The Owners of Cargo Lately Laden on Board the Ship or Vessel "Nedlloyd Seine" v. The Owners of the Ship or Vessel "Nedlloyd Seine"

HCAJ000301/1980

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Coram: Liu, J. in Chambers

Date of Judgment: 9th June, 1981.

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JUDGMENT

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1. This is an appeal against a decision of the learned Registrar made on 25th May 1981 dismissing the defendants' application for a stay of proceedings. The appeal was disposed of extempore adverse to the defendants for reasons to follow, which I now give.

2. The plaintiffs are cargo owners of rubber sandals despatched from Canton to Monrovia, Liberia via Hong Kong. The shipment of these rubber sandals from China to Liberia was initially undertaken by a Chinese shipping company with Head Office in Peking and branches in Canton, Shanghai and Tientsin. The Bill of Lading issued by the Chinese shipping company permitted transhipment. When the cargo arrived in Hong Kong, they were transhipped to Monrovia, Liberia by a vessel owned and managed by the defendants. For this appeal, the Chinese shipping company may be taken as having departed from the scene. The defendants are owners of a fleet operatingunder the name of "Nedlloyd Lines", some of which ply between Hong Kong and West Africa.

3. The plaintiffs' rubber sandals were shipped in "Nedlloyd Seine" under a clean Bill of Lading No. 7002 issued by the defendants on the 19th July 1979. Among the Conditions of Carriage in the said Bill of Lading, the following are of interest:

4. "Nedlloyd Seine" arrived in Monrovia, Liberia on 11th September 1979. The plaintiffs' rubber sandals were unloaded on 14th September 1979 and were surveyed by a Lloyd's Surveyor on 29th September 1979. Upon Lloyd's survey, shortlanding was found and certified as 1,372.5 dozens. The value of these missing dozens was in the aggregate of US$7,177.14. It was not until 9th September 1980 that the insurers, Messrs. Mollers' Insurance Agents (H.K.) Ltd. filed a claim for the shortlanding of 1,372.5 dozen rubber sandals in the sum of US$7,177.14 with the defendants' Claim Office in Hong Kong. Little negotiation was conducted with no settlement in sight. Thereupon, the plaintiffs commenced an admiralby action in rem against a sister ship of the Nedlloyd Lines, "Nedlloyd Korea" on her call at the port of Hong Kong. A Warrant of Arrest was duly issued, which was served on the 6th January 1981, whereby "Nedlloyd Korea" was arrested. "Nedlloyd Korea" was subsequently released upon an undertaking given by The Standard Steam Ship Owners' Protection and Indemnity Association (Bermuda) Ltd. to pay, upon demand, in respect of the plaintiffs' claim "such sums by way of damages, interests and costs as may be found due from the owners" "whether by agreement, arbitration award or final judgment of a court of competent jurisdiction" to the extent of US$16,000.

5. On 14th January 1981, a conditional appearance was entered on behalf of the defendants without prejudice to an application to set aside the writ and stay the proceedings. On 15th January 1981, the defendants' solicitors intimated to the solicitors for the plaintiffs that an application would be made to stay the admiralty proceedings in rem. On 22nd January 1981, the defendants caused to be issued their summons for a stay "pending determination of liability in respect of the plaintiffs' claim herein by the Court at Rotterdam in accordance with the terms of the Contract of Carriage evidenced by Dill of Lading No. 19/224 (7002)". On 25th May 1981, after a protracted period of adjournment, the defendants' summons was dismissed by the learned Registrar, and this dismissal formed the subject-matter of the present complaint.

6. The instant admiralty action in rem against the defendants as owners of "Nedlloyd Korea" sister ship of "Nedlloyd Seine", is for damages for the loss of rubber sandals shortlanded upon arrival at Monrovia, Liberia. There was little argument as to the proper law of the contract being Dutch law and Condition 34 a foreign exclusive jurisdiction clause. I do not propose to condescend to particulars for the exchange in correspondence, but the defendants cannot be said to have unequivocally admitted the plaintiffs' claim or the shortlanding of cargo as resulting from a loss on board "Nedlloyd Seine". However, even at the very hearing of this appeal, counsel for the defendants remained unaided in the formulation of a defence to the plaintiffs' claim. Up to the hearing of this appeal, it had been over 20 months from the Lloyd's survey in Liberia, precisely 9 months from the time when the plaintiffs' insurers lodged a claim with the defendants' Claim Office in Hong Kong, over 5 months from the date of arrest and almost 5 months from the defendants' appearance under protest and their solicitors' intimation of an application for a stay. The defendants could commend for my consideration no more than a pending investigation, the scope and extent of which were not fully disclosed. The threshold question as to whether there was any real defence on the merits had yet to be answered. If ever there was any justification in opposition, the defendants must have been inexcusably dilatory and unenthusiastic.

7. The proper law of the contract governs the interpretation of the forum selection clause as to whether it is valid and, if so, whether it excludes jurisdiction to all in favour of the Courts in Netherlands. The parties do not seem to be at odds in regard to these matters. But it is Hong Kong law which serves "as the lex forum to determine the effect of the jurisdiction clause, and in particular the circumstances in which it may, or must, be overridden." See Dicey and Morris, The Conflict of Laws (10th ed.) p.256. Cases which come before the Courts on a forum selection clause are generally either when opposition is made to an application to serve a defendant out of jurisdiction under Order 11 or in an application for staying an action brought within this territory against an available defendant. In either case, the Courts enjoy a discretion to proceed or continue with the proceedings in disregard of an exclusive jurisdiction clause.

8. It was said by Kerr, J. in Evans Marshall & Co. Ltd. v Bertola S.A.⁽¹⁾:

"...... that in Ord. 11 cases there is a heavier burden on the plaintiff who wants to bring the defendant within the jurisdiction than in cases of applications for staying actions properly instituted here. To bring a defendant before the English courts in the face of a foreign jurisdiction clasue to my mind clearly goes further than merely allowing an action against a defendant properly served here to proceed."

9. For applications to stay, the comparatively lighter burden remains heavy. Such burden has been paired with a variety of staunch expressions such as "the stringent test", "strong reasons", "exceptional cases", "a strong balance of argument", "displacing a prima facie case for a stay" and "a powerful factor in favour of refusing to grant a stay". If indeed the parties have chosen to bind themselves in a contract negotiated at arm's length by a forum selection clause, the Courts should be slow to intervene. In The "Media"⁽²⁾, where the plaintiffs would be left without any redress in the designated foreign court in Calcutta unless their English action was held maintainable, the President Lord Merrivale accorded a low profile to "needless expense", "gross inconvenience" and "business inefficacy" which were suppressed as "collateral considerations". In delivering the judgment of the Court, the learned President had this to say:

"Now, an action could have been brought in Calcutta when this action was brought. Quite true it would have been needlessly expensive and, I think, highly inconvenient, and I do not think it would have put the parties in a business like position for the prompt settlement of the differences. But those are collateral considerations. It was for the goods-owners to appreciate what was the agreement that they had made. They had agreed that they were to have their rights determined by British law in Calcutta unless the shipowners in due course of time declared their option that the action should be brought in the United Kingdom."

10. But the discernible degree of inconvenience as recognized by Brandon, J. in The "Makefjell"⁽³⁾ and The "Adolf Warski"⁽⁴⁾ may assume the importance of a material factor, among others, for displacing any prima facie case of a stay. When the case of The "Adolf Warski"⁽⁵⁾ came before the Court of Appeal, Cairns, L.J. summarised the position succintly at p.245:

"Now in this case, as in The Makefjell the main criterion which led to Mr. Justice Brandon to his conclusion was the degree of inconvenience that would be involved in calling witnesses who are not resident or working in the country prescribed by the jurisdiction clause to give evidence in the appropriate Court of that country. In The Makefjell the witnesses concerned were mainly people working at London docks, and the Judge did not consider that the balance of convenience in favour of calling them in London was sufficient to justify departure from the provisions of the clause. In the present case the witnesses mainly concerned are academic experts in plant pathology from English universities, and witnesses from Chile, as to whom there exists some uncertainty for political reasons about whether they would be allowed to enter Poland."

11. The general principles applicable to cases for a stay had earlier been adumbrated in The "Eleftheria"⁽⁶⁾ by Brandon, J.:

12. "Time-bar" has lost much of its prominence and is now generally regarded as a neutral factor. It is common ground that the defendants agreed to extend the limitation period for instituting proceedings for a period of three months. In the absence of specific instructions, Mr. Ma's only reservation was that the promised extension might not be inclusive of proceedings in Rotterdam, but Mr. Ma hastened to add that if ever the outcome of these proceedings hinged on time-bar, it would be open to this Court, on granting a stay, to impose a term for excluding it for Rotterdam. It was so ordered in the American case of The Gottingen (No. 1)⁽⁷⁾, referred to in The "Adolf Warski"⁽⁵⁾. The defendant in The "Adolf Warski" also offered belatedly to waive a foreign time-bar⁽⁵⁾. However, we know not if such proposed exclusion will be respected or can be enforced in Netherlands.

13. In The "Media"⁽²⁾, an action by writ in England on a contract which provided exclusive foreign jurisdiction for the determination of disputes was stayed despite a time-bar in the forum selected. In The "Adolf Warski"⁽⁵⁾, time-bar was considered to be a question of no consequence. Stephenson, L.J. and Sir Gordon Willmer put it no higher than a neutral fact. In The "Vishva Prabha"⁽⁸⁾, Sheen, J. described it as "not a very weighty matter".

14. But in a summary of a recent case, The "Blue Wave" concluded on the 20th March 1981⁽⁹⁾, Sheen, J. was reported as having said of time-bar: "a powerful factor in favour of refusing to grant a stay". I have had not the benefit of the full report in The "Blue Wave" for the reversal of the learned Judge's attitude in less than two years from The "Vishva Prabha" in 1979 to The "Blue Wave" in 1981. Moreover, it has never been suggested that the view expressed by the Court of Appeal in The "Adolf Warski"⁽⁵⁾ requires critical reconsideration.

15. The plaintiffs are out of time in Rotterdam, and the defendants have not categorically offered to waive the time-bar in Netherlands. Even if the Court were to impose a condition that the plaintiffs' remedy should not be so affected in Rotterdam, we know not if a waiver of limitation would in law be possible or acceptable in Netherlands. It would not have been reasonable to expect the plaintiffs to incur further expenses when they feasible believed that proceedings in Hong Kong were proper. On the other hand, the plaintiffs must shoulder the responsibility for not taking any precautionary Dutch proceedings in the alternative. I would follow what would appear to be the widely accepted view that time limitation can only be a neutral fact.

16. Next I turn to another aspect in this case: The US$16,000 security would cover any claim successfully prosecuted in a court of competent jurisdiction including one in Rotterdam. That would dispose of the question of security which will be preserved. I need not consider, as in The "Eleftheria"⁽⁶⁾, if the parties should be persuaded to agree on reasonable security.

17. Strong cause must be shown to justify a departure from the bargain made in the foreign jurisdiction clause. Naturally, all the circumstances will have to be carefully weighed to see if the prima facie case for a stay may be displaced. I hope it would not be impertinent to refer to an American case, The "Chaparral"⁽¹⁰⁾, where the United States Supreme Court by an overwhelming majority of eight to one decided in favour of holding the parties to a contracted foreign exclusive jurisdiction clause. At p.320, in delivering the majority judgment, Burger, C.J. had this to say:

" There are compelling reasons why a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, such as that involved here, should be given full effect."

The learned Chief Justice continued at p.321:

18. I pass then to consider the situation where there is no or no disclosed defence. In The "Vishva Prabha"⁽⁸⁾, the plaintiff's claim was based on severe damage to cargo caused by leakage of fuel oil from a puncture in the tank in the hold. The defendants there would escape liability if only the tank could be established to have been punctured after the loading of the cargo at the port of despatch. Subject to the possibility of sabotage, the circumstances suggested that the hole must have been in existence before cargo had been loaded, and the defendants had not "at any stage since the damage occurred suggested any defence to" the claim. It was held that there was no dispute on the question of liability, which ought to be submitted to the foreign court.

19. In the instant case, the plaintiffs were given a clean Bill of Lading in Hong Kong, and the shipment was certified to be shortlanded at the port of destination. Pilferage in West Africa was said to be "uncontrollable". The defendants have not specifically admitted loss on board their vessel, but after a protracted period they have not moved beyond the bounds of an alleged on-going enquiry. I can derive no real assistance from the warehouse delivery tallies and the accompanied document issued by the National Port Authority at Monrovia, but no defence is known to the defendants even today. There has been little explanation for the inordinate delay save for the bare outlines in the affidavit of Mr. Biggs filed herein on 5th June 1981. It was, inter alia, claimed that the ship-side tallies had not yet been received in Hong Kong. It was left unclear whether the defendants' investigation had in fact been conducted in Hong Kong. Over 20 months have elapsed after the Lloyd's survey in Liberia, it may not be an unfair inference to draw that no justifiable ground in opposition will ever be unearthed. As of now, there is no or no-known defence available to the defendants. Nor have the defendants been in a position even to suggest any.

20. Counsel for the defendants sought to distinguish between "dispute" from "action". On the forum selection clause, it was urged upon me that an action must be instituted in Rotterdam whether or not there was any or any known dispute. It was submitted that even as a procedural step for the recovery of damages, a forum was solemnly agreed upon and the venue must be strictly adhered to. Counsel could suggest no tangible advantage but insisted on full effect being given to the terms of a freely negotiated provision opting for a Dutch proceeding.

21. In the case of "Banglar Mita", the judgment of which was given by Sheen, J. on 6th February 1981⁽¹¹⁾, a cargo of skimmed milk was certified to be damaged on arrival and a portion shortlanded. Sheen, J. refused a motion for a stay by reason that there was no dispute "which could have been referred to the Court in Bangladesh".

22. At p.256 of The Conflict of Laws, Dicey and Morris, 10th ed., emphasis is inter alia placed on the absence of a genuine desire to bring a trial to a selected forum outside jurisdiction and the grave suspicion cast on a party merely seeking "procedural advantages". The defendants in this case have not been armed with any real controversy for a trial in Rotterdam. There is yet no issue which may reasonably be framed for the determination of a Dutch tribunal. If indeed, the selected forum in Netherlands is hoped to serve merely as a station for the legal recovery of a claim in damages to which there is no answer, the circumstances here are more than powerful enough to displace the prima facie case of a stay and call for the exercise of judicial discretion in favour of the plaintiff.

23. It was further contended on behalf of the plaintiffs that the dispute was closely connected with Hong Kong: The insurers are in Hong Kong. The company which made the arrangements for the purchase of the cargo from the Chinese suppliers, Messrs. Wagammal Boolchand & Co. Ltd., carries on business in Hong Kong. The plaintiffs' documents for their title to sue and proof of damages are available in Hong Kong. The defendants have not intimated that these would be seriously tested. These documents can be dispatched to Rotterdam with no foreseeable difficulty. Counsel for the defendants was at pains to point out that the plaintiffs are a company in the People's Republic of China with a post office box in Monrovia, Liberia. I can detect no close connection in this case.

24. It was claimed by the defendants that the entire crew of "Nedlloyd Seine" were Dutch. Hong Kong was clearly only a port of transhipment. It was submitted that it was inappropriate to conduct proceedings through interpreters whilst evidence might be given in Dutch at Rotterdam, and that the crew would be more readily available in Rotterdam than in Hong Kong. There has been no defence disclosed. It must be speculation whether in addition to formal documents, any viva voce evidence would be required. Moreover, as the plaintiffs contended, most of the Dutch crew speak English and the vessel calls regularly at the Port of Hong Kong every four months for a few days. It has not been suggested that the period in port at Rotterdam will be more extensive, and there is no evidence that the crew are residents of Rotterdam rather than of distant towns elsewhere in Netherlands. The alleged inconvenience to either party does not seem to be real or insuperable. Furthermore, these inconveniences must have been foreseeable at the time of the Bill of Lading. Only in a rare but clearly justifiable case as that in The "Adolf Warski"⁽⁵⁾ wuold the element of inconvenience be persuasive enough to merit notice. The defendants also relied on the Dutch registration of the vessel. But in all the circumstances, I remain unimpressed that there is any real or substantial connection either with Hong Kong or with Rotterdam or that the choice can be promptly made on the balance of convenience. These matters seem to be equally matched even assuming there is any genuine dispute fit for a reference.

25. The main countervailing considerations are the stipulated Dutch law for the proper law of the contract and the foreign jurisdiction clause. But there is no evidence that Dutch law is significantly different in the relevant aspects from Hong Kong law. Moreover, for the Bill of Lading, Hague Rules were incorporated both in Hong Kong and Rotterdam.

26. The Court has a discretion to grant or refuse a stay which has to be exercised sparingly and only on very strong grounds or in an exceptional case. As against the contractual preference in the Bill of Lading, we have the defendants' dilatoriness and failure to isolate or formulate any defence on the merits. The alleged inconvenience and connection have not been shown to be of real significance. Time-bar in Rotterdam is a neutral factor. There can be no question of loss of security. There is no evidence of any material difference in the legal process for establishing and recovering damages between Hong Kong and Netherlands. Real opposition is based on an invited blind adherence to the contractual term for exclusive foreign jurisdiction. It was not explained what conceivable advantage the defendants might gain by proceedings in Rotterdam. None was in fact suggested except for the time-bar which I have considered to be neutral. The defendants have caused inordinate delay. There has been no serious attempt to discuss settlement or advance any genuine defence. Not even a pretence of a defence has been sought to be presented. There is every indication of a total lack of any genuine desire to go to trial in Netherlands. Taking all the circumstances into consideration, the defendants' conduct is indeed highly controversial and unconventional. In my view, it would be wrong in these circumstances for my discretion not to be exercised in favour of the plaintiffs. The stay applied for is therefore refused.

27. For all these reasons the appeal against the Registrar's decision is dismissed with costs to the plaintiffs.

Representation:

Mr. Ma instructed by Richards Butler & Co. for Defendant

Mr. Graham instructed by Robertson, Double & Boase & Co. for Plaintiff.

(1) [1973] 1 W.L.R. 349 at p.362 F/G

(2) [1931] 41 LI. L. Rep. 80 at p.82

(3) [1975] 1 LI.L.Rep. 528

(4) [1976] 1 LI.L.Rep.107

(5) [1976] 2 LI.L.Rep. 241

(6) [1969] 1 LI.L.Rep. 237 at p.242

(7) [1964] 2 LI.L.Rep. 35

(5) ibid at p.248

(5) ibid at p.244

(8) [1979] 2 LI.L.Rep. 286 at p.288

(9) Lloyd's Maritime Law Newsletter, Issue No. 37 dated 2nd April, 1981.

(6) ibid at p.246

(10) [1972] 2 Li.L.Rep. 315

(11) A summary was given in the Lloyd's Maritime Law Newsletter - 3

Admiralty Jurisdiction 1980 Folio 301

Date of Hearing: 9th June, 1981

Date When Judgment Was Delivered: 26th June, 1981

ORDER:

1. Appeal dismissed with costs.

2. Written decision to be sent to parties at a later stage.

Cases Cited by Counsel for Plaintiffs in Argument but not mentioned in the Judgment

1. Carriage of Goods by Sea Ordinance Cap.46 Laws of Hong Kong.

Actual cases cited in the Judgment

1. Evans Marshall & Co. Ltd. v Bertola S.A. [1973] 1 W.L.R. 349 at p.362

2. The "Media" [1931] 41 LI. L. Rep.80 at p.82

3. The "Makefjell" [1975] 1 LI.L.Rep. 528

1. The "Adolf Warski" [1976] 1 LI.L.Rep. 107

5. The "Adolf Warski" [1976] 2 LI.L.Rep. 241

6. The "Eleftheria" [1969] 1 LI.L.Rep. 237 at p.242

7. The Gottingen (No. 1) [1964] 2 LI.L.Rep. 35

8. The "Vishva Prabha" [1979] 2 LI.L.Rep. 286 at p.288

9. The "Blue Wave" Lloyd's Maritime Law Newsletter, Issue No. 37 dated 2nd April, 1981.

10. The "Chaparral" [1972] 2 LI.L.Rep.315

11. "Banglar Mita" A summary was given in the Lloyd's Maritime Law Newsletter - 3

Representation:

Mr. Ma instructed by Richards Butler & Co. for Defendant

Mr. Graham instructed by Robertson, Double & Boase & Co. for Plaintiff.