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Re "Kappa Sea"

Judgment Cited authorities 7 Cited in Precedent Map Related
Vincent
Judgment Date25 August 2017
Year2017
Judgement NumberHCAJ101/2015
Subject MatterAdmiralty Action
CourtHigh Court (Hong Kong)
HCAJ101/2015 RE "KAPPA SEA"

HCAJ 101/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 101 OF 2015

____________

Between:-

The owners and/or those entitled to sue in respect of a cargo lately laden on board the ship or vessel “KAPPA SEA” Plaintiffs
and
The owners and/or demise charterers of the ship or vessel “KAPPA SEA” Defendants

____________
Before: Hon Ng J in Chambers
Date of Hearing: 10 March 2017
Date of Judgment: 25 August 2017

___________________

J U D G M E N T

___________________

Introduction

1. This is the Defendant’s application by summons dated 26 September 2016 (“Summons”) for an Order under RHC O 12 r 8(2)(a) and (b), r 8(2A)(a) and inherent jurisdiction that the court shall not exercise any jurisdiction it has in this Action; alternatively, that all further proceedings in this Action be stayed. In the Summons, it is stated that the grounds for the application are that in all the circumstances of the case considering the best interests and convenience of the parties to the proceedings and the witnesses in the proceedings, the proceedings should be conducted in the District Court of Yangon, Myanmar (“Yangon Court”).

Background Facts

2. The Plaintiffs’ claim is a cargo claim, the cargo being RBD Palm Olein (“Palm Olein”), an edible oil. The following facts are pleaded in the Statement of Claim.

3. At the material time, the Defendant, Yangtze Navigation (Singapore) Pte Ltd, a Singapore company, was the demise charterer of the vessel “Kappa Sea” (“Vessel”).

4. Golden Agri International Pte Ltd (“1st Plaintiff”), a Singapore company, was the seller and shipper of 3,200 MT of Palm Olein (“Cargo”).

5. By a Bill of Lading dated 17 August 2014 issued in Singapore, the Defendant acknowledged receipt of the Cargo in good order and condition and agreed to carry the same from Tarjun, Indonesia to Yangon, Myanmar on board the Vessel. The Hague‑Visby Rules were incorporated into the Bill of Lading by virtue of clause 1(b) the General Paramount Clause and owing to the fact that the Bill of Lading was signed in Singapore. Alternatively, the Hague Rules were incorporated into the Bill of Lading by virtue of clause 1(a) of the General Paramount Clause by contractual incorporation.

6. Yangon Technical and Trading Co. Ltd (“2nd Plaintiff”), a Myanmar company, was the buyer of the Cargo and the notify party under the Bill of Lading. It was also said to be the endorsee and/or the lawful holder of the Bill of Lading.

7. The Vessel together with the Cargo laden thereon departed from Tarjun, Indonesia on or around 17 August 2014. The Vessel arrived at Yangon, Myanmar on or around 29 August 2014 and began discharging on the same day. While the Vessel was discharging to the shore tank “J”, contaminants were discovered in the Cargo. The contaminated Cargo was then moved to a site approximately 20 km from the port for storage.

8. Both the Plaintiffs and the Defendant had appointed their own local surveyors to assess inter alia the particulars of the contaminants and cause of contamination. The conclusion of the surveyors was that the contamination was from the Vessel’s internal discharge line which contained remains of stearin, being the previous cargo carried by the Vessel.

9. Both surveyors found that 383.86 MT of the Cargo was contaminated. Out of the 383.86 MT, 345.988 MT were successfully separated from the contaminant (“de‑contaminated Cargo”). A sample of the de‑contaminated Cargo was later certified by the Food and Drugs Administration of Myanmar (“FDA”) as fit for human consumption. Notwithstanding the certification, it was the Plaintiffs’ case that the de‑contaminated Cargo could not be sold at full market rate because potential buyers knew that they had been contaminated. The 2nd Plaintiff eventually sold them at less than their commercial value.

10. Some of the remaining contaminated Cargo was sold for industrial use (“Industrial Use Cargo”) at a much lower price while the remainder was simply disposed of as being unusable.

11. Apart from loss in the value of the Cargo, the Plaintiffs also claim various “salvage costs” eg storage fees, reprocessing charges etc.

12. The Plaintiffs claim the Defendant was negligent, in breach of contract, in breach of duty, in breach of the Hague‑Visby Rules alternatively Hague Rules for inter alia failing to properly handle the Cargo or deliver the Cargo at Yangon, Myanmar in the same good order and condition as when shipped. The amount of damages claimed is US$143,852.02.

Service of Process

13. While this is an in rem action, the court’s jurisdiction was not founded on the arrest of the Vessel or the service of the Writ on the Vessel in Hong Kong. Further, since this is an in rem action, there could be no service of the in rem Writ on the Defendant, a Singaporean Company, outside jurisdiction: Hong Kong Civil Procedure 2017 Vol 1 para 11/1/4B, and there was no attempt to seek leave to do so.

14. Under RHC O 75 r 8,

“(1) Subject to paragraph (2), a writ by which an action in rem is begun must be served on the property against which the action is brought…

(2) A writ need not be served or filed as mentioned in paragraph (1) if the writ is deemed to have been duly served on the defendant by virtue of Order 10, rule 1(4) or (5).”

15. RHC O 10 r (1)(4) provides:

“(4) Where a defendant’s solicitor indorses on the writ a statement that he accepts service of the writ on behalf of that defendant, the writ shall be deemed to have been duly served on that defendant and to have been so served on the date on which the indorsement was made.”

16. What happened was that the P & I Club of the Defendant, in order to avoid the arrest of the Vessel, acceded to the Plaintiffs’ request and signed a Letter of Undertaking dated 23 May 2016 which provided inter alia that:

“(2) We undertake that we will, within 14 days of the receipt from you of a request so to do:

(a) instruct solicitors to accept on behalf of the Demise Charterers service at your option of in rem and/or in personam proceedings brought by Cargo Owners and to file an acknowledgment of service thereof…”

17. Thereafter, the amended Writ was served on the Defendant’s Hong Kong solicitors Messrs Tsui & Co who, at the time of accepting service in June 2016, expressly reserved the Defendant’s right to contest the jurisdiction of the Hong Kong Courts and made clear that service would be accepted on that basis only. Messrs Tsui & Co also made an endorsement on the amended Writ to that effect.

18. This prompted the parties to raise an interesting preliminary argument as to whether or not the court should treat this as a so‑called “as of right” case.

19. Mr Luxton, for the Plaintiffs, argues that the P & I Club had contractually agreed to instruct solicitors to accept service of in rem and/or in personam proceedings, in consideration of the Plaintiffs refraining from arresting the Vessel. The acceptance of service of the Writ within the jurisdiction under the terms of the Letter of Undertaking was akin to jurisdiction being established by the arrest of the Vessel: PT Krakatau Steel (Persero) v Mount Kerinci LLC [2009] 1 HKLRD 264. Hence, this is in effect an “as of right” case and the Hong Kong Court’s jurisdiction should not lightly be disturbed: The Kapitan Shvetsov [1997] HKLRD 374; Hong Kong Civil Procedure 2017 Vol 1 para 11/1/10A. Mr Luxton further submits that the onus is on the Defendant to show that (i) Hong Kong is not the forum conveniens; and (ii) the Myanmar Court is an available forum and is clearly or distinctly more appropriate than Hong Kong.

20. Mr Alder, for the Defendant, submits that service was not “as of right” in the sense that neither the Defendant nor the Vessel was served in Hong Kong to give the court statutory jurisdiction. Rather, acceptance of the service of the Writ was pursuant to the Letter of Undertaking and, importantly, with an express reservation of the right to challenge jurisdiction. Thus, this case is unusual in that it is neither a RHC O 11 service outside jurisdiction case where the onus would be on the Plaintiffs to show inter alia that Hong Kong is the natural forum, nor an “as of right” case where the onus would be on the Defendant to show the Yangon Court is the natural forum. He submits that the present case is closer to the factual situation in New Link Consultants Ltd v Air China [2005] 2 HKC 260. At [38]–[39], Deputy Judge Poon (as he then was) observed:

“38. Under the Rules of the High Court, service of a writ on a defendant within jurisdiction may be by way of personal service (Order 10, rule 1(1)), registered post at the defendant’s usual and last known address (Order 10, rule 1(2)(a)), insertion through letter box (Order 10, rule 1(2)(b)), indorsement by the defendant’s solicitors on the writ to accept service (Order 10, rule (4)) or in suitable cases, substituted service (Order 65, rule 4). Where the defendant is outside jurisdiction, the writ may be served outside jurisdiction under Order 11.

39. The rules do not prevent the parties from agreeing on how the service of a writ is to be effected. Thus, in cases where a foreign defendant is involved, in order to “short‑circuit” the cumbersome procedure under Order 11 and hence saving costs, solicitors have developed a practice, which is laudable, of agreeing to accept service on behalf of that defendant but reserving at the same time its right to dispute jurisdiction later. (This reservation is important because if the indorsement on the writ by the solicitors is not so qualified, the defendant will be precluded from disputing jurisdiction later: see Hong Kong Civil Procedure, Vol 1, paragraphs 10/1/9...

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