XCHRX NAM KWONG MEDICINES & HEALTH PRODUCTS CO. LTD. v. CHINA INSURANCE CO. LTD.

HCCL27/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.27 OF 1999

---------------

---------------

_____________________

J U D G M E N T

_____________________

The Application

1. This is the Defendant's application, by summons dated 19th May 1999, for an order that all further proceedings herein be stayed to the Court of Singapore on the basis that Singapore is a more natural and appropriate forum for the trial of this action and of all connected litigation, including third party indemnity proceedings.

The Background

2. The Writ herein, with Points of Claim indorsed thereon, was issued on 25th February 1999. At bottom, the Plaintiff's claim is simple. By a contract of insurance evidenced by a policy No.PMG-98-001134-7 dated 1st June 1998, the Defendant through its Macau branch agreed with the Plaintiff, in consideration for premium paid, to insure a shipment of 15,788 drums of refined bleached and deodorised palm olein valued at US$2.442 million on conditions covering marine risks as per Institute Cargo Clauses (A) dated 1st January 1982, on a voyage from Malaysia to Beihai, Guangxi, China on board the vessel "Pacifica" for loading/sailing on or about 1st June 1998.

3. The insurance is said to have attached when the cargo, duly certified, left the warehouse for the commencement of the transit, and on 1st June 1998 two bills of lading (Nos.2001/98 and 2002/98) were issued on behalf of Wheels Maritimes Sdn. Bhd., signed as agent for the Master, evidencing that the cargo was shipped on board the"Pacifica" on that date.

4. The "Pacifica" failed to deliver the cargo at Beihai and is now missing. However, the Defendant, China Insurance Co. Ltd. ("CIC"), has declined liability under the policy and has failed to pay the sum insured, that is, the cargo value of US$2.442 million.

5. Put thus, the claim is straightforward, the only other point worthy of note at this stage being the pleaded fact that this cargo was double insured, not only with the Defendant herein, but also with the People's Insurance Co. Ltd. ("PIC") of Singapore pursuant to Policy No. D98/513/11605 dated 1st June 1998; this policy was issued at Singapore pursuant to agreement between PIC and the supplier of the cargo, one Pao Sang Trading ("Pao Sang") of Singapore, which is pleaded to have assigned interest in this latter policy to the Plaintiff. Notwithstanding this aspect, however, the present suit seeks to enforce the CIC policy only, albeit the element of double insurance featured prominently in the argument upon this application.

6. But to return to the background facts. The "Pacifica" is a mystery vessel. It sailed with the cargo, but it and its cargo have now disappeared. It is said to be a "phantom ship", which is a term used within the International Maritime Bureau, which specialises in the investigation of maritime fraud, to describe a vessel which is employed as a vehicle for fraud. This phenomenon is, apparently, regrettably well known in Far East Shipping circles, the modus operandi being that shortly after leaving the port of shipment, delays occurred during the voyage, and during such delays the "phantom ship" proceeds to a new location to discharge her cargo and to achieve her disappearance. It is said in this case that the sequence of events concerning the "Pacifica", together with her eventual disappearance, conformed to this pattern; having proceeded first to Singapore (ostensibly for reasons linked to the payment under the relevant letter of credit opened in favour of Pao Sang, with the proceeds thereunder being remitted to Koo Hong Pte Ltd. ("Koo Hong"), Pao Sang's supplier), and having remained there until 12th or 13th June 1998, thereafter communications were received from the "Pacifica" indicating that the vessel was taking in water and encountering heavy weather, until on 19th July 1998 a message was received to the effect that the vessel had been lost with all her cargo.

7. Evidence filed in support of this application seeks to substantiate the contention as to wrongdoing, paragraph 10 of the affidavit of Mr Horton dated 27th May 1999 stating :-

"For example, it can readily be inferred from the facts which I set out below that the cargo which is the subject of this Action was the target of a well planned and executed theft by those operating the 'Pacifica', and that the intention to steal the cargo existed at and before the time that the vessel sailed from Pasir Gudang. Accordingly, it is improbable in the extreme that the vessel in fact sailed for Beihai when she left the loading port. It is overwhelmingly probable that she sailed for the alternative destination where the cargo was eventually discharged and disposed of. Accordingly, the Defendant will defend this claim on the basis, among others, of Section 44 of the Marine Insurance Act 1906, which provides:

'Where the destination is specified in the policy, and the ship, instead of sailing for that destination, sails for any other destination, the risk does not attach.'"

This section 44 argument, to which brief reference is therein latterly made, also assumed prominence within this application.

The Argument

8. Mr Sussex, on behalf of the Defendant/Applicant, prayed in aid the well known principles laid down by Lord Goff in Spiliada Maritime Corporation v. Cansulex [1987] AC 460, submitting that, in the particular circumstances of this case, Hong Kong is plainly not the natural forum for the trial of this action and that Singapore is the forum with which this litigation has the most real and substantial connection.

9. To the contrary, Mr Coleman, representing the Plaintiff, whilst raising no dispute as to applicable legal principle, emphasised the existence of the burden on the Defendant to demonstrate why the Court should exercise its discretion to grant a stay, further stressing that the appropriateness of the forum is to be gauged in relation to the resolution of the specific issues raised in the proceedings, with the alleged connecting factors being evaluated in terms of such issues. And that when the real issues raised by this case were properly scrutinised, centering in particular upon misrepresentation and non-disclosure (issues stressed in Mr Horton's earlier affidavit evidence seeking time extensions), it followed, he said, that this application should fail in limine.

10. It is common ground that no evaluation of juridical disadvantage arose in this case, and it is fair to say that Mr Sussex founded his detailed argument upon two main heads :

(i) The existence of a body of relevant information available and compellable in Singapore

11. Mr Sussex made a good deal of the compellability point. The seller of this cargo, Pao Sang Trading, resides in Singapore, as does that seller's immediate supplier, Koo Hong. There was, said Mr Sussex, "reason to believe" that the gentleman associated with the participation of these companies in this transaction, in particular, one Mr Lee of Pao Sang and Mr Wong of Koo Hong, together with a broker by the name of Mr Ng, "know very much more about what happened to this cargo than they have so far been prepared to disclose to those investigating the loss on behalf of underwriters." It was thus envisaged that Norwich Pharmacal proceedings would be brought against these companies and individuals in order to obtain orders compelling them to disclose what they know.

12. Argument under this head extended to the ambit of the applicability of the privilege against self-incrimination in Singapore, wherein the position presently appears to be that, subject to certain safeguards, this privilege is not available to be taken at trial, albeit it remains available in interlocutory proceedings. The compellability point was linked, also, with the section 44 issue, Mr Sussex maintaining that, for the purpose of establishing that the risk did not attach, if his client was able to prove where the vessel in fact went, there would be less necessity at any trial to rely on the Court for that which he termed"indulgent inference".

13. In my view this line of argument is, at bottom, illusory. I bear in mind that section 44 (together with sections 45 and 46 of the 1906 Act) represents but one element within this case, given the emphasis that has earlier been placed upon the issues of misrepresentation and non-disclosure, nor do I overlook the criticism Mr Coleman makes of the applicability of this line of argument given his submission that Clause 8 of the Institute Cargo Clauses (which provides that the risk attaches when the goods insured leave the warehouse for commencement of the transit) merits primacy in the circumstances of this case. Moreover, the idea that persons now being painted as probable conspirators, or at the very least accessories thereto (Mr Lee has apparently already placed a dollar value upon his story, for what that be worth) should be thought likely to co-operate, under subpoena, to tell the full story seems to me, to adopt Mr Coleman's comment in this regard, to be "far too optimistic", in that as a practical matter the Defendant was unlikely to get any information from Mr Lee prior to trial, nor in equally practical terms would it get anything from him at trial.

14. So that in reality, argument on these lines was no more, in my view, than clutching at evidential straws. And in any event, were expectations to be confounded and were Norwich Pharmacal litigation actually to yield valuable information, there is no reason of which I am aware why such information should not be adduced in the Hong Kong proceedings. And finally, whilst I accept the thesis that, at trial in Singapore, Mr Lee and his colleagues are compellable under threat of punishment by the State, I remain unconvinced that any competent advocate would contemplate putting one of these gentlemen into the witness box 'blind', so to speak, particularly given the existence of the circumstantial information which is available with regard to the movements of this particular vessel. In my judgment, therefore, this point is forensically attractive but substantively unconvincing.

15. The compellability issue elides into the other evidential aspect raised by Mr Sussex, namely, that possibilities exist for eliciting useful evidence as to this missing cargo from other sources within Singapore, namely, with regard to the vessel "Tenu", seized in the Malacaa Straits, and the vessel "Senei", which loaded in Indonesia for discharge in China a cargo bearing a passing resemblance to the missing cargo in the "Pacifica". In this context, also, reference is further made to another Singaporean Company, Diatechnology Pte. Ltd., which it is thought may be able to assist in the Defendant's further enquiries. Such may or may not be the case, but even on the assumption that such enquiries bear fruit, again it is not clear why such evidence, if voluntarily given, cannot as easily be adduced within the existing Hong Kong proceedings.

16. At the end of the day, therefore, I reject this line of argument as constituting good reason for a stay. Indeed, Mr Sussex was moved to observe, in his closing remarks, that if the only Singapore connection had been Mr Lee and his colleagues, his client "would not be troubling the court" with this stay application, but that taken in tandem with the 'double insurance' point, these aspects provided a powerful argument. I move now to this second issue.

(ii) Double insurance

17. It will be recalled that this risk was insured not only with the existing Defendant, China Insurance Co. Ltd., but also with the People's Insurance Co. Ltd. of Singapore.

18. Mr Sussex mounted his argument in this regard upon the proposition that, given his client's statutory right to contribution within the terms of what English law regarded as one insurance, it was therefore essential that the liability of PIS under this other policy should be determined in the same jurisdiction as the liability of CIC. Mr Sussex accepted that the Plaintiff was entirely within its rights to take the action it had and to sue one insured only, but maintained, since PIS is based in Singapore as is CIC also, that it was more appropriate to bring the entire action, including the third party contribution proceedings, in Singapore. In this latter regard, he isolated two points in particular :

first, if and in so far as it was possible, within the ambit of the existing Hong Kong action, to serve PIS out of the jurisdiction pursuant to Order 11 rule 1(1)(c) ("necessary or proper party"), absent appearance by PIS the position was problematic with regard to enforcement of a possible default judgment within the jurisprudence concerning the enforcement of foreign judgments; and

second, and more generally, the post-handover difficulty of enforcing Hong Kong judgments abroad, although with regard to the latter, Mr Coleman's researches had revealed that since 19th May 1999, Part 1 of Singapore's Reciprocal Enforcement of Foreign Judgments Act had been extended to judgments of the Hong Kong SAR, which point Mr Sussex was minded to accept.

19. In opposition, Mr Coleman submitted that the two actions were fundamentally different, the present being a claim under a contract of insurance, and the inter-company claim being one under a statutory right to contribution. In this context Counsel were divided also over whether a claim to contribution arose only when payment to the primary liability had been affected (Mr Coleman's position) or whether it vested prior to crystallisation of such primary liability (as Mr Sussex submitted).

20. Although this latter question remained unsatisfactorily unresolved, absent citation of authority on the point, for my own part I am inclined to the view that liability to contribution vests only on crystallisation of primary liability. Nevertheless, for present purposes the point seems to me not greatly to matter. Because at the end of the day Mr Sussex's argument under this head is dependent upon suggesting potential problems in the context of a separate (albeit related) action between two insurers which has not yet seen the light of day, either in Hong Kong or in Singapore. And persuasively though this line of argument was advanced, in my view it is a somewhat ambitious approach to justify a stay of existing Hong Kong proceedings on the basis of an action not yet in existence.

21. It clearly remains open to the Defendant to mount third party proceedings within the context of the existing action, and in my judgment the mere fact that a potential contributory is based in Singapore does not suffice to get the Defendant home on this application.

Decision

22. It follows from the foregoing that, in the exercise of my discretion, this application is refused.

23. In the circumstances, and for the reasons outlined in this judgment, I do not consider that the Defendant has discharged the burden pursuant to the Spiliada benchmark of demonstrating that Singapore is "clearly or distinctly more appropriate" than Hong Kong, notwithstanding the Defendant's contention that Singapore constitutes the "centre of gravity" of this action. There is no doubt that there are historical factual links, if I can so term them, within the broad matrix of facts which have a Singaporean connection, but in my view these are not of direct relevance; there are, for example, similar important factual events in terms of the negotiation between the Plaintiff and the Defendant in Macau in connection with the placing of the insurance, and there is and can be no suggestion that such conversations, or the passing of documentation, bears any connection with Singapore. And, as Mr Coleman pointed out, there has been no difficulty in the Defendant's solicitor obtaining five detailed witness statements in Hong Kong - in fact, the need to obtain these statements formed an important plank within the Defendant's earlier contentions that it should be permitted to garner such evidence before being required to file its Defence - nor, for that matter, has the Hong Kong forum inhibited the Defendant from the appointment of Hong Kong loss adjusters, and of raising enquiries here, activities which do not sit easily with criticism of Hong Kong as constituting the appropriate forum for the trial of this action.

24. Accordingly, when looked at in the round, the "solid practical reasons" advanced by Mr Sussex in support of the proposition that this litigation ought to take place in Singapore are not, in my judgment, made out sufficiently to persuade this Court to disturb jurisdiction, which in this instance it is founded in Hong Kong as of right. As Lord Goff put it in Spiliada, op.cit., at page 476F-G, the Court "will not lightly disturb jurisdiction so established", and indeed in these circumstances I decline the invitation so to do. Perceived convenience from the viewpoint of one party alone does not suffice to create another forum "clearly or distinctly more appropriate", and I bear in mind also that in commercial cases containing divers international elements the natural forum is sometimes less than easy to identify, as Lord Goff also remarked in Spiliada, op.cit. (at page 477).

Order

25. My Order, therefore, is as follows :-

The Defendant's Summons dated 19th May 1999 is dismissed with costs to be taxed, if not agreed.

Subject to any representations the parties wish to make today, I decline to permit further delay in a case in which the Writ was issued in February of this year. Accordingly, I propose to make the following immediate procedural directions :

(i) The Defence to the Points of Claim is to be filed within 14 days of today's date.

(ii) The Reply, if any, is to be filed and served within 14 days thereafter.

(iii) Application for leave to serve third party proceedings out of the jurisdiction, if any, is to be made within 28 days from today.

(iv) Discovery by exchange of list is to take place within 14 days after close of pleadings, with inspection 7 days thereafter.

(v) Mutual exchange of witness statements is to take place within 60 days from today.

(vi) Liberty to the parties to apply for further directions.

[Submissions from Counsel]

26. I have now had the advantage of observations from both parties on the proposed directions. As a result of those submissions, I am minded to amend my Order as follows :-

(i) In the circumstances of the case, I order that the costs be payable in any event, such costs to be taxed if not agreed. This was Mr Sussex's first point.

(ii) Second, due to the necessity of linking the Defence with the anticipated third party proceedings against the Singapore insurer, Mr Sussex has also asked for 28 days in terms of Direction (i), that is, with regard to the filing of the Defence. I also accede to that request. Having so acceded, I am sure that it will not be necessary, given the history of this matter, to consider any further time extension.

27. There being nothing further today, I take the opportunity to thank Counsel who appeared on this application for their assistance.