.

The third right of arrest (category 3) under s.21(4) of the UK Act as stated in The 'Evpo Agnic' is the right to arrest ships spirited away into different registered ownership. It is in this situation that the plaintiff has the burden of proof to establish beneficial ownership. This is obvious as it is pointless relying on the register because the register would show the new owners who are strangers to the plaintiff and who would not be liable on the claim. So, in this situation, if a plaintiff brings an action against the ship, he must be in a position to prove that the ship, though registered in a stranger;s name, is beneficially owned by the person who would be liable to him...."

42. If one applies the above typology to the present case, the circumstances here constitute a "category 1" situation. In taking out the writ and warrant of arrest, the Plaintiffs were entitled to treat Salvage's registration at the time of the cause of action as evidencing compliance with HCO s.12B(4)(b) and that continued registration at the time when the writ was issued as "virtually conclusive" evidence of the ship's beneficial ownership by Salvage.

43. Ordinarily the writ, once served on the ship, would have come to Salvage's attention as registered owner. The writ certainly came to Warehouse's attention. It appears from the Defence that it is Warehouse's intention to contest the Plaintiffs' claim on the merits. If so, the proper course would have been for Warehouse to apply to intervene as an interested party. What Warehouse cannot do is to acknowledge service as 1st Defendant, when it is apparent from the circumstances (including HCO s.12B(4)(b)) that Salvage not Warehouse is the party whom the Plaintiffs allege would be liable in personam.

44. The foregoing consideration attaches significant weight on the particulars of ownership found in a relevant registry. This is because in my view such particulars play a role not just in relation to the requirement in HCO s.12B(4)(b), but also towards ascertainment and proof of the beneficial ownership required by HCO s.12B(4)(i)⁵.

45. I note finally on this 1st issue that Mr Stokes drew my attention to Article 8 of the PRC Maritime Code which states (in translation):-

"The acquisition, transference or extinction of the ownership of a ship shall be registered at the ship registration authorities; no acquisition, transference or extinction of the ship's ownership shall act against a third party unless registered.

The transference of the ownership of a ship shall be made by a contract in writing."

The construction of the words "owner" and "beneficial owner" in HCO s.12B(4) (a Hong Kong statute) must be matters of Hong Kong law. I therefore attach little (if any) weight to Article 8 for the purposes of construing the HCO. Nonetheless, it is worth observing that, given Article 8, as between a 3rd party interested in cargo carried on board a ship and a defendant sued as shipowner, Mainland law seems to treats registration as conclusive of the ship's ownership.

46. For the reasons discussed above, in my judgment Warehouse was wrong in law to file the Acknowledgment.

47. In the premises, I am satisfied that I can set aside the Acknowledgment for lack of compliance with the requirements stipulated in RHC Order 12, Rule 3. A consequence of such setting aside is that the Defence (which was filed on the basis of the Acknowledgment being valid) cannot stand and ought likewise to be set aside.

48. It is unnecessary for me to deal with the Plaintiffs' alternative case that, in any event, the Acknowledgment should be set aside because, since from the time when Ince ceased to act for it, Warehouse no longer had a Hong Kong address for service. See RHC Order 12, Rule 3(2)(a). I merely state that, had this been the sole ground for the Plaintiffs application, I would have been reluctant to set aside the Acknowledgment without first affording Warehouse a chance to make good the omission to provide a Hong Kong address. It seems to me that a failure to give a Hong Kong address is not such an incurable objection to the Acknowledgment as to merit an immediate setting aside.

Issue (2): Whether Ince should pay the Plaintiffs' wasted costs

49. Mr Stokes submitted that, by filing the Acknowledgment in the form in which it was filed, Ince & Co. purported to be acting, and to have instructions to defend the action, on Salvage's behalf. Ince having wrongly represented that it had Salvage's authority to file the Acknowledgment, Mr Stokes relied on cases such as Yonge v. Toynbee [1910 1 KB 215 (CA) and The "NEPTUNE" [1919] P 17, at 21 (Note (1)) (Hill J) for his conclusion that Ince should bear the Plaintiffs' wasted costs from the invalid Acknowledgment. An agent is deemed to represent that he has authority to act on his principal's behalf. If that representation turns out to be untrue, the agent (Mr Stokes said) must be strictly liable for loss to a 3rd party occasioned by the breach of his implied warranty as to authority.

50. In the alternative, Mr Stokes suggested that Ince should also be liable to compensate the Plaintiffs under RHC Order 62, Rule 8. That provides as follows:-

"	(1)	Subject to the following provisions of this rule, where in any proceedings costs are incurred improperly or without reasonable cause or are wasted by undue delay or by any other misconduct or default, the Court may make against any solicitor whom it considered t be responsible whether personally or through a servant or agent an order:-
		(a) ...
		(b) ...
		(c) directing the solicitor personally to indemnify such other parties against costs payable by them.
	(2)	No order under this rule shall be made against a solicitor unless he has been given a reasonable opportunity to appear before the Court and show cause why the order should not be made except where any proceeding in Court or in chambers cannot conveniently proceed, and fails or is adjourned without useful progress being made,--
		(a) because of the failure of the solicitors to attend in person or by a proper representative; or
		(b) because of the failure of the solicitor to deliver any document for the use of the Court which ought to have been delivered or to be prepared with any proper evidence or account or otherwise to proceed.
...."

51. It is useful at this stage to refer to Hong Kong Civil procedure 2002 Note 62/8/2 (p. 870) as to the type of misconduct by a solicitor which may trigger a sanction under Order 62, Rule 8:-

"The matter complained of need not be criminal. It need not involve peculation or dishonesty. A mere mistake or error [of] judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is solicitor's duty to ascertain with accuracy will suffice. It need not involve personal obliquity. The term of professional misconduct has often been used to describe the ground on which the court acts. It would perhaps be more accurate to describe it as conduct which involves a failure on the part of the solicitor to fulfil his duty to court and to realise his duty to aid in promoting in his own sphere the cause of justice.... The conduct must be inexcusable and such as to merit reproof.... The test was whether the conduct amounted to a serious dereliction of duty..."

52. Mr Stokes candidly said that it was not his case that Ince was guilty of serious misconduct. Instead, he submitted that Order 62, Rule 8 came into play because of Ince's "cavalier attitude" in failing to take basic steps to verify that it was properly instructed to file the Acknowledgment. Mr Stokes argued that a solicitor should ensure (for example) that its authority came from the relevant defendant. Here the "stark question" of Ince's authority to act and Warehouse's locus to file the Acknowledgment was "a live issue for a lengthy period of time" with HFW pressing for clarification of Ince's client. Ince did not (Mr Stokes suggested) take any real steps to deal with HFW's concerns. Such "cavalier attitude" merited being made liable for costs under Order 62, Rule 8 on a common fund basis.

Preliminary matters

53. Ince had initially applied to be joined to the present proceedings as an Intervener. I understand that such application was taken out when it was unclear whether or not Ince would have a chance to be heard within the Motion before an Order along the lines sought by the Plaintiffs might be made against it. Mr Stokes having no objection to Ince addressing the Court in the course of the hearing of the Motion, Mr Wright thought it was unnecessary to pursue the application to intervene.

54. But Mr Wright took 2 preliminary objections to Mr Stokes' claim against Ince.

55. First, Mr Wright submitted that, insofar as the Plaintiffs were seeking to impose liability on Ince for breach of a warranty of authority, the Plaintiffs should have started a separate action and could not proceed in the present Admiralty action.

56. Second, Mr Wright submitted that, insofar as the Plaintiffs were seeking to impose liability under RHC Order 62, Rule 8, although such application could be made within the present Admiralty action, it was incumbent on the Plaintiffs to formulate the charge being made with particularity. It was not enough for the Motion, for example, to complain that "Messrs Ince & Co. in filing the said acknowledgment, acted without authority from the owners of the ship or vessel 'Tian Xiang 2 Hao'". Since (Mr Wright argued) Order 62, Rule 8 could only be exercised in cases in which there was a serious dereliction of duty by a solicitor, the rules of natural justice and fairness required that Ince should be clearly told what it had done wrong and what was being claimed in consequence thereof.

57. During the hearing, I held against Mr Wright on both preliminary objections.

58. In relation to his 1st point, there are ample examples (such as in Yonge v. Toynbee and The "NEPTUNE") of the Court summarily dealing with the question of solicitors' liability for breach of a collateral warranty as to authority, within the action in which the solicitors had purported to act, without the party applying for an order having to commence a separate action.

59. Mr Wright cited The "SARDINIA SULCIS" and "AL TAWWAB" [1991] 1 Lloyds Rep 201 as an instance where the defendants started fresh proceedings against solicitors for breach of warranty of authority in acting for non-existent clients. But the fact that the parties in one case started different proceedings for reasons unexplained in the report, does not mean that a person can only sue solicitors for breach of warranty of authority by way of a separate action.

60. To the contrary, Mr Stokes pointed to Form 19 of the section entitled "Acknowledgment of Service" in Atkin's Court Forms (2nd ed., 1994 issue), vol.6, in support of his contention that there was no need to initiate a new action. Form 19 gives sample wording for a summons or motion seeking to make solicitors liable for costs thrown away as a result of their entering an acknowledgment of service without a defendant's proper authority. From the text of Form 19 (on which the present Motion was based) it is apparent that Atkins believes that separate proceedings are not necessary and the summons or motion can be brought within the existing action between the plaintiff and defendant.

61. The Court has a degree of flexibility in how it handles applications for costs orders against solicitors of an opposing party for acting in breach of their warranty of authority. The following dictum of Sir Thomas Bingham MR in Ridehalgh v. Horsefield [1994] Ch 205 (CA) (at 238G - 239A) on the English court's jurisdiction to make wasted costs orders seem to me to be applicable in principle to the situation here:-

"The procedure to be followed in determining applications for wasted costs must be laid down by courts so as to meet the requirements of the individual case before them. The overriding requirements are that any procedure must be fair and that it must be simple and summary as fairness permits. Fairness requires that any respondent lawyer should be very clearly told what he is said to have done wrong and what is claimed. But the requirements of simplicity and summariness means that elaborate pleadings should in general be avoided. No formal process of discovery will be appropriate. We cannot imagine circumstances in which the applicant should be permitted to interrogate the respondent lawyer, or vice versa. Hearing should be measured in hours, and not in days or weeks. Judges must not reject a weapon which Parliament has intended to be used for the protection of those injured by the unjustifiable conduct of the other side's lawyers, but they must be astute to control what threatens to become a new and costly form of satellite litigation."

62. In relation to Mr Wright's 2nd point, I considered that the Plaintiffs' complaint against Ince was sufficiently clear from the Motion and Mr Mo's 4th Affidavit sworn in support. That affidavit exhibited the correspondence between the parties which I summarised above. Further, the last paragraph of the affidavit stated:-

"In the premises, I pray for orders in the terms sought by the Plaintiffs' summons, on the grounds that Messrs. Ince & Co. have purported to acknowledge service for the owners of the 'Tian Xiang 2 Hao' when they do not have instructions from Guangzhou Salvage, the registered owner of the Vessel, but act instead for a different company, Tian Xiang Warehousing and Transportation Co. Ltd. The decision of the Court of Final Appeal in The 'Tian Sheng No.8' [2000] 3 HKC 285 establishes that the word 'owner' in section 12B(4)(b) of the High Court Ordinance means 'registered owner'."

63. I asked Mr Wright whether, if I held against him on his preliminary issues, he wished to have an adjournment on the ground that he would not be prepared straightaway to deal with the substantive issues raised by Mr Stokes. Mr Wright replied that his instructions were not to seek an adjournment, but to proceed with submissions on the substance of the Motion. That was indeed the position implicit in Mr Wright's skeleton which deals in depth with the breach of warranty and Order 62, Rule 8 issues raised by the Plaintiffs. Accordingly, after I held against Mr Wright on his 2 preliminary objections, no adjournment having been sought by Ince, I proceeded to hear Ince's substantive submissions.

Substantive matters

64. Mr Wright submitted (and I agree with him) that, to make out a case for Ince's liability for breach of warranty, the Plaintiffs have to establish the following elements:-

(1)	By filing the Acknowledgment, Ince represented that it was authorised to act on behalf of Salvage, the vessel's registered owners.
(2)	That such representation was false.
(3)	That the Plaintiffs relied on such representation.
(4)	That the Plaintiffs suffered loss as a result of such reliance.

Sub-issue (1): Representation

65. Mr Wright argued that Ince never represented that it was acting on Salvage's behalf. In my view, Mr Wright is correct on this crucial point.

66. By filing the Acknowledgment, it seems to me that all Ince was doing was purporting to act for "the Owners of the Ship or Vessel 'Tian Xiang 2 Hao' (PRC Flag)". Ince took the view that Warehouse, which regarded itself as the vessel's beneficial owner, was entitled as beneficial owner to acknowledge service as of right as "owner". In the 1st part of this judgment, I have held that Warehouse was wrong in law to take this view. But the mere filing of the Acknowledgment on the basis of a wrong belief that Warehouse (as alleged beneficial owner) was entitled to appear as 1st Defendant, cannot amount to a representation that the Acknowledgment was filed by Ince on Salvage's behalf.

67. In fact, as is evident from the cases discussed in the 1st part of this judgment, it occasionally happens that alleged beneficial owners (such as Pan Ocean) purport to acknowledge service as defendants as of right, in order to apply to set aside writs and warrants of arrest. Such defendants may be struck out on the basis that they are not defendants as of right and, to the extent that they claim a beneficial interest, should have applied to intervene instead. The point is that the filing of an acknowledgement by a purported beneficial owner is simply set aside as a wrong legal step taken, not because it amounts to a false representation that the person acknowledging service is a registered owner.

68. In his skeleton, Mr Stokes submits (at §4):-

"By filing the Acknowledgment in the form in which it was filed Ince & Co. therefore purported to be acting on behalf of Guangzhou Salvage and to have instructions to defendant the action on its behalf. It has since become apparent that they did not and do not have such instructions; yet the Acknowledgment has remained in place in its original form despite an invitation from the Plaintiffs for it to be withdrawn or amended and despite a warning that, if that was not done, the Plaintiffs would have no alternative but to make the current application in accordance with the principles set out in the note at 12/3/9 on page 155 of Hong Kong Civil Procedure 2002."

It is the 1st sentence with which I have difficulty. It does not appear to me to be logical to equate Warehouse's acknowledgment of service with a representation that Ince was acting for Salvage. If anything, the facts show the contrary. Pressed by HFW to state for whom it was acting, Ince (right up to time when it filed notice to cease to act) never claimed to be acting for anyone other than Warehouse. Warehouse and Ince may have been wrong as a matter of law to acknowledge service as 1st Defendant on the strength of Warehouse's alleged beneficial ownership. However, parties take invalid procedural steps all the time in the course of litigation. I do not think that I can infer, from the fact that a party A lacking attribute X wrongly takes a procedural step which is only open to a person having attribute X, a representation that A is a person with attribute X. There are myriad reasons why A might have thought that he was entitled to take the procedural step in question, including that A misunderstood or failed to appreciate that as a matter of law only people with attribute X can take the relevant procedural step.

69. Mr Wright suggested that it was significant that, at the time of filing the Acknowledgment, Ince had not seen the affidavit leading the arrest of the vessel. But the affidavit simply shows whom the Plaintiffs thought that they were suing. It has no bearing on the question whether or not Ince warranted that it was acting for Salvage by filing the Acknowledgment. The fact is that long after it was aware that, in referring to the owners of the vessel, the Plaintiffs were claiming against Salvage, Ince maintained that Warehouse was entitled to acknowledge service. Whether or not it had seen the affidavit leading arrest and realised, before filing the Acknowledgment, that the Plaintiffs were targeting Salvage as 1st Defendant, Ince's position would not have changed. That position was made plain in Ince's fax of 26 June 2002 when Ince said that it did "not agree that only registered owners of the vessel can file an Acknowledgment of Service in an in rem proceeding". It was Ince's view that Warehouse as "the true owner of the vessel ... therefore have a right to defend your clients' claim".

70. There is no dispute between the Plaintiffs and Ince that Ince was instructed by Warehouse. Ince's view of Warehouse's entitlement to acknowledge service may have been wrong. I have so found it to be. But Ince's conduct in line with that mistaken view could not amount to a misrepresentation that it was acting for Salvage.

71. The present case is distinguishable from Yonge v. Toynbee and The "NEPTUNE". In Yonge solicitors purported to act for X who became of unsound mind shortly after engaging such solicitors. X having become of unsound mind, the solicitors' mandate to act for X ceased and the solicitors were liable for loss resulting from their claiming to act for X after their mandate had ceased. In "NEPTUNE" solicitors purported to act for shipowners from whom they in fact had no authority to act. The solicitors were responsible for costs incurred as a result of their unauthorised actions. Here Ince only ever purported to act for Warehouse in its correspondence with HFW. Warehouse indisputably instructed Ince. Where Warehouse and Ince went wrong was to become involved in the action by the filing of the Acknowledgment, rather than by intervening.

Sub-issue (2): Falsity of representation

72. Strictly, this issue doe not arise, since I have found that there was no representation.

73. Nonetheless, there is one curious factor which I should deal with. Mr Wright submitted that in any event the reality was that, in addition to acting for Warehouse, Ince was also acting for Salvage. There was (Mr Wright said) a chain of instruction from Salvage to Warehouse as evidenced by a letter dated 19 September 2003 from Warehouse to Grand Dragon Navigation Agency Co. Ltd, Warehouse's Hong Kong general agent. That letter states (in translation):-

"Our company (Guangzhou Tian Xiang Warehousing and Transportation Co., Ltd.) [Warehouse], a limited company incorporated in Guangzhou under the relevant law of the People's Republic of China, was the true owner of the vessel 'Tian Xiang 2 hao'. We confirm that we have instructed Messrs. Ince & Co. to represent the interests of the owners of the Vessel Tian Xiang 2 Hao in Action No.HCAJ 322/01. We were duly authorized by Guangzhou Maritime Rescue and Salvage Bureau [Salvage], the registered owners of the vessel to represent our company and Guangzhou Maritime Rescue and Salvage Bureau in the said action.

We authorised Messrs. Ince & Co. to take all steps necessary to protect our interest, including filing the acknowledgment of service. We confirm that all steps taken by Messrs. Ince & Co. in HCAJ 322/01, including the filing of the acknowledgment of service on 13 December 2001, were taken with our full authority and with the full authority of Guangzhou Salvage."

Before me, Mr Wright hinted (unsupported by any affidavit evidence) that, although Salvage had actually been instructing Ince, it was not prepared to risk incurring liability in the action by providing Ince with a letter expressly admitting this fact. That was because (according to Mr Wright) by Clause 8(5) of the Agency Agreement the responsibility for matters and disputes leading to the arrest of the vessel had been accepted by Warehouse. Salvage did not see why it should be troubled over something which was outside its sphere of contractual responsibility.

74. Now assume (Mr Wright posits) that there was a representation that Ince was acting for Salvage. In light of the letter from Warehouse, the Court (Mr Wright suggests) must take that representation to have been true.

75. As evidence of Salvage's involvement in the giving of instructions to Ince, the letter of 19 September 2003 is of little value. Mr Stokes was rightly scathing about the evidential weight of the letter. It is difficult for me to accord any significance to the declarations by an agent (Warehouse) as to its authority to transmit instructions from a principal (Salvage). There is only Warehouse's word for it, when what is required is evidence from Salvage itself.

76. What is of more concern is the question whether the letter from Warehouse on Salvage's involvement has any affect on my analysis of Sub-issue (1) on representation. Does the letter mean that, contrary to what I have said above in connection with events prior to Ince's ceasing to act, Ince was in fact representing that it was acting for Salvage? In my view, the letter does not affect the analysis. The letter did not come into being until long after the Motion was issued. Its contents could not have affected the minds of the Plaintiffs and HFW, so as somehow to lead them at any relevant time to believe that Ince was acting on behalf of Salvage. Objectively evaluated, Ince's conduct prior to the taking out of the Motion can only amount to a representation that Ince was acting for Warehouse and no one else. It is against such conduct of Ince, immediately prior to the taking out of the Motion, that the Plaintiffs' entitlement to costs against Ince falls to be assessed.

Sub-issue (3): Reliance

77. Mr Wright says that there could have been no reliance. I agree. There having been no representation, there could not have been reliance.

78. In any event, once the Plaintiffs had been unequivocally told on 11 January 2002 that Ince was acting for Warehouse and given Ince's refusal to confirm despite repeated requests that it was acting on Salvage's behalf, a number of courses of action were open to the Plaintiffs. Among other courses, they could allow the matter to proceed to trial or apply to strike out the Acknowledgment as wrong. That the Plaintiffs chose, whether out of caution or other reason, not to apply forthwith to strike out the Acknowledgment but to press Ince for clarification about its clients, cannot amount to conduct by the Plaintiffs or HFW in reliance on a representation that Ince was somehow instructed on Salvage's behalf. Ince had not said that it was acting for Salvage.

79. By the same token, that the Plaintiffs chose to enter into lengthy correspondence with Ince on the sale and valuation of the vessel, cannot be said to have been action in reliance on a representation that Ince was acting for Salvage. As far as the Plaintiffs knew, Ince was not acting for Salvage. Ince was refusing to say that it was acting for Salvage. It was the Plaintiffs' choice to deal with Ince in those circumstances.

Sub-issue (4): Loss

80. There having been neither representation nor reliance, it follows that there could have been no consequential loss.

81. I therefore find that there was no actionable breach by Ince of a collateral warranty as to its authority to act.

Order 62, Rule 8

82. I do not think that the sanction in Order 62, Rule 8 is called for here.

83. Ince may have given wrong legal advice to Warehouse which led to Warehouse instructing Ince to file the Acknowledgment. It is a commonplace in litigation for parties to give advice to clients which the Court ultimately finds to have been wrong. The fact that a party has taken a wrong legal stand is not of itself indicative of negligence on the part of a legal advisor, much less does it amount to serious dereliction of duty by a solicitor.

84. The nature of contentious litigation is that one party takes a stance which the Court finds to be right, while the other party takes a stance which is held to be wrong. Costs incurred by a plaintiff as a result of actions taken on the basis of a wrong stance by a defendant on wrong advice given by a defendant's legal advisors may be awarded to the plaintiff as against the defendant at the end of the day. But the giving of wrong advice to a losing defendant does not, without more, entitle a plaintiff to recover costs directly against the defendant's solicitors for giving such bad advice.

85. I note, in relation to Mr Stokes' submission of a "cavalier attitude" on Ince's part, that I am in any event disinclined to apply Order 62, Rule 8 on such ground. "Cavalier attitude", although a colourful expression, is nebulous as a legal concept. It is hard to know what (if anything) it means, much less pin it down against any specific conduct. I therefore decline to make any finding that Ince acted "cavalierly".

Conclusion

86. I make the following Orders:-

(1)	The Acknowledgment be set aside .
(2)	The Plaintiffs' application that Ince pay all costs incurred in consequence of the filing of the Acknowledgment be dismissed.

87. I make the following Orders Nisi:-

(1)	The Defence be set aside.
(2)	The costs of and occasioned by the Plaintiffs' application to set aside the Acknowledgement be paid by Warehouse to the Plaintiffs forthwith, to be taxed if not agreed.
(3)	Ince's costs of and occasioned by the Plaintiffs' application against it be paid by the Plaintiffs to Ince, to be taxed if not agreed.

88. I make 2 comments on the Order Nisi.

89. First, although the setting aside of the Defence seems to me to be an inevitable corollary of setting aside the Acknowledgment, it may not have been apparent to Warehouse (which is now not legally represented in Hong Kong) from the Motion (which does not expressly refer to the setting aside of the Defence) that the Court might make such an Order at the end of the Motion. I therefore give Warehouse an opportunity, during the interim before the Order Nisi becomes absolute, to apply for the Order Nisi as to the setting aside of the Defence to be varied. I would request the Plaintiffs and Ince to take steps to draw my judgment to Warehouse's attention.

90. Second, in relation to the payment of Ince's costs by the Plaintiffs, I assume that the relevant event is the hearing of the Motion of 3 July 2003. The Motion having been fully dealt with, the event has transpired and Ince may directly proceed to tax its costs if not agreed. It is for this reason that I have not included the words "in any event" at the end of the 3rd limb of the Order Nisi.

91. Finally, I record that at the end of the hearing before me, Mr Wright asked that, if I were minded to find against Ince on the relief claimed by the Plaintiffs, I should give Ince a further chance to adduce evidence from Salvage that Ince had been instructed by Salvage. My conclusion in this judgment makes it unnecessary for me to deal with Mr Wright's request. For completeness, I state that, had I concluded that Ince was liable to the Plaintiffs on the material before me at the hearing, I would not have acceded to Mr Wright's request.

1 HFW and Ince provided similar (but not identical) free translations of the Agency Agreement for the hearing before me. For the purpose of exposition, I have followed Ince's translation, but with the correction made by Mr. Mo of HFW in his 5th Affidavit dated 23rd September 2002. The differences between the 2 translations do not have any material bearing on my conclusions.

2 See in the case of Hong Kong RHC, Appendix B, Form No.1.

3 There was conflicting evidence as to whether POCI was the registered owner of the ship at the time of the claim. Lloyds Register suggested that POCI was the owner, while a certificate from the Philippine Coast Guard (the registration authority for merchant vessels in the Philippines) identified PNOC as owners. On this the Court of Appeal said (at 524): "Upon discovery, this discrepancy ought to have been investigated [by the plaintiff] in order to ascertain the true beneficial ownership."

4 The reasoning in "TEMASEK EAGLE" is somewhat obscure, as the judge appears to have treated the date of the vessel's arrest as equivalent to the time "when the cause of the action arose". See further Singapore High Court (Admiralty Jurisdiction) Act (Cap.123) s.4(4).

5 See also Haji-Ioannou v. Frangos [1999] 2 Lloyds Law Rep 337 (CA), at 353 (2nd col.), where Lord Bingham CJ observed : "[I]t has now for a long time been accepted law that ownership of a ship for the purposes of the [1952 Arrest] Convention and for the purposes of the Admiralty jurisdiction of the High Court means legal ownership, except in those provisions where the word is qualified by the adjective 'beneficial': see The I Congreso del Partido ... [1978] 1 QB 500 at p.541, and The Evpo Agnic [1983] 2 Lloyds Rep 411, at pp.414-415. In the latter case Lord Donaldson MR observed that the Convention clearly looked to ownership and registered ownership as one and the same. Even if the legal property in the shares of a one-ship company is held by A and the equitable property by B, he said that that distinction does not affect the ownership of the ship or the shares in the ship."