KONSUMEX FOREIGN TRADE CO AND OTHERS v. SUN LUEN TRANSPORTATION CO AND OTHERS

[An application for a stay of Hong Kong proceedings by a defendant whose contract with the plaintiff contains a clause under which disputes are to be resolved in another jurisdiction will normally be granted; but, where there are other parties to the litigation who are not parties to that contract, the inconvenience of having separate proceedings in different jurisdictions (with the risk of inconsistent decisions) may justify the refusal of the stay]

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an action in which there are three plaintiffs : the consignor of 17 cartons of silk piece goods from Shanghai to Hong Kong; the consignee of those goods; and the forwarding agent.

2. Of these the 1st plaintiff is the consignee under the bills of lading; it is a Hungarian entity. The 2nd plaintiff, the forwarding agent, is a Hong Kong company. The 3rd plaintiff, the consignor, is an entity constituted under the laws of the People's Republic of China. All the plaintiffs claim to have an interest in the cargo.

3. The defendants named in the writ are apparently five; but it appeared, during the course of the hearing of the present application before me which I shall come to in a moment, that the first two named defendants were not legal entities at all but were simply trading names used by one of the defendants, Honesty Style Godown Limited ("the warehouseman"), in the conduct of its business.

4. There are therefore really only three defendants. One of these is the warehouseman; another is Shanghai Jin Jiang Shipping Corporation Limited ("the carrier") also a Chinese entity, which is the carrier which took the goods on board its vessel "Jin Jiang". The remaining defendant Richown Shipping and Enterprise Limited ("Richown") is said to be the carrier's agent in Hong Kong (there is a dispute about this). The goods arrived here; but between the unloading of the goods over the side of the vessel in Hong Kong and their delivery to the persons interested in the cargo, there occured a mishap because, as appears to be common ground, the goods (together with others) were ultimately delivered to a driver who made off with them and has been convicted of theft accordingly.

5. The story so far is not complete; because, after the goods were taken off the vessel, they were transferred to a barge or lighter, and the complaint of the plaintiffs is maintained also against its owner. That, however, is the subject of a separate admiralty action, no doubt because it seemed appropriate to the plaintiffs to attempt to arrest the lighter. That action has not been consolidated with this action, although it is the intention of the plaintiffs to apply at a convenient moment for that to be done. (An earlier application made by the plaintiffs in that regard appears to have failed on the ground that it had been made prematurely.)

6. The bills of lading to which the two Chinese entities to which I have referred were parties, as consignor and carrier respectively, contained a jurisdiction clause. This provides :-

"2. All disputes arising under or in connection with this bill of lading shall be determined by Chinese law in the courts of or by arbitration in the People's Republic of China."

7. The present application is made by the carrier for a stay of the present action in so far as it is concerned. The carrier points out rightly that it had entered into a contract with the consignor under which both parties agreed, in the terms to which I have already referred, that any dispute between them should be dealt with in the People's Republic of China. It requires very strong grounds for this court to interfere with that contractual arrangement made between these two Chinese entities. The question for me, on this application, is whether the plaintiffs have shown sufficient reason why a stay ought not to be granted.

8. Before dealing with the points urged on me by the plaintiffs in that regard, I will cite a well-known passage from a judgment of Mr Justice Brandon in The Eleftheria [1970] P 94, at p. 99 :-

The same judge drew attention, in a subsequent case in the Court of Appeal, to another matter which I regard as of considerable importance in the instant case : I refer to The El Amria [1981] 2 LLR 119.   That case involved a consideration of the possibility of litigation in Egypt instead of England in the face of a jurisdiction clause. The decision of the judge below included a reference to the great convenience of trying another action involving other parties at the same time as the action against the carrier before him. What had happened was that the cargo had deteriorated; and it was alleged that that was, or may have been, due to negligence in the discharge of the cargo, for which purpose the plaintiffs had issued a writ against the dock company as well as the action against the carrier. Having mentioned the "great convenience" to which the judge below had referred, Lord Justice Brandon said this : -

"I agree entirely with the learned Judge's view on that matter, but go rather further than he did in the passage from his judgment quoted above. By that I mean that I do not regard it merely as convenient that the two actions in which many of the same issues fall to be determined should be tried together. Rather that I regard it as a potential disaster from a legal point of view if they were not, because of the risk inherent in separate trials, one in Egypt and the other in England; for the same issues might be determined differently in the two countries."

9. That factor is clearly present in the instant case. There is nothing to stop the plaintiffs continuing with their admiralty action against the barge owners. For that matter, there is nothing to stop them continuing with this action as against the warehouseman and against Richown.

10. If a stay is granted, so that this dispute between the plaintiffs and the carrier has to be decided in China, there is obviously not only great inconvenience but also some risk of inconsistent decisions. However, of course, I have to remember that Chinese law is applicable under the jurisdiction clause wherever the claim of the consignor against the carrier has to be decided.

11. A number of other factors have been put before me on behalf of the plaintiffs which they say I should weigh in the scale against the fact that the two parties most intimately concerned in the matter are Chinese entities who have chosen to enter into a jurisdiction clause under which the dispute between them falls to be determined in China and accordance with the laws of the People's Republic of China. The plaintiffs say that the issues as to who is responsible for the loss here are complex. They point out that the matter of the position of Richown (a Hong Kong company) has to be gone into. They point out that the Hague rules which would apply here, so they say, are the same rules as would be applied in the People's Republic of China. In so far as there is any question of tort, they say, that tort was committed within the jurisdiction of the courts of Hong Kong. They accept that the consignor and the carrier are most closely connected with the People's Republic of China but they say that this is of limited importance because it is the 1st plaintiff, a Hungarian entity, who as consignee has the greatest interest in the cargo. They say that the events, in so far as any dispute of fact is concerned, which led to the loss of the goods were events which took place in Hong Kong. They accept that the carrier is genuine in wishing to have this dispute tried, in accordance with the contract, in the People's Republic of China (or at least they accept that they have no material on which they can suggest otherwise). They appreciate that there may be points on a possible time bar, and on security (which could be left on foot) but they do not put those forward as particularly important points. They say that their legal. costs would be irrecoverable in China (although the evidence on that point was so ambiguous as in my judgment to be worthless). And they point out that the language of the contractual document is English.

12. For all those reasons, they say, there ought not to be a stay and that they ought to be allowed to proceed with their action.

13. I confess that I do not find any of these factors, other than that to which I referred at the outset of this judgment, as separately or even cumulatively of sufficient weight to displace the consideration that this contract was entered into by two Chinese entities with a Chinese jurisdiction clause. They may, however, be of some weight in support of the convenience factor. These proceedings are constituted with several parties, some of whom are Hong Kong parties and some of whom are not. Some of them may have proper interests as plaintiffs; others may not. Some of them may be proper defendants; others may not.In this piece of somewhat complicated litigation one thing is clear; somebody stole the goods which were the subject of the contract of carriage and he stole them in Hong Kong. A number of the parties possibly responsible to the plaintiffs for that are in Hong Kong and some part at least of their claims must inevitably be adjudicated in Hong Kong.

14. I have come to the view that those are sufficiently strong grounds to warrant the court in refusing this application for a stay, and so I refuse it. I do not say that the case is not somewhat near the borderline; but I do say that in the end I am convinced that the only convenient course is to allow the action to proceed in Hong Kong. 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. Despite the great weight which of course has to be given to the jurisdiction clause, these other considerations in the end satisfy me that this is not a proper case for a stay.

15. I would only add this. The carrier has intimated that it proposes to apply to this court for the claim against it to be struck out. If, of course, it turns out that the claim against the carrier is so plainly and obviously bad that it ought to go altogether, then that would be an end of the matter. That, however, is not I think, a consideration I can or should take into account on this present application. If, of course, the action is allowed to continue as against the carrier, then it seems to me all the more reason why it would be sensible for it all the issues to be dealt with at one and the same time before one and the same judge. But consideration of the carrier's application to strike out the claim against it must await another day. In the meantime, all I can do is refuse the present application for a stay.