Well Hoped Ltd and Another v. Nippon Yusen Kaisha and Another

HCCL000067/1981

Headnote

Foreign jurisdiction clause in bill of lading. Proceedings instituted in Hong Kong for damages in breach of the clause. Application by defendant for a stay. Effect of time bar.

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Coram: Jones, J. in Chambers

Date: 23 March 1982

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JUDGMENT

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1. On the 28th May and the 1st June 1979 the 1st plaintiff whose registered office is in Hong Kong entered into agreements with San Yuan Industrial Corporation (hereafter called San Yuan) of Taiwan to purchase a consignment of girl's dresses and a consignment of ladies' briefs.

2. Both consignments were resold by the 1st plaintiff to the 2nd plaintiff, a company carrying on business in the Sudan. The 1st defendant, a world wide shipping line in Japan received the goods from San Yuan on the 8th September 1979 at the port of Keelung for shipment on their vessel the "Futami Maru" to the Sudan. The goods were shipped under two clean bills of lading issued by the 1st defendant in favour of the 1st plaintiff. The vessel arrived in Port Sudan on the 11th October 1979 and the goods were discharged two days later.

3. It is the plaintiffs' case that when the goods were delivered to the 2nd plaintiff on the 8th December 1979 a large number of the cases were wet damaged.

4. The plaintiffs issued the writ in this action on the 7th August 1981 claiming damages against the 1st defendant for breach of contract of carriage under the bills of lading and in tort for negligence and fraud. The claim against the 2nd defendant is for an indemnity under two policies of insurance subject to warehouse to warehouse clauses and Institute Cargo Clauses (All Risks) issued by Lloyds Underwriters.

5. A defence has been filed by the 2nd defendant. The 2nd defendant alleges that the goods were already wet damaged when they were delivered to the 1st defendant and that clean bills of lading were issued because letters of indemnity had been given by or on behalf of the shippers, the 1st plaintiff.

6. The 1st defendant entered a conditional appearance on the 21st August 1981. By the present summons the 1st defendant applies for an order that all further proceedings be stayed on the ground that all disputes arising under the bills of lading should be decided in Japan.

7. Each bill of lading contains a foreign jurisdiction clause. This is clause 3 which reads as follows:-

8. The Court has a discretion whether to grant a stay, but the onus is upon the plaintiffs to show that there is a strong cause for refusing the stay. The principles governing the Court's discretion to grant a stay were set out in The Eleftheria⁽¹⁾ by Brandon J. at page 99.

9. The main arguments for the plaintiffs were:

Fraudulent misrepresentation

10. Mr. Waung for the plaintiff submitted that by issuing clean bills of lading when they knew that the goods were already damaged, the 1st defendants were liable in damages for fraudulent misrepresentation. He cited a statement of Roskill J. as he then was when considering the applicability of the Hague Rules to such a situation. This is referred to in Scrutton on Charterparties, Eighteenth Edition, Article 58 on page 112:-

11. In Wealthy Food Co. Ltd. v. The Owners of the Vessel "Shin Shien" and another⁽²⁾, the question whether a foreign jurisdiction clause covers an action framed solely in tort was raised before Cons J., as he then was. The foreign jurisdiction clause contained in the bill of lading in that action was phrased in identical terms to clause 3 in the bills of lading in this case. Although it was unnecessary for the purpose of his judgment to decide the point Cons J. formed the view that the jurisdiction clause was not wide enough to cover an action in tort. Nevertheless he did so with reluctance for he did not feel that such a decision accorded with common sense. He cited with approval the comments of Cairns L.J. in The Makefjell⁽³⁾ where he said at page 33:-

12. In Kalimantan Timbers Co. v. Mighty Dragon Shipping Co. S.A.⁽⁴⁾ the Court of Appeal held that the immunity conferred by Article III r.6 of the Hague Rules providing that the carrier shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered is not restricted to damages for breach of contract, but includes an action in tort.

13. Mr. Waung in support of his argument cited Monro v. Bognor Urban District Council⁽⁵⁾ where the plaintiff after doing certain work under a contract refused to continue contending that he had been induced to enter into the contract by fraudulent misrepresentations. The defendant's application for a stay in order to refer the dispute to arbitration under the arbitration clause in the contract was refused as the dispute was not a dispute "upon or in relation to or in connection with the contract" within the meaning of the arbitration clause. Mr. Waung also referred me to London Sack & Bag Co. Ltd. v. Dixon & Lugton Ltd.⁽⁶⁾, The Elizabeth H⁽⁷⁾, Printing Machinery Company Limited v. Liontype and Machinery Limited⁽⁸⁾ and Turnock v. Sartoris⁽⁹⁾ where a stay in each case was refused upon an application to refer the dispute to arbitration. It was submitted that when a doubt arose whether a jurisdiction clause covered a claim for fraudulent misrepresentation no stay should be granted.

14. These authorities depended upon the construction of the particular contracts as to whether a clear agreement has been made to arbitrate or whether the subject matter in dispute was covered by the arbitration clause. There is a fundamental distinction between a jurisdiction clause and an arbitration clause. I do not therefore consider that these cases support the plaintiffs' proposition.

15. The claim by the plaintiffs in the instant case is not framed solely in tort, but partly in tort and partly in contract. Essentially the claim in tort is based upon the bills of lading whether it is in negligence or fraudulent misrepresentation. Although it was submitted that if part of the claim falls within the jurisdiction clause and part outside, no stay should be granted, I do not agree. The Eschersheim⁽¹⁰⁾ clearly shows that it is a matter of discretion.

Multiplicity of Proceedings

16. There is no doubt that it is undesirable to have separate proceedings, The Pine Hill⁽¹¹⁾, Taunton-Collins v. Cromie and others⁽¹²⁾. In some cases it was held to be the decisive factor, The Eschersheim⁽¹⁰⁾. Mr. Ribeiro for the 1st defendant accepts this proposition, but submits that in looking at the substance of the claims the evidence relative to the 1st defendant will be different to that to be adduced against the 2nd defendant.

17. The case of the 2nd defendant is that there was material non disclosure in that the issue of a letter of indemnity in exchange for a clean bill of lading is regarded as a fraudulent practice by all Maritime Courts. The evidence on this matter will not be relevant to the cargo claim. The issues to be determined are quite different and do not overlap. It is pertinent to observe as was suggested by Mr. Ribeiro whether it was necessary to sue the 2nd defendant at this stage. The plaintiffs could conceivably have awaited the result of the proceedings against the 1st Defendant before suing the 2nd defendant. Accordingly I am of the opinion that there is no substance to the plaintiffs' contention on this point.

Time Bar

18. It is not in dispute that this action is time barred in Japan.

19. Brandon J. considered the question of a time bar in the Adolf Warski ⁽¹³⁾ where he said at page 112:-

20. In his judgment Brandon J. commented that in the United States more weight is given to the second of the two policy considerations and he expressed his preference for the approach of the American Courts.

21. When the Adolf Warski⁽¹⁴⁾ was considered by the Court of Appeal, Cairns L.J. expressed no preference for one view over another, Stephenson L.J. adopted the same approach although he indicated a preference towards the view of Sir Gordon Willmer that it should be a neutral factor.

22. In The Ocean Friend⁽¹⁵⁾ O'Connor J. expressed his view in favour of the neutral factor. At page 256 he said:-

23. The matter was also considered by Sheen J. in the "Blue Wave" reported in Lloyd's Maritime Law Newsletter issue No. 37 of the 2nd April 1981 where he said:-

24. I am of the opinion that the time bar prima facie is a neutral factor. However, the circumstances that arise in a particular case may be decisive for or against a stay.

25. The plaintiffs' action became time barred in Japan in December 1980 but an extension of time was granted until the 30th November 1981. The present summons was issued on the 2nd September 1981 for hearing before a Registrar on the 15th October 1981. However, on the 12th October 1981 the summons was transferred to the Commercial Judge and came before me on the 11th December 1981 after the time limit had expired. The plaintiffs allowed this to happen through their own default. The 1st defendants are not willing to waive the time bar. Mr. Waung said that by issuing a protective writ in Japan unnecessary expense would have been incurred. He further contended that such a step was not warranted having regard to the standing of the plaintiffs by comparison with the defendants with their substantial assets. Nevertheless in the event that I am disposed to grant a stay Mr. Waung invites me to make it subject to a condition that the 1st defendant waives its rights under the time bar.

26. Proceedings in the instant case were instituted before the time limit in Japan expired. In all the circumstances I do not consider that the actions of the plaintiffs were deliberately designed to force the Court's hand nor do I think that their conduct was unreasonable.

27. A subsidiary argument raised for the plaintiffs was that no defence had been filed by the 1st defendant. By so doing the 1st defendant would be submitting to the jurisdiction of the Court. I am satisfied that there is no such requirement. In any event the circumstances in issue are before the Court.

Conclusions

28. By bringing this action the plaintiffs are prima facie in breach of their contract to submit the dispute to the jurisdiction of the Court in Japan.

29. In The Cap Blanco⁽¹⁶⁾ Sir Samuel Evans at page 136 said:-

30. The goods were manufactured in Taiwan from where they were shipped to the Sudan. The 2nd defendants allege that the goods were already damaged before they were loaded onto the ship. The evidence on the cause of damage would be given by those persons in Taiwan responsible for the packing and transportation of the goods to the port, stevedores and the officers and crew of the ship who were concerned with loading.

31. Other evidence with regard to the condition of the goods may be required from witnesses in the Sudan where the survey was conducted. Mr. Nakagawa, the Assistant General Manager of N.Y.K. Line (H.K.) Limited stated in his affirmation that his company is the port agent for the 1st defendant's vessel. No one in Hong Kong has personal Knowledge of the transaction with the result that all instructions will have to be obtained from the 1st defendant in Japan.

32. For the plaintiffs it was submitted that on the disputed facts Taiwan has a closer connection to Hong Kong than to Japan. However, the only connection with Hong Kong is that the 1st plaintiff's registered office is here. No factual evidence is available in Hong Kong. Mr. Ribeiro even suggested that the 1st plaintiff may have no right to sue as the title to the goods could have passed to the 2nd plaintiffs. However, I think that this is a matter to be determined by the trial judge. On the other hand the 1st defendant's principal place of business is in Japan whilst the bulk of the evidence is more closely connected with Japan. A trial in Japan would be more convenient, and is likely to be less expensive than in Hong Kong. Another factor pointing to a trial in Japan is the fact that the governing law of the contract is Japanese.

33. No question of security arises because the 1st defendant is possessed of substantial assets and no difficulty is likely to be encountered by the plaintiffs in enforcing any judgment they may obtain. There is no likelihood that the plaintiffs would not receive a fair trial in Japan.

34. I found no merit in the plaintiffs' suggestion that a successful judgment in Japan would create exchange control problems.

35. I have therefore come to the conclusion that the plaintiffs have not discharged the burden of proof to show strong grounds why a stay should not be granted.

36. However, I do not consider that it would be just to deprive the plaintiffs of their right of action by virtue of the time bar. The delay has been minimal and will not cause undue hardship or prejudice to the 1st defendant. Accordingly in the exercise of my discretion I shall order a stay conditional upon the 1st defendant undertaking to waive the time bar in Japan if it is lawful to do so.

37. In the event that it is not permissible the plaintiffs are at liberty to apply for the stay to be removed.

38. By agreement no order as to costs.

(1) (1970) P. 94

(2) A.J. 1979 Folio No. 9

(3) (1976) 2 Ll.L.R. 29

(4) (1980) H.K.L.R. 272

(5) (1915) 3 K.B. 167

(6) (1943) 2 All E.R. 763

(7) (1962) 1 Ll.L.R. 172

(8) (1912) 1 Ch. 566

(9) (1889) Ch. Vol. XLIII 150

(10) (1975) 1 W.L.R. 83

(11) (1958) 2 Ll.L.R. 146

(12) (1964) 1 W.L.R. 633

(13) (1976) 1 Ll.L.R. 107

(14) (1976) 2 LI.L.R. 241

(15) (1981) H.K.L.R. 253

(16) (1913) P. 130 (C.A.)

Representation:

Mr. William Waung (Hastings & Co.) for plaintiff.

Mr. Ribeiro (Deacons) for 1st defendant.