Palace Hotel Ltd v. The Owners of the Ship or Vessel "Happy Pioneer"(Panamanian Flag)
Read the full judgment text of HCAJ 22/1981 on BabelCite. This HCAJ judgment was delivered on 22 December 1982.
1. In this matter the Palace Hotel Limited, the plaintiffs, sued the owners of the ship "Happy Pioneer", the defendants, for damages, for breach of contract and/or breach of duty in respect of the defendants' wrongful refusal and/or failure to deliver goods to the plaintiffs at Tientsin and/or negligence of the defendants, their servants or agents during the voyage.
|
HCAJ000022/1981 Admiralty action for damages for failure to deliver goods at stipulated port of destination - Action commenced in Hong Kong despite an Amsterdam jurisdiction clause - Application for stay of proceedings - Effect of a plea by the plaintiffs that defendants were guilty of a fundamental breach of contract - Contention that the words "claim .... arising under this Bill of Lading" did not include claims framed in tort - Consideration of the proper law of the contract - The Eleftheria considerations dealt with - Action ordered to be stayed.
IN THE SUPREME COURT OF HONG KONG HIGH COURT ADMIRALTY JURISDICTION __________ Admiralty action in rem against : BETWEEN
_______ Coram: Hon. Power, J. Date: 22 December 1982 ___________ JUDGMENT ___________ 1. In this matter the Palace Hotel Limited, the plaintiffs, sued the owners of the ship "Happy Pioneer", the defendants, for damages, for breach of contract and/or breach of duty in respect of the defendants' wrongful refusal and/or failure to deliver goods to the plaintiffs at Tientsin and/or negligence of the defendants, their servants or agents during the voyage. 2. The plaintiffs are a company registered in Peking, China and having a place of business at "c/o China Internation Travel Service, Head Office, 6 East Chant An Avenue , Peking, China." The defendants, who are the owners of the vessel "Happy Pioneer" are the Compania Naval Unicorn S.A., (C.N.V.) a company incorporated in the Netherland Antilles and having its registered address at P.O. Box 231, Willemstad, Curacao, Netherland Antilles. This company is a wholly owned subsidiary of the Mammoet Shipping Co., (Mammoet)a company incorporated in the Netherlands with its registered office and principal place of business at Amsterdam. Mammoet is associated with the Nedlloyd Group which operates a worldwide fleet of merchant vessels. Mammoet exercises the central management and control of the vessel from its place of business in Amsterdam, and it has no place of business or permanent agent in Hong Kong. Worldwide Technical Services Company Inc. of Houston, Texas shipped 43 packages of oil well drilling rig equipment on the "Happy Pioneer" to the plaintiffs in Peking via the port of Tientsin, The vessel did not take the goods to Tientsin. The vessel did not take the goods to Tientsin as it had undertaken to in the Bill of Lading but off loaded them in Hong Kong. The plaintiffs are suing to recover damages which they say they suffered by reason of deviation. 3. The Bill of Lading contains the following provisions:-
4. The plaintiffs commenced an action in Hong Kong, despite the jurisdiction clause in the Bill of Lading, and the defendants now apply to have that action stayed. 5. Mr. Tong who appeared for the plaintiffs contended firstly that the defendants were guilty of a fundamental breach of contract as they delivered cargo to Hong Kong and not to Tientsin. He submitted that the defendants had thereby repudiated the contract of carriage and that they could not now say to the plaintiffs that, although they had repudiated, the plaintiffs were still bound by the jurisdiction clause in the Bill of Lading. It was common ground that a deviation is a fundamental breach of contract and that it would, unless accepted by the cargo owner, bring the whole contract to an end. Mr. Tong, while conceding that there was a dispute as to whether or not a deviation had taken place, submitted that the effect of a stay would be that the Court would be holding that the plaintiffs were bound by a contract which may have been repudiated by the defendants. Initially Mr. Tong seemed to be treating this first contention as a separate and fundamental point which, of itself, would be sufficient to deprive the defendants of the right to a stay. However as his argument developed, it became clear that what he was really saying was that once the issue as to whether the contract had been discharged by the fault of the defendants had been properly raised, then it was a matter which the Court should take into account when it turned to deal with the considerations set out in the ''Eleftheria"(1) at 237. Mr. Tong submitted that this consideration, when squarely raised, would be of substantial, if not conclusive, weight against the granting of a stay. I will deal further with this contention when I come to deal with the "Eleftheria" considerations. 6. Mr. Tong's second point was that the plaintiff had a separate and distinct cause of action in tort. He submitted that this was so because Clause 3 of the Bill of Lading only covered "actions" under the "contract of carriage", which did not include actions in tort. In such circumstances, he submitted, it would be wrong to force the plaintiff to bring its action in contract in Holland while it was, quite properly, pursuing its action in tort in Hong Kong. Mr. Tong submitted that cases such as Woolf v. Collis Removal Service(2), which was cited by Mr. Ribeiro who appeared for the defendants, which held that an arbitration clause survives the acceptance of a breach as a repudiation had no application at the present case. I find myself in agreement with this submission and I do not consider that any real assistance can be gained from the cases dealing with arbitration clauses. I am satisfied that a jurisdiction clause does not stand on the same footing as an arbitration clause. A case upon which Mr. Ribeiro heavily relied was the "Makefjell"(3). In that case there was a Bill of Lading containing a jurisdiction clause which read as follows:-
It was contended that the words "claim .... arising under this Bill of Lading" did not include claims framed in tort for damage to goods that had been carried. Lord Justice Cairns said at 33:-
I must say, with respect, that this robust appeal to commonsense finds favour with me. 7. Mr. Tong sought to rely upon the unreported case of the "Shin Shien", Admiralty Jurisdiction 1979 Folio No. 9 in which Mr. Justice Cons held that the jurisdiction clause with which he was dealing was not sufficiently wide to cover claims in tort. That clause was very differently worded From the one in the present case which, I am satisfied, is, for all practical purposes, the same as that which was being dealt with in the Makefjell (3). I respectfully adopt the approach of Lord Justice Cairns and having done so I am satisfied that the jurisdiction clause is wide enough to cover actions in tort. 8. Mr. Tong's next point was, what was referred to in argument as, the COGSA point. This point, depending upon the way in which it is decided, may again have to be canvassed when the Eleftheria(1) considerations are being dealt with. Mr. Tong argued, and this was common ground, that it was for this Court to decide the proper law of the contract. He said that once this Court had decided which law was applicable then it would apply that law to the contract. 9. He submitted that an examination of the clauses of the Bill of Lading would show that United States law was a proper law of a contract and that, this having been established, it inevitably followed either that the whole agreement was null and void or that clause 2 thereof, which made the law of the Netherlands the proper law of the contract, was null and void. 10. Mr. Tong sought to demonstrate that this was so in the following way. Firstly he submitted that, when deciding which systems of law was applicable, the Court had to look at the whole of the contract and the circumstances in which it was made. He pointed to the connections which the contract had with the United States and in this regard, particularly relied upon Additional Clause (F). While it is true that it could be demonstrated that the contract was connected in a number of ways with United States, I do not consider that, leaving aside additional clause F, these were of sufficient weight to determine the proper law of the contract. Mr. Tong, in my view, could only be successful on this ground if he could persuade me to accept his view of the meaning and effect of Additional Clause F. Mr. Tong submitted that it was clear, by virtue of Additional Clause F, that the United States Carriage of Goods by Sea Act (COGSA) applied to the Bill of Lading. 11. He submitted further that not only did COGSA take effect by virtue of Additional Clause (F) in the Hill of Lading but that it also took effect because of the declaration to that effect in the Act itself which states in its preamble "that every Bill of Lading .... which is evidence of a contract for the carriage of goods by sea to or from ports of the United States, in foreign trade, shall have effect subject to the provisions of this Act." In this regard Mr. Tong sought to invoke the principle emunciated in the Morviken(4) which held that as the Hague - Visby Rules have, by the Carriage of Goods by Sea Act 1971, been given the force of law in England that, whenever there is any inconsistency between the terms of a Bill of Lading and those Rules, the Rules will prevail. Mr. Tong submitted that this same approach should be taken to the inconsistency between COGSA and the present Bill of Lading. 12. Mr. Ribeiro submitted that the COGSA was not in the same footing as the Hague - Visby Rules, as it was not the law in Hong Kong and that it could not be treated as such. 13. I cannot accept Mr. Tong's submission as to the effect of the statement in the preamble to the American Act. Its result, if it was accepted, would be that an American statute would be given the force of law in the Courts of this Colony. I accept that the parties can themselves incorporate a foreign act or part thereof into an agreement and that they have done so in this case. I do not accede to the submission that, a statement in a foreign statute can, as a matter of law, bind the Hong Kong Court to regard that statute as the he governing law of the contract. Mr. Tong submitted that he was not really inhibited in his argument by the Court so holding as the parties had by their own act made American law the proper law of the contract. 14. He submitted that s. 3(5) of COGSA therefore applied to the contract. This section reads as follows:-
15. COGSA, in s. 4(5), applies a US$500 per package damage liability limitation and; at today's rate of exchange, this amount is greater than the maximum damage liability per package of D.f1. $1,250 stipulated in clause 2 of the Hill of Lading. This being so, Mr. Tong argued that Section 3(8) either makes the "agreement", i.e. Bill of Lading, null and void and of no effect or, at the very least, makes Clause 2 of the Bill of Lading, null and void and of no effect. Mr. Tong submitted that if the whole agreement was null and void, then the plaintiffs were entitled to sue for damages in tort in any jurisdiction. He said that, alternatively, if only Clause 2 was null and void, then the law of application was United States law and that the Court should take this into account when dealing with consideration (b) of the Eleftheria(1) considerations. 16. Mr. Tongs first approach is a bold one. He argues that the parties have, by their own stipulation, declared their contract to be "null and void". A Court would surely hesitate long before allowing itself to be driven to this conclusion. Clearly the parties entered into the contract intending it to have effect and to govern their relations. The Court is being asked to hold that, by what appears to have been an inadvertent stroke, they have wholly nullified that intention. I am satisfied that it would be quite wrong to hold that they have done so and that, at best for Mr. Tong, the effect of Additional Clause (F)would be no more than that it nullified Clause 2. Does it have even that effect? 17. Mr. Ribeiro acknowledged that Additional Clause (F) made reference to COGSA but he submitted that the clause did net, when read in the context of the Bill of Lading, bring American law into play as the proper law of the contract. He submitted that Clause 2 was the controlling clause and that only the clearest indication could override such a precisely worded express choice of law clause. He argued that Additional Clause (F) stated only that -
He submitted that the clause did not bring in American law as a proper law of the contract, but simply incorporated the relevant provisions of COGSA into the governing law of the contract which, by virtue of Clause 2, was the law of the Netherlands. 18. He pointed out that the final sentence in Additional Clause (F), giving the carrier the benefit of certain sections of the revised statutes of the United States, would not be necessary at all if the clause had already made United States law the proper law of the contract. 19. He pointed to the final sentence of Clause 2 which provides: "This Bill of Lading is subject to the compulsory provisions of law under which the carriage falls, it being understood that if any stipulation of this Bill off Lading is wholly or partly contrary hereto (sic), this Bill of lading shall be read as if such stipulation or part thereof, as the case may be, were deleted." He submitted that, when the relevant provisions of COGSA were incorporated, there would no longer be any conflict as the American provision as to limitation would apply as provided by the final sentence of Clause 2. I am satisfied as to the correctness of this argument. I am satisfied that Additional Clause (F) incorporates the relevant provisions of the United States Carriage of Goods Act into the Bill of Lading and that it in no way affects the fundamental agreement of the parties which was that the law of the Netherlands would be the law of application. 20. In case I should be wrong in so holding, I will, when dealing with the Eleftheria consideration, which I turn to next, indicate the effect which the deletion of clause 2 would, in my view, have on consideration (b). 21. Finally Mr. Tong submitted that, even if the Court was against him on his first two points, he had shown strong cause against an order staying the proceedings. In this regard the Court must consider the whole of the circumstances and must in particular turn its mind to the considerations which were set out in the Eleftheria (1) as follows:-
(a) As to expense and convenience, Mr. Tong submitted that the evidence of damage would be in Hong Kong and that there was a possibility that witnesses might have to be flown from Hong Kong to Amsterdam if the trial was to take place there. This is true, however, it is very possible that this aspect of the matter will be dealt with purely by affidavit with the relevant documents exhibited thereto. Mr. Tong submitted that as far as the port control officials at Tientsin were concerned, it would certainly be less costly and more convenient to bring them to Hong Kong than to take them to Amsterdam. As far as the defence witnesses are concerned, he submitted that they might, at any time, be anywhere in the world, and that bringing them to Hong Kong would be no more expensive or inconvenient than taking them to Amsterdam. As far as the port control officials are concerned, it seems clear that it would be less expensive and more convenient if the trial were held in Hong Kong. On the ether hand, given the speed and availability of modern transport, there would be no great inconvenience in getting them to Amsterdam. 22. As to (b), I am satisfied, as I have indicated, that the law of the Netherlands is the proper law of the contract and this would clearly be best applied by the Court at Amsterdam. However, I bear in mind, in this regard, that it has not been suggested that there are any differences between Dutch and Hong Kong law and that, unless this was shown to be so, a Hong Kong Court would proceed upon the basis that the two systems of law were the same, and no difficulty should, therefore, arise in this regard if the trial were to be held in Hong Kong. If, contrary to what I have held, American law applies, there is nothing to choose between Amsterdam and Hong Kong. The foreign law point, being neutral, would then be of no assistance to the plaintiffs. 23. As to (c), Mr. Tong submitted that comparatively speaking, both parties were connected with Hang Kong and that only one had any connection with Holland. I find myself unable to agree with this contention. The plaintiffs are a Pelting based company. It has an agent in Hong Kong, namely Yick Ho Ltd., through whom, it appears, it operates when necessary. It is true that the defendant company also has an agent in Hong Kong, however the parent company, which owns the defendant, is clearly based in Holland. I do not consider that either company has any significant connection with Hong Kong. 24. No submissions were made as to consideration (d) and I, therefore, pass to consideration (e). The only argument addressed in this regard was as to consideration (e)(iv). It was submitted that, as the Netherlands and China de not have diplomatic relations, the Chinese might feel that they would be subjected to some form of racial discrimination if forced to litigate in Amsterdam. Mr. Tong was unable to point to any fact that would establish, in a concrete way, that this would be happen but he submitted that the Chinese might feel that it would, and that it was important that justice be seen to be done. There was no real basis shown from which it could be inferred that there might be discrimination. In such circumstances, I consider it would be improper For me to entertain this submission resting as it did upon the suggestion that there was some doubt as to the impartiality of the Courts of the Netherlands. 25. Finally Mr. Tong suggested that his clients would be put at some sort of disadvantage as the Courts of the Netherlands use the inquisitorial rather than the adversarial system. I had thought that arguments such as this were laid to rest by the decision in the El Amria(5). In rejecting this submission I can only refer once again to the words of Lord Justice Brandon at 127 where he said:-
26. In all of the circumstances, I do not consider that the plaintiffs have proved strong cause for refusal of the granting of a stay. The action will, therefore, be ordered to be stayed in Hong Kong. The plaintiffs were ordered to pay the defendants' costs to be taxed.
(1) (1969) 1 L.R. 237. (2) (1948) 1 K.B. 11. (3) (1976) 2 LLR 29. (4) (1982) 1 LLR 325 (5) (1981) 2 LLR 119. Representation: Mr. Ribeiro (Holman, Fenwick & Will an) for Applicant/Defendant. Mr. R. Tong (Deacons) for Respondent/Plaintiff. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||