PAN LLOYD SHIPPING LTD. v. CHO HUNG BANK

HEADNOTE

Practice and Procedure - Private International Law - whether Court should award Order 14 Judgment on part of claim and stay proceeding for the balance in favour of foreign jurisdiction which both parties agree is clearly a more appropriate forum than Hong Kong.

1. I have before me two summonses which raise the interesting question whether I should award 0.14 judgment for part of a claim on a guarantee and stay proceedings for the balance in favour of a foreign jurisdiction which both parties agree is clearly the more appropriate forum for this dispute.

2. The first summons in time is the plaintiff's summons dated the 29th August 1991 for summary judgment of sums said to be due under a guarantee. The second is the defendant's summons dated 24th September 1991 for a stay of these proceedings,on the following grounds:

(1) that the plaintiff has agreed to refer and submit all disputes out of or in relation to the matters in respect of which this action is brought to be determined andadjudicated upon by the Civil District Court of Seoul in the Republic of Korea (the exclusive jurisdiction point);

(2) further or alternatively that in all the circumstances the Courts of the Republic of Korea are the appropriate and natural forum for the resolution of the dispute between the parties to this action (the inherent jurisdiction application);

(3) further or alternatively that there are proceedings pending in the Civil District Court of Seoul in the Republic of Korea between the parties to this action which involve the same subject matter as this action and that this action is frivolous and/or vexatious and/or an abuse of the process of this Court (Lis Alibi Pendens);

3. On 27th September 1991 Mayo J made an Order by consent adjourning both summonses.and ordered the matter to be set down for hearing for one day on a date to be fixed not less than two months thereafter.

4. Both Mr Smith for the plaintiffs and Mr Dicks for the defendants asserted the right to begin and I thus heard argument thereupon. Mr. Dicks submitted that logically the stay application should come first because if I acceded to it then there would not be an 0.14 hearing. I ruled that Mr. Dicks should indeed deal with his summons first. Mr Dicks invited me not to deal with the 0.14 summons at all until I had considered the stay application and ruled upon it. As I indicated that I wished to reserve judgment on the stay application it seemed a waste of effort and costs not to hear the 0.14 summons and to rule on both in this judgment. I therefore heard the 0.14 summons after I had heard the stay application and I now give judgment in both summonses.

Background Facts

5. The plaintiff is a Libyan company and at all material times was the owner of M.V. Karrington. By a time Charter in amended NYPE form dated 2nd November 1990 the plaintiff chartered the vessel to Sun Asia Shipping Co. Ltd. a Korean company. In December 1990, a dispute arose relating to a claim by the plaintiffs for outstanding hire from the Charterers. For the period of dispute the vessel remained at anchor off the port of Inchon, Korea laden with approximately 20,000 m.t. of bagged cement.

6. During the course of this dispute it became apparent that a Hong Kong company, Hung Wah Trading Co.Ltd. purchased the cargo from the Chinese shippers. They had on sold the cargo to Wah Rang International of Korea but had not received payment. There were protracted multipartite negotiations and eventually Wah Rang agreed to take delivery of the cement pursuant to the terms of a Settlement Agreement dated the 28th February 1991.

7. The Settlement Agreement provided as follows:

"    SETTLEMENT AGREEMENT

For the amicable settlement of all disputes arising with regard to MV KARRINGTON and charter party dated November 2, 1990 and the bill of lading dated December 2, 1990, between and among WHA RANG INTERNATIONAL CORP. (hereinafter "Receivers"), SUN ASIA SHIPPING CO., LTD. (hereinafter "Time Charterers") and PAN LLOYD SHIPPING LIMITED (hereinafter "Owners"), Receivers, Time Charterers and Owners hereby agree mutually as follows:

1. The Receivers agree to pay to the owners the following sum of monies.

8. The total sum of

(a) US$420 000 of which US$120 000. will be paid in cash before the commencement of the discharge of the cement. An additional US$300 000 shall be paid upon the completion of the discharge, and

(b) the amount calculated at the rate of US$3,720 per day or pro-rata for any part of a day from and including March 14, 1991 through the time of completion of discharging the relevant cargo without any deductions allowed due to weather. ("The time of completion" means the date and time written in the Certificate of Discharge Completion which is to be issued by the Time Charterers.)

(c)The Receivers shall provide a letter of guarantee from Cho Hung Bank for the aggregate of the additional US$,300,000 of Paragraph 1(a) and the amounts of Paragraph 1(b) and Article 3.

2. The Receivers agree to pay the Time Charterers US$255,180 of which US$150 000 will be paid in cash before the commencement of the discharge of.the cement, and the additional US$105,180 shall be paid before March 30, 1991.

3. (1) The Receivers agree to pay to the Owners all port charges, bunker costs and other disbursements to be made on or after March 14, 1991. The Time Charterers shall not be responsible for the port charges or bunker costs.

    (2) The Receivers shall be responsible for port charges accruing before March 14, 1991.

    (3) The Owners shall be responsible for bunker charges accruing before March 14, 1991.

4. The Receivers agree to settle all disputes with Mindson Pacific Shipping and Hung Wah and will ensure that none of them will bring any claims against Owners and/or Time Charterers. The Receivers shall surrender to the Owners the original bill of lading issued by the Owners.

5. The Receivers agree to berth the vessel no later than 24:00 hours on March 3, 1991, and immediately commence the discharge. Furthermore, the Receivers agree to complete the discharge no later than 24:00 hours on March 13, 1991.

6. This settlement agreement shall become valid only after the provision of the payment of the money and the provision of the letter of guarantee required by Article 1.

7. Upon the completion of the discharge of the cargo, Hung Wah's declaration that it will not raise any claim against the Owners and/or Time Charterers, and the payment of the amounts listed in Articles 1, 2 and 3, the Owners confirm that they have no further claims in this matter against the Time Charterers and Receivers, and the Time Charterers also confirm that they have no further claims in this matterr against the Receivers and withdraw their auction application of the cargo and shall not pursue any demurrage claims against the cargo.

8. The interpretation, performance and validity of this agreement shall be governed by the laws of the Republic of Korea. Any dispute or claim arising out, of or in relation to this agreement or breach thereof, shall. be submitted to the exclusive jurisdiction of the Seoul Civil District Court for resolution.

9. The time charter party between Owners and Time Charterers dated November 2, 1990 is agreed to be terminated as of the date hereof and the owners and the Time Charterers confirm that they have no further claims against each other, under that time charter party.

28th, Feb. 1991."

9. The Letter of Guarantee which is sued upon in this case is in the following terms:

LETTER OF GUARANTEE

"We, Cho Hung Bank, hereby issue this Letter of Guarantee to Pan Lloyd Shipping Limited, and guarantee as follows:

1.    We assure you that Wha Rang International Corp will pay you the following sums of monies pursuant to Articles l and 3 of the Settlement Agreement attached hereto.

10. The total sum of

(a) US$420,000, of which US$120,000 will be paid in cash before the commencement of the discharge of the cement. An additional US$300,000 shall be paid by March 30, 1991, and

(b) the amount calculated at the rate of US$3,720 per day or pro-rata for any part of a day from and including March 14 1991 through the time of completion of discharging the relevant cargo without any deductions allowed due to weather. ("The time of completion" means the date and time written in the Certificate of Discharge Completion which is to be issued by Sun Asia Shipping.Co. Ltd.)

(c) Wha Rang International Corp. also agrees to pay to the Pan Lloyd Shipping Limited all port charges bunker costs and ether disbursements to be made on or after March 14, 1991.

2. Should Wha Rang International Corp. not pay the additional US$300,000 of Paragraph 1(a) and the full'amounts of Paragraphs 1(b) and (c) to Pan Lloyd Shipping Limited by March 30, 1991, we undertake to pay that.amount of monies immediately to Pan Lloyd Shipping Limited by Telegraphic transfer. (1 copy of Settlement Agreement between Wha Rang International Corp., Sun Asia Shipping Co., Ltd. and Pan Lloyd Shipping Limited is attached)

28th Feb.1991"

11. The plaintiffs sue for US$158,442.03 and Korean Won 89,193,938.00. The defendants have a representative office in Hong Kong and thus no application under 0.11 was necessary.

12. It is important to note at the outset that the plaintiffs agree that they cannot obtain 0.14 judgment for the whole of their claim in the light of the issues which have been raised. However, Mr. Smith has attempted to persuade me in the 0.14 summons that there is a sum indisputably due. He invites me to give judgment for that sum and to stay the balance.of the claim in favour of the Korean Court. The plaintiffs accept that in so far as I may decide that there is a triable issue to a portion of the claim that part should be stayed in favour of the Korean Courts. The reason for this concession is that Korea is clearly the more appropriate forum for the resolution of the dispute.

13. The following points should be noted.

(1) The events took place at the port of Inchon, Republic of Korea.

(2) Most of the witnesses are Korean.

(3) The defendant is a Korean Bank with only a small representative office in Hong Kong and does not carry on any banking business in Hong Kong.

(4) Wha Rang is a Korean company.

(5) The plaintiffs have commenced proceedings arising out of the Settlement Agreement and Guarantee in Korea and have joined Wha Rang as the lst defendant and these defendants as 2nd defendants.

(6) The Korean proceedings raise the same issues as the Hong Kong proceedings and the Korean proceedings have advanced to the stage where some hearings have taken place.

(7) Korean Law applies to the Settlement Agreement and to the Guarantee and it is said that important issues of Korean Law will be raised in the action.

The Stay

14. Mr Dicks submits that the plaintiffs are inviting the Court to make an unprecedented order. Nowhere in the books or cases will one find reference, he says  to a case where the Court grants summary judgment for part of a claim whilst at the same time subjecting the balance of the claim to a stay in favour of a foreign jurisdiction. He submits that such a conclusion can only be posited on a misunderstanding of the nature of the stay application.

15. Mr. Dicks submits that if the Court comes to the conclusion that these proceedings should be stayed in favour of the Korean Courts then the whole proceedings must be stayed. It would be wrong in principle, he submits, to hive off part of the case and assume jurisdiction here and send the balance to Korea. He submits that the situation is not analogous to the case where the Court gives 0.14 judgment for part of the claim and submits the rest to arbitration. He points out that, in at least domestic arbitration cases, the Court continues to have a supervisory role in relation to arbitration and, indeed, in international cases heard in Hong Kong under the Model Law the Court still has some functions. Mr. Smith points out correctly, that in some cases the Court will stay Hong Kong proceedings in favour of an arbitration to be held outside of Hong Kong.

16. Mr. Dicks goes further by submitting that in considering the application for a stay I should disregard the 0.14 application completely and thus I should not be able to say whether there is or is not a dispute as to any part of the claim.

17. Mr. Dicks bases his application for a stay on 3 arguments. Firstly, he submits that as a matter of construction the guarantee must be read with the Settlement Agreement and thus Clause 8 must be taken to apply to the guarantee as well, in other words it is subject to the Exclusive Jurisdiction Clause. He submits that it was clearly intended to apply to the guarantee. It is incorporated by a reference and it is auxiliary to the Settlement Agreement which is the only means of defining the guarantor's obligation. Secondly, he bases his application on the inherent jurisdiction of the Court preserved as it is by s.16(3) of the Supreme Court Ordinance, Cap 4 Thirdly, he relies upon the existence of the proceedings covering the same ground already instituted in Korea. He submits that if I am satisfied that the Foreign Jurisdiction Clause applies to the guarantee then I should have no hesitation in keeping the plaintiffs to their bargain as they have produced no grounds to the contrary. As to the inherent jurisdiction, he relies upon the plaintiff's concession, which he submits had to be made, that Korea is clearly the more suitable forum for the balance of the claim. He submits that this approach should apply to the whole claim.

18. Affidavit evidence from Korean law experts was put in by both sides. Much of it went to the issue whether the Korean Courts would in fact construe the guarantee as being subject to the Exclusive Jurisdiction Clause. I do not think that it is necessary for me to resolve that particular matter although I think the reasoning of the defendants' expert is more preferable. The reason why I say that it is not necessary for me to resolve this issue is because Mr. Smith on behalf of the plaintiffs has conceded that' whether it is because of an Exclusive Jurisdiction Clause or whether it is because of the inherent jurisdiction there can be no doubt that Korea is clearly the more appropriate forum for this dispute. However he submits that there is no case law or principle which would prevent the Court from dealing with the 0.14 application and staying the balance in favour of the clearly more appropriate forum.Why, he asks rhetorically, should the plaintiffs have to go to Korea to establish the undisputed part of their claim especially as there appears to be no procedure precisely like 0.14 in Korea.

19. In so far as the plaintiffs relied upon the absence of a summary judgment procedure in Korea (which was not entirely admitted) Mr. Dicks referred me to the first instance judgment of Robert Goff J (as he than was) in Trendtex Trading Corporation v. Credit Suisse (1980) 3AER 721 where at p.736 the learned judge did not attach fundamental importance to the absence of a summary judgment procedure in Switzerland. Mr Dicks submitted that 0.14. was after all only a procedural shortcut. A plaintiff with a good claim would get to the same point in due course and interest would compensate for any delay. It could not be compared to the absence of a process of discovery as in the Trendtex case.

20. In answer to a question from the Court whether there was any case where a similar split order had been made in circumstances similar to those before me, Mr. Smith was only able to refer me to the decision of the House of Lords in Castanho v. Brown & Root (U.K.) Ltd. (1981) A.C. 557. Although not identical he submitted that this case was analogous to the one before me, because there the plaintiff had been granted an interim payment under 0.29 (which he submitted was analogous to summary judgment) and yet at a later stage the plaintiff was allowed to discontinue the English proceedings in order to go to litigate in Texas where it was hoped he would receive far higher damages. Mr. Dicks denied that this decision was supportive of the approach which Mr. Smith invited me to take. I do not find in Castanho any support for the approach that I am being asked to make in this case.

21. Mr. Smith further submitted that the existence of the Exclusive Jurisdiction Clause did not affect his submissions that justice demanded that only the disputed part of the claim should be subjected to the stay. He went on to rely very heavily on certain observations of Brandon L.J. (as he then was) in the "El Amria" (1981) 2 Lloyd's Rep. 119. At p.123, he referred to his own decision in the Eleftheria (1969) 1 Lloyd's Rep. 237 and continued as follows:

"The Eleftheria was a decision of my own at first instance. I had been referred in the course of argument to some six authorities on this class of case, including The Fehmarn, and at pp.242 and 99 1 endeavoured to summarize what appeared to me to be the principles established by those authorities. I stated those principles in this way:

(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 its 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 properly be 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 depreived of security for their 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."

22. Mr. Smith subjected this.passage to a very close scrutiny. He referred to sub-paragraph (a) and fixed on the word "trial". He then submitted that the learned Lord Justice was there referring to a trial on the merits and did not have in mind the summary procedure under 0.14. He submitted that if there was no defence there was nothing to go to trial. Mr. Smith then turned his attention to sub-paragraph (d) and again honed in on the word "trial". He submitted that if there was no defence put in covering the whole of the claim how can the defendants submit that they genuinely desire trial in a foreign country

23. Mr. Smith submitted that the justice of this case demanded that I should exercise my discretion against granting a stay in relation to that part of the claim to which there was no defence. He submitted that there was no risk of any inconsistency between me giving 0.14 judgment on the one hand and the balance going for trial in Korea on the other. He reminded me that all the cases on forum non conveniens referred to the convenient forum for trial, and he was not seeking a trial in Hong Kong in relation to those parts which were undisputed. He invited me not to grant a stay in relation to the undisputed part because this would better serve the ends on justice.

24. In my judgment the correct approach of the Court is as follows. I should ask myself whether Korea is clearly the more appropriate forum for the resolution of this dispute. I should ask myself this question before I apply my mind to the 0.14 arguments. It is, of course, common ground that Korea is by far the most appropriate forum. I accept that I have a discretion in the matter, and Mr. Dicks does not suggest otherwise.

25. In asking myself whether I should exercise the discretion in favour of the stay, it seems to me appropriate to ask that question in relation to the whole action and not merely in relation to part of it. I must confess to finding the submission of Mr. Smith jurisdictionally uncomfortable. Everything connects this case with Korea. The plaintiffs were able to institute proceedings in Hong Kong because the defendants had a representative office here. Is it right as a matter of principle that the defendants should be subjected to two sets of proceedings? Firstly, the proceedings which have already commenced in Korea and secondly, the present proceedings under 0.14 before me. I think not. If Korea is clearly the more appropriate forum for this dispute, then it seems to me that the Courts of Korea should be seized of the whole dispute and not merely that part which the plaintiffs cannot establish under 0.14 in Hong Kong.

26. It seems to me that the piecepeal approach which Mr. Smith asks me to take is not a correct approach. Having concluded that Korea is by far the more appropriate forum, the interests of justice require the whole dispute to be litigated there rather than Hong Kong even though the plaintiffs are in a position to show that there is no defence to some part of the claim but not the whole claim. In so far as Mr. Smith sought to rely upon the above-quoted passage from Brandon L. J in the El Amria, I believe that Mr. Dicks is correct when he says that Mr. Smith place far too much emphasis on the word "trial" and in relation to the genuine desire for trial, I do not think it difficult to assume that the foreign defendant in this case would far prefer trial in the Courts of his own country.

27. It is agreed that the discretion which I have to refuse to grant a stay is exercisable whether I am dealing with the Exclusive Jurisdiction Clause, the inherent jurisdiction approach or on the basis of a lis alibi pendens. For these reasons, therefore, it seems wholly appropriate to exercise my discretion in favour of granting a stay in relation to the whole proceedings and declining therefore to assume the 0.14 jurisdiction in relation to that part of the claim which Mr. Smith has invited me to do. Each of the three bases is sufficient. The cumulative effect of all three is overwhelming.

28. As it is possible that this case may go further it might be of assistance if I indicated what my view would have been, had I been prepared to assume jurisdiction, in relation to the 0.14 summons.

29. Mr. Smith most usefully put in a skeleton argument in relation to the 0.14 aspect of this case and such argument as I heard centered around this document. Mr. Smith submitted that there was indisputably due to the plaintiff the sums of US$84,010.00 and US$17,563.73 totalling US$101 573.73. In addition, there was a sum of Korean Won 22,708,876 also due.

30. Mr. Smith concedes that the claim for demurrage must be reduced by the amount of the period of delay alleged by the defendant. The total period of delay alleged is 271 hours or 11.29166 days The total claim for demurrage is US$126,015.00 and deducting the delay of US$42,005.00 this results in the figure of US$84,010.00. The 11.29166 days also has an effect upon the claim for bunkers. The effect is to reduce this claim to US$17,563.73.

31. There is then a claim for port dues for the period before 14th March 1991. Mr. Smith submits that these amount to Korean Won 37,943,855. He then submits that for the period after 14th March the definition is wide enough to cover all the charges, but a reduction must be made for the delay of 11.29 days. Taking the post 14th March figures and subjecting them to the 11.29 days delay results in a total, he submits, of Korean Won 26,395,021. The total for these two is Korean Won 64,338,876. Mr. Smith then points out that the defendant has a set off against this sum in relation to trucking charges of Korean Won 41,630,000 which he submits is covered by the Korean Won figure of 64,338,876. Deducting the 26m figure from a 64m figure one comes to a balance in the plaintiff's favour of Korean Won 22,708,876.

32. In my judgment there is enough of a dispute, in relation. to the port charges so as to justify this matter going to trial. Further there is clearly a set off here which the plaintiff has to accept at face value in the sum of Korean won 41,630,000. It seems to me that the only fair way of dealing with this matter would have been to give the plaintiff judgment for US$84,010 and to give leave to defend in relation to all the other matters. I would not have given judgment for US$17,563.73 not because I think the figure is wrong, but because it seems to me right to leave sufficient sums against which the defendant's set off can be made. There is in my judgment sufficient doubt in relation to the port charges to prevent them being used solely for this purpose.

33. My conclusion is, therefore, that had I been prepared to assume the 0.14 jurisdiction, I would have awarded the plaintiffs US$84,010 on the ground that it seems to me that that sum is indisputably due and would have given unconditional leave to defend in relation to the balance.

34. In the circumstances, therefore, I grant the stay which the defendants seek and will make a costs order nisi in favour of the defendants on that summons.

35. It, therefore, follows that I will dismiss the plaintiff's 0.14 summons and I will make a costs order nisi in favour of the defendants in relation to that summons.

36. Before parting with this case, I would like to take this opportunity of thanking both Counsel for their assistance in what has been an interesting argument which they have both placed before me with clarity and brevity.