The Hong Kong High Court issued a judgment on 27/2/2014 explaining the legal principles in respect of extending the validity of writs. [HCAJ 24/2012]
SMY (Hong Kong) Limited issued a writ on 8/2/2012 to seek damages of US$3.33m against the owners of the vessel “Shun An” pursuant to a voyage charter arising from the owners’ failure or refusal to release the cargo. This was the 2nd ex parte application for extension of the validity of the writ.
Background
The vessel had entered Hong Kong waters on 3 occasions in 2012:
20/6/2012 (Wednesday) from 5:30pm to 21/6/2012 at 7:08am (for around 14 hours);
22/3/2012 (Thursday) from 9:54am to 2:13pm (for around 4 hours);
12/2/2012 (Sunday) from 8:48am to 2:11pm (for about 6 hours).
Despite that, the validity of the writ was renewed for 12 months.
The vessel had entered Hong Kong waters on 3 other occasions in 2013:
22/3/2013 (Friday) from 11:32am to 7:48pm (for around 8 hours);
6/5/2013 (Monday) from 12:57am to 5:27am (for about 5 hours);
2/7/2013 (Tuesday) from 3:16pm to 1:49am (for about 10 hours).
On 29/1/2014, SMY (Hong Kong) Limited applied to extend the validity of the writ for another 12 months on the ground that:
It was not possible to effect service of the writ on the vessel in 2013 (“the impossibility of service ground”).
As the Judge was not inclined to extend the validity of the writ, on 30/1/2014, the Judge directed SMY (Hong Kong) Limited to appear and make representation. Since the Judge’s direction, SMY (Hong Kong) Limited had filed another affirmation, relying further on the grounds that:
Withholding of service was for the reason of avoiding unnecessary proceedings and saving costs (“the avoidance of unnecessary proceedings ground”); and
There would be prejudice to SMY (Hong Kong) Limited if the writ was not extended but no prejudice to the defendant (“the prejudice ground”).
Before issue of the writ, SMY (Hong Kong) Limited had instituted proceedings in the Xiamen Maritime Court of Mainland China and commenced arbitration. In the Xiamen proceedings, the vessel was arrested on 30/12/2011. The owners of the vessel put up security in the form of real property and a guarantee from a real estate company (“the Security”). Despite the objections of SMY (Hong Kong) Limited, amongst others, that the value of the property was subject to severe fluctuation and the financial position of the real estate company was not at all reliable, the Xiamen Court nevertheless released the vessel on 9/2/2012 against the putting up of the Security. On 4/1/2012, SMY (Hong Kong) Limited commenced arbitration proceedings against the owners pursuant to the charterparty. The arbitration had been pursued and the parties had finished discovery.
SMY (Hong Kong) Limited was concerned that the Security might not be sufficient for SMY (Hong Kong) Limited’s claim in the arbitration proceedings. So it issued the writ with a view to obtaining further security for its intended claim in case the Security fell short of its expected value.
The legal principles
Order 6 rule 8(2) empowers the court to extend the validity of a writ where there are good reasons to do so. See also Hong Kong Civil Procedure 2014, Vol 1, para 75/3/3. A two-stage test is applied by the court, first to ascertain if there are good reasons for extending time and second to weigh all relevant factors and balance the hardship between the parties before deciding whether the writ should be extended as a matter of discretion: Kleinwort Benson Ltd v Barbrak Ltd [1987] 1 AC 597; Pacific Electric Wire & Cable Co Ltd v Hu Hung Chiu [2011] 1 HKLRD 1000, at para 17.
Whether or not there was good reason in a particular case must depend on all the circumstances of that case: Kleinwort Benson Ltd v Barbrak Ltd,at 622H to 623A.
No sufficient opportunity to effect service can be a good reason in the first stage. See the Berny principles laid down in the case of The Berny [1979] 1 QB 80, followed in Hong Kong in The Chong Bong [1997] 3 HKC 579, at 590B to E, Waung J:
In my opinion, when the ground for renewal is, broadly, that it has not been possible to effect service, a plaintiff must, in order to show good and sufficient cause for renewal, establish one or other of three matters as follows: (1) that none of the ships proceeded against in respect of the same claim, whether in one action or more than one action, have been, or will be, present at a place within the jurisdiction during the currency of the writ; alternatively (2) that, if any of the ships have been, or will be, present at a place within the jurisdiction during the currency of the writ, the length or other circumstances of her visit to or stay at such place were not, or will not be, such as to afford reasonable opportunity for effecting service on her and arresting her, alternatively (3) that, if any of the ships have been, or will be, present at a place within the jurisdiction during the currency of the writ, the value of such ship was not or will not be, great enough to provide adequate security for the claim, whereas the value of all or some or one of the other ships proceeded against would be sufficient, or anyhow more than nearly sufficient, to do so.
The plaintiff cannot rely on its own inability to prove its cause of action in rem as a justification for renewing the writ in rem: The Chong Bong, at 590G to 591D, Waung J.
Saving of unnecessary proceedings and costs can also be a good reason: Kleinwort Benson Ltd v Barbrak Ltd, at 624B to C.
It is not normally a good reason that the plaintiff desires to hold up proceedings while some other case is tried or to await some future development. Whilst it may be good reason for a delay in service that the resultant hiatus might save costs which will undoubtedly fall on a defendant who has at all material times known of the existence of the liability, there is a “world of difference” where a plaintiff delays service in order to save itself from incurring extra expense. See Kleinwort Benson at 620B to C; Pacific Electric Wire & Cable Co Ltd v Hu Hung Chiu,at paras 28 and 31.
The presence or absence of prejudice to a party cannot by itself be a good reason. Prejudice only goes towards the exercise of the discretion in the second stage test, when the court attempts (among other matters) to balance a plaintiff’s potentially good reason against possible hardship to a defendant. Pacific Electric Wire & Cable Co Ltd v Hu Hung Chiu, at para 35.
Ground A – Impossibility of service ground
Principle 2 of the Berny principles is relevant.
The Judge did not rely on the first 3 occasions when the vessel entered Hong Kong waters as they formed part of the court’s consideration in the 1st application for extending the validity of the writ.
SMY (Hong Kong) Limited said that the practice in admiralty cases had been for service and arrest to take place at the same time. On the 4th and 6th occasions, owing to the short interval of berthing in Hong Kong, it was not possible for the solicitors to prepare an application to arrest the vessel. On the 5th occasion, the vessel called in Hong Kong after office hours in Mainland China where SMY (Hong Kong) Limited was located and left before SMY (Hong Kong) Limited’s office re-opened. The solicitors had difficulty contacting SMY (Hong Kong) Limited for instructions.
Whilst the Judge was satisfied that it was impossible to effect service on the 5th occasion, the Judge was not so satisfied in respect of the 4th and 6th. There had been ample time within office hours to take instructions from SMY (Hong Kong) Limited and prepare for service of the writ. Even if the wish to arrest was taken into account, there had been ample time within 2 years to prepare the papers for arrest.
SMY (Hong Kong) Limited then submitted that there was not sufficient time for SMY (Hong Kong) Limited to value the Security and instruct the solicitors to prepare the papers for arrest. Principle 3 of the Berny principles appears to be relevant. Firstly, the Security comprised landed properties and a guarantee. The Judge failed to see what great fluctuation in value there could be. Secondly, there was simply no evidence to show what the value of the vessel and the fluctuation of the value was. Thirdly, SMY (Hong Kong) Limited could hardly say that the 2 years since issue of the writ were not sufficient for it to value the vessel.
SMY (Hong Kong) Limited could not rely on its own deliberate delay as a justification for renewing the writ in rem: The Chong Bong. Ground A is not substantiated.
Ground B – The avoidance of unnecessary proceedings ground
The commencement of the action in question was with a view to obtaining further security from the owners. SMY (Hong Kong) Limited might fail in the arbitration proceedings. The Security might be sufficient to cover SMY (Hong Kong) Limited’s claim. Effecting of an arrest of the vessel would be the last resort. The arrest of the vessel should cause severe disruptions to its normal activities and therefore cause loss to its current owners and/or charterers. In these reasons, SMY (Hong Kong) Limited claimed that by not serving the amended writ and arresting the vessel, it avoided unnecessary proceedings and saved costs.
Firstly, in the Judge’s view, the issue of the writ was to litigate the dispute between the parties, not to obtain security for SMY (Hong Kong) Limited’s Xiamen proceedings or arbitration proceedings. There were other statutory provisions for SMY (Hong Kong) Limited to obtain eg an injunction in aid of foreign proceedings or arbitration proceedings.
Secondly, the intention to arrest the vessel under the writ action was but an after-thought, raised only in the 2nd affirmation in support of the application for extension of validity of the writ. Clearly, SMY (Hong Kong) Limited could not seek to arrest the vessel for a 2nd time without being accused of abuse of the court process when the Xiamen court had arrested the vessel, released it and ordered security to be provided.
Thirdly, SMY (Hong Kong) Limited’s desire was simply to hold up the Hong Kong proceedings while some other case was tried or to await some future development. This was not a good reason for extending the validity: Pacific Electric Wire & Cable Co Ltd v Hu Hung Chiu.
Fourthly, SMY (Hong Kong) Limited’s delay in service was to save itself from incurring extra expense.
Ground B is not substantiated.
Ground C – The prejudice ground
It was submitted that SMY (Hong Kong) Limited would suffer great prejudice because there had been 2 changes of ownership in the vessel after issue of the writ. SMY (Hong Kong) Limited would be deprived of the opportunity to seek further security against the owners to secure its intended claims: section 12B(4) of the High Court Ordinance; The Chong Bong, at page 589 G to H. On the other hand, there would be no prejudice to the defendant.
Since SMY (Hong Kong) Limited could not even show good reason under the first-stage, there was no need to consider prejudice in the second-stage.
Conclusion
The Judge was not satisfied that it was impossible for SMY (Hong Kong) Limited to effect service of the writ in 2013. Nor did the Judge consider that withholding the service was for the reason of saving proceedings and costs. It was but SMY (Hong Kong) Limited’s deliberate decision to wait whilst the arbitration proceedings were taken and that was not a good reason. Prejudice did not come into consideration at all. The Judge therefore dismissed the application for extension of the validity of the writ.
Please feel free to contact us if you have any questions or you would like to have a copy of the Judgment.
23/F, Excel Centre, 483A Castle Peak Road, Lai Chi Kok, Kowloon, Hong Kong 香港九龍荔枝角青山道483A卓匯中心23樓 Tel: 2299 5566 Fax: 2866 7096 E-mail: gm@smicsl.com Website: www.sun-mobility.com A MEMBER OF THE HONG KONG CONFEDERATION OF INSURANCE BROKERS 香港保險顧問聯會會員
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The English High Court issued a Judgment on 15/5/2015 maintaining an anti-suit injunction to restrain the Xiamen Maritime Court’s legal proceedings in breach of a London arbitration agreement. [Case No: 2015-515], [2015 WL 2238741], [2015 EWHC 1974 COMM]
The Hong Kong High Court issued a Judgment on 11 January 2019 dealing with a dispute of US$335,858.31 between a bunker supplier and a ship agent. [HCA119/2015] [2019HKCFI57]
Remember our Chans advice/112 that the Hong Kong High Court held the Rotterdam terminal liable to pay the cargo value of €950,071.20 for the misdelivery of one container of Sony Play Stations? On 2/4/2013, Judge To of the Hong Kong High Court issued another Judgment holding that the forwarder was entitled to limit its liability to US$24,392 in accordance with its B/L terms. [HCAJ 106/2008]
The amendment to the International Convention for the Safety of Life at Sea (SOLAS) 1974 Chapter VI, Regulation 2 in respect of the verified gross mass of a container carrying cargo (laden container) is for entry into force globally on 1 July 2016.
The Hong Kong Court of Appeal issued a Judgment on 12/2/2018 to deal with the cargo owners’ seeking leave to appeal against the High Court’s Judgment reported in our Chans advice/209 last month. [CAMP 38/2017] [2018 HKCA77]
In our Chans advice/244, we reported the Hong Kong High Court case [HCA937/2016] [2021 HKCFI 2310] that the forwarder was held liable to pay nominal damages of HKD1,000 to the shipper in the cargo misdelivery claim of USD1,299,189.87. On 20 October 2021, the Hong Kong High Court issued a Decision on Costs holding the shipper liable to pay the costs of the forwarder. [2021 HKCFI 3021]
The Hong Kong High Court issued a Judgment on 11/12/2013 holding that a Hong Kong plaintiff needed to put up a security for costs in a court case concerning a yacht sinking incident. [HCCL 5/2013]
To continue our recent series of loss prevention articles, we would like to discuss in this issue the major provisions of the PRC Maritime Code as far as the international carriage of goods by sea is concerned.
We refer to our Chans advice/251 last month reporting the Hong Kong High Court’s decision to sentence Mr Ma (Hyundai Hong Kong’s former deputy general manager) to 15 years’ imprisonment. The High Court issued another Judgment on 27 April 2022 holding Mr Ma liable to compensate HK$387,655,303.70 to Hyundai Hong Kong. [HCA 619/2016] [2022 HKCFI 1153]
The PRC Supreme Court on 26/11/2015 issued a Judgment holding a shipping company’s container demurrage claim against a shipper time barred. [2015民提字第119號]
The Hong Kong Court of Appeal issued a Judgment on 17/7/2014 holding a Hong Kong forwarder liable to pay US$852,339 plus costs and interest (as damages for conversion) to an Indian bank in an air cargo misdelivery case. [CACV 282/2012]
The Hong Kong High Court issued a Decision on 22 January 2021 dealing with an appeal against a Small Claims Tribunal’s award concerning a dispute over a container terminal’s storage charges. [HCSA 44/2020] [2021 HKCFI 200]
The High Court of Hong Kong issued a Decision on 31/8/2018 concerning a feeder company’s claim against a shipping company’s lawyer for wasted costs. [HCA1919/2016] [2018HKCFI1879]
The Hong Kong High Court issued a Decision on 19 March 2018 dealing with some legal principles in relation to granting relief against unless orders in a ship collision case. [HCAJ 84/2017] [2018 HKCFI 609]
While the MOL Comfort incident was a disaster widely talked about among forwarders, all who suffered loss without exception will try whatever means to recover their losses down the line wherever the legal regimes permit.
The Hong Kong Court of Appeal issued a Judgment [CACV144/2017] [2018HKCA299] on 29/6/2018 upholding the High Court’s Judgment dated 2/6/2017 (which was reported in our Chans advice/201).
The Hong Kong High Court issued a Judgment on 29/4/2013 relating to a discovery order ancillary to and in support of a Mareva injunction. [HCA 2124/2011]
The Hong Kong High Court issued a Judgment on 5/8/2015 holding that a shipment of formula milk powder without the legally required export licence should not be forfeited. [HCMA171/2015]
In Chans advice/191 and Chans advice/206, we reported a case relating to a shipping company’s claim against its former deputy general manager (Mr Ma) over the alleged theft of the company’s money. The Hong Kong High Court on 16 December 2020 sentenced Mr Ma to 15 years’ imprisonment. [HCCC 20/2018] [2021 HKCFI 195]
Remember our Chans advice/171 of 31/3/2015 reporting that the Hong Kong Court of Appeal discharged the Mareva injunctions against Hin-Pro? The Hong Kong Court of Final Appeal issued a Judgment on 14/11/2016 reversing the Court of Appeal’s Judgment of 11/3/2015. [FACA No. 1 of 2016]
We have received a lot of cargo claims from our forwarder clients in the recent months. In this issue, we would like to discuss in general how the forwarders should handle the cargo claims.
The High Court of Hong Kong issued a Judgment on 21/7/2014, in which some legal principles relating to the in rem jurisdiction of the Court to arrest vessels were explained. [HCAJ 241/2009]
The Hong Kong Court of Appeal’s Judgment dated 11/4/2008 explained some legal principles relating to whether indemnity claims are allowed by in rem legal actions against vessels. [CACV 257/2007]
The Hong Kong Court of Final Appeal (“the CFA”) issued a Judgment on 10/9/2014 dismissing a cargo owner’s (“the Assured”) cargo insurance claim of US$1,555,209.00 against an insurance company (“the Insurer”) on the ground that the Assured had breached an insurance warranty relating to the carrying vessel’s deadweight capacity. [FACV No. 18 of 2013]
The Hong Kong High Court issued a Judgment on 23/12/2013 dealing with an application for security for costs in relation to a ship sinking case. [HCAJ 213/2009]
In the last issue of Chans advice, we reported the case that the Hong Kong Court of Appeal rejected the mortgagee’s appeal against the High Court’s order of granting a stay until 24 April 2019 for the sale of the Vessel Brightoil Glory. On 17 May 2019, the Court of Appeal issued another judgment refusing the shipowners’ appeal in respect of their application for a further stay of the sale of the Vessel until 22 May 2019. [CAMP81/2019] [2019 HKCA 561]
In Chans advice/215, we reported that the Hong Kong High Court refused Changhong Group’s application to stay the Hong Kong proceedings; and in Chans advice/234, we reported that the Court of Final Appeal dismissed Changhong Group’s application for leave to appeal. On 7 April 2022, the Hong Kong High Court issued a Decision dealing with Changhong Group’s action to re-litigate its stay application. [HCAJ 3/2018] [2022 HKCFI 920]
The Hong Kong High Court issued a Judgment on 9/4/2018 dealing with a cargo total loss case in which a NVOC in Malta was wrongly sued (because it had the same name as that of the correct NVOC in BVI). [HCAJ 65/2016], [2018 HKCFI 699]
The Hong Kong High Court issued a Judgment on 3/2/2017 holding Natural Dairy liable to pay HK$4,360,948.38 to Schenker being the outstanding freight charges. In the Judgment, the Judge also explained the principles regarding the meaning of notice of the forwarder’s standard trading conditions. [HCA 1755/2011].
The Hong Kong High Court issued a Decision As To Costs on 5 December 2024 ordering a shipowner (which lost in an anti-suit injunction court case) to pay the winning party’s (a cargo owner) costs on an indemnity basis. HCCT 66/2024 [2024 HKCFI 3511]
The Hong Kong Court of Appeal issued a Judgment on 18/12/2014 in connection with a cargo misdelivery claim of US$27,835,000 involving also anti-suit injunction and worldwide freezing order issued by the English Court. [CACV 243/2014 & HCMP 1449/2014]
Does the law require forklift trucks to have the third party insurance of motor vehicles? The Hong Kong High Court’s Judgment [Magistracy Appeal No 241 of 1996] dated 2/5/1996 explained the legal principles to answer this question.
The Hong Kong Court of Appeal issued a Judgment on 9/7/2015 in relation to the High Court Judgment dated 21/7/2014 (reported in our Chans advice/167 dated 28/11/2014). [HCMP 2315/2014]
Following the Hong Kong Court of Appeal’s Judgment dated 11/3/2015 discharging the Mareva Injunctions and the receivership orders (mentioned in our monthly newsletter of Chans advice/171 two months ago), the Hong Kong High Court issued a Judgment on 12/5/2015 to determine the question of who should pay the remuneration to the receivers. [HCMP 1449/2014]
On 12/4/2017, the Hong Kong High Court dismissed an application made by a cargo owner for stay of proceedings commenced by two forwarders in relation to an uncollected cargo case. [HCA 1927/2016]
This continues the Q&A in our off-line real seminar on Uncollected and Undelivered Cargo on 28 May 2024. Participants were keen to know more about seaway bills, how war plays in insurance? How modes of transport differ mis-delivery claims handling? What is insurers’ attitude towards transloading claims? And finally, why mis-delivery and uncollected cargo claims deserve special attention. SMIC deals with similar questions daily. Each case varies in its cause, and therefore healing recipe differs. But if you are conversant with fundamentals. They could be simple.
In the transport industry, the contracts of carriage (e.g. Bills of Lading, Air Waybills) usually contain an exclusive jurisdiction clause for settling disputes. However, it is not uncommon that the shippers and consignees sue the transport operators in a court other than the one specified in the exclusive jurisdiction clause. In Hong Kong, the transport operators may rely on the Foreign Judgments (Restriction on Recognition and Enforcement) Ordinance to tackle this kind of situation.
The Ningbo Maritime Court issued a Judgment on 25/5/2016, and dismissed a cargo insurer’s (PICC Ningbo) recovery claim of USD25,238.40 against Mitsui O.S.K. Lines Ltd (“MOSK”) in relation to the vessel MOL Comfort sinking into the Indian Ocean on 17/6/2013.
In our newsletter last month, we talked about some essential terms in house Air Waybills. In this issue, as the continuation of the loss prevention exercise for freight forwarders, we would like to discuss some essential terms in house Bills of Lading.
The Montreal Convention is an international treaty agreed by 140 states in respect of governing carriers’ liability for injury or death of passengers, damage to or loss of baggage and cargo and losses caused by delays. Hong Kong has adopted it through the Carriage by Air Ordinance (Cap 500).
The limit of liability for international carriage of cargoes by air under the Montreal Convention has been revised from 19 SDR/Kg to 22 SDR/Kg of the gross weight of the cargoes effective from 28 December 2019. We have received many enquiries from freight forwarders about changing their house Air Waybills’ terms to cope with the new limit of liability. We would like to take this opportunity to discuss some essential terms in house Air Waybills.
