Inchcape J.D.H. Ltd v. Baltrans Exhibition & Removal Ltd and Another
Read the full judgment text of HCCL 257/1996 on BabelCite. This HCCL judgment was delivered on 27 October 1997.
1. On 21 st January 1997 Mr Justice Waung granted leave to the Plaintiff, upon its ex parte application, to issue and serve a concurrent writ out of the jurisdiction upon the 2 nd Defendant, a Chinese corporation, which maintains its registered office in Beijing.
Cited by 9 cases
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1996, No.CL257 _________________ H E A D N O T E _________________ Order 11 rule 1(1)(c) -- service out of the jurisdiction on a "necessary or proper" party General principles -- Seaconsar v. Bank Markazi [1994] 1 AC 438 (HL) "proper party" -- Qatar Petroleum Producing Authority v. Shell Internationale Petroleum [1983] 2 Lloyds LR 35 (CA) "necessary party" -- The Electric Furnace Co. v. Selas Corporation of America [1987] RPC 23 (CA) forum conveniens -- Du Pont v. Agnew [1987] 2 Lloyds LR 585 (CA) The "Goldean Mariner" [1990] 2 Lloyds LR 215 (CA) Per curiam -- observations upon whether lack of evidence is a jurisdiction or merits issue in the context of applications under Order 11 rule 1(1)(c) 1996, No.CL257 IN THE HIGH COURT OF HONG KONG COURT OF FIRST INSTANCE COMMERCIAL LIST _________________
_________________ Coram: The Hon Mr Justice Stone in Chambers Date of hearing: 22 September 1997 Date of handing down judgment: 27 October 1997 ________________ J U D G M E N T ________________ THE APPLICATION 1. On 21st January 1997 Mr Justice Waung granted leave to the Plaintiff, upon its ex parte application, to issue and serve a concurrent writ out of the jurisdiction upon the 2nd Defendant, a Chinese corporation, which maintains its registered office in Beijing. 2. In turn, by summons dated 8th August 1997 issued pursuant to the provisions of Order 12 rule 8 RSC, the 2nd Defendant moved to set aside that Order. It is this application which is the subject of this judgment. THE FACTS 3. The material facts can be shortly stated. The Plaintiff, a Hong Kong company, is a supplier of medical equipment. In particular, it is the owner of a piece of equipment known as an "Elan Analyser". The 1st Defendant, a Hong Kong company, is a freight forwarder, and the 2nd Defendant is a Chinese commercial airline operating within the PRC. 4. What happened was this. The 1st Defendant contracted with the Plaintiff to transport the Elan Analyser and ancillary equipment (packed, I understand, in three wooden crates) by land and air from a medical exhibition site in Beijing to another exhibition site in Shanghai. The 1st Defendant used the 2nd Defendant for the air carriage leg of the trip. Unfortunately the equipment did not arrive in one piece; to the contrary, it appears to have arrived in several pieces, and the damage in question was revealed only upon the unpacking of the crates at the exhibition site in Shanghai. In the event, the Analyser was sold for scrap, and this case is brought by the Plaintiff to recover the sum of US$80,612.39, which it claims is its net loss. 5. By Amended Points of Claim dated 27th June 1997 the Plaintiff sues the 1st Defendant, the freight forwarder; as might be expected, the case is framed in contract and tort. It also seeks to recover against the 2nd Defendant, the air carrier, which had issued the airway bill relevant to the air carriage portion of the Beijing-Shanghai trip; in this connection the plaintiff says that the 2nd Defendant, as sub-bailee of the cargo, was under a duty safely to deliver the cargo to the 1st Defendant, as holder of the airway bill, in Shanghai, and that the damage complained of was caused by the negligence or breach of duty of the 2nd Defendant as sub-bailee. An alternative pleaded case is that the 1st Defendant, as agent for the Plaintiff, entered into the contract of carriage, evidenced by the airway bill, with the 2nd Defendant, and that in breach of that contract, the 2nd Defendant failed to take care of the cargo and deliver it up to the Plaintiff in the same order and condition as it was on delivery to the 2nd Defendant; in the further alternative, in breach of contract the 2nd Defendant failed to effect the necessary insurance thereof. As to the contract element of the case, however, Mr Clifford Smith, appearing for the Plaintiff, made it clear during argument that he placed no reliance thereon. BASIS OF THE EX PARTE ORDER 6. The application before Mr Justice Waung was supported by an affidavit sworn by Mr Barber, a solicitor with Richards Butler, the Plaintiff's solicitors. As Mr Barber's supplemental affidavit confirms, the application was made, and granted, solely upon the basis of Order 11 rule 1(1)(c) RSC, the relevant part of which provision reads :-
7. I note two further important requirements which must be met in connection with rule 1(1)(c) :- viz. Order 11 rule 4(1)(d) :-
And O.11, r.4(2) :-
8. On the basis of the evidence placed before him, the learned judge granted the Order which the 2nd Defendant now seeks to set aside. RELEVANT PRINCIPLES 9. The general principles to be applied in an Order 11 jurisdictional debate are now, I think, tolerably well-established; see in particular the useful commentary in the Supreme Court Practice 1997, in particular at Marginal Notes 11/1/6, 11/1/7, 11/4/3 and 11/4/10. 10. As a result of the speech of Lord Goff in the leading case of Seaconsar Ltd. v. Bank Markazi [1994] 1 AC 438 (H.L.), it is now accepted that all such applications for leave to serve out under Order 11 involve a three stage evaluation. As Lord Goff put it (op.cit., at 456H) :-
11. Order 11 rule 1(1)(c) traditionally has been set somewhat apart from the other categories within Order 11, possibly because there was a tendency for its provisions to be creatively utilised in order to establish jurisdiction when difficulties were encountered in fitting a particular case within the more "substantive" sub-heads of rule 1(1). A substantial proportion of the earlier case law in this area dealt with the situation wherein it was the party sought to be joined who was the real focus of the Plaintiff's claim, and to guard against the use of an existing Defendant as a sort of jurisdictional Trojan Horse, so to speak, the cases established a "ring fence" of protective principle. There has arisen, therefore, a certain amount of commentary and judicial authority upon the precise ambit of the term "necessary or proper party" - see, for example Dicey & Morris, The Conflict of Laws, 1st Ed., Vol.1 at p.324 et.seq. and the cases cited therein; see also Supreme Court Practice 1991 at M/N 11/1/12 (p.89). 12. Some of these cases are considered later in this judgment. At the end of the day, however, the ultimate issue for consideration, in the words of Order 11 rule 4(2), must be whether it appears to the Court that the case is "a proper one" for service out of the jurisdiction. RIVAL CONTENTIONS 13. The present case is notable in that the party in direct contractual relationship with the Plaintiff for the carriage of these crates of medical equipment from Beijing to Shanghai is the 1st Defendant, with regard to which, of course, no jurisdictional difficulty exists; the 1st Defendant is a local Hong Kong company which has been served and over which jurisdiction has been established as of right. So that there is no question of the 1st Defendant being, in effect, an artificial player impleaded to facilitate the assumption of jurisdiction; to the contrary, the 1st Defendant, as contractual carrier, is the Plaintiff's main target, a point which was stressed by Mr Jat Sew Tong for the 2nd Defendant; in his fetching phrase, the 2nd Defendant was simply "icing on the cake" as far as the Plaintiff was concerned. 14. Mr Jat's primary submission was that, in the circumstances of this case, the 2nd Defendant should not be considered a "necessary or proper" party, so that the Plaintiff fell at the first jurisdictional fence, so to speak. He put his case thus. It was the 1st Defendant, the freight forwarder, against whom there was unquestionably a valid claim. It followed that the 1st Defendant was under a clear duty, whether such was in contract, tort or bailment, to take all reasonable care of the equipment during the entire carriage, and to deliver it undamaged to the Plaintiff; ergo, this was not a case of mutually exclusive claims against the two Defendants, and accordingly there was no necessity for the Plaintiff to mount a claim against the 2nd Defendant. 15. Nor was the 2nd Defendant a proper party because the Plaintiff had not shown that it had a valid claim against the 2nd Defendant. Even on the assumption that the machine was in good order and condition when it was received by the 2nd Defendant (and the airway bill would have indicated only its apparent condition) there was no evidence that it was not re-delivered in like good order and condition to the agents of the 1st Defendant, who themselves had completed the land portion of the journey to the Shanghai exhibition hall; put another way, since the only evidence before the Court was that the machine was found damaged after re-delivery by the 1st Defendant to the Plaintiff at the Shanghai Exhibition Center, there was no evidence whatever that the machine was damaged in the custody of the 2nd Defendant, the latter being, of course, one only of the two carriers involved. It followed from this that the Plaintiff had not shown valid claims against the 2nd Defendant in tort and bailment, whilst the purported claim in contract was a non-starter (as Mr Smith effectively accepted) and the claim for failure to insure was even weaker (both latter points not having been raised in the affidavit seeking leave). And, to cap it off, the Plaintiff's claim against the 2nd Defendant was time-barred under PRC law, if such was the applicable law. 16. The like arguments were adopted to underpin the assertion that there was no serious issue to be tried on the merits. And in any event, said Mr Jat, Hong Kong patently was not the forum conveniens. In this regard he submitted that the entire incident had occurred in the PRC, the relevant personnel involved in the carriage were in the PRC (the 1st Defendant's local Chinese agents having dealt with the 2nd Defendant), and it was plainly more appropriate for substantive legal disputes governed by PRC law (for example as to the cause of action and limitation issues) to be resolved by the PRC Courts themselves. 17. Mr Smith, who appeared for the Plaintiff, adopted a broader and forensically attractive approach. His basic premise was that the 2nd Defendant is a "necessary or proper party" to the action against the 1st Defendant because the liability of each Defendant depended upon one investigation (see White Book MN 11/1/12, quoting Massey v. Heynes [1881] 21 QBD 330 (C.A.), and that in this action the common investigation against both Defendants concerned the cause of the damage to the Plaintiff's goods, the extent of that damage, and the loss arising therefrom. Jurisdiction was therefore satisfied, in his submission. If this was the case, there were plainly serious issues to be tried, given that the equipment had patently been damaged during carriage, so that the case then came down to the exercise of the forum conveniens discretion; and in this regard, the Courts had consistently deprecated the bringing of parallel proceedings in two different jurisdictions for the eminently good reason of the consequent risk of inconsistent results and increased costs. Indeed the continuation of related proceedings in a given forum had often been held to be an overriding factor in stay applications, and similar principles applied under Order 11, said Mr Smith. He further suggested that where one Defendant is a necessary or proper party to an action where at least one other Defendant is being sued here, then inevitably there would need to be some very strong reason for discharging service of the writ upon the foreign defendant; and no such strong reason existed in this case. PRINCIPLES APPLIED 18. Such, therefore, was the outline of the respective arguments, and I turn now to examine the constituent elements of the debate. (a) Jurisdiction : Good Arguable Case 19. Plainly, who is or is not to be regarded as a "necessary or proper" party within the meaning of Order 11 rule 1(1)(c) is not simply a matter of discretion, but requires a primary determination by the Court upon the facts of the particular case; the term is not one of infinite elasticity, however, and guidance in principle exists. 20. In terms of the "proper" element of the rubric, I drew counsel's attention to the case of Qatar Petroleum Producing Authority & another v. Shell Internationale Petroleum Maatschappij B.V. & anr. [1983] 2 Lloyds LR 35 (C.A.), a decision of Lord Justices Ackner and Dillon on appeal from a decision of Mustill J. (as he then was). The facts are complex, and for present purposes do not, I think, require rehearsing, particularly since the ultimate decision in that case was substantially affected by the existence of parallel arbitration proceedings. What is of considerable assistance, however, is the following extract from the judgment of Ackner L.J. (op.cit., at p.41, bearing in mind that the previous nomenclature of Order 11 rule 1(1)(c) was 1(1)(j)) :
21. In this context I referred also during the present application to the judgment of Mr Justice Phillips (as he then was) in The"Goldean Mariner" [1989] 2 Lloyds LR 390, wherein the learned judge observed :-
22. So far as the "necessary" element of the equation is concerned, assistance is derived from the case of The Electric Furnace Co. v. Selas Corporation of America [1987] RPC 23 (CA), a patent case wherein the plaintiffs alleged infringement by both Defendants of a patent directed to a method of treatment of a continuous strip of steel moving through a steel furnace. The 1st Defendant was a U.S. company who had designed the furnace, and the 2nd Defendant had been responsible for its installation. The Plaintiff had duly served the 2nd Defendant within the jurisdiction, and had obtained leave to serve out of the jurisdiction on the 1st Defendant under Order 11 rule 1(1)(j) (the equivalent at that time of the current Order 11 rule 1(1)(c)). 23. Argument in Selas provided echoes of Mr Jat's approach in the present case, it being submitted before the Court of Appeal that, inter alia, it was not necessary to join the 1st Defendant in order for justice to be done to the plaintiff, nor that any real advantage would be conferred upon the Plaintiff by so doing. This argument was shot down in terms, Slade L.J. observing as follows (op.cit., at p.32) :-
24. On the basis of the foregoing statements of principle, which I accept, I do not consider that Mr Jat's submission in terms of the primary jurisdictional issue is well-founded. To the contrary, upon the (crucial) assumption that sufficient evidence exists to underpin the action, in my view a good arguable case is made out that the 2nd Defendant is a "necessary or proper party" within the terms of Order 11 rule 1(1)(c). Had the 2nd Defendant been available for service within the jurisdiction, plainly (on the basis of sufficient evidence) it would have been "proper" to join the 2nd Defendant as a party to this action, whilst in terms of "necessary" joinder Mr Smith has made the point that it is in any event an advantage to the Plaintiff to be able to enforce any judgment against the 2nd Defendant; although he does not suggest that the 1st Defendant is not good for any judgment, he points out that the 1st Defendant's terms and conditions of carriage are subject to an express package limitation, and the Plaintiff should therefore be permitted alternatively to attempt to obtain, and thereafter enforce, judgment in the full amount against the 2nd Defendant. 25. The interesting issue which arises in this particular case is whether the obvious paucity of evidence against the 2nd Defendant (of which Mr Jat naturally has made much) is a jurisdiction or a merits issue within the Order 11 analysis. The point was not, I think, developed in argument, and I have been unable to identify any authority directly on the point. Nor perhaps does reference to other substantive sub-heads of Order 11 rule 1(1) particularly assist. Take, for example, rule 1(1)(d)(i). In Seaconsar, op.cit., (at p.454A-455B) Lord Goff made it clear that satisfaction of the jurisdictional requirement depended not upon mere assumption as to the existence of a contract, but upon establishing that there was in fact such a contract made within the jurisdiction; compliance with this head, therefore, necessarily involved an examination of the merits at the primary jurisdictional stage. By parity of reasoning in the present case, it could possibly be argued that, in considering Order 11 rule 1(1)(c), consideration of the merits should be "hoisted" into the jurisdictional analysis, so to speak, so that if clearly there is no evidence underpinning the claim itself then, ex hypothesi, it is not "proper" to join the foreigner as a party to the existing action. 26. Such is not, I think, mere arid discussion; the differing burdens upon the Plaintiff dependent upon whether "jurisdiction" or "merits" is in issue seem to me to render this of significance. However, whilst instinctively I should like to hold that this is a matter going to jurisdiction, in terms of basic principle I think that (probably) it is not. It seems to me that the fundamental rationale of the "proper party" element within Order 11 rule 1(1)(c) is to facilitate the trial of a common question of law or fact, and if this be the correct basis for the jurisdictional requirement under rule 1(1)(c), this requirement must be satisfied in the present case; looked at in these terms, the commonality of the issues in these proceedings arising from the carriage of this equipment from Beijing to Shanghai depends not upon analysis of the strength of the specific case against one of the undisputed carriers. 27. Accordingly, contrary to Mr Jat's contentions, I hold that a good arguable case has been made out that the 2nd Defendant is a "necessary or proper" party to this action, although perhaps ultimately it does not greatly matter whether jurisdictional compliance is established either as "necessary" or "proper"; the requirements under Order 11 rule 1(1)(c) are disjunctive, as Slade L.J. pointed out in Selas, op.cit., and I have accepted the arguments advanced by Mr Smith as to the potential advantage accruing to the Plaintiff from the joinder of the 2nd Defendant, and hence satisfaction of the "necessary" element within the rule. (b) Serious issue to be tried 28. The jurisdictional basis under rule 1(1)(c) having been established, the focus of the argument moves into the discretionary arena and to a consideration of whether there is a serious issue to be tried in the Plaintiff's case against the 2nd Defendant. 29. In applications of this type the courts have always been concerned about the strength of the case against a foreign party sought to be impleaded pursuant to the provisions of Order 11. Lord Justice Mustill (as he then was) succinctly expressed the position thus in TheEras Eil Actions [1992] 1 Lloyds LR 570, at 588 :
30. And as Lord Goff noted inSeaconsar, op.cit., at 452B-E :-
And, further, at 456G :
The question, therefore, is whether in this case the affidavits before the Court disclose a case against the 2nd Defendant which merits consideration at trial. 31. In terms of the Plaintiff's evidential shortfall, Mr Jat drew my attention to the content of Mr Barber's affidavits in support of the application, in particular in so far as such evidence purported to support a substantive cause of action against the 2nd Defendant. The totality of the evidence used to implead the 2nd Defendant, said Mr Jat, was effectively contained in paragraphs 7 and 8 of the first affidavit of Mr Barber, which for convenience I reproduce hereunder :
Little, if anything, was added by paragraphs 4, 5 and 6 of Mr Barber's third affidavit, said Mr Jat, which was the only other relevant material before the Court going to the merits of the case. 32. I agree that the evidential cupboard is pretty bare. As "thin" cases go, this is perhaps as good an example as any; indeed, the less charitable might say that as the 'evidence' currently stands, the Plaintiff's chances of getting home against the 2nd Defendant look distinctly remote. 33. Mr Smith's response to this line of argument is to say, in terms, that since the equipment was crated up his client "cannot know when the loss occurred", and that it "may not be the 2nd Defendant's fault" although it is "equally possible that the loss did occur by some negligence on their part". The 2nd Defendant's negligence during the air carriage leg of the trip was therefore "one of a number of possible causes" and that it was "not fanciful" to suggest that it could well have been the 2nd Defendant who permitted damage to the cargo. An inquiry was clearly necessary as to the cause of this damage, and precisely the same investigation were required to take place in China as would be required here. Essentially, therefore, the case was put thus : the crated goods clearly had had a bad bump, there was as good a chance as any that this had happened on the 2nd Defendant's "watch", so to speak, and discovery may shed some light upon the situation. 34. Is this enough for Order 11 purposes? In my judgment it is not. Service out of the jurisdiction is to be regarded as an exceptional jurisdiction, and the wide-ranging and authoritative case law that has developed over the last quarter of a century in particular has reflected this fact. Against this backdrop, I do not think it is sufficient successfully to implead a foreign carrier and to subject that carrier to the process of our Courts on the basis solely of undisputed participation in the combined carriage. In my view it is not good enough to say, as Mr Smith now does, that it is "as likely as not" to have been the 2nd Defendant's responsibility simply by reason of the overall factual matrix. The 2nd Defendant was not the sole carrier; had it been so the position may (possibly) have been different. As I understand the facts, the 1st Defendant's agents were involved at both the Beijing and at the Shanghai ends of the journey for the non-air carriage parts of the overall trip, and even taking into account the lesser burden of a "serious issue to be tried", 'evidence' such as this does not in my view suffice to enable the Plaintiff to get its foot in the door, and to persuade the Court to exercise its jurisdiction over a foreigner otherwise not susceptible to our judicial process. 35. In this connection I have further borne in mind what this application is not. It is not an application by the 1st Defendant to serve a third party notice out of the jurisdiction on the 2nd Defendant : see Order 16 rule 3(4), and White Book MN 16/1/22. Indeed, in this application I have heard nothing from or on behalf of the 1st Defendant. 36. It seems to me to be axiomatic that a plainly weak case on the merits must be a key consideration in the evaluation by the Court in arriving at its conclusion as to whether the case is "a proper one" for the exercise of its discretion within the terms of Order 11 rule 4(2); in considering a similar type of argument, Slade L.J. put the matter thus in Selas, op.cit. at p.30 :
37. Nor does the fact that there is within the jurisdiction an existing action relevant to the loss necessarily assist in the merits context; as Lord Goff observed in Seaconsar; op.cit., at 456 :
38. At the end of the day, therefore, and given the present state of the evidence, I do not consider that the Plaintiff has surmounted the burden of showing that there is a serious issue to be tried on the merits in its case against the 2nd Defendant. Participation in the carriage apart, there does not appear to be a scintilla of evidence that the damage in question is to be placed at the 2nd Defendant's door. Accordingly, in the exercise of my discretion upon an Order 11 application, I am disinclined to uphold the ex parte Order permitting service out of the jurisdiction solely upon the basis of adverse inference arising from the factum of carriage, given that the 2nd Defendant was not the sole carrier. In this regard, therefore, the Plaintiff has not been able to get its case off the ground. (c) Forum Conveniens 39. I turn, finally, to consider the issue of forum conveniens, the third element in the Order 11 analysis, and I bear in mind here Lord Goff's comments upon the separate nature of this consideration (Seaconsar, op.cit. at 456C) :
40. Unlike the situation in Seaconsar, op.cit., where there was no issue upon the point, on the facts of this case Hong Kong as the forum conveniens is very much in issue. Mr Jat's recital of the relevant connecting factors is met by Mr Smith's inviting submission that the courts are wary of permitting parallel proceedings in separate jurisdictions. This case is necessarily "anchored" in Hong Kong against the 1st Defendant, says Mr Smith, not only because it is a Hong Kong company but also because the 1st Defendant's terms of carriage contain a binding exclusive jurisdiction clause. Ergo, the entire matter should be dealt with here. 41. There is no doubt that the burden upon a Plaintiff seeking Order 11 relief is to show that Hong Kong is clearly the appropriate forum, although in considering this element the significance of the different Order 11 grounds will vary from case to case : see the judgment of Bingham L.J. (as he then was) in Du Pont v. Agnew [1987] 2 Lloyds LR 585 at 588 :
42. Does the inherent disadvantage of parallel proceedings outweigh the otherwise overwhelming Chinese connecting factors in this case? I think in the particular circumstances of this case the answer is probably no. I have noted earlier in this judgment the observations of the English Court of Appeal in The "Goldean Mariner" [1990] 2 Lloyds LR 215 (C.A.), a case in which the Court was considering an appeal from the judgment of Mr Justice Phillips, wherein the learned judge had granted leave to serve out of the jurisdiction against a number of foreign underwriters in a hotly contested marine insurance action. Mr Justice Phillips had laid great stress upon the necessity of determining the litigation against all concerned (there were in that case a total of some 18 defendants) in a single hearing binding upon all those involved, and he had noted that the justice of the case demonstrably required that all parties to be brought before a single tribunal. Although not dissenting from the exercise of the judge's discretion in this regard, Lord Justice Lloyd nevertheless observed as follows, op.cit. at p.222 :
43. At the end of the day I do not consider that the existence of the present proceedings against the 1st Defendant is sufficient in the circumstances to overcome the existing (and otherwise overwhelming) connecting factors with China and to render Hong Kong the forum conveniens, albeit there is, perhaps, some tension inherent in any such balancing process; notwithstanding Lord Goff's observation as to the separate and distinct nature of the elements of merits and forum, I suspect that, as a matter of judgment, the exercise of the Court's discretion under the forum conveniens head in a rule 1(1)(c) analysis is at least tinged by the views formed as to the merits of the case against the party sought to be joined. 44. Accordingly, and not without some hesitation in circumstances in which I have found that the jurisdictional hurdle within Order 11 rule 1(1)(c) has been negotiated successfully, in the exercise of my discretion I am also against the Plaintiff on the basis of forum conveniens. ORDER 45. It follows from the foregoing that, on the basis of the papers presently before the Court, in my judgment the case is not a "proper one for service out of the jurisdiction". Accordingly, the Order of Waung J. must be discharged and the service upon the 2nd Defendant set aside, and I make an Order in terms of paragraph 1 of the 2nd Defendant's summons dated 8th August. 46. In light of the conclusion I have reached in this case, there can I think be little dispute but that the costs of this action, including the costs of and occasioned by this application, must be to the 2nd Defendant, to be taxed if not agreed, and I make also an Order nisi in these terms.
Representation: Mr Clifford Smith, inst'd by M/s Richards Butler, for the Plaintiff Mr Jat Sew Tong, inst'd by M/s Herbert Smith, for the 2nd Defendant No appearance by the 1st Defendant |
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