Neutral Citation Number: [2006] EWHC 2223 (Comm)
Case No: 2005 FOLIO NO. 394
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 31/08/2006

Before:

HIS HONOUR JUDGE MACKIE QC.
(Sitting as a Judge of the High Court)
- - - - - - - - - - - - - - - - - - - - -
Between:

	ALMATRANS S.A.	Claimant	
	- and -		
	The Steamship Mutual Underwriting Association (Bermuda) Limited	Defendant	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Mr Nigel Cooper (instructed by TLT Solicitors) for the Claimant
Mr Gavin Geary (instructed by Richards Butler) for the Defendant

Hearing dates: 3-7 July 2006
- - - - - - - - - - - - - - - - - - - - -
Judgment
HHJ Mackie QC : 

1.	This is a claim for payment under a Letter of Undertaking given by a P and I Club.  It is strenuously resisted on a variety of grounds raising questions of  sharp practice, misnomer, the implication of terms and the validity of a judgment under the procedural laws of Cyprus and of Italy. 

The Parties and the Background

2.	The Claimant (“Almatrans”) is a transport company based in Greece.  The Defendant (“Steamship”) is a well known P and I Club incorporated in Bermuda.  On 24 March 1993 Almatrans petitioned the court in Ravenna for the arrest of a vessel “TUTOVA” to secure claims for alleged losses arising from the delay in delivery of trailers and other cargo.  After discussions between lawyers for the parties a Letter of Undertaking (“LOU”) was issued on 27 March 1993 on behalf of Steamship by lawyers, Mordiglia-Mauro, addressed to Almatrans-Interferries Lines S.A in the following terms:

“M/v “TUTOVA” at Ravenna March 1993 – Statement
of Claim presented by Messrs.  Seaways Srl and enclosed
as doc. N. 15 to the petition for arrest of the vessel
submitted to the Court of Ravenna on 24th March 1993

In consideration of and upon condition that you release and/or refrain from arresting or otherwise detaining the above vessel or any other vessel or property in the same or associated Ownership or Management in connection with the above claims and that you retrain from commencing and/or prosecuting legal or arbitration proceedings (otherwise than before the Court of Tribunal referred to below) against the owners of the above vessel their servants or agent in connection with such claims we hereby undertake to pay you on demand any sum not exceeding US$ 220,000 (two hundred twenty thousand Dollars), inclusive of interest and costs, including legal costs, which may be agreed in writing between the parties hereto to be due to you in respect of the above claims or which may be adjudged to be due to you in respect thereof from the owners of the above vessel by a judgement from a Court of competent jurisdiction and final appeal therefrom or arbitration award if arbitration agreed by the parties.

This undertaking is governed by English law and subject to the exclusive jurisdiction of the High Court of Justice in London.”

3.	The letter was issued by Steamship on behalf of its member Tutova Shipping Company Limited (“Tutova”), a Cyprus company who were the bare-boat charterers of the vessel.

4.	Almatrans put the claim in the hands of Mr Vlassis Macris, a very experienced maritime lawyer based in Athens.  For a variety of reasons, the best of which was illness suffered by Mr Macris , progress of the claim was very slow.  Details were sought by Mr Macris from his correspondent in Nicosia of the registered office and other details of Tutova.  It was not until 15 September 1995 that Almatrans made a claim by sending a telex to Tutova claiming damages and threatening legal action. At the same time Almatrans also sent a telex to Seaward Services Limited (“Seaward”) another Cyprus company which is Tutova’s company secretary and a few days later to King Shipping Corporation, based in the United States, the agents for Tutova.  It seems that there were discussions but it was not until 14 July 1997 that Avv Tassinari, Almatrans’ lawyer in Ravenna , wrote again setting out the claim and making it clear that the letter was also being sent to interrupt the time bar, as permitted by Italian law.  On 31 July 1997 Almatrans issued a writ against Tutova in the Tribunal of Ravenna.  On 11 October 1997 Avv Tassinari asked the Ravenna court to serve process on Tutova and on Seaward.  There were difficulties in carrying out service in Cyprus to which I return later.  

5.	On 27 May 1998 Avv Palandri, Steamship’s lawyer from the Mordiglia-Mauro firm, telephoned and wrote to Avv Tassinari asking for return of the LOU as the limitation period had expired.  Two days later Avv Tassinari wrote back saying that Almatrans had interrupted the time bar by its letter of 14 July but did not mention that proceedings had been issued and served.  After four hearings between 25 March 1999 and 6 July 2000 the Ravenna court issued a Judgment against Tutova for Greek Dr.101,263,437 and Italian Lire 130,817,388 plus interest and costs.  Avv Tassinari says that he spoke to Avv Novelli, a lawyer at Mordiglia-Mauro’s Ravenna office to find out whether her firm had instructions to attend the hearing on 25 March 1999.  That lawyer does not recall the conversation and certainly no action was taken as a result of it, if it occurred.

6.	At the end of February 2001 the Judgment was filed in the appropriate office of the court in Ravenna and steps were taken to serve Tutova in Cyprus.  On 10 June 2002 Avv Tassinari wrote to Avv Palandri by registered post sending a copy of the Judgment and requesting payment by Steamship under the letter of undertaking.  On 22 July he wrote to Steamship direct demanding payment.  At the beginning of October 2002 Steamship’s London solicitors informed Avv Tassinari that the claim would not be paid because of advice their clients had received about the laws of Cyprus and Italy.  Finally on 12 May 2005 Almatrans issued a claim form in this court.

Grounds on which Steamship defend the Claim

7.	Steamship complain  that progress of this claim has been slow, desultory and accompanied by sharp practice.  Their particular grounds for refusing to pay are:- 

a)	The LOU was given to Almatrans Interferries S.A. not to Almatrans.  Almatrans accept that the addressee is mistakenly named but say that this is a misnomer or a mistake which can and should be rectified.

b)	There were implied terms and/or conditions precedent to the LOU first that Almatrans would give adequate notice to Tutova of the start of proceedings or of any application to court and secondly that any Judgment obtained by Almatrans would be properly obtained and on proper notice to Steamship.  Almatrans deny the existence of the implied terms and say that if there were any such terms  they have been complied with.

c)	The Judgment is a nullity and of no effect against Tutova, and thus against Steamship first because the proceedings were not properly served on Tutova by Italian or Cypriot law and secondly because no notice was given to Steamship or its lawyers of the Ravenna proceedings.  Almatrans accepts that service of the proceedings was irregular under Italian and Cypriot law but says that this does not render the Judgment a nullity.  Almatrans says that Tutova and Steamship were made aware of the Judgment but took no steps to challenge it.  So they are bound and Steamship must pay under the LOU.

d)	It would be contrary to public policy to allow Almatrans to call on the LOU because Almatrans and/or its lawyers made a deliberate decision not to inform Steamship or its lawyers of the Ravenna case.  Almatrans denies this.

e)	There is also a counterclaim for return of the LOU or its cancellation and for a declaration that Almatrans’ claim was time barred at the time of the issue of the Ravenna proceedings.  (These points are not proceeded with as substantive defences.)

The Trial

8.	The evidence at trial was shorter than originally anticipated.  Mr Macris was the only witness of fact for Almatrans.  Avv Tassinari was unable to attend apparently on health grounds. His witness statement is relied on.  Avv Palandri was the only witness of fact for Steamship and he also gave expert evidence .  Avv Carlo Longanesi gave expert evidence on Italian law for Almatrans.  Mr Demetris Araouzos was the Cypriot law expert for Almatrans and Mr Petros Iacovides fulfilled the same role for Steamship.  I say straight away that all four experts were clear, helpful, objective and of great assistance to the court.  The court also had witness statements from Mr Andoniades ,a former court process server in Cyprus, Avv Novelli and her colleague Avv Mauro and Mr Petros Vrachas, a  lawyer in Cyprus.

Almatrans/Almatrans-Interferries Lines S.A.

9.	The Bills of Lading name Almatrans S.A. as the consignees and that company was according to Avv Tassinari and Avv Palandri the one pursuing the loss claim.  No company exists under the name of Almatrans-Interferries S.A.But that name is used in the petition for the arrest of the vessel although the statement of claim attached to it, and referred to in the LOU of 27 March 1993 refers to “Almatrans”.  In evidence Avv Palandri said that he had obtained the details of the name from Avv Tassinari.  It therefore seems obvious that the company with whom Steamship intended to contract was that which had the substantive claim against the vessel.  It seems clear that that company is Almatrans and that the error in the name was caused by an oversight within the clients instructing Avv Tassinari.  Steamship contend that use of “Almatrans” in discussion does not identify which of the entities are being referred to and that while Almatrans S.A. is shown as the Shipper on the Bills of Lading the consignee, “care of the agent of Almatrans S.A. in Ravenna” could be anyone.  Furthermore since the party bringing the arrest proceedings was Almatrans-Interferries Lines S.A. then that is the party to whom the LOU was in truth addressed.

10.	Almatrans rely primarily on the law of misnomer, a concept which was recently reviewed by the Court of Appeal, and by Lord Justice Rix in particular in Dumford Trading A.G. V. OAO Atlantrybflot [2005] 1 Lloyds 289.  In his Judgment Lord Justice Rix suggested that the doctrine of misnomer is of uncertain width.  It is clearly a doctrine of construction but it is not plain to what extent it permits extrinsic evidence.  The Lord Justice continues:-

“Davies v. Elsby Brothers Limited would suggest that where there are two possible entities, the rule is a strict one: unless one can say from the four corners of the document that the parties must have intended to refer to one rather than the other entity, then the doctrine does not apply.  If, however, there is only one possible entity, then it is possible to use extrinsic evidence to identify a misdescribed party.  It is arguable that Nittan v. Solent Steel falls into this latter category.  Moreover, the cases, as does common sense, suggest that a case of mere misnomer is not easily (query if ever?) concluded to be such without the mistake being explicable.”

11.	Mr Geary submits that there are two possible contenders here and that extrinsic evidence is not admissible to explain any mistake.  I disagree.  There is in truth only one candidate , Almatrans S.A., because Almatrans-Interferries Lines does not exist.  Furthermore the text of the LOU refers to obligations “in respect of the above claims” which can only be a reference to those being secured by the arrest, which are those set out in the statement of claim document and which surrounding papers show belong to Almatrans S.A..  As soon as one looks at the substance of the “above claims” referred to the nature of the error becomes clear.

12.	Steamship also submit that a claim for rectification should fail because even though there may be a mutual mistake there is no outward expression of accord between the parties.  I disagree.  The parties to the contract agreed that the LOU would be addressed to the party bringing the claims, or in a position to do so.  As a result of an error by Almatrans’ lawyer the contract was written up with a company that did not exist.  The outward expression of accord was almost self- evident.  There is convincing proof that the document did not , at the time it was entered into, record the parties’ true intentions about what they were seeking to achieve.  If a claim for misnomer failed then one for rectification would succeed.

Implied Terms and Implied Conditions Precedent 

13.	The terms sought to be implied are, as I have mentioned, first that notice would be given to Steamship of the commencement of and progress of the proceedings and secondly that any judgment giving rise to a claim under the LOU would be properly obtained and notified to Steamship. The Defendant submits that it is an obvious inference to be drawn from the words used in the agreement that notice would be given to it.  Steamship was the party at risk of having to pay the judgment.  That risk was always clear to the parties and it is known that one-ship companies become insolvent and/or disappear all the time.  It is easier for both sides if the club is notified and without notice the club has little protection.  The club will rarely take account of security from its member since this would defeat the point of membership in the first place.  The fact that club rules contain claims control provisions is irrelevant. These provide only notional protection against a one-ship company member.  Steamship also rely on the general practice of lawyers being, as in this case, instructed on behalf of the club and member jointly at the outset.  Notice should obviously be given to those lawyers if legal process is starting.  Steamship also say that the contract envisaged that the parties would take action in Italy and that the professional rules of conduct of the Italian bar also shape the existence of an implied term.

14.	Almatrans resist the implication of a term.  They emphasise that the court must look at the situation at the time of the contract, not at subsequent events.  The LOU was conventionally negotiated.  According to Mr Palandri, cargo receivers sometimes ask for a clause nominating solicitors to accept service, sometimes they do not.  If terms were to be implied in this case they would be implied into every LOU that does not already contain the provisions explicitly.  If such terms are to be implied it is odd that there are no authorities or text book commentaries pointing it out.  It is not uncommon for LOUs to contain provisions by which P and I clubs agree on behalf of a member to nominate lawyers within the jurisdiction, as one sees from a textbook standard form which Almatrans has produced.  Steamship could have included these terms in the LOU had they wished.  According to Mr Palandri it was usually cargo receivers who sought clauses nominating solicitors, and clubs would not usually give instructions for these to be included on their own account.  Once a company in the position of Almatrans had obtained security its interest lay in establishing a claim falling within the terms of the LOU by bringing proceedings against Tutova.  Steamship had the opportunity to make a provision of the LOU conditional on Tutova supplying counter security and to include appropriate claims control provisions within its membership rules.  In answer to Steamship’s suggestion that the taking of counter security was rare and that claims control provisions would not assist in reducing exposure to the disappearance of one-ship companies , Almatrans point out that Steamship  has the option to refuse security, and its rules give the club the power to take counter security and contain detailed claims control provisions.  If these are inadequate it is for the club to include appropriate express terms in its LOU’s.  Such implied terms sit ill with the obligation in the LOU to pay without qualification on demand.

15.	Almatrans also argue that even if terms were implied there was no breach because notification to Steamship was or should have been given as a result of Tutova being put on notice of and being served with the proceedings.  Further Almatrans say that Steamship were notified when Avv Tassinari spoke to Avv Novelli on 24 March 1999.

16.	Before expressing a view on this issue I must also consider two other issues which Steamship contend are relevant to the question of implying a term, first sharp practice and secondly the professional duties which Italian lawyers owe to notify each other when proceedings are taken between their clients.

17.	Despite the fact that the question of whether or not a term should be implied is considered as at the time the parties enter into their contract Steamship submit that what they say is sharp practice is still relevant.  That sharp practice was what Steamship contend was a deliberate decision by Almatrans to keep the Club in the dark and thereby cause it prejudice.  They say that Almatrans knew of the involvement of the Club and lawyers representing both it and Tutova from the outset.  Almatrans knew that the Club was always the party at risk but avoided each one of the countless opportunities to inform the Club or its lawyers of the existence and progress of the proceedings.  Avv Tassinari should have told Avv Palandri of the position in May 1998 when they corresponded about the return of the guarantee.  Avv Tassinari disclosed to Avv Palandri, as the latter’s evidence shows, that he had not revealed the matter because he was under no obligation to do so and it would have prejudiced his client’s position it he had.  This was a position that astonished Avv Palandri who said that he would have expected any lawyer to disclose the existence of proceedings as a matter of course.  When Richards Butler put the matter to Avv Tassinari in correspondence he replied that he had had “no duty to inform people about it”.  Steamship suggest that the underhand nature of Almatrans’ conduct is clear when it is borne in mind that the Claimants had heard nothing from Tutova for years, knew of no assets and had had no correspondence with them since 1995.  Tutova itself had disappeared from sight and might no longer exist.  Furthermore the Claimants were seeking what was in effect a default judgment.  Although the Judge in Ravenna would call evidence it would obviously be easier to obtain a judgment without opposition and, in this case, the Judge had specifically stated that non participation was an indication “according to the case law of the indifference” of the Defendant.

18.	Steamship also submit that Avv Tassinari’s claim to have notified the club by his conversation with Ms Novelli in March 1999 is unconvincing and should be rejected.  Avv Tassinari’s recollection of this conversation is rejected by Avv Novelli who says this in her statement:-

“I have no recollection of any oral communications between us at that time in respect to such a hearing and there is nothing on our files to confirm the alleged conversation took place.  Had I been contacted by Avv Tassinari in respect to this case I would immediately have advised Avv Palandri…”

19.	Steamship submit that if this conversation had taken place it would have been with Avv Palandri in the Genoa office not Avv Novelli and there would have been some record of it in writing.  Further Avv Tassinari’s recollection is in any event suspect since according to the pleadings, he had originally recalled having contacted the clubs lawyers not just in March 1999 but in October 1999 as well.  As I see the matter, it is for Almatrans to establish the existence of this conversation, should it be directly relevant.  It seems to me that they fail to do so and that Avv Tassinari’s recollection is probably less reliable than that of Avv Novelli.  If there had been such contact I would have expected Avv Novelli’s firm to have some record of it.  Further I am working only from witness statements following Avv Tassinari’s late inability to attend court to give evidence.

20.	Apart from the witness statement of Avv Tassinari I had the assistance of the live evidence of Mr Macris whose approach to the prosecution of this claim appears to have been both slow and low key.  He recollected that when the time came to press the claim he thought it appropriate to go ahead in Italy and instructed Avv Tassinari to do the necessary.  He said that he had felt under no obligation to inform the Club of the steps that were being taken or to invite them to participate at that point.  It was an issue he would leave to Avv Tassinari.  He was aware of no discussion with his client or Avv Tassinari about the issue.  He simply wanted to obtain judgment from the Italian court in order to claim on the LOU.

21.	The Code of Conduct of the Italian Bar has a section dealing with “relationships with colleagues”.  Under article 22 “a lawyer has to keep a behaviour with colleagues imbued with the spirit of correctness and loyalty… a lawyer is bound to promptly answer to the request of information from a colleague” (Avv Palandri’s translation).  Avv Palandri takes the view that Avv Tassinari’s conduct in May 1998 was a breach of article 22.  Avv Longanesi took a different view.  He considered that he might have felt under a personal duty to Avv Palandri as a result of the close relationship between their respective firms being, it seems, the two leading maritime firms in Ravenna who are on opposite sides in most matters.  His view was that under Italian law there was no obligation for a lawyer to inform the other side of the commencement of proceedings even when they are already in correspondence.

22.	The evidence of the motivation of Almatrans consists of the correspondence, the witness statements and the live evidence of only one witness Mr Macris.  It is insufficient to justify a finding of sharp practice of the kind alleged by Steamship.  The picture I have is that this claim was being pursued slowly, inefficiently, without a great deal of thought and against a background where neither Mr Macris nor Avv Tassinari thought that they were under an obligation to notify Steamship at any point.  As I have found they did not notify Steamship by informing Avv Novelli.  Avv Tassinari was not reported to the Italian Bar by Avv Palandri so the question of professional conduct remains, in this context, a grey area as it sometimes is in England.  In this country it is not always the case that solicitors are obliged to inform their opponent of the issue of proceedings particularly where there is a potential risk of defendants disappearing or disposing of assets.  Avv Tassinari’s continued policy of not disclosing the existence of the proceedings to the lawyers acting for the club and Tutova may be seen as objectionable by many including me but there is no evidence that either Mr Macris or Mr Tassinari did not genuinely believe that they were entitled to take the position that they did or that such conduct contravenes the Code.  Furthermore it is particularly difficult for a Judge in England, including one who has enjoyed the privilege of working in a partnership with  Italian lawyers, to form a considered view about the professional duties owed to each other by members of the Italian Bar lacking ( as I do) the necessary experience, background and informed intuition.  Neither the allegations of sharp practice nor the claims about the Code support the implication of terms.

23.	As I see it there is no justification for the implication of terms in this case.  The LOU is in conventional form and explicit.  It was negotiated by lawyers to the parties who had the opportunity to consider carefully what the document should say. If Steamship had required notice of the start of proceedings as well as of any judgment it could have asked for this to be provided . Mr Geary points out that this is the invariable objection to any term sought to be implied. That may be but it is an objection that ,as I see it , carries force in the context of this case . Furthermore the LOU is a common form of document which, despite being governed by English law and subject to the jurisdiction of this court, is widely used across the world often, as here, by those whose first language is not English.  The court is more cautious about  assuming a chorus of ‘yes of course’ than it might be in a domestic case unaffected by these considerations or the effect of different legal systems and professional assumptions. If this litigation had been conducted in London and an approach adopted similar to that used by Avv Tassinari in this case I would have placed it towards the bottom of the range of acceptable conduct. That does not assist Steamship in its efforts to imply terms.  The proposed terms fail the test invoked by Steamship.  It would not have been obvious to the parties in this case that it was intended that notice would be given to the Club or its lawyers of proceedings being taken against Tutova.  If the LOU had contained a nomination of lawyers provision, the position might well have been different.

Sharp Practice

24.	An additional defence relied upon by Steamship is that “to enforce the judgment by calling upon the letter of guarantee would be contrary to public policy” because the Claimants made a deliberate decision not to inform the Defendant or their lawyers or the issue or progress of proceedings.  This defence was at the forefront of Steamship’s closing submissions.  Mr Geary submits that where sharp practice exists the court will be quick to find a remedy.  He supports his submissions by reference to two cases.  The first is Niru Battery Manufacturing Co v. Milestone Trading Ltd [2004] QB 985 at1004 in which Lord Justice Clarke, as he then was, agreed with what the trial judge had said about the limits of good faith.  But this was in the context of a case about restitution and unjust enrichment and within a discussion about the circumstances in which a bank will be held to have acted otherwise than in good faith.  The second case is BCCI v. Ali [2002] 1 AC 251 at 267.  Lord Nicholls under the heading “Sharp Practice” considered the situation where a party to whom a release from liability was given knew that the other party had or might have a claim and also knew that party was ignorant of the fact.  He said that in some circumstances seeking and taking a general release in such a case could be unacceptable sharp practice.  He added “when this is so, the law would be defective if it did not provide a remedy”.  I do not read  remarks later in the passage that he preferred to leave discussion of the route “by which the law provides a remedy where there has been sharp practice to a case where that issue arises for decision” as an indication of the existence of a general principle of general application beyond the context with which the House of Lords was concerned in that case.  Mr Geary was unable to provide any other authority to support his submissions in this area.  That particular defence accordingly fails.

Defects and Insufficiency of Service of Italian Proceedings

25.	It is common ground that a guarantor such as Steamship is only liable to the extent that the principal is liable to the creditor.  It follows that the club is not liable if as Steamship claims the judgment is of no effect against and unenforceable against Tutova.   I emphasise that the question is ultimately one of Italian law.  Steamship says that the judgment is a nullity and of no effect because proceedings were not properly served on Tutova according to either Italian or Cypriot law.  Almatrans accepts that service in Cyprus was irregular and as a result irregular as a matter of Italian law but claims that this  does not as a matter of Italian law make the judgment a nullity.  This issue requires consideration of the facts of what happened with the efforts to serve the proceedings and involves also an evaluation of the relevant Cypriot and Italian law.  

26.	I set out below, taken from the papers and the skeleton arguments an adaption of the chronology of the Claimants setting out the sequence of events by which service was attempted.

31/07/97
	
Almatrans issue a Writ against Tutova in Ravenna.	

11/10/97	
Avv Tassinari requests the Ravenna court to serve the proceedings on Tutova in Cyprus at its registered office, 19 Themistocles Dervis Street, and at the offices of Seaward which by then had moved to 27 Gr. Afexentiou Street, Larnaca.  Italy and Cyprus are parties to Hague Convention of 1965.

13/11/97	
Affidavit of Non – Service sworn by Mr. Antoniades, Bailiff of the Supreme Court of Cyprus.  Service not effected at the registered office as no such company at the address.

14/11/97	
Certificate of Failure to Effect Service of Foreign Process issued by the Chief Registrar of the Supreme Court of Cyprus.  Same reasons as Affidavit of Non-Service.

16/12/97	
Avv Tassinari asks the Ravenna court bailiffs to serve the Writ on Tutova at the offices of Seaward Services by post and through the Cypriot authorities.

16/12/97	
Documents for service on Tutova at the offices of Seaward Services sent by post.

08/01/98	
Seaward Services acknowledge receipt.

12/05/98	
Ravenna Judge agrees to Almatrans’ request to repeat service of the Writ of Summons as earlier service took place less than 120 days before date of first scheduled hearing.

22/05/98	
Affidavit from Mr. Antoniades confirming service of the Writ of Summons pursuant to the request on 16 December 1997 at 41 Them Dervis St. and accepted by Mr. Vrachas.  (This Affidavit may not be accurate).

25/05/98	
Certificate of Service of Foreign Process from the Chief Registrar of the Supreme Court of Cyprus.

30/07/98	
Avv Tassinari requests service of the Writ of Summons on Tutova, following 22/05 hearing, at 19 Them Dervis St. and on Mr. Pelaghias, as director, at 41 Them Dervis St, but not on Seaward.

10/09/98	
Affidavit of Service from Mr. Antonaides, court bailiff, confirming Writ served on Mr. Pelaghias at 41 Them Dervis St. on 09/09/98 and stating that the documents had been received by Mr. Vrachas.  Statement from Mr Vrachas confirms receipt of documents but not his acceptance of service.     

10/09/98	
Certificates of Service from the Chief Registrar of Cyprus.

10/09/98	
Affidavit of Service from M. Antonaides, confirming that Writ served on Tutova at 41 Them Dervis St. and stating that the documents had been received by Mr. Vrachas.

27.	Mr Christodoulos Pelaghias is a Cypriot lawyer based in Larnaca who is or was a director of Tutova, and the only board member based in Europe and also a director of Seaward, the company secretary.  His connection with 19 Them Dervis Street ended a long time ago.  He has no connection with 41 Them Dervis Street the address of the law firm at which his uncle works in partnership with, amongst others Mr Petros Vrachas, who is an experienced lawyer and secretary of his local bar association. ( Mr Pelaghias had previously been an employee of that law firm but had left before Mr Vrachas joined.) In his witness statement Mr Vrachas says that he did not accept service on behalf of Tutova as such he simply received documents and then telephoned Mr Christodoulos Pelaghias who confirmed his association with Tutova.  When Mr Pelaghias confirmed his associations with Tutova. Mr Vrachas forwarded the document to him by taxis or internal courier.

28.	The next question is how far the service in Cyprus was irregular.  Italy and Cyprus are both parties to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.  Article 5 of the convention provides in relevant part 
“The Central Authority of the State addressed shall itself serve the document or shall arrange to have it served by an appropriate agency, either-
(a)	by a method prescribed by its internal law for the service of documents in domestic actions upon persons who are within its territory, or
(b)	by a particular method requested by the applicant, unless such a method is incompatible with the law of the State addressed.”

As a result Italian law requires that service of process in Cyprus be done by a method prescribed by Cypriot law for the service of documents in domestic actions on persons within its territory.  There are three relevant provisions.  First Order 5 Rule 7 of the Civil Procedure Rules of Cyprus provides:-

“In the absence of any statutory provision regulating service of process upon a corporate body, service of an office copy of a writ of summons or other process on the president or other head officer, or on the treasurer or secretary of such body, or delivery of such copy at the office of such body, shall be deemed good service; and in the case of any company not formed in Cyprus, the copy may be left at its place of business in Cyprus, or if there is no such place, with any person in Cyprus who appears to be authorized to transact business for the company in Cyprus, and such leaving of the copy shall be deemed good service unless the Court or a Judge otherwise orders.  And where by any law provision is made for service of any writ of summons or other process on any corporate body or any society or fellowship or any body or  number of persons, corporate, or unincorporate, the service of the office copy of a writ may be effected accordingly.”

29.	Secondly Section 372 of the Companies Law provides that a document may be served on a company by leaving it or by sending it by post to the company’s registered office. Thirdly  Admiralty Rules 20 and 21, which would apply to the Italian proceedings if brought in Cyprus state, in relevant part
“20.  A writ of summons against a corporation or a public company may be served in the mode, if any, provided by law for service of any other writ or legal process upon such corporation or company.
21.  Where no such provision exists, a writ of summons against a corporation may be served by leaving an office copy of the writ with the President or other head officer, or the clerk, treasurer, or secretary of the corporation.”
  
Case law has applied to the question of service Articles 30.1, 30.3(a) and 30.3(b) of the Cyprus Constitution.  As the Supreme Court put it in Ieras Metropolis of Limassol v Michaelides (Estates) Limited, Civil Appeal 10954:-

“Good service is inevitably connected with the ability of the interested party to be made aware of the reasons why he is required to appear before the Court.  Only then he is provided with the ability to defend.  It  involves a right that has been established as a fundamental personal right.”  

30.	Applying the subsequent case law the two experts are agreed that service of process on a company director or company secretary of a company would be good service but that in this case there was no personal service on Mr Pelaghias so service was irregular.  Mr Araouzos is of the view that where it can be demonstrated that Tutova became aware of the originating process the admitted irregularity would be capable of cure.  Mr Iacovides considers that a Cyprus court could not however cure that irregularity since the jurisdiction, under Order 64 (almost identical to the former RSC Order 2 Rule 1), to cure an irregular service does not extend to foreign proceedings.  Almatrans say that this is obviously correct but the existence of the power is relevant when Italian law reviews the extent of the irregularity. Mr Iacovides also considers that personal service on Mr Pelaghias would still have been irregular because the originating process should have been served on Tutova at its registered office as well.  Mr Iacovides also says that service on Mr Pelaghias was insufficient since there is no evidence that he is a “head officer” under Admiralty Rule 21.  Steamship say that this is a question of fact and there is no evidence that Mr Pelaghias ever exercised any function at all in relation to Tutova.  Almatrans disagree relying on the fact that Mr Pelaghias was a director of Tutova , the only one outside the US, and also of its Company Secretary, Seaward.  Mr Araouzos relies on the case of Lexicon where a senior employee who was not a director was held to have had sufficient status to be a head officer.  Mr Iacovides does agree that if Mr Pelaghias received the proceedings on behalf of Tutova in circumstances which would have enabled Tutova to defend the proceedings (and the case had been brought in Italy not Cyprus) there would be good arguments under the law of Cyprus that any defect in service should be treated as an irregularity rather than a nullity. 

31.	From the material available to me I prefer the view that service at the registered office in addition to one of the other forms permitted is not required because section 372 uses the word “may” and is not expressed in mandatory terms and there seems no indication to the contrary in the authorities cited.  I also consider that Mr Pelaghias would be held to be a head officer for the reasons Almatrans put forward.  Almatrans accept that the Cyprus court could not have cured irregularity in service of originating process on Tutova of a writ issued in Italy.  However they rely on the power of the Cyprus court and the circumstances in which that might be exercised to demonstrate that the nature of the error was an irregularity rather than a nullity.

32.	Whatever the extent of the irregularity under Cyprus law it seems to me very likely that if this had been litigation in Cyprus the court would have exercised its discretion under Order 64 (taken from the former English RSC Order2 Rule 1 of which the court has experience) given that the Claimant appears to have done everything that could have been reasonably expected of it to carry out service through official channels and that the proceedings had clearly been drawn to the Defendant’s attention in two rounds of attempts at service.                   

33.	As with the experts of Cyprus there is no suggestion that those of Italian law are not qualified for to give their evidence.  It is therefore unnecessary for me to set out the qualifications and experience of Avv Longanesi and of Avv Palandri.  As the Italian experts had neither met nor produced a summary of what they did and did not agree  I asked them to produce a brief note before their testimony started.  The experts agree on the principle which determines whether an irregular service is capable of cure but disagree about its application to the facts of this case.  The experts also disagree about the effect of a judgment upon an irregular service otherwise not capable of cure.  I deal first with what is common ground and then with the matters upon which the experts disagree.  I refer, as counsel do, to Italian cases only by number and date.  The exercise is necessarily an unsatisfactory one as the issue would have been much more appropriately determined by the Italian court following some application or appeal by Tutova.

34.	It is common ground that there was an irregularity in service and that whether or not this renders the judgment a nullity is a matter of Italian law.  It is agreed between the experts that Italian law distinguishes between service which is a nullity (and thus capable of cure) and that which is “non-existent”.  Service is a nullity if it is effected at a place and to a person having some relationship with the Defendant.  A judgment is non-existent if it is served on a place or person “in no way and by no means connectable to the address of the service being in no way related to the addressee or writ to be served”. 2998/1991.  On the other hand service is simply null or irregular – with the possibility of cure -  “if delivery is accomplished to a place or to a person other than those provided for by Law but still somewhat related to the addressee of the service.” 9372/1997.  Steamship submit that 9372 was a case within a family faed removal from the facts here and rely on other cases to suggest that the test is more rigorous.  The means by which an irregularity is cured is through the doctrine of “achievement of scope”.

35.	The application of the principle, but not its substance, is an issue.  Steamship say that Italy treats matters of service seriously citing a case where service of a writ handed directly to the Claimant but was non-existent 9772/2005.  Almatrans point out, it seems to me fairly, that the case turned on the fact that the means of service was not one recognised by law . Almatrans rely upon 9372/1997 to which I have referred..  Steamship point out that Mr Longanesi accepted at one point in cross examination although not in his report that the question of the status of the service had to be considered without regard to the fact that Mr Vrachas later passed on the materials to Mr Pelaghias.  Almatrans say that the matter needs to be looked at more broadly and that the process adopted met no objection from Tutova on either service attempt.

36.	Almatrans point out that Avv Tassinari sought to ensure proper service in the right way using the appropriate judicial channels.  Those channels responded confirming  that process had indeed been served on Tutova.  Almatrans also point out that on two occasions Tutova or its representatives actually received the proceedings.  They say that if Almatrans were obliged to serve at Tutova’s registered office and that of Seaward this occurred in the sense of the process being drawn to the attention of those concerned.  Mr Geary for Steamship enlivens the debate by characterising the position as Six Degrees of Separation.  He points out that the writ was served where Mr Pelaghias had never been based and  that he may never have visited 41 Them Dervis Street.  Mr Vrachas had no connection with Mr Pelaghias.  There was no effective service on the registered office and Mr Pelaghias was  a director but not he submits  the “head officer” under Admiralty Rule 21.  Almatrans say that as one of the only directors Mr Pelaghias’ authority is self evident.

37.	The parties accept that I must determine, as a matter of fact whether or not the admitted irregularity in service would, under Italian law, have been cured, or have been likely to be so.  The Italian cases are illustrative of the principles but, as in England, each case turns on its own facts.  Mr Geary’s highly skilful exercise in pointing to the degrees of separation in this case prevails in  the narrower argument about the connections between Mr Vrachas and Tutova.  His arguments have it seems to me  less force when set against the overall context which includes the background of the first round of service attempts and the fact that Mr Pelaghias certainly received a copy of the originating process.  If there was any doubt whether Tutova actually received notice of the action evidence of this would have been before this court. While the latter point may be said to be inconsistent with one remark in cross examination of Avv Longanesi it is consistent with his written report and with what seems to me, from looking at the cases, the way in which the Italian courts have developed and applied a broad test.  
38.	Assuming I am right about that Tutova’s time for appeal would be 30 days from service of the judgment or if the matter only later came to Tutova’s knowledge, one year from that point.  Almatrans say that the judgment itself was valid and was validly served as this was effected upon Mr Pelaghias and also at the registered office of Seaward.  Steamship contests the service to the extent that it was made upon Mr Pelaghias, again on the grounds that he was not the “head officer”.  As I read the law the steps taken would be regarded as good service of the judgment.

39.	If I am wrong on the question of nullity and service is inexistent Almatrans say that even this can be cured by the judgment.  Avv Longanesi relies on two particular principles first that an error “in procedendo” becomes, through the judgment, one “in judicatem” and must be appealed in the action. The judgment cannot be of itself simply of no effect.  272/1996 is a case that indicates that only extreme errors in service are capable of being non-existent but that they lead only to the mere nullity of the judgement.  Mr Geary points out that this case addresses the issue as a hypothetical point being one that was itself one of nullity.  Mr Geary in turn relies on cases cited by Avv Palandri in particular 1528/1992  in which  the Court of Cassation held that there was a nullity not capable of cure leading to a defect in the final judgment so radical as to make it unfit to bring about any effect.  Avv Longanesi appeared to see the force of this and of 1679/2000.  This was a case where one party served with a third party claim in an action between two others challenged the service not in that action but by seeking a separate declaration in different proceedings.  The decision of the Court of Cassation is, Steamship submit, inconsistent with the principle that service is challengeable only by appeal in that action.  It seems to me that Mr Geary is right in submitting on the balance of both logic and the case law that a judgment obtained on the basis of an inexistent service may be unenforceable even without an appeal to set the judgment aside having first been successful.

40.	I therefore conclude that the judgment is valid and of effect notwithstanding the admitted irregularities in service of proceedings as I find that these would have been cured by the Italian court.

Time Bar

41.	Steamship do not raise a limitation defence as such but seek a declaration by counterclaim that the claim was, when issued, time barred.  The basis for this is that under Italian law all claims are barred five years after the discharge of the cargo, in the present case therefore in March 1998.  The experts agree that the running of time can be interrupted by sending an appropriate notice or letter of the claim to a defendant.  Almatrans rely on telexes of 15 September 1995 to Tutova and to Seaward with notice of a claim, a letter to similar effect dated 14 July 1997 sent to Tutova at the offices of Seaward and service of the writ at Seaward by post on 8 January 1998.  Avv Longanesi says that each of these communications would have been effective since notice could be given by serving at a registered office, at the real office or on an appropriate legal representative.  Avv Palandri disagrees.  He says that for the most part notice has to be given to the registered office.  This aspect of the claim, was not pursued with much enthusiasm by Steamship (see for example its written closing submission).  The point is artificial because even if well founded the limitation point would be a substantive defence that should have been taken in the proceedings leading up to judgment.  It is common ground that Steamship cannot look behind the judgment at what might otherwise be a substantive defence to the claim.  I prefer the evidence of Avv Longanesi on this point.  Applying his views of the law the Almatrans claim is not time barred.  The relevance of the time bar point is said to be twofold.  First if it is a good point it demonstrates prejudice suffered to the club by the Claimant’s strategy.  Secondly, if the court dismisses the claim and the time bar point is a good one than it should declare as much and the letter of guarantee be surrendered.  Both these points fall away because of the conclusions I have already reached.

42.	There will therefore be judgment for the Claimant for the principal sum of US Dollars $220,000.  As I understand the position the delay and inefficiency which have pervaded the conduct of this claim until it reached the English lawyers have not prejudiced the Defendant in terms of interest but I await submissions on that point.  The Claimant’s behaviour towards Steamship  has been unsatisfactory.    Steamship’s  safeguard against conduct of this kind lies , as I see it, in how it words its LOUs not in the defences advanced in this case.

43.	I shall be grateful for corrections of the usual kind, a draft order, and for brief notes from counsel stating briefly what if anything further each party seeks and why. I am most grateful to counsel and solicitors for their organisation and presentation of a significant amount of complex material.  

GH006835A/HW