Bright Shipping Limited (P) v Changhong Group (HK) Limited (D)  HKCA 1062, CACV No. 102 of 2019
On 6 January 2018, there was a collision between D’s cargo vessel “CF CRYSTAL” and P’s tanker “SANCHI” on the high seas but within the exclusive economic zones (“EEZs”) of the PRC, South Korea and Japan.
On 9 January 2018, D commenced inter-ship proceedings against P in the Shanghai Maritime Court (“SMC”) and applied to establish in the SMC 2 limitation funds, one for personal injury and one for property. At the same time, P commenced an in personam action against D in Hong Kong for collision liability and quantum because D is a Hong Kong incorporated company with a registered office in Hong Kong.
Against the above background that D made an application for staying P’s proceedings in Hong Kong on the ground of forum non conveniens (“FNC”).
Applying the Spiliada principles, it was accepted that Hong Kong was not the natural forum for the inter-ship litigation. The dispute concerns whether D was able to establish that SMC was clearly and distinctly more appropriate than Hong Kong as the forum for the trial of the inter-ship action. Two main arguments were advanced by D.
D first argued that the trial judge had made no reference to the national laws relating the exercise of the sovereignty of the PRC over the EEZ. However, the CA rejected the argument on the grounds that (1) the location of the collision lied within the EEZs of the PRC, Japan and Korea and (2) a state’s rights over EEZ under UNCLOS do not apply to navigation activity.
D also argued that lis alibi pendens (related proceedings abroad) was a material factor for the consideration of FNC. As expected, the CA held that the constitution of limitation funds by D in the SMC pursuant to the PRC Maritime Code is not a legal bar to bringing proceedings in Hong Kong because the PRC is not a state party to the Convention on Limitation of Liability for Maritime Claims, 1976 (“LLMC”). Also, the SMC’s inter-ship proceedings have not gone beyond the initial stage and P had not accepted service of the same.
The argument that D could bear liabilities up to 2 separate limits if the Hong Kong proceedings were not stayed did not assist D at all. The CA explained that a ship owner who has already paid a claim has a well-established right to take into account the sum he previously paid in the distribution of the limitation funds. Accordingly, D’s concern that it would be burdened with liability up to 2 separate limits was misplaced.
The CA, in its obiter, found that the significant difference in tonnage limitation between the PRC and Hong Kong (the relevant monetary limit in Hong Kong is roughly 3.6 times of that in the PRC because the Hong Kong limit takes into account the loss of value due to inflation) will deprive P of a legitimate juridical advantage and substantial justice will not be achieved in the SMC if a stay of the Hong Kong proceedings is granted. Such deprivation could be unjust to P and could be capable of being a decisive factor in refusing a stay.
The Spiliada principles are settled law on FNC and involve an exercise of discretion. The court aims at finding out a forum which is suitable for the interests of all the parties and for the ends of justice. This is different from the Australian approach.
It can be seen from this case that the treatment of mainland Chinese courts has no material difference from other foreign courts. The quality of justice in mainland courts is not a factor to be taken into consideration. The logistic issues of witnesses play little importance.
Not surprisingly, the CA considered that while some weight was given, it was nothing unusual about limitation and liability actions taking place in different jurisdictions. In fact, even under Article 13 of the LLMC, it only bars a person having made a claim against the fund from attaching the assets of a person by or on behalf of whom the fund has constituted but P did not make such a claim. It is expected that the court is more inclined to stay if a fund is set up in a state party to the LLMC.
The CA reaffirmed the principle that it may only interfere with the exercise of a judge’s discretion in limited circumstances. It is therefore important to prepare well when FNC is argued before the judge of the 1st instance.
All in all, this action is a fair illustration of the “One Country, Two Systems” principle.