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The Owners of Cargo Lately Laden on Boakd the Ship or Vessel "Lanka Muditha" v. The Owners of the Ship or Vessel "Lanka Athula"

Case No.CACV 101/1990
Court
Court of Appeal
Date07 Mar 1991
Judge—
Case Document
100%

CACV000101/1990

IN THE COURT OF APPEAL 1990, No. 101
(Civil)

BETWEEN

THE OWNERS OF CARGO LATELY LADEN ON BOARD THE SHIP OR VESSEL "LANKA MUDITHA" Plaintiffs
(Respondents)

AND
THE OWNERS OF THE SHIP OR VESSEL "LANKA ATHULA" Defendants
(Appellants)

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Coram: Hon Kempster and Power JJA and Nazareth J

Dates of Hearing: 6 - 8 February 1991

Date of Handing-down Judgment: 7 March 1991

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JUDGMENT

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Nazareth, J:

1. On the 20th May, 1986, an Indian coffee exporter ("Kothari" )entered into a contract with a corporation based in New York ("Van Ekris") to sell tae latter bulk coffee. Shipment was to be in "June/July" at a future price to be paid under a letter of credit.

2. In the event, three lots of coffee were shipped from two Indian ports, Cochin and New Mangalore, about the end of September 1986. They were consigned under three United States Lines Inc. ("US Lines") bills of lading to the port of Houston "Unto order", with Van Ekris as the notify party. They were placed aboard the vessel "Lanka Muditha" owned and operated by the defendants, the Ceylon Snipping Corporation. The latter operated a feeder service for US Lines to Singapore, whence cargo was carried on to the United States by US Lines' own vessels. The three consignments were duly carried to and transhipped in Singapore to an US Lines vessel but apparently never delivered in Houston. Instead they appear to have been discharged at the port of savannah. By means of three bank guarantees, Van Ekris managed to obtain delivery from US Lines of all three consignments without the original bills and other requisite documents. The letter of credit, opened by reference to the original shipping dates, had expired and Kothari has not been paid by Van Ekris.

3. Since those events, US Lines has gone into some form of limited bankruptcy known as Chapter 11 Bankruptcy. On 17th November 1987, the plaintiffs in this action (i.e. Kothari and the Central Bank of India, to which Kothari endorsed the bills of lading) issued a writ in rem against the defendants. On 25th March 1988 the plaintiffs threatened to arrest the defendants' vessel "Lanka Athula" prompting the defendants to enter appearance and provide security. On the 29th July 1988, the defendants took out a summons to stay the plaintiffs' action on the ground of forum non conveniens. The matter came before Deputy Judge Cocoran and, on 17th May 1990, he refused the plaintiffs' application. The defendants now appeal against that decision.

4. The plaintiffs claim the sum of US$254,796.30 as the value of the coffee, for misdelivery or conversion, and plead contracts of carriage under the three bills of lading. The latter contain an extended definition of "carrier", which they say embraces the defendants.

5. The defendants' defence is that the contracts of carriage were made with US Lines and not the defendants, that the defendants carried the goods to Singapore under contract with US Lines, that it was US Lines that carried' the goods to the United States and breached the contracts or converted the cargo by delivering it to Van Ekris, and that the value of the coffee at the time of conversion was under US$67,000. They wish to implead in New York, where they can effect service, US Lines and Van Ekris and possibly also the European American Bank ("EAB") which provided the guarantees that enabled Van Ekris to take delivery without the requisite documents.

6. The issue, therefore, that the judge had to address was whether the District Court of the Southern District of New York was the appropriate forum for the trial of the action.

7. It is common ground that the judge was right in seeking to apply as the governing law that stated in Spiliada Maritime Corporation v. Cansulex [1987] I AC 460 and The Adhiguna Meranti [1987] HKLR 904; and that he cannot be faulted for applying the three stage approach commended by Hunter, J.A. in the latter. The judge set out the three stages he had to address in the following way:

"

 (I) Is it shown that Hong Kong is not only not the natural and appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong ...

(II) If the answer to (1) is yes, will a trial at the other forum deprive the plaintiff of any legitimate personal or juridical advantages. The evidential burden here lies on the plaintiff.

(III)

 If the answer to (II) is yes, a court has to balance the advantages of (I)   against the disadvantages of (II) ... Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss substantial justice will be done in the available appropriate forum, ... proof of this ... rests upon the applicant for the stay."

8. However, Mr. Michael Thomas Q.C. for the defendants submits that in the application of the law he correctly identified the judge first, fell into errors of principle and, second, wrongly took into account matters that he should not have. Those are two of the three grounds that Lord Brandon recognised in the Abidin Daver [1984] 1 AC 398, 420 A-C, as entitling an appellate court to interfere with the exercise of a trial court's discretion. Specifically Mr. Thomas submits that the judge fell into errors of principle in the second of the three-stage approach by failing to place the evidential burden of showing deprivation of legitimate personal or juridical advantage on the plaintiffs; that at the third stage he concerned himself with the competing advantages and disadvantages of the two sides and failed to take into account the wider, supra national interests of justice; and that he wrongly disregarded the undertakings proffered by the defendant.

9. As to the matters he claimed were wrongly taken into account, Mr. Thomas pointed to the following at the second stage, that is to say, delays that the plaintiffs might face in applying to serve outside the jurisdiction; delays the plaintiffs may face because of resistance by US Lines, Van Ekris and EAB to joinder by the defendants; a limitation bar that the plaintiffs might encounter in New York; time-bar points that might be raised by US Lines against the defendants and in respect of liability to the plaintiffs; the possibility that the plaintiffs might find themselves unsecured in New York in respect of judgment against the defendant; the practice of the New York court not ordinarily to award costs; and at the third stage certain rights that the plaintiffs would be deprived of in New York.

10. It is convenient to proceed directly to what I think is the clearest and, perhaps, most substantial of those matters, i.e. that the judge was wrong to disregard the undertakings the defendants offered. The undertakings in question were three in number:

(i) to submit to the jurisdiction of the New York court;

(ii) not to plead the time-bar; and

(iii) if necessary, to extend the letter of security given in respect of this action, to cover a judgment of the New York court.

The judge dealt with these in the following passage at pages 27 to 29 of his judgment:

"I do not consider that I should grant a stay on the basis of these undertakings being given by the defendants. I do not consider it appropriate to attach such undertakings to an order for a stay in this case, nor do I consider such undertakings would lead to a satisfactory result. Here in Hong Kong the plaintiffs are in a strong position to have their claim against the defendants proceed with normal speed and have the benefit of the letter of security should they succeed. Their position procedurally is simple and uncomplicated. In New York the standing of the letter of security is not clear, the undertaking not to invoke the time-bar may conflict with the interests of the Steamship Mutual Underwriting Association Ltd, there would still be the prospect of long delays while the New York court sorted out the question whether US Lines, Van Ekris and EAB should be joined in the action and whether and to what extent proceedings could be carried on against US Lines who are in Chapter 11 Bankruptcy. In addition the plaintiffs would not be awarded costs in New York even if they won. Mr. Smith referred to the possibility of an undertaking by the defendants to pay the plaintiffs' costs if they won in New York port but, as Hunter J.A. asked in the Adhiguna Meranti case at page 919, who is to determine whether the plaintiffs are successful? Any such undertaking would not be appropriate or satisfactory.

        In the case of the time-par, I am not satisfied that an undertaking by the defendants would be appropriate and effective because of the wording of the Letter of Security which states that the undertaking in that letter is given without prejudice to any rights or defences of the owners of the ships.

        I nave been referred to the comments of Hunter J.A. in the Adhigua Meranti case at pages 918 para. B to 919 para. D, in regard to undertakings such as have been suggested in this case. I consider that the four observations made by Hunter J.A., at page 918 paragraph F - page 919 paragraph A, apply in this case and that the stay should not be granted, unless it can be granted without such undertakings being required."

11. Plainly the judge was strongly influenced by what he saw as the observations and approach of Hunter J.A. at pages 917 J to 920 B. However, it seems to me that Hunter J.A. was concerned primarily with the particular facts that confronted him. Moreover the nature of some of the matters he addressed in the context of South East Asian jurisdictions are not necessarily the same as those in the authorities considered. I do not read the passages in The Adhiguna Meranti as general condemnation of undertakings. Indeed the importance Hunter J.A. attached to undertakings is implicit in the emphasis he placed upon ensuring that they were effective. He rejected the four undertakings in question primarily because he regarded them in the particular circumstances as ineffective (pp. 919 G - 920 F).

12. It is in any case well established that undertakings can be appropriate and effective.  In Spiliada itself, Lord Goff indicated that had that prospect arisen, he would have enabled proceedings to be brought in British Columbia but on condition that Cansulex waived its right to rely upon the time-bar in that jurisdiction. In Societe Nationale Industrielle Aerospatiale v. Lee Kui Jak and Anor [1987] 1 AC 871, the Privy Council allowed the appeal and granted an injunction on terms contained in undertakings appended to their Lordship's judgment, undertakings which run to over thirteen paragraphs and take up two pages of fine print.

13. In my opinion, the judge clearly erred in principle in concluding that it was inappropriate to attach the undertakings to an order for stay, and in disregarding the undertakings, particularly the defendants' undertaking to submit to the jurisdiction of the New York court, which he did not suggest was ineffective. It is therefore not necessary to examine the several other matters relied upon by Mr. Thomas as errors of principle or matters that ought not to have been taken into account. It must, however, be said that their number belies the care with which the judge approached his task.

14. Given the error of principle, it becomes necessary for this court itself to exercise the judge's discretion in deciding whether there is some other available forum having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and for the ends of justice.

15. The only forum proposed by the defendants as being more appropriate than the Hong Kong courts was the District Court of the Southern District of New York. Proceeding then to the first stage and to the connections with Hong Kong, as the judge noted, the plaintiffs are entitled to pursue this action in rem in pursuance of their arrest of the sister ship under the provisions of sections 1 and 3 of the Administration of Justice Act 1956 as applied to Hong Kong by the Admiralty Jurisdiction (Hong Kong) Order in Council 1962 S.I. No. 1547, applicable when the writ was issued. The provision of security and the appearance entered by the defendants is the sum total of the connection of this claim with Hong Kong. However, I do not think the taking of proceedings here can be said to be opportunistic, in that the defendants operate a regular liner service to Hong Kong.

16. Turning to the connections with New York, these were comprehensively listed and considered by the judge. Those that properly may be taken into account were listed by him as follows:

1. Van Ekris are in New York.

2. US Lines are in New York.

3. EAB are in New York.

4. None of these three companies has a presence in Hong Kong.

5. Witnesses and documents relevant the variation in the price of coffee at the material time, to the delivery of the coffee and to the three EAB bank guarantees would be more accessible in New York.

17. In that context since the point was raised in the Respondent's Notice, though not argued at the hearing, I would say that on the very test in Spiliada that is to be applied, and upon the observations at pages 485 H to 486 A, that wider and less direct considerations have also to be taken into account, notwithstanding that they do not relate directly to the action between the plaintiffs and the defendants. But that said, it has also to be observed that it is difficult to see of what relevance most of those third party witnesses and documents would be, the plaintiffs' claim being founded upon the contracts of carriage.

18. Upon those factors the judge answered the first question in the affirmative, rightly I think. I turn then to the second stage.

19. The plaintiffs' juridical advantages in Hong Kong, all of which the judge took into account are as follows:

(i) The plaintiffs are how able to proceed against the defendant as of right and have the benefit of the letter of security in the sum of US$300,000. The defendants are not amenable to the jurisdiction of the New York court and would have to submit to its jurisdiction. They may well have to provide security, it not being clear that the letter of security provided would extend to a judgment of the New York Court.

(ii) The time limit provided by the bills of lading and the Hague Rules has now passed, and the plaintiffs may well find themselves time-barred in the New York court. If the time bar is not invoked by the defendant, the Steamship Mutual Underwriting Association may decline to honour the letter of security it has provided.

(iii) The plaintiffs would lose the benefit of the Hong Kong practice that costs and interest are usually awarded to the successful party.

(iv) The plaintiffs would be faced with innumerable and undue delays in the New York court if the defendants seek to implead Van Ekris, US Lines and EAB, which is their stated intention. The latter particularly US Lines are likely to oppose such attempt. The position in respect of US Lines, it being in Chapter II Bankruptcy, is vague and could be further complicated by invocation of the time-bar. Inordinate delays could result.

20. Mr. Thomas submits that the plaintiffs have not discharged the evidential onus that is on them to establish the deprivation of these juridical advantages and that it amounts to injustice. I do not propose to address that submission in respect of the first two of those advantages.

21. Instead I will assume in favour of the defendants for the purposes of the third stage, to which I now proceed, that any deprivation of them is offset by the three undertakings, i.e. to submit to the jurisdiction of the New York court, not to plead the time-bar and, if necessary, to extend the letter of security. Nonetheless the position remains this. The plaintiffs brought their action in Hong Kong as of right in November 1987, at which time it could not have been brought in the New York court. It was not until the second day of the hearing below, i.e. 24th April 1990, that the defendants offered to submit to the jurisdiction of the New York court. The plaintiffs have already incurred substantial costs. If they are now sent to the New York court they will certainly incur additional substantial costs; costs that may well be out of all proportion to the relatively small amount of their claim i.e. US$254,796.30 which Van Ekris suggest should not only be reduced to $66,468.60 but that somehow they are due a net sum of $17,175.05! The plaintiffs may be constrained to abandon their claim rather than risk costs that cannot be recovered and that could wipe out or exceed the amount recovered.

22. In that regard, in reliance upon the unreported judgment of this court in Deak Pereira v. Leslie Deak and Ors, 1990 No. 116, at p. 14, Mr. Thomas submits that "the probability of a more favourable order for costs were the plaintiffs to succeed" is "neutral in its effect". That seems to me clearly to depend on the facts of each case and to be related to the particular circumstances addressed in that judgment. In the particular circumstances of this case, it seems to me that deprivation of the probability of securing an order for costs if the plaintiffs succeed in their claim, in the context of the costs already incurred and the uncertainties of the costs in the New York court would be a matter of substantial disadvantage and significant injustice to the plaintiffs.

23. More importantly, the plaintiffs are assured of expeditious disposal of their action in Hong Kong in the context of applicable law that is clear. In New York not only will the plaintiffs' legal position be unclear, but substantial delays must undoubtedly be encountered, compounded by a stay likely to result from the Chapter 11 Bankruptcy, questions of arbitration under the bills of lading and time-bar points. In the circumstances, it seems to me that the matter of delay alone would probably outweigh the advantages of New York as the forum, and, moreover result in less that substantial justice to the plaintiffs.

24. There is also a possibility that the defendant may be able to implead those third parties or some of them in this action. And even if it does not, if it succeeds in its defence, that will be the end of the matter as far as the defendants are concerned.

25. If the defendants do not succeed, then it is true in a sense there will be some multiplicity of proceedings.

26. Having balanced the advantages of the New York court as the forum (implicit in the connecting factors listed) against the deprivation of the latter two legitimate personal and juridical advantages of the plaintiff addressed, it seems very clear to me that the advantages of the former are outweighed by the disadvantages of the latter, and that the interests of all the parties and the ends of justice would best be served by trial in Hong Kong.

27. For all the foregoing reasons I would dismiss the defendants' appeal, and make an order nisi that the plaintiffs are to have their costs of the appeal.

Kempster, J.A.:

28. I agree with the conclusion of Nazareth J. that, in the exercise of our discretion, permissible for the reasons he has outlined, this appeal should be dismissed with an order nisi for costs in the plaintiffs' favour. I also agree with his reasons.

29. For an action such as this, as in cases of collision on the high seas, there is no natural forum. Claims could as well be made for the suitability of the courts in India, Sri Lanka and Singapore as for those in Hong Kong or New York to determine the matters in dispute. There is no overwhelming connection with any of them. The defendants' ships come to Hong Kong regularly and, as regards witnesses and documents at least, they would find this Colony as convenient for the litigation as New York but, having regard to the third party claims sought to be pursued, I am persuaded that, other factors being equal, New York would be the forum in which the litigation could be tried more suitably than in Hong Kong in the interests of all parties presently and potentially involved and for the ends of justice. This is not to overlook the fact that New York did not provide a forum in which the plaintiffs could have initiated proceedings against the defendants in the absence of their voluntary submission to the jurisdiction; a submission which would hardly have been forthcoming in the absence of the arrest of one of their vessels.

30. Other factors are not equal. In the Hong Kong litigation, where jurisdiction has been founded as of right, the issues arising come within a comparatively narrow compass and, if the parties are so minded, can be determined within months rather than years. If, on the other hand, over three years after the writ was issued, the Hong Kong litigation were now to be stayed on the undertakings offered the institution by the plaintiffs of proceedings in the US District Court for the Southern District of New York, followed by attempts by the defendants to seek indemnity or contribution from other parties it would be years rather than months before all the issues arising could be resolved even assuming, as seems proper, that the New York court was able to proceed with due alacrity.

31. Against US Lines Inc. all proceedings are stayed following petition to the Bankruptcy Court for the Southern District of New York for relief pursuant to Chapter 11 of the US Bankruptcy Code. The question of a time-bar arises under the provisions of the bills of lading. Insofar as it is proposed to introduce them as defendants the buyers of the goods would be entitled to apply for a stay under an arbitration clause in the contract of purchase and sale. Under American law one or all of these procedural or substantive pleas might be available to the insurers of US Lines' liability to the holders of the bills of lading.

32. Without question the plaintiffs would meanwhile incur additional costs irrecoverable even if they were successful. In relation to the comparatively small sum of US$66,468 in respect of which US Lines were guaranteed, which would seem, prima facie, to represent the value of the goods if and when converted, these costs would be disproportionately large and, albeit the defendants could not recover their costs if successful, calculated to inhibit the plaintiffs from further pursuing their claim. Costs are not a neutral factor in the context of this appeal as they were in Deak Perera Far East Ltd (in liquidation) v. R Leslie Deak and Ors Civil Appeal No. 116 of 1990 (Unreported).

33. Were the present action to be concluded in the plaintiffs' favour and the defendants subsequently to seek relief from parties amenable to the New York jurisdiction inconsistent findings on the defendants' liability to the plaintiffs or as to the quantum of damages might, theoretically, emerge. This consideration carries little weight in reality. Further, two sets of proceedings would be obviated were the defendants to make successful applications here for service on parties outside the jurisdiction pursuant to RSC Order 11 Rule 1 and Order 16 Rule 3(4). No such difficulties appear to arise as were experienced by the defendants in Societe Aerospatiale v. Lee Kui Jak 1987 AC 871. Any judgment obtained in consequent third party proceedings would, I accept, fall to be enforced by action in the USA.

34. To put the matter no higher the dismissal of this appeal is the course which, in my opinion, "overall produces the least unjust result" per Hunter J.A. in Louvet v. Louvet 1990 1HKLR 670 at p. 677; an approach hot confined to disputes between husband and wife.

Power, J.A.:

35. I also agree.

Representation:

Michael Thomas, Q.C. and Miss M. Chew (Ince & Co) for Appellants/Defendants

R. Mills-Owens, Q.C. and C. Smith (Holman, Fenwick & Willan) for Respondents/Plaintiffs