Please excuse the contrived example below, but I am wondering if this example is properly capitalised? I'm assuming that capitals are used when addressing someone directly, but lower case is used elsewhere. Can someone give some rules on this?
The captain walked into the room.
"Hi, Captain," said the admiral.
"Hi, Sir," replied the captain.
"Call me Admiral."
The captain and admiral stepped forward.
"Prime Minister, this is Captain Jones," said Admiral Brown.
"Pleased to meet you," said the prime minister.