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HCAJ 80-85/2019
[2022] HKCFI 1631
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ADMIRALTY ACTION NO 80-85 OF 2019
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Admiralty actions in rem against the ship or vessel
“SAMBO DCM 1HO” and “SAMBO DCM 2HO”
BETWEEN
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THE OWNERS AND/OR DEMISE CHARTERERS
OF THE SHIP OR VESSEL
“DCOC 3” AND “DCOC 4” |
1st Plaintiff |
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THE OWNERS AND/OR DEMISE CHARTERERS
OF THE SHIP OR VESSEL
“CHOSUK 9 HO” |
2nd Plaintiff |
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and
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THE OWNERS AND/OR DEMISE CHARTERERS
OF THE SHIP OR VESSEL
“SAMBO DCM 1HO” and “SAMBO DCM 2HO” |
Defendant |
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(Consolidated pursuant to the Order of
The Honourable Mr Justice Anthony Chan
dated 4 September 2020)
| Before: |
Hon Au-Yeung J in Chambers |
| Closing Date for Written Submission: |
11 May 2022 |
| Date of Decision: |
31 May 2022 |
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D E C I S I O N
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1. This is the Defendant’s application pursuant to: (i) Order 75 rule 27 for reciprocal security against the Plaintiffs in the sum of HK$3,500,000; or alternatively (ii) Order 23 rule 1 for security for costs against the 2nd Plaintiff only in the sum of HK$1,067,500.
Background facts
2. The Plaintiffs’ claims in this action arose out of a series of collisions between a number of vessels at the River Trade Terminal on 23 August 2017 including the “DCOC 3” and “DCOC 4” of the 1st Plaintiff, the “CHOSUK 9 HO” of the 2nd Plaintiff (together “the Plaintiffs’ vessels”), and the “SAMBO DCM 1 HO” and “SAMBO DCM 2 HO” of the Defendant (“the SAMBO barges”).
3. On 22 August 2017, the SAMBO barges were moored at the River Trade Terminal (as were the Plaintiffs’ and other vessels) for shelter under what the Hong Kong Observatory described as “Super” Typhoon Hato. It turned out to be one of the strongest typhoons to impact Hong Kong in the past 50 years which resulted in hoisting of typhoon signal no. 10 in the following morning, with winds persistently reaching hurricane force.
4. At about 11:50 hours, 2 bollards of the River Trade Terminal’s berth no 19 which had secured the mooring ropes of the SAMBO barges suddenly broke/snapped from their position on the berth under the heavy weather. This caused the mooring ropes which had secured the SAMBO barges to the berth to slacken and eventually disengage from her berth.
5. After the incident, it was found that all of the mooring ropes of the SAMBO barges were in sound condition and intact whereas those of the Plaintiffs’ vessels had snapped due to strong winds and/or storm according to their accident reports.
6. The Defendant say that there was no direct contact between any of the Plaintiffs’ vessels and the SAMBO barges. The Plaintiffs say that there was.
7. There is no dispute that the 2 bollards of River Trade Terminal had broken but there is dispute as to whether they were heavily rusted and corroded.
8. After a very detailed examination of all the barges’ electronic tracking data, the single joint expert concluded in his report that it was the “SAMBO” barges which broke free first. They then drifted across the basin colliding into the others (including the Plaintiffs’ vessels), which were at that point safely moored and secured. That in turn caused all these other barges to break free of their moorings and to collide with one another in a ‘domino effect’. (See §§2.44 and 2.45 of the Expert Report)
9. As a result of the incident, both the Plaintiffs’ vessels and the SAMBO barges have suffered damage and loss.
10. The Plaintiffs claim against the Defendant is for negligence in failing to properly and securely moor to the dock at the River Trade Terminal, failing to give any warning of their approach and failing to take action to avoid the collision. The Plaintiffs’ claims are in the sum of HK$6,049,471.12 and USD133,599.42 (ie, a total of approximately HK$7 million), plus interest and costs.
11. On 22 August 2019, the 1st Plaintiff issued 4 Writs of Summons (HCAJ 80-83 of 2019) and the 2nd Plaintiff issued 2 Writs of Summons (HCAJ 84-85 of 2019) against the Defendant for damage/loss arising from the incident. Pursuant to Anthony Chan J’s order, the actions have been consolidated on 4 September 2020.
12. The defence is one of no negligence and inevitable accident (ie could not have been prevented by the Defendant’s exercise of reasonable care and ordinary skill in mooring). On 9 November 2020, the Defendant lodged a counterclaim against the Plaintiffs for damage sustained by the SAMBO barges in the incident. The Defendant’s case is that the Plaintiffs have failed to moor their vessels properly and failed to ensure that the mooring ropes were of a proper condition that could withstand heavy weather.
13. The Defendant has provided security for the Plaintiffs’ claim by way of Letters of Undertaking to the 1st Plaintiff in the sum of HK$10 million inclusive of interests and costs; and to the 2nd Plaintiff in the sum of USD220,000 inclusive of interests and costs, to prevent the Plaintiffs from arresting the Defendant’s vessels. Out of the HK$10 million and USD220,000 security provided, a proportion of the security was designated as security for the Plaintiffs’ costs of the action. The amounts were HK$3,024,735.56 and USD66,799.71 respectively.
Legal principles
14. Pursuant to Order 75 rule 27 of the Rules of the High Court, reciprocal security should be provided in collision actions, failing which the Court may stay proceedings until such security is given. The Defendant has provided security to the Plaintiffs and the Plaintiffs should likewise provide reciprocal security to the Defendant: Hong Kong Civil Procedure 2022 at §75/27/4.
15. Order 75 rule 27(b) sets out a criterion which must be fulfilled before this power can be exercised, ie that “the ship in respect of or against which the cross action is brought or the counterclaim made cannot be arrested …”.
16. The phrase “cannot be arrested” means, eg, “where the ship has been lost or is not within the jurisdiction: Hong Kong Civil Procedure 2022, §75/27/3.
17. Where the Plaintiff is ordinarily resident out of the jurisdiction, the Court has discretion to order security for costs if, having regard to all the circumstances of the case, the Court thinks it just to do so: Order 23 rule 1, Rules of the High Court.
Application of the legal principles
18. On the facts of this case, there are reasons for making an order for security for costs:
(i) The 2nd Plaintiff is a company incorporated in and has an address in South Korea.
(ii) There is no reciprocal arrangement between Hong Kong and South Korea for the enforcement of judgments under the Foreign (Reciprocal Enforcement) Ordinance, Cap 319. South Korea is also not a jurisdiction which has a common law system.
(iii) If the Defendant succeeds and gets an order for its costs, it is not in the spirit of justice that it has to incur substantial costs and delay to go to a foreign country to enforce the order.
(iv) The 2nd Plaintiff is unlikely to have any assets of a fixed and permanent nature within Hong Kong against which an order for costs could be enforced.
19. The Plaintiffs object to the provision of security on the following grounds:
(1) Jurisdiction ground – for failing to comply with the pre-condition for granting reciprocal security;
(2) Merits ground – in that the Plaintiffs have committed no wrong, and so there is no claim lying against them that requires securing; the counterclaim inherently contradicts its defence of inevitable accident;
(3) Delay ground; and
(4) Quantum ground.
Jurisdiction ground
20. It is not disputed that the 1st Plaintiff’s vessels, “DCOC 3” and “DCOC 4” have remained in the jurisdiction of Hong Kong and can be arrested. The pre-condition in Order 75, rule 27(b) is not fulfilled and the application for security against the 1st Plaintiff must be refused.
21. It is conceded that the 2nd Plaintiff’s barge “CHOSUK 9 HO” is no longer in the jurisdiction of Hong Kong and cannot be arrested here. Accordingly, the jurisdiction ground does not apply to the 2nd Plaintiff.
Merits ground
22. It is well established that the Court should not go into the merits of each party’s case at this stage unless it can be demonstrated that there is a high degree of probability of success: Hong Kong Civil Procedure 2022, Volume 1, §23/3/3.
23. The Plaintiffs submit that the merits are strongly in their favour. On the question of liability, whose vessels broke free first and hit the other vessels is the decisive factor. It is crystal clear that it was the SAMBO barges who first broke free and hit the other moored vessels. The expert report is in favour of the Plaintiffs in showing that the Plaintiffs’ vessels were moored and stationary before the collision. The defence is without merit. If the inevitable accident defence is successful, none of the parties to this action will have proved their claims. The Defendant’s counterclaim therefore inherently contradicts its defence and is bound to fail. The Defendant has no claim which needs to be secured. Further, there is no positive case of negligence and the case of negligence seems not to be pursued by the Defendant. Any apportionment of liability between the Defendant and River Trade Terminal does not affect apportionment of liability between the Plaintiffs and the Defendant.
24. I am unable to agree with the Plaintiffs. The inevitable accident defence is a complete defence. Even if there is no claim to secure, there are costs of the defence to secure.
25. Further, the fact that it was the SAMBO barges which moved first does not necessarily show that the Defendant was negligent or affect the defence of inevitable accident. The relevant issue is how or why they moved and broke free of the moorings.
26. The facts are that the mooring ropes of the Plaintiffs’ vessels had snapped whilst those of the SAMBO barges did not; and the bollards of the River Trade Terminal had broken. As the Defendant submits, the joint expert is unable to state whether the mooring arrangement was suitable or not (§2.50 of the expert report). There are also disputes of facts, including whether there was direct contact between the Plaintiffs’ vessels and the SAMBO charges as can be seen from the 1st and 2nd Plaintiffs’ respective accident to the Marine Department, and whether the bollard was rusted and corroded.
27. It is not true that the Defendants are not pursuing their counterclaim in negligence. Even if the inevitable accident can be established, the Court can still find negligence on the part of the Plaintiffs in not having proper mooring ropes or mooring arrangement in place.
28. Having considered the submission of both parties, I am of the view that the Plaintiffs have an arguable claim on the merits and the Defendant has an arguable defence and counterclaim.
Delay
29. The Plaintiffs submit that it has been obvious from the very beginning that the 2nd Plaintiff is a South Korean company. And yet this summons was only issued about 15 months after the exchange of the Preliminary Acts, 11 months after the case management conference, and shortly after the Plaintiffs sought to set down for trial. The Plaintiffs also complain that the Defendant has delayed in serving the list of documents and delayed in responding with regard to the expert report. All of these cause prejudice to the Plaintiffs in delaying the setting down for trial.
30. The Plaintiffs submit that the Defendant’s present application is a tactic to delay the just and efficient disposal of these consolidated actions. The Plaintiffs presume that it was because the Defendant wishes to recover from River Trade Terminate first under HCAJ 5/2021 before it needs to pay the Plaintiffs in the present actions. The Defendant has abused the process of the Court.
31. I find there to be delay but it is not so gross as to justify denying the Defendant security. The present action has not yet been set down for trial.
Quantum
32. I agree with the Plaintiffs that the amount of HK$3.5 million provided to them as security bears no relationship to the Defendant’s security. There is no evidence of the estimated value of the Defendant’s counterclaim. Accordingly, the Defendant can only get an order for security to cover its costs but not its damages.
33. The present action was consolidated at any early stage. According to the Defendant, the costs in defending both the 1st and 2nd Plaintiffs’ claim are one and the same. There is no comprehensible distinction or practical apportionment of the Defendant’s costs in defending the 1st and 2nd Plaintiffs’ respective claims. But anyhow, the 2nd Plaintiff should not provide security for the 1st Plaintiff’s costs.
34. The Plaintiffs comment that the quantum of security sought in the amount of HK$1,067,500 was unjustified and not properly supported; and the breakdown of costs is only up to 28 October 2021. It is not proportionate to the principal claim that the 2nd Plaintiff makes against the Defendant in the amount of US$133,599.42 (equivalent to about HK$1,042,075.48).
35. I am unable to see what support is required of the Defendant. The security sought is of necessity based on estimates and the complexity (of lack of it) of a case. I agree that the hourly rates of the 2 fee earners of the Defendant’s firm of solicitors depart from the usual rates on party-and-party basis and should be adjusted downwards. That the Defendant’s estimates are out of date only means that the Plaintiffs can benefit from having to pay less as security. However, I agree that the security for costs sought is disproportionate to the 2nd Plaintiff’s claim.
Conclusion
36. Considering all the factors above, I am of the view that it is just to order security in the amount of HK$600,000. The 2nd Plaintiff is to provide the security within 28 days of the handing down of this decision, failing which the counterclaim shall be stayed.
37. In principle, the 2nd Plaintiff shall pay the costs of this summons to the Defendant, whereas the Defendant should pay the costs of the 1st Plaintiff. As between the 2 Plaintiffs, I apportion the costs for this summons at 10% and 90%. I make an order nisi accordingly.
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(Queeny Au-Yeung) |
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Judge of the Court of First Instance |
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High Court |
Written Submission by Ince & Co, for the Plaintiffs
Written Submission by Holman Fenwick Willan, for the Defendant
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