BRIGHT SHIPPING LTD v. CHANGHONG GROUP (HK) LTD

CACV 102/2019

[2020] HKCA 162

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 102 OF 2019

(ON APPEAL FROM HCAJ NO 3 OF 2018)

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BETWEEN

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  On 20 September 2019, the Court of Appeal (Kwan VP and Barma JA) handed down its judgment (“CA Judgment”) dismissing the appeal of the defendant (“Changhong”) against the decision of Anthony Chan J on 15 November 2018 (“CFI Judgment”), by which the judge dismissed Changhong’s application to stay an action brought against it by the plaintiff (“Bright Shipping”) on the ground of forum non conveniens. Changhong issued a notice of motion on 17 October 2019 seeking leave to appeal to the Court of Final Appeal from the CA Judgment^[1].

2.  We adopt the same expressions and abbreviations as in the CA Judgment.  The relevant background matters are set out in §2 of the CA Judgment quoting the relevant parts of the CFI Judgment and in §§31 to 43 of the CA Judgment which gave an overview of the various proceedings brought in Hong Kong and the Shanghai Maritime Court (“SMC”) by various parties arising out of the collision between Changhong’s vessel and Bright Shipping’s tanker.

3.  There was no dispute that Hong Kong is not the natural forum for this inter-ship action, even though Bright Shipping is entitled to bring this action as of right (ie first question for the stage 1 analysis applying the Spiliada principles).  The judge held against Changhong it was not established that the SMC is clearly and distinctly more appropriate than Hong Kong as the forum for the trial of this action (ie second question for the stage 1 analysis).  We saw no basis to interfere with the judge’s assessment in that respect, which is closely analogous to the exercise of a discretion.  He has not misdirected himself on the applicable principles or fallen into error in his evaluation of the factors he took into account^[2]. The appeal was dismissed on this basis.

4.  The judge also held even if Changhong should succeed on the stage 1 analysis, Bright Shipping has shown that it will be deprived of legitimate juridical advantage if this action is to be tried in the SMC rather than Hong Kong (ie stage 2 analysis) in two respects: the significant disparity in tonnage limitation that apply in Hong Kong and the SMC; and the expiry of the time limit for Bright Shipping to bring claims in the SMC against the limitation funds set up there.  We dealt with the former only and on an obiter basis.  We agree with the judge if it had been necessary to undertake the stage 2 analysis, Bright Shipping has shown that it will be deprived of a legitimate juridical advantage if the action is tried in the SMC^[3].

5.  The orders sought to be appealed from are interlocutory orders.  Appeals from interlocutory orders to the Court of Final Appeal are rare and exceptional.  Leave to bring such an appeal will generally be refused unless it can clearly be seen that (1) the proposed appeal genuinely raises a question of law of great general or public importance; (2) the result of the appeal would indeed turn on how that question is answered; and (3) such result is likely to make a significant contribution to the just disposal of the litigation (Pacific Electric Wire & Cable Co Ltd v Hu Hung Chiu & Anr, FAMV 73/2007, 13 March 2008, at §§7 to 8).

6.  Four questions are set out in the notice of motion as questions of great general or public importance.  As they ran into four pages, we do not propose to set them out verbatim.  Changhong also relied on the “or otherwise” limb.

Question 1

7.  This question is concerned with the correct test for lis alibi pendens for the purpose of forum non conveniens.

8.  On behalf of Changhong, it is contended the correct test should be as follows:

“where proceedings about a matter are pending in a foreign court which is a (or the) natural or appropriate forum for those proceedings and a party to those foreign proceedings institutes action in Hong Kong against another party concerning the same matter, then the additional inconvenience and expense which results from allowing both to be pursued concurrently where the same facts will be in issue and the same evidence required can only be justified if the first-mentioned party establishes objectively by cogent evidence that there is some personal or juridical advantage that would be available to it only in Hong Kong that is of such importance that it would cause injustice to deprive that party of that advantage”.

9.  Mr Alder submitted that the above test is supported by The Abidin Daver [1984] AC 398 at 411H to 412B and 423F to H.  He contended that the judge had wrongly applied a test of “unusual hardship” and the CA Judgment at §54, which appeared to perpetuate the same erroneous approach, would create confusion as to the correct test unless rectified by the Court of Final Appeal.

10.  We decline to grant leave to appeal on question 1 for these reasons:

(1) The dichotomy between the test contended by Changhong to be correct and the test of “unusual hardship” is a false dichotomy.  On a proper reading of the CFI Judgment and the CA Judgment^[4], “unusual hardship” was not applied as a strict test but rather that unusual hardship caused to a defendant by parallel proceedings may be relevant depending on an assessment of all the factors.  A parallel proceeding in another jurisdiction is only one of the factors to be taken into account on the issue of forum non conveniens.

(2) Previous decisions of the Court of Appeal have provided clear guidance on the approach for lis alibi pendens (The Peng Yan [2009] 1 HKLRD 144 at §§23, 31 to 33; LN v SCCM, CACV 62/2013, 4 June 2013, at §§19 to 24, 33; China Construction Bank (Asia) Corp Ltd v Shanghai Pudong Development Bank Co Ltd, CACV 14/2016, 3 February 2017 at §§5.2 to 5.3).  The CA Judgment did not cast doubt on any of these decisions and there is no confusion arising.

(3) The test propounded by Changhong wrongly assumes that the existence of lis alibi pendens satisfies the stage 1 analysis in Spiliada, such that the onus shifts to the plaintiff to show deprivation of some personal or juridical advantage if the action is tried in a forum other than Hong Kong.  The test of Changhong, which is a paraphrase of Lord Diplock’s statements in The Abidin Daver at 411H to 412B, has overlooked the context of those statements in that Lord Diplock was referring to a situation where parallel proceedings exist in a foreign court which is the natural forum in any event (at 409F to 410B)^[5]. It is well established that it is only after the stage 1 analysis is satisfied that the onus shifts to the plaintiff in stage 2 to show deprivation of a legitimate personal or juridical advantage (SPH v SA (2014) 17 HKCFAR 364 at §51).

Question 2

11.  This concerns the relevance of limitation and liability proceedings in the SMC (not true lis alibi pendens) and the proper weight to be given to them.

12.  This question has five sub-questions with sub-paragraphs for two of them.  The submissions made by Mr Alder are essentially repetitive of the arguments made at the hearing before us^[6], and were dealt with fully in the CA Judgment^[7]. We do not propose to repeat them here.

13.  Before considering whether leave to appeal should be granted for each of the sub-questions, we have these general remarks.

14.  It was contended on behalf of Changhong that this is the first case that came before the Hong Kong courts where limitation funds have been established in another jurisdiction in respect of multiple claims against a shipowner, whereas all past cases in Hong Kong and most past cases elsewhere have involved only the consequences of torts affecting just the two parties before the court.  It was further submitted that the CA Judgment followed decisions of the Court of Appeal (The Adiguna Meranti [1987] HKLR 904 and The Kapitan Shvetsov [1997] HKLRD 374) in concluding that the existence of a higher limit of liability of liability in Hong Kong is a legitimate juridical advantage for the purpose of forum non conveniens and “decisive” in favour of refusing a stay, and hence the Hong Kong law now differs from the law in England (The Herceg Novi v Ming Galaxy [1998] 4 All ER 238), Singapore (The Reecon Wolf [2012] SGHC 22), Australia (The Chou Shan [2014] FCAFC 90)^[8] and Canada (The Cougar Ace [2009] 2 FCR 382). Mr Alder submitted that this question is of great general importance and should be considered by the Court of Final Appeal.

15.  We do not agree with the above submissions.

16.  The present case is not the first case before the Hong Kong courts where limitation funds have been established in another jurisdiction in respect of multiple claims against a shipowner.  A similar situation arose in The Peng Yan [2008] 5 HKLRD 41 at §§4 to 6, 32 and [2009] 1 HKLRD 144 at §§10 and 16, in which 29 claimants had registered claims against the limitation fund set up by the shipowner in the Ningbo Maritime Court. Among the authorities cited to us are examples of past cases elsewhere involving limitation funds and multiple claims: The Volvox Hollandia [1988] 2 Lloyd’s Rep 361; The Vishva Abha [1990] 2 Lloyd’s Rep 312; Caspian Basin v Bouygues (No 4) [1997] 2 Lloyd’s Rep 507; The Chou Shan.

17.  The right of a shipowner to bring a limitation action is well settled and the choice of a limitation forum is the shipowner’s prerogative.  Shipowners would naturally contend that the limitation forum should be the single forum in which all intending claimants are expected to bring their claims and all disputes should be tried in one forum.  The position taken by Changhong in this kind of situation is nothing new.  The courts have also long recognised there is nothing unusual about a limitation action taking place in a different forum from that in which liability is being litigated (The Volvox Hollandia at 363, column 2; Caspian Basin v Bouygues (No 4) at 525, column 2).  In one instance, the court said that the shipowners were “asking too much” in contending that all issues, ie liability, quantum and limitation, should be tried in one forum and had failed to concentrate on the real issue, which was whether they should be compelled to litigate the limitation issues elsewhere when they had already instituted limitation proceedings in their own forum (The Volvox Hollandia at 364, column 2).  How this question should be resolved is fact-sensitive and depends very much on the particular circumstances of the case.

18.  As regards the holding in the CA Judgment on the existence of a higher limit of liability in Hong Kong as a legitimate juridical advantage, three things should be noted.  First, this is the stage 2 analysis, assuming that Changhong should succeed on stage 1 in establishing that there is some other available forum having competent jurisdiction which is the appropriate forum for the trial of this action.  Second, the stage 1 analysis was resolved against Changhong, and it was made clear in the CA Judgment what was said about legitimate juridical advantage was entirely obiter.  Third, it is not necessary for the Court of Final Appeal to give further guidance on the stage 2 analysis.  In SPH v SA at §51, it is stated that if the plaintiff in the Hong Kong proceedings is able to establish that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer and deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish that substantial justice will be done in the available appropriate forum.

19.  We turn to each of the questions in question 2.

20.  It is contended in question 2(1) that the limitation fund with the right of any intending claimant to lodge a claim in it should of itself constitute a sufficient pending lis for the purposes of the lis alibi pendens principles.  We do not think this is reasonably arguable.  This is not true lis alibi pendens (The Abidin Daver at 411H).  It is a question of what weight should be given to the setting up of the limitation fund in the particular circumstances and how that should be weighed against other factors in the case.

21.  Questions 2(2)(a) and (3) are concerned with the appropriate weight that should be given to the limitation proceedings.  They are fact-specific and depend on the particular circumstances of the case.

22.  Question 2(2)(b) concerns the granting of a general injunction to restrain the bringing of claims elsewhere.  This does not arise in the present case.

23.  Question 2(4) relates to the disparity in tonnage limitation in two jurisdictions and the contention that it should be approached on the basis if substantial justice would be done to all parties if the action is tried in another forum.  We have already dealt with this.

24.  In respect of question 2(5), as submitted by Mr Sussex, it has not been demonstrated by Mr Alder that the law has moved on since The Giacinto Motta [1977] 2 Lloyd’s Rep 21^[9], given the clear wording of Article 12(2) of the LLMC (Admiralty Jurisdiction and Practice by Meeson and Kimbell (5^th ed) at §8.151).

25.  For all the above reasons, we decline to give leave to appeal on question 2.

Question 3

26.  This concerns the relevance of the EEZ.

27.  We are not inclined to grant leave to appeal for question 3(1).  It was held in the CA Judgment that it is pointless to debate whether it was correct to say that the collision took place in international waters^[10]. Nor are we persuaded that The Chou Shan (at §§89 to 92) is wrong on this point^[11]. Leave to appeal should be refused as resolving this question one way or other will not lead to a different result (Cheung & Anr v Insider Dealing Tribunal (2000) 3 HKCFAR 380 at 386).

28.  Question 3(2) raises the new argument that the principle in The Albaforth [1984] 1 Lloyd’s Rep 91 (the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute) should be applied or extended to make the PRC EEZ the natural forum.  We do not think it permissible to raise this new point.  In any event, it is not reasonably arguable, nor do we think the resolution of this new point would lead to a different result.  The Albaforth principle only arises where a tort occurred within territorial waters (The Al Khattiya v The Jag Laadki [2018] 2 Lloyd’s Rep 243 at §§31 to 56).  It has no application to an EEZ.  Furthermore, this principle is but a starting point. When applying this principle, it is important to examine just how close a connection there really exists with any given forum and in some instances the place of the commission of the tort may be quite fortuitous (The Peng Yan at §§25 to 28).  We refuse to give leave to appeal for question 3(2).

Question 4

29.  This relates to how the test for forum non conveniens should be characterised, whether it is an exercise of discretion or an evaluative balancing exercise.

30.  We do not think it appropriate to grant leave to appeal for this question, which was adequately addressed in the CA Judgment^[12].

“Or otherwise” limb

31.  The usual practice of the Court of Appeal is to defer to the Appeal Committee whether leave to appeal should be granted on this basis.  We see no reason to depart from the usual practice here.

Conclusion and costs

32.  We dismiss the application of Changhong for leave to appeal to the Court of Final Appeal.

33.  Costs of the application should follow the event.  We have considered the statement of costs of Bright Shipping for summary assessment.  We find the amount of costs incurred reasonable and will allow the amount in full of $134,025.

Application for stay pending determination of the leave application

34.  The notice of motion seeks a stay of this action until the determination of the leave application by the Court of Appeal or the Appeal Committee.

35.  The onus is on an applicant to demonstrate very exceptional circumstances for a stay of execution to be granted in this kind of situation (T v Shiu Wai Tuen, CACV 255/2010, 4 November 2011, §13).  We do not think there are exceptional circumstances here.  No stay of execution was granted pending appeal to the Court of Appeal.  We do not agree with Mr Alder that an appeal to the Court of Final Appeal will be rendered nugatory in the absence of a stay.  We decline to grant a stay of execution.