COMPANIA SUD AMERICANA DE VAPORES S.A. v. HIN PRO INTERNATIONAL LOGISTICS LTD

DCCJ 3986/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3986 OF 2014

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D E C I S I O N

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1.  The plaintiff (“CSAV”) and the defendant (“Hin-Pro”) have been entangled in on-going litigation at various levels of court in the Mainland, England and Hong Kong. CSAV commenced the present action to enforce a costs order against Hin-Pro in an interlocutory application in the English proceedings. CSAV seeks summary judgment. Hin-Pro resists, and applies to transfer the present action to the Court of First Instance of the High Court.

BACKGROUND[1]

2.  The dispute arose out of a series of contracts of carriage by sea from the Mainland, which was embodied in various bills of lading issued by CSAV, an international carrier.  Hin-Pro is a Hong Kong registered freight forwarder, and the shipper under the bills.

3.  In June 2012, Hin-Pro commenced 5 actions in the Mainland for loss of cargo upon delivery by CSAV in South America.  CSAV was said to have wrongfully released the cargo without sight of the original bills of lading.  CSAV contested on the ground that the bills contained a choice of law and jurisdiction clause (“the Jurisdiction Clause”) that conferred exclusive jurisdiction on the English High Court.

4.  This prompted CSAV to commence action in the English High Court (“Action 1519/2012”), seeking anti-suit injunction and damages for breach of the Jurisdiction Clause against Hin-Pro.  CSAV managed to obtain an interim anti-suit injunction in November 2012.

5.  Ignoring the interim anti-suit injunction, between May and July 2013, Hin-Pro commenced further actions for similar cause of action as mentioned above under some 70 bills of lading against CSAV in various Mainland courts.  This resulted in contempt proceedings in England against Hin-Pro and its director and shareholder for breach of the interim injunction.

6.  CSAV responded by commencing another action in the English High Court (“Action 1248/2013”) against Hin-Pro, and obtained an interim anti-suit injunction against Hin-Pro in November 2013.

7.  Meanwhile, the proceedings in the Mainland actions continued.  CSAV’s challenge against the jurisdiction of the Mainland courts failed.  So was its substantive defence. Hin-Pro obtained the first judgment against CSAV in May 2014.  Altogether Hin-Pro has obtained 19 judgments from the Mainland courts against CSAV.

8.  In June 2014, CSAV made payment of a sum of HK$2,916,522.80 to Hin-Pro[2].  At the same time, CSAV applied for and obtained from the English High Court, among others, a world-wide freezing order in respect of the assets of Hin-Pro to the extent in excess of US$27 million.  The amount represented approximately the total amount claimed by Hin-Pro in the Mainland proceedings, which CSAV thus claimed to be its loss and damage as a result of the Mainland proceedings brought by Hin-Pro in breach of the Jurisdiction Clause.  Action 1248/2013 was then fixed to be tried in October 2014.

9.  CSAV followed by applying and obtaining ex parte from the Hong Kong court a mareva injunction in aid of the English proceedings and to give effect to the abovementioned world-wide freezing order pursuant to section 21M of the High Court Ordinance, Cap 4 (“HCMP 1449/2014”).  Subsequently CSAV went further to seek, and obtained, among others, order putting Hin-Pro under managership and receivership.

10.  So far, Hin-Pro had not entered appearance or taken part in the English proceedings.  In September 2014, Hin-Pro sought to enter appearance in Action 1248/2013 out of time, and applied for, among other things, adjournment of the trial.

11.  On 3 October 2014, Flaux J dismissed the application for adjournment, but allowed Hin-Pro to enter appearance and participate in the trial upon satisfaction of numerous conditions.  Hin-Pro was ordered to pay the costs of the adjournment application, which was summarily assessed at £47,000 and payable from a source other than specified accounts within 14 days (“the 3/10/2014  Costs Order”).

12.  The conditions were not complied with; and the trial in Action 1248/2013 proceeded in Hin-Pro’s absence.  Judgment was handed down on 14 October 2014 (“the English Judgment”).  Cooke J found that the Jurisdiction Clause was an exclusive jurisdiction clause in favour of the English courts, and the Mainland actions had been commenced in breach of the clause.  Besides granting the permanent anti-suit injunction, Cooke J ordered Hin-Pro to discontinue the Mainland actions and to repay to CSAV the sums awarded by the Mainland court as well as to pay the costs so far incurred by CSAV in the Mainland proceedings.  A declaration was granted that CSAV is entitled to damages in the amount of any sums which it was ordered to pay to Hin-Pro in the Mainland actions.

13.  Seeking to enforce the English Judgment at common law, CSAV commenced actions in the High Court here, namely, HCA 2078/2014 and HCA 2360/2014 in October and November 2014 respectively.  On 20 October 2014, CSAV also commenced the present action seeking to enforce the 3/10/2014 Costs Order.

14.  By summons filed on 16 January 2015, CSAV applies for summary judgment in the present action.  Hin-Pro responded by summons filed on 29 January 2015 seeking to transfer the present action to the Court of First Instance of the High Court.

15.  The ex parte orders obtained by CSAV in HCMP 1449/2014 mentioned above were eventually discharged inter partes, with costs to Hin-Pro, partly upon the undertaking by Hin-Pro not to enforce the Mainland judgments without obtaining the consent of CSAV or leave of the courts here and in England.  CSAV took that to appeal; and hence CACV 243/2014.  The appeal was dismissed in December 2014 with costs to Hin-Pro.  CSAV sought leave to appeal further[3].

16.  In November 2014, Hin-Pro sought leave to appeal against the order of Flaux J dated 3 October 2014 and the English Judgment respectively in Action 1248/2013. Hin-Pro however did not seek to challenge the dismissal of its application for adjournment of the trial or the 3/10/2014 Costs Order.  In any event, the application was dismissed.  Meanwhile, leave to appeal against the English Judgment was granted.

17.  CSAV then sought to set aside the leave to appeal against the English Judgment.  The English Court of Appeal heard the application together with the substantive appeal.  At the present hearing, the parties informed the court that the English Court of Appeal had just delivered the judgment.  At the conclusion of the hearing, I gave leave to CSAV to file an affidavit to exhibit a copy of the English appeal judgment.  I also gave leave to the parties to make further submission, if any, on the judgment.

18.  The approved English Court of Appeal judgment was dated 23 April 2015.  Whilst CSAV’s application to set aside the leave to Hin-Pro to appeal was dismissed, CSAV succeeded in resisting Hin-Pro’s substantive appeal against the English Judgment. The English Judgment remains.

DEVELOPMENT SINCE THE PRESENT HEARING

19.  Mr Hui made no further submission on the English Court of Appeal judgment.

20.  Mr Chu lodged his further submission.  Besides submitting that the judgment does not materially impact on the present proceedings, Mr Chu seeks to develop in his further submission (and, for that purpose, to cite further authority) beyond what was expected pursuant to my leave.  It is unfair for either party to ride on my leave with specific ambit to elaborate what was or should have been covered during the hearing.

21.  Not only that, Hin-Pro lodged a further unsigned affirmation of its solicitors for the purpose of exhibiting the order of the English Court of Appeal and Hin-Pro’s application for leave to appeal to the Supreme Court of England.  The former was an incomplete copy of the order[4]. The latter was Hin-Pro’s written submission to the English Court of Appeal’s order prior to the handing down of the order, which incorporates Hin-Pro’s application for leave to appeal to the Supreme Court.  In any event, there seems to be no dispute that such application for leave was dismissed by the English Court of Appeal[5].

22.  CSAV raises no objection to the production of the order of the English Court of Appeal, provided a complete copy of it is exhibited.  Nevertheless it does not appear that the deficiency of the copy of the order provided would stand in the way in my deliberation.

23.  By joint letter dated 11 August 2015, the parties informed this court that the notice of motion taken out by CSAV for leave to appeal in CACV 243/2014 to the Court of Final Appeal was dismissed by the Court of Appeal.  The written decision of the appellate court dated 31 July 2015 was provided.

24.  Right after the parties have been notified of the handing down of the present decision early this month, this court received from CSAV information and documents on the further development in respect of the Mainland judgments.  I shall say to that only at the end.

PRINCIPLES

25.  It is the burden of Hin-Pro as the defendant to put forward a credible defence raising triable issues, or to demonstrate some other reason that the case ought to be tried.

26.  Pursuant to sections 41 and 42 of the District Court Ordinance, Cap 336, this court has discretion to order the transfer of proceedings.  Transfer may be ordered, if it is just and convenient to do so.  If a view could be formed that there is no credible defence or trial issue, transfer will be pointless and should be refused.

27.  There is no dispute as to the above principles.

DISCUSSION

28.  The situation up to early this month was this:

(1) From the Mainland courts, Hin-Pro has obtained some 19 judgments against CSAV for compensation in excess of US$12 million and legal costs for loss of cargo caused by CSAV.  Except for the amount that CSAV had already paid pursuant to the first of them, Hin-Pro has given undertaking to the Hong Kong court not to enforce[6] the other Mainland judgments.  CSAV appealed those judgments.

(2) From the English court, CSAV has obtained the English Judgment, which has been upheld on appeal, for damages and entitlement to damages for Hin-Pro’s Mainland proceedings commenced and continued in breach of the Jurisdiction Clause.  The damages and entitlement to damages are reflective of what CSAV was adjudged to be liable in the Mainland proceedings[7].

(3) In the actions commenced in the High Court of Hong Kong, CSAV seeks to enforce the English Judgment.  In the present action, CSAV seeks to enforce the 3/10/2014 Costs Order.

(4) The 3/10/2014 Costs Order was made upon the dismissal of Hin-Pro’s application to the English court for adjournment of the trial in Action 1248/2013.  Hin-Pro is liable to pay such costs irrespective of the outcome of the trial.  There was never application for leave to appeal or appeal against that order.

(5) The 3/10/2014 Costs Order does not form part of the English Judgment.  Hin-Pro’s appeal against the English Judgment, and the judgment on the appeal, has no impact on its liability under that costs order[8].

(6) There is no real dispute that the 3/10/2014 Costs Order became payable on 17 October 2014, being 14 days after the date of the order.

Enforcement of foreign judgment at common law

29.  There is no dispute as to the applicable principles governing the recognition and enforcement of a foreign judgment: Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 (at 936, per Lord Guest; at 969, per Lord Wilberforce); The Conflict of Laws in Hong Kong (2^nd ed) at §9-015.  Essentially:

(1) the order must be final and conclusive on the merits between the same parties;

(2) the order must provide that the defendant should pay the plaintiff a certain sum of money; and

(3) the order is rendered by a court having competent jurisdiction.

30.  Considering the background mentioned above and the expert evidence on the English law adduced by the parties, I have no doubt that the 3/10/2014 Costs Order is final and conclusive.  The parties’ experts also agree that the English court had competent jurisdiction (in a matter over which it seized jurisdiction) to make the costs order.  As mentioned, no appeal against such costs order has ever been attempted.  The order is for a sum of costs payable by Hin-Pro as summarily assessed by the court.  In these respects, Mr Chu for Hin-Pro did not seek to argue otherwise during the hearing.

The Jurisdiction Clause and judicial comity

31.  The pleaded defence is that CSAV is bound by the judgments of the Mainland court, upon its seizing jurisdiction over Hin-Pro’s claim and rejecting CSAV’s jurisdictional challenge mounted on the basis of the Jurisdiction Clause.  CSAV is said to be seeking to ignore or to circumvent the effect of the Mainland judgments and thus bringing the Hong Kong court into judicial conflict.  By way of counterclaim, Hin-Pro asks for a declaration that CSAV is not entitled to judicial assistance of the Hong Kong court and damages.

32.  It should be noted that much of the contentions raised in the affidavit in opposition of the present application were premised on the appeal against the English Judgment, which was then pending.  This should now be viewed in the light of the result of the appeal, which was against Hin-Pro.

33.  As mentioned, the 3/10/2015 Costs Order was made consequential upon the English court’s dismissal of Hin-Pro application to adjourn the trial of Action 1248/2013.  The decision was one of case management, and not one on the merits of CSAV’s claim on the basis of the Jurisdiction Clause in that action.

34.  Further, the context in which the Hong Kong Court of Appeal explained the questions of judicial comity and conflict in the previous proceedings mentioned above must be noted. Such explanation was made in the specific context of determining CSAV’s section 21M application for interim relief in aid of the English proceedings, which CSAV commenced notwithstanding the Mainland proceedings.  As stated by the Court of Appeal[9], the conflict as to jurisdiction is between the outcome of the Mainland courts’ application of the Mainland law on the effect of the jurisdiction clause in the bills of lading and the outcome of the English courts’ application of English law on the same.

35.  Before this court is the costs order made upon Hin-Pro’s positive attempt to enter appearance in the English jurisdiction to apply to adjourn the trial in the English proceedings.  The application failed and the costs order followed. Hin-Pro cannot turn round to argue that the costs order should not be recognised and enforced because the same would lead to jurisdictional conflict. Whether or not the issue of judicial comity and conflict would arise out of recognising the English Judgment in view of the Mainland judgments, I do not see how the recognition of the costs order made upon a case management decision of the English court in refusing to adjourn the trial without reference to the merits of CSAV’s claim on the Jurisdiction Clause whatsoever would circumvent the Mainland judgments in the circumstances as suggested by Hin-Pro.

Set-off

36.  The pleaded case of Hin-Pro is that it relies on the Mainland judgments for total sum in excess of US$12 million as defence of set-off[10].

37.  Hong Kong Civil Procedure 2015 (Vol 1) at 14/4/14 (as cited)[11] summarises the following propositions:

(1) Where the defendant can show an arguable set-off, whether equitable or otherwise, he is entitled to leave to defend to the extent of the set-off and the court has no discretion.

(2) Where the defendant sets up a bona fide counterclaim arising out of the same subject matter as the action and connected with the grounds of defence, the order should not be for judgment on the claim, subject to a stay pending trial of the counterclaim, but should be for unconditional leave to defend, even if the defendant admits the whole or part of the claim.

(3) Where there is no defence to the claim but a plausible counterclaim of not less than the claim is set up, judgment should be for the plaintiff on the claim with costs, stayed until trial of the counterclaim.

(4) Where the counterclaim arises out of a separate and distinct transaction or is wholly foreign to the claim, judgment should be for the plaintiff with costs without a stay.

(5) The lack of clarity between (2), (3) and (4) above gives the court freedom to respond to the perceived justice of the individual case.

38.  The sum awarded under the 3/10/2014 Costs Order does not form part of what was awarded under the English judgment, which is reflective of the compensation and costs payable pursuant to the Mainland judgments.  There is no corresponding part of the Mainland judgment to set off against such order as to costs, which is the subject matter of the present action.

39.  Further, Hin-Pro has paid into court the amount previously paid by CSAV pursuant to the first of the Mainland judgments, and undertaken not to enforce the others.  Unless and until they could be and are enforced, the Mainland judgments also do not stand to extinguish the claim herein by way of legal set-off.

40.  Mr Chu confirms that he is relying on equitable set-off.  This requires a close connection between the action and the counterclaim.  The mere fact that both the claim and cross claim arise out of a single trading transaction between the parties is insufficient to supply the close link necessary to support an equitable set-off.  The cross claim should flow from the dealings and transactions which gave rise to the subject matter of the claim so that it would be manifestly unjust to allow one to be enforced without regard to the other: see Esso Petroleum Co Ltd v Milton [1997] 2 All ER 593 at 604-605; Dole Dried Fruit and Nut Company v Trustin Kerwood Ltd [1990] 2 Lloyd’s Rep 309 at 311; Bim Kemi AB v Blackburn Chemicals Ltd [2001] 2 Lloyd’s Rep 93 at 100.  An overall view of the situation has to be considered and that no single factor is likely to be conclusive of the matter: see Townearn Industrial Ltd v Golden Globe Holdings Ltd [2003] 1 HKC 186 at 191I to 193E.

41.  For the defence of set-off, there is at the moment only the pleaded counterclaim on the basis of the Mainland Judgments.  That the 3/10/2014 Costs order was made in the English proceedings, which were connected to the Mainland Judgments in terms of the background, in my view, does not suffice.  The Mainland Judgments, which would be the basis of the counterclaim in this action, did not flow from what gave rise to the subject matter of the present claim, which is the enforcement of the 3/10/2014 Costs Order made upon dismissal of Hin-Pro’s application in the English court for adjournment.  I do not see that allowing the claim without regard to the Mainland judgments, which correspond to the English Judgment but not the 3/10/2014 Costs Order, would be manifestly unjust.

42.  Beyond its pleaded case, Hin-Pro also seeks to rely on the costs orders obtained in the Hong Kong proceedings (HCMP 1449/2014 and CACV 243/2014) to set off the claim in the present action.  Such costs are to be taxed, if not agreed.  I agree with Mr Hui that in principle, the same considerations discussed above apply.  The nature of the costs orders, the reasons for the costs orders and the status of the costs order in those Hong Kong proceedings differ from those of the 3/10/2014 Costs Order, subject matter of the present action.

43.  Contentions are also put forward with reference to the suggested uncertainty and difficulty of enforcing any judgment against CSAV as well as the alleged ulterior motive of CSAV in driving Hin-Pro out of business by virtue of the present action.  Relevance aside, such contentions place themselves further away from the question of enforceability of the 3/10/2014 Costs Order as a foreign judgment and do not improve the defence.

44.  I find no valid defence to the claim for enforcement of the 3/10/2015 Costs Order.

Letter from CSAV’s solicitors dated 6 November 2015

45.  This was the most recent development.  By letter dated 6 November 2015, the solicitors for CSAV informed this court that the Higher People’s Court of Zhejiang Province handed down 18 judgments on 22 October 2015, allowing its appeal against the Mainland judgments taken out earlier as mentioned above.  Copies of 2 of those judgments were enclosed.

46.  Unlike that by the parties’ joint letter in August 2015, the attempt to introduce these new evidence was unilateral.  The letter was apparently copied to Hin-Pro’s solicitors.  However they have not made raised any objection or made any comment.  CSAV’s suggestion to leave it to the court to indicate if the new evidence should be properly adduced by way of affidavit and to decide if this court wishes to view all 18 appeal judgments from the Zhejiang court is not commended.

47.  If taken into account, the Mainland appeal judgments, as they are, tell two things.  First, the Mainland Higher Court confirmed[12] the jurisdiction of the Mainland court and applicability of the Mainland law over the parties’ dispute.  In substance, this remains in conflict with the stance of CSAV and the English Judgment.  Second, the first instance Mainland judgments were overturned, so that the core of Hin-Pro’s counterclaim, which is based on the Mainland judgments, falls away.  Nevertheless, in view of the conclusion reached above, I need say no further on this latest development.

TRANSFER

48.  Upon the above conclusion, Hin-Pro’s application for transfer is refused.

ORDER

49.  Judgment is entered against Hin-Pro for the sum of £47,000 and interest in terms of paragraphs (1)(a), (b) and (c) of CSAV’s summons.  Hin-Pro’s summons is dismissed.

50.  I make a costs order nisi that Hin-Pro shall pay CSAV its costs of and incidental to the parties’ respective summonses, and any costs reserved, to be taxed if not agreed.

51.  I thank counsel for their assistance.