Intraline Resources Sdn Bhd v The Owners Of The Ship Or Vessel "Hua Tian Long

HCAJ 59/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 59 OF 2008

Admiralty action in rem against: The ship or
vessel “HUA TIAN LONG” of People’s Republic of China flag

----------------------

BETWEEN

----------------------

INDEX TO JUDGMENT

--------------------------

J U D G M E N T

--------------------------

Nature of this application

1. This is application involves the claimed immunity from suit of an entity of the Central People’s Government – and hence the contention that this court has no jurisdiction over one of the vessels owned by that entity.

2. By summons dated 21 October 2009 the defendants in these proceedings, which on the writ in rem are named as “The Owners of the Ship or Vessel “HUA TIAN LONG”, but which now have been identified as the Guangzhou Salvage Bureau, have applied for a stay and/or dismissal of this action on the ground that, in the words of the application, “the Defendant enjoys, and has not waived, the sovereign and/or crown immunity and hence this Honourable Court has no jurisdiction over the Defendant”.

3. This is a case which has been in existence before the Hong Kong court since the issue on 15 May 2008 of the Admiralty action in rem against ‘The ship or vessel “HUA TIAN LONG” of the People’s Republic of China flag” resulting in the arrest a few days later of that vessel in Hong Kong harbour. How, then, has the present situation arisen?

The factual background

4. The principal facts leading to this case are essentially undisputed. This action arises out of an alleged breach of contract on the part of the defendant owners of the “HUA TIAN LONG” which vessel, say the plaintiff, failed to honour its commitment under a Memorandum of Agreement entered into by the plaintiff with the Guangdong Salvage Bureau (‘GZS’) to make available this vessel – which is the largest floating derrick crane-barge based in Asia – to work on offshore Malaysian and Vietnamese projects (‘the Newfield’ and ‘Talisman’ projects) for the installation of pipelines and oil platforms.

5. Consequent upon the non-appearance of the “HUA TIAN LONG” – which, it transpires, in the period in question was under charter to China National Overseas Oil Company, which refused to release the vessel for the plaintiff’s use – the plaintiff says that it was unable properly to complete the Newfield and Talisman projects, which it had been awarded on 16 January 2007, and hence it now claims damages against defendant owners in the sum of some hundreds of millions of US dollars for fraudulent misrepresentation and/or breach of contract.

6. On 21 April 2008 the plaintiff invoked the Admiralty jurisdiction of the High Court. The writ was nailed to the mast, and the bailiff arrested the “HUA TIN LONG” in Hong Kong waters, this massive lifting barge earlier having been sent from its Guangzhou base to Hong Kong to raise from the sea bed a Ukrainian tug which some weeks earlier had been in collision with a container vessel in the outer reaches of the harbour, and had sunk with tragic loss of life.

7. By order dated 30 April 2008 Reyes J dismissed the defendants’ application for setting aside the writ and this action, and for the release of the vessel from arrest.

8. In the skeleton argument of counsel for owners which was placed before Reyes J at this hearing to set aside the arrest, the following appears at paragraph 3 thereof, under the heading ‘Sovereign Immunity’:

“GZS is a Bureau of the Ministry of Communications. For the purpose of the present application, GZS will not seek to invoke any principle of Sovereign Immunity. However, GZS reserve the right to do so at a future stage.”

9. Some five weeks later, on 9 May 2008, GZS ultimately secured the release of the “HUA TIAN LONG” by arranging bail bonds to be posted on its behalf by China Merchants’ Bank; in the event, the application for bail bond(s) was hotly disputed at hearings both before this court and in the Court of Appeal.

10. At first instance the Order of 9 May 2008 was for the provision of bail in the sum of US$65 million, which sum, consequent upon the admission of fresh evidence, was varied by the Court of Appeal to the sum of US$122,412.000: see [2008] 4 HKLR 719 (1^st instance) and [2008] 4 HKLR 745 (CA).

11. Having furnished bail and thus securing the release of the vessel by Order of Reyes J on 4 June 2008, the defendants now seek an order granting immunity from suit – hence the present application commanding this judgment.

Chronology of the proceedings to-date

12. Whilst a full and highly detailed chronology of this litigation to-date has been supplied to the court during the course of this hearing, it may be worth sketching in the principal procedural landmarks, since this information is germane to legal argument as to the sustainability of this application in the context of waiver and submission to the jurisdiction.

13. Subsequent to the issue of the writ in rem on 21 April 2008, and the failure of the application to set aside the writ, the defendants acknowledged service of the writ on 2 May 2008. Thereafter followed the decision, and subsequent appeal, as to the amount of bail to be posted, the writ was amended on 15 May, and on 22 May 2008 a Statement of Claim was filed; some idea of the scale of the case can be gleaned from the figures claimed: the sum claimed in damages variously is pleaded at US$190 million in wasted costs/expenditure, US$96 million in damages for fraudulent representation, and a like sum in damages for breach of contract.

14. On 31 July 2008 a Defence and Counterclaim was filed ‑ the sum of almost US$38 million is claimed in damages for wrongful arrest ‑ and on 16 September 2008 a Reply and Defence to Counterclaim was filed; Further and Better Particulars of the Statement of Claim were sought on 3 November 2008.

15. Discovery by list took place between the parties over the period 13 February 2009 to 6 October 2009.

16. On 12 May 2009 a Case Management summons was issued, resulting in orders from Reyes J on 7 July (as to case management) and on 11 September 2009 (as to service of witness statements), and on 26 May 2009 the plaintiff gave notice of payment into court of security for costs in the sum of HK$5,812,800; provision for further security for costs was made by order of this court dated 1 February 2009.

17. Exchange of witness statements of fact and on quantum took place on 2 October 2009, and on 6 October 2009 a notice was issued seeking to set down the case for trial.

18. After due consultation with the court and counsel, trial dates were fixed for a 20 day hearing commencing on 5 July 2010 and concluding on 30 July 2010, but these dates clearly now are in jeopardy given the issuance of the defendants’ ‘immunity summons’ on 21 October 2009; it appears tolerably clear that whatever this court’s decision upon the present application, either side will embark upon the appellate chain in circumstances in which very large sums of money are claimed, in addition to the practical significance and legal importance of the point which is central to this debate.

Evidence at the hearing of this application

19. For the plaintiff affirmation evidence was filed by Ms Hui Kit Yu, who swore two affirmations, and Mr Lin Feng.

20. Ms Hui is a trainee solicitor of M/s Holman Fenwick & Willan, which firm acts for the plaintiff, who provides evidence of the factual background, identifying the defendants and their business activities, and commenting upon various other aspects of this case, including that of waiver and the issue of submission to the jurisdiction; Dr Lin Feng is a Professor at the City University School of Law, and gave evidence to the court qua expert on Chinese law in the context of the claimed immunity from suit.

21. For the defendants primary evidence was provided by Mr Fu Shi Qun, who swore five affirmations in support of the application.

22. Mr Fu is an officer of the defendant, GZS, who has been with that entity since 1980 – he says that he is the Manager of its Business Administration Office. His evidence was filed in support of the defendant’s immunity application, and he says in terms (at paragraph 3 of his 1^st affirmation) that he is “authorized to, and instructed by the Ministry of Communications, Guangzhou Salvage Bureau of the Central...