BRODY LTD AND ANOTHER v. CHU KONG SHIPPING ENTERPRISES (HOLKINGS) CO LTD AND ANOTHERS

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JUDGMENT

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1. On 21^st May 1997 this Court made an Order granting the Plaintiffs herein leave to serve the 2^nd Defendant out of the jurisdiction pursuant to the provisions of O.10, r.2 and O.11, r.1(1)(d)(i) and (ii) and r.1(1)(c). On 22^nd September 1997 the 2^nd Defendant issued an application under O.12, r.8 R.S.C. seeking to set that Order aside. This is the judgment upon that application.

The Factual Background

2. This case concerns a misdelivery of goods at the port of Puerto Quetzal, Guatamela of seven consignments of cargo shipped at Chinese ports under bills of lading issued by the 1^st Defendant; as sometimes occurs, the cargo was delivered at Puerto Quetzal without presentation of the original bills of lading.

3. The factual matrix is complicated by the fact that the goods in question appear to have been subject to two sets of bills of lading. First, bills of lading issued by the 1^st Defendant, Chu Kong, acknowledging shipment of the goods in China, and undertaking to deliver the same to Puerto Quetzal; and second, a further set of bills of lading issued by the 2^nd Defendant, NYK, upon transhipment of the goods in Hong Kong, and undertaking to ship the goods from Hong Kong to Puerto Quetzal. What is presently unclear are the circumstances in which these NYK bills came into being, or indeed why Chu Kong apparently expressed itself as entering into these bill of lading contracts with NYK on behalf of the Plaintiffs; certainly, said Mr Sussex for the Plaintiffs, Chu Kong had no authority so to do, and any authority they had was simply to sub-contract qua principal. Be that as it may. What is clear is that the goods were carried to Puerto Quetzal on two NYK vessels; as Mr Sussex neatly put it, his case was that the goods went in and did not come out, and accordingly his clients seek redress against the 1^st and/or 2^nd Defendants.

The Relevant Principles

4. There is, I think, no dispute between counsel as to the relevant principles concerning applications for leave to serve out of the jurisdiction. These principles have been considered by this Court in a number of recent cases; see in particular the case of Inchape JDH Ltd. v. Baltrans Exhibition & Removal Ltd. & Another [1997] HKLRD 1275, a case which itself also assumes prominence within the confines of the present argument in terms of the analysis of the meaning of O.11, r.1(1)(c).

5. Suffice it to say that as the result of the speech of Lord Goff in Seaconsar v. Bank Markazi [1994] 1 AC 438, it is now accepted that applications for leave to serve out involve a three-stage evaluation under the broad headings of Jurisdiction, Merits and Forum Conveniens, and in so far as may be necessary I formally remind myself of this approach, together with the relevant passages in the useful commentary upon the various provisions of O.11 in the Supreme Court Practice 1997.

6. I turn now, therefore, and I hope relatively briefly, to the argument.

Jurisdiction

7. On behalf of the 2^nd Defendant, NYK, Mr Kerr forcefully submits that the subheads of O.11 relied upon by Mr Davidson, whose affidavit evidence led the application for leave to serve out, clearly did not meet the required "good arguable case" threshold in the particular circumstances of this case. Mr Davidson had in fact relied upon O.11, r. 1(1)(d)(i) and (ii) and O.11, r.1(1)(c), and for broad descriptive purposes, Mr Kerr urged upon me that the case was neither made out in contract nor under the rubric of "necessary or proper party".

8. So far as the contractual side of the argument was concerned, Mr Kerr emphasized that it was the Plaintiffs' primary case that there was no contractual relationship between the Plaintiffs and NYK, a point which had been raised by the Defence of the 1^st Defendant, Chu Kong, and indeed has been denied by the Plaintiffs. Whilst so far as r.1(1)(c), namely the "necessary or proper party", was concerned, I think it fair to say that, to some extent, Mr Kerr elided the merits into the jurisdiction argument, and suggested that the conclusion of this Court in Inchape, op. cit, to the effect that the issue of jurisdiction ought not to be entangled with merits (so that, for example, on a weak merits basis, it would not be 'proper' to join a foreigner as a party to the existing action) was probably incorrect. For his part, Mr Sussex maintained that the primary basis upon which the Plaintiffs sought to join NYK was as a "necessary or proper party" to the action, although he did not let go of the alternative contractual arguments under r.1(1)(d).

9. On the issue of the satisfaction of the jurisdictional head under subrule 1(1)(c), I am in no doubt that NYK is a "necessary or proper party" within the accepted meaning of that term - as to which, see the discussion on the point in Inchape, op. cit, at pages 1282 to 1286. Indeed, absent Mr Kerr's contention that threshold considerations in terms of merits should be injected into the jurisdictional argument, he recognized, I think, the difficulties in arguing that in the circumstances NYK could not be regarded as a "necessary or proper party".

10. For his part, Mr Sussex put it higher. There were, he said, a number of complex issues of law potentially arising consequent upon the factual determination, at trial, of the relationship between the Plaintiffs, Chu Kong and NYK, all centering upon events occurring in Hong Kong, given Chu Kong's contention that it had ceased to be the carrier in Hong Kong and that NYK had taken over; and that viewed against this backdrop, there could be no doubt that there was a real issue to be tried between the Plaintiffs and Chu Kong, and further that NYK was a "necessary or proper party" to this action. I agree. In my view, the jurisdictional case under this head is eminently made out to the required standard.

11. Having reached this firm conclusion, there is, in the circumstances, perhaps no need for present purposes to finally decide the interesting arguments put forward under the contractual head, and in particularly, the approaches of Saville J. (as he then was) in The Ines [1993] 2 LLR 492, and the decision of the High Court in Finnish Marine Insurance Co. Ltd. v. Protective National Insurance Co. [1990] QB 1078. Suffice to say that I do not think they are in conflict to the degree suggested by Mr Kerr. In Finnish Marine, op cit., the learned Deputy Judge held that a contract with a third party did not fall within O.11, r.1(1)(d)(ii), whereas Saville J. (op. cit at 495) was, I think, merely pointing out that the precise words of the rule (i.e. r. 1(1)(d)) should not be subject to the implied requirement of establishing, at the outset, that the contract in question is one to which the party sought to be served is a party, holding merely that in cases of dispute as to whether or not a proposed defendant is a contractual party, the case will not be a proper one for service out unless the Court was of the view that the question of the identity of the contracting parties and the alleged breach raised issues which it is fair to all concerned should be tried in England. As Saville J. pointed out (at page 495):

".... Where there is a real dispute as to who is party to a contract it is ex hypothesi not likely to be possible satisfactorily to decide at the outside which contention is probably correct, for such a dispute by its nature calls for a trial for its proper determination. If the rule required a plaintiff to prove on the balance of probabilities that the one party rather than the other was the contracting party then in anything but the simplest case leave could not be granted, even though it was clear that the plaintiff had a good case against the one or the other which justice dictated should be tried out in England. It would follow that in a case where leave was being sought to serve both out of the jurisdiction, neither could be served, even where it was clear that the one or the other was liable as the contracting party. This can hardly have been the intention behind the rule ...."

12. This, in my view, satisfactorily answers Mr Kerr's point on the Plaintiffs' alternative case. So that if, absent r.1(1)(c), this Court had had to decide the case solely on the argument relating to r.1(1)(d), I should, I think, have been inclined to hold also that the jurisdictional requirement under this head was met, notwithstanding Mr Kerr's criticisms of the Plaintiffs' approach in this regard.

13. I turn now to the outstanding issues of Merits and Forum conveniens.

Merits

14. On analysis, this is perhaps Mr Kerr's main line of attack. In a nutshell, he says that there is no merit in the claim against NYK in the particular circumstances, notwithstanding the lower threshold of a "serious issue to be tried", because it is clear that his client was blameless in terms of what happened in Guatamela in the port of Puerto Quetzal, since the loss occurred whilst the cargo was in the possession of the Guetamela Customs, and that it is common ground that under the relevant Guatamela law the carrier had no option but to handover the cargo to the Customs. Having put evidence up in this regard, it was therefore incumbent on the Plaintiff, said Mr Kerr, to respond and to show the Defendent was the bailee at the time of the loss; absent such evidence, the Plaintiff must lose in bailment and conversion, and, of course, the Plaintiff positively denied the existence of a contract with NYK. There was, therefore, no serious issue to be tried - albeit I think it fair to observe that to some extent this is a distillation of the merits arguments, the bulk of which were propounded with greater enthusiasm within the jurisdictional context, with its attendant greater threshold.

15. Mr Sussex responded as follows. His clients' claim is in contract, tort and bailment. So far as contract is concerned, there was and is clearly a serious issue as to whether the NYK bills of lading constituted a contract between NYK and the Plaintiffs, and either of them. And with regard to bailment and conversion, the short and inescapable fact was that his clients' goods were shipped to Guatamela on board NYK vessels, and that neither his clients nor their expert witness (of whose evidence on Guatamelan law Mr Kerr made much) have or had any knowledge of any primary facts concerning the loss of these goods. The loss would not have occurred without the consent of NYK to handover the container, since it was fairly clear that the person who transported the goods from one warehouse to another was apparently the prospective consignee, who in the event appears to have stolen them. Accordingly, the 2^nd Defendant could not presently establish, continued Mr Sussex, that the loss had occurred without default on their part, the relevant facts are not common ground, and the matters raised by Mr Kerr simply went to potential defences that NYK would wish to raise at trial, that is, to prove that they took appropriate care of the goods which had been received into their possession in good order and condition, and thereafter lost. There was no burden on the Plaintiffs to show the Defendant was bailee at the time of the loss; to the contrary, the burden was on the 2^nd Defendant to show either that they escaped liability by virtue of a contractual exception or by reason of bailment on exculpatory terms or under common law in terms of taking all reasonable care of the goods. It followed that Mr Kerr's attempt to rewrite the law of bailment should be resisted.

16. After reflecting on the arguments, I have no doubt that this case is redolent with serious issues to be tried, and I so hold. What is more, it is absolutely clear that there are common issues in this case which ought to be tried together. Which conveniently brings me, I suppose, to the issue of forum conveniens.

Forum Conveniens

17. I will take this element of the case very shortly. Mr Kerr suggested that the more appropriate forum would be Guatamela or Japan, albeit I think it fair to say that even he could summon up little enthusiasm for Guatamela. However, he did pray in aid Japan, referring in particular to the Japanese COGSA. I regret that he was unable to satisfy me in this regard, and he was in difficulty, I think, in pressing the Japanese law and jurisdiction clause in the NYK bill (which had appeared prior to this hearing to be the main focus of the application) given his submission that the NYK contract had been discharged with the return of the bills to NYK (a submission which Mr Sussex did not accept); indeed, a stay on El Amria principles was not in the event mooted. Be that as it may. It is difficult to see how, in the proper exercise of the discretion, this Court could sanction the trial of the myriad issues in this case in separate jurisdictions, and I do not propose to countenance that suggestion. The clear and obvious "centre of gravity" of this case, if I may borrow Mr Sussex's attractive phrase, is Hong Kong, and for present purposes I am satisfied that Hong Kong is the forum conveniens in light of all the circumstances and the evidence before the Court.

Order

18. The result of the foregoing judgment is, I think, clear. I am in no doubt, in the words of O.11, r. 4(2), that the case is "a proper one for service out of the jurisdiction". Accordingly, in the exercise of my discretion it must follow that the 2^nd Defendant's summons to set aside is dismissed.

19. I have heard preliminary observations on costs from both counsel. I make an order nisi that the costs of and incurred by this application be to the Plaintiffs, to be taxed if not agreed.

20. It remains only to thank counsel for their assistance.