QCR Spring 2019: Conflict of laws – Forum non conveniens –Plaintiff bringing proceedings against defendant in Shanghai Maritime Court and also in Hong Kong – Should Hong Kong proceedings be stayed in favour of Shanghai Maritime Court?

QCR Spring 2019: Conflict of laws – Forum non conveniens –Plaintiff bringing proceedings against defendant in Shanghai Maritime Court and also in Hong Kong – Should Hong Kong proceedings be stayed in favour of Shanghai Maritime Court?

Bright Shipping Ltd v The Changhong Group (HK) Ltd (The “CF Crystal” and The “Sanchi”) – High Ct of Hong Kong SAR (CFI) (Anthony Chan J) [2018] HKCFI 2474 – 15 November 2018

Facts

On 6 January 2018, a collision occurred in the East China Sea between the plaintiff’s tanker, Sanchi, and the defendant’s cargo vessel, CF Crystal. This took place on the high seas but within the Exclusive Economic Zone (EEZ) of China.

The Sanchi exploded immediately upon collision and then sank. None of her officers or crew survived. Pollution resulted from the collision of which some made landfall in China and Japan.

The Crystal flew the Hong Kong flag and her port of registry was Hong Kong. Her crew were all Chinese nationals and she was managed by Changfeng Shipping Holding Ltd, a company incorporated in Hong Kong.

The Sanchi flew the Panamanian flag and her crew were Iranian and Bangladeshi. She was managed by an Iranian company, National Iranian Tanker Co (NITC) which had a representative office in Shanghai.

A number of legal actions were commenced in the aftermath of the collision.

On 9 January 2018, the defendant, Changhong, commenced inter-ship actions in the Shanghai Maritime Court (SMC) against parties including Bright Shipping, a company incorporated in Belize and owner of the Sanchi (the plaintiff). On the same day, the plaintiff commenced an in personam action against the defendant before the Hong Kong High Court for collision liability and quantum. The defendant applied for a stay of the Hong Kong proceedings on the ground of forum non conveniens.

Judgment

The Hong Kong High Court stated that the jurisdiction of the court had been invoked by the plaintiff as of right by serving on the defendant at its registered address in Hong Kong.

Given that the collision took place in international waters, there was no natural forum for the claim. The burden was on the defendant  to show that the SMC was “clearly or distinctly” more appropriate than the Hong Kong courts for the trial of the action (as per the test laid out in The Spiliada [1987] 1 Lloyd’s Rep 1).

It was important to evaluate whether Shanghai had the most real and substantial connection with the inter-ship action. This required the court to focus on;

a) the inter-ship apportionment of liability for the collision; and

b) assessment of the parties’ respective quantum of loss.

The liability issue could not seriously be doubted as the Voyage Data Recorder (VDR) data was available from the Sanchi.

As for the assessment of damages, the judge considered that whilst it was more convenient for the defendant to have the inter-ship action tried in the mainland, it did not follow that Shanghai was “clearly and distinctly” more appropriate than Hong Kong. The Hong Kong court was well-placed and experienced in dealing with cases involving mainland witnesses, documents in Chinese and mainland law. Today, the presence of witnesses was rarely an obstacle as evidence might be given via video link.

The judge further stated that multiplicity of proceedings was not of itself a material factor for a consideration of forum non conveniens and that it was not unusual for there to be parallel proceedings in collision cases. The possibility of inconsistent findings did not make Shanghai the appropriate forum, nor would this constitute unusual hardship to the defendant in the context of a collision in international waters.

Additionally, the SMC inter-ship proceedings had not been served on the plaintiff. Furthermore, the defendant was being sued in its place of incorporation and as such, any suggestion of unusual hardship for the defendant would be rejected.

In conclusion, the court held that the defendant had failed to discharge its burden for the Spiliada first-stage analysis, and its application for a stay of the Hong Kong proceedings on the ground of forum non conveniens had to fail. 

Comments:

What underpinned the jurisdictional dispute in this case was the very different tonnage limitation in the mainland China and in Hong Kong. The relevant monetary limit applied in Hong Kong was roughly 3.6 times that in the mainland.

This decision reaffirms the two-stage test from The Spiliada which first requires the defendant to establish that another forum which is clearly more appropriate, exists and second requires that justice must be satisfied. The judge reasoned that Bright Shipping would not gain justice in the SMC.

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