Newocean Petroleum Co Ltd v. Rio Tinto Shipping (Asia) Pte. Ltd
Read the full judgment text of CACV 122/2018 on BabelCite. This Court of Appeal judgment was delivered on 30 April 2019.
1. I respectfully agree, for the reasons given by Cheung JA, the appeal should be allowed and there should be an order set out the end of this judgment. In light of the judgments of the English Court of Appeal and the Supreme Court in The Res Cogitans [2016] AC 1034, it is understandable why the plaintiff deemed it necessary to seek a declaration that no permission or licence was granted under the contract between the plaintiff and OWBC for the purpose of propulsion of the Vessel. The basis for
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CACV 122/2018 [2019] HKCA 485 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 122 OF 2018 (ON APPEAL FROM HCA NO. 2265 OF 2016) ________________________
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________________________ J U D G M E N T ________________________ Hon Lam VP : 1.I respectfully agree, for the reasons given by Cheung JA, the appeal should be allowed and there should be an order set out the end of this judgment. In light of the judgments of the English Court of Appeal and the Supreme Court in The Res Cogitans [2016] AC 1034, it is understandable why the plaintiff deemed it necessary to seek a declaration that no permission or licence was granted under the contract between the plaintiff and OWBC for the purpose of propulsion of the Vessel. The basis for such contention was pleaded at paragraph 10 of the amended statement of claim by reference to the relevant terms. Had there been such permission or licence, a claim for conversion cannot be maintained notwithstanding that title of the consumed bunker remained with the fuel supplier. This seems to me to follow from the analysis of Lord Mance JSC in the judgment of the Supreme Court at [28] to [31] and [39]. Thus, as my Lord elaborated below, the plea is part of the plaintiff’s cause of action on conversion. The Judge had erroneously misapprehended that to be a claim in contract. As regards the arguments of Mr Luxton based on the respondent’s notice, I have nothing to add to the reasons of Cheung JA in rejecting the same except to reiterate that on the evidence the plaintiff has established a good arguable case on conversion based on the mixing of bunkers which took place in Hong Kong which had been pleaded at paragraphs 15.3 and 15.5 of the amended statement of claim. Hon Cheung JA : I. The appeal 2.1The plaintiff is a Hong Kong company. The defendant is a Singapore company. The plaintiff issued a writ endorsed with a statement of claim in Hong Kong against the defendant. The Master granted the plaintiff leave to serve the concurrent writ out of the Hong Kong jurisdiction on the defendant in Singapore. 2.2On the application of the defendant, Deputy High Court Judge Kwok SC set aside the order of the Master. He set aside the concurrent writ and its service on the defendant. He further refused to regrant an order allowing the plaintiff to serve the concurrent writ on the defendant again. 2.3The plaintiff’s application for service out of jurisdiction is based on Order 11, rule 1(1)(f) of the Rules of the High Court (‘RHC’)(Cap. 4 sub leg A) namely, its claim is founded on a tort and the damage was sustained or resulted from an act committed within the jurisdiction. 2.4The Judge found that the plaintiff had pleaded a good arguable case on conversion but decided to set aside the order of the Master by reason of material non‑disclosure. 2.5The plaintiff now appeals against the Judge’s decision. The defendant issued a respondent’s notice, challenging the Judge’s decision that the plaintiff had a good arguable case on conversion. II. The plaintiff’s case 3.1This is another case arising from the liquidation of companies under the OW Bunkers Group. 3.2The defendant was the time charterer of the vessel MV Star Big (the ‘Vessel’) by a time charterparty between Donatus Marine Inc (the ‘Owner’) and the defendant dated 27 October 2010. The defendant agreed to provide and pay for all the marine fuel (bunkers) on the vessel. 3.3The plaintiff’s case is that the defendant had ordered the bunkers from OW Bunker Far East (S) Pte Ltd (‘OWB Far East’). The plaintiff claimed that it was the ultimate supplier of the bunkers. On 27 October 2014, it received an order from OW Bunker China Limited (‘OWBC’) for the supply of the bunkers. Paragraph 7 of the statement of claim pleaded that :
3.4OWBC in turn entered into a contract with its affiliate OWB Far East to deliver or arrange for the delivery of the bunkers to the Vessel. At about the same time, OWB Far East contracted with the defendant to deliver or arrange for the delivery of the bunkers to the Vessel. 3.5The plaintiff pleaded that in its contract with OWBC, the plaintiff was to retain title to the bunkers pending payment, and that pending payment in full for the bunkers, such bunkers would be clearly identified as product supplied by the plaintiff and kept separate from any other fuel or lubricant. The plaintiff did not authorise, permit or license the use of the bunkers pending payment for, or the passing of property in, such bunkers. 3.6The plaintiff pleaded that the defendant purported to give permission to the owner to use the bunkers for the purpose of propulsion of the Vessel pending payment and the passing of title to the bunkers but, in fact, the plaintiff had never given permission to its customer OWBC and accordingly neither OWB Far East nor the defendant had the authority to grant such permission to their respective buyers or to the owner. 3.7The plaintiff further pleaded that it had never received payment for the bunkers. OWBC went into liquidation without paying for the bunkers. In the premises the bunkers, while they existed, remained the property of the plaintiff. The plaintiff pleaded its case on conversion of the bunkers as follows :
3.8The plaintiff claimed damages against the defendant for conversion in a sum of US$948,802.05 which is made up as follows : 1) Quantity of Bunkers actually supplied: 1,987.02 MT 2) Unit price per MT: US$477.50 3) Total: 1,987.02 MT x US$477.50 = US$948,802.05 3.9The plaintiff relied on its General Terms and Conditions for Sales and Delivery of the Marine Fuel dated March 2014 (the ‘General Terms and Conditions’) which expressly provided that the terms thereof shall apply to the sale and delivery of marine fuel oil, marine diesel fuel, gas oil and similar products (‘Marine Fuel’) by the plaintiff or by any subsidiary of NewOcean Energy Holdings Limited (in each case the ‘Seller’) to a third party customer (the ‘Buyer’) buying from the Seller, whether as principal, agent, broker or otherwise. 3.10Clause 1(c) further provides that :
3.11Clauses 5 and 11 are also relevant :
III. Decision of the Judge 1) Good arguable case on conversion 4.1The Judge held the plaintiff has a good arguable case on conversion. First, he relied on the judgment of Deputy High Court Judge Le Pichon in NewOcean Petroleum Co Ltd v. OW Bunker China Limited (in provisional liquidation) & Another (HCA no. 381 of 2015) (dealing with a similar clause 5(b) in transactions involving another company of the OW Bunkers Group) in which she held :
4.2The Judge further referred to the decision of this Court in NewOcean Petroleum Co Ltd v. OW Bunker China Limited (in provisional liquidation) & Another (HCMP 1474/2016) where the 2nd defendant in HCA 381 of 2015 applied for leave to appeal against DHCJ Le Pichon’s decision in HCMP 1474/2016. This Court declined to grant leave to appeal on the conversion claim :
4.3Second, the Judge (proceeding on the basis that it is not unarguable that the plaintiff’s Terms and Conditions applied to the contract between the plaintiff and OWB China) held that the plaintiff was also relying on the mixing of the bunkers in its conversion claim. The Judge referred to the evidence on the mixing of the bunkers when they were pumped to the Vessel in Hong Kong. 4.4Third, in respect of the defendant’s contention that no consumption of the bunkers took place within the jurisdiction (this is relevant to the defendant’s argument of whether the damage was sustained in Hong Kong or the tort which resulted from an act committed in Hong Kong), the Judge held that :
2) Material non-disclosure 4.5The Judge then held that as the plaintiff had expressly stated that its case for service out of jurisdiction is based on tort and not contract, there was material non‑disclosure by the plaintiff because of item (1) of the relief claimed (‘prayer (1)’) in the statement of claim which pleaded that :
4.6The Judge held that because of this prayer the plaintiff’s claim is arguable a claim in contract. He held that :
IV. My view 1) Cause of action is tort and not contract 5.1In my view, the Judge had misunderstood the plaintiff’s case on prayer (1). It is plain that the plaintiff’s case as pleaded is based on conversion (hence a claim founded on tort within the ambit of Order 11, rule (1)(f)) and not contract. Notwithstanding the reference to contract in prayer (1), the plaintiff’s claim remains to be a conversion claim. The reference to contract is simply for the purpose of showing that the plaintiff had not given permission to the use of the bunkers before payment thereby removing a defence to conversion. Support for this view is found in another case concerning company of the OW Bunkers Group, namely, PST Energy 7 Shipping LLC and Another v. O W Bunker Malta Ltd and Another (The “Res Cogitans”) [2015] 2 Lloyd’s Rep 563. 5.2The summary of facts of that case is as follows : 1) On 31 October 2014 the owners of the vessel Res Cogitans (the owners) contracted with OW Bunker Malta Ltd (OWBM) for the supply of bunkers at a price of US$443,800. The delivery date was 3 or 4 November 2014. The contract provided that the physical supplier of the bunkers would be ‘Rosneft’ and that payment would be made within 60 days from the date of delivery. OWBM assigned its right to payment to its bank, ING Bank NV (ING). Notice of the assignment was duly given. 2) On the same day OWBM contracted with its Danish parent company. OW Bunker & Trading AS (OWBAS), to supply the bunkers. OWBAS in turn contracted with Rosneft Marine (UK) Ltd (Rosneft), a UK company. The OWBAS/Rosneft contract required OWBAS to make payment in the sum of US$416,000. Rosneft in turn contracted with its Russian subsidiary, RN‑Bunker Ltd, and it was the latter company which supplied the bunkers to the vessel at Tuapse in the Black Sea on 4 November 2014. 3) All the contracts included a retention of title clause in favour of the supplier, a provision that payment would be due a fixed number of days after delivery, and gave permission for the shipowner to consume the bunkers in the meanwhile. 4) Payment from OWBAS to Rosneft in the sum of US$416,000 was due by 4 December 2014 while payment from the owners to ING was due by 3 January 2015. Neither payment was made, although Rosneft paid RN‑Bunker on 18 November 2014. 5) On 6 November 2014 OWBAS announced that it was commencing insolvency proceedings. OWBM was not currently in insolvency proceedings. 6. ING brought arbitration proceedings against the owners claiming payment of the US$443,800 due under the contract between OWBM and the owners in its capacity as assignee of OWBM’s rights under that contract. 7. On the determination of preliminary issues the arbitrators held that the bunker supply contract was not a contract of sale to which the Sale of Goods Act applied. ING’s claim to payment was a straightforward claim in debt which was not subject to any requirement as to the passing of property in the bunkers to the owners at the time of payment. If, contrary to their conclusion, the contract had been a contract of sale to which the Sale of Goods Act applied, the conditions in section 49 of the Act were not satisfied because the provision for payment to be made within a fixed period after delivery did not satisfy the requirement that ‘the price is payable on a day certain’. 8. The owners appealed to the UK High Court. 5.3Males J dismissed the appeal. It is only necessary to refer to a short passage in his judgment which is relevant to the issue of permission to use the bunkers before payment :
5.4The Court of Appeal dismissed the appeal by the owners. However, it also held that on the facts of the case, it was not necessary for Males J to deal with the issue of permission to consume the bunkers before payment. The relevant part of the judgment by Moore-Bick LJ which discussed the question of permission to consume the bunkers is as follows :
5.5The Supreme Court dismissed the further appeal by the owners. Likewise, it held that because of the nature of the case the issue before the Court did not involve any claim OWBM had no right to permit the use of the bunkers before payment. The relevant part of the judgment which deals with permission to use the bunkers is in the judgment of Lord Mance JSC. Lord Mance first dealt with the true nature of the transaction between the parties.
5.6Lord Mance then discussed why the issue of permission in that case was not relevant :
5.7The Res Cogitans case was referred to by this Court in HCMP 1474/2016. It was also referred to by the Judge in his judgment. In contrast with the situation in The Res Cogitans, the plaintiff in this case expressly pleaded that there was no permission being given to consume the bunkers before payment. The is the basis of the plaintiff’s case on conversion. The reference to contract in Prayer (1) is merely for the purpose of showing that the plaintiff had not given such permission. If the cause of action relied upon by the plaintiff is not based on contract, it cannot be guilty of non‑disclosure at all. It is irrelevant for the purpose of the present case that the plaintiff had been found guilty of material non‑disclosure in another High Court action, namely, HCA 446/2015. What matters is the present case. 5.8Mr Luxton for the defendant referred to the case of Gulf Bank KSC v Mitsubishi Heavy Industries Ltd [1994] 1 Lloyd’s Rep 323 in which the dispute arose from a transaction which included a contract whereby the defendants were to supply a plant to the Kuwaiti Ministry of Electricity and Water, and ‘advance payment guarantee’ issued by the plaintiffs to the Ministry and a letter of counter‑indemnity given by the defendants to the plaintiffs in consideration of the plaintiffs issuing the guarantee. The plaintiff sought, amongst other things, the following declaration : ‘A declaration that on the true construction of the defendants’ counter indemnity to the plaintiffs contained in the defendant’s letter to the plaintiffs dated 10 March 1989 and in the events which have happened the defendant is and remains liable to indemnify and hold the plaintiff harmless against any and all payments made by the plaintiff to the Ministry of Electricity and Water, Government of Kuwait (MEW) under or pursuant to the Advance Payment Guarantee issued by the plaintiff in favour of MEW of 22 March 1989 in the sum of Kuwaiti Dinars 27,740,072.78.’ 5.9The defendants there argued that the writ was improperly served on them in Japan because the plaintiff’s claim did not fall within the terms of Rules of Supreme Court, Order 11, rule 1(1)(d) because such a claim is not a claim ‘... brought to enforce, rescind, dissolve, annul or otherwise affect a contract.’ Hobhouse J held that :
5.10In my view, the context of a case is important. The view of Hobhouse J, while relevant to that case, is not applicable to the context of this case when the plaintiff’s cause of action is on conversion. The matter can be tested in this way. Even if the plaintiff had not pleaded prayer (1), in order to establish its claim on conversion, it is clearly entitled to refer to the contract to show that no permission had been given without changing the true nature of its claim. The mere fact that prayer (1) was pleaded would not change it either. Further, as Mr Sussex submitted, this cannot be a contractual claim because the plaintiff did not even include OWB China as a party to the action. 2) The respondent’s notice 5.11It is convenient at this stage to deal with the respondent’s notice. Mr Luxton for the defendant challenged the Judge’s decision on conversion. I have already set out the Judge’s reasons for holding the plaintiff has a good arguable case on conversion which I agree. I have also addressed the true nature of the plaintiff’s claim. Mr Luxton argued that the plaintiff had not shown a prima facie case that it was the owner of the bunkers. He referred to Newocean Petroleum Company Ltd v OW Bunker China Ltd [2016] 3 HKLRD 892 in which Deputy High Court Judge Manzoni SC stated that in order for the plaintiff’s claim to fall within Order 11, rule 1(1)(f), the plaintiff must establish a good arguable case, inter alia, that ‘the title in the bunkers remained with it’ (paragraph 43). DHCJ Manzoni had referred to The Res Cogitans at first instance and in the Supreme Court, which specifies that an intermediate supplier must obtain permission to consume from the true owner of the bunkers (paragraphs 35 to 38). He argued that the plaintiff did not provide any documentary evidence regarding how or when it acquired title to the bunkers. On the contrary, the evidence showed that the bunkers were supplied to the Vessel from the ‘Feoso Leader’, which was a bunker barge ‘employed by the plaintiff’. The bunker barge was owned by the Feoso Group, one of the leading physical suppliers of bunkers in Hong Kong. The bunker delivery note was issued by OW Bunker China, rather than the plaintiff. The effect is that OW Bunker China and not the plaintiff was the ‘bunker supplier’ for regulatory purposes. Such evidence is consistent with the plaintiff being an intermediate supplier of the bunkers. 5.12Apart from merely challenging the ownership of the plaintiff, the defendant was not able to provide any clear and uncontroversial evidence that the plaintiff was not the owner. In my view when the Court deals with an application for service out of the jurisdiction, it is not to conduct a mini trial of the action such as whether the plaintiff is indeed the owner of the bunkers. At this stage, the Court merely has to look at the pleadings by which the plaintiff has pleaded it was the owner of the bunkers. Implicit in this plea is that the plaintiff has a proprietary title or possessory title to the bunkers which is relevant to its case on conversion. The matters referred to by Mr Luxton are matters that are fit for investigation at the hearing of this action. 5.13Further for the purpose of argument, even if the plaintiff is not the immediate supplier who gave the permission, as Mr Sussex SC for the plaintiff pointed out, in The Res Cogitans the Court of Appeal [38] and Supreme Court [39] referred to the requirement that the permission so given must bound all the suppliers in the chain of contracts. How the permission bound the plaintiff is a point that clearly merits consideration and not simply brushed aside in a summary application to set aside the service of the writ. 5.14Mr Luxton then argued that under Order 11, rule 1(1)(f) RHC, there are two alternatives – the claim is founded on a tort and (i) the damage was sustained in Hong Kong, or (ii) the tort resulted from an act committed in Hong Kong. The first alternative (damage sustained in Hong Kong) requires some significant damage to have been sustained in the jurisdiction. The second alternative (tort which resulted from an act committed in Hong Kong) requires that the act complained of was substantial and efficacious to the damage sustained: Metall und Rohstoff AG v Donaldson, Lufkin & Jenrette Inc [1990] 1 QB 391 at 437D-F. He argued that no damage was sustained in Hong Kong and no act which resulted in the tort was committed in Hong Kong. He referred to the evidence which showed that bunkers were not consumed within the jurisdiction. 5.15With respect, this is another matter which should be properly tried. In my view, the plaintiff’s case on conversion has been sufficiently pleaded for the purpose of the application for service out of the jurisdiction. 3) Discretion exercised afresh 5.16In my view, the Judge had wrongly exercised his discretion because of his misunderstanding of the plaintiff’s case on conversion. There clearly is no proper basis for the Judge to set aside the Master’s order by reason of non‑disclosure. In view of the Judge’s wrong exercise of discretion, this Court is entitled to exercise the discretion afresh and dismiss the defendant’s application to set aside the service of the writ. V. Conclusion 6.Accordingly, I would allow the plaintiff’s appeal and dismiss the respondent’s notice of the defendant. VI. Costs 7.I would make an order nisi that the plaintiff is to have the costs of its appeal and of the respondent’s notice.
Mr Charles Sussex SC, instructed by ONC Lawyers, for the plaintiff Mr Nick Luxton, instructed by Gall, for the defendant | ||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under CACV 122/2018