THE OWNERS AND/OR THOSE ENTITLED TO SUE IN RESPECT OF A CARGO LATELY LADEN ON BOARD THE SHIP OR VESSEL “COSCO TIANJIN” v. THE OWNERS AND/OR DEMISE CHARACTERS OF THE SHIP OR VESSEL “COSCO TIANJIN”

HCAJ 177/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 177 OF 2009

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Admiralty action in rem against the ship or vessel “COSCO TIANJIN”

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D E C I S I O N

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1. This is an application by the defendant under Order 23 for further security for costs in sum of over $600,000.

2. The claim is for loss and damage as a result of damage to a yacht which was shipped on board the vessel M/V Cosco Tianjin on or about 2 August 2008 and arrived in a damaged condition.  The defendant denies liability.  A prior order for security in the sum of HK$150,000 has been made in July 2010 as security up to and including PTR.  The trial is due to be set down, estimated to last for 3 days.

3. There is no dispute that the plaintiffs have no presence in Hong Kong, they being entities in the USA or Canada.  They have no assets within the jurisdiction.  Any cost award that may be made against the plaintiffs may be difficult to enforce.

4. The defendant alleges that the plaintiffs have failed to provide their addresses on the writ.  They may be ordered to amend by adding the correct address or else the proceedings may be stayed or the plaintiffs may be ordered to give security for costs.  Despite being alerted to this, the plaintiffs have failed to state the address.  It is said that the prolonged failure to amend the writ was an additional ground for seeking security.  With respect, this is not something that I will give great weight here.  The plaintiffs’ addresses are stated on oath.  There was nothing to show that the plaintiffs are in hiding.

5. The only issue is one of merits.  Usually in an Order 23 context, the court does not go into the merits unless it can be clearly demonstrated one way or another that there is a high degree of probability of success or failure: Hong Kong Civil Procedure 2012, Vol 1, para 23/3/3, at page 507. 

6. The plaintiffs say that they have an overwhelming case on the merits so that the court should exercise its discretion not to order further security. 

7. The defendant, on the other hand, says that they had been informed of the claim about a year after the event.  They have a good arguable case.  Ms Wai for the defendant identified 4 issues disclosed in the pleadings in her skeleton submission:

(i) While the plaintiffs seek to advance a claim under contract in the capacity of the consignee under a bill of lading, the bill of lading relied on by the plaintiffs was issued by a Global Cargo Logistics, Inc (“the GCL bill of lading”) and not the defendant (“the COSCO bill of lading”).

(ii) While the plaintiffs seek to advance a claim in tort, the plaintiffs failed to establish that they were the owner and/or person entitled to immediate possession of the yacht at the time of loss or damage.

(iii) The plaintiffs’ claim was time barred under the GCL bill of lading, which provided for a 9-month limitation.

(iv) The defendant’s position was further strengthened by the existence of exclusion of liability clauses and limitation of liability clauses in the relevant contracts of carriage.

8. With regard to (i), Mr Laracy for the plaintiffs submits that that was a red-herring.  The fact that the charterer issued its own bill of lading was irrelevant.  The plaintiffs were named on the GCL bill of lading and were entitled to rely on it to launch this claim.  I have not been shown the COSCO bill of lading which can assist me in making a finding one way or another.

9. With regard to (ii), the defendant’s witness statement was brief, being virtually a bare denial.  The plaintiffs’ witness statements, asserted that there was a contract, payment of purchase price and a subrogation receipt in proof.  However, despite the defendant’s request, these documents in support have not been produced.  One cannot say that the plaintiffs have a cast-iron case.

10. With regard to (iii), the defendant argues that the Hague Visby Rules (“the Rules”) should not apply because the bill of lading relied on by the plaintiffs was issued by China, which was not a contracting state.  Mr Laracy, however, has shown that the GCL bill of lading contained an express provision stating Hong Kong law, which incorporates the Rules, shall apply. According to Article III (8), any attempt to circumvent the Rules will be null and void.  The Rules provide for a 12 month limitation period.  Therefore, any provision that limits the limitation period to 9 months will be null and void.  This point may be ruled in favour of the plaintiffs.

11. With regard to (iv), there is argument as to whether the customary freight unit applicable to the contract of carriage was the gross weight of the yacht (23,000 kg) or the unit of goods shipped (1 unit).  That is a matter of law and construction for which the parties have not shown me authoritative definitions.  That aside, there was certainly a dispute over quantum of damages.  Although there may be a receipt on subrogation, there was no contemporaneous record of proof of the alleged damage together with breakdown of the value of each head of damages.  The defendants are entitled to question the damage and the quantum claimed.

12. At this stage, I do not agree that the plaintiffs have an overwhelming case on the merits.  The points raised by the defendant (especially (ii) and (iv)) are not entirely unarguable.

13. I have also take into account other matters raised by plaintiffs. The defendant had been obstructive in the sense of failing to put up security at the commencement of this action, until proceedings for arrest of the vessel was taken out.  I do not think this is enough to tip the scale in favour of the plaintiffs.  Afterall, the defendants have provided security.

14. The plaintiffs say that an order for security will stifle their claim.  There is no evidence on this.

15. In summary, I am of the view that it is appropriate to order security for costs.

Quantum of security

16. Ms Wai claims that her client has spent about HK$1.2 million on costs already.  However, the damages claimed are only in the region of CAD210,000 or HK$1.68m.  Additional security of HK$654,000 together with the HK$150,000 already ordered will clearly be excessive for a claim of this amount.  In the prior application for security in the amount of HK$737,700, the defendants could only obtain an order for HK$150,000.  I bear in mind that the court needs only order security, and not indemnity, which is supposed to cover the post-PTR costs.  I therefore order HK$250,000 as security. 

Costs of this application

17. Costs should follow the event and be to the defendant, the plaintiffs having fought from liability to quantum of security and failed.  I have read the costs statement of the defendant.  The application is simple.  The hourly rates are excessive.  There is no justification for engaging 2 fee earners. Costs should be in the amount of $40,000.

Order

18. I order that the plaintiffs do pay HK$250,000 into court within 28 days as security for this action up to the end of trial, failing which the action shall be stayed.  There be an order nisi that costs should be to the defendant, summarily assessed and allowed at $40,000. 

19. I thank Ms Wai and Mr Laracy for their assistance.