Owners of the Sardinia Sulcis v Owners of the Al Tawwab (The Al Tawwab)

JurisdictionEngland & Wales
JudgeLORD JUSTICE LLOYD,LORD JUSTICE STOCKER,SIR GEORGE WALLER
Judgment Date08 November 1990
Judgment citation (vLex)[1990] EWCA Civ J1108-6
Docket Number90/0980
CourtCourt of Appeal (Civil Division)
Date08 November 1990
The Owners of the Ship or Vessel "Sardinia Sulcis"
and
The Owners of the Ship or Vessel "Al Tawwab"

[1990] EWCA Civ J1108-6

Before:

Lord Justice Lloyd

Lord Justice Stocker

Sir George Waller

90/0980

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMIRALTY COURT

(MR JUSTICE SHEEN)

Royal Courts of Justice

MR HUGH BENNETT Q.C. and MR M.J. TEMPLEMAN, instructed by Messrs Lloyd & Co., appeared for the Appellants (Defendants).

MR JEREMY COOKE Q.C. and MR D.J. BAILEY, instructed by Messrs Richards Butler, appeared for the Respondents (Plaintiffs).

LORD JUSTICE LLOYD
1

In the early hours of 23rd April 1979 the "Sardinia Sulcis" suffered collision damage while lying off Karachi with a cargo of wheat in bulk. She was under charter at the time. The owners were Sardanavi Societa di Navigazione Maritima SPA, a wholly-owned subsidiary of Sindicaco Immobiliare Turistico SPA ("SIT"). The time charterers were Kawasaki Kishen Kaisha Ltd ("KKK"). The damage occurred during a lightening operation being carried out by the "Al Tawwab". The damage was repaired at Singapore a few weeks later. The charterers paid the cost of repairs amounting to $443,914.

2

In these proceedings, which are brought in the name of the owners of the "Sardinia Sulcis", the charterers are seeking to recover the cost of repairs from the owners of the "Al Tawwab". The action is an Admiralty action in rem. The writ was issued on 14th April 1981, a few days before the expiry of the limitation period prescribed by section 8 of the Maritime Conventions Act 1911.

3

In paragraph 1 of the statement of claim, the plaintiffs say that they were at all material times the owners of the "Sardinia Sulcis". The defendants admit paragraph 1 of the statement of claim in their defence.

4

In March 1987 the parties reached a compromise agreement, subject to one point. The agreement was recorded in an order of the court dated 23rd March 1987. The terms of the agreement were that the defendants would pay 65% of the plaintiffs' claim, together with their costs. The sole point remaining at issue was referred to arbitration. The submission to arbitration is dated 10th June 1987, and was signed by solicitors for and on behalf of the owners of the two vessels. Mr Anthony Diamond Q.C., as he then was, was able to make his award within a fortnight. He described the point taken by the defendants as being "wholly lacking either in merit or commercial reality". I agree with that description. On 14th July the defendants sought leave to appeal to the High Court from Mr Diamond's award. I assume that the application was dismissed. I do not see how it could possibly have succeeded. At that point the order of the court made on 23rd March 1987, recording the prior agreement between the parties, should have taken effect.

5

But in the meantime the defendants' solicitors had been making enquiries in Italy. They had known since 21st August 1984 at the latest, and very probably since 17th March 1981, that the owners had gone into liquidation. The defendants' last hope, therefore, was that the plaintiffs might have ceased to exist before the writ was issued. In a telex sent on 21st August 1984 the defendants observed:

"On reviewing our file we note that we have a note of a conversation dated [17th March 1981] between your Mr Pertwee and our Mr Kay in which you told us that the owners of 'Sardinia Sulcis' had assigned their rights to the demised charterers and then gone into liquidation. This obviously brings into question the whole legal basis upon which your clients' claim is made…"

6

On 31st October 1984 Messrs. Richards Butler, acting on behalf of their clients, KKK, replied:

"Finally, we would advise you that the owners of the 'Sardinia Sulcis' at the time of the ranging damage incident, Sardanavi Societa di Navigazione Maritima S.p.a. have not ceased to exist: Sardanavi was merged with Messrs. SIT Sindicaco Immobiliare Turistico in 1980, and from the date of the merger, SIT took over all liabilities and obligations of Sardanavi, as well as all of their assets and rights, including their rights to sue".

7

If the defendants were going to take the point that Sardanavi had ceased to exist before the issue of the writ, and that therefore the writ and all subsequent proceedings were a nullity, that was the time to do so. But they did not. They waited until June 1987, some three months after they had entered into the compromise agreement.

8

On 23rd July 1987 the defendants' solicitors received advice from their correspondents in Italy that Sardanavi had ceased to exist on 4th July 1980, as a result of the merger with SIT. On 21st September they issued proceedings in the Commercial Court against Messrs. Richard Butler for breach of warranty of authority on the ground that they had issued a writ on behalf of non-existing clients. On 11th August 1989 they issued a summons in the Admiralty Court to strike out the plaintiffs' action on the ground that it had been "commenced in the name of the wrong party, and/or a party that had ceased to exist at the time the writ was issued". Meanwhile on 3rd March 1989 the plaintiffs had issued a summons to correct the name of the plaintiffs.

9

These summonses, together with a third summons which does not matter for present purposes, came before Sheen J. on 19th July 1989. He decided all points in favour of the plaintiffs. It is regrettable that the appeal should have taken so long to come on before us.

10

The case has been extremely well argued on both sides. Some of the points are by no means easy. But there is one point which gives rise to no difficulty at all, and that is to discern where the merits lie. It is hard to imagine a more unmeritorious application than that of the defendants, bearing in mind (1) that Sardanavi always was a wholly-owned subsidiary of SIT, (2) the deed of merger, whether or not it resulted in the extinction of Sardanavi (to which I shall return later) transferred all Sardanavi's rights and obligations to SIT, (3) the defendants have known of the merger since at least 1984, (4) Messrs. Richards Butler have full authority to act on behalf of SIT, and (5) the real plaintiffs were not the owners at all but the charterers.

11

The final irony lies in a letter from the defendants' solicitors dated 24th August 1979, of which the judge says, with commendable understatement, that he had noted it "with interest". While denying that they were a hundred per cent to blame for the collision, the defendants had "no wish whatsoever to be obstructive and desire this dispute to be resolved as quickly as possible in the normal way". The letter concludes:

"We stress that our clients are anxious for early resolution of this dispute and have no wish whatsoever to be obstructive."

12

It is now over 11 years since that letter was written, and over three and a half years since the defendants agreed to accept 65% liability, subject only to an unarguable point which has now been decided against them.

13

But I put the merits on one side, lest I should miss the strait gate, or be deflected from the narrow way of legal principle.

14

Mr Bennett's first point on behalf of the defendants is that Sardanavi ceased to exist at latest on 13th January 1981. The writ was not issued until 14th April 1981. It is a fundamental rule of English law that proceedings cannot be commenced in the name of a non-existent plaintiff. In such a case the writ, and all subsequent proceedings, including any judgment of the court given in the course of those proceedings, will be set aside as a nullity: see Daimler Co. v. Continental Tyres & Rubber Co. [1916] 2 A.C. 307 and Lazard Brothers v. Midland Bank [1933] A.C. 289. For a recent application of the rule, Mr Bennett referred us to the decision of Morritt J., dated 12th February 1990, in Dubai Bank Ltd v. Galadari & Others.

15

Secondly, if Sardanavi had not ceased to exist at the time of the writ, Mr Bennett submits that the writ was issued without authority. The memorandum of agreement authorising KKK to use the owner's name in the action, though back-dated to 10th December 1980, cannot have been executed by Sardanavi before 21st January 1981 at the earliest, or by KKK until much later. Even if Sardanavi did not cease to exist on 13th January 1981, there was nobody who could sign on its behalf after that date. So Messrs. Richards Butler had no authority from Sardanavi. Nor could SIT authorise the issue of the writ, by subsequent ratification, since Messrs. Richards Butler did not purport to act on SIT's behalf.

16

The judge dealt with the second point first. He held that Sardanavi and KKK reached agreement as to the terms on which KKK were authorised to use the owner's name on 12th January, the day before the merger took effect. In the judge's view, the granting of authority was not subject to execution by the parties of the formal memorandum of agreement. Once given, Sardanavi's authority could not be revoked. The right to sue in the owner's name remained alive notwithstanding the subsequent merger.

17

I see no reason to disagree with the judge. But I will start by dealing with Mr Bennett's first point, that the writ was a nullity.

18

Logically, the first question is one of fact, namely, whether Sardanavi had ceased to exist by 14th April 1981 when the writ was issued. This depends on the effect of the merger in Italian law. The judge did not make a finding on this issue. Mr Cooke, on behalf of the plaintiffs, submits that on the evidence of Italian law before the court, the question is left open. He relies on a letter from the defendants' experts, Studio Legale Bisconti, dated 1st October 1987. The writer of that...

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