NEWOCEAN PETROLEUM CO LTD v. RIO TINTO SHIPPING (ASIA) PTE. LTD

CACV 122/2018

[2019] HKCA 897

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 122 OF 2018

(ON APPEAL FROM HCA NO. 2265 OF 2016)

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D E C I S I O N

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Hon Cheung JA (giving the decision of the Court) :

I. Leave to appeal

1.1   The defendant applies for leave to appeal to the Court of Final Appeal from our judgment dated 30 April 2019 on the grounds that pursuant to section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance (Cap. 484), the judgment raises questions of great general or public importance, or otherwise, ought to be submitted to the Court of Final Appeal for decision.  The questions are :

‘ 1)   in an application for service out, and in particular an application based on Order 11, rule 1(1)(f) of the Rules of the High Court (Cap. 4A) (‘RHC’) :

(1)  Is the Court bound to consider whether the plaintiff has shown a ‘plausible evidential basis’ for each element necessary to establish the jurisdictional gateway; alternatively, is it sufficient for the Court to focus merely on the plaintiff’s pleaded case?

(2)  In a claim for damages for consumption of bunkers based on an instruction by the defendant, what must be shown to have occurred to the level of a plausible evidential basis within the jurisdiction of the Hong Kong Court for a good arguable case within Order 11, rule 1(1)(f) of the RHC to be shown; and in particular is it sufficient that commingling of bunkers occurred in Hong Kong where the damages claim is based on consumption rather than commingling?

2)  If the above questions, or any of them, are answered as proposed by the defendant, leave for the plaintiff under Order 11, rule 1(1)(f) of the RHC would be set aside and the defendant would not be subjected to a claim in Hong Kong.’

1.2 The defendant contends that the matters giving rise to the application are as follows.  We failed to apply the test in Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV [2019] EWCA Civ 10 which provided at paragraph 70 for a three stage test and required the plaintiff to show the required ‘plausible evidential basis for the application of a relevant jurisdictional gateway’.  In relation to title to bunkers, we have :

(1)  erroneously transferred the burden to the defendant to show lack of title rather than place it on the plaintiff to show title;

(2)  erroneously focused merely on the pleaded case put forward by the plaintiff rather than whether there was evidence to support it;

(3)  not considered whether there was a ‘plausible evidential basis’ for the claim to title.

1.3   In relation to damage sustained or act committed in Hong Kong :

(1)  the defendant performed no relevant act in Hong Kong and we did not hold otherwise;

(2)  we erred in focusing on the pleaded case and not the ‘plausible evidential basis’ required;

(3)  to the extent that Lam VP referred to the commingling in Hong Kong, he erred in holding that could constitute substantial and efficacious acts in Hong Kong in relation to the damage, because the damage case pleaded and put forward by the plaintiff was based on consumption of bunkers not commingling bunkers.

II.   Our view

2.1   We will not grant leave.  Of the two questions, the second one clearly does not come within the great general public importance threshold.

2.2   The first question was not argued before us in the substantive appeal.  Counsel did not cite to us any of the authorities which are now relied upon by Mr Hollander.  Kaefer refers to two judgments of the UK Supreme Court, namely, Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192 and Goldman Sachs International v Novo Banco SA (Banco de Portugal intervening) [2018] 1 WLR 3683.  The latter confirmed the reformulation by Lord Sumption in Brownlie on the test regarding service out of jurisdiction.  In Brownlie, Baroness Hale of Richmond PSC has this to say :

‘ 33 As we agree that this action cannot continue against the current defendant, everything which we say about jurisdiction is obiter dicta and should be treated with appropriate caution. For what it is worth, I agree (1) that the correct test is “a good arguable case” and glosses should be avoided; I do not read Lord Sumption JSC’s explication in para 7 as glossing the test;......’

2.3   The Supreme Court in Goldman Sachs held :

‘ 9 This is, accordingly, a case in which the fact on which jurisdiction depends is also likely to be decisive of the action itself if it proceeds. For the purpose of determining an issue about jurisdiction, the traditional test has been whether the claimant had “the better of the argument” on the facts going to jurisdiction. In Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192, para 7, this court reformulated the effect of that test as follows:

“(i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.”

It is common ground that the test must be satisfied on the evidence relating to the position as at the date when the proceedings were commenced.’

2.4   In Kaefer, the English Court of Appeal, attempted to see how the reformulated test works in practice because it did not address what is meant by ‘plausible’, how it relates to ‘good arguable case’ and how the various limbs interact with the relative test in Canada Trust Co v Stolzenberg (No. 2) [1998] 1 WLR 547 where Waller LJ at page 555 :

‘ ‘Good arguable case’ reflects ... that one side has a much better argument on the material available.  It is the concept which the phrase reflects on which it is important to concentrate, ie of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction.’ 

2.5   The ‘good arguable case’ test has been well established and the leading modern authority is Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438.  It is the test adopted in this case. 

2.6   In Kaefer Green LJ (whose view was agreed to by Asplin and Davis LJJ) held :

‘ 72. Notwithstanding, when one stands back in order to determine what was sought to be achieved and when one takes into account pre‑existing case law which was not in question in Brownlie and in Goldman Sachs, it is in my view possible to make sense of the new, reformulated, test.’

2.7   Davis LJ further held :

‘ 119. I am in something of a fog as to the difference between an “explication” and a “gloss”. But whatever the niceties of language involved, it is sufficiently clear that the ultimate test is one of good arguable case. For that purpose, however, a court may perfectly properly apply the yardstick of “having the better of the argument” (the additional word “much” can now safely be taken as consigned to the outer darkness). That, overall, confers, in my opinion, a desirable degree of flexibility in the evaluation of the court: desirable, just because the standard is, for the purposes of the evidential analysis in each case, between proof on the balance of probabilities (which is not the test) and the mere raising of an issue (which is not the test either).’

2.8   The Brownlie line of English authorities were not referred to us at the hearing of the appeal.  In view of the difference in the applicable rules in England as submitted by Mr Sussex, it is not satisfactory for the question relating to the elaboration on the ‘good arguable case’ test to be considered by the Court of Final Appeal without proper debates in lower courts.  Whatever maybe the interest generated by the reformulation and even proceeding on the basis that the reformulation should be adopted (a point disputed by the plaintiff) one must bear in mind the limited scope the appellate court has in interfering with a first instance judge’s appraisal of the evidence, let alone a second tier appellate court.  What the defendant is now seeking is to seek a further appeal on what is basically an issue on the appraisal of evidence which, with respect, is clearly not intended to be the function of the Court of Final Appeal.  We have referred to the plaintiff’s case on its ownership of the bunkers and its retention of title prior to payment.  We pointed out the defendant’s challenge to the plaintiff’s ownership and the lack of any clear and uncontroversial evidence by the defendant to support its challenge.

2.9   Likewise on the consumption of the bunkers, the bunkers were taken on board, mixed with other fuel, and then consumed.  As Mr Sussex submitted they were lost to the plaintiff from the moment that they were mixed with other fuel.  The plaintiff would still have a sustainable cause of action in conversion even if the bunkers were still in existence.

2.10   In the circumstances we decided it was not appropriate to conduct a mini trial of the parties’ case on affidavit.

2.11   Thus even adopting the three-tier reformulated approach, the test was clearly satisfied in respect of each of the three limbs, namely, there was plausible evidential basis for the application, there was an issue raised which required this Court to make an assessment and in view of the limitation of material, no reliable assessment can be made.  Hence there was a good arguable case for the application of the jurisdictional gateway.

2.12   To put it bluntly the defendant is attempting to have a second bite of the cherry under the guise of the threshold question. Neither can we see any basis for invoking the ‘or otherwise’ limb.

III.   Conclusion

3.1   The application is refused with costs to the plaintiff.

3.2   We have considered the plaintiff’s summary statement on costs.  We will order the plaintiff to re‑file its summary statement on costs within seven days for the following reasons.  The plaintiff’s statement on costs was not signed.  Under Practice Direction 14.3 at paragraph 7, the statement should be signed by the acting solicitors.  Further, under item D4, there is a charge for the preparation of the plaintiff’s statement.  Under Practice Direction 14.3 at paragraph 13, costs for the drafting of a summary statement will generally not be granted.