CALM OCEAN SHIPPPING S.A. v. WIN GOAL TRADING LTD AND OTHERS

HCAJ 118/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 118 OF 2015

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R U L I N G

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1.  There are two substantive applications before this Court:

(1)     the Plaintiff’s Summons seeking an order pursuant to RHC O 26 that the 1^st to 4^th Defendants do answer the Plaintiff’s interrogatories dated 20 July 2016 on an unless basis; 

(2)  the 1^st to 4^th Defendants’ Summons seeking an order also pursuant to RHC O 26 that the interrogatories be withdrawn and the Plaintiff’s Summons be dismissed.

2.  For the sake of simplicity, I will call the 1^st to the 4^th Defendants the “Defendants”.

3.  The Plaintiff’s and the Defendants’ Summonses are two sides of the same coin.  If this Court takes the view that the Plaintiff is not entitled to administer the interrogatories on the Defendants, it will dismiss the Plaintiff’s Summons, and vice versa.

4.  The interrogatories are in these terms and I quote:

“1. Was the cargo lately carried on board the ‘SOPHIA Z’ under the bill of lading LD001002 covered by an insurance policy?

2. If the answer to the first interrogatory is yes:

(a) Was the insurance policy a cargo insurance or credit insurance policy;

(b) Has a payment been made under that policy and if so to whom and when;

(c) What is the identity of the insurer.

(d) When payment was made did the insurer became [sic] subrogated to any parties’ rights or was there any assignment of rights from the party receiving the funds to the insurer?

3.  Whether D1 to D4 has been compensated by an insurer or not in respect of the cargo, has any action been taken by D1 to D4 (or insurers) to recoup the invoice value of the cargo from any banks involved in the credit arrangement between D1 and D7 as indicated at the hearing dated 30 October 2015.”

5.  Pausing here, Mr Alder tells this Court that the banks in question are the 5^th Defendant, Deutsche Bank (China) Company Limited, as nominating bank; the 6^th Defendant, as issuing bank; and HSBC, who is not a party to this action.

“4. If the answer to the third interrogatory is yes:

(a) Before which Court has the action been taken?

(b) Has the action been determined?

(c) If not, when is it anticipated to be determined?

5.  Where are the original bills of lading numbered LD001002?”

6.  The factual background is not in serious dispute. 

7.  The Plaintiff is the registered owner of the vessel “SOPHIA Z”. On about 24 July 2015, a cargo of slightly over 50,000 steel billets was shipped on board the vessel from a port in the PRC to a port in Algeria under the bill of lading in question.

8.  The 1^st Defendant is the named shipper under the bills of lading, the seller under a sales contract with the 7^th Defendant (ie the buyer), and the named beneficiary under a letter of credit issued by the 6^th Defendant, a bank in Algeria.

9.  The Plaintiff duly carried the cargo to Algeria.  On arrival, the buyer refused to take delivery while 1^st Defendant did not give fresh instructions to the Plaintiff as to how to deal with the cargo.

10.  Subsequently, the Plaintiff arranged for the discharge and sale of the cargo in Europe at considerable cost.  This Court was told that the cargo’s original value was about US$12 million.  After the sale, about US$2.4 million is kept in the Plaintiff’s account in Germany.  Another US$1.3 million has been paid into Court in Italy, to which the Intervener in this action lays claim.

11.  None of the Defendants have come forward and made a claim against the Plaintiff for having sold the cargo.  Rather, it is the Plaintiff who instituted the present proceedings in October last year. 

12.  In its prayer for relief, the Plaintiff seeks various declarations, the essence of which is that the Plaintiff has already fulfilled its duty of delivery and it is under no liability for having sold the cargo and kept the proceeds.  It also seeks damages against all Defendants in the action, except the 5^th Defendant, for breaches of contract and/or duty in their failure to perform their contractual obligations under the bills of lading.

13.  According to Mr Alder, the primary purpose of the Plaintiff’s application is to ensure that the Plaintiff and its vessel are protected from legal actions in connection with the sale.  Specifically, the Plaintiff is concerned about claims for misdelivery and/or conversion by someone purporting to be the true owner of the cargo and/or its insurer. 

14.  Thus, the Plaintiff seeks, by the interrogatories, to identify all relevant parties and bring them before the Court so that the matter in this action can be resolved once and for all in a way that binds all concerned parties and to ensure that the Plaintiff and its vessel are protected from further legal action.

15.  In support of its application, the Plaintiff has adduced expert evidence to the effect that, under PRC law, an insurer, upon subrogation or obtaining an assignment from the assured — in this case, one or more of the Defendants — may bring recovery action against the Plaintiff.

16.  The evidence is contained in a letter dated 14 September 2016 from Wang Jing & Co.  The relevant part reads:

“1. Generally, as a matter of Chinese law, a subrogated cargo insurer stands in the shoes of the cargo interests for recourse claims within the amount of insurance indemnity. In other words, the subrogated cargo insurer would be entitled to enforce the subsisting or revived rights of the cargo interests for the insurer’s own benefit. In the meantime, the cargo insurer should also be subject to any defense against the cargo interests.”

17.  Paragraph 2(2) reads:

“Time limit. Subrogated cargo insurers under a marine cargo insurance policy should be subject to the time limit applicable to the cargo interest, which generally is one year upon cargo delivery. However, for cargo insurers who issue other insurance policies, the time limit starts from the day when the cargo insurers obtain the subrogation.”

18.  Pausing here, the time limit at the back of the bills of lading also states that the time limit for bringing action is one year from the date of the delivery of the cargo or the date where the cargo should have been delivered.  On that basis, it seems that any claim for the loss or damage or any claims relating to the cargo would have been time‑barred by today.

19.  Paragraph 3 of the letter reads:

“By way of clarification, subrogation and assignment are two different conceptions under Chinese law. Subrogation is regulated mainly by the Chinese insurance law. By way of the subrogation, the cargo insurer does not have to inform the third liable party and any recourse claim should be commenced in the name of the cargo insurer itself. However, assignment is mainly provided under the Chinese Contract Law. Typically, a third‑party is involved in a contract with the assignor and the contract is in effect transferred to the assignee. For assignment of contract, notice to the third party beforehand would be necessary.”

20.  In this case, Mr Alder tells this Court that the Plaintiff has not received any notice of assignment.

21.  Lastly, towards the end of the letter, it reads:

“Depending on the terms of the insurance policy, there is a real risk that the insurer, by virtue of the rights acquired from the insurer by subrogation, would be entitled to arrest the Vessel in China in order to obtain security for their claims.”

22.  On the existing materials, it is reasonably clear that the Plaintiff need only be concerned if an insurer, having paid the Defendants and subrogated to their rights, whatever those may be, makes a claim against the Plaintiff and arrests its vessel. 

23.  It is also reasonably clear that the Plaintiff suspects that the Defendants have been paid by a PRC insurer, which explains why none of the Defendants have come forward to make a claim against the Plaintiff for the sale of the cargo and, of all jurisdictions in this world, the Plaintiff has chosen to put before this Court a PRC legal opinion as expert evidence.  That suspicion is now reinforced by the contents of Mr Butler’s second affidavit.

24.  RHC O 26 r 1 reads:

“A party to any cause or matter may, in accordance with the following provisions of this Order, serve on any other party interrogatories relating to any matter in question between the applicant and that other party in the cause or matter which are necessary either for disposing fairly of the cause or matter; or for saving costs.”

25.  The governing principles are fully set out in Lee Nui Foon v Ocean Park Corp (No 2) [1995] 2 HKC 395 and are not in dispute. 

26.  Mr Alder argues that the interrogatories are both relevant and necessary.  On the issue of relevance, he submits that the words “relating to” are of very wide scope, citing in support a House of Lords’ decision and a decision of the High Court of Australia. 

27.  This Court does not doubt that the words “relating to” can be of very wide scope, but in law, context is everything and neither decision is remotely concerned with what this Court is now dealing with, ie the propriety of the interrogatories in the context of RHC O 26 and the principles set out in Lee Nui Foon v Ocean Park Corp (No 2).

28.  Miss Cheung accepts that the test of relevance is fairly wide and the right to interrogate is not confined to facts directly in issue, but extends to any facts the existence or non‑existence of which is relevant to the existence or non‑existence of facts directly in issue, but she submits that relevance is determined by reference to the pleadings and there is nothing of remote relevance to insurance, whether or not the Defendants have been paid by an insurer, and if I may add, whether any of the Defendants have pursued the banks for payment of the value of the cargo.

29.  This Court agrees with Miss Cheung relevance has to be determined by reference to something and it is widely accepted that that something is the parties’ pleaded case.  If not, what else can it be?  The opening words of paragraph 24/2/10 in the Hong Kong Civil Procedure 2017 reads as follows:

“Relating to any matter in question between them”.

30.  And that is in the context of discovery.

31.  And I further quote:

“These words refer, not to the subject‑matter of an action, but to the questions in the action. So, in an action for possession of land, where the plaintiff’s title is in question, they refer to the title, not the land (per Lindley J in Philipps v Philipps (1879) 40 LT 815 at 821). Relevance will be determined by reference to the pleadings (Re Estate of Ng Chan Wah, unrep, HCAP No 5 of 2003, March 5, 2003, [2003] HKEC 317, CFI).”

32.  In CHC Software Care Limited v Hopkins & Wood [1993] FSR 241, a case relied upon by the Plaintiff, Mummery J ordered disclosure by the defendants to the plaintiff the names and addresses of recipients of letters allegedly containing malicious falsehood.  The gist of the decision of Mummery J was summed up in a short passage at page 250. It reads:

“The recipients of the letters are not wrongdoers, but, in my view, the jurisdiction of the court is not confined to the case of identifying wrongdoers. The copies of the letters sent by the defendants and any distribution list of names and addresses of recipients are documents relevant to the issues pleaded in this action. The fact that the immediate purpose for which the plaintiff seeks discovery is to write to the recipients to set straight the record does not oust the jurisdiction of the court to order discovery of relevant documents. The plaintiff’s purpose is a legitimate purpose relating to the issues raised in the action. The plaintiff wishes to take reasonable steps to protect itself against the damaging consequences of the alleged tortious document disseminated by the defendants.”

33.  This Court readily understands why Mummery J came to the conclusion that the plaintiff’s purpose for seeking the names and addresses of the recipients of the letters in question was a legitimate purpose, but as this Court has no access to the pleadings in that case, it does not know how Mummery J came to his conclusion that the information requested related to the issues in that action.

34.  On the other hand, this Court has read the pleadings in the present case and is satisfied that at least paragraphs 1 to 4 of the interrogatories sought by the Plaintiff do not relate to the issues raised in this action.

35.  For the avoidance of doubt, this Court hastens to add it accepts the Plaintiff’s application is for a proper and legitimate purpose, but that is only one hurdle that an applicant of interrogatories has to overcome.

36.  Given the Plaintiff’s failure to show relevance, that is sufficient to dispose of paragraphs 1, 2, 3 and 4 of the interrogatories.

37.  Regarding paragraphs 3 and 4 of the interrogatories, this Court should add that none of the Defendants are counterclaiming against the Plaintiff for the value of the cargo.  Hence, whether any of them have taken legal action against the three banks involved in the transaction to recoup the invoice value of the cargo is not an issue that requires this Court’s determination at trial, if this action does get to trial eventually.

38.  Lastly, in relation to paragraph 5 of the interrogatories, concerning the location of the bills of lading in question, the Plaintiff has already received the answer from the Defendants, not once but twice:  in Mr Pang’s first affidavit in October last year and in correspondence with the Defendants’ solicitors in May this year.

39.  This Court therefore agrees with Miss Cheung that paragraph 5 is not necessary, either for disposing fairly of the cause or matter or for saving costs.

40.  For these reasons, this Court will dismiss the Plaintiff’s Summons.

41.  I will make no order on the Defendants’ Summons.

42.  Costs of and occasioned by the Plaintiff’s Summonses dated 10 August 2016 and dated 24 November 2016 be to the Defendants, with certificate for Counsel.