NOOR MARITIME LTD v. CALANDRA SHIPPING CO LTD

HCAJ 84/2017

[2018] HKCFI 1136

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 84 OF 2017

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D E C I S I O N

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Introduction

1.  This appeal raises the question as to whether the plaintiffs can be represented by 2 different firms of solicitors.

2.  The Rainbow (owned by the plaintiffs, Noor Maritime) collided with the Calandra (owned by the defendants, Calandra). The Rainbow sank with cargo, fuel and effects on board but with no loss of life.  The Calandra, on a ballast voyage, was damaged but later repaired.

3.  Arising from the collision were different sets of proceedings in rem and personam, the extant ones being:

(a)  HCAJ 109/2011 – action in personam by Calandra against the Rainbow.  Preliminary Acts have been filed by each party. There had been no progress between 2011 and 2017.  It has since been “superseded” by Calandra’s claim in a reference in the present action (HCAJ 84/2017).

(b)  HCAJ 123/2013 – action in rem by Noor Maritime against Calandra.  It has not been progressed but the related action in personam (ie HCAJ 84/2017) has been.

(c)  HCA 1260/2013 (subsequently became HCAJ 84/2017) – action in personam by Noor Maritime against the owners of the Calandra.  In view of the Settlement Agreement on liability (paragraph 5 below), this action is now proceeding by way of respective claims in a reference confined to matters of quantum.  The claim and cross-claim are now the main active proceedings.

4.  The writ in the present action (originally HCA 1260/2013) was filed by Hart Giles on behalf of Noor Maritime on 11 July 2013, on the instructions of the hull and machinery underwriters, Al Sagr.

5.  On 19 July 2017, a Settlement Agreement was signed by Holman Fenwick Willan on behalf of Calandra and Hart Giles on behalf of Noor Maritime.  It apportioned liability at 1/3 Calandra : 2/3 Rainbow.  The Settlement Agreement provided in §2 for claims for damages to be referred to the Registrar.

6.  On 9 October 2017, Calandra filed its cross-claim.

7.  On 10 November 2017, the parties went before a Master for directions. Hart Giles informed the Master that they had limited instructions, did not represent Noor Maritime in respect of the cross-claim and declined to make submissions therefor.  The Master thereupon gave directions for the filing of defences to the claim and cross-claim, respectively. 

8.  On 30 November 2017, Reed Smith Richards Butler (“RSRB”) filed a notice of change of solicitors to replace Hart Giles.  RSRB purported to act on behalf of the North of England P&I Club (“the P&I Club”), ie liability underwriters for Noor Maritime, to defend the cross-claim.

9.  On 13 February 2018, notwithstanding the agreement of Hart Giles and RSRB to co-counselling, the Master ordered that RSRB be removed from the record and that Hart Giles do remain on record as solicitors for Noor Maritime (“the February Order”).

10.  Anxious to protect the P&I Club’s position, RSRB filed a defence for the P&I Club, a Notice to Act restricting the representation to defend the Calandra’s “counterclaim”, and a “co-counselling” summons for Hart Giles to remain on record for Noor Maritime’s claim and RSRB for Noor Maritime’s defence to Calandra’s “counterclaim”. 

11.  On 1 March 2018, the Master dismissed the co-counselling summons (“the March Decision”).   This is RSRB’s appeal against it.

Legal principles on legal representation

12.  The primary rule is that there should be no separate representation for co-plaintiffs: Lewis v Daily Telegraph Ltd (No.2) [1964] 2 QB 601, 621, Pearson LJ. 

13.  The general rule is that the insured and the insurer cannot have separate representation even if there are “insured” and “uninsured” elements to the claim; or where commercially speaking, a nominated party is a person behind whom different insurers stand or who is involved in more than one capacity: Elphick v Westfield Shopping Centre Management Company Property Ltd [2011] NSWCA 356, §§8 and 10, Young JA.

14.  If there is a difference in view or conflict of interest between the 2 teams of lawyers for the plaintiff, the difference or conflict could be reflected in the pleadings. Secker v Oxfordshire County Council 1992 WL 12678895, p 4, Stuart-Smith LJ (dissenting).

15.  The rationale, as set out in the dissenting judgment of Stuart‑Smith LJ in Secker, p 4, is that there may be all sorts of practical problems arising in dual representation.

“Are they to be allowed two speeches? Can they cross-examine each other’s witnesses? Can they both cross-examine the other party’s witnesses? If there is to be a settlement, who has authority to negotiate? Mrs Secker may be subjected to conflicting advice from her two sets of lawyers. Which advice is she to take? It may be that some of these problems can be resolved by the trial judge, but I think he is placed in a very difficult position. He must not allow inconsistent cases to be advanced by Mrs Secker’s different counsel; yet, if they are not to be inconsistent I can see no point in separate representation.

16.  However, the court has inherent power to give leave for separate representation but leave is not likely to be granted and full evidence must be submitted as to why an exceptional order should be made: Elphick, §10.

17.  In fact, Pearson LJ had made clear that he was not saying that it would be impossible ever in any case to have separate representation, wholly or partially, in a consolidated action.  He referred to a case in which 8 actions were consolidated as to the issue of liability but separate representation was allowed as to the issue of damages: Lewis, p 620.

18.  Separate representation of a plaintiff was upheld in Secker by a majority in the Court of Appeal.  That case involved 2 actions arising out of one collision between a car and a van:

(i)  One action by S, the administratrix of the car driver (without legal aid or insurance cover) against the Oxfordshire County Council as highway authority (insured); on advice, S did not sue the van driver M; and

(ii)  The other by M (without insurance cover) against S and Brooklands Aviation Ltd alleged to be vicariously liable for the negligence of the car driver.  Both defendants were covered by the insurer, Royal.  Brooklands Aviation issued third party proceedings, causing Oxfordshire CC to become a defendant.

The trial judge allowed the administratrix to have separate representation in the 2 actions.

19.  On appeal by theordshire CC, by a majority of 2 to 1, the Court of Appeal, upheld the exercise of the trial judge’s discretion.

(a)  Lord Donaldson MR held that the trial judge undoubtedly had power to restrict representation in an appropriate case (p 3).

(b)  There was no consolidation although the 2 actions were ordered to be tried at the same time. (Lord Donaldson, p 2)

(c)  “The basic problem” was that S as plaintiff in the 1^st action was a quite different person from S, alias Royal, who was the defendant in the 2^nd action.  S was not willing to put forth Royal’s primary defence lest she incurred irrecoverable costs.  Royal was not willing for its defence to be handled by a legal team which did not really believe in it.  (Lord Donaldson, p 2) 

(d)  There was no anticipated increase in time and expense at the trial (Lord Donaldson, p 3).

(e)  Balcombe LJ knew of no power in the Court of Appeal to require S to discharge one or other of the solicitors who acted for her in the 2 actions. 

Legal principles for appeal

20.  An appeal against a master’s decision operates by way of rehearing and the judge exercises the discretion afresh.  It is not necessary to demonstrate an error of law on the part of the master.  See Hong Kong Civil Procedure 2018, Vol 1, §58/1/2.

Application of the legal principles

21.  The following factors are relevant.

22.  Firstly, Noor Maritime no longer has interest in this action, it having been fully paid by Al Sagr.  Noor Maritime had been struck off the Register of International Business Companies of St Vincent and the Grenadines on 30 December 2016, but was only restored to the register for the purpose of litigation. So no one from Noor Maritime would be giving instructions at all.  Al Sagr and the P&I Club are the real entities having interest in this litigation.

23.  Secondly, Al Sagr and the P&I Club have different rights derived from different sources.  Al Sagr’s has a right of subrogation under section 79(1) of the Marine Insurance Ordinance, Cap 329 because of the total loss of the Rainbow.  In addition, it has rights arising out of the Discharge Receipt and the Settlement Agreement. 

24.  The P&I Club derived its right to represent Noor Maritime from rule 34(5) of the 2017 P&I Rules. 

25.  If Al Sagr succeeds on its claim, Calandra or its insurer shall pay damages.  On the other hand, if Calandra is successful on the cross-claim, the P&I Club (not Noor Maritime or Al Sagr) shall pay.

26.  This allocation of insurance among different insurers is entirely normal for shipowners, hull and machinery underwriters and P&I insurers in admiralty cases.  Neither Al Sagr nor the P&I Club dispute each other’s non-overlapping authority to represent Noor Maritime.

27.  Thirdly, the claim and cross-claim were commenced as separation actions and there has been no formal order for “consolidation”.

28.  Fourthly, the Settlement Agreement was entered into indisputably without knowledge or instructions of the P&I Club. When the P&I Club learnt of it, it decided, for commercial reasons, not to overturn the settlement. Every party/insurer is thus willing to confine itself to assessment of damages.  The P&I Club should not be punished for taking this sensible step and be forced to have a firm of solicitors not of its choice.

29.  Fifthly, no conflict of interest is anticipated between Al Sagr and the P&I Club as liability has already been apportioned and damages for assessment will be heard by a Master.  The cross-claim is an independent claim.  The facts relevant to establish the damages of each party do not overlap.  Hart Giles/Al Sagr and RSRB/P&I Club do not wish and have no right to make submission on each other’s defence/claim.  As Mr Alder suggests, the assessments can be heard one after the other as a matter of case management.

30.  Sixthly, the P&I Club is discontented with the way Hart Giles handled this litigation eg in not informing the P&I Club of the settlement or the Master’s directions.  It is not necessary for me to adjudicate on whether the P&I Club’s view was justified.  Suffice to say that it is not fair to force it to retain a firm of solicitors about whom they have reservations.

31.  Considering all circumstances, I find it proper to exercise my discretion to grant an exceptional order of co-counselling of the plaintiffs.

32.  This decision of mine does not contradict the February Order, which was plainly right because RSRB/P&I Club had no right to replace Hart Giles. 

Conclusion

33.  I allow the appeal and set aside the March Decision.  I make an order in terms of the co-counselling summons.

34.  I thank Mr Alder for his assistance.