Conflict of laws - Defendant applying for stay of Hong Kong proceedings on grounds of forum non conveniens and lis alibi pendens - Should Hong Kong proceedings be stayed in favour of Shanghai Maritime Court?

(last updated 22nd December 2020)

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

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. 

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

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

On 9 January 2018, the Defendant applied to set up two limitation funds in the Shanghai Maritime Court (“SMC”) for, respectively, personal injury and property claims.  On the same day, the Plaintiff commenced an in personam collision action against the Defendant in the Hong Kong High Court for a decision on the extent of each vessel’s blame for the collision, and the quantum of any damages to be awarded. 

Parties interested in cargo on the Sanchi also commenced an action against the Defendant in the Hong Kong court.  Other actions commenced in the SMC were a claim by the Defendant against NITC in respect of the collision, a claim by the insurers of cargo onboard the Crystal against the Defendant, the Plaintiff and NITC, and cargo, emergency response and pollution related claims against the Defendant and the Plaintiff.

The Defendant applied for a stay of the Hong Kong proceedings on the ground of forum non conveniens.

Two points to note are: 

1. The tonnage limitation in Hong Kong was roughly 3.6 times of that in the PRC
2. The SMC inter-ship proceedings had not been served on the Plaintiff and the Plaintiff did not submit to the jurisdiction of the SMC in any of the above proceedings.

The Defendant’s case

(i) That the overwhelming “centre of gravity” of the case was in Shanghai, that the SMC was an available and experienced specialist court which was dealing with pollution and civil claims arising from the collision and would apply various legislations based on international conventions, and it would not be reasonably open to the HK court to hold that substantial justice could not be obtained in the SMC; and
(ii) that the SMC had accepted jurisdiction over the collision when it presided over a jurisdiction challenge by the NITC, and so the questions of inter-ship liability and assessment of the Defendant’s loss were going to be tried in its proceedings against the Plaintiff in the SMC in any event (lis alibi pendens). 

The Plaintiff’s case

(i) The collision took place on the high seas and there was no natural forum to determine such a collision. 
(ii) The Defendant’s claim did not get pass the stage 1 requirement for the Defendant to establish that the SMC was “clearly and distinctly” more appropriate than the HK court to determine the inter-ship disputes (The Spiliada [1987], see below).
(iii) The significant difference in the tonnage limitation in Hong Kong and the Mainland was a decisive juridical advantage in favour of refusing a stay.  

Judgement

The Hong Kong High Court rejected the application to stay the Hong Kong proceedings on the ground of forum non conveniens.  In doing so, the Court, applied the two-stage test for discretion in forum non conveniens cases set down in the House of Lord’s decision in The Spiliada [1987] AC. This test was approved and adopted by the Hong Kong Court of Final Appeal in SPH v SA (2014). 

The Court set out the test as follows;  

1. The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action i.e. in which the action may be tried more suitably for the interests of all the parties and the ends of justice?
2. In order to answer this question, the applicant for the stay has to establish that first, Hong Kong is not the natural or appropriate forum (‘appropriate’ in this context means the forum has the most real and substantial connection with the action) and second, there is another available forum which is clearly and distinctly more appropriate than Hong Kong. Failure by the applicant to establish these two matters at this stage is fatal.
3. If the applicant is able to establish both of these two matters, then the plaintiff in the Hong Kong proceedings has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.
4. If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer. Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.”

The Court, after weighing up all the factors for and against the competing jurisdictions, concluded that the Defendant had failed to discharge its burden for the Spiliada first-stage analysis; 

• As the collision took place in international waters, there was no natural forum for the claim. The burden was therefore 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. The jurisdiction of the Hong Kong court had been invoked by the Plaintiff as of right by serving on the Defendant at its registered address in Hong Kong.
• Whilst it may be 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.
• Multiplicity of proceedings was not of itself a material factor for a consideration of forum non conveniens. 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.
• The lower tonnage limitation in the Shanghai Maritime Court, as compared with Hong Kong, was an important juridical disadvantage for the Plaintiff.
• Another important juridical point was that the time limit for bringing a claim in the PRC had already expired. 

The Judge concluded that substantial justice would not be done for the Plaintiff in Shanghai. 

Comments

The difference in the limitation arises because the Hong Kong limits have been increased twice since adopting the 1976 LLMC following the increase of limits by the IMO, via the 1996 Protocol to that Convention and an amendment thereto, whereas the limits in the PRC Maritime Code have remained unchanged at a level equivalent to the 1976 figures. 

Leave to appeal the High Court’s decision has been filed. We will monitor the position and update Members accordingly.