Wisdom Newsletter (Issue 25)

Shipping

Sea Powerful II Special Maritime Enterprises (ENE) v Bank of China Ltd [2016] 3 HKLRD 352, CACV 36/2016.

Facts

P was the owner of a vessel (“Vessel”) and D was the lawful holder of the bill of lading (“B/L”). The B/L incorporated the terms and conditions of a charterparty, which in turn contained an arbitration clause imposing a limitation period (1 year) for the institution of arbitration.

When the contractual time bar was about to expire in 4 months, D commenced proceedings in Mainland for wrongful discharge of cargo. However, due to P’s evasion of service, P only entered into an appearance 8 months after commencement of the mainland proceedings. By that time, the contractual time bar had expired. P then applied to the mainland court to challenge its jurisdiction based on the arbitration clause, but failed in both the first instance and appeal.

P applied for an anti-suit injunction in Hong Kong to restrain D from continuing in the Mainland Proceedings. P lost in the first instance and appealed, arguing that the Judge erred in ruling delay and comity considerations were sufficient free- standing justifications for refusing anti-suit relief.

Judgment

The CA dismissed the appeal.

In relation to the issue of delay, the CA cited the UK Court of Appeal case Essar, Ecobank and Ecobank and ruled that an applicant should act promptly and claim injunctive relief at an early stage. Here, P did not challenge the Judge’s finding that P was evading service in mainland in order to wait for the D’s claim to be time-barred, and there was inordinate and culpable delay on the part of P to take out the application for anti-suit injunction.

For the issue of comity, while CA agreed with P that comity considerations in contractual anti-suit injunctions (as in the present case) would be less important than in cases of forum non conveniens types of anti-suit injunctions, such considerations cannot be said to be of no or minimal importance. In the present case, the judge could not be said to have erred for giving significant weight to the comity considerations, as grant of an anti-suit injunction would mean that the two mainland courts decisions rejecting P’s challenge to its jurisdiction would be practically overturned.

Since the CA could not find any fault in the Judge’s exercise of discretion in refusing the relief sought, the appeal was dismissed.

Comments

The use of arbitration clause is widespread in the maritime industry. In the usual circumstances, parties must honour their obligation and refer any dispute to arbitration. If a party is in breach of the arbitration clause, anti-suit relief is available to the other contracting party. However, such relief is only discretionary. This case shows that while the sanctity of contractual rights are to be respected, it is not a trump card to other discretionary considerations such as delay and comity. A party must therefore act promptly if he wishes to claim anti-suit injunctive relief.

Personal Injury

Mohammad Amjad v John M Pickavant & Co CACV 698/2013, judgment on 21 February 2017

The Respondent was employed by the Appellant, a law firm, as a litigation manager. At the time of accident, he was earning about HK$32,500 per month by a combination of salary and commission. On 1 March 2006, the Respondent, while walking from his room passing the reception area to the storage room, tripped on a cardboard carton for photocopier paper that was placed in the reception area near a sofa. As a result, he fell forward and suffered personal injuries.

Soon after the injury, Mr. Pickavant of the Appellant accused the Respondent of paying monies received from clients into the Respondent’s own bank accounts and allegedly falsely telling clients that the Appellant required them to pay additional amounts. The Respondent and his wife were subsequently charged with criminal offences but they were acquitted of all charges after trial.

In the proceedings, the trial judge found the Appellant liable for the Respondent’s injuries without any contributory negligence on the part of the employee. The Appellant appealed.

Held

Honourable Barma JA (giving the Judgment of the Court) dismissed the appeal.

Barma JA upheld that there had been no contributory negligence on the part of the Respondent. Barma JA rejected the Appellant’s contention that the Respondent failed to heed the presence of the box and that the box was clearly visible. He accepted that at the time of accident, a client was seated on the sofa ahead of the box so that it would be quite possible (and perhaps likely) that the Respondent’s view of the box would have been obscured, so that he would not have been aware of its presence.

The Appellant also contended that as a result of the allegations of dishonesty made against him, regardless of the accident, the Appellant would have ended employment with the Respondent and that any other employment the Respondent could have secured would not have included the element of commission that he was being paid by the Appellant. Hence, his loss of earnings would have been less than they would have been had he continued to be employed by the Appellant. Barma JA agreed with the trial judge’s skepticism of the timing and circumstances in which the complaint of “dishonesty” came to be made against the Respondent, and thus had reservations as to whether or not the complaint was justified. Barma JA held the trial judge was hence entitled, in the circumstances, to decline to find that the Respondent would have been dismissed regardless of the accident.

Further, the Appellant contended that the trial judge erred in her approach to the assessment of the Respondent’s loss of earnings. The Appellant argued (i) that the trial judge had wrongly adopted findings as to loss of earning capacity made in the Employee’s Compensation proceedings and (ii) that the trial judge had wrongly sought to make use of concepts such as impairment of the whole person and reduced earning capacity expressed in percentage terms when assessing the Respondent’s loss of earnings, as these were concepts applicable to Employees’ Compensation claims but not in assessing loss of earnings in common law proceedings.

Barma JA accepted that the trial judge had adopted Judge Chow’s assessment of likely income after the accident in the Employees’ Compensation claim. Barma JA considered Judge Chow’s decision that his approach was not to use an earning capacity percentage figure to calculate the award to be made in those proceedings but to make an assessment of the Respondent’s actual likely level of earnings at the time of the trial of those proceedings and use that amount of the purposes of the calculation. Barma JA held that this does not differ in practical terms from the approach at common law, as that approach involves considering the Respondent’s potential earnings in his post-accident condition at the relevant time with his pre-accident income.

Further, Barma JA held that the trial judge was perfectly entitled to use percentages of pre-accident earnings as loss of earnings at different stages of recovery. Barma JA acknowledged that the trial judge, in assessing the percentages, had considered the medical evidence, the evidence of both sides as to the nature of the Respondent’s work and the Respondent’s own evidence as to the impact of those injuries on him and on his ability to carry out those duties. Barma JA acknowledged that that those figures are somewhat rough approximations but the assessment of loss of earnings is not always capable of exact or precise quantification. Barma JA also accepted that the trial judge did the best she could with the material available and the trial judge was perfectly entitled to come to the conclusions that she did.

Barma JA dismissed all the Appellant’s contentions and upheld the trial judge’s decision.

Comments

The present case is a personal injuries claims arising out of relatively safe office environment. More importantly in terms of the legal aspects, this case recognized the assessment of the Respondent’s actual likely level of earnings at the Employees’ Compensation proceedings and use that amount of the purposes of the calculation. Further, this case recognized the use of percentages of pre-accident income when assessing loss of earnings in different stages pf recovery provided that all evidence has been thoroughly considered. Given the flexibility in this method of assessment of loss of earnings at different stages of recovery, it should not be surprised to see future personal injuries claims adopting this method.

WISDOM OF THE ISSUE

You reap what you sow.

Wisdom Newsletter (Issue 24)

Personal Injury

Cai Guoping (Plaintiff) v Yim Hok Wing (1st Defendant), May’s Asia Limited (2nd Defendant) & Hip Hing Construction Company Limited (3rd Defendant), CACV 96/2015, judgment on 9 September 2015 & 13 October 2015

This is an appeal brought by the Plaintiff against the judgment of HCPI 494/2013 in relation to a work accident on a construction site. In the subject accident, a concrete panel fell and struck the Plaintiff when he was moving another concrete panel in a hoist. As a result, he sustained multiple facial injuries and was given intermittent sick leave over 16 months from the date of accident.

During the trial, the Plaintiff gave a version of the alleged accident which is largely different from the version set out in his declaration to the Labour Department, his Statement of Claim and his signed witness statement, leaving the trial judge with a real sense of doubt. The trial judge preferred the evidence given by the defendants’ witness, i.e. the Plaintiff was taught to first untie the two panels on the hoist, then rotate the first panel by 90° to the side of the hoist whilst another worker would tend to the second panel to ensure that it did not fall. It was ruled that this did not constitute a safe system of work since very heavy, large concrete panels were being transported in pairs, which required handling the panels in a confined space and handling one panel whilst the other was not secured. The trial judge held that common law liability was established against all three defendants but there was 50% contributory negligence on the part of the Plaintiff.

On the issue of quantum, the trial judge found the appropriate sick leave period to be 6 months and 5 days and did not allow any loss of earnings beyond this sick leave period and loss of earning capacity. Damages assessed at HK$473,229.00 was reduced by 50% to HK$236,614.00, which was less than the award for the employees’ compensation already received by the Plaintiff in the sum of HK$333,300.00. Therefore, no award for damages was made even when liability was established. The Plaintiff’s action was dismissed with an order nisi that there be no order as to costs. The order nisi was later varied pursuant to Order 22, rule 23(5) of the Rules of the High Court, Cap.4A. In the light of the Sanctioned Payment made by the Defendants on 18 November 2014, it was ordered that the Plaintiff was to pay the Defendants indemnity costs from the expiry of the Sanctioned Payment on 17 December 2014 and enhanced interest on disbursements incurred after 17 December 2014 up to the judgment date.

On appeal, the appeal judges revisited the evidence put forward at trial. They found that the Defendants should be liable for failing to take the simple measures which could have helped prevent the risk arising to workers handling the panels; the “correct method” taught to the Plaintiff, although not found to be unsafe, was cumbersome and needed sufficient strength in maneuvering the panels; the Plaintiff and his co-worker were engaged in performing the hard, physical and repetitive task for up to 100 panels a day; the system of work provided was not designed to protect the Defendants’ workers as much from their carelessness as from anything else. At the same time, the appeal judges upheld the trial judge’s finding that the Plaintiff should also be responsible for the occurrence of the accident as it was not a momentary lapse of attention but the Plaintiff and his co-worker had made a conscious decision to depart from the Defendants’ instructions and not to follow the “correct method”. However, re-weighing the above findings, however, the appeal judges allowed the Plaintiff’s appeal against liability and reduced the apportionment of contributory negligence from 50% to 25%. In the absence of any serious error or wrong application of the principle of law however, the Plaintiff’s appeal against quantum was dismissed.

After the reduction of contributory negligence to 25%, the net award of damages to the Plaintiff would beHK$21,621.75.00. Therefore, the Plaintiff still failed to beat the said Sanctioned Payment in the sum of HK$120,000 dated 18 November 2015 by a wide margin. The appeal judges maintained that the Plaintiff was to pay the Defendants indemnity costs from the expiry of the Sanctioned Payment on 17 December 2014 up to the judgment date. However, the appeal judges set aside the costs order that the Plaintiff do pay enhanced interest on disbursements (i.e. half of the fees for mediation on 17 November 2014 paid in January 2015) as it was actually not incurred after 17 December 2014.

Comments:

The above case illustrates that on top of whether safety training is given to the injured employees, the court would also consider in detail the training/instructions given to the injured employees in assessing liability.
With the availability of a detailed description of the training given, the court would be able to find that the Plaintiff did not follow the instructions and allocate a substantial percentage of contributory negligence on
the part of the Plaintiff. In order to better defeat the Plaintiff’s credibility and absolve the employers’ liability in similar work-accident related personal injury claims, employers are advised to keep a detailed record of the trainings/instructions given to their workers and attendance records of training courses signed by their workers.

It can be seen that after reconsidering the available evidence, the appeal court upheld the trial judge’s findings and continued to allocate a substantial percentage of contributory negligence on the part of the Plaintiff for not following the employer’s instructions thereby causing the accident. It appears that whilst the law poses obligations for the employers to do as far as reasonably practicable to ensure their workers’ safety, the employers are protected from being held liable for accidents to disobedient workers who
voluntarily act not in accordance to the employers’ instructions.

The above case also indicates how the mechanism of sanctioned payments could protect the defendant’s position on costs. Whenever the Plaintiff fails to obtain a judgment that is better than the sanctioned payment, the Plaintiff would have to bear not only the defendant’s costs of the proceedings from the date when the sanctioned payment expired but also enhanced interests on disbursements incurred after the expiration of the sanctioned payment. In the above case, the appeal judges opined that it was a “sheer speculation” to say that there was an objective basis for thinking that the Plaintiff might
have a reasonable chance of beating the sanctioned payment. There is no excuse for the Plaintiff to not accept an adequate sanctioned payment within the prescribed deadline.  In other words, the sanctioned payment can exert pressure on the Plaintiff to reasonably assess his/her own claim at an earlier stage before trial, taking into account the risks on costs as mentioned above.

To safeguard the defendant’s position on costs, the defendants are advised to effect a sanctioned payment at an “early stage” in the proceedings. Taking into account the chance that some documents enhancing the plaintiff’s claim might not yet be disclosed at the early stages, the amount paid into court could be a bit higher than the actual assessed damages to ensure that the risks of costs sits firmly with the plaintiff.

Shipping

Cargill International Trading Pte Limited v Loyal Base Development Limited, HCCL 12/2015, Decision on 24 November 2015.

This is a Court of First Instance case concerning an application made by the Defendant to discharge an ex parte mandatory injunction order (“Order”) granted in favour of the Plaintiff.

Under a sale contract, the Plaintiff was the seller of a cargo and the Defendant was the buyer. In order to procure the Plaintiff to deliver the cargo to the port agents without production of the original bills of lading, the Defendant issued a letter of indemnity (the “LOI”). In the LOI, the Defendant promised that, inter alia, it would provide, on demand, any security required to secure the release of the vessel, in the event the vessel is being arrested in connection with the delivery of the cargo regardless of “whether or not such an arrest or
detention … may be justified”. The cargo was then released to the port agents and ultimately released from the port without production of the original bills of ladings.

Subsequently, a bank obtained an order from the Qingdao Maritime Court for the arrest of the vessel. The order was based on the bank’s claim that it was entitled to take delivery of the cargo, but the cargo had been wrongly released without the original bills of lading which was in the bank’s possession.
When the Defendant was unwilling to provide for the security as required under the LOI, the Plaintiff applied for and obtained the Order ordering the Defendant to provide security to secure the release of the vessel. The Defendant later applied for the discharge of the Order on various grounds, including, inter alia, (1) the Plaintiff has misled the Court, and (2) the Plaintiff has failed to disclose to the Court the material facts.

The Court of First Instance, in a decision given by Mimmie Chan J, dismissed the application for discharge of the Order.

On the issue of the Court allegedly being misled by the Plaintiff, the Defendant sought to argue that the Plaintiff failed to demonstrate that there would be a high degree of assurance that at trial, the Court will find that the arrest of the vessel fell within the scope of the LOI, to trigger the Defendant’s obligations and liabilities thereunder. The reasons for the Defendant’s argument are two-fold. First, it was argued that, during the negotiation of the LOI, the parties intended that the LOI was to cover the “discharge” of the cargo to the port agent from the vessel, and not “delivery” of the cargo (after discharge) without the original bills, so the LOI should be rectified on the ground of alleged common mistake. If the Court did rectify the LOI, then it follows that the Defendant would not be liable under the LOI because the vessel’s arrest was in relation to wrongful “delivery” of the cargo, as opposed to “discharge”. In rejecting this line of argument, the Court acknowledged that in reality, parties had limited opportunities for close textual analysis before committing to a wording, so the distinction between “discharge” and “delivery” was artificial and there was no basis that the LOI needed to be rectified. Accordingly, the Defendant’s obligations and liabilities under the LOI were triggered because the cargo was delivered to the port agent, which was prima facie acting as the Defendant’s agent in taking delivery of the cargo.

The Defendant’s second argument was that the bank’s claim underpinning the arrest of the vessel had no merit and was not connected with the delivery of the cargo. The Court rejected this argument as well on the basis that the LOI expressly provided that the Defendant’s liabilities would be triggered regardless of whether the arrest may be justified and the phrase “in connection with” used in the LOI was a very broad term.

On the issue of alleged material non-disclosure, the Defendant sought to argue, inter alia, that the Plaintiff failed to disclose the fact that the Plaintiff was arranging security after the Order was granted with another bank which eventually led to the release of the vessel. Mimmie Chan J first pointed out that the duty to make full and frank disclosure in an application for ex parte relief continues while the proceedings remain on an ex parte basis. She then held that the Plaintiff had the duty to disclose to the Court that it was arranging security for the release of the vessel because it was relevant to the Court’s consideration of whether it should continue or vary the Order. Nevertheless, the Plaintiff’s failure to disclose was not sufficiently material to justify the discharge of the Order because such failure did not discharge the Defendant from its liabilities under the LOI.

Comments

In rejecting the Defendant’s argument that the LOI did not reflect the true intention of the parties, Mimmie Chan J noted that the word “delivery” was used throughout the LOI. The LOI, which is in the standard form used in the shipping industry and is commonplace in international trade, is to be construed robustly and in a straightforward way.

Another lesson from this case is that in a letter of indemnity such as the LOI, the phrase “whether or not such arrest or detention… may be justified” could have far reaching implications. Such a phrase could be relied on by an applicant for ex parte relief to show a prima facie case that the respondent’s liability is triggered, without proving the merits of the arrest, as illustrated in this case where Mimmie Chan J spent very little time discussing whether the arrest was justified.

It is well established that, for an ex parte application, the applicant shall make full and frank disclosure of any material facts. If the failure to make material disclosure ground can be made out, this ground alone is sufficient for the Court to set aside the ex parte order with costs ordered against the applicant. It is imperative that the applicant shall disclose all the material facts, whether to the disadvantage to the applicant or not, in any ex parte application.

WISDOM OF THE ISSUE

When one door closes, another opens.

Wisdom Newsletter (Issue 23)

Shipping

Stellar Ocean Transport LLC v. The Owners And/Or Demise Charterers of The Ship or Vessel “Ruby Star” HCAJ 126/2012, judgment on 24 January 2014

The Plaintiff was the ship manager pursuant to a ship management agreement with the Defendant demise charterer of the ship. The Plaintiff used the receipts in respect of the vessel to pay off the hire due from the Defendant to the shipowner under the charterparty and left the balance to meet all operational expenses and management fees. No offset of any claims for operational expenses, whether in rem or in personam, nor appropriation of receipts to any particular item of operating expenses was made by the Plaintiff.

The Plaintiff commenced proceedings against the Defendant for the sums due under the ship management agreement and served a writ of the ship. The Defendant did not file an acknowledgement of service but it admitted the claim. Although the Plaintiff had no claims against the shipowner, the shipowner filed an acknowledgment of service and the Plaintiff served a notice of discontinuance of action against the shipowner.

The Plaintiff applied for judgment in default of acknowledgement of service against the Defendant and the shipowner applied for an Order to set aside the Writ and a declaration that the court has no jurisdiction in rem over the ship.
The basis of the shipowner’s argument was that while some items of the Plaintiff’s claim fell within the admiralty jurisdiction of the Court, the Plaintiff’s claim was for the balance of a mercantile account which did not. Since the Plaintiff demanded payment of operating costs comprising of crew salary, bunker, insurance, etc., the Plaintiff had made an appropriation generally to the running account between the Plaintiff and the Defendant.

Therefore the Plaintiff’s claim fell outside the Court’s admiralty jurisdiction.

Held

Ng J held that if the underlying nature of a claim falls within one of the recognized maritime claims under section 12A(2) of the High Court Ordinance, the mere fact that the claim happens also to be the remaining balance of a general account between a plaintiff and a defendant makes no difference to the in rem nature of the claim. Since some items of outgoings claimed by the Plaintiff, e.g. provision of crew services, were within the in rem jurisdiction of the court, the bulk of the Plaintiff’s claim was within the Court’s in rem jurisdiction and sufficient to give the Court admiralty jurisdiction.

Regarding the Plaintiff’s right to appropriate, Ng J held that the Plaintiff was entitled to exercise its right of appropriation up to the last moment, which was exercised when it served its Further and Better Particulars of the Statement of Claim.

With respect to the Plaintiff’s application for default judgment, Ng J held that the in rem action is only machinery for enforcing the claim in personam. Since the Plaintiff’s claim in personam is against the Defendant, it should be the Defendant’s default in filing the acknowledgement of service which counts. Where a plaintiff sues multiple defendants, each defendant must acknowledge service of the writ and state its intention to contest the proceedings, failing which it will suffer the consequences of being liable to a default judgment.

The Plaintiff’s notice of discontinuance did not change the shipowner’s status as a defendant in the in rem action. The filing of acknowledgement of service of the writ in rem by the shipowner constituted a submission to the admiralty jurisdiction of the admiralty court. In an application for default judgment, the court has to be satisfied that the plaintiff’s claim is well founded and a party should be allowed to demonstrate to the court that the claim or part of it is not well founded.

Since the shipowner proposed to demonstrate to the Court that the Plaintiff’s claim was not well founded, Ng J held that the shipowner should be allowed to do so and it was only fair that the shipowner should be given an opportunity to defend the claim on the merits and pur forward defences which the Defendant could put up. The Plaintiff’s application for default judgment was adjourned for substantive argument.

Comments

As demonstrated by this case, whether a plaintiff’s claim falls within the court’s admiralty jurisdiction depends on the underlying nature of the claim. A plaintiff’s claim in respect of the balance of an account, which comprises of in rem and in personam items, does not necessarily imply that the claim falls outside the court’s admiralty jurisdiction.
Commercially, if a ship manager indiscriminately apply the fund to sums that are subject to the admiralty jurisdiction first, then the ship manager may only take out actions in personam against the demise charterer or shipowner for the balance.
With respect to the application of default judgment, the plaintiff has to show that its claim is well founded so that the Court will allow the application. The shipowner should be given an opportunity to defend the claim on merits and put forward defences, if any, which defendant could but has chosen not to set up.

Personal Injury

Lo WaiShing(Plaintiff) v LikSang Engineering Co Ltd (Defendant), HCPI15/2012, judgment on 5 November 2013

On the date of the accident, the Defendant was engaged to deliver some 40-feet long steel rods on flatbed trucks to a warehouse. The Plaintiff’s job was to climb onto the back of the lorry, and working with another man, secure bundles of steel rods to a crane so that they could be lifted off the lorry. The steel rods were placed such that they ran the length of the lorry. One end of the rods rested on the top of the driver’s cab. In the middle of the flat bed portion of the lorry was a sturdy metal frame which held the rods off the floor of the lorry so that the rods could slope down from the driver’s cab to the very rear of the lorry without sagging in the middle. There were two potential hazards during unloading. Firstly, at the time of loading, large wooden wedges were hammered between bundles of steel rods to keep them apart. These wedges often worked themselves loose when the lorry travelled from one place to another and during the unloading process, falling to the floor of the lorry. Workman may then trip over the wedges. Further, the rods could swing and turn when they were lifted by crane.

During the course of employment, the Plaintiff received instructions from the Defendant’s site foreman: the flatbed of the lorry was at all times to be kept clear of wedges; the wedges were to be picked up and put to one side, or thrown off the lorry onto the ground. Further, workmen were to alight from the lorry and move a safe distance away when the rods were being lifted.
On the date of the accident, the Plaintiff slipped on a wedge on the flatbed of the lorry, thus falling off the lorry onto rocky ground. His left kidney was badly injured and had to be surgically removed. The Plaintiff sued the Defendant in negligence.

Held

DHCJ Hartmann found for the Plaintiff on liability. The system to ensure safety was inadequate. The safety instructions given by the Defendant with respect to the risk of wooden wedges was at best vague. No storage space was provided on the lorry in which the wedges could be kept. It would have been easy enough to set out in clear, chronological terms, how the wedges were to be dealt with. It seemed to be the choice of the individual worker whether to move them to one side or to throw them off the lorry, in both cases there were risks of someone tripping over.

Further, there was only limited and irregular supervision to ensure compliance with the safety instructions. There was no specified supervisory programme and the foreman only visited the unloading area for limited period of time. Applying Wilson v Tyneside Window Cleaning Company [1958] 2 QB 110, the Defendant had a personal and non-delegable duty to take reasonable care of the Plaintiff’s safety even though the Defendant did not have management of the warehouse. It would have been an easy enough matter for an employee of the defendant to ensure that the unloading only took place when a space in the designated unloading area became vacant; otherwise, the Plaintiff would not have fallen onto rocky ground.

However, the Plaintiff was contributorily negligent to the extent of 25% for disobeying safety instructions. Instead of alighting the lorry safely by taking one of the ladders at the rear of the flatbed, the Plaintiff chose to make his way forward along the flatbed and skirted along the edge of the bundle of steel rods and stepped over the metal frame.

Comments

The present is a personal injuries claim arising out of a relatively simple and straightforward industrial accident. It illustrates the need for employers to issue clear and workable safety instructions and have an adequate system of supervision to ensure compliance. That an accident occurs at a place outside his management is not necessarily a defence to a claim in negligence.