PARAKOU SHIPPING PTE LTD v. JINHUI SHIPPING AND TRANSPORTATION LTD AND OTHERS

HCAJ 184/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 184 OF 2009

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BETWEEN

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REASONS FOR JUDGMENT

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I. INTRODUCTION

1.  On the first day of trial, on the Defendants’ application, I struck out Parakou’s claim as an abuse of process.

2.  The Defendants contended that allowing Parakou to proceed to trial would be a collateral attack on the outcome of a London Arbitration between Parakou and Galsworthy Ltd. The Arbitration culminated in an Award on 31 August 2010. 

3.  A collateral attack on the findings in the Award (the Defendants submitted) would result in manifest unfairness and bring the administration of justice into disrepute.  I agreed.  In this Judgment, I set out my reasons why.

II. BACKGROUND

4.  In this Section, I summarise the following:-

(1)  The parties

(2)  The context of the dispute

(3)  The findings in the Award

A. Parties

5.  Parakou is a Singapore company.  Before September 2008, it belonged to the Parakou group. That group owned, operated and chartered ships.  Mr Yang Jian Guo is a Singapore-based director of Parakou. Mr Du Hong joined the Parakou group in July 2007. He is a Senior Manager with responsibility for chartering and based in Parakou’s Beijing office.  He reports to Mr Yang.

6.  Jinhui Holdings Company Ltd. is a Hong Kong listed company.  It is the ultimate holding company of entities within the Jinhui/Goldbeam group. “Goldbeam” is the English translation of “Jinhui”.

7.  The 1st Defendant, Jinhui Shipping and Transportation Ltd. (JSTL), is a subsidiary in the Jinhui group.  JSTL is listed in the Oslo Stock Exchange.  It serves as a holding company for the Jinhui group’s shipping interests.  JSTL typically holds vessels through one-ship Panamanian companies.  All vessels owned by JSTL subsidiaries have names with the prefix “JIN”.  JSTL owns 100% of the 2nd, 3rd and 4th Defendants and Galsworthy. 

8.  The 2nd Defendant, Goldbeam Shipping Inc. (GSI) (a Liberian company), charters vessels from ship-owning companies within and without the Jinhui group.  It then sub-charters those vessels to third parties. 

9.  The 3rd Defendant, Jinkang Marine Inc. (JMI) (a Panamanian company), was the JSTL subsidiary which became the registered owner of the “CANTON TRADER” (later re-named the “JIN KANG”) (the Vessel). The Vessel is the subject matter of the proceedings before this Court.

10.  In June 2004 the Jinhui group chartered the Vessel through GSI from her then owners Ratu Shipping SA.  Under the charterparty, GSI had an option to purchase the Vessel from Ratu.  GSI exercised the option in November 2008.  In January 2009 GSI nominated JMI as the buyer of the Vessel. In late February 2009 Ratu delivered the Vessel to the Jinhui group and the Vessel became the “JIN KANG”.  The Jinhui group re-sold the Vessel in June 2009, delivery to the buyer being effected in July 2009.  Consequently, the Vessel (now named “SAM TIGER”) no longer belongs to the Jinhui group.

11.  The 4th Defendant, Goldbeam International Ltd. (GIL) (a Hong Kong company), engages in ship management. GIL does not itself charter vessels. Mr Norman Wu is the Director of GIL’s Chartering Department.

12.  Galsworthy (a Liberian company) specialises in chartering vessels from entities within the Jinhui group and then sub-chartering those ships as disponent owner to third parties.

13.  Ocean Glory Shipping Ltd., a company founded by former employees of COSCO, was in the business of chartering vessels.  An employee of Ocean Glory, Mr Jin Pei Yong, negotiated with the Third Party (Clarkson) for the charter of the Vessel.  Ocean Glory has since gone out of business. 

14.  As will be seen, Mr Jin played a significant part in the events of the present action.  What he said (and did not say) is a prominent part of Parakou’s case.  But Parakou did not propose to call him as a witness at trial.  Nor did Parakou call him to give evidence in the Arbitration.  In neither proceeding has there been a witness statement from Mr Jin. 

15.  Clarkson is the Asia office of the well-known shipbroking company.  Ms Qian Yu is a shipbroker at Clarkson.  It was through her as broker acting upon the instructions of Mr Wu that the Vessel was chartered.

B. Context

16.  The parties intended to call the same persons (Mr Yang, Mr Du, Mr Wu and Ms Qian Yu) as gave factual evidence in the London Arbitration to appear at the trial before me.  The parties called expert evidence on the proper translation of certain Mandarin shipping terms.  But no such expert evidence was to be called before me.

17.  The factual witnesses statements filed in the Hong Kong action were, save in minor respects, identical to the factual statements submitted in the Arbitration.  The matters summarised in this sub-section derive from the pleadings in the Hong Kong action and the factual witness statements.

B.1 Events to 18 June 2008

18.  In early June 2008 the Jinhui group’s senior management informed Mr Wu that the purchase option for the Vessel might be exercised.  In anticipation of the purchase, Mr Wu was requested to find a 5 year charter for the Vessel.  Mr Wu was told that the Vessel would be re-named “JIN KANG” once purchased. 

19.  Mr Wu appreciated that (following normal practice within the Jinhui group) the Vessel would be chartered by its registered owner within the group to another group entity to hold as disponent owner.  The latter would sub-charter the Vessel to such third party as Mr Wu might find. At the outset Mr Wu did not know which company within the group would end up as the Vessel’s disponent owner.

20.  On 11 June 2008 Mr Wu instructed Ms Qian Yu to market the vessel for a 5 year fixture. 

21.  According to Ms Qian Yu, on approaching her to find a 5 year fixture for the Vessel, Mr Wu told her that “‘Goldbeam’ had purchased a vessel named the ‘CANTON TRADER,’ which was to be renamed the ‘JIN KANG’”.  Mr Wu (Ms Qian Yu says) had “further explained that the vessel was on a period charter-party with an option to purchase, and that the reason the vessel was to be renamed the ‘JIN KANG’ was to reflect the fact that it had already been purchased by ‘Goldbeam’”.  Ms Qian Yu apparently understood from all this that “the Vessel had been purchased by Goldbeam (ie. the Group) through a particular company under the umbrella of the Group”. 

22.  It is Ms Qian Yu’s evidence that she did not know which specific company within the group had purchased the Vessel.  She further says that she “did not know whether the owner under the intended charter would be a registered owner or a disponent owner”.

23.  It is also Ms Qian Yu’s evidence that, as far as she was concerned, she was acting at all times on behalf of GIL.  She accepts that GIL may itself have had principals behind it, such as Galsworthy or some other company within the Jinhui group.

24.  Upon receiving Mr Wu’s instructions to find a charterer, Ms Qian Yu proposed approaching Tianjin Tianhui Shipping Enterprise Co. Ltd., Ocean Glory and Parakou.  Mr Wu suggested that Ms Qian Yu focus on Tianhui as he did not think that the newly-established Ocean Glory was suitable. 

25.  Ms Qian Yu says that on 11 June 2008 she telephoned Mr Du about chartering the Vessel.  But Mr Du told her that Parakou was not interested as the Vessel did not suit Parakou’s operations.  Ms Qian Yu says that Mr Du recommended that she approach Ocean Glory.

26.  On 12 June 2008 Ms Qian Yu managed to fix the Vessel with Tianhui at a daily rate of US$32,250.  But that fixture was subject to final approval by Tianhui’s directors.  Tianhui was supposed to decide whether to approve the fixture and lift subjects by the following day. 

27.  On 13 June 2008 Mr Ben Lam of GIL informed Ms Qian Yu that the fixture would be effected with Tianhui through Galsworthy as disponent owner.  From then on, according to Ms Qian Yu, she knew that the Jinhui group’s intention was for the Vessel to be chartered through Galsworthy as disponent owner.  She also says that at that point she realised that “Galsworthy must have been [GIS’] principal”.  At the time, she had no knowledge of JMI. 

28.  Tianhui did not lift subjects on 13 June 2008. Tianhui finally decided not to approve the fixture on 16 June 2008.

29.  Following the failure of the Tianhui fixture, Mr Wu asked Ms Qian Yu to arrange a clean fixture, not subject to conditions.

30.  Ms Qian Yu then telephoned Mr Jin on 17 June 2008. Given Mr Wu’s reluctance in chartering direct to Ocean Glory, Mr Jin suggested a “sleeving arrangement”.  Under that arrangement, Parakou (the established company) would first charter the Vessel from the Goldbeam company and then sub-charter the Vessel to Ocean Glory (the newcomer) on a back-to-back basis. Ocean Glory had previously entered into a similar sleeving arrangement with Parakou.

31.  Ms Qian Yu reported this conversation to Mr Wu.  Mr Wu was happy to accept Parakou as charterer.   

32.  According to Mr Du, Mr Jin telephoned him at some time in mid-June 2008 to say that he had been approached by Ms Qian Yu on behalf of “a company named Goldbeam operating from Hong Kong”.  Ms Qian Yu had told Mr Jin that the Goldbeam company “had bought and owned” the Vessel and wished to charter her out for 5 years.  Ms Qian Yu had inquired of Mr Jin whether Ocean Glory was interested in the proposed charter.

33.  The conversation between Mr Du and Mr Jin was largely in Mandarin.  Mr Du claims that, in referring to Goldbeam as the owner of the vessel, Mr Jin had used the words chuan dong (船東).  Mr Du says that he understood such description to be referring to the registered (as opposed to disponent) owner of the Vessel. 

34.  Parakou contends that, if Mr Jin had intended to convey to Mr Du that the Goldbeam company was only the disponent owner of the Vessel, Mr Jin would have used the expression er chuan dong (二船東) instead of chuan dong.  Parakou further contends that Mr Jin reported to Mr Du precisely what Ms Qian Yu had told him.  Thus, it is Parakou’s case that, when contacting Mr Jin, Ms Qian Yu had herself used the words chuan dong to refer to the Goldbeam company chartering out the Vessel.

35.  According to Mr Du, Mr Jin reported that “Goldbeam” was reluctant to charter the Vessel to Ocean Glory.  Mr Jin asked Mr Du whether Parakou would be interested in chartering the Vessel on a sleeving arrangement as discussed with Ms Qian Yu.  Parakou would then earn the difference between the charter and sub-charter rates as recompense for assisting Ocean Glory.  (I note in passing that a hire differential of US$530 per day was eventually agreed between Ocean Glory and Parakou later on.)

36.  Parakou’s case is that Mr Du told Mr Jin to negotiate terms with the Goldbeam company on Ocean Glory’s behalf.  Once terms were reached, Mr Jin was to forward the same to Parakou and the latter would consider whether to approve the terms as a basis for a sleeving arrangement.

37.  Following his conversation with Mr Du, Mr Jin started to negotiate terms with Ms Qian Yu for the Vessel’s charter.   At some point on 17 June 2008, Ms Qian Yu and Mr Jin had agreed the charter rate and address commission.

38.  There was a break in their discussions (Ms Qian Yu says for about 2 hours) for Mr Jin to seek Parakou’s approval.  Mr Jin later reverted to Ms Qian Yu saying that Mr Du had obtained approval from his boss for Parakou to charter the Vessel on the terms that Ms Qian Yu and Mr Jin had negotiated.

39.  Ms Qian Yu prepared a full fixture recap and sent the same to Mr Jin by email. The recap named Galsworthy as disponent owners. But by mistake the recap identified Ocean Glory as charterers.

40.  Realising her mistake, Ms Qian Yu rang Mr Jin and apologised.  She sent corrected copies of the recap, this time naming Parakou as charterer, to GIL on the evening of 17 June 2008 and to Mr Du in the morning of 18 June 2008.  According to Ms Qian Yu, the delay in sending the fixture details to Mr Du was to enable Mr Jin to check the same.  The corrected recap identified Galsworthy as disponent owner.

41.  Ms Qian Yu says that she telephoned Mr Du on 18 June 2008 to inquire whether he had received the recap.  She also wanted to thank Mr Du.  According to her, Mr Du confirmed receipt of the recap and did not query the naming of Galsworthy as disponent owner.  Nor (Ms Qian Yu continues) did Mr Du inquire who the registered owner of the Vessel was.  

42.  Mr Du accepts that, on the same day as he spoke to Mr Jin or possibly a day later, Ms Qian Yu had telephoned him. 

43.  Mr Du and Ms Qian Yu had then conversed in Mandarin.  Mr Du recalls that Ms Qian Yu told him that she was acting on behalf of “Goldbeam” (Mr Du claims that the English name was mentioned) and that “Goldbeam” had bought and owned the Vessel. 

44.  Mr Du alleges that Ms Qian Yu specifically used the expression chuan dong when referring to Goldbeam.  He says that Ms Qian Yu telephoned to confirm that Parakou was willing to act as intermediate charterer of the Vessel.  Mr Du apparently replied that Parakou would be prepared to enter into a charter with Goldbeam and a back-to-back sub-charter with Ocean Glory subject to Parakou’s approval of any proposed terms.  But Mr Du insists that he stressed that any proposed charter had first to be forwarded to Parakou for approval by Parakou’s senior management.

45.  According to Mr Du, Galsworthy was never mentioned in the course of Mr Du’s conversations with Mr Jin or Ms Qian Yu mentioned above.

46.  For her part, Ms Qian Yu is adamant that she never used the phrase chuan dong when speaking either with Mr Jin or Mr Du. She claims to have referred to the vessel as “Goldbeam de chuan” (“Goldbeam 的船”) or, in English translation, “Goldbeam’s vessel”.

47.  Mr Du explains that, when Ms Qian Yu telephoned him on 17 or 18 June 2008, he had not seen the recap.  Accordingly, he told Ms Qian Yu that he still had to check that the email recap was accurate. It was not until after he had spoken to Ms Qian Yu that (according to Mr Du) he noticed the reference to Galsworthy.  He had no idea who Galsworthy was.  But “it didn’t strike [him] immediately that there was necessarily a problem because Galsworthy might be a substantial entity, or they might be the registered owner”.

48.  Mr Du telephoned Mr Jin for an explanation.  Mr Du says that Mr Jin was himself surprised by the reference to Galsworthy.  Mr Jin apparently replied that he would revert to Mr Du.

49.  Mr Du then started composing an email on the charter for his senior management.  He claims to have “cut and pasted the terms from the email from Ms Qian Yu and inserted them in the draft email that I was composing”.  The email was composed “as confirmation of a clean fixture and sub-fixture because I was expecting Mr Jin to revert to me quickly with an explanation of who Galsworthy were”.  Mr Du inserted the words “Goldbeam own vsl” in brackets alongside the reference in his email to Galsworthy as disponent owners.  Having written the email, Mr Du says that he did not immediately send off the same, pending Mr Jin’s clarification of Galsworthy’s position.

50.  At this point, Mr Du says Mr Yang called him.  Mr Yang himself had never heard of Galsworthy.  Mr Yang (Mr Du recounts) made it clear that unless Parakou could “satisfy ourselves that [Galsworthy] were substantial enough to do business with, there could be no fixture”.  Mr Yang asked for the proposed terms of the Vessel charter for Mr Yang’s review. 

51.  The email to senior management having already been composed, Mr Du thought that the “easiest way” of complying with Mr Yang’s request for information on the proposed charter was to send the email.  Mr Du emphasises that “[t]he email was an internal document and was not intended, when I sent it, to confirm a clean fixture”.  It was (according to Mr Du) sent to Mr Yang for information purposes only.

52.  Mr Yang called back to Mr Du to say that, subject to Mr Jin’s clarification, Parakou could not enter into a charter with an entity which it did not know.

53.  Mr Jin apparently never came back to Mr Du.  Mr Du says that consequently he “began to assume that the fixture had fallen through”.  He notes that “certainly [he] was not pressed by anybody from Ocean Glory to sign a formal charterparty”.

B.2 Events from 18 June 2008

54.  Parakou did little following the receipt of Ms Qian Yu’s recap.  Mr Du says that this was because “the lay can [stipulated in the recap] was 1st March/30th April 2009”.  Thus, “[b]ecause the fixture was being negotiated so far forward, there was no particular agency in dealing with issues”.

55.  On 17 July 2008 Mr Du received a working copy of the Vessel charterparty from Clarkson.  Mr Du says that he followed up by telephone with Mr Jin about Galsworthy.  But Mr Jin apparently replied that he was “still checking”.

56.  On 11 September 2008 Mr Du emailed a notice to Clarkson introducing Ms Jin Yu, a new employee.  The email requested that from 16 September 2008 “ALL MSGS/COMMUNICATIONS RELATED TO FIXTURES OF:-... M/V CANTON TRADER/PARAKOU/OCEAN GLORY” be sent to Ms Jin.

57.  On 6 October 2008 Mr Du sent an e-mail to Mr Henry Leung at Clarkson reminding him to send “all yr post-fix msgs directly to Pic [person-in-charge]: Ms Jin Yu”.

58.  On 27 October 2008 Clarkson sent 2 original charterparties naming Galsworthy as disponent owner to Parakou for signature.

59.  On 31 October 2008, Mr Du being on holiday, Ms Jin Yu sent an email to Clarkson asking “Who is ‘Galsworthy Limited’ (full style + background)”.  Mr Leung replied on the same day that: “The owner is Goldbeam Hong Kong (Galsworthy Limited is the subsidiary and independent company of Goldbeam for this vessel). The charterer is Parakou Shipping.”

60.  Clarkson repeatedly pressed Parakou to return signed copies of the charterparty.

61.  On 11 February 2009 Parakou stated that it had not agreed to enter into a fixture with Parakou.

62.  In March 2009, following Ratu’s delivery of the Vessel, Parakou refused to take delivery.  Galsworthy then accepted what it claimed was Parakou’s repudiation of the charterparty.

63.  The charterparty provided for a daily hire of US$32,250 over 5 years. 

64.  The dry bulk shipping market had taken off in the second half of 2002.  It reached an unprecedented high in May 2008.  At that stage, ships could be hired for daily rates of around US$65,000 to US$85,000. Shortly thereafter, however, the market began to collapse.  By early March 2009, daily rates could be as low as US$7,000 to US$15,000. The Jinhui group suggests that Parakou walked away from the charter of the Vessel simply because of the financial implications of the market collapse.

65.  Galsworthy commenced London Arbitration in February 2009.  In the Hong Kong action, as during the Arbitration, it has been Parakou’s contention that it never entered into a charter with Galsworthy. But, given an arbitration agreement in the putative charterparty, Parakou agreed ad hoc to participate in the Arbitration and for the Arbitrators to determine whether Parakou was bound by the charterparty.

66.  Parakou commenced the Hong Kong action on 24 August 2009.  Parakou’s claim argues that, insofar as the Arbitrators find that there was a binding charterparty between Parakou and Galsworthy, the charterparty was induced by the reckless or negligent misrepresentations of one or nmore of the Defendants. 

67.  Those misrepresentations are said to have arisen as a result of Mr Wu instructing Ms Qian Yu on behalf of the Defendants to communicate (and Ms Qian Yu having communicated) to Parakou that:-

(1)  Clarkson had authority to negotiate a charter of the Vessel on behalf of its chuan dong or registered owner;

(2)  any negotiation for a charter of the Vessel would be conducted by Clarkson on behalf of such registered owner; and,

(3)  any fixture which resulted from those negotiations would be concluded with the registered owner of the Vessel.

68.  Parakou by its claim contends that the representations were false because:-

(1)  at the time of Ms Qian Yu’s representations on behalf of the Defendants the Vessel was still owned by Ratu;

(2)  JMI was not nominated to be the registered owner of the Vessel until January 2009; and,

(3)  “there was therefore no ‘Goldbeam’ entity which had the right to charter out or deal with the Vessel as its registered owner”.

69.  Parakou says that it relied on the representations, insofar as it entered into any charterparty with Galsworthy.  In particular, Parakou pleads that, but for the representations, Parakou would not have entered into any charter.  This is because:-

“it does not charter in vessels unless it is satisfied that it is contracting with the registered owner (which has the ship as its asset) or with a company with substantial assets, or with the benefit of a performance guarantee from a company with substantial assets”.

70.  Parakou claims in the Hong Kong action to be indemnified against such amounts as it may have to pay Galsworthy as a result of the Award.

C. Award

71.  The Arbitrators (Mr Patrick O’Donovan, Mr Alan Thambiayah and Mr Christopher Moss) held that “prima facie a binding fixture had been concluded” between Galsworthy and Parakou.  The Arbitrators “had little doubt that Parakou was aware of and was content with the main terms of the proposed fixture before it received the clean recap from Ms Yu [on 18 June 2008]”.

72.  The Arbitrators accepted that Ms Qian Yu was “aware at all material times prior to 13th June that GIL was acting on behalf of an unidentified principal in the Jinhui/Goldbeam group”.  However, on the strength of Ms Qian Yu’s admission in cross-examination, the Arbitrators found that Ms Qian Yu had “in fact told Mr Jin that Goldbeam had already purchased the vessel”.

73.  The Arbitrators thought, on the strength of Mr Ben Lam’s email to Ms Qian Yu of 13 June 2008, that “there could be no real question but that GIL had acted as agent on behalf of Galsworthy as principal”.  It followed (the Arbitrators concluded) that the intention of the Jinhui group as understood by Ms Qian Yu was that the GIL “were acting for Galsworthy first as undisclosed, and then as disclosed, principal”.

74.  The Arbitrators held that Ms Qian Yu had not used the words chuan dong but “had simply referred to the fact that the vessel was ‘from Goldbeam’ or ‘Goldbeam’s vessel’”. 

75.  In any event, the Arbitrators concluded that the expression chuan dong was not a term of art connoting a registered owner as Parakou contended. On the contrary:-

“The literal translation of chuan dong may be ‘ship owner’, but we concluded on the [expert] evidence which was available to us that it is used in precisely the same way that English speakers in the shipping industry use the words ‘owners’ or ‘shipowners’ -- without distinguishing between the different types of owner (ie. registered or disponent). We concluded that the words chuan dong can be understood as referring to someone who is in control of a vessel. It was not suggested to Ms [Qian] Yu that she had ever used the Mandarin words that specifically translate as ‘registered shipowners’ and Mr Du accepted that ‘owners’ in this context would, so far as he was concerned, mean simply the party that would counter-sign on the owner’s side”.

76.  The Arbitrators took the view that, when talking over the phone to Mr Du and Mr Jin, Ms Qian Yu “must clearly have been referring to a company called Goldbeam and not simply to any company within the Goldbeam group”.  As a result, Parakou (the Arbitrators reasoned) must have thought that “it had entered into a binding charterparty with a company called Goldbeam” and not Galsworthy.

77.  The Arbitrators found, on the balance of probability, that “Mr Jin had told Ms [Qian] Yu that he had obtained [actual] authority from Mr Du [to approve the terms of the charterparty]”.  It was also the case (the Arbitrators thought) that “Mr Du must indeed have led Mr Jin to believe that he [Mr Du] was in a position to approve the terms on behalf of Parakou”. 

78.  But Mr Du’s actual authority had been limited by Mr Yang.  More pertinently, there was “no satisfactory evidence that Mr Yang had ever specifically approved a fixture with Galsworthy -- or any entity within the Goldbeam group other than a company called ‘Goldbeam’”.  It followed (the Arbitrators held) that Mr Du and Mr Jin had no actual authority to approve a charter with any entity other than one called “Goldbeam”.

79.  The Arbitrators agreed with Parakou’s submission that Mr Jin had no apparent authority either to agree a charter of the Vessel between Parakou and a company (such as Galsworthy) which was not called “Goldbeam”.

80.  Nonetheless, contrary to Parakou’s submission that it only contracted with registered owners of ships or companies having substantial assets, the Arbitrator’s held on the evidence that “Parakou had been prepared to charter from disponent owners without a [performance] guarantee from an associated company of financial substance”. 

81.  In this particular case, on the strength of the internal communication on 18 June 2008 between Mr Du and Mr Yang and Mr Du’s messages of 11 September and 6 October 2008 to Clarkson, the Arbitrators concluded that Parakou had ratified the proposed charter with Galsworthy.

82.  The Arbitrators stated:-

“147. The attempt made by Counsel on behalf of Parakou to dispel the impression that it had not ratified the charterparty was painstaking and ingenious but flew in the face of what seemed to us to be a clear conclusion on an objective consideration of the evidence as a whole. We found it inherently implausible that sophisticated commercial parties such as these involved in the present case would have been prepared to leave such a valuable contract ‘up in the air’ merely because it was executory and did not require performance for a further nine months. In our view, Mr Yang and Mr Du are commercially astute and sensible businessmen. They must have been aware that on 18th June 2008 and 17th July 2008 Parakou received two documents confirming a 5 year charterparty between Parakou and Galsworthy. It defies credulity that in the face of these documents neither Mr Yang nor Mr Du thought it desirable or sensible to apprise Ms [Qian] Yu or Galsworthy, soon after receipt of either document, of what Parakou considered to be an important error in an important commercial document which purported to commit Parakou to an outlay over five years, of very large sums of money. It seemed to us that they must be taken by the end of the fixture negotiations in June to have been clear in their own minds as to whether there was a fixture or not.

148. Put that way, it seemed to us that the only conclusion could be that whilst Parakou might not have been clear as to precisely how Galsworthy fitted in to the Goldbeam group picture, it was clear that it had a binding charterparty with a Goldbeam counter-party. All its subsequent conduct was consistent with our conclusion that had it not been for the collapse in the market, there was little doubt that Parakou would have expected the vessel to be tendered for delivery into service under the charterparty in the name of one Goldbeam group company or another in March 2009.”

83.  On the question whether Parakou was entitled to rescind the charterparty on the basis of misrepresentation, the Arbitrators held that Ms Qian Yu’s ostensible authority was “simply to transmit accurately messages and information received from Mr Wu”.  There was “nothing in the evidence that constituted a representation on the part of Galsworthy to Parakou (or to the world at large) that Ms [Qian] Yu had any other or wider authority”.  This was especially the case since no one at Galsworthy or the Jinhui group had communicated with Parakou directly.

84.  Insofar as Ms [Qian] Yu made any representation beyond the scope of her authority, such would be “irrelevant since no representation by her as to the extent of her authority could amount to a relevant representation by Galsworthy”.

85.  Further, the Arbitrators stated:-

“159. Although we accepted that the relevant question (had we concluded that there was a misrepresentation for which Galsworthy were liable) was what Parakou would have done had no misrepresentation been made, we were by no means convinced that if the alleged misrepresentation had been made Parakou would have acted any differently in the particular circumstances prevailing at the time. The evidence as it emerged at the hearing seemed to us to lead to the conclusion that what mattered to Parakou was the view which it took of the ‘strength of the covenant’ of the party with whom it intended to contract, and not the fact that the potential counter-party was the registered owner of the vessel (and therefore had the vessel as security). The email Mr Du sent Mr Yang on 18th June 2008 puts this beyond doubt. In this email Mr Du inserted the words in brackets ‘GOLDBEAM OWN VSL’ after the reference to ‘GALSWORTHY LTD AS DISPONENT OWNERS’. Thus, when Parakou ratified the charterparty on 18th June 2008 it was fully aware that the charterparty was not the registered owner of the vessel. It would not be unreasonable to conclude that the day before, on 17th June 2008, Parakou would have entered into the charterparty on the terms that it did.”

III. DISCUSSION

86.  In this section, I consider the following:-

(1)  The law on collateral attack as an abuse of process

(2)  The Defendants’ case for a strike-out

(3)  Parakou’s main argument against strike-out

A. Law

87.  It may be an abuse of process for a plaintiff P to initiate proceedings in Court for the purposes of mounting a collateral attack upon an adverse final decision against P made by another Court or tribunal of competent jurisdiction in previous proceedings.  This is especially so where P has had a full opportunity of contesting the decision in the Court by which it was made.  Abuse arises because it would be “a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again”.  See Hunter v. Chief Constable of the West Midlands Police [1982] AC 529 (Lord Diplock at 541B and at 542C (citing from Lord Halsbury LC in Reichel v. Magrath (1889) 14 App Cas 665, 668)).

88.  Where there is abuse, the Court may refuse to allow the subsequent proceedings to continue in whole or part.

89.  There are two aspects to the Court’s jurisdiction to strike out collateral attacks as abuses of process.

90.  The first aspect arises where a claim or issue has previously been determined between the parties or their privies in a forum of competent jurisdiction. 

91.  So where P in subsequent proceedings attempts to re-litigate the same cause of action or the same fundamental issues which have previously been determined by another forum as a necessary step in reaching a judgment, the Court will prevent P from re-opening the cause of action or issues.  In this first aspect, the strict doctrine of res judicata comes into play.  P may not re-litigate the old cause of action (cause of action estoppel) or re-open the issues previously determined (issue estoppel). Indeed, P may not even be allowed to raise causes of action or issues in the later proceedings which P ought to have raised in previous litigation. 

92.  This first aspect applies whether or not the previous forum has rightly decided a case.  If P is to set aside any part of the original decision, he may do so by appealing against the same within the applicable time limits, not by bringing new proceedings.  The reason for the first aspect is the policy that a person should not be twice vexed for the same reason.  See China North Industries Investment Ltd. v. Shum and others Civ App No. 321 of 2006, 21 December 2007 (Stock JA at paras. 47 and 48); Arthur J S Hall & Co v. Simins [2002] 1 AC 615 (Lord Hoffmann at 701A).

93.  The second aspect applies where the doctrine of res judicata may not be strictly applicable. Hence, the second aspect is sometimes referred to as an extension to res judicata.

94.  This second aspect can apply in a wide variety of situations, even including those where the parties to the subsequent proceedings are not the same and cannot be described as privies of the original parties.  Because “the circumstances in which abuse of process can arise are very varied,” the Courts are reluctant “to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty ... to exercise this salutary power” to prevent an abuse (Lord Diplock in Hunter at 536D).  There is “no catch all formula for identifying an abuse”.  Instead, the resolution of the question whether or not a collateral attack constitutes an abuse will be “highly fact sensitive” and “peculiarly a matter or judicial application to the facts of each case”.  See China North (Stock JA at para. 53).

95.  The reason for the extended approach of the second aspect is the public interest that there should be an end to litigation and judicial resources should not be wasted trying the same issue all over again. This rationale of finality “can be used to justify the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the case within the spirit of the rules”. See China North (Stock JA at para. 55, citing Lord Hoffmann in Arthur Hall at 701A).

96.  Where a collateral challenge is alleged to be an abuse of process under the second aspect, the Court scrutinises the relevant facts carefully.  This is because it is a serious matter to strike out a claim and prevent a plaintiff from litigating a matter. It is not every collateral attack that will be held to be an abuse of process by the Court.  In particular, although one cannot be “overly nice or precise” about the matter, where the parties to later proceedings are not parties or their privies, a collateral attack will typically only be an abuse where the Court finds that there will be “manifest unfairness” or “the bringing of justice into disrepute” if a plaintiff is allowed to continue with subsequent proceedings.  See China North (Stock JA at paras. 58 and 59).

97.  Before leaving this sub-section, I should also explain what I understand by the expression “privy” mentioned above.

98.  In China North (at paras. 76-80), Stock JA remarked that defining “privity” in relation to the abuse of process jurisdiction meant embarking on “difficult territory”.  Much as the scope of the second aspect of the abuse of process jurisdiction is incapable of precise delimitation, it may be that “privity” is incapable of exact definition. Nevertheless, it would be helpful to have guidelines, by no means exhaustive, as to what “privity” encompasses.

99.  The starting point is a dictum of Lord Reid in Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No.2) [1967] 1 AC 853 (at 910) defining privity as involving a relationship of “blood, title or interest”. There may be little difficulty with the notions of “blood” or “title”.  But just what is meant by “privity of interest”?    

100.  In Gleeson v. J Wippell & Co Ltd. [1977] 1 WLR 510 (at 515) Megarry VC defined privity of interest as one where “there is a sufficient degree of identification between the two [persons said to be privies] to make it just to hold that the decision to which one was party should be binding in proceedings to which the other was party”.  It was not necessary for there to be privity of interest (the Vice-Chancellor noted) that “one must be the alter ego of the other”. 

101.  Megarry VC’s definition of privity of interest has been criticised as circular.  Circularity arises because the second aspect of the abuse or process jurisdiction requires the Court to determine whether an action should be barred in the interests of justice.  Where the jurisdiction depends on whether parties are privies in interest, determining whether there is the requisite privity would (on Megarry VC’s definition) mean determining whether justice demands (or does not demand) treating the parties as privies. The assessment of privity would consequently entail initially answering the question (that is, where the interests of justice lie) which the assessment of privity is supposed to help one only eventually to answer.

102.  Recognising this circularity, the Hong Kong Court of Appeal settled for the following as a pragmatic guide to the existence of privity of interest: “The required commonality is a direct interest in the subject matter of the litigation, a parallel or corresponding interest in that subject matter and not simply a financial interest in the result of the action”.  See China North (Stock JA at para. 81, citing Genesee Enterprises Ltd. v. Abou-Rached [2001] BCSC 59, 84 BCLR (3rd) 277, [2001] BCWLD 344. 

103.  The Court of Appeal’s dictum is obviously not intended to be a rigorous definition of “privity of interest”. I doubt that it is possible to come up with a comprehensive formula of “privity of interest” applicable in all cases.  But the Court of Appeal’s dictum provides a convenient working definition.  It is that sense of “privity of interest” which I follow here.

B. Defendants’ case

104.  Mr John Scott SC (appearing for the Defendants) submitted that the Hong Kong action plainly falls within the second aspect of the abuse of process jurisdiction. 

105.  Mr Scott argued that the Award was equivalent to the decision of a Court of competent jurisdiction. The Award (Mr Scott contended) had binding effect not just between Parakou and Galsworthy (the actual parties to the Award), but also between Parakou and the Defendants (as privies of Galsworthy in interest). 

106.  Mr Scott observed that, in order to succeed at trial, Parakou would have to persuade this Court to come to opposite findings from those reached by the Arbitrators.  To proceed with the trial of the Hong Kong action would therefore constitute a collateral attack on the Arbitrators’ findings on fundamental (as opposed to merely peripheral) disputes of fact and law.  There would be no finality to litigation. 

107.  Opposite findings by this Court would undermine the Arbitrator’s conclusions.  No one would know where they stood.  That would not (Mr Scott stressed) be conducive to the promotion of arbitration as a means of effective dispute resolution, especially in commercial matters.  It would bring the administration of justice into disrepute.  It would above all be unfair to the Jinhui faction which had effectively prevailed in the Arbitration.

108.  Mr Scott stressed that Parakou could not pick and chose which parts of the Award to accept and which to attack for the purposes of the Hong Kong action. 

109.  For instance, trial before this Court (Mr Scott noted) is based on the Arbitrators having held that there was a binding charterparty between Parakou and Galsworthy.  In the Hong Kong action, Parakou’s case is that Parakou only entered into a binding charterparty in reliance on misrepresentations by one or more of the Defendants communicated through Ms Qian Yu. 

110.  Assume the Court proceeds on the basis of the Arbitrator’s finding of a binding charterparty.  At the very least (Mr Scott submitted) the Court cannot then ignore the reason why the Arbitrators so concluded, namely, the Arbitrators’ finding that Parakou had ratified the charterparty. 

111.  But if one accepts that there has been ratification as found by the Arbitrators, then (as the Arbitrators themselves point out) the question of misrepresentation by the Defendants becomes moot.  Whatever misrepresentations there might have been (Mr Scott reasoned) would not have been causative of the entry into the charterparty.  This is because, as found by the Arbitrators, Parakou ratified the charterparty knowing full well that the agreement was with Galsworthy as disponent owner.   

112.  Therefore, to succeed at trial, Parakou must establish, not only that there were misrepresentations by the Defendants, but also that Parakou has not ratified the charterparty.  That means that Parakou must undermine the premise upon which its whole case in the Hong Kong action depends, namely, that it entered into a charterparty with Galsworthy.

113.  Parakou’s case (Mr Scott concluded) is well-nigh impossible.  It is at the end of the day an attempt to re-litigate what has been decided against in the Arbitration by obtaining from the Court a fundamentally different conclusion.

114.  Echoing China North, Mr Scott observed that the rights or wrongs of the Award are not a matter of concern to this Court. To the extent that Parakou is unhappy with any of the Arbitrators’ conclusions, it is open to Parakou to appeal to the English Court against the same.  It is true that the avenues of appeal in England against an arbitration award are few and narrow.  But that is merely a function of Parakou’s having agreed with Galsworthy to use arbitration as a means of dispute resolution.  That is not a reason for refusing to strike out Parakou’s action as an abuse of process.

115.  In my judgment, Parakou has no answer to Mr Scott’s submissions just summarised.  Let me make some supplemental observations.

116.  First, applying the definition of “privity of interest” mentioned above, the Defendants must be regarded as Galsworthy’s privies. 

117.  In particular, JSTL is the 100% owner of GSI, JMI, GIL and Galsworthy.  All the latter companies (JSTL, GSI, JMI, GIL and Galsworthy) may be regarded as alter egos of each other.

118.  Further, the latter companies shared a direct interest in the outcome of the Arbitration, if only in the sense that it must have been in the interest of the shipping side of the Jinhui group (headed by JSTL) to establish the existence of a charterparty between Parakou and Galsworthy. 

119.  On Parakou’s case, GIL at all material times was acting as agent for one or more of itself, JSTL, GSI and JMI.  The Arbitrators found (contrary to Parakou’s case) that GIL was acting as agent of Galsworthy. There is then the added consideration that an agent would have a direct interest in the outcome of litigation to the extent that the litigation is supposed to establish whether an agent has (or has not) successfully concluded a contract with a particular principal.

120.  Second, Mr Charles Sussex SC (appearing for Parakou) suggested that, although there are “overlapping issues,” Parakou’s claim in the Hong Kong action is “very different”.  In particular, Mr Sussex submitted that:-

(1)  the issue of whether Mr Wu was acting on behalf of the any of the Defendants was not raised in the Arbitration;

(2)  the issue whether Ms Qian Yu was representing the Defendants, (as opposed to just Galsworthy and Parakou), was not considered;

(3)  the pleaded misrepresentations in the Hong Kong action are different from those which featured in the Arbitration; and,

(4)  there are reasons to doubt whether the Arbitrators correctly held in fact and law that Parakou had ratified the charterparty.

121.  But on this I agree with Mr Scott that there is substantial overlap (indeed, near identity) between the fundamental issues in the Hong Kong action and the Arbitration.  In practical terms, the key issues in both litigations are the same. 

122.  The Arbitrators concluded that Mr Wu and Ms Qian Yu were ultimately acting for Galsworthy in relation to the fixture of the Vessel.  In light of that, I do not believe that it can reasonably be maintained that Mr Wu and Ms Qian Yu were also acting for other Defendants and somehow fixed the vessel for one or other of the Defendants instead of Galsworthy.

123.  Nor do I accept that the pleaded misrepresentations here differ in substance from those alleged in the Arbitration.  The Arbitrators were essentially concerned with whether there had been a misrepresentation that Parakou would only be chartering the Vessel from its registered (as opposed to disponent) owner.  The Arbitrators held that Mr Wu (acting for Galsworthy) had never authorised Ms Qian Yu to say that Galsworthy was the registered owner of the Vessel.  Further, no one in Galsworthy or any entity within the Jinhui group (the Arbitrators held) had ever represented to Parakou that Ms Qian Yu could say more than what she had been instructed by Mr Wu to communicate to potential charterers of the Vessel.  In short, the Arbitrators found against there having been any misrepresentation that the Vessel would be chartered out by its registered owner. 

124.  As for the Arbitrators’ finding on ratification, I think (as Mr Scott submitted) that Parakou’s criticisms of the same could not justify a collateral attack on the Award.  Mr Sussex accepts that, given ratification, it is “clearly unarguable that [Parakou] was induced by a representation.”  Insofar as Parakou alleges that the Arbitrators went wrong on ratification, the proper forum to explore such contention must be on appeal to the English High Court.

125.  Third, given the substantial overlap of issues between the Arbitration and the Hong Kong action and given privity of interest among the parties, the present situation is close to the first aspect of the abuse of process jurisdiction.  It may not be res judicata in a strict sense, because the parties to the Hong Kong Action are literally not the same as those in the Award.  But I do not think that the Court can ignore the near analogy with the first aspect.  Consequently, in deciding whether or not to strike out, the Court should consider the unfairness and injustice that would result if the Jinhui group were troubled by twice by litigation covering essentially the same issues. 

126.  Fourth, Mr Scott’s submission on Parakou’s difficulty with the Arbitrators’ finding on ratification only highlights that the Hong Kong action, if allowed to proceed, would effectively be an attempt to obtain a different outcome from that reached by the Arbitrators and indeed a different position from that upon which the Hong Kong action is founded (namely, the existence as a result of ratification by Parakou of a binding charterparty with Galsworthy). Further litigation would only be conducive to more uncertainty rather than to a final resolution of the dispute between Parakou and Jinhui group. This will not be good for the proper administration of justice.

C. Parakou’s main argument

127.  I have so far dealt with the Defendants’ case and minor arguments against that position raised by Parakou.  I need, however, to deal with Parakou’s principal argument against strike out.  That argument was only fully articulated on the first day of what would have been the trial of the Hong Kong action.  That argument relied heavily on the judgment of the English Court of Appeal (Mance, Longmore and Jacob LJJ) in Sun Life Assurance Company of Canada and others v. Lincoln National Life Insurance Co. [2005] 1 Lloyds Law Rep 606.  Mr Sussex informed the Court that he had only come upon Sun Life the night before the hearing.

128.  In this sub-section, I will first summarise Mr Sussex’ argument.  I will then examine Sun Life and explain why I do not think it assists Parakou.

C.1 Summary of Parakou’s main argument

129.  Mr Sussex submitted that the Arbitration could not be binding otherwise than as between Parakou and Galsworthy who were the immediate parties to it.  On that premise, it could not be an abuse, as against the Defendants, for Parakou by the Hong Kong Action to litigate some (if not all) of the issues which featured in the Arbitration. 

130.  On issues which overlapped with those considered in the Arbitration, the Hong Kong Action may conceivably result in different findings.  But that was not a reason for striking out the Hong Kong action. 

131.  There is nothing unusual about different forums coming to different (possibly opposite) conclusions.  For example, an arbitration between A and B might end up with an opposite conclusion on an identical overlapping issue considered in an arbitration between B and C.  Such divergence would simply be a feature or risk inherent in arbitration as a dispute resolution mechanism.

132.  That is because arbitration is a private consensual matter.  It is different from ordinary litigation. 

133.  For example, in England, under the Contract (Rights of Third Parties) Act 1999, a third party who is a beneficiary of a contract between A and B may be allowed to intervene (and be treated as) a party in an arbitration between A and B.  But that situation apart (and no one suggests that the 1999 Act applies here), it is not normally possible for a stranger to an agreement to intervene in (or be joined to) an arbitration between A and B so as to be bound by (or to bind A and B to) findings by the arbitration tribunal in the stranger’s favour.  Further, in England (as opposed to Hong Kong) where the Arbitration took place, there is no mechanism by which arbitrations may be consolidated with other arbitrations or proceedings.  A stranger must bring independent proceedings against A or B as appropriate and take the risk that the chosen tribunal will come to a different conclusion from that obtained in the arbitration between A and B.       

134.  Given the contractual nature of arbitration, Mr Sussex submited that it would be wrong for the Court to extend the second aspect of the abuse of process jurisdiction to enable a stranger to strike out a collateral attack against an award in an arbitration between A and B. 

135.  There may be situations where, under the first aspect of the abuse of process jurisdiction, the Court strikes out proceedings between A and B which seek to re-open issues decided in a previous arbitration between A and B.  See, for example, Fidelitas Shipping Co. Ltd. v. V/O Exportschleb [1966] 1 QB 630 (CA).  Such would be a straightforward application of the doctrine of issue estoppel.  But (Mr Sussex noted) there has been no case where the Court has applied the second aspect of the abuse of process jurisdiction to strike out litigation seeking to overturn in whole or in part an arbitration involving different sets of parties.

136.  In Hunter, Lord Diplock referred to the second aspect of the abuse of process jurisdiction as applying where there has been an initial decision by a “Court of competent jurisdiction”.  Given the private nature of arbitration, save where the same parties and issues are involved, it cannot be said that an arbitration tribunal can be treated as a Court or even tribunal of competent jurisdiction.  Arbitration only binds the parties to an arbitration agreement. 

137.  In this particular case, Parakou could not have joined the Defendants to the Arbitration. This was because none of the Defendants were parties to the putative charterparty (including the arbitration agreement therein) between Galsoworthy and Parakou. The only way to sue the Defendants was through a separate action. In the Hong Kong action then, Parakou has from the outset made no secret of the fact that its claim is premised on an adverse award in the Arbitration. 

138.  Consequently, there is no manifest unfairness in proceeding with the Hong Kong action.  Nor would the administration of justice be brought into disrepute by refusal of a strike out.  

C.2 Sun Life

139.  In support of his argument, Mr Sussex cited Sun Life.

140.  In that case, Sun commenced an arbitration against Cigna.  Sun claimed that Cigna had reinsured Sun under an occupational accident policy.  Sun lost the arbitration, the arbitrators declaring that Cigna had validly avoided the Cigna policy for misrepresentation and non-disclosure.

141.  Lincoln commenced a separate arbitration against Sun.  In that arbitration, Sun counterclaimed that the policy which Sun had taken out with Cigna did not cover Sun’s exposure to Unicover.  In consequence, Sun sought to recover its liability to Unicover from Lincoln pursuant to a net retained loss clause in a reinsurance policy which Sun had taken out with Lincoln.

142.  Lincoln pointed out that the arbitrators in the Sun/Cigna arbitration had held that, but for the avoidance of the Cigna policy, Sun’s exposure to Unicover would have been covered by the Cigna policy. Lincoln submitted that such finding was binding on Sun and could be relied on by Lincoln in its arbitration to negate Sun’s counterclaim.

143.  The arbitrators in the Lincoln arbitration held that, although “bound by the decision of the Cigna tribunal,” the latter had not focussed on the same issues as those in the Lincoln arbitration.  The Lincoln tribunal held that it was necessary to reach its own conclusion on whether, but for Cigna’s avoidance, the Cigna policy would have covered Sun’s exposure to Unicover.  The Lincoln tribunal then found in Sun’s favour that the Cigna policy did not cover Sun’s exposure to Unicover.  This meant that Lincoln was liable to Sun under the net retained loss clause in the Lincoln policy.

144.  Lincoln appealed to Toulson J.  He held that the Cigna tribunal had come to “an unambiguous decision” as to the scope of the Cigna policy.  Therefore, Lincoln could rely on that decision of the Cigna tribunal as against Sun in the Lincoln arbitration, even though (if the Cigna tribunal had come to an opposite conclusion on whether the Cigna policy covered exposure to Unicover) Sun could “not necessarily” have relied on the Cigna tribunal’s finding against Lincoln.

145.  Sun appealed to the Court of Appeal.

146.  In his judgment (with which the other judges agreed), Mance LJ identified four issues.  Of those, two are relevant here. Those two are:-

(1)  Whether the Cigna tribunal’s decision on the coverage of the Cigna policy created an issue estoppel or was the Cigna tribunal’s decision simply an obiter dictum which was collateral (rather than fundamental) to its award?

(2)  Whether Sun was bound by the Cigna tribunals’ decision on the scope of the Cigna policy in relation to Unicover?

147.  On Issue (1), Mance LJ concluded that the Cigna tribunal’s decision on the scope of the Cigna policy was merely an obiter dictum.  The Cigna tribunal had itself stated that, given its decision that the Cigna policy had been validly avoided for misrepresentation, it was unnecessary to consider the scope of the policy. Accordingly, the tribunal’s decision on the scope of the Cigna policy could not found an issue estoppel. Issue estoppel requires a finding to be fundamental or necessary to the resolution of a dispute, if the finding is to prevent a person from re-opening the finding in another forum.

148.  On Issue (2), it followed from Mance LJ’s conclusion on Issue (1) that there was no issue estoppel which was binding on Sun in the Lincoln arbitration, in relation to the scope of the Cigna policy.

149.  Sun’s appeal succeeded.

150.  One may wonder how Lincoln became aware of the contents of the Cigna tribunal’s award.  Awards are confidential to the parties in an arbitration.  But it appears (according to Mance LJ at para. 1) that Cigna consented to the Cigna tribunal’s award being made available to Lincoln.

C.3 Sun Life examined

151.  I am not persuaded by Mr Sussex’ submissions.  In my view, Sun Life does not assist Parakou.

152.  First, Sun Life is not an abuse of process case.  Counsel for Lincoln (Mance LJ noted at para. 63) “did not ... make any submission to the effect that the Lincoln tribunal ... had ... any similar jurisdiction to refuse to entertain any case by Sun/Phoenix contrary to the Cigna award on grounds of abuse of process”.

153.  Second, contrary to Mr Sussex’ submission, I do not read Sun Life as excluding resort to the abuse of process jurisdiction where, as here, arbitration is somehow involved. 

154.  There is no blanket rule. It all depends on the facts of a given case, more particularly on whether the Court detects manifest unfairness or the potential to bring the administration of justice into disrepute by a second set of proceedings. 

155.  That Sun Life did not mean to preclude the application of the abuse of process jurisdiction where (say) a Court is faced with an attempt to re-litigate issues decided in an arbitration is evident from at least two dicta.

156.  Mance LJ stated (at para. 63):-

“In the present case, Lincoln, the stranger, is seeking to rely on the Cigna award as against a party to it. Such attraction as there is in [Lincoln’s] suggested principle derives from this distinction. The Judge was clearly influenced by the feeling that Sun-Phoenix had had a full opportunity to argue the issue and lost, and that justice is not generally served by permitting re-litigation of previously decided issues. Such considerations underlie conventional principles of res judicata and issue estoppel. Even where those conventional principles do not apply, such considerations may have direct force in court, in the context of arguments based on abuse of process....”

157.  More explicitly, Jacob LJ stated (at para. 88):-

“Where a party seeks to re-litigate in subsequent proceedings against Y a point he fought fully in earlier proceedings against X, it may be that, notwithstanding a lack of mutuality, he can be prevented from doing so on the grounds of abuse of process. As to that I express no concluded opinion for, for the reasons given by Lord Justice Mance, there is no question of abuse of process here.”

158.  There may or may not to date be a reported case on the abuse of process jurisdiction (in particular, the second aspect thereof) in a situation involving arbitration.  But the absence of a reported case is a slender basis for an inference or argument that the abuse of process jurisdiction will never apply where at least one of the proceedings involves an arbitration. 

159.  Fidelitas shows that arbitration tribunals may be regarded as tribunals of competent jurisdiction as far as the first aspect of the abuse of process jurisdiction is concerned.  In light of this, I see no basis for categorically ruling out a priori the possibility that the decision of an arbitration tribunal may give rise to the second aspect of the abuse of process jurisdiction such that a Court should intervene to prevent a later collateral attack on that arbitration tribunal’s decision.  In appropriate situations, there must be the possibility of invoking the second aspect of the abuse of process jurisdiction, especially when (as here) a prior arbitration award may be converted into a Court judgment and enforced as such.

160.  The second aspect of the abuse of process jurisdiction eschews any all-encompassing formula as to its applicability.  It instead examines each situation on a case-by-case basis to see whether there is some affront to justice in allowing a party to continue with some subsequent proceeding. I shall return to this theme below in the context of Mance LJ’s Consideration (3).

161.  Third, although Lincoln was not suggesting abuse of process, Mance LJ nevertheless went on to consider whether abuse of process could be argued by examining the specific circumstances of the particular case.  He took the view (at paras. 63, 66, 67, and 68) that on the facts three considerations militated against concluding that there would be an abuse of process if Sun were allowed to argue the scope of the Cigna policy in the Lincoln arbitration. 

162.  None of Mance LJ’s three specific considerations apply to the Hong Kong action.

163.  Consideration (1) was that Mance LJ did “not think that it was obviously just ... to allow a stranger to enjoy a one-sided entitlement to hold a party to the award ... to its terms, with a concomitant right to challenge its correctness whenever it appeared favourable to do so”.

164.  The asymmetry or want of mutuality identified by Mance LJ is not pertinent here. 

165.  The Award was essentially in the Jinhui group’s favour.  Not surprisingly, the group seeks to uphold the same. 

166.  But consider what would happen if the Award had gone against Galsworthy.  The Jinhui group would in practical terms be bound by that decision even though not parties to the Arbitration.  It is inconceivable that any of the Defendants of Galsworthy could subsequently commence litigation claiming that, despite an adverse decision of the Arbitrators, there nonetheless existed a binding charterparty between Galsworthy and Parakou.

167.  In contrast, as Mr Scott suggested, injustice would arise here if Parakou were allowed to pick and choose only a limited part of the Award (namely, the finding that there was a binding charterparty with Galsworthy), ignore a key part (namely, that Parakou had ratified the charterparty), and seek an indemnity from the Defendants on the basis only of those parts of the Award which suit its case in the Hong Kong action.

168.  Consideration (2) was that “there is a strong element of fortuity about the one-sided benefit for which [Lincoln] contends”. Mance LJ asked rhetorically why Lincoln should obtain a benefit from an award to which it was not a party.  This consideration is not relevant here, where I have found there to be privity of interest between the Defendants and Galsworthy.  It is not “fortuitous” for the Defendants as privies to rely on the Award.

169.  Consideration (3) concerns the differences between arbitration and ordinary court litigation.  Mance LJ stated (at para. 68):-

“[M]ore fundamentally, the solution for which [Lincoln] contends appears to me to overlook or obscure important differences between arbitration and litigation. In the context of litigation, problems of potentially conflicting judgments arrived at between different parties to the same overall complex of disputes are met by provisions for joinder of parties or proceedings or for trial together, if necessary on a mandatory basis using the courts’ compulsive powers. Even in circumstances in which there has been no such joinder, and where neither res judicata nor issue estoppel has any application, the court may intervene to prevent abuse of its process... All this is facilitated by the public nature of litigation, the public interest in the efficient administration of justice and the courts’ coercive powers.... Arbitration is in contrast a consensual, private affair between the particular parties to a particular arbitration agreement. The resulting inability to enforce the solutions of joinder of parties or proceedings in arbitration, or to try connected arbitrations together other than by consent, is well-recognised -- though the popularity of arbitration may indicate that this inability is not often inconvenient or that perceived advantages of arbitration, including confidentiality and privacy[,] are seen as outweighing any inconvenience. Different arbitrations on closely inter-linked issues may as a result lead to different results, even where, as in the present case, the evidence before on tribunal is very largely the same as that before the other. The arbitrators in each arbitration are appointed to decide the disputes in that arbitration between the particular parties to that arbitration. The privacy and confidentiality attaching to arbitration underline this; and, even if they do not lead to non-parties remaining ignorant of an earlier arbitration award, they are calculated to lead to difficulties in obtaining access, and about the scope of any access, to material relating to the award.”

170.  Mr Sussex’s argument echoes Consideration (3).  But in the passage cited, Mance LJ is clearly referring to the peculiar situation before the Court in Sun Life.  Lincoln was seeking to bind Sun in one private arbitration to the result of another private arbitration to which Lincoln was not even a party.  Lincoln’s argument can only be described as ambitious. It was attempting to rely on a confidential determination reached through a contractual process to which Lincoln was a stranger.

171.  I do not read Mance LJ as having in mind (or extending his remarks to) the situation here, where in effect Parakou is seeking by litigation in Court to re-open matters decided in an Arbitration to which the Defendants were privies.  In contrast to Lincoln’s argument in Sun Life, the Defendants here advance a more modest application.  This is not a case of two arbitrations.  We are here closer to the Fidelitas situation than to that in Sun Life. 

172.  In the present circumstances, regardless of the availability of joinder or consolidation in arbitration proceedings, the Court must undoubtedly have jurisdiction in the interests of justice to prevent its own process from being abused. 

173.  Where arbitration is concerned, of course the Court must exercise caution given the differences between arbitration and ordinary litigation identified by Mance LJ.  But caution does not mean that the Court should not strike out in an appropriate situation.  In light of the similarity of issues and of the alter ego relationship between the Defendants and Galsworthy, it seems to me that the proper and efficient administration of justice imposed a duty (Lord Diplock’s expression) to refuse to allow the Hong Kong action to proceed.

174.  I note incidentally that there was no difficulty here about the Award becoming available to the Defendants.  Precisely because they were Galsworthy’s privies, the Defendants were aware of every thrust and counter-thrust in the Arbitration and knew of the Award almost as soon as it was published. 

175.  Fourth, Sun Life was squarely argued by Lincoln on the basis of an issue estoppel.  But there were at least two difficulties with Lincoln’s case on issue estoppel. 

176.  The first difficulty was that the parties to the two arbitrations were not identical.  Nor could the parties to the Lincoln arbitration conceivably be described as privies to the parties to the Cigna arbitration.  Lincoln had no apparent connection with Cigna.  Further, because of the net retained clause in the Lincoln policy, far from being common, the interests of Lincoln and Cigna were diametrically opposed.  To the extent that Cigna had reinsured Sun in relation to Unicover, Lincoln’s liability to Sun would be diminished or extinguished and vice versa.

177.  The second difficulty was, as the Court of Appeal found, an essential ingredient of issue estoppel (or (for that matter) the second aspect of the abuse of process jurisdiction) was missing.  The previous finding of the Cigna tribunal on the scope of the Cigna policy was not essential to that tribunal’s decision.  That finding reflected no more than an interesting opinion hazarded by the Cigna tribunal in deference to the argument which had been advanced before it.

178.  Neither difficulty is present in relation to the Hong Kong action.  Here I have held that the Defendants are privies of Galsworthy.  I have also held that the issues for determination at trial are substantially those which were fundamental to the Arbitration and upon which the Arbitrators made findings.

179.  Fifth, Mance LJ cited the following dictum of Goddard LJ in Hollington v. Hewthorn [1943] KB 587:-

“A judgment, however, is conclusive as against all persons of the existence of a state of things which it actually affects when that state of things is a fact in issue. Thus, if A sues B, alleging that owing to B’s negligence he has been held liable to pay £x to C, the judgment obtained by C is conclusive as to the amount of damages that A has had to pay C, but it is not evidence that B was negligent ... and B can show, if he can, that the amount recovered was not the true measure of damage.”

180.  In reply to Mr Scott’s submissions on ratification summarised above, Mr Sussex submitted that, following the Award, Parakou could bring the present proceedings on the bare premise that there was a binding charterparty between Parakou and Galsworthy.  Mr Sussex relied on the citation from Goddard LJ in support of this submission. 

181.  If I understood Mr Sussex correctly, that meant that the Court could ignore the finding in the Award that the binding charterparty came into effect as a result of ratification by Parakou.  The Defendants (Mr Sussex argued) could not rely on the Arbitrator’s finding of ratification as such holding would not form part of “the existence of a state of things” conclusive as against all persons.

182.  I am unable to agree.  It appears to me that the finding of ratification constituted a conclusion as to “the existence of a state of things”.  As a practical matter, that finding cannot be divorced from the finding that a binding charterparty came into existence between Parakou and Galsworthy.  That is because on the Arbitrators’s reasoning, but for ratification, there would have been no consensus ad idem between Galsworthy and Parakou. 

183.  Accordingly, I do not think that the Court can ignore the finding of ratification.  That would be artificial.  But, if the Court cannot ignore the fact of Parakou’s ratification as part of “the state of things” binding “as against all persons”, there would be no purpose in embarking upon a trial alleging misrepresentations by one or more of the Defendants.  On any view, in light of “the state of things” binding on all, the alleged misrepresentations (even if they had been made) could not have been operative.  Thus, following the Award, the Hong Kong action must be treated as having as a primary objective the subverting of the Arbitrators’ conclusive finding on ratification.  On Goddard LJ’s dictum, such a course of proceeding is not open to Parakou.

D. Conclusion on Parakou’s main argument

184.  Closely read, I do not think that Sun Life supports Parakou’s case.  The abuse of process jurisdiction may be invoked in appropriate cases even where arbitration in involved.  

185.  In the context of the Hong Kong action, the second aspect of the abuse of process jurisdiction was available to prevent Parakou from re-litigating fundamental findings in the Arbitration which were binding on Parakou, Galsworthy and (as Galsworthy’s privies in interest) the Defendants.  Following the release of the Award, the Court came under a duty upon the Defendants’ application to refuse to allow the Hong Kong Action to proceed and, by such refusal, to prevent manifest unfairness to the Defendants and the bringing of disrepute to the administration of justice.

IV. CONCLUSION

186.  For the above reasons, Parakou’s claim was struck out and the Hong Kong action was dismissed.

187.  There will be the following Order Nisi:-

(1)  The Third Party proceedings between the Defendants and Clarkson will be dismissed in consequence of the dismissal of Parakou’s claim.

(2)  The Defendants’ costs of the Hong Kong action, including the costs of the Defendants’ strike out application, will be paid by Parakou to the Defendants, such costs to be taxed if not agreed.

(3)  Clarkson’s costs of the Third Party proceedings will be paid by the Defendants to Clarkson, such costs to be taxed if not agreed.

(4)  Clarkson’s costs as paid by the Defendants pursuant to sub-para. (3) shall form part of the Defendants’ costs recoverable under sub-para (2).

(5)  Subject to sub-para. (6), the amount of US$44,412,905 (and any interest accrued thereon) paid by the Defendants into Court as security for Parakou’s claim shall be paid out to the Defendants.

(6)  The payment out of the security (and any interest accrued thereon) shall be stayed for 28 days from the date of this Judgment or for such other period as the Court may later order.

(7)  There will be liberty to apply.

188.  The stay of 28 days on the payment out of the security is intended to give Parakou time to decide whether to appeal against this Judgment and to take such steps as it may deem necessary to preserve the security pending the hearing of any appeal.