Puia v TJ Ocean Enterprises Ltd [2003] SBHC 61; HC-CC 312 of 2002 (10 January 2003)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 312 of 2002

IAN T. PUIA (T/A UVEA INVESTMENT)

-V-

TJ OCEAN ENTERPRISES LIMITED

Honiara: Brown PJ

Mr. Suri for Plaintiff
No appearance of Defendant

Practice and Procedure

Service of ex parte summons and originating Statement of Claim on company – no proper registered office – no address for service – service on shareholder of a private company –
Companies Act, Cap 175, S.102
High Court Rules, O. 9

Admiralty Law

Jurisdiction – law and practice for Solomon Islands – Administration of Justice Act 1956 (U.K.) adopted
Constitution Schedule 3 – Application of Laws
Administration of Justice Act 1956 (U.K.)

The Plaintiff came initially seeking ex parte orders for the recovery of a ship which apparently was owned by the defendant company and which had been taken from the plaintiff during the period of a charter party agreement. When the Summons first came before the Court, it was ordered that service be effected of all originating process on the defendant and the summons was set down for further hearing on a fixed date.

On the hearing date, it transpired that the defendant, a company, had not been served in accordance with the Companies Act but that a shareholder and director had been personally served with the papers.

During the course of the plaintiff's argument, it became apparent that the cause of action disclosed in pleadings of the Statement of Claim was more properly one for disposition under the practice and procedure of the Admiralty Division.

Held: Personal service on a director and joint shareholder of a private company is sufficient service for the purposes of the High Court Rules Order 9 r.14 where through irregularities, there is no registered office of the private company.

Where it appears that the more appropriate practice and procedure of the Admiralty Division should be adopted in ex parte proceedings before the Court for orders of a nature better suited to an action in rem in the Admiralty Division, and appropriate undertakings as to damages and costs are given, the court may substitute appropriate summons and warrant of arrest of the ship for the summons originally filed. There is no change to the underlying claim of right, rather a change to the manner of proceeding, and the defendant has his opportunity, to appear and be heard, quite unaffected.

Date of Hearing: 10 January 2003
Date of Ruling: 10 January 2003

SUMMONS

Reasons for Decision

This summons by the plaintiff seeks this Court's order to return a ship MV Hamakyo Maru 38, to the plaintiff and an order in support, addressed to the Police to "retrieve the vessel and return the same to the plaintiff". In addition the plaintiff sought an order restraining the defendant from preventing the plaintiff enjoying his possession of the ship.

On the day the summons was intended to be heard, I ordered that all material, including the Statement of Claim, be served on the defendant before I would entertain the matter.

Mr. Suri, for the plaintiff now comes before me to pursue his client's interest in the summons.

There has been no appearance of the defendant and the threshold question is whether the material ordered to be served, has been served or if this court should in the absence of service, allow the summons to proceed, ex parte in the first instance and whether my earlier orders should be vacated.

Threshold Question – Service on Defendant Company

On reading the affidavit of Davis Puia sworn 23^rd December 2002 and the affidavit deposing to the registered particulars of the defendant company, I am satisfied that sufficient steps have been taken by the plaintiff to comply with rules of service.

Corporation law requires service at the registered office of a company. [The Companies Act Cap 175A. 102.] The affidavit of search merely recites Honiara as the registered office. There is a postal address shown, but no registered office.

The plaintiff has not sought to post the document, rather to serve them personally on an officer of the company. Whether a director is a proper officer, for the purposes of the High Court rules, has not been argued. The search of Philip Kaukui, the clerk of the plaintiff's lawyer, Mr. Suri does show that both Teikanoa Jorge and Dennis Tepuke are directors of the company, and the only shareholders.

Having read the affidavit of service of Davis Puia, I am satisfied that Jorge Teikanoa knew the nature of the documents which were to be served on him to wit, court documents involving Ian Puia, the plaintiff. Whilst he did not receive the papers because he refused to personally accept them, had they been left in his possession, in the circumstances, I am satisfied service on a director would have been good service for the purposes of this urgent application. The irregularities in the company register, relating to details of the registered office of the company, precludes service on the company in conformity with the Companies Act.

Both persons sought to be served personally by the plaintiff, from the recitals in the affidavit of search, were owners of the company. Service on Dennis Tepuke was personally effected. The defendant company may reasonably be expected to be appraised of the date and place of this hearing. The company has been called by the sheriff this morning and there has been no appearance.

HC Rules Order 9 deals with service on a person, not a corporation. Because both directors' behaviour suggests they sought to avoid having documents served on them and because of the irregularities in the company registry, I propose to adopt the HC Rules as giving me power to allow proper service on the defendant company, only for this summons.

I propose to hear the summons.

Mr. Suri addressed the amended ex parte summons, pursuant to Statement of Claim filed 6^th January. Mr. Suri in support of the summons, read the charter agreement found in the affidavit of David Dennis sworn 10^th December 2002.

The agreement is short and to make my reasons clearer, terms are reproduced in full. The original agreement, dated 20^th June 2002 was produced by Mr. Suri from the custody of the plaintiff Mr. Ian Puia in court today.

The Plaintiff undertakes to have the document stamped in accordance with the Stamp Duty Act within 30 days. On the undertaking, because of the urgency, I accept the agreement as proper evidence in this cause. The original has been returned for stamping.

The parties hereby agree with each other as follows:-

Uvea will charter from the Owner a vessel (with all of its equipment, facilities and crew without limiting the generality of these definitions) for a minimum of five trips. It is also agreed that the trips must be completed within six months from the date of the first trip.

1.1 The Owner agrees to allow unfettered access and use of all of the vessel and to permit anything which may be reasonably required by Uvea. Uvea agrees that operation and use of the machinery and equipment will be done in consultation with the Owner.

1.2 Uvea shall pay the Owner charter fees of $1,500.00 per day for the first trip and $2,500 per day for the subsequent trips. An initial deposit of 50% of chartered days will be effected on the first day of sail subject to clause 1.3. Uvea will also pay 10% of net proceeds as defined to the Owner and any balance of outstanding charter fees upon cash receipt of sale funds subject to clause 1.3.

1.3 The Owner agrees that any expenses incurred by Uvea in relation to the ship including but not limited to repairs & maintenance, licensing, hiring, painting or any other costs incurred to prepare the vessel for the divine operations will be recoverable in full from the Owner. The Owner further agree that Uvea will hold the vessel as security until such time as all costs have been fully recovered and at the end of the fifth trip to the Indispensable Reefs. All costs must be repaid in full before any other payment obligations noted in clause 1.2 will be made.

1.4 Uvea will not accept any responsibility for an Act of God or any interference including but not limited to, bad weather, poor seamanship, any defects of the vessel or equipment, disputes, lockouts, explosion, governmental or quasi-government restraint, expropriation, prohibition, intervention or embargo, unavailability or delay in availability of the ship or equipment, inability or delay in obtaining governmental or quasi-governmental approvals, consents, permits, licences or authorities, and any other cause, whether of the kind specifically enumerated above or otherwise, which is and reasonably within the control of the Party effected to carry out any obligation under this Agreement and that party.

1.3 The persons executing this Agreement on behalf of a party hereto represents and warrants that he/she has been fully empowered by such party to execute this Agreement.

1.4 Net proceeds refers to revenue after taking into consideration all costs attributable to the operation of the ship (including costs noted in clause 1.3).

1.5 The Owner, in consideration for the repairs and licencing of the vessel, agrees that for this duration of this Agreement, the total operations of the vessel and its activities will be under the absolute control of Uvea within the laws and regulations of the Province and Solomon Islands. The Owner concedes that all collections, revenues or inflows as a result of the charter of the Vessel for the duration of the contract are entirely and solely for the benefit of Uvea.

1.6 The vessel is known as MV Hamkyo Maru 38

The terms of para 1.3 of the charter agreement have apparently by oral representation, been varied to the extent that moneys have been advanced to the defendant. Then on the 9^th of December, the defendant purported to terminate the charter agreement. That letter was in this form .

Yan Puia

Uvea Investment Company

HONIARA

Dear Sir,

This is to inform you and your company that after observing our lease agreement for the last four months, the Board of Directors in their meeting on the 8^th December 2002, decided to terminate the agreement based on the following reasons:

(a) Threats by the public to burn down the ship during the trip to Renbel Province putting the ship on a higher risk

(b) There are numbers of Marine regulations breaches during the period of four months.

(c) Non payment of outstanding bills as agreed by both parties.

(d) Non payment of chartered arrears from the two fishing trips.

(e) Non payment of 10% from the catches as agreed by both parties.

I hope the reasons stated above justify the decision taken by the Board of Directors.

Thank you for your cooperation and understanding.

Yours sincerely

JORGE TEIKANOA

Now the first reason, threats by the public to burn the ship may or may not have a basis in fact, but the assertion in the letter does not sheet responsibility for the threats to the plaintiff. The charter agreement is silent on this type of threat but clause 1.4 seeks to absolve the plaintiff from the risk of "any other cause, whether of the kind specifically enumerated above or otherwise, which is not reasonably within the control of the party affected to carry out any obligation under this agreement and that party".

In other words, the defendant must show a direct nexus between the plaintiff and the threat of burning, to avoid the natural meaning of the words in clause 1.4, which seeks to protect the plaintiff from risks enumerated in the clause.

So that ground of termination, in the absence of a clear nexus, is not sufficient to justify termination. The second reason for termination, para b of the letter, is a mere assertion. The plaintiff denies the assertion.

So far as sub para (c) (d) (e) are concerned the plaintiff in his Statement of Claim purports to show that the spirit of the charter agreement as to payment was met in that the defendant's financial benefits were accelerated. Advances were made to the defendant before the due date for payment recited in clause 1.3.

Now while that clause may have been varied by oral subsequent agreement, any variations must be construed strictly, especially against the party seeking to benefit from the oral variation of the written document. In the absence of evidence to the contrary, I accept the plaintiff's assertions that moneys were paid to the defendant, moneys which by rights of the agreement, had not fallen due.

Consequently there is nothing in the terms of the agreement which the plaintiff says, gives the defendant the right to seize his vessel the subject of this charter party.

Terms of Order sought

Since the charter party agreement is on foot and the plaintiff has the right to possession of the vessel I must ask whether it is proper to make an order retrieving the vessel from the possession of the owner.

Argument

By taking ship from the plaintiff, the defendant has threatened irrevocable damages to the plaintiff's whole business. The Plaintiff only completed 2 trips out of 5 for bêche de mer. Less than ½ allowed by the defendant, not withstanding that the six month charter period, on its face was due to expire on the 1^st February. But the defendant has had possession of the vessel since the 9^th of December, effectively precluding the plaintiff from working it.

Whether damages would be a sufficient remedy instead of seizure must be addressed. The variability of fishing receipts and the fact that only two trips have been completed really cannot give a proper basis for determining damages. Especially when the plaintiff is willing and seeks to work the ship, accepting the risk of loss or the hope of gain.

The defendant could argue, were he here, that applying the yield of the first two trips could be the basis for assessing damages, but the defendant is not here and clearly intends to rely on the letter of termination. The Catastrophic effect on the plaintiff, without the return on the vessel to allow him to continue his business of fishing for "bêche de mer", is the reason damages are not a proper alternative, Mr. Suri says.

On Damages

I agree with the plaintiff's argument. The adequacy of the alternate remedy of damages is an issue to be resolved before I begin considering whether to order the return of the vessel to the plaintiff, as sought in the summons.
.
To endeavour to assess damages for the remaining three trips could be done in some fashion, but such a financial assessment could not be preferred when the obvious alternative, for the plaintiff to continue his charter, is available. Then the defendant has every chance, as the plaintiff, to a share of the anticipated profits of the venture.

Any financial assessment at this junction is fraught with "probabilities" involving statistical concepts. On two trips it would be possible to determine the degree of scatter of the variables, both running costs of the vessel, and prices for fish (quality, seasonal variations in price, size etc) and arrive at standard deviations from the mean, but the variance, I would imagine (the square of the standard deviation) would be big. As a result, attempting to resolve the two, the costs and income, to arrive at a possible range of profit/loss figures, would show the futility of the exercise. Damages in this case, are not a reasonable alternative. It would be an exercise in futility to try and assess the potential profits if any, for the remaining three trips. The defendant should bear the risk of the agreement with the plaintiff, not unilaterally terminate it to suit its own purposes.

After the luncheon adjournment, Mr. Suri apparently realized a more efficacious way to approach the result sought, the return of the vessel, was by way of the courts Admiralty Division. He referred me to HC Rules 31 and Halsbury 3^rd Edition Vol. 1 wherein the Administration of Justice Act 1956 (U.K) afforded this court jurisdiction, under Part 1

"Part 1 S.1(i) (a) over claim as to possession or ownership of ship,

(i)(h) arising out of hire or use of ship

(i)(n) in respect of repair or equipment of ship"

He says that the section is jurisdictional, and does not create any new causes of action. Consequently, the mode of exercise of such jurisdiction, with respect to Ss.(i)(a), is an action "in rem" and to Ss.(i)(h)(n), in personam. He accordingly sought ordered by way of summons and warrant of arrest pursuant to forms 257 and 258 of the enabling Act. He relied on the material filed and read on his case this morning, material which I have included in my earlier reasons.

I would say that, whilst the charter party agreement and the letter of termination have been included in my reasons, and whilst both form part of an affidavit of the plaintiff, that affidavit has not been read, rather the documents themselves have been tendered into evidence so that I was in a position, on material before me, to determine whether the plaintiff had a triable issue in seeking possession of the ship, and to not merely accept the assertion in the plaintiff's pleadings in his statement of claim.

Having heard Mr. Suri, I am satisfied on the pleadings filed in the plaintiff's statement of claim, that the plaintiff has disclosed a cause of action for recovery of MV Hamakyo Maru 38 from the plaintiff. This Court has jurisdiction to entertain such an action.

The Admiralty Division, its practice and procedures, is the appropriate means, for the plaintiff seeks an order for possession under Ss 1(i)(a) of the adopted U.K. Act. I am further satisfied, having regard to Schedule 3 to the Constitution, that the Administration of Justice Act 1956 (UK) has full force and effect in the Solomon Islands. The United Kingdom Act, Section 1 came into force before the 1^st January 1961, to wit; January 1957 and applies here as part of the law of Solomon Islands.

Those considerations in Papua New Guinea in the case The Ship "Federal Huron" –v- OK Tedi Mining Ltd (1986) PNGLR 5 need not trouble us here, for paragraph 1, Schedule 3 to the Constitution stands on its own and does not fetter the application of this U.K Act, by the need to consider the phrase "the principles and rules of the common law and equity shall have effect" which, because of their different context in the PNG Constitution, caused the PNG Supreme Court to fall back on the old Colonial Courts of Admiralty Act 1980 (imp). In para 2(2) that phraseology is used, but it is in different context to that of its use in the PNG Constitution, which was the subject of such detailed reasoning in The Ship "Federal Huron" case.

That detailed reasoning had much to do with the interpretation of the section which "is peculiar to the Constitution of this country" (PNG). (The Ship "Federal Huron" judgment, p.19) while our "application of laws" in para 1, Schedule 3 to the Constitution, states categorically that the "Acts of the Parliament of the United Kingdom of general application and in force on the 1^st January 1961 shall have effect as part of the laws of Solomon Islands''.

Para 2(2) provides for the recognition of principles and rules of the common law and equity notwithstanding any revision of them by an Act of the Parliament of the United Kingdom, which does not have effect as part of the law of Solomon Islands.

Para 1 by its terms, clearly applies the Administration of Justice Act 1956 (U.K) because it falls within the two criteria set out in that paragraph. It consequently has effect as part of the law of Solomon Islands and is not struck down, as it were, by the fact that the Act (U.K) codified and revised principles and rules of common law applied by the High Court in England in Admiralty matters, for hundred of years.

ORDERS

1. Leave is given to substitute the Statement of Claim on file with a Writ of Summons in an action in rem in accordance with the Administration of Justice Act 1956 (UK).
   
2. This leave is granted pursuant to Order 31 of the High Court Rules.
   
3. I further order, upon the filing of the plaintiff's undertaking as to damages, and to keep the Marshall harmless of costs and expenses, that a warrant for the arrest of MV Hamakyo Maru 38, be issued in form to be settled by me.
   
4. The summons shall be returnable 8 days from the date of service by affixing it to the mast of the aforementioned vessel.
   
5. I further order that the plaintiff lodge a bank letter of credit for the sum of $4000 or pay into court that sum as security for the costs of the Marshall.
   
6. The costs of the proceedings before me on the urgent application are reserved.
   
7. Liberty is granted to either party to apply to the Court on 2 days notice.
   
8. Liberty is granted to have the summons and warrant settled by me at short notice.
   

Amended Order 1 by slip rule 13^th January 2003

1. Leave is granted to substantiate the ex parte summons on file with a Writ of Summons in an action in rem in accordance with the Administration of Justice Act 1957 (U.K)
   

Dated this 13^th January 2003

BROWN PJ