CHAN CHI KEUNG t/a TADI LAND INTERNATIONAL AND ANOTHER v. DELMAS HONG KONG LTD

HCCL 40/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO. 40 OF 2003

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J U D G M E N T

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1. This is an application by the defendant by its summons dated 9 October 2003 for an order that all further proceedings in this action against the defendant be stayed in favour of the Court of Tribunal de Commerce du Havre in France pursuant to the law and jurisdiction clause of bills of lading Nos. TAOPKL00382 and TAOPKL00378 dated 23 November 2002 and 29 November 2002 respectively issued by the defendant.

2. The plaintiffs' claim is set out in the re-amended points of claim. It is alleged that by bills of lading nos. TAOPKL00382 and TAOPKL 00378 dated 23 November and 29 November 2002 respectively ("the bills of lading") the defendant by its servants or agents acknowledged shipment on board the vessels BUNGA MAS LIMA and BUNGA MAS 11 two cargoes of 215 packages of poplin and 190 packages of poplin respectively weighing 13,775 kg and 18,050 kg respectively, in good order and condition ("the cargoes") for carriage to and delivery at Dar Es Salaam for reward.

3. It is pleaded that the 1st plaintiff was at all material times the owner of the cargoes or became the lawful holder of the bills of lading. The 1st plaintiff had agreed to sell the cargoes to the 2nd plaintiff on or around the end of September 2002 and it was agreed between them that the title and risk would remain with the 1st plaintiff until delivery. The 2nd plaintiff paid for the cargoes prior to the bills of lading being issued.

4. It is also alleged in the alternative that if (which is denied) title and risk passed to the 2nd plaintiff upon payment or shipment then the 2nd plaintiff was the owner of the cargoes and/or became the lawful holders of the bills of lading.

5. It is alleged that the defendant was under a duty to the 1st and/or 2nd plaintiff as bailee and/or carrier for reward and/or under the contract of carriage contained in or evidenced by the bills of lading to take reasonable care of the cargoes and to deliver the same at Dar Es Salaam upon presentation of the bills of lading in the same good order and condition as when shipped.

6. The plaintiffs further allege that in breach of contract the defendant failed to deliver any of the cargoes at Dar Es Salaam. Further or alternatively, it is alleged that the defendant, its servants or agents wrongfully and without authority delivered the cargoes to a person unknown without production of the bills of lading thereby converting the said cargoes. As a result of this the 1st and/or 2nd plaintiff has suffered loss or damage and incurred expenses and the 1st plaintiff and/or 2nd plaintiff claims the sum of US$153,780 or alternatively damages, interest and costs.

7. There is no dispute that the defendant was the carrier of the goods. The defendant's case is that the cargoes under the bills of lading were lost after discharge from the vessels at Dar Es Salaam and after the cargoes had been delivered to the agent of the 2nd plaintiff who was the consignee named in the bill and after the completion of the contractual carriage by the defendant.

8. The defendant's case as set out at para. 12 of the 1st affidavit of Ms Girard is that the cargoes were discharged from the vessels at Dar Es Salaam on or about 27 December 2002 and 1 January 2003. They were then moved to Tanzania International Container Terminal Services ("TICTS") a private but monopolistic terminal appointed by the 2nd plaintiff to receive the cargoes. The customs documents of the cargoes were passed to Customs Transit on 6 January 2003. A delivery order was received on 6 January 2003 and lodged in TICTS in order to obtain the release of the cargoes to the 2nd plaintiff. The containers were released by Customs Transit on 8 January 2003. The 2nd plaintiff sent a truck to TICTS for the collection of the cargoes on 9 January 2003. However, TICTS were unable to locate the cargoes.

9. The defendant relies on Clause IV of the bills of lading which provide that :

“ Carrier's Responsibility - Port to Port Shipment

(1)	Where the carriage called for by this Bill of Lading is a Port to Port Shipment then, whatever the custom of the port and freight tariff applicable, the Carrier is deemed to take possession of the Goods on loading on the vessel and to deliver same on discharge from the vessel and the Carrier shall not be liable for loss or damage to the Goods during the period before loading on or after discharge from the vessel, howsoever such loss or damage arises and even if an original of the Bill of Lading is not presented or accomplished by the Merchant or his agent on discharge from the vessel.
(2)	Loading shall be deemed to have commenced when the Goods are connected with the tackle alongside the vessel, and discharge shall be deemed to have been completed when the Goods are disconnected from the tackle.
(3)	For the operation of handling, stowage, loading or unloading carried out before loading or after discharge from the vessel, the stevedore or/and the Ship Agent are deemed to act on behalf of the Merchant even if they were chosen by the Carrier, in particular, when these operations are performed by a public or semi public or monopolistic organization."

10. The defendant's case is that this was a port to port shipment and that under the said Clause IV the defendant has discharged its obligations under the bills of lading after the cargoes were discharged from the vessels concerned. The cargoes were lost after discharge from the vessels and when in the custody of the agent appointed by the consignee, the 2nd plaintiff.

11. As the evidence shows, the 1st plaintiff engaged the services of the defendant for the shipment of the cargoes in containers from Qingdao, the Mainland to Dar Es Salaam, Tanzania. The transport from Dar Es Salaam to Bukavu, Rep. Dem du Congo would be undertaken by the 2nd plaintiff himself at his own risk. It was agreed between the 1st and 2nd plaintiff that the risk and title of the goods under the bills of lading would remain with the 1st plaintiff until delivery to the 2nd plaintiff. On 13 and 14 November 2002 the 1st plaintiff placed the booking request for the defendant in Hong Kong who confirmed the booking on the respective dates.

12. On 23 and 24 November 2002 the defendant's agent in Qingdao issued three sets of the two original bills of lading ("the 1st set") to the 1st plaintiff under which the 1st plaintiff was the notify party and the box for the consignee was marked "to order". This was the arrangement at the time as the 2nd plaintiff had not yet paid the 1st plaintiff for the goods. There were payments made by the 2nd plaintiff to the 1st plaintiff and the 2nd plaintiff had a sufficient credit balance to settle the invoices issued by the 1st plaintiff for the goods. The 1st set of bills of lading were subsequently surrendered to the defendant in exchange for the three sets of the bills of lading. The 'notify party' stated in the bills of lading was "Notco (Tanzania) Limited" ("Notco") who was nominated by the 2nd plaintiff. Notco is a well known clearing agent at Dar Es Salaam and Notco is also an agent of the defendant.

13. The plaintiffs' case is that the 2nd plaintiff delivered the original bills of lading and the invoices to Notco for customs clearance and to obtain a delivery order for the release of the containers from TICTS who stored the containers on behalf of the defendant pending presentation of the bills of lading, customs clearance and the issuance of a delivery order. The cargoes were unloaded at Dar Es Salaam on 27 December 2002 and 1 January 2003 respectively and stored by the defendant with TICTS. Notco, as the defendant's agent and not as the plaintiffs' agent, cleared all customs duties and issued a delivery order to the 2nd plaintiff so that he could release of the containers from TICTS. The original bills of lading was submitted in exchange for a delivery order for the release of the cargoes from TICTS to Notco. The 2nd plaintiff was informed by Notco to collect the cargoes from TICTS at Dar Es Salaam on 9 January 2003. However, when the 2nd plaintiff's driver went to collect the cargoes TICTS could not trace the cargoes.

14. The plaintiffs dispute the defendant's contention that the cargoes were delivered to TICTS as the 2nd plaintiff's agent. The plaintiffs also dispute that the defendant is entitled to rely on the said Clause IV as exempting the defendant from liability. Mr. Kerr submitted that even though the defendant as carrier unloaded the cargoes from the vessels it still had the obligation to deliver the same to the consignee or his agent and that the defendant failed to do so.

15. The defendant's application is made on the basis of an exclusive jurisdiction clause ("the clause") contained in the bills of lading. The clause relied on is as follows :

“ LAW AND JURISDICTION : Any claim or dispute against the Carrier arising under this Bill of Lading, including third party proceedings or those involving several defendants, shall be governed, for the maritime part of the carriage either by the International Convention for the unification of certain rules relating to Bills of Lading dated Brussels, the 25th August 1924 as enacted in the country where the Bill of Lading is issued or when the Convention is not compulsorily applicable, by the said Convention non amended and, for the non maritime part of the carriage either by the provisions contained in any International Convention or National Law compulsorily applicable, or by the French Law applicable to the means of transport utilized and shall be determined in France by the "Tribunal de Commerce du Havre"."

16. It is the construction of the clause that I have to consider.

17. Mr. Coleman, for the defendant, submitted that on a proper construction of the clause this was an exclusive jurisdiction clause where the parties have agreed that the forum for resolving claims or disputes is the Tribunal de Commerce du Havre in France.

18. Mr. Kerr, for the plaintiffs, submitted that the clause was not an exclusive law and jurisdiction clause. He also submitted that the clause was invalid for the reason that it provided for a number of different governing laws and that therefore the clause was unenforceable. It was also submitted in the alternative that if the clause were valid it provided that Hong Kong law was the applicable law of the contract and that in any event Hong Kong law has the closest and most real connection to the transaction. Hence, the defendant's application should be dismissed.

19. It seems to me that the first question that I have to consider is whether the clause is an exclusive jurisdiction clause.

20. Mr. Kerr submitted that the words "and shall be determined in France by the "Tribunal de Commerce du Havre" " only applies for the non-maritime part of the carriage and only when French Law is applicable to the means of transport utilized. Hence this was not an exclusive jurisdiction clause for both the maritime and non-maritime part of the carriage.

21. It seems to me that on a proper construction of the clause this is an exclusive jurisdiction clause where it is clearly provided that "any claim or dispute against the Carrier" shall be determined in France by the said Tribunal. I am unable to accept Mr. Kerr's submission that on a proper construction of the clause what should be determined in France by the said Tribunal are only disputes in respect of the non-maritime part of the carriage and only when French law is applicable to the means of transport utilized.

22. I am unable to accept Mr. Kerr's submission that the clause is not an exclusive jurisdiction clause. I accept Mr. Coleman's submission that the clause provided for the resolution of disputes to be determined exclusively in France by the said Tribunal.

23. The matter can be tested by asking the following questions :

(1) what is it that "shall be governed"? and

(2) what is it that "shall be determined"?

In my view, on a plain reading of the clause the answer to both these questions must be "any claim or dispute against the Carrier arising under this Bill of Lading".

24. In my judgment the clause is an exclusive jurisdiction clause whereby the parties have agreed that any claim or dispute against the defendant as carrier shall be determined in France by the "Tribunal de Commerce du Havre."

25. Mr. Kerr also submitted that the clause was in any event invalid and unenforceable. It was submitted that the clause envisages four possible laws applying to the party's rights and obligations and that, therefore, the clause is invalid and unenforceable and the defendant cannot rely on the same.

26. It was submitted that for the maritime part of the carriage it is envisaged that Hong Kong law applies as this is the country where the bill of lading was issued. There are two scenarios provided for the maritime part of the carriage namely, the claim or dispute shall be governed "either by the International Convention for the unification of certain rules relating to Bills of Lading dated Brussels, the 25 August 19243 as enacted in the country where the Bill of Lading is issued or when the Convention is not compulsorily applicable, by the said Convention non amended". This, it was submitted, meant that either the Hague Rules as enacted in the country where the bill of lading was issued, in this case Hong Kong, applies or only the Hague Rules as unamended will apply. Mr. Kerr submitted that this provides for the application of two different types of law.

27. As regards the non-maritime part of the carriage, the clause provides for "either the provisions contained in any International Convention or National Law compulsorily applicable, or by the French Law applicable to the means of transport utilized". Mr. Kerr submitted that this envisages that the non-maritime part of the carriage could be governed by the law where the road transport takes place or by French law.

28. It was thus submitted by Mr. Kerr that this was an attempt to incorporate four different laws applying to a contract which rendered the clause invalid and unenforceable.

29. Mr. Coleman submitted that there is no express choice of law provided for in the clause. It is only the rules that have been chosen and not the system of law.

30. As is stated at para. 31-004 Chitty on Contracts 28th Edn. :

“ The modern approach to the problem of determining the proper law of a contract involves the need to examine three possible situations. If the parties have made an express choice of law in the contract itself, then, subject to certain limitations, the law that they have chosen will govern. If there is no express choice, the court must examine all the facts surrounding the contract to determine whether there was an inferred or implied choice of law by the parties. In the absence of any choice, express or implied, the court ceases to look for the intention of the parties (since they are presumed to have no intention on the point) and proceeds, on objective grounds, to determine and apply "the system of law with which the transaction has the closest and most real connection".

31. It cannot be disputed that there must be a proper law and that there cannot be a proper law which "floats" i.e. not identified when the contract is made but which is left to be determined later by the unilateral act of one of the parties (para. 31-004 Chitty).

32. In The "Armar" [1980] 2 Lloyd's Rep. 450 Megaw LJ said at page 455 :

“ There must be a governing law from the outset : not a floating absence of law, continuing to float until the carrier, unilaterally, makes a decision.

The governing law cannot fall to be decided, retrospectively, by reference to an event which was an uncertain event in the future at the time when obligations under the contract had already been undertaken, had fallen to be performed, and had been performed."

33. It is also stated at para. 31-004 in Chitty :

“ A contract can, however, validly provide for two proper laws, the second to be applied if the event on which the application of the first depends is negatived."

34. Hong Kong is the place where the bill of lading was issued. By section 3 of the Carriage of Goods By Sea Ordinance Cap 462 the Rules as defined in the Ordinance apply to Hong Kong and shall have the force of law. The Rules as defined by section 2(1) of the Ordinance are not the unamended version of the Hague Rules but the Hague Rules as amended by the Protocol signed at Brussels on 23 February 1968 and by the Protocol signed at Brussels on 21 December 1979 which apply in Hong Kong. These are commonly referred to as the Hague-Visby Rules.

35. It seems to me that the clause does not incorporate Hong Kong law as the governing law of the contract. I am unable to accept Mr. Kerr's submission. Mr. Coleman, rightly in my view, pointed out that the clause merely provided that for the maritime part of the carriage the Hague Rules, whether in its amended form being the Hague-Visby Rules, or in its unamended form should apply. I am satisfied that this is not the application of a system of law but merely the application of the Rules.

36. And for the non-maritime part of the carriage again it is the "provisions contained in" the International Convention or the National Law or the French Law which applies. There is no express choice of a system of law.

37. It is important to bear in mind that there is a distinction between reference to a foreign law as a choice of law and the incorporation of some provisions of a foreign law. As it stated at para. 32-086 Dicey and Morris on The Conflict of Laws 13th Edn. :

“ There is a clear distinction in theory between reference to a foreign law as a choice of law to govern the contract (or part of a contract), on the one hand, and incorporation of some provisions of a foreign law as a term or terms of the contract, on the other hand, although sometimes it is difficult to draw the distinction in practice."

38. And it is stated at para. 32-087 that :

“ It often happens that statutes governing the liability of a sea carrier, such as the former Harter Act in the United States, or statutes implementing the Hague Rules, such as the United Kingdom Carriage of Goods by Sea Act 1971 or the United States Carriage of Goods by Sea Act 1936, are thus "incorporated" in a contract governed by a law other than that of which the statute forms part. The statute then operates not as a statute but a set of contractual terms agreed upon between the parties. The parties may make an express choice of law (e.g. English law) and then incorporate the terms of a foreign statute. In such a case the incorporation of the foreign statute would only have the effect as a matter of contract."

39. I am satisfied that the clause does not incorporate four different systems of law as was submitted by Mr. Kerr. The obligations are certain at the commencement of the contract of carriage and there is no question of there being a proper law which "floats".

40. In my judgment the clause is valid and enforceable.

41. It was Mr. Coleman's submission that for the maritime part of the carriage there was no express choice of law in the contract but that there was an implied choice of law namely, French law.

42. I was referred to The "Komninos S" [1991] 1 Lloyd's Rep. 370 where it was held, inter alia, that the parties intended their contracts to be governed by the law of the forum where disputes were to be tried; there were no indications which displaced this inference and the parties, by virtue of the relevant clause in the bill of lading (which provided that all disputes should be referred to the British Courts) intended English law to govern their contracts.

43. Referring to the House of Lords decision in Compagnie D'Armement Maritime SA v. Compagnie Tunisienne de Navigation SA [1970] 2 Lloyd's Rep. 99, Bingham LJ (as he then was) said in "The Komninos S" at page 375 :

“ This case is undoubted authority for the proposition that choice of an arbitral forum is not determinative of the proper law. This must indeed be so, since so long as the Court is concerned with ascertaining intention it cannot be bound by any rule of law to reach any given conclusion as to what the parties intended, and when it turns to consider the closest connection under sub-r. 3 it must consider and weigh all relevant features of the transaction and not give preponderant weight to some features to the exclusion of others. Nonetheless, while rejecting the somewhat absolutist and doctrinaire approach of the Court of Appeal, the House did make plain the significance of choice of forum in ascertaining the parties' intentions. Lord Reid described the choice of an English arbitral form as "an important factor and in many cases it may be the decisive factor" (at p. 103, cols. 1 and 2; p. 584E). Lord Morris said at p. 107, col. 2; p. 590G :

The circumstance that parties agree that any differences are to be settled by arbitration in a certain country may and very likely will lead to an inference that they intend the law of that country to apply.

Lord Wilberforce said at p. 111, col. 2; p. 596B, D :

...That the selection of a certain place for arbitration and, by inference, of nationals or residents of that place as arbitrators, is an indication that the parties intended the law of that place to govern is a sound general rule ... So, unless otherwise constrained, I would regard the clause as a weighty indication, but one which may yield to others.

Lord Diplock said :

The fact that they have expressly chosen to submit their disputes under the contract to a particular arbitral forum of itself gives rise to a strong inference that they intended that their mutual rights and obligations under the contract should be determined by reference to the domestic law of the country in which the arbitration takes place, since this is the law with which arbitrators sitting there may be supposed to be most familiar.

He emphasized, as Lords Reid, Morris and Wilberforce had also done, that this was no more than an inference.

But he also emphasized at p. 120, col. 2; p. 609E :

... I do not wish to throw any doubt upon the proposition that an arbitration clause is generally intended by the parties to operate as a choice of the proper law of the contract as well as the curial law and should be so construed unless there are compelling indications to the contrary in the other terms of the contract or the surrounding circumstances of the transaction."

44. I was also referred to York Airconditioning & Refrigeration Inc v. Lam Kwai Hung T/A North Sea A/C Elect Eng Co. [1995] 1 HKC 287 where it was held that the fact that the contract provided for arbitration in China was a very strong indicator that the proper law of the contract was China. On the facts it was held that the strong inference that the proper law of the contract should be determined by the place of arbitration was not displaced.

45. Mr. Kerr relied on the following factors :

(1) the plaintiff is a Hong Kong company;

(2) the defendant is a Hong Kong company;

(3) the bills of lading were issued in Hong Kong;

(4) the contract was agreed in Hong Kong;

(5) The freight was paid in Hong Kong dollars.

46. I am unable to accept that the above factors are sufficient to displace the strong and compelling inference that the parties intended that the proper law of the contract should be the law of the forum where the parties intended their disputes to be determined. That is in France and to be determined by the Tribunal de Commerce du Havre.

47. I accept Mr. Coleman's submission that there was an implied choice of law by the parties namely, French law.

48. As I have found that the clause is an exclusive jurisdiction clause whereby the parties have contractually agreed for the resolution of disputes in France, the Court retains a discretion whether or not to grant a stay of the proceedings brought in breach of contract. The discretion will be exercised in favour of a stay unless strong cause for not doing so is shown. The burden of showing such strong cause is on the plaintiffs who oppose the stay application. The court will take into account all the circumstances of the case. (The "El Amria" [1981] 2 Lloyd's Rep 119; The Thorscan [1998] 4 HKC 536).

49. I have considered the above factors relied on by Mr. Kerr. I have also considered that the 1st plaintiff's representatives are based in Hong Kong and that it would be more convenient for them to give evidence in Hong Kong rather than in France. The 2nd plaintiff is prepared to come to Hong Kong to give evidence. But it seems to me that he can equally travel to France to give evidence there. There is nothing to suggest that there is any difficulty for him to do so. I have also considered that the carriage of the cargoes was from Qingdao in the Mainland direct to Dar Es Salaam in Tanzania. There was no transhipment in Hong Kong. The cargo went missing after discharge from the vessel in Dar Es Salaam.

50. Ms Girard has summarized some of the key issues between the parties at para. 16 of her 1st affidavit as follows :

“	a.	The construction of the Bills of Lading under French law;
	b.	The events which occurred at Dar Es Salaam relating to the loss of the Cargoes;
	c.	The role and responsibilities of TICTS in Dar Es Salaam;
	d.	The relationship between TICTS and [the 2nd plaintiff]."

51. No evidence is required from Hong Kong to determine any of the above issues.

52. Mr. Kerr also submitted that the defendant does not genuinely desire trial in France and is seeking a mere procedural advantage in seeking the order for a stay.

53. I was referred to The "Pia Vesta" [1984] 1 Lloyds Rep. 169 where it was held that the defendants there did not genuinely desire a trial in Denmark but had applied for a stay to achieve a tactical advantage. The application for a stay was dismissed. Each case, of course, depends on its own facts and The "Pia Vesta" is distinguishable on its facts.

54. I am unable to accept the submission that the defendant does not genuinely desire trial in France. Although the defendant's defences were not set out in the correspondence before the issue of the writ, Ms Girard has by her affidavits set out the defences that the defendant relies on. She has identified the issues between the parties and the defendant has been advised that it has good defences to the claim of the plaintiffs. I am unable to see what tactical advantage or procedural advantage can be gained by the defendant in seeking the stay.

55. It seems to me that the plaintiffs have failed to show a strong cause for the Court not to exercise its discretion in favour of a stay.

56. It is unnecessary for me to consider whether the defendant is entitled to rely on the said Clause IV as a defence to the plaintiffs' claim. This together with the other defences raised are all matters to be determined by the parties' contractually agreed forum in France.

57. I am satisfied that the Court should exercise its discretion in the defendant's favour. I make an order that all further proceedings in this action against the defendant be stayed in favour of the Court of Tribunal de Commerce du Havre in France.

58. I also make an order nisi that the costs of and occasioned by the defendant's application and of the action be paid by the plaintiffs to the defendant.