DFS TRADING LTD AND ANOTHER v. SWISS AIR TRANSPORT CO LTD AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMMERCIAL LIST

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REASONS FOR DECISION

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1. This is an application by the 4th Defendant for a stay of proceedings in favour of the Zivilgericht Basel-Stadt (The Civil Court of the City of Basel) in Switzerland, firstly under Order 12 rule 8, on the grounds that the Plaintiffs' claims are within the exclusive jurisdiction of the Swiss Courts by virtue of contract and/or Swiss law, and secondly, under the Court's inherent jurisdiction, on the grounds of forum non conveniens, that Switzerland is the natural and most appropriate forum for trial. At the conclusion of the hearing I dismissed the 4th Defendant's application with costs to the Plaintiffs and I now give my reasons for so doing.

2. The events which give rise to these proceedings occurred on 13th March 1995 when a consignment of goods, the property of the Plaintiffs, having arrived by air from Switzerland, was stolen from the cargo terminal of Hong Kong Air Cargo Terminals Limited ("HACTL") at Kai Tak Airport by means of a Shipment Release Form taken from the office of the 5th Defendant by a person unknown.

3. Proceedings were commenced against all five Defendants in December 1995, but until late 1996 only the 4th and 5th Defendants had been served. Points of Claim, since amended and re-amended, have been filed and served on the 4th and 5th Defendants; Points of Defence, since amended, have been filed and served by the 5th Defendants, and a Reply filed and served by the Plaintiffs.

4. The 1st Plaintiff is a Swiss company and the 2nd Plaintiff is its Hong Kong associate. The 4th Defendant is also a Swiss company and the 5th Defendant its Hong Kong subsidiary. Transport of the goods was arranged by the 4th Defendant, with the 1st Plaintiff being named as shipper and the 2nd Plaintiff as consignee.

5. The Plaintiffs are now claiming, inter alia, under four contracts for carriage by air, evidenced by four air waybills, which they contend are separate contracts subject to the conditions printed on the back of each. These conditions in turn make the carriage of the goods subject to the rules relating to liability established by the Warsaw Convention which applies to Hong Kong under the Carriage by Air (Overseas Territories) Order 1967, as amended.

6. It is not in dispute that arrangements for transport of the 1st Plaintiff's goods from Switzerland to its associates around the world have subsisted for some twenty years, and it was the 4th Defendant's initial contention that, as previous dealings between them were governed by the General Conditions of the Swiss Freight Forwarders Association ("GCSFFA"), which give exclusive jurisdiction to the Swiss courts with only Swiss law applicable, the proper law of these contracts is Swiss law and the Swiss courts have exclusive jurisdiction in respect of any dispute arising out of them.

7. This contention was not pursued by Mr. Faulkner on behalf of the 4th Defendant with particular vigour in his arguments before me, and I believe I can deal with the point fairly briefly. The evidence of the arrangements between the 1st Plaintiff and the 4th Defendant in the past show only that they were just that -general arrangements under the umbrella of which individual contracts were made from time to time for the transport of goods. It may well be that some of those contracts were governed by Swiss law, but it would be necessary in each case to examine the particular contract to determine this. Equally, it may well be that transport arranged by the 4th Defendant within Switzerland would be subject to the GCSFFA giving the Swiss courts jurisdiction and applying Swiss law. However, it is clear from the face of the air waybills that the 4th Defendant entered into separate contracts of carriage by air as contracting carrier. and in no other capacity, and from the conditions incorporated into the contracts, that these contracts were subject to the Warsaw Convention. There is nothing in the contracts themselves which makes Swiss law applicable or which gives exclusive jurisdiction to the swiss courts.

8. Mr. Faulkner however takes the matter one step further by maintaining that, on the facts here, it is apparent that the carriage by air had ceased upon the delivery of the goods into the custody of HACTL, that the Convention therefore no longer applied to the contract between the parties, and that it is consequently arguable that the contractual conditions of exclusive jurisdiction apply, and that under common law principles Swiss law was that with which the contracts had the closest and most real connection. He went on to repeat the views expressed in Dicey and Morris, The Conflict of Laws at page 424, that a "practical solution would be to treat the jurisdiction clause as effective if a good arguable case is made out that the contract is valid under the law which would apply to it."

9. It is not for me on this application to try the merits of the action, but I need to look at the facts to see whether it is "arguable" that the carriage by air had terminated. It is clear that the Convention still applies to the carriage of the goods if they are in the charge of the carrier, in spite of the journey by air having been completed. In this case the goods were taken to the cargo terminal of HACTL at the airport. HACTL having the sole franchise to operate the cargo terminal, the carrier has no choice as to where the goods are temporarily stored. It is submitted on behalf of the 4th Defendant that this means that they are no longer in the custody of the carrier and the carriage has terminated.

10. Although I have little sympathy with that view, particularly in the light of the fact that the Defendants were at all material times in possession of the documents of title to the goods, and it is their conduct in relation to them, not the conduct of HACTL in relation to the goods, that is in question, it is not appropriate that I make a finding on it, and, indeed, I do not think that I need to do so. It is quite clear from the contract itself that the Warsaw Convention applies, and continues to do so until the contract has been performed. I accept and adopt the argument of Mr. Smith on behalf of the Plaintiffs that Article 18 of the First Annex to Schedule 1 of the 1967 Order, relied on by Mr. Faulkner in his submission that the carriage by air was concluded, only provides a defence to a carrier against a claim for loss and damage, and that the definition of carriage by air therein is only for the purposes of that Article. It does not have the effect of excluding the contract from the other Provisions of the Convention, of which Article 28 gives the Plaintiffs the option of bringing the action in Hong Kong, the place of destination, and Article 32 makes any agreement to alter the rules as to jurisdiction null and void.

11. I accordingly do not accept that it is arguable on the facts here that the Convention does not apply, and a stay on the ground of exclusive jurisdiction and applicability of Swiss law must accordingly be refused.

12. As to forum non conveniens, I am also satisfied that a stay on this ground must be refused for two reasons.

13. The first is that there is nothing to show that Hong Kong is not, in the words of Lord Goff of Chievely in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] 1 A.C. at page 477: "the natural or appropriate forum for the trial", or that "there is another available forum which is clearly or distinctly more appropriate".

14. Although the contract was made in Switzerland, the main evidence on the facts is all in Hong Kong. This is where the goods were stolen and one of the main issues will be in relation to the events surrounding the loss by the Defendants of the Shipment Release Form and whether they can limit their liability. It is by no means certain that evidence of Swiss witnesses will be required at all as to the making and effect of the contract, but evidence of the events leading to the loss of the goods is only available here, and a trial in Switzerland would inevitably require witnesses to be taken there involving expense and inconvenience.

15. The second reason is that given for the decision in Milor S.R.L. & Ors. v. British Airways PLC. [1996] 3 W.L.R. 642, where the English Court of Appeal held that, if the Warsaw Convention applied, as I have held here that it does, the Plaintiff has a choice of venue under Article 28 and there is no scope for the court to impose a venue which conflicts with that choice. Mr. Faulkner has pointed out that I am not bound by the decision of the English Court of Appeal and has directed my attention to the criticism of that decision by the editors of Shawcross and Beaumont. Of the two views I prefer that of the Court of Appeal and on that basis make a similar finding here.

16. In any event, for reasons which I shall address below, I do not consider it appropriate in this case to order a stay for the purpose of the claim being tried in Switzerland even if I had accepted the submissions on behalf of the 4th Defendant with regard to exclusive jurisdiction and applicability of Swiss law.

17. There are altogether five Defendants in this action and, as has already been noted above, until comparatively recently only the 4th and 5th Defendants had been served and taken part in the proceedings. The point has been taken on behalf of the 4th Defendant that this raises a doubt as to whether the Plaintiffs intend to pursue their claims against the 1st to 3rd Defendants, and they cannot raise the argument against a stay that the 4th Defendant is sued jointly with others and there would have to be separate trials in respect of different defendants, giving rise to the risk of the issues being determined differently in two countries.

18. I have to say that the fact of the late service of the other defendants does not seem to me to be conclusive evidence of any reluctance on the part of the Plaintiffs to proceed against them. Even if it were, the fact remains that the action is proceeding against the 5th Defendant who, although, I believe, a subsidiary of the 4th Defendant, is very much a separate entity, and does not seek a stay of these proceedings in Hong Kong. Indeed, it is difficult to see on what grounds it could make such a request. It follows that, come what may, the action will proceed here against the 5th Defendant and many of the same issues as against the 4th Defendant will fall to be determined.

19. It is abundantly clear from the authorities to which Mr. Smith has drawn my attention that the courts have constantly refused to grant a stay of proceedings where the result would be a multiplicity of actions in different jurisdictions on the same issues, but I need to refer here to only one. namely  [1990] 1 HKC 247. In spite of a clear jurisdiction clause in the contract the subject of those proceedings. Godfrey J. (as he then was) declined to order a stay, saying, at page 251:

          "All these disputes as to who is responsible for what happened ought to be tried in the same action, at the same time, before the same court. Any other result would seem to me to be not only potentially inconvenient but potentially disastrous."

20. For these reasons I find that there is no merit in the present application and a stay is refused.