COMPANIA SUD AMERICANA DE VAPORES SA v. HIN-PRO INTERNATIONAL LOGISTICS LTD

HCMP 1449/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1449 OF 2014

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D E C I S I O N

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Introduction

1.  By Summons dated 5 August 2014, the defendant applied for the discharge of the following orders:

(1) A Mareva injunction against the defendant (granted ex parte by DHCJ Saunders on 16 June 2014, continued inter partes by DHCJ Saunders’ order dated 20 June 2014) (the “Hin‑Pro Mareva”);

(2) An Amended Injunction Order against the defendant and Soar International Logistics Limited (“Soar”) (granted ex parte by DHCJ Saunders on 18 July 2014, continued inter partes by DHCJ Saunders’ order dated 25 July 2014) (the “Soar Mareva”); and

(3) A Receivership Order against Soar (granted ex parte by DHCJ Saunders on 30 July 2014, continued inter partes by DHCJ Marlene Ng’s order dated 8 August 2014) (the “Soar Receivership Order”).

2.  At this hearing, the defendant sought leave to re‑amend the Summons to apply also for the discharge of a Receivership Order against the defendant, granted by DHCJ Saunders on 17 July 2014 (the “Hin‑Pro Receivership Order”).

3.  There is a dispute between the parties as to the basis upon which the Hin‑Pro Receivership Order was granted.  The plaintiff contends that the Hin‑Pro Receivership Order is, from the beginning, an inter partes order.  The only way to challenge that order is by way of appeal to the Court of Appeal.  Indeed, an application by the defendant is now underway before the Court of Appeal for leave to appeal out of time.

4.  On the other hand, the defendant contends that due to the conduct of the plaintiff’s solicitors, the 17 July 2014 hearing at which the Hin‑Pro Receivership Order was made was an ex parte hearing (in the sense of a hearing conducted without notice of that hearing being provided to the defendant).  The defendant pointed out that on 15 July 2014, the plaintiff’s solicitors sent two letters to the defendant each of which incorrectly stated that the summons for the Hin‑Pro Receivership Order was to be heard on “Thursday, 19 July 2014 at 9:30 am”.

5.  For reasons which will become apparent in the later part of this Decision, it is not necessary for this court to come to a definite view as to whether the Hin‑Pro Receivership Order was an ex parte or an inter partes order.  Even if the order is one made inter partes, there is undoubtedly an application before the court by the defendant for the discharge of the Hin‑Pro Mareva.  For the purpose of this Decision, I would allow the defendant to apply also for the discharge of the Hin‑Pro Receivership Order in the event and as a consequence of a discharge of the Hin‑Pro Mareva.  On any view, a discharge of the Hin‑Pro Mareva would be a material change in circumstances vis‑à‑vis the Hin‑Pro Receivership Order.

Factual and procedural background

6.  The plaintiff is a substantial Chilean shipping company.

7.  The defendant is a Hong Kong registered company.  It provides freight forwarding services to companies in the People’s Republic of China (“PRC”), and used the plaintiff’s shipping services.

8.  Dispute arose between the plaintiff and the defendant, in which the defendant alleges that the plaintiff mis‑delivered cargo in Venezuela without production of the original bills of lading (“BL”).  The defendant’s complaint was that the plaintiff delivered the cargoes to the Venezuelan port authorities without having sight of the original bills of lading.

9.  All the BLs which have been the subject matter of dispute between the plaintiff and the defendant contained the jurisdiction clause (“JC”).  That jurisdiction clause reads as follows:

“LAW AND JURISDICTION This Bill of Lading and any claim or dispute arising hereunder shall be subject to English law and the jurisdiction of the English High Court of Justice in London. If, notwithstanding the foregoing, any proceedings are commenced in another jurisdiction, such proceedings shall be referred to ordinary courts of law. In the case of Chile, arbitrators shall not be competent to deal with any such disputes and proceedings shall be referred to the Chilean Ordinary Courts.”

10.  It is the plaintiff’s contention that this jurisdiction clause is exclusive, in favour of the English courts.  Thus, the defendant should have commenced proceedings (if any) in England only and not in any other forum.

11.  However, in alleged breach of the JC, the defendant commenced legal proceedings against the plaintiff in Wuhan, the PRC.

12.  In response, the plaintiff commenced an action against the defendant in England in November 2012 (the “1^st English Action”).  Under the 1^st English Action, the plaintiff sought a declaration that the JC required the defendant to litigate all disputes in relation to the first 5 mis‑delivered cargoes (ie those which already were the subject of the proceedings in Wuhan) in “the High Court of Justice in England and Wales and in no other forum” plus a permanent anti‑suit injunction to restrain the defendant from further pursuing the Wuhan proceedings.  An interim anti‑suit injunction (“ASI”) was obtained against the defendant on 22 November 2012 which was continued thereafter.

13.  Following advice from its PRC lawyers, the defendant (which has no connection with the United Kingdom) failed to engage in the 1^st English Action.  In defiance of the ASI, the defendant proceeded with the Wuhan proceedings.  That resulted in the defendant and its sole director and shareholder, Ms Su Wei, being held in contempt of the English court on 21 March 2013.  The court sentenced Ms Su Wei to imprisonment in absentia for three months and permitted the issue of writs of sequestration against the defendant.

14.  The defendant persisted in ignoring the contempt proceedings and order in the 1^st English Action.  Between May and July 2013, the defendant commenced many more proceedings against the plaintiff in various cities in the PRC, namely, Guangzhou, Qingdao, Tianjin, Ningbo and Shanghai in respect of some further 70 BLs containing the same jurisdiction clause.

15.  The plaintiff commenced another action in November 2013 for further breaches of the jurisdiction clause (the “2^nd English Action”).  A similar interim ASI was obtained against the defendant on 29 November 2013.  That second ASI was similarly ignored and breached by the defendant, in the sense that the defendant continued to progress the claims in the PRC in respect of the 70 BLs.

16.  In order to protect the plaintiff’s position, the plaintiff applied ex parte for and was granted in the English Actions a worldwide freezing order (“WWFO”) on 13 June 2014, freezing the defendant’s assets in the amount of US$27,835,000.  That sum is roughly the total amount claimed by the defendant against the plaintiff in the proceedings in the PRC, which the plaintiff says represents the amount of damages suffered as a result of the breach of the JC.

17.  On the following Monday, 16 June 2014, an ex parte Mareva injunction application was made in Hong Kong against the defendant under the present action, pursuant to section 21M of the High Court Ordinance, Cap 4, to freeze the defendant’s assets in Hong Kong (ie the Hin‑Pro Mareva).  The application was made in aid of the English Actions, and to give effect to the WWFO.  DHCJ Saunders granted the injunction.  The Hin‑Pro Mareva also contains an ancillary disclosure order, which requires the defendant to disclose its assets in Hong Kong above the value of HK$78,000.

18.  The defendant failed to comply with the disclosure order in both the English WWFO and the Hin Pro Mareva by their respective deadlines.  It was not until 5 August 2014 that Ms Su Wei filed her 2^nd Affirmation to disclose the defendant’s and Soar’s assets.

19.  On 14 July 2014, the plaintiff issued a summons for the appointment of receivers against the defendant, in support of the WWFO and the Hin‑Pro Mareva.  The application was made on the grounds that the defendant had failed to comply with the Hong Kong Mareva injunction and both English ASIs, and that the appointment of receivers was necessary for the preservation of the defendant’s assets in Hong Kong (and elsewhere pursuant to the WWFO).

20.  This summons was heard by DHCJ Saunders on 17 July 2014 (see: paragraphs 3 and 4 above). The learned Judge appointed practitioners from Deloitte as receivers and managers of the defendant (ie the Hin‑Pro Receivership Order).

21.  On 18 July 2014, another ex parte application was made by the plaintiff to vary the Hin‑Pro Mareva, so that in addition to the defendant’s assets, the assets of Soar are also frozen.  That application was made pursuant to the court’s jurisdiction under TSB Private Bank International SA v Chabra [1992] 1 WLR 231, and on the ground that Soar is the alter ego of the defendant, holding assets for and on behalf of the defendant or as the defendant’s nominee.   DHCJ Saunders acceded to that application and granted the Soar Mareva.  The Soar Mareva also contained a disclosure order against Soar, requiring it to disclose all its assets in Hong Kong above the value of HK$78,000.

22.  The deadline for Soar to comply with the disclosure order in the Soar Mareva expired on 28 July 2014.  Soar failed to comply with that order (it was not until 5 August 2014 that Ms Su made her 2^nd Affirmation in purported compliance).

23.  On 30 July 2014, another ex parte application was made against Soar for the appointment of receivers and managers over Soar.  The grounds for that application are similar to those for the receivership application against the defendant.  DHCJ Saunders granted the plaintiff’s application and made the Soar Receivership Order.  The return date of the Soar Receivership Order was 8 August 2014.

24.  Then, on 5 August 2014, the defendant issued:

(1) in this action, the Summons which is dealt with in this hearing; and

(2) under HCMP 1932/2014, a summons returnable before the Court of Appeal, to seek leave to appeal to the Court of Appeal against the Hin‑Pro Receivership Order out of time.

25.  The defendant’s summons dated 5 August 2014 was heard before DHCJ Marlene Ng on 8 August 2014. DHCJ Marlene Ng adjourned the discharge application for substantive argument with one day reserved.  That hearing was fixed for 11 September 2014 (ie this hearing).

The Hin‑Pro Mareva

26.  Mr Barrie Barlow, SC (and with him Mr George Chu) for the defendant submitted that the pivotal challenge is to the ex parte Hin‑Pro Mareva because, if that is discharged, all the subsequent orders which are based upon it must also be discharged.

27.  I agree.  From paragraph 13 of the Decision of DHCJ Saunders dated 17 July 2014, it is clear that the learned Judge decided to grant the Hin‑Pro Receivership Order on the basis that the Hin‑Pro Mareva had been breached or that there was a real risk of such breach, relying on the decision in Akai Holdings Ltd (in compulsory liquidation) v Ho Wing On, Christopher, HCCL 37/2005 (Judgment dated 1/09/2009).  Furthermore, the Soar Mareva and the Soar Receivership Order, which were made under the so‑called Chabra jurisdiction, were obviously also based upon and granted ancillary to the Hin‑Pro Mareva.

28.  Regarding the Hin‑Pro Mareva, it should be noted that under paragraph 2 of the inter partes order dated 20 June 2014 ordering its continuation until further order of the court, the defendant or any party affected by the injunction was expressly given liberty to apply to vary or discharge the same upon reasonable notice. Indeed, in the plaintiff’s Skeleton Submissions dated 19 June 2014 for the hearing, it was stated that:

“5. In view of the circumstances, the Court is invited to make an order to continue the Mareva Injunction order made by DHCJ Saunders on 16^th June 2014 until further order of the Court. P also proposes that there should be liberty to apply, such that if D wishes to set aside or vary the injunction order in the future, it can apply to the Court to make the appropriate applications upon reasonable notice.” (emphasis supplied)

29.  In the circumstances, I agree with Mr Barlow SC’s submissions that the Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 WLR 485 line of authority is concerned with cases where there has been a substantive interlocutory hearing which, in the absence of a change of circumstances, may give rise to issue estoppel.  This has not occurred in the present case.

Material non-disclosure

30.  Mr Barlow SC submits that as can be seen from the Originating Summons herein, the plaintiff commenced these proceedings pursuant to section 21M of the High Court Ordinance, Cap 4 in aid of the two English Actions.

31.  Relevantly, section 21M(4) provides as follows:

“(4) The Court of First Instance may refuse an application for appointment of a receiver or interim relief under subsection (1) if, in the opinion of the Court, the fact that the Court has no jurisdiction apart from this section in relation to the subject matter of the proceedings concerned makes it unjust or inconvenient for the Court to grant the application.” (emphasis supplied)

32.  In the present case, the plaintiff has fully participated in the PRC court proceedings inter alia raising challenges to the jurisdiction of the PRC courts, which the PRC courts heard and rejected.  Thereafter, the plaintiff continues actively to defend the PRC proceedings.

33.  Thus, by late May 2014, the parties’ proceedings in respect of the defendant’s claims for the plaintiff’s misdelivery of goods had, according to Mr Barlow SC, resulted in the kind of classic judicial conflict that our common law principles of international judicial comity strive to avoid (the “Judicial Conflict”), with:

(1)     the English court tentatively asserting upon an interim basis (the substantive issue not having been decided) that it alone has jurisdiction to decide the defendant’s claims; and

(2)     the PRC courts rejecting the interim assertion of the English court and assuming and exercising jurisdiction over the defendant’s claims.

34.  In such circumstances, Mr Barlow SC submits that this court is obliged, not only by the terms of section 21M but also by the common law principles of international judicial comity, to proceed very carefully [see: eg, Motorola Credit Corpn v Uzan (No 2) [2004] 1 WLR 113, at 137B‑D and 147E‑H].  This court’s section 21M jurisdiction is purely statutory and it was enacted in the interests of judicial comity in order to assist relevant foreign proceedings (and not in order to take sides within judicial conflicts).

35.  Mr Barlow SC submitted that it would be “unjust” and judicially “inconvenient” for this court to exercise its section 21M jurisdiction by aggregating to itself the role of referee or adjudicator over cases in which two courts are in Judicial Conflict with each other – since such conduct would be contrary to this court’s judicial policy of judicial comity [see: eg, Masri v Consolidated Contractors International (UK) Ltd (No 3) [2009] 2 WLR 669 at paras 26‑28, 81 and 95; and Deutsche Bank AG v Highland Crusader Offshore Partners LP [2010] 1 WLR 1023 at 1036B‑H].

36.  Mr Barlow SC went on to submit that the most significant of the plaintiff’s material non‑disclosures is the plaintiff’s decision not to highlight to this court the fact of the Judicial Conflict which, in particular, arose from the following material facts:

(1) that since 23 July 2013, the plaintiff herein had submitted to the jurisdiction of the PRC courts by generally defending the proceedings there;

(2) in the Ningbo court, on 24 September 2013 the plaintiff herein had raised its challenge to the jurisdiction of that court (based on the plaintiff’s “exclusive jurisdiction” argument) which on 16 October 2013 that court dismissed, whereupon it proceeded to exercise jurisdiction over the defendant’s claims by hearing both parties’ arguments and adjudicating upon them; and

(3) on 26 May 2014, following a contested trial, the Ningbo court adjudicated that the plaintiff herein should pay the cargo loss in sum of USD360,000 to the defendant.

37.  Mr Barlow SC further submits that these material non‑disclosures are incurable, because they compel the court to dismiss the plaintiff’s application pursuant to section 21M(4).

38.  I agree with Mr Barlow SC’s submissions.  The defendant sues the plaintiff in the PRC courts to enforce its BL contracts.  The plaintiff sues the defendant in the English court to enforce its interpretation of the JC contained in the same BL contracts. The Ningbo court has heard the plaintiff’s challenge to its jurisdiction and given final judgment that it has jurisdiction to try and determine the defendant’s claims.  On the other hand, the English court has provisionally ruled upon an interlocutory basis that the plaintiff has a good arguable case that the JC is an exclusive jurisdiction clause and it has provisionally ruled that it has jurisdiction to hear and determine the defendant’s claims

39.  By these proceedings, the plaintiff is seeking to have this court assist the English court in thwarting the defendant’s claims in the PRC courts.  As the two courts are in clear conflict over the question of jurisdiction, I agree that the policy of section 21M(4) and this court’s policy of judicial comity require this court to refuse to make any order.

40.  This court has been and is being asked to choose between the two courts and to take a course which has always been contrary to the policy of our courts, namely: “to arrogate to itself the decision how a foreign court should determine the matter” [see: the Deutsche Bank AG case, Supra at 1036F‑G].  Here, as in England, our court’s policy of judicial comity and respect for foreign courts requires that no choice between the two courts should be made.  It follows that the Hin‑Pro Mareva (upon which the Hin‑Pro Receivership Order, the Soar Mareva and the Soar Receivership Order were based) should be discharged due to the requirement of section 21M(4).

Defendant’s offer of undertaking in lieu

41.  The defendant, in its Skeleton Argument dated 5 September 2014 for this hearing, proffered its undertaking in lieu of interlocutory injunction that, if the Hong Kong interlocutory Mareva and Interim Receivership Orders are discharged, the defendant shall not take any step to enforce any PRC judgment against the plaintiff without first obtaining the prior consent of the plaintiff or the leave of this court and the English court (where the defendant has entered an appearance in order to challenge the interim orders) to do so (“D’s Offer in lieu”).

42.  Mr Barlow SC submits that D’s Offer in lieu provides all the protection that the plaintiff ever required. Requiring the defendant to give the undertaking and discharging all the interlocutory orders is the course which seems likely to cause the least irremediable prejudice to one party or the other.

43.  Mr Charles Manzoni, SC (and with him Mr John Hui) for the plaintiff, on the other hand, submitted that the D’s Offer in lieu is unacceptable because the defendant cannot be trusted to honour it.

44.  I do not agree with Mr Manzoni SC.  I agree with Mr Barlow SC that should the defendant seek to execute upon future PRC court judgments in breach of the undertaking, the plaintiff would be the first to know – whereupon the plaintiff could then take immediate further steps to restrain the defendant, a Hong Kong company.

Disposition

45.  Upon the defendant by its counsel undertaking that the defendant shall not take any step to enforce any PRC judgment against the plaintiff without first obtaining the prior consent of the plaintiff or the leave of this court and the English court to do so, the Hin‑Pro Mareva; the Hin‑Pro Receivership Order; the Soar Mareva and the Soar Receivership Order be discharged.

46.  I see no reason why costs should not follow the event.  Accordingly, I order that the costs of the applications be paid by the plaintiff to the defendant in any event.  Such costs shall be taxed on the party and party basis, if not agreed.

47.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

48.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.