SHIJIAZHUANG IRON & STEEL CO LTD AND OTHERS v. HUI RONG NAV. CORP. S.A. AND OTHERS

HCAJ 76/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY JURISDICTION ACTION NO. 76 OF 2007

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J U D G M E N T

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I.   INTRODUCTION

1.  The present in rem actions have been brought by the owners of cargo loaded on board the Hui Rong (collectively, the Plaintiffs).  On 17 March 2007 at about 2251 hours the Hui Rong and the Peng Yan collided off Zhou Shan Dao.  At about 2320 hours, the Hui Rong sank with the loss of 17 men and all its cargo.

2.  The Plaintiffs represented by Richards Butler issued their in rem writ against (among others) the owners of the Peng Yan (the Owners) on 5 May 2007.  Those Plaintiffs then caused the Peng Wei, the Peng Yan’s sister vessel, to be arrested on 12 May 2007.  On 15 May 2007 the Peng Wei was released against the security of a Letter of Undertaking from the Owners’ insurers.

3.  On 28 December 2007 another Letter of Undertaking was issued on behalf of the Owners to forestall the arrest of a vessel by those Plaintiffs represented by Clyde & Co.  On 12 January 2008 the latter Plaintiffs issued their in rem writ against the Owners.

4.  In March 2008 and thereafter various cargo interests and other claimants commenced proceedings against the Owners in the Ningbo Maritime Court in respect of losses from the collision.  Those proceedings are ongoing.

5.  On 30 April 2008 the Owners applied to set up a limitation fund in the Ningbo Court.  That application was initially approved by the Ningbo Court on 12 May 2008.  The approved limitation amount was 50% of the amount which would be necessary to constitute a limitation fund in Hong Kong.

6.  Since then the Ningbo Court has ruled that the limitation fund should be for a higher amount.  That higher amount would be equivalent to 100% of the amount needed to constitute a limitation fund in Hong Kong. 

7.  The Owners have appealed against such decision of the Ningbo Court.  More recently, the Owners say that in principle they are agreeable to the setting up of an increased fund.  They have only appealed (they say) to buy time to put up the necessary security.  Nonetheless, such a 100% limitation fund remains to be actually constituted in Ningbo.

8.  On 11 July 2008 the Owners applied to stay the Plaintiffs’ proceedings in favour of the Ningbo Court on the ground of forum non conveniens. 

9.  The Owners accept that the Plaintiffs’ actions were brought in Hong Kong as of right.  Therefore, the burden is on the Owners to show that the Ningbo Court is:-

“an available forum having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice” (Spiliada Maritime Corp. v. Cansulex Ltd. [1987] 1 AC 460 (at 476C (Lord Goff)).

II.  DISCUSSION

10.  Mr. Nigel Kat (appearing for the Owners) submits that the following key factors establish the Ningbo Court as the more appropriate forum:-

(1) The collision having taken place in PRC waters, the PRC is the natural forum for the trial of this action.

(2) The Peng Yan was registered in the PRC.  The Owners are Shenzhen COSCO, a PRC company.

(3) The crew of both vessels involved in the collision were Chinese nationals.  In the case of the Peng Yan, the crew were largely from Shandong.

(4) The collision was investigated by both the Hong Kong Marine Department (MD) and the Zhejiang Maritime Safety Administration (MSA).  The electronic evidence (showing the vessels’ positions before, during and after the collision) may be available to both the Hong Kong and Ningbo Courts.  But there is no evidence that the authors of the MSA would be prepared to attend trial in Hong Kong.

(5) There are other actions, including a limitation action, proceeding in Ningbo.  It is more convenient for all claims to be adjudicated in the same jurisdiction.

(6) The Owners no longer contest the setting up of a 100% limitation fund in the Ningbo Court.  Although (in contrast to Hong Kong) the PRC is not a party to the Convention on Limitation of Liability for Maritime Claims 1976, the PRC has enacted a law which is similar in effect to the Convention.

11.  I am not persuaded that the Ningbo Court is the more appropriate forum.

12.  As Litton VP stressed in The “KAPITAN SHVETSOV” [1998] 1 Lloyds Rep 199 (CA) (at 217 (col.2) and 219 (col.2)), where (as here) a party invokes the Hong Kong Court’s jurisdiction as of right, “this right cannot be lightly disturbed”.  In my view, none of the matters raised by Mr. Kat is sufficiently weighty to show that the trial of this action should be more appropriately held in Ningbo “in the interests of all the parties and the ends of justice”.

13.  Let me briefly consider each of Mr. Kat’s key factors.

14.  First, there is the place of the collision.  There is some dispute between the parties whether the collision took place in PRC or international waters.  I shall, however, assume that the collision took place in PRC waters as Mr. Kat contends.

15.  That would make the PRC the place where the alleged negligent navigation of the Peng Yan took place.  On the principle in The “ALBAFORTH” [1984] 2 Lloyds Rep 91, this would prima facie make the PRC the natural forum for the adjudication of the present dispute.

16.  But being the natural forum is simply the starting (and not the end) point of a consideration of appropriate forum.  See Tang JA in EsquelEnterprises Ltd. v. Tai Apparel Ltd. [2006] 2 HKC 385 (CA), at §§15-6.  The Court must “focus on the appropriateness of a forum from the point of view of the trial of the action” (see Hwoo Huang Linda v. Fu Being San and others HCA No. 4888 of 2001, 10 April 2002, citing Recorder Ma SC in Rambas Marketing Co. LLC v. Chow Kam Fai David [2001] 3 HKC 250 (at 255B)).

17.  Thus, the mere fact of being the natural forum would not by itself discharge the burden on the Owners.  The real question is whether this factor taken with Mr. Kat’s other factors clearly point to Ningbo as the appropriate forum.

18.  Second, given the touchstone of the trial of this action, the fact that the Peng Yan was PRC registered and its owners are a PRC company can carry little weight. 

19.  Hong Kong is a leading international port.  In an Admiralty context, one would expect defendant ships to be registered in foreign jurisdictions and to be under the ownership of foreign companies.  But such circumstances typically have little (if any) impact on the trial of a cargo claim.

20.  Third, the PRC nationality of the crew may carry some weight in the evaluation of an appropriate forum, especially where members of the crew are to be called to give evidence. 

21.  But the PRC is an enormous country.  Here the crew member who is in a position to give the most useful evidence to any Court, the Third Officer of the Peng Yan, is resident in Shandong.  There is no evidence that it is more convenient for him to come from his Shandong home to attend trial in Ningbo as opposed to Hong Kong.

22.  The other person whose evidence may conceivably have been of some value would have been the Third Officer of the Hui Rong. Unfortunately, he did not survive the collision.

23.  At any rate, by the nature of their work, crew members are usually at sea.  In the past, the Peng Yan has travelled among ports in various countries (including the PRC, Singapore, India, South Korea, Taiwan, Malaysia, United Arab Emirates, Russia and Australia).  It is unclear whether, at any given moment, the Peng Yan’s crew would be more or less inconvenienced by having to travel from wherever they might be to attend trial at Ningbo as opposed to Hong Kong.

24.  Looking at the evidence in the round, I am far from satisfied that trial in Ningbo would be more convenient to any member of crew in terms of the time and cost involved in appearing as a witness.

25.  Fourth, in any event I doubt that much (if any) evidence can usefully be obtained from the crew many months after the event.  In contrast, the collision was thoroughly investigated by the MD and MSA shortly after the accident occurred.  I suspect that the evidence supporting their reports (including records of interviews with the Peng Yan Third Officer) will be more useful to any trial judge. 

26.  That body of evidence from the MD and MSA will likely be largely agreed for the purposes of trial.  That will mean that the task of the Court will essentially be hearing submissions on how such evidence is to be assessed from the standpoint of the law generally and the International Regulation for the Prevention of Collisions at Sea 1972 specifically.

27.  That body of evidence would likely be available to both the Hong Kong and Ningbo Courts.  So its existence cannot be a compelling factor in favour of the Owner’s stay application.

28.  Mr. Kat suggests that the MSA report’s authors would be more likely to attend before the Ningbo Court.  But I have doubts as to what the MSA report’s authors might usefully be cross-examined upon.

29.  The MSA report would be of help for the data and other evidence compiled there.  However, neither the Ningbo nor the Hong Kong Court would be bound by the views of the authors of such report on the apportionment of liability among the vessels.  From the standpoint of the Hong Kong Court, for instance, such views on liability would simply be irrelevant.

30.  Fifth, I am unable to attach much weight to the mere fact that there are liability actions in Ningbo in relation to the same accident.

31.  To see why, assume that I stay the claims here and that they are litigated in Ningbo.  It is far from clear on the evidence that the Ningbo Court would consolidate all liability claims before it.  Some seem to me impossible to consolidate. 

32.  For example, the MSA has brought a liability claim for pollution damage arising from the accident.  I have doubts whether the Ningbo Court could or would consolidate such a claim with cargo claims arising from the collision since the 2 types of claim are very different.  Consequently, I am unclear on the evidence to what extent the staying of liability claims to the Ningbo court would have the effect of substantially saving time and costs.

33.  It is true that there is in Ningbo, in addition to miscellaneous liability actions, a limitation action.  The relative liability of each vessel in the collision may possibly be determined in such action.  Accordingly, it might be suggested, all parties opposing any particular apportionment of liability can apply to be joined as defendants in such limitation action.

34.  But, as Rix J observed in Caspian Basin SpecialisedEmergency Salvage Administration and Another v. Bouygues Offshore SAand others [1997] 2 Lloyds Rep 507 (at 525 (col.2)):-

“[t]here can be nothing surprising or inappropriate about a limitation action being commenced in the same forum as a claimant action to establish liability, but equally there is nothing unusual about a limitation action taking place in a different forum from that in which liability is being litigated.”

35.  Nothing prevents the Owners from pleading limitation here and arguing that, in deciding liability, the Court should for whatever reason recognise any limitation decree by the Ningbo Court. 

36.  I appreciate that the PRC is not a party to the 1976 Convention.  At the end of the day, it may be a difficult question whether the Hong Kong Court (applying conflicts of law principles) will or will not recognise a limitation decree by a PRC Court.  But it was the Owners’ choice (despite the initiation of proceedings in Hong Kong in late 2007) to constitute a limitation fund in Ningbo in early 2008. 

37.  The choice of a limitation forum was the Owners’ prerogative (see The “VOLVOX HOLLANDIA” [1988] 2 Lloyds Rep 361).  Having freely made that choice in favour of Ningbo in the circumstances where Hong Kong litigation had already been commenced and more was threatened, it seems to me that the Owners should also take any consequences.

38.  In other words, there being nothing unusual about limitation and liability actions taking place in different jurisdictions, the owners cannot here argue that their choice of Ningbo for a limitation action is any strong factor militating for the stay of Hong Kong proceedings to Ningbo.

39.  Sixth, Mr. Kat suggests that the limitation amounts being effectively the same in Hong Kong and Ningbo, there can be no loss of juridical advantage to the Plaintiffs if they were compelled to litigate in Ningbo.

40.  But, in at least one respect, it seems to me that the Plaintiffs would be less well off in Ningbo than in Hong Kong.

41.  That is that, strictly, an appeal by the Owners remains extant in Ningbo against 100% limitation there.  The Owners say that they will abandon that appeal once security is constituted.  But what would the position be if the unthinkable happens (as it sometimes does)?  What would the position be if the Owners are unable to put up the requisite security for a 100% limitation?

42.  If they are to rely on 100% limitation as a factor pointing to Ningbo, the Owners should by now have cleared all procedural and financial hurdles and actually have constituted a 100% fund.  By procedural hurdles I include the disposal of the Owners’ appeal against the Ningbo Court’s 100% limitation fund ruling.

43.  Article 13(2) of the 1976 Convention provides that a Court may release a security held in relation to a relevant claim “[a]fter a limitation fund has been constituted”.  Given such provision, I do not believe that the Court should here grant a stay to Ningbo where there remains a chance (however small) that something less than a 100% fund may be constituted.

44.  At best then, the existence of a 100% limitation fund would be a neutral factor pointing neither to Ningbo nor Hong Kong.  But given that even now 100% limitation in Ningbo is not 100% certain, this factor would marginally favour Hong Kong.  I am not impressed by the undertakings offered by Mr. Kat on behalf of the Owners.  The undertakings seem to me to fall short of an actual guarantee that the requisite security will materialise.

45.  Mr. Kat has mentioned, in passing, the fact that a specialist court has been constituted in Ningbo to hear disputes arising out of the collision.  Even if that were the case, I do not find that a compelling factor.  Some mention has also been made in passing that witnesses are more likely to give evidence in Putonghua, rather than Cantonese or English.  But again I do not think that this is any strong feature.  Hong Kong Courts deal with Putonghua evidence on a near daily basis.  

46.  For the foregoing reasons, I do not think that the Owners have discharged the burden of showing that Ningbo is a more appropriate forum.

47.  The Plaintiffs have suggested that they would be deprived of a number of juridical advantages if a stay were granted.  In light of my conclusion, there is no need to consider the Plaintiffs’ case in this respect in any detail.

48.  The disadvantages which the Plaintiffs claim that they would undergo are as follows:-

(1) PRC proceedings are more cumbersome.  Many forms and documents would have to be submitted.

(2) The Plaintiffs would not be able to recover their legal costs.

(3) There is no general discovery in the PRC.

(4) Interest on the limitation fund would be lower than in Hong Kong.

(5) There is foreign exchange control in the PRC.  This means that it would difficult for the Plaintiffs to remit outside the PRC any RMB damages awarded to them by the Ningbo Court.

49.  In my view, the first 3 matters listed could not here constitute a deprivation of a legitimate juridical advantage. 

50.  Court proceedings in different jurisdictions typically require the filing of many forms.  Some jurisdictions require more forms than others.  But that could hardly be a ground for saying that one forum would not be appropriate in all the circumstances.

51.  The second and third matters are typical features of many foreign jurisdictions, especially those which follow continental European models. 

52.  The Court would be slow in today’s global age to refuse a stay to a forum which is found to be more appropriate on the mere basis of the features (a lack of general discovery and an inability to recover certain costs) complained of by the Plaintiffs.  Considerations of comity should make a court hesitate to claim superiority for a system simply because one has general discovery and can recover party-and-party costs.

53.  In relation to the remaining 2 factors, the evidence is that the Plaintiffs may apply for a higher rate of interest.  They may also seek permission for the outward remittance of foreign currency.  Accordingly, I do not think that the last 2 matters can be regarded as substantial disadvantages.

54.  Consequently, had I found that Ningbo was the more appropriate forum, I would have stayed the present proceedings.  On the stated hypothesis, I would not have found that the Plaintiffs might be deprived of juridical advantages by a stay.

III. CONCLUSION

55.  A stay is refused.  The Owners’ Motions are dismissed.  The Owners have requested a return of the Letters of Undertaking provided on their behalf.  But, given my conclusion, it would not be appropriate to direct the return of such Letters at this stage.  I shall now hear the parties on costs and other matters.