THE J FASTER

HCAJ 365/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. HCAJ 365 OF 1998

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Admiralty Action in rem against the ship "J FASTER"

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J U D G M E N T

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1. This is a Motion by the Defendants, the owners of the vessel "J Faster" for two reliefs. One is that the Action is to be dismissed on the ground that there is no reasonable basis by which the Defendants could be liable in personam to the Plaintiff. The second relief or the alternative application is that the Warrant of arrest should be set aside on the basis of material non-disclosure by the Plaintiff when the Plaintiff obtained ex parte order for the issue of the Warrant of arrest.

2. The Defendants are the owners of the ship. The Plaintiff is a supplier of cargo services in the form of moving containers and stowing containers.

3. The Great Ocean is a Group of companies which consists at the head Shenzhen Great Ocean Holding Co. Ltd. and with subsidiaries in the Goup being Jin Cheng Shipping Inc., and a Hong Kong Great Ocean Shipping Agency Co. Ltd. What happened was that the Defendants owners chartered out the vessel "J Faster" initially to Fuhai and then subsequently to Jin Cheng Shipping Inc. Between Fuhai and Jin Cheng there was a slot charter arrangement so as to facilitate the provider of Cross Strait services.

4. The charterers of the vessel appointed in turn their respective agents and it is the charterer's agents who had ordered the Plaintiff to provide the cargo handling services in relation to this vessel. The charter party entered into by the Defendants with the respective charterers is under the New York Produce Form and the various provisions of the charterparties which I will not elaborate here make it clear that the responsibility for cargo handling rests exclusively with the charterer. In fact, there is expert evidence placed before the court by a shipbroker Mr. Mo Shing Chi, which makes it clear that it is the invariable practice and commercial reality in respect of time charter of vessels for the time charterer and only the time charterer (not the owners) to be responsible for cargo handling services.

5. As I said earlier, in this case, the evidence shows clearly that the charterers' agents ordered on behalf of the charterers the provision of cargo handling services and pursuant to such orders the Plaintiff provided such services and this went on for some time, I believe starting from probably March of 1998 until November 1998.

6. On completion of each of the cargo handling services by the Plaintiff, the Plaintiff caused an officer of the vessel to sign an acknowledgement by way of what the party called a Confirmation confirming that the services had been provided. The documentation in relation to this confirmation has taken two forms. Initially, it was in a neutral form but in June 1998 they had assumed a more complex form, the relevance of which I will analyse later.

7. Following the provision of the services and the signing of the Confirmation, a debit note was sent every month by the Plaintiff to the charterers' agent, namely to the charterer for the payment of such services and this had continued non-stop. Apparently some money was paid but large amount remained outstanding. It got to the stage in September 1998 that the Plaintiff was concerned as to the large amount of outstanding in relation to these cargo handling services charges, so that a Debt Confirmation Agreement was entered into and this could be found from page 105 of the Bundle onwards. It was entered into between the Plaintiff, Hong Kong Great Ocean Shipping Agency Co. Ltd and Shenzhen Great Ocean Shipping Holding Co. Ltd. The terms of the Agreement make it clear that Great Ocean as charterers and their agents acknowledged their liability to the Plaintiff for the cargo handling services charges and that there were arrangements made there for the payment of the same. In fact, the matter went further because subsequent to that Debt Confirmation Agreement in September, securities of the Great Ocean Group were given to the Plaintiff to secure the debt.

8. It was clear from the above recital and I think it is also clear from the evidence that the Plaintiff at all material times looked only to Great Ocean, namely the charterers and their agents for the payment of the sums involved. They never look to the Defendants. They never sent any invoice to the Defendants or the Defendants' agents or even to the Ship and the first time the Defendants knew about this matter was when the Vessel was arrested upon the issue of the Warrant granted by the Court on the basis of the affidavit material presented by the Plaintiff.

9. Two issues which fall to be considered are, as I said earlier, firstly the question of non-liability of the Defendants for the provision of cargo handling services and secondly the matter of material non-disclosures.

10. I will consider the issue of non-liability first. The only basis that the Plaintiff could succeed in this Action against the Defendants for the provision of the cargo handling services is by way of the contract alleged to have been made on behalf of the Defendants by the agent, the Hong Kong Great Ocean Shipping Agency and Kanway. I would accept that in this kind of application, the burden on the Defendants is the very high one applicable in a striking out application. So if there is any arguable basis by the Plaintiff that the Action could succeed then I readily accept that I should not order the striking out of the Action. I will proceed to consider this application on the basis of the appropriate high level of burden on the Defendants.

11. The alleged contract of ordering the services made by Hong Kong Great Ocean Shipping Agency or Kanway as agent for the Defendants depends on the ability of the Plaintiff to establish that Hong Kong Great Ocean Shipping Agency or Kanway as the charterers' agents were acting as agents for the Defendants in ordering the services. Now there is the clearest evidence from the Defendants that Hong Kong Great Ocean Shipping Agency and Kanway had no authority from the Defendants whether actual, implied, ostensible or otherwise to enter into any such contract or to order the services.

12. In fact, the case of the Defendants here is remarkably similar to the case of The Yuta Bondarorskaya [1998] 2 Lloyd's Rep. 357. This is a judgment of Clarke J. where the similar point there was whether the agent of the charterer had ostensible authority to bind the owners in relation to bunkers which under the charterparty was the exclusive responsibility of the charterer. Clarke J. made it quite clear such a case as alleged by the supplier would be contrary not only to the express terms of the charter but to the underlying basis of the time charter itself and was against the whole commercial arrangement of the situation.

13. I think exactly a similar situation applies here. There can therefore be no basis whatsoever for the Plaintiff to argue or for the Court to accept that the ordering of the cargo handling services made by Great Ocean or Kanway was with the authority of any kind of the Defendants.

14. Here, there is no question of any representation made by the Defendants to the Plaintiff that Hong Kong Great Ocean Shipping Agency or Kanway had the Defendants' authority nor did the Defendants at any time put Hong Kong Great Ocean Shipping Agency or Kanway in any position of authority.

15. The only remaining basis for liability on the contract turns on the point strongly argued by Mr. Bartlett for the Plaintiff that the representation contained in the second set of Confirmation from June onwards makes the huge difference by either estoppel or as confirmation of the existence of the contract. Here it is necessary to look at the position of an officer on board a time chartered vessel in order for the court to analyse the scope of authority of such officer. I think it is clear that such officer in a time chartered vessel knowing of the non-responsibility of the owners for the cargo handling services would have no authority whatsoever to order such services. It seems to me that if he could not order such services and had no authority to order such services, then he would have also no authority whatsoever to bind the owners in relation to any representation (with wordings such as in the later Confirmation) which might impinge on the owners having liability in relation to provision of those services. Reference was made by Mr. Sussex to the authority of the Armagas v. Mundogas which has some resemblance to the present situation in the passage of Robert Goff, L.J. (as he then was) at p.731 of the judgment.

16. But I think this case can be looked upon in a wider way. It seems to me that if in a case of a time chartered vessel, the officer has no authority whatsoever to order the goods then any Confirmation signed by him in relation to the provision of the cargo handling services (in whatever favourable terms to the supplier) would be only admissions and of evidential effect limited to those representations of which the officer himself has personal knowledge. That is the value of the admission evidence that he himself is involved in the transaction of which he has personal knowledge. Other than that, any admission made by him is admission made by him personally only and certainly does not bind the owners.

17. It follows therefore in my view that the basis of the application of the Defendants is made out and that there is no point in having the case go to trial because I am of the view that the Plaintiff is bound to fail in this Action. I would therefore order Judgment be entered in favour of the Defendants and that the security provided by the Club to the Plaintiff be returned.

18. I now turn to the second ground that the Defendants rely upon in asking for the return of the security. The case of the Defendants on this is a simple one. They say that it is highly material on an ex parte application for proper evidence to be put before the court as to who is the person liable in personam. The evidence had shown that the Plaintiff has regarded the person liable in personam as being not the Defendants but Great Ocean, namely the charterers and their agents and had in fact entered into the Debt Confirmation Agreement of September 1998 with Great Ocean and had issued and sent all the debit notes to the charterer's agents. These are materials which ought to have been put before the Court as being highly material.

19. Mr. Sussex also referred me to other documentation such as the two sets of the Confirmation and the lack of explanation in the ex parte evidence about the changes. I regard this aspect perhaps as less weighty but equally material. In my view, there had clearly been material non disclosures to the Court and this is of great significance because it goes to the heart of the Plaintiff's case against the Defendants. In the circumstances of the this case, I would exercise my discretion by also ordering the return of the Club Undertaking based on the serious matter of material non disclosures.

20. The final matter that was raised by Mr. Bartlett is the matter of the effect of Club Undertaking. The point made by Mr. Bartlett for the Plaintiff is that the Undertaking that had been given to the Plaintiff precluded the exercise of the right of the Defendants to make the present application before the court. The right of the Defendants to seek the assistance of the court in the present application is a right conferred on them by statue by the Rules of the Court and such statutory right can only be waived and cannot be easily taken away. I have seen nothing in any of the provisions of the Club Undertaking which can remotely be construed as achieving that result of taking away the right of the Defendants to apply to the court for the present reliefs. I am referred by Mr. Bartlett to the case of Lloydiana. That case is of doubtful assistance as it turns on its special facts and I need not consider it in any detail. Suffice it to say that in my view it provides me with no assistance whatsoever in the resolution of the point about the present Undertaking being a bar. I can see no basis for preventing the Defendants from making the present application and I make the appropriate order as sought by Mr. Sussex.