The Owners of the Ship or Vessel M.V. "Hui Cheng" v. The Owners of Cargo Lately Laden Aboard M.V. "Hui Cheng"
Read the full judgment text of CACV 160/1983 on BabelCite. This Court of Appeal judgment was delivered on 25 April 1984.
1. This is an appeal from a refusal by Power, J. to stay proceedings being brought in the High Court (Admiralty Jurisdiction) Hong Kong. The Plaintiffs, the owners of Goods Laterly Laden aboard M.V. "Hui Cheng" are a Philippine Company, Cagayan de Oro Timber Company Puntod, Cagayan de Oro City, Philippines and the Defendants, the owners of M.V. "Hui Cheng" are Guangdong Province Hong Kong/Macau Navigation Company of Guangzhou City, Guangdong Province, China. I shall refer to the Plaintiffs here
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CACV000160/1983 IN THE COURT OF APPEAL
BETWEEN
_____________ Coram: Sir Alan Huggins, V.-P., Yang & Barker, JJ.A. Date of Judgment: 25 April 1984 ___________ JUDGMENT ___________ Barker, J.A.: 1. This is an appeal from a refusal by Power, J. to stay proceedings being brought in the High Court (Admiralty Jurisdiction) Hong Kong. The Plaintiffs, the owners of Goods Laterly Laden aboard M.V. "Hui Cheng" are a Philippine Company, Cagayan de Oro Timber Company Puntod, Cagayan de Oro City, Philippines and the Defendants, the owners of M.V. "Hui Cheng" are Guangdong Province Hong Kong/Macau Navigation Company of Guangzhou City, Guangdong Province, China. I shall refer to the Plaintiffs hereinafter as the Shippers and to the Defendants as the Shipowners. 2. The action is brought by the Shippers under five Bills of Lading, it each of which they are described as the Shippers. In four of them the "Notify Address" is Thaisino Metals (H.K.) Corporation, 28 Harbour Road B8/12th floor, Hong Kong and in the fifth the "Notify Address" is Acersino Limited, (a Company with the same address as Thaisino). The Port of Loading is described therein as Cagayan de Oro City, Philippines and the Port of Destination Hong Kong. The Shippers claim against the Shipowners for breach of contract and/or duty and/or conversion in or about the custody, carriage and delivery of cargo shipped aboard the M.V. "Hui Cheng", The Shippers' case is that the goods were never delivered to Hong Kong at all, but were taken straight to China, where by order of the Intermediate Court, Swatow, they were offloaded and delivered, not to the order of the Shippers as provided by the Bills of Lading, but to persons described in argument as the Chinese Buyers. 3. Before hearing the appeal proper, the Court of its own motion raised the issue of illegality, an issue not dealt with in the Court below. It did so for the following reason. There were before the Court an Affirmation by Mr. Lee Ho Man, on behalf of the Shipowners, paragraph 10 of which read:
Because of the low rate of tax payable for export from Philippines to Hong Kong as opposed to export from Philippines to China, it is standard practice for Philippines shippers/sellers to arrange their affairs so that switched bills of lading,'Hong Kong to China' will be exchanged for bills of lading 'Philippines to China'." and an Affirmation by Mr. Michael Chan, paragraph 6 of which read:
4. Thus there appeared to be prima facie evidence, at least, to show, a criminal conspiracy, to which the Shipowners. were a party, to defraud the Philippine Government. (It is right that I should add that the Shippers have always denied any knowledge of a system of Switched bills of lading or of any such conspiracy.) 5. However, there was drawn to the Court's attention a certificate, exhibited to an affidavit of Mr. Lyne, a solicitor acting for the Shippers, made by one Santiago C. Arrabaca, a District Collector of Customs of the Philippine Bureau of Customs, Ministry of Finance which read as follows:
6. Thus if the Shipowners were conspiring, they were conspiring to do something legal. We therefore allowed the appeal to proceed.
7. The above are in the order and way in which Power, J. set out the issues, but it is convenient to deal first with Issue 2, since if that is decided in favour of the Shippers, it becomes unnecessary to deal with any of the other Issues.
8. This came into being in the following circumstances. The Shippers came to know that a ship the M.V. "Feng Sheng" had arrived in Hong Kong. Thinking that it was a sister ship to the M.V. "Hui Cheng" they caused it to be arrested. In fact it was not a sister ship, but since the evidence as to its ownership appeared to the Shippers' solicitors to be conflicting, they were not satisfied and refused to allow it to be released unless a suitably worded guarantee was forthcoming. Negotiations went on between the Shippers' solicitors and solicitors acting for the owners of the "Feng Sheng". Eventually, a form of words satisfying the Shippers' solicitors was arrived at (by which time the solicitors for the owners of the "Feng Sheng" were acting also for the owners of the "Hui Cheng") and on the 5th February 1983 the Nanyang Commercial Bank Ltd. issued the guarantee, which it is necessary to set out in full:
9. Power, J.'s conclusion on this issue was expressed as follows:
10. Counsel for the Shippers did not, as I understand it, argue that the Shipowners actually became a party to the guarantee. His contention was that by their conduct in putting up the guarantee to the Shippers (to use his own phrase) the Shipowners impliedly contracted with the Shippers to be bound by its terms. Counsel for the Shipowners objected to this line of argument since, so he said, it had never been taken in the Court below. Support for his objection was forthcoming by reason of the fact that he did not deal with this argument in his opening and it is doubtful whether Power, J, dealt with it in his judgment. Nevertheless Counsel for the Shippers equally steadfastly maintained that he had taken the point and produced excerpts from his argument below to substantiate his contention. Not without some reluctance, I have come to the conclusion that the argument was advanced before Power, J., though not with that degree of clarity with which it was presented to us. 11. In holding as he did, Power, J. followed a decision of Sheen J. in the Banglar Baani(2). That was an action brought by the underwriters to cargo owners, by virtue of their right of subrogation, against Shipowners in the English Courts. Clause 4 of the Bill of Lading provided:
12. The Shipowners' principal place of business was in Bangladesh, and they accordingly applied for a stay. The Judge refused so to order because he held that there was no dispute between the parties to refer to the Courts of Bangladesh. The judgment continued:
13. It is thus at least arguable that Sheen J.'s decision on this point was obiter. 14. The agreement was said to be contained in a letter from agents for the managers of the Shipowners' P & I Club in the following terms:
15. As to this document Sheen J. said:
16. The Judge must have meant by "both sides", both parties to the action, but he gave no reasons for having arrived at his conclusion. 17. However, his reasoning became clear in the later case of The Pia Vesta(3). That was a claim by cargo owners against shipowners in which the Bill of Lading contained a jurisdiction clause and in which a Danish Insurance Company had given to the solicitors acting for the cargo owners a guarantee couched in similar terms to that in the Banglar Baani(2). 18. Sheen J. said at page 171:
19. It was argued before us that the Banglar Baani(2) and The Pia Vesta(3) were wrongly decided, but for my part I am content to accept them as correct. It is not difficult to understand how the Judge concluded that there was a contract between the Shipowners and the cargo owners to vary one of the terms of the Bill of lading, since the Shipowners wanted the release of their ship, and the cargo owners wanted the action to be tried in England. 20. But there is a vital distinction between those two cases and the present case, namely the interposition of the owners of the Feng Sheng. It was they who were anxious to secure the release of their ship and to prevent the arrest of any sister ship, not the Shipowners. It was no concern of the Shipowners if the Shippers brought proceedings in Hong Kong or elsewhere against the owners of the Feng Sheng. It must have been the owners of the Feng Sheng who negotiated with the Bank to give the guarantee. Clearly, having regard to the wording of the guarantee, there must have been some arrangements (a) between the owners of the Feng Sheng and the Shipowners and (b) between the Bank and the Shipowners. 21. But does this mean that there must also have been a contract between the Shippers and the Shipowners? In my judgment it does not. If the “promise” to submit to the jurisdiction of the Hong Kong Courts benefited solely the Shipowners, the position might have been different. But it did not. The Bank, and possibly the owners of the Feng Sheng, may well have wished to have the claim litigated here. 22. Moreover, even assuming that the foregoing is wrong, and that there was a contract between the Shippers and the Shipowners, it is necessary to spell out the terms of that contract. They are, on the Shipowners' side, as evidenced by the guarantee, to give an irrevocable authority to the Bank to accept service on their behalf of proceedings brought by the Shippers in the Supreme Court of Hong Kong and to file an Acknowledgement of Service thereto. Must a term be implied that by so agreeing the Shipowners had waived their rights under clause 22 of the Bill of Lading and had agreed to the dispute being litigated to a conclusion in Hong Kong? I think not. So to hold would be to impute to the Shipowmers an intention which was at total variance with their avowed wishes, since according to the evidence before Power, J. it was their policy for a number of reasons which need not here be elaborated to have disputes of this kind tried in China. 23. It follows that in my view, the Shipowners are not debarred from applying for a stay by reason of the guarantee. That being so, it is not necessary to decide the further argument that was advanced on behalf of the Shipowners, namely that even if there was any contract between the Shippers and the Shipowners there had been an express reservation as to jurisdiction made on behalf of the Shipowners. 24. Issue 1. The Jurisdiction Clause 25. The Bills of Lading were, as one would expect, on a printed form. The top right hand corner was headed "Keyway Trans-China Line" and underneath "A Division of Keyway Freight (International) Ltd." This printed heading was incorrect. Keyway Trans-China Line was a joint venture between Chu Kong Shipping Co. Ltd. and Keyway Freight (International) Ltd. and was in no sense a division of Keyway Freight (International) Ltd. 26. The definition clause of the Bill of lading provided, by clause 1(a) thereof:
27. The reference to Keyway Freight (International) Ltd. in clause 1(a) is the only reference to a named company in all the conditions. Furthermore, every clause, with the exception of clause 22, refers to the Carrier. 28. I therefore turn to clause 22. It reads as follows: " 22. JURISDICTION
29. The English in the clause is not grammatical and must be taken to read:
30. "The Company" is nowhere defined in the conditions. Power, J. held that giving these words their natural and obvious meaning and reading the Bill of Lading as a whole, they refer, and can refer only, to Keyway Freight (International) Ltd. Such a construction produces surprising results. It is common ground that the Bills of Lading the subject of this action are shipowners' Bills of Landing and that Keyway Freight (International) Ltd. are not shipowners. It must follow that in the context of the present action clause 22 has no meaning. It can never apply in the case of a shipowner's Bill of Lading. It can only apply in the case of a charterer Bill of Lading if Keyway Freight (International) Ltd. are the charterers. 31. Clause 22 is clearly badly and inefficiently drafted. As Viscount Simonds said in Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. (4) at page 157:
32. This is just such a case. Furthermore, as was said by Lord Keith in the same case at page 178:
33. The construction arrived at by Power, J. in my view in effect reads the clause out of the contract altogether. 34. In my judgment, and there are cases too numerous to cite in support of this proposition, when a clause of this nature is being construed it behoves the Court to remember, that it is a commercial document, that it has a commercial purpose and that it should therefore be construed in the light of that purpose. 35. The Bills of Lading here happened to be on a form printed by Keyway Freight (International) Ltd., but that Company had no connection whatsoever with the parties involved, nor with the goods and it does not in my opinion make commercial sense to hold that only Keyway could rely on clause 22. In my judgment the Company, for the purposes of this Bill of Lading, means the other party to the contract than the Shippers, and in a Shipowners' Bill of Lading that means the Shipowner. It follows that the jurisdiction clause does apply and the Shipowners can rely upon it, subject to Issue 3, to which I now turn. 36. It is not necessary for me to deal with the argument as to what would be the meaning of the clause if the Shipowners were not a company and I do not do so. 37. Issue 3. Have the shippers made a strong case why the jurisdiction clause should not be applied? 38. This issue was decided by Power, J. in favour of the Shipowners, but the Shippers have served a Respondent's notice. 39. The principles which govern this issue were conveniently laid down by Brandon, J. (as he then was) in The Eleftheria (op. cit.) as follow:
40. 5(d) and 5(e)(i) and (iv) were hot argued. 41. 5(e)(i) and (iii) do not arise because the Shipowners have offered alternative security and have expressly waived any time bar not applicable in Hong Kong but applicable in China. 42. It seems to me that there is a body of evidence, e.g. what happened at Swatow on the inspection of the goods, their seizure, etc., which is more readily available in China. One of the main issues is whether this is a case of deviation or not, and on that the evidence of the master of the "Hui Cheng" and possibly that of the masters of other ships of the same fleet may well be vital as to the customary route. There is no evidential connection. on the part of the Shippers with Hong Kong, the only witnesses from. the Colony being shipowners' witnesses. It will clearly be cheaper to have the case tried in China. (Power, J. appears to have taken into account on this issue the expense of taking Hong Kong lawyers to China, but as Lord Diplock pointed out in MacShannon v. Rockware Glass Ltd.(1) (op. cit.) at page 816, this is not a legitimate factor to take into account.) Chinese law will certainly apply to the dispute, but this is a factor which cannot be taken into account since there is no evidence that it differs from Hong Kong Law. 43. The only matter upon which it is necessary to comment arising from the Respondent's Notice is the argument that the Judge, in relation to Issue 3, ought to have taken into account the fact that the Shippers had instituted two actions in Hong Kong, one against Keyway Freight (International) Ltd. and the other against Thaisino. The Judge did consider this matter in connection with Issue 4. That he did not expressly do so in connection with Issue 3 could not in my opinion have altered his conclusion on that issue. There was uncontradicted evidence before him that both Companies have admitted liability and Thaisino has made a payment on account. The vices of having two actions each one being conducted in a different jurisdiction are that there will be a duplication of costs and might be differing decisions. Neither of these situations is likely to arise in the present case. 44. In the result I agree with Power, J. that the Shippers have not discharged the burden which is upon them of proving a strong cause why the jurisdiction clause should not apply. 45. It is therefore unnecessary for me to express any conclusion on Issue 4, and I do not do so. 46. I would allow the appeal and grant a stay. Sir Alan Huggins, V.-P.: 47. As we are disagreeing with the judge, I shall endeavour to state shortly my reasons for coming to a different conclusion on what I consider to be the essential issues as set out in the judgment of Power, J. 48. Issue No. 2 reads:
At the outset I think it is necessary to consider who in fact did "give" the guarantee and who were the other panties to any agreement of which it is evidence. It was signed by the Bank, the party which would have to pay if a valid claim were made under the guarantee. Needless to say the Bank would not have signed such a guarantee unless asked to do so by a customer. The customer in this case must have been the Owner of the Feng Sheng, the party interested in ensuring the release from arrest of their vessel. Thus in one sense the guarantee was "given" by the Bank and in another it was "given" by the Owners of the Feng Sheng, the party at whose request it was provided. The Defendants, the owners of the Hui Cheng, were not concerned with the possibility of any arrest of the Feng Sheng and her sister ships or with the possibility of proceedings instituted against the Owners of the Feng Sheng, whether in Hong Kong or elsewhere. However, it was part of the consideration for the Bank's undertaking to pay that the Plaintiff would not commence and/or prosecute legal or arbitration proceedings (otherwise than before. the Supreme Court of Hong Kong) against the Defendants. The question is whether the inclusion of that promise by the Plaintiffs necessarily indicates that the Defendants were party to the agreement evidenced by the first part of the Letter of Guarantee. If the promise could benefit no-one but the Defendants, it might be reasonable to infer that the Defendants were responsible for the inclusion. However, that is not the position. The promise could well be thought to benefit both the Bank and the Owners of the Feng Sheng, because their liability was based upon a claim by the Plaintiffs against the Defendants: the Bank and the Owners of the Feng Sheng may have preferred that such claim be litigated in Hong Kong. That is enough to make it impossible to infer that the Defendants were necessarily party to the agreement. 49. Let it be assumed that the Defendants did give authority to the Bank to instruct solicitors to accept service of proceedings in Hong Kong and further let it be assumed that the Defendants intended to be bound to the Plaintiffs. It does not follow that the Defendants had agreed to litigate only in Hong Kong. It is difficult to see why the Defendants should have been willing to litigate only in Hong Kong. Indeed, there was every reason why they should not agree: they were a Chinese company which had deliberately inserted a provision in the Bills of Lading that claims were to be brought to China. They are seeking a stay of the action in Hong Kong because they still want the claim decided in China. It is true that the last part of the Letter of Guarantee, whereby the Bank warrants that it has irrevocable authority from the owners of "the abovenamed ship" (presumably the Hui Cheng) to instruct solicitors to accept service of proceedings brought by the Plaintiffs in the Supreme Court of Hong Kong, suggests that the Defendants have given the authority alleged in spite of their wish to have any litigation in China, but I do not think we should infer that such authority was given as a result of an agreement between the Defendants and the Plaintiffs: it may have been the Defendants' intention to be bound only to the Owners of the Feng Sheng. If the Bank had warranted that it had authority from the Defendants to undertake that the Defendants' rights under Cl.22 of the Bills of Lading would be waived, the position would have been different, but it is one thing to accept service of process and quite another to agree that process elsewhere will be foregone. I appreciate that if the Defendants are able to obtain the stay they seek, the bank's warranty of authority from the Defendants to accept service in Hong Kong will have proved to be a snare and a delusion as far as the Plaintiffs are concerned, but that does not justify our attributing to the Defendants an intention which they have not clearly indicated. A stay is not something to which the Defendants are entitled whatever the circumstances. 50. The judge took the view that the Letter of Guarantee was evidence of a wider agency in the Bank than that revealed by the last 7½ lines of p.1, for he said:
What the judge seems to have envisaged is that there was a quadripartite agreement by which the Bank, the Owners of the Feng Sheng and the two parties to the action were all equally committed. For the reasons I have given I am unable to regard the Letter of Guarantee as evidence of any such agreement. There must have been some agreement between the Defendants and the Bank and probably there was an agreement between the Defendants and the Owners of the Feng Sheng, but it does not follow that there was an agreement between the Plaintiffs and the Defendants. 51. We were referred to The Banglar Baani, an unreported decision of Sheen J. on 6th February 1981. That was an action by cargo underwriters against ship-owners brought by virtue of the underwriters' right of subrogation. The ship-owners moved the court for a stay on the ground that the parties had agreed that the subject-matter of the action be referred to the exclusive jurisdiction of the courts of Bangladesh. Clause 4 of the Bill of Lading provided:
The ship-owners' principal place of business was in Bangladesh. The judge refused a stay on two grounds. First, he held that there was no arguable defence to the claim and that there was therefore no "dispute" between the partiss to be referred to the courts of Bangladesh. Secondly (and more importantly for our purposes), he held that the parties had in truth agreed that litigation should be in England. That agreement was contained in a Letter of Guarantee signed by the agents of the ship-owners' P. & I. Club in which undertakings were given to the cargo underwriters' solicitors in these terms:
(By "both sides" I take him to have meant both sides in the action.) The judge did not think it necessary to give any reason for so holding, but I think it must have been that the court would refuse a stay of proceedings where to grant a stay would result in a breach of contract freely entered into by the parties. Whether one looked at the letter of guarantee as a variation of c1.4 of the bill of lading or as a waiver of rights conferred by that clause, the bill of lading was in this respect superseded by the Letter of Guarantee. From The Pia Vesta 1984 1 Lloyd's Rep. 169 it would appear that Sheen J. thought the correct view was that there was a variation of the bill of lading. 52. I entirely accept those decisions as correct applications of the law, but they do not govern this case because they are clearly distinguishable: whereas there the parties to the agreement evidenced by the letters of guarantee were the same as those to the bills of lading, that is not the case here. Had the Feng Sheng been a sister ship of the Hui Cheng, the result might have been different, but in my view the Bill of Lading is still binding - and in particular Condition 22:
53. That brings me to the first of the issues raised for the court's determination:
The ship owners contended that they are "the Company" referred to in the clause, whilst the cargo owners submit that those words refer to Keyway Freight (International) Limited ("Keyway"). The basis of the cargo owners' submission is that Keyway is the only company named in the Bill of Lading. It would have been more accurate to say that Keyway was the only company named in the printed form upon which the Bill of Lading was completed, for in the event the names of three other companies were inserted in each of the relevant bills:
The judge held that the words "the Company" referred to Keyway and could not properly be held to include the ship owner in, any case where Keyway was not the ship owner. It is an admitted fact that Keyway was not a ship owner, so that the judge's interpretation would have the effect of making Clause 22 of no effect. 54. Badly as the Bills of Lading were drafted, I think their intention was tolerably clear and I would be reluctant to interpret them in a way which would leave the forum and applicable law unprovided for, although the parties manifestly thought they were providing for them. The only way in which that result can be avoided is by treating "the Company" as meaning the company which would be party to any bill of lading executed upon this printed form, i.e. the ship owner. I recognize both that the draftsman could easily have made such an intention clear if it was what he wanted, and also that it presupposes that any ship owner which used the form would be a company. The first objection is of no great weight in a contractual document, although it might have been significant if we were construing a statute. The second objection is of no great weight because in these day few vessels engaged in the carriage of goods are not owned by companies. 55. The conclusion I have reached on this issue is that the ship owners are entitled to rely upon the jurisdiction clause. 56. I turn to the third issue:
In that case Brandon, J, set out the principle governing the matter and, as Barker, J.A. has extracted them in detail in his judgment, I shall not repeat them For the reasons which Barker, J.A. has given I think that the cargo owners have failed to make out a strong case for not granting a stay and I, too, would allow the appeal. Yang, J.A. : 57. I agree with the judgments of my brethren Barker and Huggins and have nothing that I can usefully add. (1) [1978] A.C. 795 (2) (1981) Lloyd's Maritime Newsletter No. 3 (3) (1984) 1 Lloyd's Law Reports 169 (2) (1981) Lloyd's Maritime Newsletter No. 3 (3) (1984) 1 Lloyd's Law Reports 169 (4) [1959] A.C. 133 (1) [1978] A.C. 795 Representation: Mr. William Waung (Messrs. Liu, Chan & Lam) for Defendants/Appellants. Mr. Clifford Smith (Messrs. Johnson, Stokes & Master) for Plaintiffs/Respondents. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||