MORPOL S.A AND OTHERS v. BLUE ANCHOR LINE AND ANOTHER

HCAJ 150/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 150 OF 2014

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J U D G M E N T

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Introduction

1.  The defendant has applied for the transfer of the case from this court to the District Court.  The facts alleged are straightforward enough.  The plaintiffs are the shippers, consignees, sellers and subrogated insurers of a cargo of 2,867 cartons of frozen salmon fillet strips, which were carried in 3 containers on board 3 vessels, successively, from Ustka, Poland to Lat Krabang, Thailand.  The defendants are said to be the contractual carrier under the bills of lading and bailees for reward of the cargo.

2.  Under the bills of lading the carriage was by multimodal transport.  It is alleged the cargo was damaged in the course of sea transit from Gdynia, Poland to Singapore, in that one of the containers was found to be defective upon arrival in Singapore and therefore replaced, but the cargo inside that container had been damaged due to exposure to improper temperature during the sea carriage. 

3.  The defendants are said to have caused the damage

“[n]egligently and/or in breach of their duties as bailees and/or as carrier for reward and/or in breach of the contract contained in or evidenced by the Bills of Lading and/or in breach of its duties and/or obligations under the Hague‑Visby Rules as set out above, in particular Article III Rule 2[1] …”.

4.  The loss claimed is particularised as the 2 sums of JPY8,475,704 and BHT90,971.40, which together are equivalent to approximately HK$629,000, and thus within the monetary limit of the District Court’s jurisdiction of HK$1 million.

5.  S 43 of the District Court Ordinance (Cap 336) provides:

“(1) The Court of First Instance may, either of its own motion or on the application of any party, order the transfer to the Court[2] of all or part of an action or proceeding, other than a counterclaim, which appears to the Court of First Instance likely to be within the jurisdiction of the Court.

(2) An order may be made under this section at any stage of the proceedings of the motion of the Court of First Instance itself or on the application of any party.

(3)   The Court of First Instance is required to make an order under this section unless it is of the opinion that, by reason of the importance or complexity of any issue arising in the action or proceeding, or for any other reason, the action or proceeding ought to remain in the Court of First Instance.”

6.  The plaintiffs oppose the application for transfer.  First, they contend the case does not fall within the jurisdiction of the District Court because (i) the District Court has no Admiralty jurisdiction; and (ii) the District Court has no jurisdiction to determine a claim in bailment.  Secondly, it is argued that the plaintiffs have a right to bring the action in the Court of First Instance by virtue of s 12B of the High Court Ordinance (Cap 4).  Thirdly, they contend that, for reasons I shall describe, the case ought nevertheless to remain in this court.

Admiralty jurisdiction

7.  As to the first point, it was submitted on behalf of the defendants, correctly in my view, that while s 12A of the High Court Ordinance sets out the Admiralty jurisdiction of the Court of First Instance and the plaintiffs’ claim here falls within s 12A(2)(g)[3] and (h)[4], there is nothing in that Ordinance to suggest that the Court of First Instance has exclusive jurisdiction over such a claim.  The phrase in s 12A(1) that “[t]he Admiralty jurisdiction of the Court of First Instance shall consist of” is apt to confer jurisdiction but not exclusive jurisdiction.  Where the legislature has sought to give a particular tribunal exclusive jurisdiction, this is done in clear and express terms; see eg s 7 of the Labour Tribunal Ordinance (Cap 25) and s 5 of the Small Claims Tribunal Ordinance (Cap 338).  There is nothing similar to confine the matters falling within s 12A to the exclusive province of the Court of First Instance. 

8.  The matters referred to in s 12A — under the general heading of Admiralty jurisdiction — are wide ranging and varied in nature.  There are no doubt certain claims there that lie outside the jurisdiction of the District Court, though this is not because s 12A excludes the jurisdiction of tribunals other than the Court of First Instance, but simply because those claims do not fall within the terms of the statute that confers jurisdiction on the District Court.  Conversely, there are in my view undoubtedly in personam claims in s 12A that fall within the jurisdiction of the District Court because, for example, they are founded on contract, quasi‑contract or tort and the amount claimed does not exceed the monetary limit.[5]  The fact that a ship or bills of lading feature in such claims does not, in my view, deprive the District Court of jurisdiction.

9.  Thus, in Pacific Bridge Services Ltd v Wide Tech Shipping Ltd (unrep, HCA 12492/1999; 25 October 2000), Waung J, a most experienced Admiralty judge, ordered the transfer to the District Court of a High Court action involving a defence of time‑bar under the Hague‑Visby Rules even though, it would appear, the action was within the Admiralty jurisdiction of the Court of First Instance.  Likewise, in The APL Malaysia (unrep, HCAJ 152/2010; 3 February 2012) at §40, Master de Souza said that the District Court regularly tried disputes involving loss or damage to goods carried on ships (which would fall within s 12A(2)(g)), citing as examples Forsa Multimedia Ltd v C&C Logistics (HK) Ltd (DCCJ 3467/2009), Red Chamber Co v Lau Siu Man (DCCJ 2790/2009), and Kind Respect Ltd v Apex Logistics Ltd (DCCJ 502/2004).  Mr Toms who appeared for the defendants was able to refer me to many further examples but it is not necessary to recite them here.

10.  It seems to me that where it is said in Ng Cho Chu Judy v Chan Wing Hung [2016] 1 HKLRD 1073 at §96 that “certain areas of laws are altogether excluded from the jurisdiction of the District Court — for example, admiralty …”, and when s 52(2) of the District Court Ordinance provides that nothing in s 52 (which confers jurisdiction on the District Court to grant and enforce injunctions) “shall be deemed to confer admiralty jurisdiction” upon that court, it is the type of claims that are a peculiarity of the Admiralty court that are being referred to.  The relevant question in this case is whether the plaintiffs’ claim falls within the terms of the statutory provisions conferring jurisdiction on the District Court (especially s 32 of the District Court Ordinance), and not whether it falls within s 12A of the High Court Ordinance. 

Jurisdiction in relation to bailment

11.  This brings me to the other point made by Mr Alder on jurisdiction, namely, that the plaintiffs’ action involves, amongst others, a claim in bailment, which (counsel submitted) does not clearly fall within s 32(1) of the District Court Ordinance, which provides:[6]

“The Court has jurisdiction to hear and determine any action founded on contract, quasi‑contract or tort where the amount of the plaintiff’s claim does not exceed $1,000,000.”

12.  Mr Alder submitted it is doubtful if a claim in bailment is “founded on contract, quasi‑contract or tort”.  He referred to Palmer on Bailment (3^rd ed), §§1.001 & 1.047, as well as the dictum of Windeyer J in Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220, 241 that “it may well be that the duty of the bailee to use due care does not arise from contract or tort”. 

13.  To determine what an action is founded on, the court has to look at the substance of the matter rather than the form.  The foundation of an action consists in those facts which are necessary to maintain it: Bryant v Herbert (1877) 3 CPD 389.  Where both causes of action are relied upon, it seems to me there is no reason in the general law or in the District Court Ordinance why an action cannot be poised both in contract and in tort. 

14.  For the purposes of s 32, it is unnecessary to distinguish between contract and tort, in contrast to the position under the older English County Courts Acts.  Until the County Courts Act 1959, s 47, whether the action was one founded in contract or in tort could affect the plaintiff’s entitlement to costs.  Many of the former English cases were decided on the basis that, having regard to the sum recovered, the plaintiff would be entitled to less costs if the action was founded in contract as opposed to in tort.   The dichotomy was compulsory and an action must be classified as founded either on contract or on tort, but not on both.  This had perhaps influenced the way in which the English courts had approached the question of categorization.  Professor Winfield stated in The Province of the Law of Tort (1931), p 76: “The influence of the County Courts Acts on the division between contract and tort, whatever its practical success, has been unfortunate as a matter of science”.  Notwithstanding this peculiar feature, the English cases in my view shed light on the proper approach.

15.  I accept that a bailment may arise in the absence of contract.  However, as Mr Toms submitted, we are here concerned with a case of contractual bailment.  On the pleaded case, there was a contract of carriage contained in or evidenced by the bill of lading of which the bailment was an incidence.  As is not uncommon in this type of case, several entities have been joined as plaintiffs, but the purpose is to avoid any argument about standing and title and no distinction has been made among the various plaintiffs as regards the cause of action raised.  Likewise the two defendants have been pleaded as the “contractual carrier” without any distinction between them.  Insofar as the cause of action was breach of the duties arising from the contract of carriage, the action should in my view be regarded as “founded on contract”; see eg Fleming v The Manchester, Sheffield, and Lincolnshire Railway Co (1878) 4 QBD 81.

16.  It is true that a bailee, even without a contract, is subject to a duty to take reasonable care to keep the goods safe, which is more onerous as regards burden of proof than the general duty of care under the law of negligence, because if the goods are lost or damaged whilst in his possession, he is liable unless he can show that the loss or damage occurred without neglect or default or misconduct of himself or his servants: Morris v C W Martin & Sons Ltd [1966] 1 QB 716, 726.  I also recognise that modern exposition tends to regard such a duty as arising from bailment as distinct fromcontract and tort.  But it by no means follows that an action for breach of such a duty cannot be said to be founded on tort for the purposes of the District Court Ordinance. 

17.  As Greer LJ said in Jarvis v Moy, Davies, Smith, Vandervell & Co [1936] 1 KB 399, 405:

“where the breach of duty alleged arises out of a liability independently of the personal obligation undertaken by contract, it is tort, and it may be tort even though there may happen to be a contract between the parties, if the duty in fact arises independently of that contract. Breach of contract occurs where that which is complained of is a breach of duty arising out of the obligations undertaken by the contract.”

18.  In Turner v Stallibrass [1898] 1 QB 56, the plaintiff had delivered his horse to the defendants to be agisted and cared for under a contract.  When the horse was injured by a low fence concealed by long grass, the plaintiff sued the defendants for negligently erecting the low fence or allowing the horse to be kept in that field with a concealed fence.  A L Smith LJ said:

“The question is whether upon the facts of the case this was an action which could be maintained without relying on the contract of agistment.[7] I think that the plaintiff showed a good cause of action by proving a bailment on which a duty arose at common law on the part of the defendants not to be negligent in respect of the plaintiff’s horse, independently of any contract, and a breach of that duty. On that short ground I think this was an action founded on tort within the meaning of the enactment of the County Courts Act, 1888, as to costs.”

Rigby and Collins LJJ delivered judgments with similar reasoning.  This decision is in my view clear authority that a claim for breach of a bailee’s duty arising independently of contract can properly be characterised as an action founded on tort within the meaning of the County Courts Acts.

19.  Similarly, in Chesworth v Farrar [1967] 1 QB 407, after the plaintiff had occupied the premises of one Farrar for some years as a statutory tenant, Farrar recovered possession pursuant to a judgment obtained against the plaintiff.  After Farrar died, the plaintiff sued the administrators of his estate claiming damages for loss of her goods whilst in Farrar’s possession at the premises, alleging that Farrar had become bailee of her goods.  The issue was whether the action was time-barred under s 1(3) of the Law Reform (Miscellaneous Provisions) Act 1934[8] on the ground that it was an action “in respect of a cause of action in tort” and brought more than 6 months after letters of administration were granted.  Edmund-Davies J, following Turner v Stallibrass, held (at 416D) that:

“the claim rests basically upon the simple fact of possession of the plaintiff’s goods and is independent of the circumstances which gave rise to that possession. If this is right, it follows that the claim is one ‘in respect of a cause of action in tort’ …”

20.  As shown in the valuable survey of the history of the District Court in Deputy District Judge Winnie Tsui’s judgment in Ng Cho Chu Judy, supra, at §§79–95, the District Court was first established by Ordinance enacted in 1953.  The language of the present‑day s 32 first appeared in the District Court (Civil Jurisdiction and Procedure) Ordinance 1962, s 3(1) of which provided:

“The Court shall have jurisdiction to hear and determine any action founded on contract or tort where the debt, demand or damage claimed is not more than five thousand dollars, whether on balance of account or otherwise”.

The relevant phrase in this section “any action founded on contract or tort” was derived from s 39 of the (English) County Courts Act 1959. The background to the 1962 Ordinance, as stated in §2 of the Second Interim Report of the District Court Committee in November 1959 the recommendations of which that Ordinance sought to implement, was as follows:

“It is generally accepted that the present legislation, both substantive and procedural, governing the Civil Jurisdiction of the Court might be considerably improved, particularly as regards the substantive legislation in that the jurisdiction is conferred by reference to an Ordinance which has largely been repealed, namely, the Supreme Court (Summary Jurisdiction) Ordinance (Cap 5).

It appears to the Committee that what is required is a precise conferment of jurisdiction, defined in terms of contract, tort and equity, and for this purpose the Committee has given considerable attention to the pattern of the English County Court Act, paying due regard however to the established features of the District Court and to necessity of not disturbing unduly an institution which has formed a valuable part of the judicial system of the Colony.”

21.  The phrase had remained in that form until 2000, when by the District Court (Amendment) Ordinance 2000 it was amended to “any action founded on contract, quasi‑contract or tort”.  The reason for adding the term “quasi‑contract” is not entirely clear from the legislative materials including the report of the working party chaired by Kempster VP in 1993, but the effect of this amendment was to bring the section in line with the provision in the Small Claims Tribunal Ordinance which, since its enactment in 1975[9], had always defined the jurisdiction of the Small Claims Tribunal in terms of, inter alia, any monetary claim “founded in contract, quasi‑contract or tort”.

22.  One thing that is clear from the legislative history is that no discernible reason in logic, policy or practicality exists for claims in bailment to be carved out specifically and excluded from the civil jurisdiction of the District Court.  Rather, it seems to me, by adopting the relevant language of the English County Courts Acts (which had been held in England to cover bailment), the general intent was that the District Court should have jurisdiction over claims arising from the common law of personal obligations which, it might well have been thought, was covered by contract and tort: see Bryant v Herbert, supra, at 390. 

23.  I conclude that for the purpose of s 32 of the District Court Ordinance, an action in bailment should, depending on the facts of the particular case, be characterised as a claim founded on contract or on tort or on both, and not be regarded as sui generis and founded in neither.  Accordingly, the claim in bailment poses no obstacle to the transfer of this action to the District Court.

S 12B(1) of the High Court Ordinance

24.  Secondly, Mr Alder submitted on behalf of the plaintiffs that by virtue of s 12B(1) of the High Court Ordinance, they have a right to bring an Admiralty claim in the Court of First Instance, and that this right cannot or should not be frustrated by an order for transfer to the District Court.  With respect, I think this contention is misconceived.  S 12B is concerned with the mode of exercise of Admiralty jurisdiction and, in particular, whether an action may be brought in personam or in rem and, if in rem, against what ship and property.  Thus s 12B(1) provides that an action in personam may be brought in the Court of First Instance in all cases within the Admiralty jurisdiction of this court.  It stands in contrast to s 12B(2)–(5) which provides that an action in rem may be brought only in certain limited cases and against specified ships or property.  In my opinion s 12B(1) does not confer an absolute right for the plaintiffs to insist on their claim being heard and determined by the Court of First Instance, or detract from the provisions on transfer of proceedings in s 43 of the District Court Ordinance.

Reasons against transfer

25.  Thirdly, it is submitted on behalf of the plaintiffs that, in any event, this court should exercise its discretion against ordering a transfer.  While s 43(1) confers a discretion by using the word “may”, s 43(3) makes clear that this court is required to order a transfer unless the case ought to remain in this court “by reason of the importance or complexity of any issue arising” or “for any other reason”.  I am prepared to accept that for this purpose it was not necessary to show great general importance or complexity.  Still the burden is on the plaintiffs to demonstrate that the case positively ought to remain in the Court of First Instance.  The structure of s 43 reflects the objects of the legislation which include allowing High Court judges to devote their skills and time to cases warranting their attention and lowering costs to a level more proportionate to the subject matter of the claims (see the materials referred to in Ng Cho Chu Judy, supra, at §§90 & 95).

26.  Importance and complexity are matters of degree.  Mr Alder pointed to a number of issues joined on the pleadings in relation to the application of the Hague‑Visby Rules such as whether the defendants could be bailees of the containers without being bailees of the cargo inside and whether the Rules only apply to the sea carriage.  As to the latter point Mr Toms clarified that the defendants are merely contending that the Hague‑Visby Rules apply compulsorily only to sea carriage; there is no dispute that they can apply more widely by agreement express or implied.  I do not propose to deal at length with these issues. Suffice it to say that I do not think they are so important or complex as to show that the case ought to be tried in the High Court.  In Pacific Bridge Services Ltd, supra,Waung J considered that the fact there may be a point of law involved, and the Admiralty judge may be able to deal with it somewhat faster, is no reason for the court to refuse the transfer.  I also disagree with Mr Alder’s submission that judges of the District Court cannot be expected to have any knowledge of the Hague‑Visby Rules.  As the authorities show, cargo claims have frequently come before that court. 

27.  As for the “any other reason” limb of s 43(3), the plaintiffs submit that it is not limited to situations of an exceptional nature and that the existence of the Admiralty List in the Court of First Instance with a specific judge in charge of it is a reason for retaining the case in this court.  I do not think this is a sufficient reason.

Disposition

28.  For all these reasons I shall order the action to be transferred to the District Court.

29.  There will be a costs order nisi that the plaintiffs pay the defendants the costs of the application, to be taxed on the High Court scale if not agreed, but excluding the costs of and relating to items 1 to 10 of the defendants’ supplemental bundles of authorities which were very late and merely examples of what may broadly be described as “cargo claims” dealt with in the District Court.