The Owners of Cargo Lately Laden Aboard M.V. "Hui Cheng" v. The Owners of the Ship or Vessel M.V. "Hui Cheng"(Chinese Flag)
Read the full judgment text of HCAJ 16/1983 on BabelCite. This HCAJ judgment.
1. In this matter the plaintiffs the owners of cargo lately laden aboard M. V. "Hui Cheng" were originally suing the owners of the ships or vessels listed in the schedule to the writ of summons. There were 44 vessels listed in the schedule among which are the "Hui Cheng", whose port of registry is alleged to be Guangzhou/Canton and the "Feng Cheng" whose port of registry is alleged to be Shanghai. The plaintiffs, as owners of cargo, were claiming against the defendants for breach of contract and
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HCAJ000016/1983
IN THE HIGH COURT OF JUSTICE ADMIRALTY JURISDICTION
BETWEEN
______________ Coram: Hon. Power, J. Date: 25th Nov., 1983. ___________ JUDGMENT ___________ 1. In this matter the plaintiffs the owners of cargo lately laden aboard M. V. "Hui Cheng" were originally suing the owners of the ships or vessels listed in the schedule to the writ of summons. There were 44 vessels listed in the schedule among which are the "Hui Cheng", whose port of registry is alleged to be Guangzhou/Canton and the "Feng Cheng" whose port of registry is alleged to be Shanghai. The plaintiffs, as owners of cargo, were claiming against the defendants for breach of contract and/or duty and/or conversion in or about the custody, carriage and delivery of the cargo shipped aboard the defendants' vessel M.V. "HUI CHENG" in or about April 1982 under 5 bills of lading. The writ was issued on the 27th January 1983 and the vessel the "Feng Cheng" was arrested shortly thereafter upon the basis that the China Ocean Shipping Company (COSCO) was the beneficial owner of all the shares in the "Feng Cheng" and that COSCO would, apart from the effect of the provisions of Section 4 of the Administration of Justice Act 1956, be liable on a claim in personam by the plaintiffs. The Nan Yang Commercial Bank furnished a guarantee on the 5th February 1983 and the "Feng Cheng" was released from arrest. There was no admission in the guarantee, nor indeed has there been any admission anywhere else, that the "Feng Cheng" is owned by the owners of the "Hui Cheng". On the 10th February 1983 the plaintiffs took out a summons asking for leave to amend the writ so as to make the owners of the ship or vessel "Hui Cheng" the defendants. On the 22nd February the application was granted and the writ was amended accordingly. On the 11th April 1983 a statement of claim was filed which was served on the solicitors for the defendants Liu, Chan & Lam. The claim is for damages in the sum of US$432, 591.05 for breach of duty and/or breach of contract in that the defendants having been entrusted with logs, which were loaded onto the vessel at Cagayan de Oro City in the Philippines, failed to deliver those logs in accordance with the bills of lading to the plaintiffs at Hong Kong. It was alleged that the defendants had caused the vessel to deviate and had discharged the logs in Swatow and had failed to take any adequate steps to safe-guard them after discharge. It was also alleged that the defendants had delivered the logs without the production of the bills of lading. 2. The material placed before me reveals that the plaintiffs in this action, who are named in the writ as "The owners of cargo lately laden aboard M. V. "Hui Cheng", are, in fact, the Cagayan de Oro Timber Co. (Catimco) of Cagayan de Oro City in the Philippines and that in April 1982 they agreed to sell on F.O.B. terms certain quantities of lumber to Thaisino Metals (H.K.) Corp. (Thaisino) and to Acersino Limited (Acersino), both of Hong Kong (the buyers). Contracts were drawn up and signed by the parties and 4 letters were sent by Thaisino and one by Acersino on the 15th April confirming the contracts of purchase and stating that the shipment dates would be on or about April or May and that payment would be by irrevocable letter of credit. It was also stated in these letters that the vessel by which the goods were to be shipped would be the "Feng Cheng" or substitute. The Thaisino letters and the Acersino letter bear the address "Causeway Centre, B8/12th floor, 28 Harbour Road, Wanchai Ferry, Hong Kong". All five letters are signed by "R.A. Wong". Pursuant to these agreements the buyers established through the Bank of Communications in Hong Kong and the Consolidated Bank & Trust Corporation in Manila an irrevocable credit in favour of Catimco. The plaintiffs between the 24th and 26th April 1982 caused the goods to be loaded on the M.V. "Hui Cheng" and 5 bills of lading covering the said goods were issued, each of which is dated the 27th April 1982. Each is signed by Ace Maritime Agency Inc. on behalf of the master of the vessel. Each of the bills of lading is headed with the words "Through Bill of Lading". Under the words there appear the words "Keyway Trans China Line" under which appear the words "A Division of Keyway Freight (International) Ltd." (Keyway) and the address, "Room 101 Sam Cheong Building, 216-220 Des Voeux Road Central, Hong Kong". These notations clearly would not make Keyway a party to a contract evidenced by such a Bill of Lading unless, of course, that company was the owner of the vessel. Four of the bills of lading state that Thaisino is the notify party and one states that Acersino is the notify party. In each case the address already mentioned, at 28 Harbour Road, is given for the notify party. 3. A Statement of Facts dated the 27th April 1982 signed by the master of the vessel sets out that the loading was completed on the 26th April 1982 and that the vessel sailed for Swatow, China, on the 27th April. 4. The plaintiffs in due course delivered the shipping documents, including the 5 bills of lading to the Consolidated Bank, and were informed, by telex, that their shipping documents had, for various reasons set but in the telex, been rejected. 5. It is alleged, and there is considerable dispute in this regard, that the goods were always intended by both the plaintiffs and the defendants to be taken straight to Swatow, China for delivery to the eventual purchaser, the Guangdong Trust and Investment Corporation of Guangzhou (Guangdong Trust). It is suggested by the defendants not only that the plaintiffs were well aware that this was to happen but that it was being done for their benefit. It is suggested that, because China is a communist country, difficulty of expense is incurred by shippers from the Philippines thereto and that this can be avoided if the real destination is not disclosed to the authorities. It is suggested that all parties knew that what was to happen was that the Bills of Lading originally issued by the master would be withdrawn after the vessel left Cagayan de Oro and before delivery of the goods in Swatow and that the new Bills of Lading issued by Chu Kong Shipping Company Limited (Chu Kong), the owners' agents in Hong Kong, would replace them and that these new Bills of Lading would set out the new position showing Swatow as the port of discharge. It appears that these were to be signed by Chu Kong, on behalf of the master. It appears from the letter of 4th June 1982 from Thaisino to Keyway that the new Bill of Lading was to read: "Consigner: Thaisino Metals (H.K.) Corporation. Consignee: To order. Notify Party: Guangdong Trust and Investment Corporation, Guangzhou." 6. It is suggested that these Bills of Lading would then be given to the buyers in exchange for the copies of the Bills of Lading which they had received from the plaintiffs and that they would, then pass these "switched" Bills of Lading to Guangdong Trust. The plaintiffs deny having had any knowledge of the proposed switching of Bills and say that their knowledge was confined to the information set out on the Bills of Lading. 7. The defendants have taken out stay proceedings upon the ground that there was an exclusive jurisdiction clause in the Bill of Lading and it is these proceedings with which I am now dealing. In support of these proceedings Mr. Lee Ho Man, the Sub-Manager of Chu Kong filed an affidavit in which he said that Chu Kong was the agent of the owners, Guangdong Province Hong Kong/Macau Navigation Company, who have their principal place of business in Guangzhou city. He stated that China wished to have disputes between Chinese vessels and other parties decided in China by Chinese law. He said that the "Hui Cheng" was chartered by Chu Kong, acting for the owners, to Keyway Shipping Co. Ltd. (Sic) to load a cargo of timber for the voyage from Hong Kong to Swatow, China. He produced a Fixture Note, dated the 7th April 1982, which provided in para.6: -
This clearly shows that the arrangement between the charterer, Keyway Shipping Co. Ltd., and the owner was that switched Bills of Lading were to be issued. However, it does not, of itself, indicate that the plaintiffs had any knowledge of this arrangement. This deponent produced a second Fixture Note, also dated the 7th April 1982, whereby the vessel was sub-chartered to Thaisino by Keyway Freight (International) Ltd. (Keyway), which is presumably the same company as Keyway Shipping Co. Ltd. referred to in the first Fixture Note. This second Fixture Note contains a similar stipulation as regards the switched Bills of Lading. 8. It was suggested by Mr. Lee that the reason the switched Bill of Lading procedure was used was because of a low rate of tax payable for export from the Philippines to Hong Kong as opposed to a higher rate for export of goods from Philippines to China. Mr. Lee suggested that it was Standard practice for Philippines shippers to participate in switched Bill of Lading arrangements. As evidence of the fact that the plaintiffs knew of the arrangement, Mr. Lee' referred to the Statement of Facts dated the 27th April 1982. This stated that the vessel sailed for Swatow, China on the 27th April 1982 and was signed by a person on behalf of the plaintiffs. It is to be noted that it does not say that the goods were being shipped to Swatow, China, but that the vessel sailed for Swatow. In the heading it reads that the cargo of sawn timber was from Cagayan de Oro to "China Ports". This document nowhere states that the goods were to be unloaded at Swatow. The plaintiffs deny that they received any knowledge that that was intended and say, as regards the Statement of Facts, that it was signed by a junior officer of the company and that no indication was given to him, or to them thereby, that the goods were destined for Swatow. 9. There was considerable evidence, both from Mr. Lee and in affidavits from others, as to the state of knowledge of the plaintiffs as regards the intended use of switched Bills of Lading. Suffice to say that the defendants contend the plaintiffs had full knowledge of the intended use and the plaintiffs deny that they had any such knowledge. What is of importance to note is that, in this regard, all of the evidence is either in the Philippines or in Hong Kong. 10. Mr. Lee goes on to say that after the vessel arrived in Swatow on the 2nd May, a dispute arose between Mr. Lau Kwok Keung, the partner of the Thaisino who had gone to Swatow, and Guangdong Trust which was, in part at least, occasioned by the failure of Thaisino to produce Bills of Lading. He goes on to state that "On the 12th May 1982 the intermediate People's Court of Swatow, Guangdong Province, China (hereinafter referred to as Swatow Court) to resolve the dispute between the Chinese buyers and Thaisino by oral decision ordered (hereinafter referred to as Court Order) that the vessel be detained and that the vessel's cargo of timber be discharged and given to the Chinese buyers before the vessel was allowed to sail" and that "Pursuant to the court order, the cargo of timber was discharged in Swatow and it was in these circumstances that the vessel and the owners lost possession of the said cargo. The vessel eventually left Swatow on the 24th May 1982." He says that thereafter Thaisino approached Chu Kong for the issue of the switched Bills of Lading. Thaisino required these switched Bills in order to obtain payment for the cargo under the Bank of China's letters of credit. He says that on or about the 11th June Chu Kong released to Thaisino the switched amended Bills of Lading. 11. The defendants raise the defence that they were acting in accordance with the lawful order of a court when they discharged the cargo. 12. An affidavit was filed by Mr. Huang Jiang Ji, the special assistant in the shipping department of Chu Kong, Mr. Huang, who does not appear to have any legal qualifications, was sent to Guangzhou to discuss this matter with Chinese lawyers. He spoke to the president of the Commercial Court of the Superior People's Court of Guangdong Province, to the Registrar of that court and to Mr. Ho Cheng Sum, a "distinguished lawyer" practising in that province. He set out some fairly basic facts regarding the operation of the Chinese legal system which indicate that commercial cases can be tried in China and that there is a system of appellate courts. He stated that the cost is usually borne by the losing party and that the fees of the court and of the lawyers vary according to the case but that in no circumstances can they be more than 2.5% of the amount in dispute. He said that he had been informed that the total cost of the proceedings in China would be likely to be under US$12,500 for both parties. It is to be noted that he did not say how one obtains a lawyer and whether one has any choice in that regard. Nor did he indicate whether there were any lawyers trained in admiralty law available at Guangzhou or, indeed, in the province of Guangdong. 13. I find it disturbing that no indication in this regard was given and also that it was not indicated whether, indeed, any admiralty case had ever been conducted in the courts of Guangdong. When I posed this question to Mr. Waung, who appeared for the defendants, he was unable to assist me. 14. There was an affidavit from a Mr. Michael Chan, a director of Keyway. He said that Chu Kong was the agent for the owners and that Chu Kong, acting as agent, entered into a joint venture with Keyway to operate the service called Keyway Trans-China Line by an agreement dated the 12th November 1981. He said that operations commenced and that announcements were made in this regard in newspapers in the Philippines. He said that the Bills of Lading headed Keyway Trans-China Line, such as we have in the present case, were printed specially for this service. It is to be noted that these bills of lading do not indicate that Keyway Trans-China Line is a joint venture between Keyway and the owners. Indeed the impression given by the wording thereon is that Keyway Trans-China Line is a subsidary of Keyway. Had the true position been set out on the face of the Bill of Lading, i.e. that Keyway Trans-China Line is a joint venture between the owners and Keyway, some of the difficulties facing us in this litigation might have been avoided. 15. As to the switched Bills of Lading, Mr. Chan says that Thaisino requested Keyway to switch the Bills of Lading and says that it is a "common practice in this area specially when it involves carriage between conservative and anti communist countries like South Korea, Philippines, Indonesia on the one hand and communist countries like North Korea, China, Vietnam etc. on the other hand". This may be so but it goes no way towards showing that, in the present case, there was any knowledge on the part of the shippers in the Philippines that switched bills were to be used in their transaction. The shippers were dealing with a Hong Kong buyer and on the face of the Bill of Lading the goods were to be shipped from the Philippines to Hong Kong. There was an affidavit from Mr. Joseph Lee, a solicitor of Joseph C. T. Lee & Co., who was previously a partner in Messrs. Liu, Chan & Lam. He said that, on or about the 16th December 1982, Mr. Jonathan Lyne of Johnson Stokes & Master came to his office to discuss with him the question of security and the merits of the case. He says that he draw Mr. Lyne's attention to Clause 22 of the Bill of Lading and that during their conversation he said that "Whatever may be the position in relation to security, I must reserve the position and rights of the owners in relation to Clause 22". He says, however, that when he came to arrange for security to be given about the 31st January, he did not discuss Clause 22 again because "As far as I am concerned, there was no need at that stage to discuss it as I had adequately reserved the position of the defendants on Clause 22 with Mr. Jonathan Lyne on the 16th December 1982. 16. Mr. Lyne filed four affidavits. He denied that there was any attempted tax evasion such as was suggested in paragraph 10 of Mr. Lee Ho Man's affidavit. 17. He went on to state that the plaintiffs denied all knowledge of the arrangement whereby the ship was to sail directly to Swatow. He referred to Mr. Sia Beng Pue who is not an officer of the plaintiff company, but who was involved, to some extent, in introducing the buyers and in making enquiries at a later stage and to Mr. Sia Bang Tek who is a director of the plaintiff company. 18. Mr. Lyne produced a certificate from the district collector of customers at Cagayan de Oro City saying that all taxes for export products from the Philippines were the same regardless of the port of destination. Mr. Lyne also said that the only bar to trading with China was that permission must be sought from the Philippines International Trading Corporation and that when such permission was given, trading was permitted. 19. As to the conversation to which Mr. Lee referred in his affirmation, Mr. Lyne said that as regards the conversation on the 16th December, he had "no recollection whatsoever of the issue of jurisdiction being discussed, and certainly no reservation of jurisdiction was made on the part of the defendants". 20. Mr. Lyne referred to the statement made by Mr. Huang Jiang Ji that the figure of US$12,500 would cover both parties' cost. He quite rightly asked what costs were included in this figure. Whether it was meant to include party and party costs and solicitor and own client costs. Mr. Lyne submitted that there would be no great saving in costs as far as the plaintiffs were concerned as he considered that, even if the hearing was in China, they would still have to be represented by Hong Kong solicitors. It seems to me that there is much force in this assertion. If the case were to be conducted in China, it might well be necessary, certainly for the plaintiffs, to send Hong Kong solicitors to China. It is unlikely that such costs were taken into account in calculating the figure of US$12,500. 21. Mr. Lau Kwok Keung, a partner of Thaisino, filed an affidavit as to his dealing with the plaintiffs' in which he alleged that the plaintiffs knew of the Switched Bill of Lading procedure and, indeed, requested that it be used. 22. He said that a writ was issued on the 29th December 1982 in High Court Action No.12772 of 1982 whereby the plaintiffs claimed the outstanding moneys from Thaisino. He said that he had acknowledged liability by a telex dated the 3rd January 1983 and said that he would "accept the arrangement of bankruptcy". He said that the plaintiff had also issued proceedings in Hong Kong against Keyway and that Mr. Michael Chan of Keyway had informed him that Keyway had admitted liability but that the plaintiffs had not pursued the matter further against Keyway. 23. Mr. Lee Man Ho, the Sub-General Manager of Chu Kong, filed a third affirmation in which he said, inter alia, that all of the ships of the defendants are registered in Guangzhou which is the home port of the ships and that the master and crew of the ships including the "Hui Cheng" are all resident in Guangzhou. He said that the defendants company exercised its management and control over its operation in Guangzhou and that its management and supervisory staff live there and that all documents relating to the defendants' ships are to be found in Guangzhou. The deponent, on behalf of the defendants, undertook to extend the time limit for the issue of proceedings by the plaintiffs in Chins to three months after any order for stay was made by this court. 24. A final affidavit was filed by Mr. Lyne to which objection was taken in part. I have not made use of the parts of that affidavit to which objection was taken. He exhibited two affidavits; one made by Mr. Sia Beng Tek and one made by Mr. Sia Beng Pue which dealt with the constitution and operation of the plaintiffs and the original negotiations. 25. The defendants in the application before me have asked for an order staying the plaintiffs from proceeding further in Hong Kong. The issues raised for the court's determination are as follows: -
26. As I have already indicated the Bill of Lading is headed "Keyway Trans-China Line", underneath which appear the words "A Division of Keyway Freight (International) Ltd." and the words "Room 101 Sam Cheong Building, 210-220 Des Voeux Road, C., Hong Kong". The Bill of Lading was signed "For and on Behalf of the Master" by "Ace Maritime Agency Inc. (as agent)". There was nothing on the face of the bill of lading to suggest that any company other than Keyway had any connection therewith. Clause 1(a) of the "Definitions" section of the Bill of Lading reads as follows: -
27. Mr. Smith, who appeared for the plaintiffs, contended that the words must be given their natural and obvious meaning and that the natural and obvious meaning to be given to them, when one read the Bill of Lading as a whole was that they referred to "Keyway Freight (International) Ltd." Mr. Smith went on to argue that, if the Court was left in any doubt as to the meaning of the words, the contra proferentum rule should be applied and the words should be construed against the party seeking to rely upon them, namely, the owner. There might be much force in this argument, however, as I was not, in the outcome, left in any doubt, I did not rely upon it. 28. Mr. Waung approached the problem raised by the wording of the jurisdiction clause by saying that the court must ask itself why such a clause is inserted in a Bill of Lading. He submitted that it is inserted to deal with disputes and that normally it is inserted at the insistence of the carrier. He referred to The Makefjell(3) and relied, particularly, upon the words of Lord Justice Cairns, at 33, where he said: -
29. Mr. Waung asked that a commonsense business approach be applied to the interpretation of the words "the company" in the Clause 22. He submitted that, applying such an approach, the court should hold that the words "the company" meant "the owner". 30. I am by no means satisfied that it would be proper to approach the matter in this robust way. The words used are "the Company". The words "her owner" could have been used; indeed the draughtsman did not hesitate to use those words in Clause 1(a) of the definition section. However attractive such as solution might be to a commonsense businessman I do not consider that the problem can be resolved simply by saying that such a person must have intended to give protection to the owner, being the other party to the Bill of Lading, and that, therefore, the words "the owner" can be substituted for the words "the Company". In The Makefjell there was no substitution of one set of words for another. The meaning given to the words "any claim" was not only one which commonsense indicated they should have but was also one which they were readily capable of bearing. The decision in The Makefjell is no warrant for submitting that a Court can rewrite a contract so as to give it greater business efficacy. In the present case the owner saw fit to use a Keyway Trans-China Line Bill of Lading in the form in which it was printed. The shipper in this case, and indeed, in virtually all cases, had nothing to do with the wording of the Bill of Lading. He was simply presented with it at the time when his goods were loaded. 31. It seems to me unarguable that the Court, when giving meaning to the words used in a Bill of Lading, must first, and most importantly, look at the words that appear thereon. If the words do not admit of a particular interpretation then the Court cannot give them that interpretation, no matter what business commonsense might suggest. 32. I am satisfied, having looked at the whole of the Bill of Lading, that the words "the Company" refer to Keyway Freight (International) Ltd. and that they cannot properly be held to include the owner, unless the owner happens to be Keyway. 33. Mr. Waung had an alternative approach which he called the legal approach. He submitted that under this approach it would be appropriate that the words "the Company" be read as applying to any party to the Bill of Lading as long as that party was a company. In other words, the words "the Company" must be read as meaning "any company that is a party to the Bill of Lading". This approach also, in my view, does a violence to the words used which cannot be justified. The Court is being asked to twist the words so as to give them a meaning altogether different from that which they really bear. It seems to be suggested that they must be given this meaning because it is the one which the draughtsman must have intended them to have. I do not consider that' the words can properly be given this meaning. The words must bear their ordinary meaning which is, I am satisfied, as I have set out above. 34. I would remark further that the Court, in this case, is not in a position where it must give some meaning, other than their ordinary meaning, to the words in order to give efficacy to the contract. The contract is one for the carriage of goods. The fact that the parties have not provided for a jurisdiction clause in no way affects the attainment of the primary object of the contract. If a dispute arises, there being no jurisdiction clause, any contest as to jurisdiction can be resolved by the Court. I hold that the defendants are not entitled to take advantage of the jurisdiction clause. (2) The Guarantee given by the Nanyang Commercial Bank Ltd. read as follows: -
35. Mr. Waung contended that no waiver either of the right to rely upon the jurisdiction clause or of the right to apply for a stay of proceedings arose because of the giving of the above guarantee. I am satisfied that no question arises as to whether the jurisdiction clause was waived as that clause has no application as between the parties. The question then to be determined is whether the giving of a guarantee in this form by a third party constituted a submission by the defendants to he jurisdiction of the Supreme Court of Hong Kong.
36. Mr. Smith relied, in this regard, upon the decision of Mr. Justice Sheen in the Banglar Baani(4). In that matter, Thomas R. Miller and Son, as agents for the managers of the defendants' P. & I. Club, gave an undertaking in very similar terms to the present one. The question then arose as to whether the defendants had agreed, by that undertaking, that the English High Court was the forum for the resolution of any dispute between the parties to the exclusion of all others. Mr. Justice Sheen found "That agreement binds both sides. They agreed that litigation should be in England. If the plaintiffs had issued a writ in Bangladesh they would have been in breach of that agreement. In the light of that agreement I can see no grounds upon which this action should be stayed." Mr. Smith pointed out that the plaintiffs had, by accepting the guarantee, bound themselves not to commence proceedings elsewhere. He met the contention of Mr. Waung that this was not a contract between the defendants and the plaintiffs and that it did not, therefore, bind the defendants by contending that when the document was properly construed it did bind the defendants and urged the Court to adopt the same view in this regard as that taken by Mr. Justice Sheen in the Banglar Baani. He pointed to the undertakings given by the bank to pay any amount finally adjudged to be owing by the Hong Kong court and to instruct the solicitors to accept, on behalf of the owners, service of proceedings and to file an acknowledgment of service. He pointed to the warranty by the bank that they had received irrevocable authority from the owners to instruct the solicitors as aforesaid. He contended that the bank was clearly acting as agents of the defendants when giving the undertaking that they would instruct the solicitors and that the plaintiffs had accepted that they were so acting when they accepted the guarantee. He submitted, this being so, that the defendants were bound by those undertakings and that those undertakings amounted to an agreement that the forum for the resolution of the dispute was Hong Kong. He submitted that what had been agreed by the bank, on behalf of the defendants, was that proceedings could be commenced and pursued in Hong Kong and that, if any amount was adjudged to be owing at the conclusion thereof, that amount, subject to the limitation expressed, would be paid. He pointed out that, if the guarantee was not a submission to jurisdiction, it would be open to the defendants to obtain a stay of the Hong Kong proceedings even though the plaintiffs were bound by the guarantee not to pursue the matter elsewhere. 37. Mr. Waung submitted that the Banglar Baani was wrongly decided. I do not accept his contention in this regard. I indicated in the "On Tat"(5) that I was satisfied that the learned judge was correct in his decision in the Banglar Baani and nothing has been argued which shakes me in that regard. 38. Mr. Waung further argued that the decision in the Banglar Baani had no application in the present circumstances because of the difference in wording between the guarantee given in that case and the guarantee given in the present case. In the Banglar Baani the wording was as follows: "We hereby undertake to pay to you on behalf of the said ship-owners on demand such sums as may be adjudged by the English High Court of Justice ........ in respect of the said claims''. The words "on behalf of the said ship-owner'' appear nowhere in the guarantee with which we are dealing. He submitted that there was, therefore, no statement that that undertaking was given on behalf of the said ship-owner and submitted further that in the circumstances of the present case, it never having been admitted that the ship arrested was in the same ownership as the "Hui Cheng", there was nothing from which it could be inferred that the bank was giving the guarantee on behalf of the defendants. He submitted that there was simply no evidence that the guarantee as to payment was being given on anyone's behalf. I do not think the omission of these words is of any real significance. What the bank was saying was that any SUM that was awarded in relation to the cargo claim made against the owners of the "Hui Cheng" would be paid. It was further acknowledging that it had authority to instruct the solicitors of the owners to accept service and to file an acknowledgment of service and, in consideration of these promises, it was extracting a promise from the cargo owners not to pursue their proceedings anywhere except Hong Kong. 39. In order to interpret the agreement properly one must look at it as a whole. On the one hand, the cargo owners were promising not to pursue their proceedings against the defendants anywhere except Hong Kong and on the other hand it was being promised that service of those proceedings would be accepted by the defendants and that acknowledgment of service would be filed and that any judgment granted in those proceedings would be met. There being no reservations made, it seems to me that the only proper conclusion to be arrived at from the agreement as a whole is that the defendants were, through the bank, a party to the guarantee and did agree that the Hong Kong court would be the forum for the resolution of their dispute with the plaintiffs. 40. I am satisfied that the guarantee is binding upon the defendants even though they were not a direct party thereto and that by the wording thereof they submitted to the jurisdiction of the Supreme Court of Hong Kong. 41. I turn now to deal with Mr. Waung's third point which was that the facts revealed that there had been a reservation made by the defendants' right to make application for stay of proceeding. I have already fully set out the relevant evidence. I have considered it carefully. Counsel asked me, upon the basis of the affidavit evidence, to make a determination of fact in this regard. There is nothing in writing to support the evidence of Mr. Lee - no diary note, nothing in the wording of the guarantee or of the contemporaneous documents. Bearing that in mind and taking into account all of the circumstances, I am satisfied that I should accept the recollection of Mr. Lyne. It appears to me, on the balance of probabilities, to be more likely than that of Mr. Lee. I am satisfied that no reservation made. I feel I should add that, even had there been a reservation such as was contended for, I am very doubtful that it would have had any effect, other than as regards the jurisdiction clause, as it was not a general reservation of the right of the defendants to apply for a stay in any circumstances. 42. Mr. Waung finally contended that, as a matter of public policy, the Court should be slow to find that a party has waived his rights by giving a guarantee. I am not altogether certain what Mr. Waung meant in this regard. I can see no consideration of public policy, any more than did Mr. Justice Sheen in the Banglar Baani, that would persuade me not to construe the guarantee as I have. Indeed it seems to me that justice and commonsense, which one can properly hope are important ingredients of public policy, cry out for the construction which I have adopted. 43. Given the findings I have made already, it is not necessary for me to make any decision as to the third and fourth matters raised for the Court's consideration. However, the parties have informed me that, whatever the outcome of these proceedings, the matter will be taken further and I consider therefore that I should deal with both the third and fourth matters. (3) In the third matter what I would have had to consider, given that the jurisdiction clause applied, is whether the plaintiffs had made out strong cause against stay. This would have required me to examine The Eleftheria(1) considerations. 44. The matters to which regard must be had in determining whether to exercise discretion are set out by Brandon J. at 100. In the present case they may be stated as follows:
(a) Mr. Waung submitted that the principal matter of fact for the Court's consideration was whether or not the captain of the vessel had acted in accordance with the order of the court in Swatow. Mr. Waung submitted that it would have to be proved that the order was made in Swatow, that it was a valid order and that the captain had acted in obedience thereto. He submitted that a number of difficulties might arise when it came to prove these matters. He suggested both that it might be difficult to obtain a copy of the order from the court and that it might be difficult to obtain it in a form that could be proved in Hong Kong. He submitted that the order would be in Chinese which would have to be translated and that there might be disputes as to the correctness of the translation. He submitted that, even if the order could be obtained and translated and no challenge was made to the translation, the Hong Kong court might find difficulty in understanding and applying the order. 45. There was nothing in the evidence to suggest that the difficulties suggested by Mr. Waung would, in fact, arise. They owed their existence rather to Mr. Waung's ingenuity than to any matter of fact raised in the affidavits. He was, I am satisfied asking the court to give them much more weight than they deserved. Mr. Smith pointed out that the procedure to be followed to prove a foreign judgment, as set out in Section 31 of the Evidence Ordinance (Cap. 8), is a simple one. From the affidavits evidence it appears that the terms of the judgment of the court of Swatow are clear. There is nothing before me that would lead me to suppose that there would be any difficulty obtaining a written copy of this judgment from the court in Swatow and of proving it. There is nothing in the terms that makes me suppose that any great difficulties as to interpretation thereof might arise. I do not see why, the judgment having been proved, it would be necessary to call anyone other than the captain, or perhaps the First Mate, to give evidence that he acted in accordance therewith when discharging the cargo. Indeed it may well be that upon production of a properly certified copy of the judgment these facts will be agreed. Even if there be no agreement I do not consider that there is any very substantial body of evidence in Swatow. 46. Mr. Smith submits that it is wrong to say that the principal matter for the court's consideration will be what occurred in Swatow. The plaintiffs will, it being shown that the court made the order and the Captain acted in obedience thereto, be relying upon deviation. He submitted that this will require a close examination of what occurred both in the Philippines and in Hong Kong. He submitted that all of the documents seen by this court are in English and can be more readily dealt with by the court in Hong Kong. He referred in this regard to the Bills of Lading, the Statement of Facts, the Fixture Notes, the certificate from the Philippines Tax Authorities and the letters of credit both in Hong Kong and in the Philippines. He submitted that the evidence from representatives of Thaisino and Chu Kong, who reside in Hong Kong, can be more readily, dealt with in Hong Kong. He conceded that the Sia brothers and Mr. Alarico Lim reside in the Philippines, but submitted that it would not occasion them any substantial difficulty or inconvenience to come to Hong Kong for the trial. He submitted also that there would be evidence from the Philippines which would be in English as regards the Philippines International Trading Corporation. He contended that all of the above evidence was either in Hon Kong or could be more conveniently and less expensively heard in Hong Kong than in China. 47. It does appear that legal costs will be less in China than in Hong Kong. It does, however, seem to me that the amount of costs suggested in the affidavit of Mr. Huang Jiang Ji would be greatly increased if, as seems to me likely, one or both parties were forced, in order to properly conduct their ease, to bring lawyers from Hong Kong to assist those retained in China. (b) I am proceeding upon the basis that Chinese law does apply and I must, therefore, ask whether it differs from English law in any material respect. Mr. Smith submitted that there was no contest that the Hague Rules applied, and that there was no evidence to show that the Chinese court would apply the rules in a way different from that in which they would be applied by an English court. He submitted that this Court should act upon the basis that Chinese law would not differ from English law in any material way when it came to apply the Hague Rules to the issues of the case. In this regard, he relied upon The El Amria(6) at 127 where Lord Justice Brandon stated:-
48. Mr. Smith also referred me to the Nedlloyd Schie (7) at 26 where I said when dealing with the matter of this kind:-
49. Mr. Waung submitted that this was much too simplistic an approach. He submitted that the question a Hong Kong court would have to ask was how a Chinese court applying Chinese law would approach a contract governed by the Hague Rules. He submitted that what must be borne in mind is that those rules have not been adopted in China and that difficulties are likely to arise because there is no certainty as to how Chinese law will approach the matter and it may well be that the questions raised will involve the breaking of new ground. The present situation does seem to me to be distinguishable from that being dealt with in the Nedlloyd Schie where both countries recognise the Hague Rules. Mr. Waung submitted that in these circumstances, it was clearly better that the matter be resolved in a Chinese court and that, indeed, perhaps the only possible way of properly resolving the matter would be to have it so heard. (c) Under this head the Court is called upon to consider the countries with which the parties are connected and how closely they are connected thereto. Mr. Waung suggested that this was a consideration of great importance in the present case. Mr. Smith submitted that no real weight should be attached to this consideration. Mr. Waung pointed out the parties have no connection with Hong Kong except, perhaps, that the defendants might be said to have some connection as their agent Chu Kong is Hong Kong based. He submitted that the defendants' real and substantial connection was with China. 50. I am satisfied that, at times, too much emphasis is placed upon this aspect of the Eleftheria considerations. To say that a litigant has a substantial connection wither particular country should only be given real weight when it is shown that the connection is, in some material way, pertinent to the place of trial. This does not seem to me to have been established in the present case. (d) It was not argued that the defendants do not genuinely desire a trial in China. (e) None of the considerations under the fifth head were really canvassed except that Mr. Smith pointed out that, if Mr. Waung's suggestion that it might be difficult to get a clear written decision from a Court in China was correct, then he might be placed in a difficult position if the matter was tried in China and he obtained a judgment as he might then be unable to get from the Court a clear statement setting out the terms thereof. I am not prepared to give any more weight to this suggestion than I gave to that of Mr. Waung. I am satisfied that I must proceed upon the basis that the Chinese courts will deliver proper judgments and will hand down copies thereof to any party who applies. 51. Although some of the matters weigh in the plaintiffs' favour, having regard to all of the circumstances, I would have been satisfied that the plaintiffs had not shown strong cause against the granting of a stay and I would, had I been called upon to consider this aspect of the matter, have ordered that the proceedings in Hong Kong be stayed. (4) I now turn to consider the position which would have obtained if I was correct in holding that there was no jurisdiction clause but incorrect in holding that there was a submission to jurisdiction. In such circumstances I would be required to give consideration to the conditions set out by Lord Diplock at p.812 in Macshannon v. Rockware Glass(2). His Lordship there stated: -
52. I do not intend to go over the matters pertinent to inconvenience and expense which I have already canvassed. Having considered those matters I am not satisfied that the defendants have shown that in China the matter could be dealt with at substantially less inconvenience or expense. In this regard Mr. Waung placed considerable reliance upon the statement of Lord Diplock at p.815 of MacShannon's case where he said: -
53. Mr. Waung submitted that the defendants had shown that the natural forum was China and that it was therefore thrown upon the plaintiffs to prove how the substantive or procedural law of China differs from the corresponding Hong Kong law to his disadvantage. I am not satisfied that the defendants have, in fact, shown China is the natural or appropriate forum. Indeed it seems to me that in this regard, the scales may well be tipped in favour of Hong Kong. 54. Limited argument was addressed to me upon the basis that the plaintiffs would be deprived of a legitimate personal or juridical advantage by having to litigate in China. Mr. Smith contended that, as the plaintiffs have actions in Hong Kong against both Keyway Freight (International) Ltd. and Thaisino, it would be a "potential disaster" if the action against the owners went on in China. In this regard, he referred to a statement of Lord Justice Brandon in The El Amria(6) where he said at p.128: -
55. In my view if trials were about to be conducted to determine the liability of tire Keyway Freight (International) Ltd. and Thaisino there would be much force in this submission. That, however, is not the case. It does not appear that either trial is going to be proceeded with as neither of the defendants are in a position to meet any judgment that might be given. I do not, therefore, feel it any real weight can be placed on this consideration. 56. Mr. Smith also submitted that there is no evidence to show that the plaintiffs would be able to obtain any representation in Guangdong by lawyers familiar with Admiralty law who would be able readily to appreciate the complexities of this litigation. If this be so the plaintiffs would be placed at a considerable disadvantage if forced to litigate in China. I find this submission disturbing. I do not however, because the first condition has not been satisfied have to consider it further. I feel it appropriate to point out that great weight might have to be given to such a consideration should applications similar to the present one come before this court in the future. 57. I am satisfied that, had I been called upon to apply the MacShannon conditions, I would have found that the defendants had not satisfied me as to the first condition and would have refused to grant a stay. 58. The application for stay is, in the outcome, refused because I am satisfied that the defendants by giving the guarantee submitted to the jurisdiction of this Court. I make an order nisi that defendants pay the plaintiffs costs of this application to be taxed.
(1) (1970) P.94 (2) (1978) A. C. 795 (3) (1976) 2 Lloyd's Rep. 29 (4) (1981) Lloyd's Maritime Newsletter No.3. (5) (1983) H.K.L.R. 52 (6) (1981) 2 L.L.R. (7) (1983) H.K.L.R. 17 Representation: Mr. Clifford Smith (instructed by Johnson, Stokes & Master) for Plaintiffs. Mr. William Waung (instructed by Liu, Chan & Lam) for Defendants. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||