Sport-billy Productions E. Deyhle and Another v. Dhl International Limited

HCA002102/1986

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HEADNOTE

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Application to stay action on the grounds of forum non conveniens - Plaintiff to show strong grounds that another forum is more appropriate see Spiliada Maritime Corporation v. Cansulex  Ltd. (1986) 3 W.L.R. 972 - Principles of Law summarised in The Eleftheria' (1969) 1 Ll. L.R. 237 considered - order for stay granted.

IN THE HIGH COURT OF JUSTICE

HONG KONG

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BETWEEN

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Coram: Hon. Jones, J. in Chambers

Dates of hearing: 10th, 11th and 12th February 1987

Date of handing down of judgment: 10th March 1987

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JUDGMENT

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1. This is an application by the defendant under the inherent jurisdiction of the Court to stay the present action on the grounds that the parties had agreed to the exclusive jurisdiction of the Courts of  Switzerland for the resolution of all disputes and in the alternative that Switzerland is the natural and convenient forum. The facts relating to the dispute which appear from the affidavit evidence and documents exhibited are as follows. The 1st plaintiff is a corporation which has its principal offices in West Germany. The 2nd plaintiff is a Swiss corporation which has its administrative offices in Monaco. The defendant is a Hong Kong corporation. The 2nd plaintiff was the agent for the 1st plaintiff in the promotion and marketing of trademarks designs and associated rights owned by the 1st plaintiff relating to the 1986 FIFA Soccer World Cup competition that was held in Mexico.

2. By an agreement dated the 19th October 1984 made between the plaintiffs and the defendant, together with the companies which form the worldwide courier network known as DHL which are referred to as being represented by the defendant, the defendant was appointed to be the exclusive agent to act as the official worldwide courier for the World Cup in all forms of advertising, promotion, public relations and merchandising. The 2nd plaintiff warranted by the agreement that it had full authority to grant these rights to the defendant. Under the agreement, the defendant agreed to pay to the 2nd plaintiff a sum of US$125,000 which is described as compensation of which US$62,500 was paid upon the execution of the agreement with the balance to be paid on or before the 31st January 1986. By the present action, the plaintiffs claim the balance of US$62,500 which it is alleged, was not paid.

3. In July, 1985, proceedings were instituted in the High Court in England against DHL International (UK) Limited (DHLUK), a member of the DHL Group by two West German companies, ROFA Sport Management A.G. (ROFA) and ISL Marketing A.G. (ISL), claiming inter alia, an injunction restraining DHLUK from describing or holding itself out as being the official worldwide courier to the FIFA World Cup 1986. The claim related to an agreement which ROFA purported to make in 1982 with FIFA whereby FIFA granted to ROFA the exclusive right to appoint certain companies as official suppliers or sponsors for the FIFA World Cup. ROFA had in turn appointed ISL as its exclusive marketing agent. ROFA maintained that as it had been granted exclusive rights by FIFA to appoint certain companies as official suppliers and sponsors, DHLUK had no right to designate itself as such. DHLUK concluded on the evidence that the plaintiffs in the instant case had no right to grant an exclusive licence to the defendant with the result that they considered ROFA's claim would succeed. Accordingly DHLUK settled the English action with ROFA and ISL. The amount of the settlement has, however, not been disclosed.

4. The defendant's defence is by way of an indemnity and a set-off of the amount paid to ROFA and ISL in the English proceedings against sums paid under the agreement. It is therefore the defendant's case that when the agreement was entered into with the plaintiffs, the plaintiffs did not have the right to appoint the defendant to be its exclusive agent for the licensing rights that it purported to grant.

5. The first question to be decided is whether the jurisdiction clause is valid. To assist me in my determination, I have affidavit evidence from two experts in Swiss Law, Peter Widmer on behalf  of the plaintiffs, a lawyer who is practising in a firm in Zurich and who is also a partner in the international firm of Baker & McKenzie who are the solicitors for the plaintiffs in this action and Dominique de Weck on behalf of the defendant who is a lawyer practising in Geneva.

6. The clause in the agreement on which jurisdiction is based is No. 19, although in sequence it should have been No. 21. This clause reads as follows:

"19.     CONSTRUCTION
The provisions of this Agreement shall be construed and the performance thereof governed in accordance with the laws of Switzerland. The parties consent to the exclusive jurisdiction of the courts of Switzerland for the resolution of all disputes arising from this Agreement or relating to the Licensed Property."

7. It is agreed that the law that governs the contract is Swiss law and both Mr widmer and Mr de Weck agree that a choice of jurisdiction clause must conform to the rules of the Swiss Federal Code of Obligations (SFCO) relating to the conclusion of contracts.

8. Before I come to consider the evidence of  Mr  Widmer and  Mr  de Weck, I will set out some of those matters that are not in dispute. Switzerland has a dual legal system of Federal and Cantonal laws. There are 26 Cantons, each having its own cantonal court and procedure. Each canton is divided into district courts where the court acts at first instance with jurisdiction limited to that district. There is, in addition, a cantonal supreme court which has appellate jurisdiction from the district court and also some first instance jurisdiction. Finally there is the Swiss Federal Supreme Court which has both an appellate jurisdiction and a first instance or sole instance jurisdiction. Civil Law is governed by Federal Law which is embodied in the Swiss Civil Code which deals, inter alia, with matrimonial probate and property law and the Swiss Federal Code of Obligations which is concerned with the law of contract and tort. All suits, whether based on Federal or Cantonal law have to be brought in the Cantonal Courts.

9. Several articles of the SFCO have been drawn to my attention and in particular Articles 1, 2, 18 and 41(c) which read:-

"Article 1

Article  41

10. As it is agreed that the proper law of the contract is Swiss, in considering whether clause 19 of the contract is valid, it will necessarily depend upon the effect of Swiss law. Further the defendant has given an undertaking to submit to the jurisdiction of the Federal Supreme Court  of  Switzerland. However, Mr Widmer has submitted that clause 19 is invalid and unenforceable because it is not unequivocal as it does not specify the actual court in Switzerland which he says is necessary before the clause can be valid. He asserts that according to the Swiss Code, a contract is validly concluded only when the parties have agreed on the essential terms of the contract. That the jurisdiction clause is an essential term of the contract which is not effective unless the particular court is defined courts of Switzerland being too vague. He agrees that by Article 41(c) the Swiss Federal Supreme Court can try the action if the amount in dispute, as in this case, exceeds SF 20,000, but that it can only do so when the court is invoked (called upon) under a valid jurisdiction clause by both parties in lieu of the cantonal courts. In view of the invalidity of the clause Mr Widmer considers that the appropriate forum, is Hong Kong, being the domicile of the defendant. Mr  de Weck, on the other hand, says that the choice of venue clause has been made in accordance with Article 2 of the civil code which provides that the Federal Court will only have jurisdiction over an action if under Federal or Cantonal law, a Swiss Court is competent by reason of venue. He says that a choice of jurisdiction clause in favour of the Swiss Court is not binding on the Federal Court, but that it must assume jurisdiction when the plaintiff has his domicile in Switzerland or when one party is of Swiss nationality. Even where all essential points between  the parties to the contract have been agreed, the judge is entitled to deal with ancillary points if there is a disagreement under Article 18 whereby he can look into and establish the real intention of the parties as to the exact contents of the contract. He goes on to say that upon the fundamental principles of the Swiss legal system, known as favor negotii, a judge will always give an act an interpretation which validates it rather than one which would render it  null and void. Accordingly the Swiss court will approach the matter in two steps. First when the contract was made, the parties acknowledged that they were submitting themselves to the jurisdiction of the Swiss Courts. By so doing the parties had exercised their right to have their disputes determined in the Courts of Switzerland to the exclusion of the courts of any other country. Mr de Weck describes this step as the rule of international competence. Having chosen Switzerland as the Country which should exercise jurisdiction the second question is to decide whether Clause 19 provides sufficient information to determine the particular court within the country which Mr de Week describes as intra-national competence. He analysed the position by asserting that there could be three possibilities. First Geneva or Lucerne for DHLSA one of the companies in the DHL group which comes within the definition of companies in the contract has its registered office in both places. Second Lucerne where the 2nd plaintiff has its head office. Third the Federal Supreme Court at sole instance which is the supreme authority for determining cases relating to civil matters for the whole territory.

11. From the evidence, it is clear that  the Federal Supreme Court would have jurisdiction to hear the case under Article 41(c) because the 2nd plaintiff is domiciled in Switzerland and the claim exceeds the sum of SF20,000. Mr de Week contended that Article 2 is decisive with regard to whether the Swiss Federal Court has jurisdiction, but Mr Widmer disagreed on the grounds that the court's jurisdiction has not been validly invoked by the parties. The parties clearly invoked the jurisdiction of the Swiss Court upon the execution of the agreement. The defendant is prepared to abide by that agreement and has given an undertaking to submit to the jurisdiction. The plaintiffs' refusal to do so for the reasons put forward is  unconvincing. Having considered the evidence I have no hesitation in preferring that given by Mr  de Weck. The failure of the parties who prepared the agreement to mention the specific court, does not in my view, render the clause invalid. I accept the two step approach set out by Mr  de Weck to be correct. There is force to the argument that by not making DHLSA a party to the proceedings may amount to an abuse of rightsunder Article 2, paragraph 2 by evading the jurisdiction of the courts in Geneva and Zurich. In the absence of their right to sue in Lucerne the only court that remains is the Swiss Federal Supreme Court at sole instance. I am therefore satisfied that the choice of venue clause is valid.

12. I now come to the second question which relates to the forum conveniens or the proper forum for the proceedings to be heard. As I have decided that the jurisdiction clause is valid, the burden is placed upon the plaintiffs to establish that Switzerland is not the proper forum. Having regard to the jurisdiction clause, the court in considering the doctrine of forum non conveniens, will only stay the proceedings if the plaintiffs can show on strong grounds that another forum is more appropriate see Spiliada Maritime Corporation v. Cansulex Ltd.⁽¹⁾. Accordingly there is a prima facie case for a stay in order that the parties should be held to the terms of the contract unless the plaintiffs can point to issues that tend to rebut the assertion of the defendant.

13. The principles of law on an application to stay were summarised by Brandon, J. (as he then was) in The "Eleftheria"⁽²⁾ where he had this to say at p. 242:-

"(1)    Where plaintiffs sue in England in breach of an agreement  to refer disputes to a foreign Court, and the defendants apply for a stay, the English Court, assuming the claim to be otherwise within the jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs. (4). In exercising its discretion the Court should take into account all the circumstances of the particular case. (5) In particular, but without prejudice to (4), the following  matters, where  they arise, may be properly regarded: (a) In what country the evidence  on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign Courts. (b) Whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects. (c) With what country either party is connected, and how closely. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign Court because they would (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial."

14. These principles, although not meant to be exhaustive, have been cited in subsequent cases, including The "El Amria"⁽³⁾ at p. 123.

15. I will now deal with the various matters that were canvassed before me by counsel in their   arguments with my conclusions. First the availability of witnesses. All the potential witnesses except for Mr Horowitz who is employed by one of the 2nd plaintiff's subsidiaries in Hong Kong, are in Europe. They are likely to come from England, Germany, Switzerland or Monaco. Indeed, there was no evidence before me that Mr Horowitz will be a witness. However, it is clear that none of the defendant's witnesses are in Hong Kong. Mr  Clayton for the plaintiffs concedes that it will be more expensive for the witnesses to come to Hong Kong but says that once they are here, the expense of accommodation in hotels will be about the same as in Switzerland. However, it is quicker, easier and less tiring to travel to Switzerland which is only about two or three hours flying time from England. The time to travel to Hong Kong on the other hand is likely to be up to about 18 hours. Switzerland is undoubtedly a far more convenient forum. Second, the lanuage of the majority of the witnesses is English which also applies to the bulk of the documentary evidence. Although the language of the court is German, French or Italian, it is common knowledge that English is widely spoken in Switzerland. Indeed both the experts Mr Widmer and Mr de Weck have sworn their affidavits in English and it is reasonable to suppose that many members of the Swiss judiciary speak English. It is unlikely that any insuperable difficulty will be caused by interpretation that would result in the proceedings being unduly prolonged. Third,  the plaintiffs complain that they will be deprived of a juridical advantage being prevented from an application for summary judgment under Order 14 which is not available in Switzerland. However, upon the evidence that has been placed before me, it is far from clear that the plaintiffs have shown that  there is no arguable case to be tried for the right to grant the licences to the defendant is in issue. Accordingly this factor does not feature prominently. Fourth, there is no evidence to show that there will not be a fair trial in Switzerland. Although there is no right of appeal from the Swiss Federal Supreme Court, I do not see that this creates any disadvantage for that court is the highest court in the land. In fact there will be an advantage by a saving in the costs of an appeal. Fifth, a judgment in favour of the plaintiffs can be enforced by registration in Hong Kong. In any event DHL is a worldwide organisation of high repute. It is most unlikely that any judgment made against them would not be discharged. Sixth, the fact that Hong Kong law may be the same as Swiss law does not arise unless the plaintiffs can show strong grounds as to why Hong Kong law should prevail. The issue of abuse of rights may arise which would clearly be better determined by a Swiss Court than by a Hong Kong Court. Seventh, apart from the defendant having its registered office situate in Hong Kong, none of the parties has any connection with Hong Kong. Eighth, the defendant genuinely desires the trial to be in Switzerland and this is reinforced by the undertaking that has been given to submit to that jurisdiction. Ninth, no issue of a time-bar arises whilst the matter of discovery is neutral.

16. In my judgment, the matters that have been argued weigh heavily in favour of Switzerland as the appropriate forum. The plaintiffs have failed to establish strong grounds that it would be unjust to grant a stay. Even if the burden had not been placed upon the plaintiffs I would have come to the same conclusion. In the circumstances, I shall accede to the application by making an order for a stay.

(1)    [1986] 3 W.L.R. 972

(2)    [1969] 1 L1. L.R. 237

(3)    [1981] 2 Ll. L.R. 119

Representation:

Mr  P.D. Clayton (Baker & McKenzie) for the Plaintiffs

Mr  Clifford Smith (Fairbairn & Kwok) for the Defendant