XCHRX SUPERSTRONG INDUSTRIES LTD. t/a M & T INTERNATIONAL v. FURNESS LOGISTICS (HK) LTD

HCCL56/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.56 OF 1999

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J U D G M E N T

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The Application

1. This is an application by the Defendant, Furness Logistics (HK) Limited, for an order that all further proceedings in this action be stayed in favour of the Court at Rotterdam, the Netherlands, on the ground that the contract which is the subject of this action contained an exclusive jurisdiction agreement. Clauses 21 and 22 of the Terms and Conditions of Bill of Lading, No.KKA040, pleaded in the Amended Statement of Claim, read as follows :-

"21. LAW

The provisions of this Bill of Lading apply to all relations between the parties to the contract evidenced herein. The law of the Netherlands shall supplement those provisions only insofar as not dealt with by the contract evidenced in this Bill of Lading.

22. JURISDICTION

Any claim or dispute arising under this Bill of Lading shall in first instance be decided by the Court at Rotterdam, the Netherlands.

No proceedings may be brought before other court unless the parties expressly agree on the choice of another court or arbitration tribunal."

The Background Facts

2. The Plaintiff is a Hong Kong company which trades in electrical goods. The Defendant, which is owned by a Dutch parent, is also incorporated in Hong Kong, and functions as a freight forwarder. This claim is a claim by the Plaintiff for the misdelivery of a consignment of electrical goods which were carried from Hong Kong to Kotka, Finland.

3. The underlying contract of sale of these goods was concluded in early October 1997 with another Hong Kong company called Maratz (HK) Limited ("Maratz"), which went into liquidation in 1998. The goods the subject of the contract were clearly intended for export since the contract provided that payment would be effected by Maratz to the Plaintiff within 15 days "against mate receipt". As Mr Sussex, who appeared on this application for the Defendant, pointed out, the obvious intention was that the Plaintiff would retain the 'mate receipt' provided by the carrier until Maratz paid for the goods because, without this receipt, Maratz would not be able to obtain a bill of lading, and without a bill of lading consequently would not be able to deal with the goods at their destination.

4. By a Shipping Order dated 15th October 1997 Maratz instructed the Defendant to arrange shipment of a 40-foot container, in which the contract goods were packed, for shipment from Hong Kong to Kotka. Subsequent thereto, on 24th October 1997, these electrical goods were delivered to HIT's Container Terminal at Kwai Chung and a Terminal Receipt was issued, which document has been referred to by both the Plaintiff and the Defendant as the 'mate receipt'.

5. Pursuant to the shipping arrangements which had been made by the Defendant, the goods were in fact shipped on the vessel "Ming Moon", owned and operated by 'K' Line in that company's liner service between Hong Kong and Northern Europe. In this regard, a 'K' Line ocean bill of lading appears to have been issued which names the Defendant as Shipper, and an entity known as Scanrapid OY, of Helsinki, Finland, as Notify Party and Consignee.

6. On 28th October 1997, the buyer of the goods, Maratz, requested the Defendant to issue a 'house' bill of lading in accordance with the specimen supplied, which named Maratz as Shipper. The Defendant duly complied with this request and on 3rd November 1997 issued what transpired to be a first bill of lading, No.7A28KKA040, as agent on behalf of "Kingwood Container Lines", the full significance of which was apparently then unappreciated. This first 'house' bill of lading was, apparently, also issued by the Defendant without sight of any mate receipt in respect of these goods. Shortly thereafter, the Defendant also invoiced Maratz for freight and other charges arising in connection with this shipment.

7. Some six weeks later, on 11th December 1997, the Defendant received a further request from Maratz to issue a second bill of lading in respect of this same shipment of electrical goods. On this occasion thepro forma supplied by Maratz required the Plaintiff (as opposed to Maratz) to be named as Shipper. I am told by Mr Sussex that the Defendant issued the second bill, again as agents for "Kingwood Container Lines", but retained the bill because Maratz had not yet surrendered the Terminal Receipt issued to Maratz by HIT when these goods had originally been delivered to Kwai Chung.

8. On 18th December 1997, the Defendant faxed Maratz to the effect that this consignment of goods had reached Kotka, and stated that because Maratz had not yet surrendered the Terminal Receipt (described as 'the mate receipt'), the ocean carrier was threatening to auction off the goods. As a result, on or about 18th December 1997, the Terminal Receipt was delivered by Maratz to the Defendant and in turn this second 'house' bill of lading, No.KKA040, was released to Maratz, in this instance naming the Plaintiff as Shipper. And it is in respect of this second bill of lading that the Plaintiff hitherto has framed its claim in these proceedings.

The Argument

9. In the usual course argument in support of a stay application based upon a foreign jurisdiction clause proceeds along fairly well-defined lines. The applicability of the clause to the relevant contract of carriage is normally clearly established, and thereafter, on what are generally referred to as the principles set out in The "El Amria" [1981] 2 Lloyds Rep. 119 (see in particular the speech of Brandon LJ at 123), the matter is debated and the Court's discretion to stay is, or is not, exercised upon the basis of whether the Plaintiff/Respondent, on whom the burden rests, can demonstrate strong cause for not so doing.

10. Here, however, two significant 'wrinkles' have arisen, which render this case unusual. I take them briefly in turn.

(i) Non-existent principal

11. Both the 'house' bills of lading issued by the Defendant were issued "as agents only", and purport to have been issued on behalf of 'Kingwood Container Lines' as carrier. This company was a Netherlands Antilles company which was dissolved in 1993 at a time when the Furness group was apparently subject to restructuring by new owners. The precise details do not for the moment matter; suffice to say that Mr Sussex submits that the house bills in this form were issued by the Defendant in ignorance of the fact that the purported principal had ceased to exist, with the result that the Defendant in this case had purported to contract on behalf of a non-existent principal.

12. In his helpful skeleton argument, Mr Sussex has taken the Court through a useful (and educational) summary of the legal possibilities thrown up by this situation, and has argued that, in the circumstances, this is not a case wherein it can or should be said that there is no contract in existence at all but, to the contrary, that the contract in question was concluded with the Defendant itself. He arrives at this conclusion either as the result of the application of Hong Kong law, which involves a line of cases commencing with Kelner v. Baxter (1866) LR 2 CP 174, or by means of the application of Dutch law, Rule 181 of Dicey and Morris providing that the formation and existence of a contract falls to be determined by the putative proper law of that contract, namely, Dutch law, and that the unchallenged evidence before the Court is that Dutch law would regard the bill of lading as constituting a contract made with the Defendant.

13. Having arrived at his desired position by application of belt or braces, Mr Sussex then argued that before any bill of lading was issued by the Defendant, a contract existed between the Defendant and Maratz, as evidenced by the Shipping Order, the fact that the Defendant invoiced Maratz for shipping charges, and the fact that the Defendant contracted with 'K' Line to ship the goods to Kotka. Equally, he said, it was plainly intended that when a bill of lading was issued, a contract would come into existence between Maratz and the carrier, as to the precise identity of which Maratz was obviously indifferent. Accordingly, he submitted, when the Defendant issued the second 'house' bill of lading in exchange for the Terminal Receipt, there was a novation of that contract as contained in or evidenced by the first bill of lading, the Plaintiff thereby becoming a party to this contract of carriage in substitution for Maratz, and that, due to the demise of Kingwood Container Lines, as a matter of law this was a contract of carriage made with the Defendant personally.

14. It followed that, since the second bill of lading (like the first) contained the Law and Jurisdiction clause relied upon to found the present stay application, the Plaintiff was, in effect, stuck with it. The Plaintiff had sued the Defendant in contract on the basis of the Bill of Lading No.KKA040, and reformulation of the case in bailment failed to assist, because if (which was not necessarily accepted) the Defendant at any time had assumed physical possession, and therefore become bailee of the goods, such bailment would have had to have been on the terms of the bill of lading, and accordingly the Plaintiff could not escape the jurisdiction clause by framing its case in the alternative in bailment.

15. Miss Teresa Cheng, on behalf of the Plaintiff, did not seek to meet this detailed analysis head on; instead she sought to sidestep it. With customary fairness, she accepted that if her client was constrained to rely on the existing pleading, invoking the second 'house' bill of lading and/or bailment, then significant difficulties would lie in her path, and she would face an uphill battle in resisting the present application.

16. Instead, she produced for the consideration of the Court a proposed draft re-amendment to the existing Amended Statement of Claim which, in substance, focused upon a characterisation of the second bill of lading as a 'false' bill and as a 'sham document' which the Plaintiff had exchanged against delivery up of the Terminal Receipt in ignorance of the fact that Kingwood Container Lines no longer existed, and also in ignorance of the existence of the first bill of lading, which itself had been issued by the Defendant to Maratz without sight of the Terminal (or 'mate') receipt.

17. The draft amendments as thus put up, which no doubt will be the subject of a formal application to amend in terms should a stay of these proceedings not be granted, recite the history of events as they were now known by the Plaintiff (the affidavit evidence filed upon this stay application having assisted the Plaintiff, which hitherto had not known precisely what had gone on between the Defendant and Maratz nor appreciated the sequence of events involving the two 'house' bills of lading). The Plaintiff specifically complains of not being informed by a Mr Ferreira of the Defendant, during a conversation with a Mr Wong of the Plaintiff, as to the existence of the first 'house' bill of lading when in the same conversation Mr Ferreira had said that a bill of lading would be issued to the Plaintiff in exchange for the mate receipt, thereby impliedly representing that such bill of lading to be issued "is the only Bill of Lading in respect of the said goods and that this Bill of Lading to be issued would be a valid title document" (at paragraph 5F). The draft pleading then recites (at paragraph 5H) that in reliance upon the aforesaid representation by Mr Ferreira "the Plaintiff did surrender its Mate Receipt to the Defendant in or around December 1997 and at the same time took delivery of a purported Bill of Lading No.KKA040 issued by the Defendant (the second House Bill)". Nor was the Defendant at the material times aware of the details of the Ocean Bill issued by 'K' Line to the Defendant (naming the Defendant as Shipper and Scanrapid OY as Consignee and Notify Party), which Ocean Bill had been 'surrendered' (paragraph 5L), and that thereafter Scanrapid OY took delivery at the discharge port "on a date unknown to the Plaintiff" (paragraph 5M).

18. The Plaintiff further asserts that when, as holder of the second House Bill, it made the request to the Defendant to release the goods, "the Plaintiff was ... unaware of all the dealings with the parties of the Defendant ... save for the dealing with the Plaintiff" (paragraph 6), and avers that "By reason of the misrepresentation of the Defendant pleaded hereinabove and the acts or omissions of the Defendant, the Plaintiff has suffered loss and damage", thereafter providing six particulars of negligence, together with particulars of misrepresentation and damage, the latter element being referable to the value of the goods, namely US$55,036.86 (paragraph 8A).

19. The claim as originally pleaded is retained in the alternative (at paragraph 9), albeit on the basis that "if it is found that the second House Bill is a valid Bill of Lading notwithstanding the existence of the first House Bill duly issued to Maratz by the Defendant ..."

20. As the result of the foregoing, therefore, Miss Cheng makes it clear that the principal case she now wishes to run against the Defendant, subject to the grant of leave to effect a formal amendment in terms, centres around the issuance by the Defendant of the two 'house' bills of lading, and she argues that there can be no novation in the terms submitted by Mr Sussex when, at the time of the exchange of the Terminal Receipt for the second house bill, the Plaintiff was entirely ignorant of the existence of the first house bill. So that it followed, she said, that her primary case against the Defendant is now firmly based on a free-standing claim in tort, as opposed to contract or bailment, and that it was the Defendant's misrepresentation, via Mr Ferreira, that gave rise to the delivery up of the all-important mate receipt in exchange for the second house bill, which then erroneously was thought by the Plaintiff to be the only such bill of lading in existence. Moreover, although she could not put it any higher on the face of the papers, she further submitted that there was "evidence which tends to suggest" that it had been the first house bill which had been operative in the wrongful release of the goods to Scanrapid OY.

21. In addition, submitted Miss Cheng, such new case had not been the subject of attention by the expert on Dutch law, whose evidence as exhibited obviously had not covered these aspects, in particular the existence of another bill of lading and the arrangements independently made between the Defendant and Maratz. So that when the case was looked at in this new light, Miss Cheng argued, there was very good reason to maintain the trial of this relatively small claim within the existing Hong Kong proceedings, and not to order the stay which in any event, she said, was now sought by the Defendant for obvious procedural purposes.

Decision

22. After reflecting on all the circumstances disclosed in the evidence, together with the submissions of Counsel, in the exercise of my discretion I have decided not to stay this action in favour of Rotterdam. And I do this in large part on the basis of the revised case in tort which the Plaintiff now seeks to pursue against the Defendant.

23. The case as now primarily put forward involves Hong Kong parties, with Hong Kong witnesses testifying to events which occurred in Hong Kong. Notwithstanding the elaborate analysis put forward by the Defendant, that is the bottom line. In coming to this view I have not overlooked Mr Sussex's critique of the revised case - to which in my view he rightly accepts the Court may pay heed, notwithstanding the absence of the grant of formal leave to amend - in terms of causation, and in terms of what he describes as the 'shoehorning' of a contract case into a tort framework. But it seems to me, in the circumstances now prevailing in which the case has assumed a manifestly different bias, that it would be quite inappropriate at this stage to send these two Hong Kong companies off to Rotterdam to debate the merits of a case factually rooted in Hong Kong and in the context of a claim which is worth so relatively little (whether such be the face value of the claim or the package limit) with the result that, to use Lord Brandon's terminology, consideration of the aspect of "the relative convenience and expense of trial" in my view points all one way.

24. I further entertain a real doubt, in the circumstances of this case, as to the genuineness of the Plaintiff's desire for trial in Rotterdam, or whether, again in Lord Brandon's words, the Defendant is seeking "procedural advantages" or is seeking to create a tactical edge of the type which can readily be appreciated by any commercial litigator.

25. Moreover, I take into consideration that this is a claim, again most unusually in the circumstances of a stay application, to which a Defence already has been fully pleaded, incorporating all relevant defences, including time bar and package limitation (asserted to be US$500). This is another strange facet of this case, albeit in the circumstances I see no need to rehearse in detail the somewhat odd sequence of events by which this situation arose, involving the dismissal by a Master, at a three-minute hearing on 1st March 1999, of the original stay application (prior to the transfer of this case to the Commercial List), the consequent filing of a Defence dated 1st March 1999, and the Order on the appeal to Sakhrani J dated 10th March 1999, whereby Master Kwan's Order was set aside, with the stay application being adjourned to the Commercial List for hearing. And whilst I decline to categorise the filing of this Defence in itself as amounting to a binding election, waiver or other type of procedural bar to the mounting of the present stay application, as Miss Cheng suggested, I do not ignore the fact that the pleadings in this action are now in place and, subject to consequential amendment, the battle lines firmly drawn between the parties.

26. Looked at overall, therefore, to cause this entire matter now to be stayed in Hong Kong and to be recommenced and readdressed in Rotterdam strikes me, in the circumstances, as an absurdity, and I decline so to order.

27. The result of the foregoing is that the Defendant's application, by its summons dated 26th February 1999, is dismissed. I make an Order nisi that the costs of and occasioned by this application are to be paid by the Defendant to the Plaintiff in any event, such costs to be taxed if not agreed.

28. I am obliged to Counsel for their assistance.