BRIGHT SHIPPING LTD v. CHANGHONG GROUP (HK) LTD

HCAJ 3/2018

[2024] HKCFI 821

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 3 OF 2018

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BETWEEN

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DECISION

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1.  This is the hearing of the Plaintiff’s Summons filed on 5 September 2023 (“Summons”). Much of the relief sought in the Summons had been dealt with by the Court on 4 October 2023. What remain are paras 9 and 10 of the Summons, namely :

(1) Within 14 days, the Defendant pay into Court the sum of HK$1,134,188.25 (“Sum”) together with interest accrued thereon. The Sum represents the total liability under various costs orders made against the Defendant in this action. They are identified in para 9 of the Summons. The costs orders had been taxed or assessed by the Court or agreed by the parties;

(2) Unless the Sum and accrued interest are paid into Court within 14 days, the Plaintiff shall be discharged from all liability under para 3 of the Order dated 4 October 2023, namely, the Plaintiff’s obligation to pay 70% of the Defendant’s costs incurred in determining liability in this action.

2.  Given that there is no dispute that the Sum is due and owing for some time (the first unpaid costs order was made on 20 September 2019 and taxed on 27 May 2022), the burden is squarely on the Defendant to demonstrate why it (with the accrued interest) should not be paid into Court.

3.  The Defendant relies on one main ground to resist this application, namely, the risk of secondary sanctions by the US Government under the Iranian Transaction and Sanctions Regulations (“Sanctions”), which were made by the executive branch of that government.

4.  Before giving a brief summary of the Sanctions, it should be pointed out that it is accepted by the Defendant that this Court’s jurisdiction and powers are not in any way constrained by the Sanctions. Quite rightly, the Defendant accepts that this Court has the jurisdiction to make the order sought by the Plaintiff.

5.  According to the evidence filed by the Defendant, the Sanctions were re-activated in November 2018 after the US had withdrawn from an accord reached between Iran and, inter alia, the 5 permanent members of the UN Security Council under which the former was relieved from various international sanctions.

6.  The Sanctions prohibit US persons and foreign entities owned or controlled by US persons from engaging in transactions and activities with Iran and/or the Government of Iran.

7.  The Defendant is a company incorporated in Hong Kong. Its insurer, Skuld (“Insurer”), is a Norwegian P&I Club. The Insurer is neither a party to these proceedings, nor is liable for the Sum (it may have a contractual obligation to indemnify the Defendant against the payment of the Sum). In respect of the Plaintiff, it is a company incorporated in Belize. It is not a sanctioned entity, and the vessel “SANCHI” it used to own (it was sunk by the collision with the Defendant’s vessel) had been removed from “Specially Designated Nationals List” (“SDNL”) kept by the US Department of Treasury’s “Office of Foreign Assets Control” (“OFAC”). On the other hand, the uncontradicted evidence of the Defendant is that the Plaintiff was indirectly owned by the National Iranian Tanker Co (“NITC”), which was also the ship manager and operator of SANCHI at the time of collision. At that time, it was loaded with a cargo of natural gas condensate which originated from the National Iranian Oil Co (“NIOC”). Both NITC and NIOC are understood by the Defendant to be Iranian companies ultimately owned by the Iranian Government.

8.  The Defendant says the Sanctions authorise the US Secretary of Treasury to impose sanctions on a person (not expressly limited to US persons or foreign entities controlled by US persons) if they materially assist or provide financial support for persons on the SDNL, which includes NITC and NIOC.

9.  On the evidence, I accept that the Defendant (and the Insurer) is genuinely concern with the possibility of secondary sanctions, and has been trying its best to obtain a “specific licence” from the US Government for approval to honour its obligations to the Plaintiff since 16 June 2021. However, it was rightly pointed out by Mr Sussex SC, who appeared for the Plaintiff, that the Defendant’s evidence did not provide any explanation on how the Sanctions may have any effect on it, which is a Hong Kong company. The evidence directed almost exclusively to the potential effect on the Insurer. The exchanges between the Defendant’s solicitors and the US Department of Treasury or OFAC show much procrastination on the part of the US Government.

10.  Whilst this Court accepts that the Defendant’s concern is genuine, the concern has to be scrutinized a little closer to evaluate its quality and to see if it can balance out the Plaintiff’s undoubted entitlement to the Sum.

11.  To begin with, Mr Sussex rightly made the point that the Plaintiff is not a sanctioned entity and SANCHI had been removed from the SDNL. The costs orders represent a debt owed by the Defendant to a Belize entity. It is trite law that a shareholder, or any other person with a controlling interest in a company, has no interest whether legal or equitable in the assets of that company. There is no reason demonstrated that the US Government would ignore clear principles of law.

12.  Mr Glover, who appeared for the Defendant at the adjourned hearing, made the point that the Sanctions were designed to lift the corporate veil in achieving the desired effect. Whilst the point may have some force, the evidence before the Court does not show why or how the discharge of costs liability to the Plaintiff will infringe the Sanctions.

13.  Further, the costs orders arose from the Plaintiff’s entitlement to bring proceedings to remedy the wrong committed by the Defendant in sinking its ship. It is difficult to understand how they can be characterised as material assistance or financial support for Iranian entities on the SDNL.

14.  The Defendant says that payment of the costs orders is likely to be viewed by the OFAC as material support “because such a payment would reduce the financial obligations or liability of the SANCHI interests”. First, the proposition that payment of costs ordered against the Defendant would reduce the financial obligations or liability of the SANCHI interests is not easy to understand, and not one which the Court can simply rely upon to further delay the discharge of the Defendant’s liabilities. If the proposition is that the “SANCHI interests” have a liability to pay their solicitors and the payment into court would reduce such liability, then unless the Court ignores the fact that SANCHI was owned by the Plaintiff, this action was brought by the Plaintiff and the work done by its solicitors in this action must be payable by the Plaintiff, the argument cannot get off the ground. There is no reason why the Court should ignore the facts.

15.  In Fortenova Grupa v LLC Shushary Holding [2023] EWHC 1165 (Ch) at [37], [40]-[43], the Court permitted the claimant to redeem loan notes held by a subsidiary of a Russian bank which was subject to international sanctions, by making a payment into court (see also Celestial Aviation Services Ltd v Unicredit Bank AG [2023] EWHC 663 (Comm), at [175]). It is important to note that the redemption was indisputably unlawful in that case, which is a distinguishing feature with the present where there is no lawfulness in the payment of outstanding costs order. Perhaps more importantly, I agree with the Mr Sussex that a payment into court cannot be regarded as payment to any person. It is only at the stage where payment out of court is ordered that the payment would be made to a specific entity. In the circumstances of this case, it appears that payment into court is a legitimate way in which an innocent party may seek relief from the risk of sanctions.

16.  Further, as pointed out by Mr Sussex, it is inherently unlikely that any sanctions would be imposed upon an entity for compliance with a court order. The Court is entitled to assume that the US Government will not conduct itself unreasonably.

17.  In respect of the Defendant’s belief that “it is possible that a positive response will be received from the OFAC in the near future”, I cannot see the support for such optimism from the correspondence. It is therefore little more than speculation.

18.  It should be added that during the adjournment of this hearing various efforts were made by the Defendant and the Insurer to press OFAC to expedite the processing of the application for “specific licence” as a matter of urgency. The matter remains unresolved after almost 3 years.

19.  As regards the Defendant’s contention that the Plaintiff has the liability to pay 70% of its costs incurred on liability, which exceed the Sum and accrued interest owed to the Plaintiff, such costs of the Defendant are yet to be taxed. Further, there is no evidence on the amount of the costs or their reasonableness. Mr Sussex submitted that the Defendant’s costs entitlement are limited given that the trial was conducted in Shanghai and much of the work done for the purpose was adopted by the Defendant in this action.

20.  Furthermore, there are other outstanding costs orders in favour of the Plaintiff. The taxation of the same are on foot. The bills of costs amount to nearly HK$ 3 million in total. The costs owed to the Defendant must be balanced against such further liabilities to the Plaintiff on its part.

21.  The Defendant also contends that the sanction for non-compliance with the unless order sought by the Plaintiff is excessively harsh (see para 1(2) above). It must be right that the unless order should be backed by sanction. Mr Glover was asked by the Court what effective alternative sanction there may be, and none was identified. There is no evidence that the Defendant (and/or the Insurer) is financially incapable of paying the Sum. Therefore, the sanction needs not come into effect.

22.  I am unable to accept the Defendant’s submission that there is no prejudice to the Plaintiff by reason of delay in receiving the Sum. Money due and not paid is itself a prejudice. It is the deprivation of an entitlement.

23.  Finally, I am unable to agree with the Defendant that the Court is being used as a debt collection agency by the Plaintiff. First, the payment into court would serve to alleviate the Defendant’s concern about secondary sanctions (see Fortenova Grupa, supra). Second, it would not be a sensible deployment of the Court’s resources to decline this application with the knowledge that a different application will likely be made by the Plaintiff to enforce the costs orders.

24.  For these reasons, I do not believe that the Defendant has demonstrated a well-found concern of secondary sanctions or any good reason to resist the relief in question. I make an order in terms of paras 9 and 10 of the Summons. The costs of and occasioned by this application be paid by the Defendant, to be taxed if not agreed.

25.  I am grateful to counsel and Mr Glover for their assistance.

Mr Charles Sussex SC, instructed by Holman Fenwick Willan, for the Plaintiff

Mr Colin Wright, instructed by Reed Smith Richards Butler LLP (on 23 January 2024) and Mr Peter Glover of Reed Smith Richards Butler LLP (on 19 March 2024), for the Defendant

HCAJ 3/2018

[2023] HKCFI 2990

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 3 OF 2018

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D E C I S I O N

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1.  I will decide two matters first because I find them relatively straightforward. In respect of the third issue, the payment into court, I think it is a bit controversial and difficult.

2.  There are three issues before the Court today. The first issue concerns para 1 of the Plaintiff’ Summons seeking an order of apportionment in respect of liability to reflect what has recently been decided in the Shanghai Maritime Court, namely, that the liability for the collision in question should be apportioned such that the Plaintiff was 70% to blame and the Defendant was 30% to blame. The second issue concerns the costs order which should be made in respect of the costs incurred so far. The Plaintiff says that it should equally reflect the order of the Shanghai Maritime Court, namely, that the Defendant to pay 30% of the Plaintiff’s costs of determining liability and the Plaintiff to pay 70% of such costs incurred by the Defendant.

3.  In respect of the first issue, I have considered the somewhat lengthy submissions put forward by the Defendant. I have not noticed anything said in respect of the basis of this application by the Plaintiff, namely, that given the determination of the Shanghai Maritime Court there is an issue estoppel which binds the parties. Nothing has been said about this, and Mr Wright who appears for the Defendant has been given the opportunity to inform the Court if there is any dispute on the application of that principle and nothing has been advanced. In these circumstances, I think there can be no serious alternative but to make the order sought by the Plaintiff. I should deal with the terms of the order in a minute.

4.  In respect of the second issue on costs, first of all, as regards the Defendant’s position concerning an opportunity to file evidence and so on, there is nothing in Mr Wright’s submissions on what specifically is the relevant evidence which the court requires for the determination of the issue in question. Again, Mr Wright has been given the opportunity to inform the Court what evidence there can be which is relevant, and nothing has been advanced.

5.  The Defendant contends that the Plaintiff should bear the costs of the trial on liability, which was adjourned sine die with liberty to restore shortly before it was to start on the Plaintiff’s application. The Defendant says that the costs of the trial were wasted because, in short, the Plaintiff should not have proceeded in parallel with both the trial on liability in the Shanghai Maritime Court[1] as well in this jurisdiction. I am afraid that I do not find that to be a properly grounded proposition because the fact of the matter is that the Plaintiff was entitled to bring proceedings against the Defendant in Hong Kong. That was confirmed by not just the decision of this Court, but also the Court of Appeal as well as the refusal of leave for the Defendant to appeal further. Given the Plaintiff’s entitlement to bring proceedings against the Defendant in Hong Kong, I see nothing wrong in principle for the Plaintiff to proceed with the trial.

6.  It is not disputed that there was a race perceived by the parties as to whether the Shanghai Maritime Court or this Court would be quicker in the determination of liability. As it happened, the trial on liability by the Shanghai Maritime Court took place and concluded in 2020. At that stage, only the decision was pending and the Plaintiff in those circumstances applied to the trial Judge, Mr Justice Ng, to adjourn the trial sine die with liberty to restore. The matter was fully ventilated and resulted in a detailed Decision by the learned Judge dated 7 April 2022 ([2022] HKCFI 920). In that Decision, the learned Judge dealt with much of the substance of the submissions now being advanced, namely, the Defendant’s complaints that the Plaintiff was gaming the system and it was playing with tactics. The treatment of those complaints can be seen in paras 37-38 of the Decision.

7.  I think it must be accepted that once the Plaintiff is entitled to sue the Defendant in Hong Kong, it must be entitled to have the matter tried. The fact that the Shanghai Maritime Court in a sense had done better than this jurisdiction in terms of speed in dealing with the trial on liability is not a matter for which the Plaintiff can be criticized. In any case, the Plaintiff must have a judgment in Hong Kong before it is entitled to have the quantum assessed, so I do not see any real objection in principle for the Plaintiff to proceed with the trial here. Sensibly, as accepted by Mr Justice Ng, the matter was then adjourned sine die because at that stage the Shanghai Maritime Court had already tried the matter and only the decision was outstanding.

8.  For these reasons, I do not believe that the Defendant has made out any good resistance to the order of costs proposed in paras 2 and 3 of the Summons.

[The third issue was adjourned for argument.]

Mr George Lamplough of Holman Fenwick Willan, for the Plaintiff

Mr Colin Wright, instructed by Reed Smith Richards Butler LLP, for the Defendant

HCAJ 3/2018

[2022] HKCFI 920

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 3 OF 2018

________________________

________________________

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DECISION

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Introduction

1.  This is an in personam action commenced on 9 January 2018.  This Action concerns a collision between the Plaintiff’s tanker SANCHI (“Sanchi”)  and the Defendant’s cargo vessel, CF CRYSTAL (“Crystal”). The collision took place on 6 January 2018 in international waters viz the East China Sea. 

2.  There is no dispute that the jurisdiction of the Hong Kong Court was invoked by the Plaintiff as of right, having served these proceedings on the Defendant at its registered address in Hong Kong. 

3.  There is before this court the Defendant’s Summons filed on 30 October 2020 (“Summons”)  for a permanent stay of this Action under RHC O 12 r 8 and the inherent jurisdiction of the Court in favour of the Shanghai Maritime Court (“SMC”)  on the grounds of forum non conveniens and lis alibi pendens viz SMC is the natural forum for the determination of the Plaintiff’s claim and that there are proceedings pending between the parties in the SMC.  The Defendant’s application is almost 2 years out of time, having filed its Preliminary Act on 24 December 2018[1].  Hence, at paragraph 1, it seeks an extension of time for the filing of the Summons. 

4.  This application is the Defendant’s 2^nd attempt to stay this Action.  Previously in May 2018, the Defendant had applied for a stay of this Action on the same grounds of forum non conveniens and lis alibi pendens in that the proceedings should be conducted in the SMC instead of Hong Kong (“1^st Application”).  The 1^st Application was dismissed by A Chan J on 15 November 2018.  Firstly, the learned Judge held that the Defendant has failed to discharge its burden in relation to the Spiliada Stage 1 analysis.  While the Plaintiff accepted that the collision took place on the high seas and there was no natural forum to determine the liability for such a collision, the Defendant had failed to get pass the Stage 1 requirement of establishing the SMC was “clearly and distinctly” more appropriate than the Hong Kong Court. Secondly, the learned Judge held that a significant difference in tonnage limitation applied in Hong Kong and the Mainland[2] was a very important, if not decisive, personal juridical advantage in favour of refusing a stay: Bright Shipping Limited v Changhong Group (HK)  Limited[2018] HKCFI 2474 at [17] - [18], [23] and [55] - [56].

5.  A Chan J’s decision in relation to the Spiliada Stage 1 analysis was upheld by the Court of Appeal: Bright Shipping Limited v Changhong Group (HK)  Limited [2019] 5 HKLRD 30 at [63].  A Chan J’s decision in relation to the Spiliada Stage 2 analysis on the significant disparity in tonnage limitation between Hong Kong and the Mainland was also upheld by the Court of Appeal on an obiter basis ie the Plaintiff has shown that it would be deprived of a legitimate juridical advantage if this Action were tried in the SMC: supra at [64] - [72]. 

6.  The Defendant went all the way up to the CFA at the leave to appeal stage.  Its application for leave was dismissed by the Appeal Committee on 13 July 2020 with reasons handed down on 16 July 2020. 

7.  The basis of the present application is that since the 1^st Application was determined against the Defendant, there have been significant new developments.  The Defendant submits that contrary to the Plaintiff’s previous stance of (i)  avoiding the proceedings in the SMC[3] and (ii)  seeking an early trial of liability in this Action[4], the Plaintiff:

(1)  started to participate in the SMC proceedings shortly before the hearing before the Appeal Committee on 13 July 2020, by firstly instructing lawyers to appear at a pre-trial hearing on 30 June 2020 for disclosure and exchange of evidence and subsequently to argue the merits of the inter-ship liability at the trial before the SMC which concluded on 14 July 2020; and

(2)  after the parties had incurred costs in preparing for the trial of liability in this Action scheduled on 14 October 2020, applied by summons dated 11 September 2020 to adjourn the trial sine die with liberty to apply, in order to wait for the ruling on liability pending before the SMC - at the hearing on 16 September 2020, this court granted the adjournment. 

(“New Developments”)

8.  For the record, the Defendant did not oppose the adjournment of the trial as such.  At paragraph 15 of the Defendant’s skeleton for the hearing on 16 September 2020, it submitted that:

“Although the Defendant does not object to the exceptional indulgence that the Plaintiff seeks, the Defendant ought not to be burdened with the costs of the application and thrown away consequent upon the adjournment – costs which will have been increased by the Plaintiff’s unexplained and unforgivable delay.”

9.  At the time of the hearing of this application, Judgment was still pending in the SMC.  On 8 November 2021, the SMC handed down its Ruling on liability in which Sanchi was 70% to blame for the collision and Crystal was 30% to blame.  Both parties have appealed against the Ruling.

Background

10.  The basic facts of this Action were set out in the Decision of A Chan J (“1^st Decision”).  For ease of reference, they are repeated below. 

11.  The Plaintiff was incorporated in Belize.  The Defendant is a Hong Kong incorporated company with a registered office in Hong Kong.

12.  Sanchi flied the Panamanian flag.  Her crew were Iranian and Bangladeshi.  At the time of the collision, she was loaded with 115,000 tonnes of natural gas condensate and was on her way from Iran to South Korea.  She was managed by an Iranian company, National Iranian Tanker Co (“NITC”)  which has a representative office in Shanghai.  Crystal flied the Hong Kong flag and her port of registry was Hong Kong.  She was laden with nearly 64 m.t. of sorghum cargo and was on a voyage from Port Kalama in the USA to Port Machong, Guangdong, PRC.  Her crew were all Chinese nationals.  She was managed by Changfeng Shipping Holding Ltd (“Changfeng”), a company incorporated in Hong Kong.

13.  Sanchi exploded immediately upon collision and both vessels caught fire.  Crystal managed to reverse her engine and escape the fire.  Her crew abandoned the vessel but returned to successfully extinguish the fire on board.  Afterwards, she safely proceeded to and berthed at Zhousan, Zhejiang, PRC.  Sanchi kept burning and drifting after the collision.  Eventually, she sunk at a location around 151 nautical miles southeast of the point of collision on 14 January 2018.  None of her officers or crew survived the accident.

14.  Pollution resulted from the collision was in the form of spilt bunkers and natural gas condensate. 

15.  The Mainland authorities had been heavily involved in all aspects of the aftermath of the collision, including investigation and pollution issues.  Following the collision, a multi-national task force, led by the Shanghai Maritime Safety Administration (“MSA”)  with participants from Hong Kong, Iran and Panama, carried out an investigation. On 11 May 2018, a 191-page report of the joint investigation was submitted to the International Maritime Organisation (“IMO”). 

16.  The collision was followed by a number of legal actions. 

17.  This Action was commenced on 9 January 2018.  Also on 9 January 2018, the Defendant applied to establish in the SMC two limitation funds, one for personal injury claims and one for property loss/damage claims. On 11 January 2018, the Defendant commenced the SMC proceedings against the Plaintiff and NITC.  The Plaintiff has not filed a claim against the Defendant in the SMC.  It is time-barred from doing so now.

18.  On 30 January 2018, the Defendant brought an action in the SMC against NITC as cargo shipper and a Korean entity as cargo consignee in respect of the collision.  In addition, the insurers of Crystal’s cargo brought an action in the SMC against, the Defendant, the Plaintiff and NITC in respect of the loss of cargo on Crystal.  There are also cargo claims against the Defendant.  Further, there are emergency response and pollution related claims, two of such actions involve the Plaintiff. 

19.  As of 22 October 2018 ie the hearing of the 1^st Application before A Chan J, the Plaintiff has not submitted to the jurisdiction of the Mainland Court in any of those proceedings. 

Deliberation

20.  The Defendant’s contention, as summarised in Mr Scott SC’s skeleton, is this:

(1)  This Court has jurisdiction to and should reconsider the Defendant’s stay application on the ground of forum non conveniens and lis alibi pendens or entertain it afresh.

(2)  Given the New Developments, there has been a relevant change of circumstances.  Had the Plaintiff participated in the SMC proceedings from the outset and/or had A Chan J been aware of the Plaintiff’s intended tactics at the time of his decision on 15 November 2018, the Court would have reached a different conclusion and granted a stay.

(3)  The Plaintiff is guilty of abuse of process by way of “gaming the system” so as to achieve the best of both worlds, to the Defendant’s considerable and unfair disadvantage.  The Plaintiff resisted a stay of this Action and obtained an early trial date of this Action on the basis that it had no intention to participate in the SMC proceedings.  Having succeeded in defeating the 1^st Application, the Plaintiff started participating in the SMC proceedings and sought an adjournment of the trial of this Action sine die with a view to reopening this Action in due course and taking what advantage it can of events in the SMC.

(4)  In light of these new circumstances, and given the existence of lis alibi pendens in the SMC, this Court should grant a permanent stay of this Action on the grounds that (i)  the SMC is now the natural forum for the determination of the Plaintiff’s claim and/or (ii)  the Plaintiff is guilty of abuse of process.

21.  The first question for this court is whether the Defendant should be allowed to re-litigate its stay application well out of time. 

22.  In SJH v RJH [2012] 4 HKLRD 308 at paragraphs 9(4)-(7), the Court of Appeal held that RHC O 12 r 8(2)  applied to applications for a stay of proceedings based on forum non conveniens and that an answer filed in divorce proceedings was akin to a defence filed in High Court proceedings.  Since the defendant had already filed his answer, it was clearly too late to challenge the jurisdiction of the Hong Kong Court.  Further, the Court of Appeal held at paragraph 9(13)  that the filing of an answer must be construed as a submission to jurisdiction.

23.  At paragraph 9(6), Cheung JA cited the following observation by Sir Anthony Mason NPJ in Re Resource 1 (2000)  3 HKCFAR 187 at 213:

“ A power to regulate by rules the practice and procedure in actions generally in a superior court must extend to the prescription of time limits within which, and procedures by which, objections on various grounds, including jurisdiction, are to be made. Indeed, in the case of jurisdictional objections, there are powerful reasons for thinking that they should be resolved, as far as possible, at an early stage of an action. It is not right that a court should be venturing upon the merits or substance of an action without determining at the threshold of the action, if it can conveniently do so, that there is jurisdiction to proceed. The prospect of a defendant raising a jurisdictional objection at a very late stage of an action, perhaps after a lengthy hearing and just before the delivery of judgment, is one not readily to be contemplated. Accordingly, in the absence of any compelling contrary consideration, there are strong grounds for holding that the rule making power extends to prescribing a time and method by which a jurisdictional objection is to be taken, at least an objection of the type raised here, in default of which jurisdiction will be exercised.” (emphasis added)

24.  It is true that the Court may in its discretion grant an extension of time under RHC O 3 r 5 even after a defendant has submitted to jurisdiction.  However, the purpose of the power to extend time is to ensure that the legal consequences which ordinarily flow from non-compliance with time limits do not apply in cases where an extension is appropriate: Re Resource 1 at 202-3.

25.  Mr Scott SC also submits that there remains an inherent jurisdiction to stay proceedings on the grounds of forum non conveniens even if RHC O12 r 8 is not applicable: Balram Chainrai v Kushnir Family (Holdings)  Ltd[2019] HKCFI 2866 at [122].  But as Recorder Manzoni SC noted at [123], by submitting to the jurisdiction the 3^rd defendant in that case has effectively debarred himself from successfully applying under RHC O 12 r 8 and so he is only entitled to apply under the inherent jurisdiction in the event that something has occurred since the date of his submission to the jurisdiction which would itself justify a stay.

26.  As far as this court can see, the Defendant is relying on the same New Developments, in particular, the Plaintiff’s application for an adjournment of the trial of this Action sine die which took place after the Appeal Committee had given its ruling, in seeking an extension of time as well as for permission to re-litigate the stay application. If the Defendant cannot get pass the hurdle for obtaining permission to re-litigate the stay application, this court cannot see any point in granting it an extension of time or why an extension is appropriate.

27.  At this juncture, this court should refer to Chu J’s (as she then was)  decision in Re Prudential Enterprises Ltd (No 2) [2004] 2 HKC 205 at [12] - [13] in which the learned Judge held that as a matter of general principle, when an interlocutory application was dismissed, whether on procedural ground or merits, it is not permissible to make a fresh application for the same relief and/or on the same ground.  A possible exception to the general rule against re-litigating over interlocutory applications will be where there is a significant change of circumstances.

28.  Mr Sussex SC submits that the Plaintiff’s participation in the SMC proceedings themselves is not a significant change of circumstances.  This court agrees.

29.  First, lis alibi pendens is only one of the relevant factors that a court will take into account when addressing the Stage 1 question of whether an applicant for a stay has demonstrated that another jurisdiction is clearly or distinctly more appropriate than Hong Kong: Bright Shipping Limited v Changhong Group (HK)  Limited unrep, FAMV 34 of 2020, 16 July 2020 at [10] - [11].

30.  As a general rule, the fact that to permit the Hong Kong action to be pursued would result in concurrent actions on the same subject matter proceeding in two different jurisdictions could not be sufficient to justify depriving the plaintiff of the advantage to which he was entitled to choose Hong Kong as a forum in which he preferred to litigate the matter.  It is only in exceptional cases where the existence of parallel proceedings might cause unusual hardship to a defendant that an action might be stayed on that ground: LN v SCCM unrep, CACV 62 of 2013, 4 June 2013 at [23] - [24] (per Cheung JA).  There is no suggestion of unusual hardship in the present case.

31.  Second, the existence of parallel proceedings in admiralty matters is by no means unusual and the mere existence of such by itself should not incline a court towards staying an action on the ground of forum non conveniens: The “Peng Yan” [2009] 1 HKLRD 144 at [23] (per Ma CJHC, as he then was). 

32.  Third, in the present case, as Ma CJ observed at the CFA leave hearing on 13 July 2020, the fact that the Plaintiff would fully participate in a full trial in the SMC is of limited utility.  This is because whether or not the Plaintiff has submitted to the jurisdiction of the SMC, it has not abandoned its claims in Hong Kong.

33.  Fourth, also in the present case, A Chan J, at [49] of the 1^st Decision, correctly, if I may respectfully say so, held that:

“ Whilst I am concerned about the possibility of inconsistent findings if the inter-ship dispute is litigated in 2 jurisdictions, this does not of itself render Shanghai the appropriate forum, nor would it constitute unusual hardship to Changhong in the context of a collision in international waters.”

34.  A Chan J’s decision on this point was upheld by the Court of Appeal, holding that in the absence of serious consequences with regard to expenses or other matters of the kind envisaged in The Abidin Daver and undue hardship, the SMC Action did not tip the balance in the Stage 1 analysis, despite the undesirability of the same issue being tried in different courts: see the Judgment of Kwan VP at [53] - [57].

35.  In this court’s view, there is no real basis for Mr Scott SC’s submission (i)  at paragraph 28(3)(a)  of his skeleton that “had matters been in 2018 as they are now, a different outcome would have almost certainly ensued.  In short, there has been a material change in circumstances” or (ii)  at paragraph 29 of his skeleton that the Plaintiff’s success in opposing the 1^st Application and in subsequent appeals depended heavily on its tactical non-participation in the SMC proceedings.

36.  Mr Sussex SC further submits that the adjournment of the trial of liability in Hong Kong pending the ruling in the SMC is also not a significant change of circumstances.  This court agrees.

37.  Mr Sussex SC now accepts that in all likelihood the apportionment of liability as determined by the SMC will, subject to appeal, give rise to an issue estoppel in Hong Kong and will obviate the need for a liability trial in Hong Kong.  The parties could then proceed to assessment of quantum in Hong Kong.  Hence, the adjournment of the Hong Kong liability trial serves to avoid a risk of the Hong Kong Court arriving at a contrary decision and prevents the wastage of the Court’s time in hearing unnecessary evidence and submissions.

38.  In this court’s view, that was a sensible position for the Plaintiff to take and this court agreed by granting in effect a case management adjournment.  The fact that the Defendant did not oppose the application for an adjournment only serves to reinforce the merits of the Plaintiff’s application.  This court therefore cannot see any basis for the Defendant’s submission that the Plaintiff is guilty of abuse of process by “gaming the system” if the adjournment application was itself meritorious.  Nor can this court see why the adjournment of the trial of liability in Hong Kong pending the ruling in the SMC is a significant or even relevant change of circumstances in order to justify re-litigating the stay application.  The Plaintiff has not abandoned the Hong Kong proceedings but simply obtaining an adjournment sine die of the liability trial.  It may still have to proceed to assessment of quantum in Hong Kong in the absence of agreement on quantum with the Defendant.  In civil litigation, all parties make what may be regarded as “tactical” decisions all the time.  Even assuming Mr Scott SC’s submission at paragraph 39 of his skeleton is correct in that the Plaintiff’s overall pattern of conduct was aimed at obtaining the best of all possible worlds, in the absence of anything reprehensible or abusive of the system, that is not something which should be considered a significant or even relevant change of circumstances.

39.  For completeness, in February this year, both parties have submitted to this court post-hearing notes with regard to a judgment of Sir Nigel Teare dated 30 November 2021 in Apollo Ventures Co Ltd v Surinder Singh Manchanda [2021] EWHC 3210 (Comm).[5]

40.  The Teare judgment was concerned with an application by the defendant[6], who was Thailand-based and domiciled[7], and who ultimately succeeded in staying the English proceedings in favour of Thailand on forum non conveniens grounds.  The application was made in May 2021 almost 5 years after the claim was originally issued in 2016 by the claimant, a Thai company, against the defendant and several others (some of them were based in England)  and after he had submitted to the English jurisdiction by serving his Defence. 

41.  Mr Scott SC submits Apollo Ventures Co Ltd is a useful illustration of the Court’s jurisdiction and willingness to reconsider forum non conveniens arguments notwithstanding (a)  that time for a conventional jurisdictional challenge by the defendant expired long ago, and (b)  significant participation by the defendant in the English proceedings, in the light of significant changes of circumstances. 

42.  But in this court’s view the facts of Apollo Ventures Co Ltd are so different from the present case that its usefulness even as an illustration is very limited.  First, the underlying facts of the case had no connection with England (para 3 of the Teare judgment).  Second, prior to the defendant’s application, the claimant had in 2018 commenced parallel proceedings in Thailand against him (para 6 of the Teare judgment).  Third, in January 2021, the claims against all the other defendants were struck out because the claimant had failed to provide security for costs, leaving the defendant as the sole defendant in the English proceedings (para 7 of the Teare judgment).  Fourth, the learned Judge considered that there was such a significant change of circumstances that he was prepared to consider the defendant’s case that Thailand was the clearly and distinctly more appropriate forum than England (para 14 of the Teare judgment)  and the learned Judge eventually found it was (paras 34 - 36 of the Teare judgment). 

43.  Mr Sussex SC submits that Apollo Ventures Co Ltd is of no assistance to this Court in determining the present renewed application.  This court agrees.

44.  To conclude, this court does not see any compelling circumstances to justify the grant of an extension of time to the Defendant or to entertain its application under the inherent jurisdiction.  Nor can this court see any significant change of circumstances to justify the Defendant re-litigating the stay application.  For these reasons, this court is not minded to entertain the Defendant’s present application. 

45.  In deference to counsel’s efforts, this court will briefly deal with the submission that the present application should also be dismissed on its merits. Given the 1^st Application and the subsequent appeals had been rejected by six eminent judges at three different levels, and given this court’s view that the New Developments are not significant changes of circumstances, it seems to this court that it should respectfully adopt the conclusions of A Chan J, the Court of Appeal and the Appeal Committee. 

46.  The principles governing applications for a stay on forum non conveniens grounds are not in dispute and have been restated by the Court of Final Appeal in SPH v SA (2014)  17 HKCFAR 364 at [51] as follows:

“ 51. We adopt the re-statement of the principles … in DGC v SLC (née C) [2005] 3 HKC 293, 297-298, applying Spiliada Maritime Corporation v. Cansulex Limited [1987] 1 AC 460, 477 and Louvet v. Louvet [1990] 1 HKLR 670, 674-675:

‘1. The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action i.e. in which the action may be tried more suitably for the interests of all the parties and the ends of justice?

2. In order to answer this question, the applicant for the stay has to establish that first, Hong Kong is not the natural or appropriate forum (‘appropriate’ in this context means the forum has the most real and substantial connection with the action)  and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong. Failure by the applicant to establish these two matters at this stage is fatal.

3. If the applicant is able to establish both of these two matters, then the plaintiff in the Hong Kong proceedings has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.

4.  If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer. Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.’”

47.  In The Spiliada Maritime Corporation v Cansulex Limited [1987] AC 460, at 477C-D, Lord Goff observed that:

“ … [T]here are cases where no particular forum can be described as the natural forum for the trial of the action. Such cases are particularly likely to occur in commercial disputes, where there can be pointers to a number of different jurisdictions … or in Admiralty, in the case of collisions on the high seas. I can see no reason why the English court should not refuse to grant a stay in such a case, where jurisdiction has been founded as of right.” (emphasis added)

48.  As far as Stage 1 analysis is concerned, this court agrees with A Chan J that there are no particular forum that can be described as the natural forum for the trial of this Action and that the Defendant has failed to discharge its burden of showing that the SMC was clearly or distinctly more appropriate, in light of (i)  the location of the collision in international waters, (ii)  the ready availability of documentary evidence on liability, (iii)  the location of witnesses, (iv)  the lack of commercial operation of the Defendant and the management of Crystal in Hong Kong, and (v)  the fact that Hong Kong court is well-placed and experienced in dealing with cases involving Mainland witnesses, documents in Chinese and Mainland law.  In this regard, it should perhaps be noted that the words “clearly or distinctly” suggest that the onus is not to be lightly discharged.  The burden of proof on the defendant in a stay application has been described as “a very high burden”: China International Fund Ltd v West China Cement Ltd unrep, HCA 1889 of 2019, 4 December 2020, DHCJ Burns SC at [27]-[28]; cited with approval in Patrick James Joseph O’Mara v Chin Shau Tong unrep, HCA 1253 of 2019, 18 March 2022, Ng J at [10].

49.  As for the existence of the SMC proceedings, A Chan J is clearly correct in concluding that lis alibi pendens is only a relevant factor at the Stage 1 analysis and that the possibility of inconsistent findings by the SMC does not of itself render Shanghai the appropriate forum, nor would it constitute unusual hardship to the Defendant when it is being sued in its place of incorporation by the Plaintiff as of right.  As noted earlier, A Chan J’s decision on Stage 1 analysis was not faulted by the Court of Appeal.

50.  As far as Stage 2 and Stage 3 analyses are concerned, Mr Sussex SC urges this court to accept and adopt the observations made by Kwan VP at [64] - [72] of her Judgment.  Essentially, the Court of Appeal held at [67] - [69] that there are binding decisions of the Court of Appeal that a higher tonnage limitation in Hong Kong is a legitimate juridical advantage at Stage 2 and the Hong Kong limit reflects international public policy and to deprive a plaintiff of that limit would be unjust to it and is capable of being a decisive factor in refusing a stay.  At [72], the Court of Appeal concluded that “it must be doubted if substantial justice can be achieved in the SMC by awarding a sum which has been significantly eroded by inflation”. 

51.  This court would respectfully adopt the analyses of Kwan VP on her Stage 2 and Stage 3 observations and have nothing to add.

52.  In addition, regarding legitimate juridical advantage of suing in Hong Kong, the Plaintiff had not lodged a claim against the Defendant in the SMC and is now time-barred from doing so.  Under Mainland law, the time bar in ship collision claims is accepted by the Defendant as 2 years and the limitation period for the Plaintiff’s claim against the Defendant had expired on 6 January 2020.

53.  Mr Scott SC submits that the Plaintiff’s juridical disadvantage was of its own making.  In this regard, the test is whether the Plaintiff has acted reasonably in allowing time to expire in the SMC: The Pioneer Container [1994] 2 AC 324, 348-9 (Lord Goff); The Kappa Sea [2017] 1 Lloyd’s Law Rep Plus 102 at [56]-[59] (Ng J).

54.  Mr Sussex SC submits and this court agrees that, in the circumstances of this case, it was reasonable for the Plaintiff to have allowed the limitation period in the Mainland to lapse.  By then, the Defendant’s challenges to the Hong Kong Court’s jurisdiction had failed twice before A Chan J and the Court of Appeal on the Stage 1, 2 and 3 analyses.  Whereas in The Kappa Sea, the action had no or no relevant connections with Hong Kong while there were numerous connections with the Yangon Court.  In the absence of a clear and plausible explanation as to why the plaintiffs in that case did not issue a protective writ in the Yangon Court, this court was not satisfied that they had acted reasonably in failing to do so.

55.  A stay of the Hong Kong Action means that the Plaintiff will recover nothing from the Defendant despite its significant claim, said to be estimated at US$130 million, and notwithstanding the SMC’s ruling that Crystal was 30% to blame for the collision.  Conversely, if this court were to refuse to stay this Action, the Plaintiff now accepts that in all likelihood it will be bound by the liability apportioned by the SMC (or the appellate Court)  and may have to proceed with its quantum claim against the Defendant in Hong Kong.  The Defendant will suffer minimal duplication of effort as the quantum of the Plaintiff’s claim against the Defendant is not in issue in the SMC proceedings.  These consequences mean that the Defendant cannot establish to this court’s satisfaction that substantial justice will be done in the Mainland Court.

56.  To conclude, even if this court were to entertain the present application on its merits, it would still dismiss the application.

Disposition and costs order nisi

57.  For the above reasons, the Defendant’s application is dismissed with a costs order nisi in favour of the Plaintiff, to be taxed if not agreed and paid by the Defendant forthwith, certificate for 2 counsel.

Mr Charles Sussex, SC and Mr Jason Yu, instructed by Holman Fenwick Willan, for the Plaintiff

Mr John Scott, SC and Mr Edward Alder, instructed by Reed Smith Richards Butler, for the Defendant

HCAJ 3/2018

[2019] HKCFI 542

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 3 OF 2018

___________________________

___________________________

________________

D E C I S I O N

________________

1.  I believe that the short delay by the Defendant in making this leave application is largely attributable to its erroneous belief that the Order to be appealed is a final order. I hold that the short delay is excusable.

2.  Despite Mr Luxton’s able submissions, I believe that the intended appeal has reasonable prospects of success, which is not a particularly high threshold.  The existence of parallel proceedings in different jurisdictions can be an important consideration in an application for stay of proceedings on the ground of forum non conveniens, and there is some substance in the contention that the correct approach by the court in the application of the principles deserves another visit by the Court of Appeal.

3.  I therefore grant leave to appeal.

HCAJ 3/2018

[2018] HKCFI 2474

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 3 OF 2018

___________________________

___________________________

________________

D E C I S I O N

________________

1.  This is the application of the Defendant (Changhong) for stay of these proceedings on the ground of forum non conveniens.

Background

2.  This action concerns a collision at sea between Changhong’s cargo vessel, CF CRYSTAL (Crystal), and a tanker owned by the Plaintiff (Bright Shipping), SANCHI (Sanchi).  The collision took place at around 19:50 hours on 6 January 2018 (Beijing time) at a location about 125 nautical miles from Changjiang Kou Light Ship in the East China Sea. 

3.  Crystal flied the Hong Kong flag and her port of registry was Hong Kong.  She was laden with nearly 64 m.t. of sorghum cargo and was on a voyage from Port Kalama in the USA to Port Machong, Guangdong, PRC. Her crew were all Chinese nationals.  She was managed by Changfeng Shipping Holding Ltd (Changfeng), a company incorporated in Hong Kong.      

4.  Sanchi flied the Panamanian flag.  Her crew were Iranian and Bangladeshi.  At the time of the collision, she was loaded with 115,000 tonnes of natural gas condensate and was on her way from Iran to South Korea.  She was managed by an Iranian company, National Iranian Tanker Co (NITC), which has a representative office in Shanghai.

5.  Changhong is a Hong Kong incorporated company with a registered office in Hong Kong.  Bright Shipping was incorporated in Belize.  The evidence before the court does not show that Bright Shipping had any business operation other than owning Sanchi. 

6.  Sanchi exploded immediately upon collision and both vessels caught fire.  Crystal managed to reverse her engine and escape the fire.  Her crew abandoned the vessel but returned to successfully extinguish the fire on board.  Afterwards, she safely proceeded to and berthed at Zhousan, Zhejiang, PRC.

7.  Sanchi kept burning and drifting after the collision.  Eventually, she sunk at a location around 151 nautical miles southeast of the point of collision on 14 January 2018.  Tragically, none of her officers or crew survived the accident.

8.  Pollution resulted from the collision in the form of spilt bunkers and natural gas condensate.  Some of the pollutant made landfall in the PRC as well as Japan. 

9.  The Mainland authorities had been heavily involved in all aspects of the aftermath of the collision, including investigation and pollution issues.  Following the collision, a multi-national task force, led by the Shanghai Maritime Safety Administration (MSA) (with participants from Hong Kong, Islamic State of Iran and Panama), carried out an investigation.  On 11 May 2018, a 191 page report of the joint investigation dated 10 May 2018 (Report) was submitted to the International Maritime Organisation.  The Report is publicly available via the website of the Organisation.  

10.  The collision was followed by a number of legal actions, including Changhong’s proceedings against Bright Shipping and NITC in the Shanghai Maritime Court (SMC) and this action.  These inter-ship actions were commenced simultaneously on 9 January 2018. 

11.  On 9 January 2018, Changhong also applied to establish in the SMC two limitation funds, one for personal injury and one for property.  On 30 January 2018, Changhong brought an action in the SMC against NITC as cargo shipper and a Korean entity as cargo consignee in respect of the collision.

12.  In addition, the insurers of Crystal’s cargo brought an action in the SMC against, Changhong, Bright Shipping and NITC in respect of the loss of cargo on Crystal.  There are also cargo claims against Changhong.  Further, there are emergency response and pollution related claims, two of such actions involve Bright Shipping. 

13.  So far, Bright Shipping has not submitted to the jurisdiction of the Mainland court in any of these proceedings. 

14.  This is an in personam collision action brought against Changhong.  There is no dispute that the jurisdiction of this court was invoked by the Bright Shipping as of right, having served these proceedings on Changhong at its registered address in Hong Kong. 

Issues

15.  What underpins the jurisdictional dispute before the court is the very different tonnage limitation in the Mainland and in Hong Kong.  The relevant monetary limit applied in Hong Kong is roughly 3.6 times of those in the Mainland.

16.  In this application, Changhong contends that: (a) the overwhelming “centre of gravity” of this case is in Shanghai, the SMC is an available and experienced specialist court which is dealing with pollution and civil claims arising from the collision and will apply various legislation based on international conventions, and it would not be reasonably open to this court to hold that substantial justice cannot be obtained in the SMC; and (b) the questions of inter-ship liability and assessment of Changhong’s loss are going to be tried in its proceedings against Bright Shipping in the SMC in any event (lis alibi pendens).

17.  Bright Shipping’s case is that the collision took place on the high seas and there is no natural forum to determine such a collision.  Changhong’s case does not get pass the stage 1 requirement to establish that the SMC is “clearly and distinctly” more appropriate than Hong Kong court to determine the inter-ship disputes: see The “Spiliada” [1987] AC 460.

18.  Further, even if Changhong succeeds in discharging its burden for the stage 1 analysis, the significant difference in tonnage limitation applied in Hong Kong and the Mainland is a decisive personal juridical advantage in favour of refusing a stay.

Law

19.  The Spiliada is the seminal authority on forum non conveniens (FNC).  There are many authorities which contain a distillation of the principles expounded in that case.  I refer to the summary adopted by the Court of Final Appeal in SPH v SA (2014) 17 HKCFAR 364, §51 :

“1. The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action ie in which the action may be tried more suitably for the interests of all the parties and the ends of justice?

2. In order to answer this question, the applicant for the stay has to establish that first, Hong Kong is not the natural or appropriate forum (‘appropriate’ in this context means the forum has the most real and substantial connection with the action) and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong. Failure by the applicant to establish these two matters at this stage is fatal.

3. If the applicant is able to establish both of these two matters, then the plaintiff in the Hong Kong proceedings has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.

4. If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer. Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.”

Location of the collision

20.  It is common ground that the collision took placed outside PRC’s territorial waters.  Although the location lied within international waters, there is no dispute that it was within PRC’s exclusive economic zone (EEZ) pursuant to the United Nation Convention on the Law of the Sea (UNCLOS) to which the PRC acceded in 1997.

21.  Article 3 of UNCLOS provides that the breadth of the territorial sea does not exceed 12 nautical miles.  The collision position was thus far beyond the territorial seas of the PRC.  Article 55 of UNCLOS defines the EEZ as an area beyond and adjacent to the territorial sea.  Article 57 provides that the breadth of the EEZ shall not extend beyond 200 nautical miles.

22.  It appears that the point of collision also lied within the EEZ of Korea and Japan.  It was within 155 miles of Jeju, South Korea and 190 miles of Me Shima, Japan. 

Appropriate forum

23.  Appeared on behalf of Bright Shipping with Mr Yu, Mr Sussex SC submitted that there is no natural forum for a collision in international waters.  Consequently, it is accepted that Hong Kong is not the natural forum for the inter-ship litigation.  However, Bright Shipping is entitled to bring this action as of right given that Changhong is a Hong Kong company. 

24.  Mr Sussex relies on the dicta of Lord Goff in The Spiliada at p.477C-D :

“[T]here are cases where no particular forum can be described as the natural forum for the trial of the action. Such cases are particularly likely to occur in commercial disputes, where there can be pointers to a number of different jurisdictions … or in Admiralty, in the case of collisions on the high seas. I can see no reason why the English court should not refuse to grant a stay in such a case, where jurisdiction has been founded as of right.”

25.  The court was also referred to Meeson and Kimbell, Admiralty Jurisdiction and Practice, 5^th edn, [7.15] and the observations made by Sheen J in The “Coral Isis” [1986] 1 Lloyd’s Rep 413 at 416 :

“The same cannot be said of an action arising out of a collision in international waters between two ships of different nationality. It must frequently happen that when such a collision has occurred no Court can properly be described as “the natural forum” or even “a natural forum”. The reasons are self-evident. The two ships may be registered in different countries; their owners or managers may be companies incorporated in yet other countries; the master and crew may be nationals of still different countries; after the collision the ships may go into repair yards in other countries …”

26.  Mr Sussex pointed out that in most collision cases where it was concluded that some other forum was the natural forum for the action, the court had found that the collision occurred in foreign territorial waters: see The “Al Khattiya” [2018] 2 Lloyd’s Rep 243, §43 per Bryan J.

27.  I do not take the view that the occurrence of the collision in international waters necessarily precludes the court from concluding that Shanghai is clearly and distinctly more appropriate than Hong Kong as the forum for the inter-ship action.  On the other hand, it is clearly an important factor in the present exercise to evaluate whether Shanghai has the most real and substantial connection with the inter-ship action. 

28.  I remind myself of the dicta of Recorder Ma SC (as he then was) in Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250, at 255B-C :

“The burden is on the defendant to show that the courts of Nevada are clearly or distinctly more appropriate than the Hong Kong courts for the trial of the action. Mere convenience is not enough nor is it enough simply to point to factors which connect a case or the parties to any particular jurisdiction. The approach in forum non conveniens applications is not just an exercise in loading up with factors which point to any particular jurisdiction. The court is required to focus on the appropriateness of a forum from the point of view of the trial of the action. This would in part explain the need to identify the particular court in favour of which the action is to be stayed, for it is to the appropriateness of that court for the trial that the court’s attention is directed.”

29.  The evaluation requires the court to focus on the inter-ship action.  It is not controversial that the primary issues for trial in such action are (a) the inter-ship apportionment of liability for the collision and (b) assessment of the parties’ respective quantum of loss.

30.  On the liability issue, it cannot be seriously doubted that with the availability of the Voyage Data Recorder (VDR) data from Sanchi (those of Crystal was lost) and the Report, which contains a detailed summary of the evidence collected from the investigation, the most important evidence is readily available in documentary form.

31.  In The “Peng Yan” [2008] 5 HKLRD 418, §§25-27, Reyes J summarised the approach of the court in assessing liability in a collision that was investigated by maritime authorities :

“… I doubt that much (if any) evidence can usefully be obtained from the crew many months after the event. In contrast, the collision was thoroughly investigated by the MD[1] and MSA shortly after the accident occurred. I suspect that the evidence supporting their reports (including records of interviews with The Peng Yan third officer) will be more useful to any trial judge.

That body of evidence from the MD and MSA will likely be largely agreed for the purposes of trial. That will mean that the task of the Court will essentially be hearing submissions on how such evidence is to be assessed from the standpoint of the law generally and the International Regulation for the Prevention of Collisions at Sea 1972 specifically.

  That body of evidence would likely be available to both the Hong Kong and Ningbo Courts.”

32.  The decision of Reyes J was affirmed by the Court of Appeal: [2009] 1 HKLRD 144, §18(5) per Ma CJHC :

“[I]t was far from clear in any event what relevant testimony would come from crew members. The main evidence going to the issue of the respective fault of both ships would come from the reports of the incident compiled by the Hong Kong Marine Department and the Shenzhen Maritime Safety Administration.”

  And at §34:

“Here, the careful analysis undertaken by the Judge directed at what was likely to occur at trial (which analysis was not really challenged on appeal) clearly justified his conclusion it could not be shown that the Ningbo Maritime Court was clearly or distinctly the more appropriate forum for the trial of the disputes.”

33.  As regards the assessment of damages, Bright Shipping’s suggestion that all of the evidence on quantum is likely to be available to this court is not contradicted.  The vast majority of contracts, invoices and receipts concerning the claim of Sanchi for loss arising from the collision are in the English language.  The evidence of the value of Sanchi is likely to come from international experts adopting a market comparables approach and, in relation to Crystal, international surveyors (including surveyors based in Hong Kong) who had inspected the vessel at a shipyard on 1 February 2018.

34.  Changhong’s case that SMC is clearly and distinctly the more appropriate forum rests heavily on lis alibi pendens. In addition, a number of factors had been identified by Mr Coleman SC, who appeared with Mr Alder on behalf of Changhong, as pointing in favour of SMC as the appropriate forum. 

35.  These factors included the lack of commercial operation in Hong Kong in respect of both Changhong and Changfeng; Crystal was managed by the Shanghai operation of the latter; and Crystal’s crew, as well as 2 independent witnesses, are based in the Mainland. 

36.  I do not believe that these factors, on proper analysis, assist Changhong’s case.  It can readily be seen that it would be more convenient to Changhong that the inter-ship action be tried in the Mainland, but it does not follow that Shanghai is clearly and distinctly more appropriate than Hong Kong. 

37.  It has to be said that the location of witnesses, in the absence of specificities about the relevance and importance of their evidence, is of little weight.  Further, in this age, the location of witnesses is rarely a real obstacle.  In the worst case, evidence may be given via video link.

38.  Furthermore, Hong Kong court is well-placed and experienced in dealing with cases involving Mainland witnesses, documents in Chinese and Mainland law. 

Lis alibi pendens

39.  The evidence of Changhong is that Mainland court has, and has accepted, jurisdiction over the collision, being one which took place within PRC’s EEZ.  Such evidence is not disputed.  A jurisdictional challenge was indeed made by NITC before the SMC, which was rejected.  The decision of the SMC had been upheld on appeal.   

40.  However, Mr Sussex submitted that there is inconsistency between the relevant law of the Mainland and the provisions of UNCLOS (in particular, Articles 55, 56 and 58 which set out the specific legal regime over the rights of exploration, exploitation and conservation of natural resources of the EEZ by costal states and the rights of other states to lawful use of the sea, including the freedom of navigation), and that the SMC does not have jurisdiction over the inter-ship claim as a matter of international law. 

41.  In The “Chou Shan” [2014] FCAFC 90, §102, the Full Court of the Federal Court of Australia held in respect of a collision that took place in the EEZ of the PRC that the lex causae was not PRC law.  Whilst noting that the law of the coastal state applied if the activity giving rise to damage was “closely connected with the exercise [of a state’s rights over the EEZ under UNCLOS]” (§90), the Court held that the activity concerned was the “freedom of both parties to navigate under Arts 58 and 90” and it was not relevant that pollution was caused by the collision.  It was held that the “closest and most direct analogue” to a collision in the EEZ was a collision “on the high seas”, in respect of which the general maritime law as administered in the forum applies (§92).

42.  For the present purpose, I do not believe that this court is required to resolve the suggested inconsistency or SMC’s jurisdiction over the collision as a matter of international law.   

43.  Mr Sussex also submitted that any judgment obtained from the SMC would not be recognised in Hong Kong or common law jurisdictions applying similar conflict of laws rules.  Apart from the lack of jurisdiction over the inter-ship claim, the SMC has not established in personam or in rem jurisdiction over Bright Shipping.  Thus, SMC’s jurisdiction would not be recognised as a matter of Hong Kong conflicts rules, and its judgment would not be enforceable.  This court was referred to Johnston, The Conflict of Laws in Hong Kong, 3^rd edn, [9.055]-[9.066] and [9.075].   

44.  There is certainly force in the submissions over the enforceability of SMC’s judgment against Bright Shipping.  However, I agree with Mr Coleman that Changhong cannot be looking to enforce any judgment against Bright Shipping in Hong Kong as it has no identified asset here, and that this court should not endeavour to predict (or guess) how matters will unfold after judgment. 

45.  As a matter of general principle, multiplicity of proceedings is not of itself a material factor for consideration of FNC but there might be exceptional cases where such proceedings may cause unusual hardship to a defendant: see Nan Tung Bank v Wangfoong [1999] 2 HKC 606, CA, at 610H-611A.

46.  Further, it is not unusual for there to be parallel proceedings in collision cases.  In The “Peng Yan”, supra, §23, Ma CJHC observed that :

“Further, as cases like The Kapitan Shvetsov (at p.217(2)) and Caspian Basin Specialised Emergency Salvage Administration v Bouygues Offshore SA (No 4) [1997] 2 Lloyd’s Rep 507 (at p.525(2)) show, the existence of parallel proceedings in admiralty matters is by no means unusual, nor should the mere existence of such by itself incline a court towards staying an action on the ground of forum non conveniens …”

47.  In this case, the inter-ship proceedings before the SMC have not been served on Bright Shipping.  The proceedings are therefore at the initiating stage, and of little relevance: see LN v SCCM, unrep., CACV 62/2013, 4 June 2013, §§20 and 24, per Cheung JA. 

48.  In respect of the host of other actions in Shanghai, 3 of which involve Bright Shipping (see para 12 above), I agree with Mr Sussex that they are of little relevance for the present purpose – an evaluation of the appropriate forum for the inter-ship action – notwithstanding that there are advantages for all the disputes arising from the collision to be deal with in one place in terms of convenience, saving of costs and possibly consistent findings. 

49.  Whilst I am concerned about the possibility of inconsistent findings if the inter-ship dispute is litigated in 2 jurisdictions, this does not of itself render Shanghai the appropriate forum, nor would it constitute unusual hardship to Changhong in the context of a collision in international waters.  

50.  Finally, Changhong relies heavily on The “Chou Shan”, supra, which was also a case involving a collision in the EEZ of the PRC.  The jurisdiction of the Australian court was invoked by arresting “Chou Shan” in Australia.  With respect, I do not believe that The “Chou Shan” is of much assistance to Changhong’s case.

51.  Most importantly, the Australian court applied a rather different test from that of The “Spiliada” for the stay application, namely, whether Australia was a “clearly inappropriate forum”.  As the Full Court explained, under the Australian test “[t]he focus is upon the chosen local forum – its advantage and disadvantages, rather than on a true comparative analysis” (§§57-58, 77, 81) (see also the observation of the Court of Appeal in DGC v SLC [2005] 3 HKC, §22, about the Australian approach being different). 

52.  It appears that lis alibi pendens was a major factor in the Court’s determination to stay the Australian proceedings in favour of the Ningbo Maritime Court in the Mainland (McKerracher J at §§148, 149 and 158(f); Full Court at §§29-30, 36 and 61). 

53.  There is considerable force in Mr Coleman’s submission that the undesirability of the same issues being tried in different courts at the same time is so obvious and should be avoided.  On the other hand, the test applied by the Hong Kong Court is different (see paras 45 to 47 above).  It appears that under Australian law, it is prima facie vexatious and oppressive for identical issue or the same controversy to be litigated in different countries, and that the courts “should strive” to avoid that situation (see Henry v Henry (1996) 185 CLR 571, per Dawson, Guadron, McHugh and Gummow JJ at p 591).

54.  In addition to the fact that the SMC inter-ship proceedings have not been served on Bright Shipping, it should not be overlooked that Changhong is being sued in its place of incorporation.  I am unable to see any unusual hardship to Changhong in the circumstances of this case.

55.  For these reasons, I am driven to the conclusion that Changhong has failed to discharge its burden for the stage 1 analysis and this application must fail. 

56.  Out of deference to counsel, I would mention very briefly my view on 2 factors which would have led me to decline a stay in this case in the stage 2 analysis.  Firstly, the significant disparity in the tonnage limitation.  I am inclined to agree with Mr Sussex that this court is bound by Court of Appeal authorities to the effect that a significant difference in tonnage limitation applied in Hong Kong and the competing jurisdiction is a very important, if not decisive, personal juridical advantage in favour of refusing a stay: see The “Adhiguna Meranti” [1987] HKLR 904, at 922B-F per Hunter JA and The “Kapitan Shvetsov” [1997] HKLRD 374, at 380J, 318D-F and 382A and G, per Litton VP.

57.  Secondly, it is uncontroversial that all PRC claims subject to limitation must be brought against the limitation funds within a time limit, which had expired on 9 June 2018.  Hence, an inter-ship action by Bright Shipping brought in Shanghai now will not result in an effective remedy.  I do not believe that Bright Shipping can be criticised for allowing the time limit to lapse or for forum shopping.  Apart from the lack of natural forum for the collision, it was (and is) entitled to bring these proceedings against Changhong at its place of incorporation, and to take into account the disparity in the tonnage limitation.

58.  In the premises, I do not believe that substantial justice will be done in Shanghai. 

Conclusions

59.  For these reasons, this application is dismissed with a costs order nisi in favour of Bright Shipping and a certificate for 2 counsel.

60.  I am grateful to counsel for their assistance.