XCHRX NUCRON PHARMACEUTICALS LTD. v. THE NEW INDIA ASSURANCE CO. LTD.

HCCL308/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.308 OF 1998

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J U D G M E N T

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1. In this action the Plaintiff claims against the Defendant under an insurance policy of which it is the assignee. The insurance related to a cargo of chemicals of which the Plaintiff was the buyer from one Indotech Limited ("Indotech"), pursuant to a Sale Contract dated 5th June 1997. On 29th July 1997, Indotech took out the policy (later assigned to the Plaintiff) under which, in consideration for premiums paid, the Defendant agreed to insure the cargo against specified risks or loss or damage during carriage of the same from Shanghai to Mumbai, India.

2. This cargo of, I am told, some 60 chemical drums was stuffed into a container at Shanghai and was devanned and restuffed upon transshipment in Hong Kong. However, when the container arrived at Mumbai on 24th August 1997, there was no cargo. Accordingly, having paid Indotech the sum of US$57,750, the Plaintiff now claims to be indemnified by the Defendant under the policy. But the Defendant has refused so to indemnify, and hence this claim.

3. This, then, is the broad background to the present application, which is an application for a stay of proceedings by the Defendant pursuant to its summons dated 21st August 1999. This summons asks first, that all further proceedings in this action be stayed on the basis of forum non conveniens in that the High Court of Hong Kong is not an appropriate, convenient and suitable forum for the adjudication of the dispute between the parties and that the appropriate, convenient and suitable forum for such adjudication is the High Court of Judicature at Bombay, India. Alternatively, the summons requests that all further proceedings in this action be stayed on the basis of lis alibi pendens in that the High Court of Judicature at Bombay, India has been seized of the cause of action in this action by reason of the Plaintiff having already commenced parallel proceedings in the same cause of action in that Court.

4. After having heard submissions from the solicitors for the parties, it seems to me that this application may conveniently be approached from both a procedural and a substantive standpoint.

5. Let me take the procedural element first. It is not clear why this Court should exercise its discretion in favour of the grant of a stay of these proceedings when, on its own case, the Defendant has taken defined steps in the action prior to inviting this Court, under its inherent jurisdiction, to consider this application. Most unusually for an applicant in the Defendant's position, it filed its Defence - albeit this amounted to little more than a bare denial and a putting to proof - on 23rd February 1999. It took out a summons for security for costs on 26th February 1999, which summons presently stands adjourned, and it actively defended the Plaintiff's Order 14 application for summary judgment on this claim by swearing and serving an affidavit in opposition on 2nd June 1999. I pause to note that this latter summons is not restored for hearing today, but I apprehend that at the conclusion of this judgment, I will be asked to make directions for that hearing.

6. It is quite clear that for there to be a step in the proceedings, two requirements must be satisfied. First, the conduct of the applicant must be such as to demonstrate an election to abandon his right to request a stay in favour of allowing the action to proceed; and second, the act in question must have the effect of invoking the jurisdiction of the Court. Moreover, the circumstances which accompany an act must be scrutinized to see whether such act amounts to such an election, and there has been a considerable amount of case law that has developed in this area upon precisely these principles.

7. I am in no doubt that these three events which have taken place at the instance of the Defendant in these proceedings objectively amount to "steps in the action" properly so-called. The Defendant has clearly elected to proceed with the exercise of the very jurisdiction it now asks the Court, at this comparatively late stage, to cease so to exercise. Whether the effect of this is to amount to a complete procedural bar, which nullifies the jurisdiction of the Court to grant a stay, or whether it is simply a matter which is to be weighed when the Court exercises its discretion, does not seem greatly to matter. Although for what it be worth - and it is an interesting juridical argument - in my opinion the better view is that steps which are unequivocally "steps in the action" do in fact amount to such a procedural bar.

8. In any event, on this basis alone I would have decided the outcome of this application, notwithstanding the submissions by the solicitor for the Defendant that these steps were "only minimal steps", that "the proceedings had not advanced to the stage where there would be prejudice to the Defendant", and that the executive in charge of the Defendant apparently did not have a clear picture of events at the time these steps were taken. Such submissions are, with respect, misguided. Whether the concept of a step in the action be expressed in terms of election, or approbation, or affirmation of the jurisdiction does not greatly matter in terms of the descriptive labels adopted. What does matter is that which unequivocally occurred, and that which those steps represented in terms of invoking the jurisdiction of the Court; in this connection the benchmark must be an objective evaluation of the acts in question. In my view, the case in this regard is simply not arguable.

9. The application herein is made under the Court's inherent jurisdiction, and not, as I perceive it, under Order 12 rule 8, which brings me to the second procedural point. The Defendant is asking the Court, under its inherent jurisdiction, not to continue the exercise of that jurisdiction which it is accepted that the Court possesses. In other words, the primary existence of jurisdiction is not in issue. It is suggested by Mr Laracy, the Plaintiff's solicitor, that this approach is not open to the Defendant given that the provisions of Order 12 rule 8 govern, and that accordingly it must follow, because of the temporal requirements of any Order 12 rule 8, that the Defendant is too late in any event to make this application.

10. I do not accept this submission, and I have had occasion to refer Mr Laracy to an earlier decision of this Court in High Court Commercial List 81/1997, United Phosphorus Limited v. China Merchants Shipping and Enterprises Company Ltd., and in particular the finding in that case, in circumstances broadly the same as the present, wherein it was held that an application to stay was not an Order 12 rule 8 application. This concept was clearly recognised by Lord Goff in a case cited in that case, which I repeat here for good measure : see The Messiniaki Tolmi [1984] 1 Ll.L.R.266 at 270 where Goff LJ (as he then was) observed as follows :

" In our judgment, the application by the appellant for a stay of proceedings was not an application under O.12, r.8(1). Only where a party on one of the grounds specified in that rule seeks relief in which he disputes the jurisdiction of the Court can his application fall within the rule. Here there was no question of the appellant disputing the jurisdiction of the Court. Indeed, as he had been served personally with the writ in this country, it is difficult to see on what ground he could possibly dispute the Court's jurisdiction. His application was for a stay of proceedings which, indisputably, had been properly commenced against him. The effect of a stay, if granted, would not have been to set aside the proceedings; it would have been simply to stop the respondents from pursuing the action any further at that time. Moreover, it would have been open to the respondents to apply thereafter to have the stay lifted, and if such an application was granted they could continue to proceed with the action."

11. Accordingly, I am against Mr Laracy on this point albeit, as earlier indicated, I am with him in terms of the "step in the action" argument.

12. This brings me now to the substantive issues, which I decide also out of an abundance of caution in case I be wrong on the procedural aspects. There is, and can be, no dispute about the relevant test - the speech of Lord Goff in Spiliada Maritime Corporation v. Cansulex [1987] AC 460 continues to hold sway in common law jurisdictions, and is cited in this Court on a weekly basis. It will be recalled that the Applicant for a stay must demonstrate that it would be right to deprive the Plaintiff of the right to sue in Hong Kong. The Court must choose the forum where the case could be tried more suitably in the interest of all parties and for the ends of justice. The burden of proof lies on the Defendant, the Defendant being required to show not merely that Hong Kong is not the natural or appropriate forum for the trial, but also that there was another available forum which is "clearly or distinctly more appropriate". I will, I hope, be forgiven for not setting out details of the Spiliada more fully, but that at any rate represents the bones of the test.

13. What then do the present facts reveal? Mr Laracy has pointed out to this Court that the Defendant is an Indian company with Hong Kong offices. Indeed, the Defendant has been served as of right in Hong Kong. There is no question here of effecting extraterritorial jurisdiction. The Defendant's personnel concerned with fixing the insurance are here in Hong Kong, the insurance policy (which is the subject of the claim) was written in Hong Kong, the representative of the Plaintiff concerned with this case is in Hong Kong, and a number of the Plaintiff's witnesses (for example, a gentleman from Indotech, the seller) are in Hong Kong. Indotech itself is a Hong Kong company, or at least has Hong Kong offices. Transshipment took place in Hong Kong, and the Defendant has requested documentation in connection therewith. The carrier in question in this case, if not based formally in Hong Kong, at least visits Hong Kong regularly. The insurance policy is subject to English law and practice which, of course, is the basis of the law applied in Hong Kong Courts, with suitable modifications.

14. There is in my view no need to probe further into the case by considering the advantages or disadvantages of litigating in India, although Mr Laracy for good measure throws those in as well in terms of the time likely to be taken to get proceedings underway and advanced in India.

15. For my part, it seems to me quite clear that, against this background, Hong Kong is plainly appropriate as the forum for trial. Or, to put it the other way round, it is not clear how it can seriously be suggested that Hong Kong is not an appropriate forum, nor after reviewing the situation, do I consider that in the circumstances Bombay is, in Lord Goff's words "clearly or distinctly more appropriate". So in my judgment, the Defendant in this case fails in limine on a straightforward application of forum non conveniens principles. In fact, I am not sure how in the circumstances this case could have been put up. The criteria for forum non conveniens are not necessarily the same, and do not necessarily correlate with, the perceived convenience of one party to the litigation - which is a point often overlooked in these Courts, and in particular, in applications of this nature in the Commercial Court.

16. As a second string to its bow, the Defendant relies upon lis alibi pendens. At the outset I observe that this basis in any event remains discretionary, and subject to like objections in terms of the "steps in the action" argument. So that once again, on this point alone, the "steps in the action" taken by this Defendant serve to preclude a lis alibi pendens attack.

17. Nevertheless, it is far from clear to me in any event whether the basic ingredients oflis alibi pendens exist in this case. The proceedings before the Courts of Bombay, I understand, have been commenced by the Plaintiff at the request of the Defendant in order to protect the Defendant's right, as subrogated underwriter, to proceed against the carrier under the contract of carriage. Indeed I am told that the proceedings were commenced by the Plaintiff in accordance with its obligations under Clause 16.2 of the Institute Cargo Clauses. Mr Laracy makes the point that the Plaintiff saw fit to commence the Indian proceedings in reliance on that understanding, and that the Defendant is estopped or precluded from now insisting upon or requiring a stay in favour of the Courts at Bombay. However, I do not think it necessary to explore this aspect too deeply. Mr Laracy's better point, I think, is that lis alibi pendens occurs only where the actions as are proceeding before two or more Courts are between the same parties and in respect of the same cause of action. He notes that the Bombay proceedings have not been brought solely against the Defendant herein. Indeed, in those proceedings, the Defendant herein is named as the "2nd Defendant" with the 1st Defendant in that action being the carrier. And, it emerges that although that is the title in the Bombay action, there is no actual prayer for relief against the 2nd Defendant therein who is, of course, the present Defendant in these proceedings. Mr Laracy also observes that there is a different cause of action prayed in aid in India, the Bombay proceedings specifically being brought pursuant to the contract of carriage with the carrier, whereas the present proceedings in Hong Kong have been brought pursuant to the contract of insurance. And, as I have already indicated, it does not appear there is actually a "live" action by the Plaintiff against the present Defendant in Bombay pursuant to that contract of insurance, notwithstanding the formal title of the Bombay action. So that given this factual matrix, were other things to be equal (which they clearly are not), it does not seem to me that the Defendant has any chance to succeed upon a lis alibi pendens basis either.

18. The result of the foregoing is that in my judgment the decision of this Court on this application is crystal clear. I have no hesitation whatever in dismissing this application, with costs to the Plaintiff. I so order. I will now hear the parties on any matter arising from this judgment.

[Submissions]

19. I have now had the advantage of submissions from Mr Laracy for the Plaintiff and Mr Sundara-Moothy for the Defendant on the issue of both costs and further directions. I take these matters in turn.

20. As to costs, Mr Laracy asks for costs on a higher order. He shows me a fax of 25th August 1999, the final paragraph of which refers to this application being clearly misconceived. Had the premise of that letter not been predominantly non-compliance with Order 12 rule 8, upon which basis I have found against Mr Laracy, I might have been more sympathetic to his request for indemnity costs. However, I think he is broadly correct when he says that costs in this case should not be on the normal party and party basis. I say so primarily because, quite apart from what I consider to be the very weak nature of the application substantively in terms of the connecting facts both with Hong Kong and Bombay, I have taken a dim view of the lack of recognition on the part of the Defendant of what I have called "the step in the action" line of argument. In all the circumstances, after hearing submissions, in my view the proper Order is that this application is dismissed, with costs to the Plaintiff, such costs to be taxed and paid by the Defendant upon a common fund basis. That does not get Mr Laracy to his indemnity level, but it is at least a higher level than the normal party and party level. I also point out, for the avoidance of doubt, that absent agreement these costs are to be taxed and paid by the Defendant, and that there is no insertion of the magic words "in any event", so that it is open for the Plaintiff to go to the Taxing Master and to secure an early taxation and early payment of these costs. I can see no basis in this case for ordering costs in any event, and I decline to do so.

21. That then deals with costs.

22. The other matter that arises is directions on the Order 14 application which has been stood down and which, it appears fairly clear, was not promptly restored by the Plaintiff's solicitors, possibly because of Mr Laracy's recent absence from Hong Kong, I know not. In any event, whilst it might usefully have been dealt with today, this has not occurred and, in my view, since the Order 14 application was issued in April of this year, it is high time it is now dealt with one way or another. Accordingly I now fix hearing of the Order 14 Summons for 4th November at 10 o'clock before this Court.

23. So far as the evidence on that application is concerned, Mr Laracy has been complaining about late affidavits. He appears to have some basis for that, although this has not been an insuperable obstacle. Nevertheless, Mr Sundara-Moothy has put in five affidavits and, in blunt terms, enough is enough. Indeed, the 5th affidavit is one that I have not yet read because it was filed only yesterday, and has just made its way through the system. So my Order is that the Plaintiff is to have leave to file a Reply, if any, to the evidence filed by the Defendant within 21 days of today. I further order that no further evidence on the Order 14 application is to be filed without the leave of the Court. In other words, if Mr Sundara-Moothy is in difficulties and feels that he must try and get some further evidence in, he has to make a specific application, and to justify why such evidence is late.

24. That being all for today, I thank both solicitors for their assistance.