This was an appeal against the Court of First Instance decision in Pusan Newport Co Ltd v The Owners and/or Demise Charterers of the Ships or Vessels 'Milano Bridge' and 'CMA CGM Musca' and 'CMA CGM Hydra' [2021] HKCFI 1283 (CMI1396) staying the plaintiff’s action against the defendants in favour of the courts of South Korea on forum non conveniens and/or lis alibi pendens grounds. The plaintiff's admiralty action in rem concerned an allision between the Milano Bridge and the plaintiff's terminal which took place on 6 April 2020. The plaintiff asserted that the allision was caused by the negligence of the defendants, their servants or agents in the navigation and management of the vessel, and that it suffered loss and damage in terms of: (i) physical damage to the cranes with resulting monetary loss in terms of repair and replacement cost; and (ii) business interruption.

The plaintiff argued on appeal that:

(1) The Judge erred by characterising the plaintiff's attempt to seek the juridical advantage of the higher tonnage limit available in Hong Kong as 'forum shopping'. The Judge misread the Hong Kong authorities on forum non conveniens.

(2) The Judge was bound to accept that the plaintiff had discharged its burden at Stage 2 of the Spiliada exercise, ie it had shown that the higher tonnage limit in Hong Kong was a legitimate juridical advantage (The Adhiguna Meranti [1987] HKLR 904 (CMI1342); and The Kapitan Shvetsov [1977] HKLRD 374 (see CMI1347; and CMI1348)). Contrary to those authorities, the Judge appears to have disposed of tonnage limitation at Stage 2, and concluded that to commence Hong Kong proceedings in order to get the benefit of the higher limit was illegitimate 'forum shopping'.

(3) In consequence, the Judge erred by ascribing no weight to the higher tonnage limit at Stage 3 of the Spiliada exercise.

(4) The Court of Appeal should exercise its discretion anew to refuse a stay. Substantial justice cannot be done in South Korea by the award of a sum which has suffered the ravages of 45 years of monetary debasement and inflation.

Held: Appeal dismissed.

Chow JA: The Judge noted that it was agreed that the higher tonnage limit in Hong Kong was a 'juridical advantage' in favour of the plaintiff. Accordingly, the Judge should have concluded Stage 2 of the Spiliada exercise in favour of the plaintiff, and moved on to Stage 3. Instead, the Judge went on, as part of the Stage 2 consideration, to find that the plaintiff’s decision to litigate in Hong Kong was as an exercise of 'forum shopping'. Although he did not expressly state whether he regarded the significantly higher tonnage limit as a 'legitimate' juridical advantage for the purpose of Stage 2, it is plain that the Judge did not view this factor favourably towards the plaintiff.

The Judge’s characterisation of the plaintiff’s conduct of litigating in Hong Kong because of the higher tonnage limit as 'forum shopping' is incorrect. The Judge erred in treating the plaintiff's decision to sue in Hong Kong in order to benefit from the higher tonnage limitation regime as nothing more than forum shopping, and thus gave this juridical advantage little or no weight when carrying out the balancing exercise under Stage 3. The Court of Appeal is therefore entitled to exercise its discretion afresh on whether to grant the stay of proceedings sought by the defendants.

The question for this Court is whether, balancing the advantages of the alternative forum with the disadvantages that the plaintiff may suffer, the defendants are able to establish that substantial justice will still be done in South Korea.

The plaintiff strongly relies on the disparity in the tonnage limits in the two jurisdictions in support of its case that substantial justice cannot be done in South Korea. It refers to the rationale behind the limitation under the LLMC 1976, namely, that 'limitation of liability should be permitted only in respect of such excess of liability for which the person liable cannot reasonably be required to carry adequate insurance' (see The Travaux Préparatoires of the LLMC Convention, 1976 and of the Protocol of 1996, para 2, p 5). The courts of South Korea will apply Panamanian law, as the law of the ship's flag, to determine limitation of liability. The plaintiff argues that although Panama must have accepted the rationale underlying the limits by its adoption of the LLMC 1976, by reason of legislative inaction or oversight it has not amended the limits in line with the 1996 Protocol or the subsequent amendment, and has thereby failed to address the erosion of the currencies that comprise the SDR sought to be rectified by the Protocol. The 1996 Protocol is the most widely accepted Convention on tonnage limitation, having been adopted by 63 Contracting States (representing some 69.13% of the world’s merchant fleet). It would be contrary to international public policy, and unjust, to deprive the plaintiff of the advantage of Hong Kong’s higher tonnage limit.

However, there is no evidence as to why Panama has failed to adopt the 1996 Protocol, and it would be speculative to attribute its failure to legislative inaction or oversight. The 1996 Protocol should not be elevated to the status of international public policy, although the difference in the maximum amount (of about USD 58.6 million) recoverable by the plaintiff in pursuing its claim against the defendants in Hong Kong and South Korea is plainly an important consideration in the assessment of whether substantial justice can be done in South Korea. On a careful consideration of the opposing factors for or against the stay of proceedings sought by the defendants, the defendants have established that substantial justice will be done in South Korea, notwithstanding the lower limit of liability applicable in that jurisdiction.

G Lam JA: The Judge erred in regarding the plaintiff as having engaged in forum-shopping before balancing the justice of the case under Stage 3 of the requisite analysis. Given that the Judge’s exercise of discretion was vitiated, the question that this Court must itself deal with is the balancing exercise in the last stage of the 3-stage test that has been applied in Hong Kong since The Adhiguna Meranti [1987] HKLR 904, 907 and restated in SPH v SA (2014) 17 HKCFAR 364 [51]. In accepting the forum non conveniens principle expounded in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, but splitting up the second phase of the analysis into Stages 2 and 3, Hong Kong law places the burden of proof in Stage 3 on the applicant for stay, differing from English law in this respect (see Spiliada 476E-F, 478C-E; Connelly v RTZ Corp plc [1998] AC 854, 871H-872B). Ultimately, however, this case does not turn on the burden of proof.

If the trial takes place in South Korea, by its rules of private international law, the tonnage limit of liability that applies is that under Panamanian law as the law of the place where the vessel is registered. Panama and Korea have not ratified the 1976 Convention or the 1996 Protocol, although they have enacted domestic law providing for limitation at the 1976 Convention level. They have not since raised their monetary limits following the 1996 Protocol, and their limit based on the tonnage of the Milano Bridge (about USD 24m) is therefore substantially lower than the limit under Hong Kong law (USD 82.6m). The Hong Kong limit is thus a considerable advantage that the plaintiff would lose if the action is tried in Korea.

It is important to bear in mind that the exercise in Stage 3 presupposes that Hong Kong is not the natural or appropriate forum and that there is another forum which is clearly or distinctly more appropriate than Hong Kong ('appropriate' being a reference to the forum that has the most real and substantial connection with the action). The general principle is that once a clearly more appropriate foreign forum has been identified, generally speaking the plaintiff will have to take that forum as it finds it, even if it is in certain respects less advantageous than the Hong Kong forum – the Court will ordinarily not be satisfied that a plaintiff will not obtain justice in the foreign jurisdiction merely because it will enjoy procedural advantages or a higher scale of damages or more generous rules of limitation in Hong Kong.

The plaintiff's counsel has referred to the observation of Lord Denning MR in The Bramley Moore [1964] P 200, 220 that 'limitation of liability is not a matter of justice. It is a rule of public policy which has its origin in history and its justification in convenience.' But it does not follow that limitation of liability is inherently unjust. Systems of limitation of shipowners’ liability are prevalent if not ubiquitous (at least among shipping nations), albeit not uniform. In practice they represent differing regimes for the allocation of risk and responsibility for the perils of the sea and form the basis for insurance arrangements. The reality is that it is the insurers who are dominus litis on both sides.

Although limitation of liability has for almost a century been the subject of international Conventions, the search for uniformity in this area has by no means been successful. Whatever the merits of the international unification of limitation regimes, the fact is that there is a complex patchwork around the world consisting of, among others, 1976 Convention countries (with variations in terms of reservations), 1996 Protocol countries (of which some have denounced the 1976 Convention and some have not), and countries who have ratified neither, such as China (except for Hong Kong), the United States, and, significantly in this case, Korea and Panama, and who may or may not have their own domestic systems of limitation. If by international public policy is meant some standard common to all civilised nations, plainly it is impossible to regard the 1996 Protocol as such. Nor can the 1996 limit fairly be regarded as so central to notions of justice that to send a plaintiff away to a foreign forum with a lower limit should be anathema to the public policy of Hong Kong.

It is true that in The Adhiguna Meranti Hunter JA, giving the judgment of the Court of Appeal, stated that the Hong Kong limit reflected international public policy. This statement is not easy to reconcile with his observation that the Convention in question was much more widely adopted in Europe than in this part of the world, reflecting the wide differences in conditions and attitudes of the two regions. But in any event the statement does not avail the plaintiff here. The limit referred to was that prescribed in the LLMC 1957, applied to Hong Kong via an Imperial statute, namely, s 503 of the Merchant Shipping Act 1894 (Imp) which 'was drawn about as widely as it could be' and had effect in 'the whole of Her Majesty’s Dominions'. In this era, Hunter JA’s statement cannot be taken as authority that the 1996 Protocol represents international public policy. The Court of Appeal could not have intended to say that whatever Hong Kong has adopted at any particular time should be regarded by its courts as international public policy, for that would be a form of judicial chauvinism wholly inconsistent with the forum non conveniens principle.

The fact that a significant number of State Parties to the 1976 Convention have not ratified the 1996 Protocol, and certain States with domestic law reflecting the 1976 Convention have not yet increased their limits in line with the 1996 Protocol (including Panama, Korea and China (except in relation to Hong Kong)), suggests that they each have their own reasons for their position, which is prima facie as much a considered stance as that of the ratifying States, with reasons that are as likely to involve socio-economic and political considerations. It is not for the Hong Kong courts to speculate what those reasons may be, still less pass judgment on whether they are justifiable.

Stage 3 calls for an evaluative exercise that involves weighing the fairness to the parties. The process evokes measuring the extent to which the parties deserve the juridical advantages or disadvantages concerned, a question that should consider the geography of the case. It can readily be accepted that the stronger the connections with a jurisdiction, the more deserving the parties are of the juridical consequences, favourable or otherwise, flowing from a trial there. In this sense, the analysis is not completely divorced from the factors relevant in Stage 1.

Invoking the jurisdiction of the High Court by an action in rem founded on the arrest of a sister ship is a procedure of special value in admiralty cases recognised by international Convention. The plaintiff was entitled to bring the action here when the sister ship of the Milano Bridge called at Hong Kong. But apart from this, the case has no connection with this jurisdiction. In contrast, the connections with Korea are overwhelming. The plaintiff is a Korean company operating a maritime terminal in Korea, with cover from Korean insurers. The allision took place in Korea, the liability for which is governed by Korean law. The third parties against whom the defendants seek recourse are all in Korea: the pilot, the tugs, the Todo Islet contractors, and the Korean Government. It is Korean law that applies the limit in the law of the ship’s port of registry, in this case the Panamanian limit, which happens to be the same as the Korean limit. The defendants are admittedly not Korean, but like the plaintiff they have no connection to Hong Kong whatsoever.

The plaintiff knew of the perennial risk of allision of its terminal by ships of different nationalities with different tonnage limitation laws. The Milano Bridge itself had visited the Pusan port four times before, each time at the same pier. The plaintiff criticises Korean law as capable of producing 'arbitrary and unfair results' by applying the limit under the law of the ship’s flag. Yet it has chosen to operate a terminal there without limiting its services to vessels registered in jurisdictions with higher limits or requiring those registered in jurisdictions with lower limits to waive them. On the contrary, its own terms of trade stipulate an even lower limit for calling vessels.

In these circumstances, the plaintiff cannot have a strong expectation of, or claim for, the advantage of the higher limit in Hong Kong, available in this case only because the Milano Bridge happened to have a sister ship that called here. Generally speaking, it is not unjust that the legal consequences of an alleged wrong are adjudicated in the place where it was wholly done, and in accordance with the law of that place. The weight generally given to the place of a tort in Stage 1 of the forum non conveniens analysis stems from the notion that it is 'manifestly just and reasonable' that a defendant should answer for its wrongdoing in the jurisdiction where the tort was committed. Limitation of damages is a disadvantage to the plaintiff, but an advantage to the defendants. Overall it is quite difficult to say that justice will not be obtainable in Korea, the natural and clearly more appropriate forum for the action, and the plaintiff's home country.

[For the unsuccessful application for leave to appeal to the Final Court of Appeal, see Pusan Newport Co Ltd v The Owners and/or Demise Charterers of the Ships or Vessels 'Milano Bridge' and 'CMA CGM Musca' and 'CMA CGM Hydra' [2022] HKCA 749 (CMI1870).]