TIAN SHENG NO.8

CACV 103/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 103 OF 1999

(ON APPEAL FROM HCAJ 370/1996)

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Admiralty Action in rem against: the ship or vessel "TIAN SHENG NO.8" now named "RESOURCE 1", and the ship or vessel "TIAN SHENG NO.1"

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D E C I S I O N

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Hon Ribeiro J: (giving the decision of the Court)

1. This is an application by the defendant shipowners for leave to appeal to the Court of Final Appeal from the decision of this Court handed down on 12 November 1999 whereby it dismissed the defendants' appeal from the judgment of Waung J handed down on 15 February 1999.

2. Mr Charles Sussex, who appeared for the defendants, sought leave on the basis that the defendants have an appeal as of right under section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance. Alternatively, he submitted that the questions to be raised are ones which, by reason of their great general or public importance, ought to be submitted to the Court of Final Appeal for decision under section 22(1)(b). He also submitted that if the case does not strictly satisfy the abovementioned test of importance, this Court should nonetheless exercise its residual discretion in favour of granting leave to appeal.

3. The facts relevant to the present application may be summarised as follows. The defendants' vessel, now named "Resource 1", was arrested in Hong Kong on 9 February 1997 by the Plaintiff cargo owners. The plaintiffs allege that their cargo of 30,000 metric tons of bagged cement was shipped on board the vessel, then named "Tian Sheng No. 8", in October 1996 at Rizhao, China for shipment to Bangladesh, but that there was a deviation with the cargo being wrongfully discharged and sold at Haikou. The in rem action pursuant to which the vessel was arrested is brought on the basis that the plaintiffs have good causes of action in contract, tort and bailment. The loss and damage allegedly suffered by the plaintiffs, as particularised in the Points of Claim, is said to exceed US$2 million in value.

4. After the vessel's arrest, service of the in rem Writ was acknowledged on 24 February 1997 by Messrs Sinclair, Roche & Temperley on behalf of the vessel's present owners, namely, International Resources Investment Inc. Such defendants allege that they had purchased the vessel from her previous owners, on 6 December 1996, an entity whose identity was subject to some controversy, but need not detain us at present.

5. The defendants accordingly say that the matters complained of by the plaintiffs took place prior to their acquisition of the vessel. However, it is not in dispute that, by virtue of the provisions of Part III of the High Court Ordinance, potential liability in rem is preserved against a vessel notwithstanding a change in its ownership having taken place between the time that the causes of action accrued and the time of her arrest, such provisions sometimes being said to give the plaintiffs a "statutory lien" over the vessel. As Mr Sussex pointed out, such potential liability on the part of the new owners is generally catered for by their obtaining a suitable indemnity from the previous owners as a condition of the purchase. If they choose to acknowledge service, the new owners are entitled to deploy any defences open to the previous owners and, in the present case, they have done so, having filed a defence joining issue on the merits of the plaintiffs' claim.

6. When the plaintiffs obtained an order for sale pendente lite on 18 March 1997, the defendants put up a bail bond in the sum of US$1.01 million and so secured the release of the vessel. However, the defendants did not then, or at any other time, seek to challenge the Court's in rem jurisdiction under Order 12 rule 8 of the High Court Rules. Instead, some time after the arrest, the defendants applied for a stay of the proceedings on the basis of an exclusive jurisdiction clause and on the ground of forum non conveniens. That application was subsequently abandoned on 6 January 1999.

7. In the meantime, on 25 April 1998, the defendants issued a summons before Waung J to set aside the Warrant of Arrest and consequentially, for cancellation of the bail bond on the ground that the case did not come within the Court's admiralty in rem jurisdiction as constituted by section 12B of the High Court Ordinance.

8. Waung J dismissed the summons inter alia on the basis that, not having challenged the Court's jurisdiction under the provisions of Order 12 rule 8, it was not open to the defendants to make such a challenge on some other basis. He so held applying the Court of Appeal's decision in Wo Fung Paper Making Factory Ltd v Sappi Kraft [1988] HKLR 346 that every application which, if successful, would result in the defendant avoiding the jurisdiction of the Hong Kong courts has to be made under Order 12 rule 8. This Court (differently constituted, with Suffiad J then forming part of its membership) upheld Waung J's decision.

Whether as of right

9. The defendants contend that they are entitled to appeal that decision to the Court of Final Appeal as of right under section 22(1)(a). For that contention to succeed, the Court's decision must involve a final judgment. As laid down in First Pacific Bank Ltd v Robert H P Fung [1990] HKLR 527, this means that the defendants must show that, whatever its result, the appeal would finally dispose of the controversy between the parties.

10. In our judgment, applying that test, the Court in the present case is not concerned with a final judgment. The appeal would settle the question whether the defendants are entitled to challenge the Court's in rem jurisdiction. If the defendants fail, it will remain for the plaintiffs to establish substantive liability in contract, tort or bailment. If the defendants succeed and if in rem jurisdiction is held to be lacking, the arrest would be set aside and the bail bond which now represents the res would be cancelled. However, in personam jurisdiction having been founded against the defendants by their submission to the jurisdiction, there would still remain for determination all questions of substantive liability in respect of which issue has been joined on the merits. The appeal would therefore not finally dispose of the controversy between the parties.

11. We accept, of course, that commercially, it may (but by no means necessarily will) be that, without an arrested vessel or substituted security for their claim, the plaintiffs will decline to pursue the in personam proceedings against the defendants. The test, however, is whether the judgment is a final judgment as a matter of law and not whether, commercially, a particular result of the appeal is likely to lead to abandonment of the claim.

12. Accordingly, in our view, the application for leave to appeal as of right fails because the judgment sought to be appealed against is not a final judgment within the meaning of section 22(1)(a).

Great general or public importance

13. The questions said to qualify under section 22(1)(b) as questions which, by reason of their great general or public importance, ought to be submitted to the Court of Final Appeal for decision were formulated by Mr Sussex as follows:-

(1)	Whether RHC Order 12 rule 8 is a comprehensive and exclusive code for dealing with all questions relating to the jurisdiction of the High Court, so that where a defendant contends that the Court lacks substantive jurisdiction, and does not challenge his own amenability to be brought before the Court, that defendant must nevertheless apply under RHC Order 12 rule 8 and comply with the time limit thereby prescribed.
(1A)	If a challenge to jurisdiction, such as that made in Wilkinson v Barking Corporation [1948] 1 KB 721, does not have to be made under RHC Order 12 rule 8, should the admiralty jurisdiction in rem be characterised in the same way as the jurisdiction issue under consideration in Wilkinson v Barking Corporation?
(2)	Whether The "Evpo Agnic" [1988] 1 WLR 1090 is good law insofar as it decides (at p 1096D) that "owner" in section 12B(4)(b) of the High Court Ordinance (Cap 4) means "registered owner", and, if so, whether it is permissible for the Court to conclude that someone other than the party whose name appears on the relevant register is in fact the owner.

Questions (1) and (1A)

14. Question (1A) was not in the Notice of Motion but was allowed to be included in this application by leave of the Court. It is put forward as a refinement of Question (1). The two questions can, in our view, be dealt with together.

15. As we understand them, these two questions in combination are designed to raise on appeal an argument which was advanced by Mr Sussex both before Waung J and this Court and which may be summarised in the following propositions :-

(1)	It is necessary to recognize that the court may be concerned with its "jurisdiction" in at least two different senses:-
	(a)	a court may have to decide if it has jurisdiction to deal with the merits of a particular class of dispute (sometimes called "merits jurisdiction");
	(b)	a court may also be concerned to decide the prior question of whether it has jurisdiction to determine whether it has some particular merits jurisdiction (sometimes being called "jurisdiction jurisdiction").
(2)	If a court is deprived by statute of a merits jurisdiction (as in Wilkinson v Barking Corporation [1948] 1 KB 721; or Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corporation [1981] 1 QB 368), the parties cannot confer jurisdiction on the Court, whether by a voluntary submission, by a purported waiver of the statutory restriction on the court's jurisdiction or otherwise.
(3)	It follows that Order 12 rule 8 time limits and procedural requirements cannot operate to preclude the defendant from objecting to the lack of such merits jurisdiction.
(4)	Here, the defendants have undoubtedly submitted to the Court's in personam jurisdiction by acknowledging service and not seeking to challenge its jurisdiction under Order 12 rule 8 within time. However, such submission is merely to the court's "jurisdiction jurisdiction".
(5)	The question of whether the admiralty in rem jurisdiction was validly invoked by the plaintiffs in the present case is a merits jurisdiction question. The defendants are entitled to challenge such jurisdiction at any time, irrespective of their previous submission to the Court's jurisdiction jurisdiction and irrespective of the requirements of Order 12 rule 8.
(6)	The Wo Fung Paper decision does not extend to challenges against unfounded invocations of the admiralty in rem jurisdiction, so that it is not authority requiring such challenges to be mounted solely within the four corners of Order 12 rule 8.

16. These arguments raise novel and possibly difficult points of law. However, in our view, as appears from the judgment of Mayo JA, with whom the other Judges agreed (at pp 5 and 6), this Court held that the question of whether the present case falls within the admiralty in rem jurisdiction (as laid down by section 12B) is plainly an entirely different question from the jurisdiction question posed in Wilkinson v Barking.

17. Wilkinson v Barking was a case in which the challenge was to the court's merits jurisdiction, namely, as to whether the power to determine certain rights of local authority employees had been taken away from the court and vested exclusively by statute in some other tribunal. In the present case, the challenge is as to the amenability of the vessel to the Court's in rem jurisdiction, being a "jurisdiction jurisdiction" challenge which, like the challenge in Wo Fung Paper, must be brought within the four corners of Order 12 rule 8.

18. In the Rothmans case (supra, at pp 375-6), Mustill J (whose decision was upheld by the English Court of Appeal) considered the circumstances in which possible objections to a court exercising jurisdiction can be waived and gave as an example where waiver was possible, the Court's exercise of jurisdiction under Order 11, as follows:-

"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 [of Schedule 1 to the Carriage by Air Act 1961] 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."

19. This Court has in effect decided that objections to the admiralty in rem jurisdiction are to be treated on the same basis as objections to jurisdiction asserted under Order 11, as discussed by Mustill J, with the consequences prescribed by Wo Fung Paper v Sappi Kraft.

20. The plaintiffs invoked the admiralty in rem jurisdiction by serving and arresting the vessel in Hong Kong on the grounds set out in the affidavit leading arrest. If no objection was taken to the court exercising such jurisdiction, the court is entitled to proceed on the assumption that jurisdiction has been properly invoked. If in fact there was a potential objection on the ground that the subject-matter of the dispute "lies outside the jurisdiction of the court, as conferred by ....... statute", such objection can be waived and is deemed to have been waived unless an application to set aside the Writ, service and/or the arrest is made in accordance with Order 12 rule 8.

21. The Court's conclusion is also strongly supported by the wording of the rule. Order 12 rule 8(3) expressly provides for challenges to the admiralty in rem jurisdiction to be made under Order 12 rule 8(1). This requires and presupposes an acknowledgment of service and notice of intention to defend by the vessel's owners if they wish to mount a challenge. The submission to the court's jurisdiction prescribed by Order 12 rule 8(7) if a challenge is not made pursuant to sub-rule 1 within the time limited gives a clear indication that it was intended to make Order 12 rule 8 a compulsory code for challenges to jurisdiction, including challenges to the admiralty in rem jurisdiction.

22. This Court has accordingly decided that the applicability of Order 12 rule 8 to such challenges is plainly settled. In our view, in such circumstances, it is appropriate to refuse the defendants' application, leaving them to seek leave from the Court of Final Appeal, if so advised.

23. There is an additional ground for refusing leave under section 22(1)(b) which is of at least equal weight. As Mr Michael Bunting, who appeared for the plaintiffs, pointed out, the defendants find themselves advancing the intricate argument summarised above purely or very largely because they have chosen not to avail themselves of simple procedures made available by Order 12 rule 8 for challenging any invocation of jurisdiction. Not only did they choose to make no challenge under that rule in the time limited by Order 12 rule 8(1), at no stage have they sought an extension of time for the bringing of such a challenge.

24. In our view, the availability, in appropriate cases, of extensions of time for Order 12 rule 8 applications lends force to a construction of the rule which attributes to it the intention and ability to provide an all-embracing code for challenging amenability to jurisdiction. The claim that the questions formulated by the defendants as set out above are of great general or public importance is severely undermined or destroyed if such questions need to be canvassed only as a result of the defendants' failure to avail themselves of readily accessible procedures designed to enable the jurisdictional questions to be tested.

Question (2)

25. In the light of the conclusion that leave should not be granted under section 22(1)(b) in respect of Questions (1) and (1A), Question (2) is not engaged. It is concerned with an argument only arising if the challenge to the in rem jurisdiction is to be entertained. No justification exists for giving leave to appeal on that question alone. Accordingly, in our judgment, leave must also be refused in respect of Question (2).

26. We are also unable to see any ground for the grant of leave pursuant to the residual discretion given to the Court by section 22.

27. Accordingly, in our view, the application must be dismissed. We make an order nisi that the costs of this application be to the plaintiffs in any event.