JINGJIN SHIPPING CO LTD v. THE OWNERS OF THE SHIP OR VESSEL "TIAN XIANG 2 HAO" (PRC FLAG) AND ANOTHER

CACV 327/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 327 OF 2003

(ON APPEAL FROM HCAJ NO. 322 OF 2001)

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Admiralty action in rem against
the ship or vessel "TIAN XIANG 2 HAO" of the PRC flag

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1. This is an appeal against a judgment of Reyes J given on 8 October 2003 and the order dated the same date. The order was entered in the following terms:

"(i) The Defence dated 15th February 2002 be set aside.

(ii) The costs of and occasioned by the Plaintiffs' application to set aside the Acknowledgement of Service herein dated 13th December 2001 be paid by Warehouse to the Plaintiffs forthwith, to be taxed if not agreed.

(iii) Ince's costs of and occasioned by the Plaintiffs' application against it be paid by the Plaintiffs to Ince, to be taxed if not agreed."

2. It is necessary to explain that the reference to Warehouse in the order is a reference to Guangzhou Huangpu Tian Xiang Warehousing and Transportation Company Limited, "Warehouse" being a shorthand expression which the judge used in the course of his judgment and will likewise be used here. The reference to "Ince" is a reference to Ince & Co. In other respects the order appears to be incomplete and otherwise not reflect the judgment. At the conclusion of the hearing of the appeal this court dismissed the appeal with costs with reasons to be given in writing.

Background

3. This case arises out of loss and damage to containers of newsprint for which it is said that the owners and/or the demise charterers of "Tian Xiang 2 Hao" were liable. After the writ was issued in 13 November 2001, the vessel was arrested in Hong Kong on 4 December 2001. There is no dispute that the ultimate sale of the vessel has realised an amount which is insufficient to cover the loss which has been occasioned. However, prior to any sale, Ince & Co. filed an acknowledgment of service on behalf of the first named defendants "(1) The owners of the ship or vessel 'Tian Xiang 2 Hao' (PRC flag)".

4. Correspondence ensued with regard to the provision of security. In the course of that correspondence the plaintiffs' solicitors requested information as to the name of the party for whom Ince & Co. were acting. On 11 January 2002 Ince & Co. informed the plaintiffs' solicitors that "As to the identity of our clients, we confirm that we act for Tian Xiang Warehousing & Transportation Co. Ltd. of Guangzhou who instructed that they are the owners of the vessel Tian Xiang 2 (天翔2號)". That was met with an immediate response requesting a copy of the ownership registration certificate evidencing that Warehouse were the owners of the vessel at the material time. Following a further request for that information, Ince & Co. replied on 5 February 2002 confirming that there had been no change of ownership since the date of the loss. The letter went on to say:

"As requested, we now attach a copy of the agreement between our client and Guangzhou Salvage Association showing that our client is the true owner of the vessel who is in charge of its day-to-day operation."

5. Further correspondence ensued. From that it may be gleaned that the plaintiffs' solicitors took the view that the agreement was not sufficient to establish ownership of the vessel, whereas Ince & Co. were making it clear that they were acting for Warehouse and that the agreement was the only document relied upon as establishing ownership of the vessel in Warehouse.

6. The vessel was sold on 16 April 2002. The correspondence between the plaintiffs' solicitors and Ince & Co. appears to have stopped after a fax from Ince & Co. on 26 June 2002 in which it was said:

"We do not agree that only the registered owners of the vessel can file an Acknowledgement of Service in an in rem proceeding. The essence of an in rem proceedings is that the 'res' itself becomes the defendant and that its owners or other parties who have an interest in the 'res' may come forward to defend it by filing an Acknowledgement of Service and thus become a party to the proceedings.

The entry in the port of registry is only a prima-facie evidence of ownership and is displaceable by proof to the contrary. The documents which we had disclosed to you clearly indicate that our clients were the true owner of the vessel at the relevant time who were involved in the operation of the vessel and therefore have a right to defend your clients' claim."

7. Matters revived again in May 2003 when Ince & Co. obtained an order that they cease to act as solicitors "for the Defendant". That was as a result of direct instructions from Warehouse. That order was not drawn up and entered until 30 June 2003 and it was apparently served on the plaintiffs' solicitors on 3 July 2003. On the same day the notice of motion with which the judge below was concerned, was issued. The first relief sought was that the acknowledgement of service be struck out or set aside on the ground that in filing the said acknowledgement Messrs Ince & Co. acted without authority from the owners of the ship or vessel "Tian Xian 2 Hao". The second prayer for relief was that all costs incurred in consequence of the said acknowledgment of service be paid by Messrs Ince & Co. on a common fund basis.

The judgment below

8. The judge below identified two questions which had to be considered. The first was as to whether the acknowledgement of service should be struck out and the second was whether Ince & Co. would be liable for the costs. In approaching the first question the judge pointed out that admiralty procedure allows the parties to an action in rem to be described, as opposed to being named, in the title to the action. He then went on to identify the first question which he needed to decide, namely whether Warehouse was entitled to acknowledge service of the writ as the 1st defendant. He referred to the case of The Tian Sheng No 8 [2000] 3 HKC 285 and in particular to the judgment of Litton PJ and the passage at pages 292-293 where he said that the inference must be as a matter of common sense that a registered owner of a ship must be the legal and beneficial owner of that ship. In so saying, however, he went on, at page 293B, to say:

"It is possible that registration is, as a matter of law, not conclusive on the issue of ownership; conceivably, there are circumstances where it might be shown that the registered owner was in fact not the legal and beneficial owner of all the shares in the ship: The fraudulent procurement of registration would be an example. But, in the general run of things, registration would be virtually conclusive, and it would take a wholly exceptional case for it to be otherwise. In this regard, I note the references in Bokhary PJ's judgment to The Evpo Agnic at pp 1095H to 1096E and to Lord Bingham of Cornhill CJ's judgment in Haji-Ioannou v Frangos [1999] 2 Lloyd's Rep 337 at 353: There the English Court of Appeal was not dealing with a situation such as ours where the judge was invited to disregard the ship's register altogether."

9. Reference can also be made to the passages in the judgment of Bokhary PJ at pages 301-305 which concludes on the basis that it is the interpretation of the statute which leads to the use of the word "owner" in relation to a registered ship meaning the registered owner and it was not a question of rewriting the statute. On that basis the judge below came to the conclusion in paragraph 31 that it was difficult to see how Warehouse, which was not the registered owner of the vessel, could be entitled to acknowledge the writ in the action.

10. Having reached that conclusion, however, the judge made reference to three other cases. One was a Malaysian authority and the other were two Singaporean authorities. He regarded the decision in The "ABLE LIEUTENANT" [2002] 6 MLJ 433 by Zulkefli J of the Malaysian High Court as strengthening his conclusion. To my mind references to these cases were unnecessary. They clearly did not provide the primary basis for the judge's reasoning and it has led to a criticism by Mr Stokes, on behalf of the plaintiffs, that he was not given an opportunity to deal with the authorities. Whether or not a judge considers it necessary to draw the parties' attention to authorities of which he has become aware subsequent to the hearing, is a question which has to be answered in the context of each particular case. It cannot be said that simply because a new authority has come to attention that this matter must be drawn to the attention of the parties. If the new authority does not change the effect of the decision which will be taken on the basis of the arguments and authorities which have already been put but merely provides some "comfort" to the judge on the footing that judges in other jurisdictions have reached the same conclusion, those new authorities are merely superfluous. In the context of this case, where there is a clear authority of the Court of Final Appeal on which the judge based his judgment, to have called the parties back for further argument would, in my view, have been a waste of resources and costs.

11. It is clear that Warehouse was intending somehow to bring itself within an exception to the general rule, perhaps along the lines alluded to by Litton PJ in the passage quoted above. Nevertheless, at paragraph 46 of the judgment, the judge held that Warehouse had been wrong in law in seeking to file the acknowledgement of service. On that basis, at paragraph 47, the judge expressed himself as satisfied that the acknowledgement should be set aside the lack of compliance with the requirements of Order 12 rule 3 of the Rules of High Court and that consequentially the defence should be set aside. It might be observed at this juncture that when the order was drawn up it was drawn up simply in terms of the notice of motion but not in terms of the judgment which the judge had given, still less was there any reference in the order to the "setting aside" of the defence.

12. The judge then turned to the matter, which is the subject of this appeal, as to whether Ince & Co. should pay the plaintiffs' wasted costs. Two grounds were put forward. The first was that Ince & Co. had wrongly represented that it had authority to file the acknowledgement of service on behalf of the 1st defendant, which was Salvage and no other, and secondly, under Order 62 rule 8 that the costs should be borne by Ince & Co. because they had been incurred improperly and without reasonable cause.

13. In approaching the question as to whether Ince & Co. should be liable for the costs the judge specified four elements which he regarded as relevant to the question as to whether Ince & co. should be liable for the costs on the basis that the acknowledgement of service had been struck out. They were as follows:

"(1) By filing the Acknowledgment, Ince represented that it was authorised to act on behalf of Salvage, the vessel's registered owners.

(2) That such representation was false.

(3) That the Plaintiffs relied on such representation.

(4) That the Plaintiffs suffered loss as a result of such reliance."

14. The judge considered that all those four elements were not satisfied. In my view, he was correct in this. There are, perhaps, different ways of looking at the same point. Nevertheless, cases such as Yonge v Toynbee [1910] 1 KB 215 show that the liability for costs arises as a result of a breach of warranty of authority. In this case Ince & Co. was acting on behalf of Warehouse. The solicitors' argument on behalf of Warehouse, albeit wrong in law, was that Warehouse fell within the description owners of the vessel. The judge held that Warehouse was not entitled to claim to be the owners of the vessel. Having so held, he held that Warehouse was liable for the costs incurred as a result. The judge could only make an order for costs against Warehouse on the basis that they had been responsible for causing costs to be incurred in the proceedings. In this case the only basis upon which he could so hold that was that Warehouse had been represented by Ince & Co. The reason why solicitors are made liable for costs when they acknowledge service without having the authority to do so is that otherwise the plaintiff would be left empty-handed since costs could not be ordered against a person or company who had not given valid authority to the solicitors to act on his or its behalf.

15. Mr Stokes, in an oft repeated submission, argued that Ince & Co. were liable having represented that they acted on behalf of Salvage, the owners of the vessel. That, however, is to take a further step. It is to treat the description "owners of a vessel" as the identity of the particular party. Whereas in law Salvage was the party to which the description "the Owners of the Ship or Vessel 'Tian Xiang 2 Hao' (PRC Flag)" properly applied, in my view the judge was correct in coming to the conclusion that Ince & Co. never represented that it acted on behalf of Salvage.

16. Neither do I consider that there is any validity in the argument that a decision on this issue in this case against the plaintiffs would mean that there is a different rule in relation to in rem and in personam actions. The rule is the same. If a solicitor acknowledges service on behalf of a party who has not or cannot give him instructions, then he is liable because he did not have the authority which he purported to have. If, on the other hand, the solicitor properly instructed for an identified entity or person seeks to put forward a case that his client falls within a particular description or category, there is no breach of warranty of authority, albeit there may be a bad argument in law.

17. It was not sought to be argued that the error of law in seeking to argue that Warehouse fell within that description was so gross as to amount to negligence on behalf of the solicitors. I see no basis for imposing the liability for costs on Ince & Co. either on the basis of breach of warranty of authority or on the basis of Order 62. The plaintiffs have their remedy for the costs thrown away against Warehouse. There may be difficulties in enforcing that order but that is one of the perils of litigation. It was argued that the plaintiffs are now saddled with the costs of Ince & Co. Those are, in effect, the costs of seeking an order of costs against Ince & Co. In this respect, the plaintiffs sought to argue the point and failed. They, therefore, have to pay the costs of arguing the point.

18. For completeness, I would add that this court did not consider, still less admit, further evidence which was prepared on behalf of Ince & Co. Such evidence forms no part of this decision. In the light of the way in which the matter went this court makes no order on the summons to admit the further evidence.

Hon Chu J:

19. I agree.