THE OWNERS OF CARGO LATELY LADEN ON BOARD THE VESSEL "K.H.ENTREPRISE" v. THE OWNES OF THE SHIP OR VESSEL "PIONEER CONTAINER"

A.J. No. 36/88

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The Defendants are seeking an order that the writ of summons be set aside together with consequential orders.

2. The main ground being relied upon is that the Court has no jurisdiction to entertain the action on account of the provisions contained in S 21(8) of the Supreme Court Act 1981 which has been applied to Hong Kong.

3. Their complaint is that the Plaintiffs have already taken proceedings in Rem in respect of the same claim. In the alternative they seek to strike out the claim as being vexatious for the sane reason.

4. It is necessary to provide a brief background to the present situation. As can be seen, from the title to the proceedings the Plaintiffs are making their claim as the owners of cargo which was shipped on board the K.H. Entreprise.

5. The cargo was loaded in Taiwan in early March 1987 for a voyage to Hong Kong. On the 11th March K.H. Entreprise was involved in a collision with a ship the Oriental Faith. As a result of the collision K.H. Entreprise sank. Hence the cargo claims.

6. Shortly before the commencement of the voyage there was a transfer in the ownership of K.H. Entreprise from a company called Pro Line to Kien Hung Shipping Co. Ltd. It is the Defendants case that property passed under the Law of the Flag, Liberian Law in February 1987. This is not now contested.

7. In July 1987 the Plaintiffs issued a writ in Rem against the owners of the ship 'Strait Container'.  This ship was and is owned by Pro Line. The basis of the arrest was that the Strait Container was a sister ship of R.H. Entreprise.

8. Immediately before the arrest there was an exchange of correspondence between the Plaintiffs solicitors and the Defendants solicitors who are the same solicitors as are representing the parties in the present action.

9. The Defendants solicitors advised the Plaintiffs solicitors of the transfer of ownership of K.H. Entreprise shortly before the collision and pointed out that the consequence of this was that the Strait Container was not a sister ship of K.H. Entreprise.

10. This advice did not correspond with the information the Plaintiffs had obtained as a result of the inquiries they have made at Lloyds I do not consider it to be necessary to go into all of this in any detail. Suffice it to say that I consider that the Plaintiffs were not in my view in any way acting unreasonably when they declined to accept the advice proffer red to them by the Defendants solicitor and proceeded to commence the action which became Admiralty Folio 92/87.

11. Be that as it may the Plaintiffs commenced the cargo claims against the owners of the Strait Container and at the same time issued a warrant for the arrest of the ship which was duly acted upon.

12. Negotiations then proceeded and a compromise was reached which led to the release of the Strait Container. The basis of the compromise was that the Defendants arranged for their P & I Club to promise to give an undertaking in an agreed amount. This promise was still subsisting up to the time when I commenced hearing the present application.

13. In March 1988 the Plaintiffs commenced the present proceedings. The owners of the Pioneer Container are Kien Hung Shipping Co. Ltd. The claim is the same claim as was made in Folio 92/87 save that numerous additional cargo owners are making claims.

14. The Plaintiffs issued a warrant of arrest of the Pioneer Container on the 24th October when the ship visited Hong Kong.

15. At the commencement of the hearing before me no Notice of Discontinuance lay on the Court file of 92/87. I was however informed by Mr. Waung who represents the Plaintiffs that a notice was being filed on the 1st day of the hearing; namely, the 1st November. To be fair I would add that correspondence in the form of faxs was exhibited to an affidavit which was before me which made it quite clear that it was not the Plaintiffs intention to proceed with their claim in 92/87.

16. It was Mr. Dicks contention for the Defendants that the court had no jurisdiction to entertain the Plaintiffs claim in the present action. He referred to S. 21(8) of the Supreme Court Act 1981 which reads :

^"(8) Where, as regards any such claim as is mentioned in section 20(2)(e) to (r), a ship has been served with a writ or arrested in an action in rem brought to enforce that claim no other ship may be served with a writ or arrested in that of any other action in rem brought to enforce that claim but this subsection does not prevent the issue in respect of any one such claim, of a writ naming more than one ship or of two or more writs each naming a different ship."

17. The provisions in the subsection were clear and unequivocal. A writ had been served and an arrest made to enforce the same claims as were now being made and consequently the Court had no jurisdiction to entertain the present claim.

18. Mr. Waung submitted that the subsection had no application to the present case. It was clear from the facts of the case that the Plaintiffs had not proceeded against a sister ship when they had, taken action in Folio 92/87. It had now been established that the owners of K.H. Entreprise were Kien Hung Shipping Co. Ltd. The proceedings in 92/87 were against the owners of Strait Container who were Pro Line. It was now common ground that the 2 ships were at the time of the commencement of 92/87 owned by different parties. Accordingly the litigation in 92/87 was entirely separate and distinct from the present proceedings and had no bearing upon it.

19. There is one case on the point which is of assistance. It is the Stephan J. 1985 2 Lloyds 344. The facts of that case were in many respects similar to the instant case. A firm of solicitors acing in good faith placed reliance upon advice they received from Lloyds and proceeded to arrest a ship. It subsequently transpired that the intelligence which had been received was mistaken. When the solicitors attempted to make a subsequent correct arrest the Admiralty Registrar refused to issue a warrant of arrest calling in aid the Provisions of S. 21(8).

20. Sheen J. dealt view the problem which arose in the following way at p. 346 and 347:

" Sub-section 8 of is. 21 of the Act was introduced to deal with the question raised in The Banco, [1971] 1 Lloyd's Rep. 49; [1971] P. 137. The purpose of sub-s. 8 of s. 21 is to make it quite clear, that the plaintiff whose claim is within that part of the jurisdiction of the High Court which can be invoked by an action in rem, can arrest only one ship, either the of fending ship or another ship in the same ownership, in accordance with the International Convention Relating to the Attest of Seagoing Ships which was signed in Brussels in 1952; while at the same time preserving the practice, which started in 1956, of naming more than one ship on the writ, and then deleting all but one when the time came to serve the writ and arrest a ship, In my judgment sub-s. 8 of s. 21 cannot be interpreted in isolation,'' It must be interpreted in conjunction with sub-s. 4 of the same section.

Take the facts of this case. The ship Herm J was arrested in an action in rem brought to enforce a claim which could not possibly succeed: against her, owners because when the true facts were known, it could not be contended that they were liable in personam. The action ought to have been brought only against the owners of Stephan J. As a matter of commonsense, it would be absurd if the arrest of Herm J had the result that Stephan J could not be arrested in respect of a claim which could properly be made against her owners. It seems to me that if one has the words of sub-s: 4 in mind when reading sub-s. 8 the correct interpretation of Sub-s. 8 is

Where as regards any such claim as is mentioned in section 20(2)(e) to (r)...a ship (against which an action in rem maybe brought) has been served with a writ or arrested in an action in rem brought to enforce that claim, no other ship may be served with a writ or arrested in that or any other action in rem brought to enforce that claim.

The words in brackets from sub s (4) have to be read into sub-s. (8).

    It is now clear from the second affidavit of Mr. Martin Harrison that the ship Herm J was not a ship of which at the time when the action was brought the relevant person was the be beneficial owner as respects all the shares in it Accordingly Herm J was not a ship against which an action in rem; could be brought. It follows that Stephan J may be arrested in an action in rem brought to enforce this claim."

21. Mr. Dicks argued that the Stephan J was readily distinguishable from the present case. There the solicitors had immediately they realised they had made a mistake released the Herm J from arrest and had not served the writ on the ship. This was in stark contrast to the conduct of the Plaintiffs solicitors in Folio 92/87. Even at the time of the hearing of the application before me they had not discontinued the action or taken steps to release the Defendants from the terms of the promised P & I undertaking. The consequence of this was that the Plaintiffs had obtained and continued to obtain an advantage from arresting, the "Strait Container".

22. I have given careful consideration and thought to sheen J's judgment.  I have come to the J conclusion that the present case is not distinguishable from the Stephan J. The rationale of that case was the ability of Sheen J to read section 8 in conjunction with subsection 4 which led him to a conclusion that the earlier arrest of the Herm J. was a separate and independent exercise and accordingly that it did not constitute a violation of the provisions contained in subsection 8. There is nothing in my reading of the judgment to lead me to a conclusion that Sheen is decision would: have been different even if Richards Butler the solicitors concerned had not withdrawn immediately in the way they did.

23. I am satisfied that^, I must come to a similar conclusion in the present case. I hold that the proceedings in this case are not lacking in jurisdiction.

24. The next question for me to consider is whether this is a suitable case for me to order that the action be struck out as being vexatious. I do not think that I should order. My reason for this My reason for this is that adopting the logic of the Stephan J the present Defendants have not suffered vexation. The arrest in Folio 92/87 was against Pro Line as owners of the Strait Container and this was a separate matter to the present proceedings. Whether the Plaintiffs would have a right of action against the Plaintiffs for wrongful arrest is a different matter which I do not have to consider.

25. Mr. Dicks also submitted that the arrest should be set aside on the basis that when the Plaintiffs solicitors applied to the Registrar for the warrant of arrest, they failed to make the full and complete disclosure which is required on an ex parte application.

26. In the affidavit in support the solicitor in charge of the case Mr. MacFarlane only made a passing reference to Folio 92/87. He did not give any details of what had transpired. I am inclined to think that there is some justification to the criticisims which have been levelled against Mr. MacFarlane. In my view he should have been much more specific. I am though entirely satisfied of his good faith and the lack of particularity falls short of justifying me in setting aside the arrest on this ground.

27. The consequence of all of this is to lead me to a conclusion that the Defendants application must be dismissed. I will hear the parties on costs.