Hanjin Shipping Co Ltd v. Grand King Shipping Ltd
Read the full judgment text of on BabelCite. was delivered on 20 November 1998.
1. There are two summonses before the Court which are in effect cross summonses. The first is issued by the Defendant and is dated 28th May 1998, in which the Defendant asks that judgment be entered against the Plaintiff and that the action be dismissed under Order 18 rule 19 and/or Order 19 rule 1 of the Rules of the High Court and/or the inherent jurisdiction of the Court on the ground that the Plaintiff has failed to serve a statement of claim within the time prescribed, and that this action
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HCCL78/98 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL LIST NO.78 OF 1998 ---------------
--------------- Coram : The Hon Mr Justice Stone in Chambers Dates of Hearing : 19 October and 19 November 1998 Date of Delivery of Judgment : 20 November 1998 ____________________ J U D G M E N T ____________________ 1. There are two summonses before the Court which are in effect cross summonses. The first is issued by the Defendant and is dated 28th May 1998, in which the Defendant asks that judgment be entered against the Plaintiff and that the action be dismissed under Order 18 rule 19 and/or Order 19 rule 1 of the Rules of the High Court and/or the inherent jurisdiction of the Court on the ground that the Plaintiff has failed to serve a statement of claim within the time prescribed, and that this action is otherwise an abuse of the process. 2. For its part, the Plaintiff issued its own summons dated 12th June 1998, whereby the Plaintiff prayed for an order that this action be stayed pending the outcome of the arbitration proceedings commenced by the Plaintiff in England. 3. In order to understand how these summonses arise, I ought, I think, briefly to venture into the factual background. 4. The Plaintiff's action was commenced by writ on 21st March 1998. The Writ itself was generally indorsed as follows :-
5. As the endorsement indicates, the Plaintiff's claim arises out of a charterparty which the Plaintiff contends that it concluded with the Defendant company on or about 10th September 1997, the Plaintiff's claim being for dead freight, demurrage and damages for detention under that charterparty. The Defendant's case is straightforward. It denies that it is a contracting party. 6. On the day of the issue of the Writ, that is on 21st March 1998, the Plaintiff made an ex parte application and obtained a Mareva injunction from Mr Justice Yeung. Some two weeks later, at the end of March 1998 and after a contested hearing, the Mareva injunction was discharged by Mr Recorder Kotewall S.C.; the date of his judgment was 1st April 1998. The injunction was discharged primarily, it appears, upon the basis of material non-disclosure, albeit the learned Recorder was unable at that stage to say that the Plaintiff had established a good arguable case on the issue of the identity of the charterer. Perhaps of greater significance in the present context was the learned Recorder's order for costs upon such discharge : this is at paragraph 3 of his Order dated 1st April 1998, and reads :-
7. I am told that this order was made against the background of submissions from Mr Carolan, Counsel for the Defendant who appeared before Recorder Kotewall and also in this Court, to the effect that the successful Defendant should have its costs forthwith, and the submission of Mr Kerr, then Counsel for the Plaintiff, who asked for the usual interlocutory order "in any event" and then - and this is Mr Carolan's verbatim note - apparently observed "If the Plaintiff does not proceed with this action, it will end", with the obvious implication that in that eventuality the Plaintiff would then be able to recover its costs. 8. There is some dispute about what was or was not the implication of Mr Kerr's submissions, and in particular those instructing Mr Sussex are adamant that the word 'arbitration' was not used. But what is evident as a matter of history is that the learned Recorder made his costs order in those terms at a time when no arbitration had been commenced, that is, at that stage the existing action constituted the only proceedings between the parties which were then in place. 9. Be that as it may. Nothing further happened in the action and the next step was that the Plaintiff commenced arbitration proceedings in London on 14th May 1998; this is the arbitration which is presently on-going. Although the Defendant maintains its stance that it is a non-party to the relevant charterparty, and whilst it has made representations to the arbitrator to this effect, I am told by Mr Carolan that it does not intend to participate in the substantive debate before the learned Arbitrator. I am further told, in the context of the on-going arbitration, that the Arbitrator has recently handed down a Final Interim Award upon the issue of his jurisdiction, part of which reads as follows :-
10. This then is the broad background against which these summonses have been brought by the parties, albeit the principal motivation for the respective applications at this stage is abundantly clear : this case is purely and simply about costs, namely, the costs the subject of the learned Recorder's Order. 11. The Defendant, who has been successful in discharging the Mareva, wants to recover its costs; for its part, the Plaintiff wishes to avoid being in the position of having to pay the costs order of the learned Recorder pending resolution of the arbitration (which it no doubt expects to win), and thus wishes to be placed in the position to set-off its existing costs liability in these proceedings against that which will be found to be due and owing by the Defendant in the arbitration. To pay now without the advantage of such a set-off is doubtless regarded as throwing good money after bad, there being apparently a real doubt, in the Plaintiff's mind at least, about the ability of the Defendant to satisfy any arbitration award. Indeed, such ability so to set-off, asserts Mr Sussex for the Plaintiff, represents "the ultimate justice of the case" in these particular circumstances. 12. Mr Carolan on behalf of the Defendant makes no bones about asking for a dismissal rather than a stay. Dismissal is the proper way to deal with this situation, he says. The 'event' contemplated by the learned Recorder's Order could and can only be the end of this action, there being no alternative event in terms of what, at the time the order was made, was no more than a prospective arbitration. Moreover, in this regard, the present action clearly is of no use. The Plaintiff wants the substantive liability issue to be determined in the London arbitration, and this will now happen. The Defendant does not ask the Court to dismiss on the basis of the Defendant's claim that it is not a party to the agreement; it simply says that the present action should be dismissed because the Plaintiff has not filed a claim and now has no intention of doing so. The Plaintiff has chosen to arbitrate rather than to litigate, and the present action will never be used to resolve the substantive dispute. In the event, further submitted Mr Carolan, the present action was used only to obtain a Mareva which could not be held; therefore when the Plaintiff wishes to seek the assistance of the Court collateral to the arbitration, or seeks to enforce an arbitral award, the provisions of Order 73 amply assist, and are designed specifically to do so. Mr Carolan sums up his stance rather neatly when he says that "the happenstance of an existing action cannot be clung onto just to frustrate the Defendant's ability to recover costs it has been awarded." 13. For the Plaintiff, which of course wishes formally to obtain a stay of these proceedings, Mr Sussex maintains that Mr Carolan's approach is essentially wrong in principle. He says that in such circumstances, and he has referred me to a number of diverse authorities in this area, a stay of proceedings is in the natural and well-established order of things. He makes the point that when the Court renounces jurisdiction in favour of contractually agreed arbitration, such renunciation is provisional only. And in this context he cites the well-known text Mustill and Boyd, Law & Practice of Commercial Arbitration in England, 2nd Edn (1989), page 156 at para.5, which states :-
14. Further sub-paragraph 6 of the same text reads as follows :-
I would observe in passing that I have been taken to a number of the cases which are footnoted with reference to this latter passage. And indeed, said Mr Sussex, the latter passage demonstrated what was in effect Mr Carolan's second basic error of approach, namely, that it could not be said that this action could never be of any further use. To the contrary, he said; there was "always the chance that the arbitration will require some form of ancillary relief from the Hong Kong Court" so that, for example, the Plaintiff might use the present proceedings to come to the Hong Kong Court for ancillary discovery orders against a recalcitrant (and non-participating) Hong Kong defendant. 15. These matters aside, however, Mr Sussex put his case considerably higher. In the circumstances, he said, this Court had "no alternative" but to order a stay of these proceedings pursuant to the provisions of Article 8 of the Model Law. In other words, whatever the Court thought about it (and during argument the Court made it plain that it thought a good deal), the Court had no room for manoeuvre. Article 8 sub-rules (1) and (2) read as follows :-
16. Absent satisfaction of the statutory provisos within Article 8(1), said Mr Sussex, the stay was mandatory, in this connection citing the Hong Kong Court of Appeal decision in Tai Hing Cotton Mill Ltd. v. Glencore Grain Rotherdam B.V. [1996] 1 HKC 363 (albeit I note that the applicant for the stay in that case was not the plaintiff but the defendant). 17. In response to the submission based upon Article 8, Mr Carolan had persuasively argued that there was no scope or reason to apply Article 8 where the Plaintiff had already commenced arbitration; in other words, the fact of a pre-existing arbitration removes the applicability of Article 8. And, on the facts of this case, said Mr Carolan, the Plaintiff's summons for a stay was issued on 12th June 1998, two weeks after the Defendant's application for dismissal of the action and over a month after the Plaintiff had already commenced the arbitration. 18. However this approach, argued Mr Sussex, was such as to "lead the Court into heresy". The present case, he submitted, was firmly within Article 8 which (unlike previous legislation) does not differentiate on its face between plaintiff or defendant as the requesting party. There were but three statutory circumstances in which the Court could refuse to grant a stay, none applied in this case, and the fact of a pre-existing arbitration was an irrelevance. 19. I confess that I am not enamoured of this point. No court warms to the position wherein it is told that it has nowhere to go but upon the route upon which it would otherwise decline to venture. Nor am I minded to venture into the broad merits of the dispute itself, or to accord any weight to Mr Sussex's frequent observations that the Defendants are in effect rogues seeking to avoid their true liabilities. I do not know if this be right or wrong. What I do know, and what cannot be gainsaid as a matter of history, is that the Plaintiff chose to issue the present proceedings solely for the purpose of obtaining Mareva relief, only for that injunctive relief to be discharged, from which discharge there has been no appeal, and that thereafter a costs order was made. And although, as Mr Sussex's solicitors insist, there may then have been no specific reference to arbitration, such order on its face was made on the basis that there would be an 'event' in the action. Six weeks later, however, an arbitration is commenced wherein the Arbitrator now has ruled that he has jurisdiction to decide whether there is indeed a valid arbitration agreement between the Plaintiff and the Defendant, and it is evident that the substance of the issue will be resolved by that arbitration in London. Given that I do not accept Mr Sussex's submission that the event within Recorder Kotewall's costs order is now in effect that of the arbitration, for all practical purposes these present proceedings have become little more than a repository for unpaid costs which may or may not become subject to a set-off against orders in the arbitration which the Plaintiff may secure in its favour. I cannot believe, if the learned Recorder had known what was going to occur shortly after he made his Order, that he would not have acceded to the costs submission made to him by Mr Carolan at that time. Indeed, it appears that the clear implication of the costs submission made by Mr Kerr for the Plaintiff was that if the present action were to go no further, costs then would be recoverable without further delay. 20. However, as Mr Sussex has reminded me, this court is not an appellate court, and that whatever I may think of the justice of the situation that has now come about, there is little I can do about it, given the strictures of Article 8, and the established jurisprudence in this area. I note that it is accepted by both Counsel that the arbitration in question is international and not domestic, and also that, in the course of his submission Mr Carolan accepted, correctly in my view, that the term "a party" in Article 8 is on its face sufficient to include both Plaintiff and Defendant. As a matter of construction of the words used, I am driven to accept that this is the case, although I find the underlying logic somewhat elusive. In situations such as these, it is virtually always the Defendant who seeks to dispute the jurisdiction of the court selected by the Plaintiff, and indeed one of the ironies in this case is that it was almost certainly open for the Plaintiff to continue with its claim in this jurisdiction untrammelled by concerns about the arbitration clause, since it is the Defendant's case that, as a non-contracting party, it was in no sense bound by such a clause. 21. Be that as it may. During the overnight adjournment I have found no further illumination on the point save reference to a brief paragraph in Mr Morgan's useful commentary on the Hong Kong Arbitration Ordinance (1997), wherein he observes at p.496 :-
22. There is no doubt that this authority accords with and follows the line of argument developed by Mr Sussex, whom I am reminded had referred this passage to the Court during the hearing prior to the adjournment. 23. After reflecting on the issue, therefore, I have reluctantly concluded that this Court must recognize and comply with the mandatory provisions within Article 8 and, in the circumstances, must accede to the stay submission mounted in this case by Mr Sussex. However I would observe, should the matter go further, that in the particular circumstances of this case had this court not been placed in what is in effect an Article 8 straitjacket, the court would have exercised its discretion and would have dismissed this action, thus permitting the Defendant to obtain its costs "in the event" of such dismissal, thereafter leaving the Plaintiff to the originating motion procedure canvassed within Order 73 should collateral procedural assistance have been required from the Hong Kong court in terms of the on-going London arbitration. 24. As a result of the foregoing judgment, therefore, my Order is as follows :-
25. I will hear the parties as to costs. [Submissions from Counsel] 26. I have now had the opportunity of hearing from Counsel on the issue of costs. Mr Sussex asks for his costs on both summonses, although he has the grace to accept, in these particular circumstances, that such costs should be "in any event". Mr Carolan for his part is in difficulty. He accepts, again I think correctly, that there really should be one costs order covering these cross summonses, and that it is difficult to justify disjunctive orders for the two applications. The highest he can fairly put it, I think, and he does not seek to go beyond that, is to suggest, in the circumstances and given the tenor of this judgment, that there should be no order as to costs on both summonses. 27. In the costs context Mr Sussex has also drawn my attention to a fax communication from Messrs Richards Butler to Messrs Clifford Chance, who instruct Mr Carolan, dated 27th May, whereby Richards Butler referred to the commencement of the London arbitration and asked for confirmation that in the circumstances Mr Carolan's clients agreed to a stay of the Hong Kong proceedings in High Court Action CL 78 of 1998 pending the outcome of the London arbitration proceedings. This, of course, was the day preceding the issuance by the Defendant of its summons to dismiss dated 28th May, and in fact by a letter in reply of the same date, Clifford Chance responded that as regards Action No.78/98 "We have been instructed by our clients to seek a dismissal of the proceedings and consequently we confirm that our clients are not in a position to agree a stay of the proceedings.", a summons with a supporting affidavit duly being served under cover of that letter. 28. As may be evident from this judgment, my sympathies on this particular point are entirely with Mr Carolan's clients. However, I think it is the case that if I accede to Mr Carolan's request in terms of making no order as to costs, that that would fly in the face of the legal position as I have found it to exist, although such an order might make the court feel a good deal better. However, I think that in the same way as I have found myself in a one way street upon the substantive matters that have been debated, I have no alternative in the circumstances but to give the Plaintiff the costs of and occasioned by both of these summonses, such costs to be paid by the Defendant to the Plaintiff in any event and to be taxed if not agreed. 29. It remains only to thank both Counsel for their very considerable assistance.
Representation: Mr Charles Sussex, inst'd by Richards Butler, for the Plaintiff Mr Paul Carolan, inst'd by Clifford Chance, for the Defendant |