COMPANIA SUD AMERICANA DE VAPORES SA v. HIN PRO INTERNATIONAL LOGISTICS LTD

HCMP 1449/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1449 OF 2014

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D E C I S I O N

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The factual background

1.  This is an inter partes application for the appointment of receivers and managers over the defendant (Hin-Pro), and all its assets, until further order of the court.  I am satisfied from the affidavit of service of Mr Brian You that has been put before me this morning that the application has been brought to the attention of Hin‑Pro, but that Hin‑Pro has elected, deliberately, to ignore the proceedings and in particular to ignore this application.

2.  The plaintiff (CSAV) is a substantial Chilean shipping company which has provided shipping services to Hin-Pro, a Hong Kong registered company which provides freight forwarding services to companies in China.

3.  A number of disputes have arisen between CSAV and Hin-Pro.  These disputes are, CSAV argues, covered by an exclusive jurisdiction clause contained in the bills of lading upon which Hin-Pro has sought to sue CSAV.  The exclusive jurisdiction clause provides:

“LAW AND JURISDICTION This Bill of Lading and any claim or dispute arising hereunder shall be subject to English law and the jurisdiction of the English High Court of Justice in London. If, notwithstanding the foregoing, any proceedings are commenced in another jurisdiction, such proceedings shall be referred to ordinary courts of law. In the case of Chile, arbitrators shall not be competent to deal with any such disputes and proceedings shall be referred to the Chilean Ordinary Courts.”

4.  In breach of the exclusive jurisdiction clause, Hin-Pro commenced proceedings against CSAV in Wuhan PRC.  In response CSAV sued Hin-Pro in England for breach of the exclusive jurisdiction clause, and obtained an interim anti-suit injunction against Hin-Pro.  Hin-Pro ignored the anti-suit injunction, and CSAV took enforcement proceedings in England, which have resulted in Ms Su Wei, Hin-Pro’s director, being held in contempt by the English courts, and being sentenced to imprisonment for three months in absentia.

5.  In those proceedings, Hin-Pro was ordered to pay £57,000 in respect of costs.  No payment was made and CSAV was obliged to commence enforcement proceedings in Hong Kong, which it did in the District Court in May 2013.  Hin-Pro resisted these proceedings, but four days before the hearing on 29 April 2014, paid the costs order in full and agreed to pay the costs of the District Court proceedings.  CSAV had spent in excess of £70,000 in respect of the enforcement proceedings.

6.  Notwithstanding the orders made against it, Hin-Pro commenced numerous other proceedings against CSAV in a number of PRC courts, including Ningbo.  All of those proceedings are in breach of the anti-suit injunction and the exclusive jurisdiction clause in the bills of lading.  CSAV countered these PRC proceedings with a further anti-suit injunction in England against Hin-Pro. This injunction was also ignored by Hin-Pro.

7.  On 13 June 2014, CSAV obtained a worldwide freezing order against Hin-Pro in England, in order to preserve Hin-Pro’s assets.  The note made of the oral judgment of Walker J in granting the worldwide freezing order contains the following passage:

“I have read and considered the 2nd and 3rd affidavits of Mr Kaiser in the affidavit which has been signed (but not yet sworn) by Mr Jose Alfredo Sabatino Pizzolante. For the reasons given by Ms Melwani QC in her written skeleton arguments, I am satisfied that there is good reason for concern that Hin-Pro’s activities in China involve a fraudulent bringing of proceedings and there are good grounds to fear that they may result in execution in China so as to force CSAV to pay a sum which when combined with costs in this country, would total something in the region of US$27,845,000. Similarly I am satisfied that there are strong grounds for thinking that a cause of action has accrued now, even though a substantial part of the damage may not be suffered until sometime in the future. Ms Melwani QC’s skeleton arguments drew attention to four matters which indicate that there is a real risk of dissipation of assets. Taken together, I have no doubt that they make it appropriate to grant a worldwide freezing order.”

8.  On 16 June 2014, on CSAV’s application ex parte, in aid of the worldwide freezing order, I made a Mareva injunction, including a disclosure order requiring Hin-Pro to disclose assets of US$10,000/HK$78,000 or more.  The order required disclosure within seven days of service.  Service was effected by post on Hin-Pro of both the Mareva injunction and the worldwide freezing order, on 17 June 2014.  Hin-Pro has not responded to either the worldwide freezing order or the Mareva injunction with any disclosure at all.

9.  On 26 May 2014, the Ningbo Court awarded damages to Hin-Pro in one of the PRC actions.  There being a judgment and an award of damages in favour of Hin-Pro, Hin-Pro is prima facie entitled to enforce that judgment against CSAV. 

10.  The failure of Hin-Pro to respond to either the anti-suit injunction, and the fact that on the face of those orders Hin-Pro proceeded to judgment in Ningbo is clear evidence that Hin-Pro has no intention to discontinue the PRC actions. 

11.  Notwithstanding its continuance of the PRC actions, Hin-Pro has remained completely silent in respect of the English and Hong Kong proceedings save in respect of the action for the English costs in Hong Kong.  The plain inference is that Hin-Pro has no intention of appearing in or contesting the English or Hong Kong proceedings. 

12.  No inference can be drawn from the payment of costs in the Hong Kong District Court, because in those proceedings Hin-Pro had been forced by the progress of the proceedings to face a judgment.  In neither the English nor the other Hong Kong proceedings, is Hin-Pro yet facing a judgment.

Jurisdiction

13.  The court has power to appoint receivers: see s 21L High Court Ordinance.  There is long and well established authority that when a Mareva order is breached or there is a real risk of such breach the appropriate remedy is the appointment of a receiver over assets which are subject to the Mareva order: see Akai Holdings Ltd v Ho Wing On, Christopher (HCCL 37/2005, unreported, 1 September 2009). 

14.  The American Cyanamid principles apply.  CSAV must show:

(i) that there is a serious question to be tried,

(ii) that there is a real risk of dissipation of assets,

(iii) that there is no current effective protection regime whereby some form of interim protection could be granted to preserve the status quo, and

(iv) that the appointment of interim receivers is appropriate because the other less invasive remedies would not be adequate,

and that any risk of damage to the subject company can be adequately compensated by an undertaking as to damages: see Hong Kong Civil Procedure (2014) at §30/1/0; Re Zealot & Co [2008] 1 HKLRD 386 at §34, Beach Petroleum NL v Johnson (1992) 9 ACSR 404 at 406.

15.  The power to appoint receivers on an interlocutory application is discretionary and is to be exercised flexibly: Guo Jing Jing v Art Master Investment Ltd (HCA 1008/2009, unreported, 11 December 2009) at §36.

Discussion

16.  In my view this is a clear case for the appointment of receivers.  There is plainly a serious question to be tried. That requirement was a pre‑requisite for the granting of the anti‑suit injunctions, the worldwide freezing order, and the Mareva injunctions.

17.  I am satisfied that there is a real risk of dissipation.  Hin-Pro’s willingness to act fraudulently in the PRC courts in support of its claims against CSAV is a plain demonstration that if given the opportunity it will dissipate assets.  Hin-Pro has demonstrated itself to be a habitual flouter of serious court orders, and ignores the court proceedings in both England and Hong Kong, unless brought right to the wire.  It ignores orders made in England and in Hong Kong, but proceeds freely in the PRC, and at the same time is likely to move assets out of CSAV’s reach.

18.  To permit Hin-Pro to continue to act in this way is likely to render any judgment obtained either in England or in Hong Kong to be an empty judgment, unenforceable in the light of the absence of assets. There is the real risk that having obtained judgments in the PRC, Hin-Pro will attempt to arrest CSAV’s ships thereby seriously disrupting CSAV’s major business operations.

19.  The current interim remedies, those of anti-suit injunctions and asset freezing orders have been demonstrated to be ineffective against Hin-Pro.  In those circumstances, where the status quo cannot be maintained by the existing remedies it is proper for the court to look to appoint receivers notwithstanding the invasive nature of such an order.

Conclusion

20.  I am satisfied that the necessary prerequisites for the appointment of receivers have been established on the evidence.  I am further satisfied that the balance of convenience is strongly in favour of the appointment of receivers. Receivers will be in a position to effectively locate and preserve Hin-Pro’s assets for the purpose of complying with the Mareva injunction and the world wide freezing order, and to ensure that Hin-Pro properly complies with the disclosure orders made in the English and Hong Kong courts. 

21.  The receivers will be under the supervision of the court, and will be able to apply to the Hong Kong court should they require guidance in the course of their duties.  CSAV is willing to give the cross-undertaking as to damages.  It is a major listed company in Chile, and I am satisfied that there is no cause for concern regarding its ability to honour that undertaking.

22.  There will accordingly be an order for the abridgment of time in terms of CSAV’s summons of 15 July 2014, and an order for the appointment of receivers in terms of CSAV’s summons dated 14 July 2014.

23.  CSAV is entitled to its costs on the application.  There will be an order that Hin‑Pro must pay CSAV’s costs, with a certificate for two counsel, those costs to be paid forthwith.  I will make a summary assessment of those costs upon receipt of the appropriate schedules.