ARKO SHIP LEASING LTD AND ANOTHER v. WINSMART INTERNATIONAL SHIPPING LTD AND ANOTHER

HCAJ 213/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY JURISDICTION ACTION NO. 213 OF 2009

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BETWEEN

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J U D G M E N T

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1.  I have before me an application by the plaintiffs in the action to have the trial re-fixed to commence on a date not less than 12 months from the date of the order. The ground relied upon is that four out of the five witnesses they wish to call will not be available. The trial, which is estimated to take 8 days, has been fixed (in consultation with counsel’s diaries) to commence on 20 February 2013.

2.  In order to assess the merit of the application, it is necessary to have a broad understanding of the nature of the action, the issues arising in it, and the evidence that the relevant witnesses are anticipated to give if they attend at the trial and testify.

3.  The action arose out of the sinking of a cargo vessel called the “Ying Gao 306” in Hong Kong waters near Green Island on 30 April 2009. 

4.  The 1^st plaintiff was apparently the charterer of the ship under a bareboat charter from the owners.  The 2^nd plaintiff appears to be a related company.  The 1^st defendant was a company operating a business of arranging for the carriage of container cargo between Hong Kong and ports in Guangdong.  The 2^nd defendant was a Korean company that provided carriage services to its customers.

5.  In April 2009, the 2^nd defendant was engaged by its own customers to carry 28 containers of tobacco, 20 containers of softwood pulp and 1 container of songnox to various destinations via Hong Kong.  The 2^nd defendant engaged the 1^st defendant to provide connecting carrier service between Hong Kong and ports in the Mainland.  The 1^st defendant in turn entrusted the containers to the plaintiffs. 

6.  The plaintiffs’ case is that the 1^st defendant supplied certain information about the weight of the cargo, which turned out to be grossly inaccurate.  In particular, the plaintiffs say that one Miss Emily Sin of the 1^st defendant understated, fraudulently or at least negligently, the gross weights of the containers to Mr Chan Ping Kwan, operation manager of the 1^st plaintiff, and also to Mr Leung Ka Yip, general manager of the 1^st plaintiff.  As a result, the vessel was loaded beyond its proper capacity, and eventually sank.  The plaintiffs also claim that the 1^st defendant breached implied terms of the carriage contract by failing to provide accurate information of the gross weights of the containers. 

7.  The plaintiffs claim that the 2^nd defendant is vicariously liable for the wrongs done by the 1^st defendant as its agent, and further that the 2^nd defendant itself negligently prepared the bills of lading, which, according to plaintiffs, also understated the true gross weights of the containers. Counsel told me that the amount of plaintiffs’ claim is about RMB3 million for the ship and HK$10 million for consequential losses.

8.  The 1^st defendant denies making any representation about the weight of the cargo, at any rate other than what was stated in the booking notes, which, according to the 1^st defendant, indicate — by industry custom — the weight of the cargo excluding the tare weight of the containers.  The 1^st defendant also contends that the combined weight of the cargo and the containers was below the deadweight tonnage of the ship, and that the sinking of the ship was caused by the fault and negligence of the plaintiffs, rather than by the cargo being too heavy.  Among other things, the 1^st defendant pleads that the containers were stacked or stowed in an unsecure manner, that the numbers and tiers of containers stowed on board exceeded the maximum limit, that the ship was not seaworthy, and that the master and crew were incompetent.

9.  The 2^nd defendant denies that the 1^st defendant was its agent, and denies that the 1^st defendant relied on the bills of lading in making any representation to the plaintiffs. The 2^nd defendant contends that the plaintiffs should know that, as a matter of trade practice, the information on the bills of lading was furnished by the cargo interests, and that the 2^nd defendant had no responsibility for such information.  The 2^nd defendant similarly says that the sinking of the ship was caused by the fault or negligence of the plaintiffs in the way I have already mentioned.

10.  Both defendants’ counterclaim for, inter alia, an indemnity relating to the loss of the cargo.  The magnitude of their combined claim is in the region of US$300,000.

11.  Two main issues that arise are:

(1)  The nature and contents of the communications between the parties relating to loading capacity of the vessel and weight of the cargo.

(2)  The circumstances of the sinking of the vessel including the manner of slashing and stowing of the containers and the navigation of the ship.

12.  The plaintiffs have filed witness statements of five witnesses, namely, the 1^st plaintiff’s general manager Mr Leung Ka Yip, the 1^st plaintiff’s operation manager Mr Chan Ping Kwan, Mr Zheng Gang Qiang, who is the general manager and engineer of an associated company of the plaintiffs, Mr Peng Chang Xiong, master of the ship, and Mr Li Mou second officer of the ship.  The plaintiffs say that, except for Mr Leung, their witnesses will not be able to attend the trial if it is not adjourned.  The reason, in the case of Mr Zheng, Mr Peng and Mr Li, is that they have been arrested in the Mainland in connection with suspected offences of smuggling, which have nothing to do with the incident with which this action is concerned.  The situation of Mr Chan is different, and I shall come to that in a moment.

13.  Under Order 25, rule 1B(3) of the Rules of the High Court, the court should not grant an application by a party to vary a ‘milestone date’ unless there are exceptional circumstances justifying the variation.  The trial dates are of course milestone dates.  Practice Direction 5.2 (on Case Management) at paragraph 42 emphasises that milestone dates are immovable save in the most exceptional circumstances.

14.  I think that in approaching the present application I need to consider a number of matters.

(1)  What is the nature of the proceedings?  What is at stake to the parties, in particular to the plaintiffs who seek the adjournment?

(2)  Would the relevant witnesses definitely not be available to give evidence in any manner — for example, if a witness is unable to come to Hong Kong, is it possible nevertheless to receive his evidence via videolink?

(3)  What is the nature of the difficulty preventing the witnesses from attending, and is the applicant responsible for creating that difficulty and if so to what extent?

(4)  What is the nature of the evidence each relevant witness is intended to be called to give?  Is he the only possible source of such evidence?

(5)  Has the party seeking the adjournment made efforts to locate other persons who may be able to stand in to give similar evidence?

(6)  Will the adjournment be likely to address the problem faced by the applicant?

(7)  What is the risk of prejudice or other disadvantage to other parties if the adjournment is granted?

(8)  The application must also be viewed in terms of the wider implications on the administration of justice.  In particular, I have in mind the public interest in the efficient despatch of the court’s business, and the effect on the interests of future litigants of vacating a hearing close to the date and possibly leaving the court empty.  In this context, I should take into account the timing of the application for adjournment.

15.  I turn to the circumstances of the relevant witnesses in this case.

16.  First, Mr Chan Ping Kwan.  He is not being incarcerated.  Indeed, he is not implicated in the suspected smuggling offences at all.  All that is said is that he had resigned from office in May 2011 and had not kept close contact with the plaintiffs, that he was not allowed to leave the Mainland and that Mr Leung tried to contact his family but they did not return the calls and he did not know the personal whereabouts of Mr Chan.  

17.  The suggestion that he is not allowed to travel outside the Mainland is not borne out by any proper evidence.  But even if he cannot leave the Mainland, there is nothing to suggest that he cannot give evidence via videolink if he is willing to give evidence at all.  If, on the other hand, he is unwilling to give evidence for the plaintiffs, I cannot see that this problem will be resolved by the adjournment sought.  In the context of this application, therefore, little weight can be given to the circumstance of the plaintiffs’ potentially not being able to call Mr Chan as a witness, though it may make the other witnesses’ evidence more important to the plaintiffs.

18.  Second, Mr Li, the second officer of the ship.  He was arrested on 21 August 2012 but granted bail on the same day.  He is contactable and has indeed been contacted on behalf of the plaintiffs.  Even if he is not permitted to leave the Mainland, as to which the evidence is inconclusive, there is nothing to suggest that he cannot give evidence via videolink.  The evidence of the Mainland lawyer engaged by the 2^nd defendant would suggest that there is nothing to prevent Mr Li from giving evidence in that manner.

19.  Third, Mr Peng, the master of the ship. His evidence is in part corroborated by that of Mr Li, the second officer.  But there are a number of matter that are dealt with, at least in the witness statements, by Mr Peng alone.  Paragraphs 5 to 8, 10, 13 and 20 of Mr Peng’s witness statement are not reflected in Mr Li’s statement. 

20.  Mr Peng was first detained by the Mainland customs authority on 4 February 2012, formally arrested on 9 March 2012 and is now in custody in the First Detention Centre of Guangzhou.  The evidence indicates that he will not be permitted there to give evidence through videolink.

21.  Fourth, Mr Zheng, the manager and engineer.  He was first detained on 12 January 2012, and formally arrested on 11 May 2012.  He is now also held in the First Detention Centre of Guangzhou.  The evidence suggests that he too will be unable to give evidence through videolink.

22.  Part of his evidence in the witness statement filed concerns the recommendations of an expert consultation meeting on operational safety of barges sailing from Guangdong to Hong Kong and Macau.  Further, in paragraphs 9 to 12 of the statement he gives some evidence about the communications between the plaintiffs’ group and the 1^st defendant shortly before and immediately after the sinking of the vessel. 

23.  To sum up, it seems reasonably clear that Mr Peng the master and Mr Zheng the engineer will be prevented by their detention in the Mainland from giving evidence in Hong Kong in any manner if the trial takes place this February.  The difficulty leading to this application cannot be said to have been created by the plaintiffs and lies beyond their control.

24.  I bear in mind that the claims and counterclaims in this case are not insubstantial, and that there are allegations against the master and crew of fault and incompetence in the stowage of cargo and navigation of the vessel.

25.  The evidence to be given by Mr Peng, though in part corroborated by that of Mr Li, is of some importance.  The master was the more experienced seaman and the person generally regarded as in overall charge of the vessel and it is on his conduct and evidence that the experts had primarily focused.  The evidence to be given by Mr Zheng seems to me to be less significant, but not immaterial.

26.  The defendants, in their detailed and helpful submissions, submit that the plaintiffs can rely on the expert opinions filed and their supporting documents (such as the Report of Marine Accident, the Hong Kong Marine Department’s records of interview with the master) in relation to the circumstances and events leading to the sinking of the vessel.  I have surveyed the relevant reports, in particular those on the cause of the sinking, including that of Mr Robert Vart, the plaintiffs’ expert, and those of Mr Zhong and Mr Wilson, the defendants’ experts.  I accept that the availability of expert evidence is a factor to be taken into account, but I do not think it entirely obviates the need or desirability of oral factual evidence.  In fact, the expert reports make considerable references to the factual evidence that it is expected the witnesses will give.  The defendants’ experts also criticised the master for the way of vessel was handled.

27.  In the short adjournment of the hearing of the summons that I granted as an indulgence to the plaintiffs, they have investigated the possibility of calling other persons.  The position, as stated in the 7^th affirmation of Leung Ka Yip filed today, is that the chief officer of the vessel at the time is also being detained with the others in Guangzhou.  The chief mechanic of the vessel has been located who can give some evidence which however is unlikely to exceed the scope of what Mr Li the second officer can say.

28.  I also bear in mind that there is no certainty that the adjournment will address the problem faced by the applicant and that Mr Peng and Mr Zheng will be able to appear at the adjourned trial.  If for instance they are prosecuted, convicted and sentenced to imprisonment in the Mainland, they will most probably remain unable to testify in the adjourned trial.  On the other hand, if the trial is not adjourned now, it is virtually certain that they will not be able to testify.  The defendants have submitted opinions from Mainland lawyers to the effect that, based on the information in the Prosecution Advice issued by the customs authority, it is highly likely that the individuals concerned will be prosecuted, convicted and sentenced to over 10 years’ imprisonment.  They contend that an adjournment will therefore be of no avail to the plaintiffs.  I do not however think that it is appropriate for me to try to guess the outcome of the criminal investigation and trial in the Mainland and I reject the invitation for me to do so.

29.  As regards the disadvantages to the defendants in this case, I do not underestimate the prejudice to the defendants in simply having to wait another substantial period of time for the trial.  The defendants also say that memories will fade and their witnesses may no longer be willing to testify with the lapse of time.  I note however that there are no specific factual circumstances put forward to suggest that their witnesses may become unwilling or unavailable.

30.  An adjournment of the nature sought here will inevitably adversely affect the efficient discharge of the court’s duties.  In this context, I regret to have to say that the application for adjournment has not been brought with promptitude.  The plaintiffs must have been aware that the relevant witnesses were under investigation by the Mainland customs authorities and that they had been detained, as early as in January and February 2012.  Yet they let dates be fixed for the trial without raising any potential problem.  The present application was not taken out until December 2012, months after the witnesses in question had been formally arrested and put in custody.  The court is entitled to pass severe criticism on such conduct.  I consider however that, in the circumstances of this case, this should be reflected in an appropriate order for costs, rather than result in the peremptory dismissal of the application on this ground alone.

31.  I am satisfied that exceptional circumstances exist here, such as to engage my discretion.  Ultimately, it seems to me that this involves a balancing exercise, a choice between unattractive options and a balance between the underlying objectives.  To allow the application would result in the vacating of trial dates just a month away when these dates were fixed many months ago.  It would require the defendants (who are also the plaintiffs by counterclaim) to wait longer for the trial and therefore for a final outcome.  To refuse the application would however be to deny the plaintiffs the chance of having the relevant witnesses, in particular, the master of the vessel, testify at the trial a main issue in which is the cause of the sinking of the vessel.  I recognise that one of the underlying objectives of our procedural rules is to ensure that a case is dealt with as expeditiously as is reasonably practicable (see Order 1A, rule 1(b)), but rule 1(d) requires the court to ensure fairness between the parties and rule 2(2) states that the court must always recognise that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.

32.  In the end, I consider that at this stage, the balance comes down in favour of an adjournment.  I would therefore, albeit with some reluctance, accede to the application.

33.  I emphasise however that this is a decision based on the circumstances of this case at this stage, and is in no way to be taken to indicate that the plaintiffs are entitled to an indefinite adjournment until the witnesses are available. 

34.  I shall now hear the parties on costs. 

35.  My decision on costs is as follows.  I think there are three components of the costs.  First of all, the costs of issuing the summons itself.  There is no dispute that they should be paid by the plaintiffs.  In relation to the costs thrown away by the adjournment, I will order the plaintiffs to pay those costs on an indemnity basis. 

36.  In relation to the hearing of the summons, I think that the additional hearing today has largely been necessitated by the plaintiffs’ failure to investigate the position regarding videolink which I would have thought was fundamental for an application of this nature.  So the costs of the additional hearing should be borne by the plaintiffs but otherwise I will make no order as to the costs of the hearing of the summons, on the basis that although the plaintiffs are ultimately successful in getting the order for vacating the trial date and the adjournment of the trial, it is very much a matter of indulgence of the Court.  Given the circumstances including in particular the timing of the application, I am satisfied that the defendants have acted reasonably in putting forward material information and appearing on the hearing of the summons to apprise the court of all relevant matters.  The costs ordered are to be paid forthwith rather than in any event.