LAM YAU TAI v. DENHOLM SHIP MANAGEMENT LTD. AND OTHERS

1990 A.J. Folio No. 66

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ADMIRALTY JURISDICTION

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JUDGMENT

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1. On 16th March 1987, the plaintiff, a seaman, was injured on board MV Lavender while she was off the coast of Israel. He suffered personal injuries, and quite naturallywishes to recover compensation for these injuries and his financial loss.

2. On 15th March 1990, he issued a writ against all three defendants. The 1st defendant was served in Hong kong. On the 28th February 1990, Master Jones had given the plaintiff ex parte leave under order 11 of the Rules of the Supreme Court to serve the writ on the 2nd defendant out of the jurisdiction.

3. The lst defendant was sued as a ship's agent for the purpose of employing crew and the 2nd defendant was sued as the owner of the vessel. I need not concern myself with the 3rd defendant.

4. The 2nd defendant now applies to set aside the leave granted to issue and serve the writ upon it. The grounds upon which the.application is made is that there was no contract of employment between the plaintiff and the 2nd defendant, and thus the case is not within order 11. The tort alleged here was committed outside of the jurisdiction.

5. The plaintiff has also issued a summons seeking leave to amend the writ by adding Beta Maritime Services Ltd as a 4th defendant. I granted such leave.

6. Mr. Smith for the plaintiff also applied for, and obtained leave from me to amend the writ to add a claim against the 1st defendant for breach of warranty of authority. I also exercised my discretion under section 30of the Limitation ordinance in respect of that claim. I did so because Beta have only just been alleged to be the employers of the plaintiff and then.may well be.a claim for breach of warranty of authority against the 1st defendant in the circumstances which I would shortly relate.

7. I also gave the plaintiff ex parte leave under Order 11 rule 1(1) (d) to serve Beta at their registered office in London.

8. Returning to the 2nd defendant's summons to set aside service of the writ, I was invited by Mr. Smith for the plaintiff to allow it to stand (i.e. dismiss the summons) on the footing that they were necessary and proper parties to the claim based on breach of warranty of authority -  a ground not relied upon when the matter was placed before the Master.

9. What happened is this. The 2nd defendant was, at all material times, an equipment leasing company and it acquired MV Lavender. for the purposes of leasing it by demise charter to another financial institution which in turn intended to sub-demise charter the vessel.

10. On 29th March 1985 - two years before the accident and the alleged hiring - the 2nd defendant entered into a demise charter of the vessel with Samuel Montagu & Co. who on the same day sub-demised the same vessel to Bulk Oil Shipping Services (UK) Ltd. The two charters have been exhibited and I note from clause 8 of the charter that thecharterer is entitled to the full and exclusive use and control of the vessel throughout the charter period of seven years. An identical covenant is contained in the sub demise charter.(All. this information and documentation comes from an affidavit of Mr. Percy, a director of the 2nd defendant.)

11. The legal effect of the demise charter was to hand over to the charterer everything but title to the vessel. As a matter of interest, the 2nd defendant sold the vessel on the 17th November 1988.

12. On the evidence, which was quite unknown to the plaintiff until after the writ was issued, it seems quite clear to me that the 2nd defendant did not enter into a contract of employment with the plaintiff through the agency of the 1st defendant or otherwise. An affidavit was also put in by Mr. Hough, a director of the 1st defendant, who denied that the 1st defendant. acted as the 2nd defendant's agent for the purposes of entering into a contract of employment with the plaintiff or any other crew members.

13. In this affidavit, Mr. Hough says that the true employer is Beta. The 1st defendant, he says, acted on behalf of Beta in relation to employing the plaintiff. He denies that any instruction had been given by the 2nd defendant to the lst defendant in relation to the provision of crew.

14. Had the matter rested there, I would not have been troubled at all with this application because the matter, was perfectly clear. However, things went wrong because the 2nd defendant's name as employer appeared on certain documents which quite reasonably let the plaintiff to believe the 2nd defendant was his employer.

15. At pt 12 in the bundle is an agreement and list of crew which shows the 2nd defendant as the employer. However, it is clear that the 1st defendant completed this document incorrectly. The 2nd defendant was the registeredowner of the vessel, but says Mr. Hough, Beta were the manager.In fact, by telex dated 29th March 1990, Beta. say in terms to the 1st defendant that they are the employers of the plaintiff.

16. A document issued pursuant to section 15 of the Employee's Compensation Ordinance also shows the employer as the 2nd defendant, care of Beta.

17. When the ex parte documents were submitted to the Master, the claim against the 2nd defendant was on the basis of a contract of employment between the plaintiff and the 2nd defendant made within the jurisdiction, i.e. Order 11 rule 1 (1) (d)(i).

18. Mr. Smith for the plaintiff, as frank and realistic as ever. agreed that the claim in contract looked very thin on the basis of the evidence now before the court. However, in an attempt to keep the 2nd defendant inthe action he asked to be permitted to shift his ground somewhat and argue that the service on the 2nd defendant should stand on the ground that they were a necessary and proper party to these proceedings.This plea relies on Order 11 rule 1(1)(c) which permits service out of the jurisdiction with the leave of the court the action, "the claim is brought against a person duly served within or out of the. jurisdiction. and a person out of the Jurisdiction is a necessary or proper party thereto". He submits that if he is to argue breach of warranty of Authority against the 1st defendant, then the 2nd defendant had to be in the action for that purpose. In support of this proposition, he relied upon a decision of Wills, J. in Massey v. Heynes (1888) 21 QBD 330. In that case, brokers in England had been instructed by a foreign principal to enter into a charter party in England. They entered into one with the plaintiffs and it was thereafter broken. The foreign defendant contended that the English broker exceeded their authority It was a plain case for the, foreign principal to be kept in the action as a necessary and proper party. However, in the present case, it is plain that the 1st defendant made an error for it is inconceivable, given the terms of the demise charter, that the 2nd defendant would have had any interest whatever in manning this vessel. Unlike in Massey, we do in this case have Beta who accepts. that it is the employer of theplaintiff.

19. In my judgment, the case against the 2nd defendant is hopeless. Mr. Smith asked me to keep them in the action on the basis that something may turn up during the courseof the trial which may conceivably show why the 1st defendant misled everybody, and that this might, in some way, establish liability against the 2nd defendant. This is far too tenuous, a basis for allowing a writ to be served on a foreign national in a foreign country. This was not the basis of the application before the Master, and I note that the plaintiff did not as he should have done specify precisely which part of order 11 he was relying upon even at that stage.

20. It is Clear that the applicant for leave has to show that his case falls clearly within one or other of the sub-paragraphs of rule 1(l) or (2). It is incumbent uponthe applicant to choose which sub-paragraph of rule 1(l) to rely upon. The case has to fall within the spirit as well as the letter of the Order, and the applicant has to show that he has "a good arguable case" on the merits. This is one of the consequences that the case must be shown to be "a proper one for service out of the jurisdiction". As is made clear in the notes on page 86 to the White Book, the court does.not require proof of the plaintiff's case to its satisfaction, but it does expect something more than a mere prima, facie case. Of course, one does not by disputedissues of fact on affidavit, but in this case, there really is no real dispute on the facts and the plaintiff wasmisled into believing that the 2nd defendant was his employer, and unforunate though this is, the matter is so clear now onthe documents thathave little doubt as to what the correct position is. I have to decide whether the casecomes within Order 11 and this does hot involve an exercise of discretion, but a judgment of fact.

21. I am quite satisfied that the plaintiff has failed to bring himself within Order 11 rule 1(d)(i) or (ii) in relation to the claim against the and defendant, and inthose circumstances, I must, as a matter of law, set aside the service of the writ against the 2nd defendant. Even if I were prepared to permit the plaintiff to put his case differently before me which I am not, the result would still be the same.

                 As to the question of costs, it is quite clear that the plaintiff has been misled by the statements of the 1st defendant. It is clear that the 1st defendant made incorrect written statements which misled the plaintiff. I do not see why the plaintiff should bear any responsibilityfor the costs so thrown away. It appears to me that the appropriate person to bear the costs of this application is the 1st defendant. That was the application made by Mr. Smith on behalf of the plaintiff, and the 1st defendant was represented before me by Mr. Scott. It seems to me thatthe justice of this case requires that the 1st defendant should pay all the costs thrown away for having misled everybody as to this true employer of the plaintiff. It is, of course, to the credit of the lst defendant that they have now put matters right, but costs have unnecessarily been incurred by reason of their previously uncorrected errors. I, therefore, propose to make a costs order nisi against the 1st defendant in relation to the costs incurred by the application to set aside the service of the writ on the 2nd defendant.