The Tacoma City
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE RALPH GIBSON,LORD JUSTICE LEGGATT,LORD JUSTICE DILLON |
| Judgment Date | 14 November 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J1114-2 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 November 1990 |
| Docket Number | 90/1021 |
[1990] EWCA Civ J1114-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMIRALTY ACTION IN REM AGAINST
The Ship "TACOMA CITY"
Royal Courts of Justice
Lord Justice Dillon
Lord Justice Ralph Gibson
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Lord Justice Leggatt
90/1021
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MISS B. BUCKNALL Q.C. (instructed by Messrs Ingledew Brown Bennison & Garrett) appeared on behalf of the Appellants (Fourth, Eight, Fifteenth, Seventeenth and Eighteenth Plaintiffs).
MR. T. BRENTON (instructed by Messrs Norton Rose) appeared on behalf of the Respondents (Interveners).
This is an appeal by the plaintiffs in an Admiralty action in rem against the ship "Tacoma City" ("the ship"), a bulk carrier of 11,375 tons.
Sheen J. on 8th December 1989 (1990 1 LI.R.408) dismissed all the plaintiffs' claims to maritime liens, for severance payments and for wages in lieu of notice, upon the proceeds of sale of the ship and in priority to the claims of the mortgagees, Barclays Merchant Bank Limited, ("the Bank"), who are interveners in the action. The plaintiffs' claims arise out of the collapse in 1985 of the Reardon Smith Line plc and its subsidiary companies.
The Reardon Smith Group of companies consisted then of the Reardon Smith Line plc, ("RSL"), the parent company, and a number of wholly owned subsidiary companies, which included Sir William Reardon Smith and Sons Ltd. ("SWRS"), a management company, and various shipowning companies of which the ships were managed by SWRS. In addition to managing ships owned by companies in the group, SWRS also managed ships owned by companies unconnected with the group, including ships owned by United Kingdom companies controlled by Transportation Maritime Mexicana, ("TMM"), a Mexican Corporation. Finally the group included Reardon Smith Services (Far East) Pte. Ltd. ("RSS(FE)"), manning agents for the Reardon Smith ships which were not registered in the United Kingdom.
There are 20 plaintiffs named in the writ which was issued on 8th August 1985. All are officers who served aboard the ship. The defendants named in the writ were described as "the owners of the ship Tacoma City". The owners were Reardon Smith Navigation Co. Ltd. ("RSN), one of the shipowning companies in the group. That company has taken no part in the proceedings. The bank intervened under leave granted on 3rd October 1985.
The Reardon Smith Group of companies announced at the end of May 1985 that they were ceasing to trade. The ship, which was then in ballast off the Danish coast, proceeded on receipt of orders to the Blackwater. The bank as mortgagees issued a Writ in Rem against the ship on 4th June 1985 and the ship was arrested in that action. Leave was given to the bank to pay off the Master, officers and crew and the ship was ordered to be sold. On about 18th June the Master and officers were paid by the bank the sums claimed by them as wages so far as the amounts were not in dispute. On 8th August 1985 the ship and bunkers etc. were sold for a total of U.S. $1,541,957. On 12th November 1985 the court declared the bank's mortgage to be valid and gave judgment for the bank for the principal sum of U.S. $1,112,500, for $59,193 for interest and for $21,000 redemption fee, together with costs. There is, in addition, an unsatisfied second mortgage ranking immediately behind the bank.
The sums claimed by the 20 plaintiffs for severance pay amount in total to £119,662. There are four comparatively large claims, namely by the first plaintiff, for £15,973; by the 13th plaintiff for £18,340; by the 16th plaintiff for £16,686; and by the 19th plaintiff for £19,583. The remaining claims vary between £666 by the seventh plaintiff and £7,613 by the second plaintiff.
In addition three plaintiffs claim wages in lieu of the three calendar months notice to which they claim to have been entitled: the total of these claims is £4,325.
As to the severance payment claims, the bank contends that they are not made out upon the terms of the agreement and that, if there is any valid claim to severance payments, the law gives no maritime lien in respect of it. As to the claims to wages in lieu of notice, the bank again contends that they are bad on the facts but it is conceded that, if they are valid, they would be enforceable by maritime lien.
If the plaintiffs are entitled to maritime liens in respect of the sums claimed for severance payments, each will recover in full in priority to the bank. If, as the bank submits and Sheen J. held, the plaintiffs do not have maritime liens in respect of those claims, and can rely only upon the personal liability of RSN, or of any other company in the Reardon Smith Group the bank will take the whole of the proceeds of sale and the plaintiffs will recover nothing.
Although there are twenty plaintiffs named in the writ, the hearing before Sheen J. was concerned only with the claims of Mr. A.C. Prosser, 4th, Mr. M.G. Moore, 8th, Mr. R.W. Eacott, 15th, Mr. A. Doubler, 17th and Mr. A.J. Tuck, 18th. These claims were ordered to be tried before the other claims in the expectation that the decision by the court of the selected five claims would enable the parties to dispose of the remaining claims by agreement.
The grounds of decision of Sheen J.
The full grounds of decision of Sheen J. can be seen at [1990] 1 Ll.R. 408. Sheen J. dismissed the claims of the five selected plaintiffs upon grounds which, in brief summary, were as follows:
(i) a lien attaches to a ship only in respect of wages earned in that ship: per Lord Watson in The Castlegate [1893] AC at page 52.
(ii) Officers serving with the Reardon Smith Group had the benefit of two contracts: the first was a contract between each officer and SWRS, the management company of the group; and the second was a contract between the officer and the shipowning company contained in the Articles or "Crew Agreement".
(iii) The Crew Agreement incorporated the National Maritime Board ("NMB") Agreements including the "Company Severance Payments Agreement". The basic provisions of that Agreement are that, to qualify for payments, an officer must have "a minimum of two completed years of company service" which is defined to include service with "an associated company"; and the scale of payments is calculated by reference to the aggregated amount of separate periods of company service subject to certain maximum periods of absence from company service.
(iv) The nature of severance pay, as revealed by the contract documents, is that of a lump sum payable to an officer who becomes surplus to the requirements of the shipping company and is not payable "for service to the ship". It is compensation for losing employment and is not part of the emoluments of employment. It is not paid for services rendered but because services are no longer required. Therefore severance pay is not "wages" for the purposes of a maritime lien.
(v) In the context of these claims, "the shipping company", to the requirements of which the officers became surplus, was SWRS or RSL—i.e. the company with which the officers had a continuing contractual relationship as contrasted with the individual shipowning companies.
(vi) The amount of severance pay is calculated by reference to service in different ships. If the liability for severance pay were the liability of that company which owns the ship in which an officer last served, the result would be that the owners of the last ship would bear the burden for service in ships owned by other companies and the security provided by a mortgage on a ship would thereby be greatly diminished. It was impossible to accept that service with a different shipowner can form the basis of calculation of money due from the owners of the ship.
(vii) In reality each plaintiff looked for the payment of his wages to SWRS and was entitled to severance payments from that company. Service in the employment of other companies did not give to each plaintiff a maritime lien upon the ship.
(viii) As to the claims for wages in lieu of notice, the 8th plaintiff, Mr. Moore, was not entitled to any notice of termination of his services under the terms of the Crew Agreement because he had served for less than three calendar months on board; and it was impossible to imply any term as to a requirement for notice because the Crew Agreement contained express terms relating to notice. The 15th plaintiff, Mr. Eacott, had no claim for wages in lieu of notice against the ship because he had ceased to serve in the ship on 3rd February 1985 before there was any failure to give such notice as he was entitled to receive.
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