DAEWOO HONG KONG LTD v. MANA MARITIME INC AND OTHERS

1996, No. CL-122

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H E A D N O T E

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Service out of the Jurisdiction--Order 11 rule 1(1)(d)(i) and (ii) and Order 11 rule 4(2)--Seaconsar v. Bank Markazi [1994] 1 AC 438 applied ? good arguable case, merits and forum conveniens

"Switch" Bill of Lading--authority to issue - The "Atlas"[1996] 1 Ll. L.R. 642

Suit by Shipper--Bill of Lading endorsed to purchaser--extinction of rights of shipper--vesting of rights in lawful holder of Bill of Lading ? Bills of Lading and Analogous Documents Ordinance, Cap. 440

Scale of Costs--Order other than upon usual party-and-party basis

1996, No. CL-122

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

COMMERCIAL LIST

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J U D G M E N T

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THE APPLICATION

1. On 13^th January 1997 Mr. Justice Yeung heard the Plaintiff's ex-parte application and granted leave to issue a concurrent writ and serve the same out of the jurisdiction upon the 1^st Defendant, a Liberian company and registered owner of the Greek flag vessel "MANA".

2. On 1st April 1997 the 1^st Defendant issued its application pursuant to the provisions of Order 12 rule 8 to discharge that ex-parte Order and to set aside such service. This is the judgment consequent upon that application.

FACTUAL BACKGROUND

3. As is often the situation in actions of this type, the case is larded with detail, and I am grateful to Mr. Sussex, who appeared before me on behalf of the 1^st Defendant, for the thoroughness and precision with which he mounted this application.

4. In outline, the dispute in question involves the shipment on board the "MANA" of approximately 20,000 metric tonnes of steel billets for carriage from Kherson in the Ukraine to, and delivery at, Shanghai. The Plaintiff sues as the shipper under a Bill of Lading No. 1B which, I note at the outset, was a "switch" or substitute bill of lading and which, although dated 23^rd November 1994, was actually issued in Hong Kong by the 4^th Defendant on or about 21^st or 22^nd April 1995. The "MANA" arrived in Shanghai on 19^th January 1995, discharged the steel between 21^st and 23^rd January 1995 and sailed from Shanghai on 23^rd January 1995.

5. The Plaintiff, which had apparently purchased the cargo from the 2^nd Defendant after the vessel had sailed from Kherson, so that appears to have been a purchase afloat, had onsold 10,000 metric tonnes of the steel to an entity known as the China National Metals and Minerals Import & Export Corporation, Ningbo ("Minmetals") in early April 1995, by which time, of course, the steel had been ashore for a period of some three months. This sale to Minmetals had itself taken place after the failure of an earlier attempted sale of the entire cargo of 20,000 metric tonnes to one Shanghai Defu International Trade Company Limited ("Defu"), and the Minmetals transaction called for the presentation of a bill of lading naming Minmetals as the notify party. Accordingly, it was at this stage, and in order to comply with the relevant letter of credit requirement, that the Plaintiff sought and obtained from the 4^th Defendant Bill of Lading No. 1B in respect of which the Plaintiff maintains the present proceedings against the 1^st Defendant.

6. But to return to the sequence of events. Bill of Lading No. 1B was endorsed by the Plaintiff and presented pursuant to a letter of credit dated 17^th April 1995 issued by the Bank of China on behalf of Minmetals, wherein the Plaintiff was named as beneficiary. Minmetals, however, did not take delivery against presentation of the endorsed bill of lading. Instead, it obtained a delivery order against a letter of guarantee, jointly signed by itself and the Bank of China, which letter of guarantee was subsequently surrendered for the endorsed bill of lading. Nor, as it happens, did Minmetals obtain the entire 10,000 metric tonnes of steel the subject of the sale from the Plaintiff. For reasons which are not altogether clear, but which appeared to have something to do with the earlier aborted sale to Defu, the shore agent in Shanghai, namely Shanghai United International Ocean Shipping Agency Limited ("Unisco"), released to Minmetals 7,500 metric tonnes only of the discharged steel. There is some dispute about the agency status of Unisco, the Plaintiff averring that Unisco was the 1^st Defendant's agent and the 1^st Defendant maintaining that Unisco was the agent of the 2^nd Defendant herein, Calx Limited. Be that as it may. The short delivery caused Minmetals to make a claim in a Chinese court with regard to the non-delivery of the undelivered balance of 2,500 metric tonnes, in the course of which Minmetals obtained an injunction from the Chinese court preventing payment in respect of the entire cargo being made to the Plaintiff under the letter of credit. I understand that in these Chinese proceedings the Plaintiff is also counterclaiming for the price.

7. The present action therefore is based upon an alleged breach of Bill of Lading No. 1B which, as I have earlier noted, was a "switch" bill issued in Hong Kong on 22^nd April 1995 (in fact the fourth such "switch" bill issued by the 4^th Defendant), and it is this which is the key to the present jurisdictional dispute. It is not in issue that on its face Bill of Lading No. 1B purports to contain or evidence a contract with the 1^st Defendant shipowners. What is in issue, however, and that which has formed the predominant focus of the argument in this application, is whether the 1^st Defendant shipowner authorised the issue of Bill of Lading No. 1B on its behalf. Notwithstanding the presence of a number of other significant collateral issues, for present purposes this is the "bull" point in this application, and one which indisputably goes to the primary issue of jurisdiction.

BASIS OF THE ORDER 11 APPLICATION BEFORE YEUNG J.

8. The Plaintiff obtained leave to serve the 1^st Defendant out of the jurisdiction pursuant to the provisions of Order 11 rule 1(1)(d)(i) and/or (ii), on the basis of an assertion that it was party to a bill of lading contract with the 1^st Defendant, made in Hong Kong, through the agency of one Vigour Shipping and Enterprises Limited, a company incorporated in Hong Kong and trading within the jurisdiction. The affidavit of Miss Nanette Kwong leading the ex-parte application puts the matter squarely thus:

"The Plaintiff has suffered loss and damage in that it has not received any payment for the cargo because of the injunction order granted by the Ningbo court. I respectfully submit that this is a proper case for service out of jurisdiction. The contract of carriage was made in Hong Kong, in that the bill of lading no.1B was issued in Hong Kong, hence complying with Order 11 Rule 1(1)(d)(i) of the Rules of Supreme Court. Further or alternatively, the bill was signed by the Fourth Defendant as agent on behalf of the Master, and hence on behalf of the owners of the vessel. The Fourth Defendant is a company registered in Hong Kong. Therefore, the contract of carriage was made by an agent trading and residing within the jurisdiction in accordance with Order 11 Rule 1(1)(d)(ii)."

9. No other jurisdictional ground within Order 11 was relied upon, and on the basis of the material then placed before him and in the absence of argument, Mr. Justice Yeung granted the Order sought.

10. I note two further matters at this stage. First, that in the generally endorsed writ issued in these proceedings on 2^nd May 1996, in addition to the claim for damages against the 1^st and/or 2^nd and/or 3^rd Defendants for breach of contract contained in or evidenced by Bill of Lading No. 1B, the Plaintiff makes an alternative claim against the 4^th Defendant, Vigour, for damages for breach of warranty of authority on the part of the 4^th Defendant in issuing Bill of Lading No. 1B on behalf of the 1^st Defendant and/or the 2^nd Defendant and/or the 3^rd Defendant; and second, that none of the other Defendants in these proceedings, including the locally based 4^th Defendant, has to-date been served with these proceedings.

ORDER 11: ESTABLISHED PRINCIPLES

11. I pause to remind myself of the established principles in relation to an Order 11 application, and in particular an application involving rules 1(1)(d)(i) and (d)(ii). These are of course admirably annotated in the commentary to Order 11 in the Supreme Court Practice 1997, and are further extensively commented upon by the learned editors of Dicey & Morris on The Conflict of Laws, 12^th Ed. Vol. 1, at pp. 315 et. seq. Notwithstanding extensive case law which has developed upon the issue in recent years, perhaps now the leading single authority on the correct approach towards applications for leave to serve out of the jurisdiction is contained in the speech of Lord Goff in Seaconsar Ltd. v. Bank Markazi [1994] 1 AC 438 (H.L.), wherein the distinction is drawn between the standard of proof in considering whether jurisdiction has been sufficiently established under one of the heads of Order 11 rule 1(1) and that in respect of the merits of the Plaintiff's claim. As Lord Goff put it (op. cit. at 456H):

"Accordingly, a judge faced with a question of leave to serve proceedings out of the jurisdiction under Order 11 will in practice have to consider both (1) whether jurisdiction has been sufficiently established, on the criterion of the good arguable case laid down in Korner's case, under one of the paragraphs of rule 1(1), and (2) whether there is a serious issue to be tried, so as to enable him to exercise his discretion to grant leave, before he goes on to consider the exercise of that discretion, with particular reference to the issue of forum conveniens."

12. Seaconsar also contains guidance on what has to be shown in terms of a case brought under sub-paragraph 1(1)(d). After reviewing the terms of sub-paragraphs (d)(i), (ii) and (iii), Lord Goff noted as follows (op. cit. at 454H):

"... I am of the opinion that what has to be sufficiently shown by the plaintiff for the purpose of establishing jurisdiction is, in the case of, for example, sub-paragraph (i), not merely that, if the contract existed, it was made within the jurisdiction, but that (1) there was a contract, and (2) such contract was made within the jurisdiction. Likewise, under sub-paragraphs (ii), (iii) and (iv), the existence of the relevant contract has to be sufficiently proved. But, once that is done, there arises a separate question as to the merits of the plaintiff's claim relative to that contract. ..."

13. At the end of the day, of course, the one requirement necessary to be satisfied by a Plaintiff seeking leave to serve out of the jurisdiction is that as set out in Order 11 rule 4(2):

"No such leave shall be granted unless it shall be made sufficiently to appear to the Court that the case is a proper one for service out of the jurisdiction under this Order."

14. I turn now, therefore, to the application of these principles to the instant case.

PRINCIPLES APPLIED

15. Mr. Sussex, for the 1st Defendant, submits that this is and was an ill-founded application, and that the Order granted ex parte cannot stand. I propose to examine the arguments advanced under the accepted heads of jurisdiction, merits and forum conveniens.

(a) Jurisdiction: Good Arguable Case

16. The 1^st Defendant's unequivocal position is that Bill of Lading No. 1B does not contain nor evidence a contract between the Plaintiff and the 1^st Defendant. It was issued without authority. Vigour Shipping, the 4^th Defendant herein, is not, was not and never has been the 1^st Defendant's agent; indeed the 1^st Defendant never has had any dealings with Vigour. Although Miss Nanette Kwong, the solicitor deposing on behalf of the Plaintiff, asserted that Vigour Shipping was the agent of the 1^st Defendant, she had failed to produce any evidence indicating that Vigour was actually or expressly authorised to issue Bill of Lading No. 1B on the 1st Defendant's behalf. It followed, therefore, said Mr. Sussex, that such authority could only have been derived from the sequence of charterparties in this case. And, given the highly unusual circumstances in which Bill of Lading No. 1B came into existence with regard to this portion of the cargo of steel billets (this was in fact the second "switch" bill bearing the specific appellation '1B', and in total the fourth such substitute bill) there could be no question either of any authority being derived from the chain of charterparties, nor, in the particular circumstances, could there be any case in terms of apparent or ostensible authority. Descriptive compression inevitably tends towards over-simplification, but that, in essence, was how Mr. Sussex set out his stall.

17. Although in light of the way the argument developed it perhaps does not now retain its anticipated importance, I was guided through the sequence of charterparties to which the "MANA" was subject during the relevant time, viz. a time charterparty on NYPE form dated 26^th September 1994 by which the vessel was chartered from the 1^st Defendant to one Seanav International Ltd., a Bermudan company, and thereafter a sub-charterparty again on NYPE form dated 25^th October 1994, whereby the vessel was chartered to Calx Ltd., the 2^nd Defendant herein, who in turn purported (and here the picture becomes somewhat murky) to enter into a sub-sub-charterparty on Gencon form dated 24^th October 1994 to Calx (UK) Ltd., which may or may not be a separate corporate entity and which agreement may or may not comprise anything but a purely paper transaction. In any event, Mr. Sussex demonstrated that under the terms of the sub-charter, Calx Ltd. had no authority to reissue a split or "switch" bill of lading with regard to the cargo of steel carried on board the "MANA", and that to purport so to do exceeded such authority as could properly be derived from the head charterparty. It was plainly established, absent express authority, that the master or other agent could not bind the shipowner by issuing a second set of bills of lading for goods for which a bill of lading had already been issued: see Scrutton on Charterparties (20^thEdition) pp. 51 and 1189. In this connection, my attention was drawn also to the comments obiter of Mr. Justice Longmore in The Atlas [1996] 1 Lloyd's L.R. 642 at 649; although obiter, these observations seem to me, with respect, to reflect the true position:

"... I cannot see how it can be said that the defendant shipowners are bound by the terms of the switch bills. They were issued by the charterers pursuant to a specific clause in the voyage charter. There is no similar specific clause in the head charter between the shipowners and Navix Line Ltd. who in their turn sub-chartered the vessel to the company which sub-sub-chartered the vessel to Sewon. Through this chain of time charters, Sewon's Nakhodka agents no doubt had implied or ostensible authority to issue bills of lading binding the shipowners : see The Berkshire, [1974] 1 Lloyd's Rep. 185 and The Vikfrost, [1980] 1 Lloyd's Rep. 560. Tesei were, in fact, given express authority by the master to issue bills of lading and they did so. I cannot accept that other agents of Sewon in Hong Kong can be impliedly or ostensibly authorized by owners to issue a second set of bills of lading. A master has no such authority, see Scrutton, Charterparties, (19^th ed.) p. 39 citing Hubbersty v. Ward, (1853) 8 Exch. 330. The same would apply to Sewon's Nakhodka agents and even more clearly to other agents of Sewon. Mr. Jacobs sought to say that owners ratified the excess of authority when they delivered the cargo without production of the bills of lading against an indemnity which named the plaintiffs as the shippers (which, of course, they were under the switch bills but not under the Russian bills). Without evidence that the owners appreciated the significance of the identity of the shipper named in the letter of indemnity, I do not consider that there was sufficiently complete knowledge for the doctrine of ratification to apply. ..." (emphasis added)

18. The short point is that the authority conferred on Calx Ltd. was plainly not wide enough to permit the issue of Bill of Lading No. 1B, upon which the proceedings herein are founded. By the time of the issue of Bill of Lading No. 1B, a bill of lading had already been issued in respect of the cargo of steel billets loaded in the Ukraine. Moreover, Mr. Sussex pointed out the various further bills which were issued, including Bill of Lading No. 1B, were not just split bills in that they also purported to introduce a new contractual party; unlike the earlier bills, they named the Plaintiff as "shipper", which, he said, constituted an effective novation which would have required the express approval of the 1^st Defendant. The ineluctable result, said Mr. Sussex, was that on the evidence neither Calx Ltd. nor any sub-agent on its behalf had either express or implied authority to issue Bill of Lading No. 1B. Nor could there be any possibility of ostensible authority on the part of Vigour Shipping; in this regard there was no representation by the 1^st Defendant that Vigour Shipping were its agents, and in any event ostensible authority could not run since the issuance of a second set of bills of lading for goods for which a bill of lading had already been issued could not fall within the authority usual for that type of agent.

19. Faced with what seemed to be a persuasive analytical argument, Mr. Smith, on behalf of the Plaintiff, chose not to do battle head on, so to speak. Indeed he did not dispute the analysis of general legal principle, and disavowed reliance upon any authority deriving from the chain of charterparties, or upon any argument based upon apparent or ostensible authority. Instead he chose boldly to assert a case of actual authority on the part of Vigour Shipping to issue Bill of Lading No. 1B, and an arguable ratification on the part of the 1^st Defendant in terms of the issuance of the "switch" bill. I characterise this submission as bold because, so far as I can see, nowhere in Miss Kwong's affidavits sworn on behalf of the Plaintiff does any such submission appear in these terms, and as a result it had clearly not been anticipated by those appearing on behalf of the 1^st Defendant. Doubtless with good reason. Because the argument as developed, and indeed the only basis put forward to underpin the alleged actual authority of Vigour to issue Bill of Lading No. 1B on behalf of the 1^st Defendant, was by way of inference the Court was invited to draw from two documents exhibited to Miss Kwong's affidavits. First, was a Letter of Indemnity dated 20^th April 1995 issued "to the Owner/Agent/Master of M.V. MANA" and signed for and on behalf of the Plaintiff, the key paragraph of which read:

"We hereby request you to issue the 2^nd set bills of lading with alternative shipper Daewoo Hong Kong Ltd. against returning of old Bills of Lading.";

And second, a fax dated 6^th December 1994 to the Korean agents of Calx Ltd., one Chilsan Shipping Ltd., from agents of the 1st Defendant, Lygnos (who had in fact signed the head charterparty on behalf of the 1^st Defendant), the relevant part of which read:

"MV. Mana V. 26

Re Yr Fax Today

Pls send all your requirements to charterers of subject vessel 'Seanav'. Pls apply any future requests through proper channels, Owners will oblige to your requirements accordingly."

20. It was solely on the basis of these two documents, both unsignposted in the body of the affidavits as amounting to such, that Mr. Smith sought to erect an inferential edifice of express/actual authority on the part of the 4^th Defendant, and this in the face of consistent and repeated sworn evidence (albeit on instructions) to the effect that not only was Vigour not constituted the 1^st Defendant's agent, but that the 1^st Defendant had no involvement in, and no knowledge of, any of the transactions that had been described by Miss Kwong in her various affidavits.

21. With respect to Mr. Smith, this approach was far from compelling. Certainly Mr. Sussex was unimpressed. So far as the fax from Lygnos was concerned (the date of which was 6^th December 1994) he sought to place this in its proper context. The exhibit in which this fax reposed was, he pointed out, Chilsan's file which had been exhibited in toto by Miss Kwong, and as such an isolated fax as at this date was hardly testimony to a two-way channel of communication ultimately resulting in the knowledge and approval of owners of all that subsequently occurred, including the general issue of the substitute or "switch" bills culminating in the issue of Bill of Lading No. 1B. If there was a consistent line of communication going "up the chain", so to speak, patently it was not there, nor was it plausible that Chilsan, as Calx's agent, would have withheld it. Mr. Sussex further submitted with some force that, on the available documents at least, Calx and its agents, Chilsan and/or Vigour, had in fact been secretive about the issuance of the substitute bill of lading, such as to amount to a deceit upon both Seanav and Owners by Chilson on behalf of Calx. Plainly on the available documents it could be seen that the attitude of the 1st Defendant Owners, via the Master, was in terms of a point blank refusal to permit the accumulation of two sets of shipping documents. Further, Seanav, the charterers under the head charterparty, was documented in terms of its insistence upon bills of lading to be issued in conformity with Mates Receipts. It was, moreover, possible to understand why Calx was being secretive: once the vessel had discharged its cargo in Shanghai, the cargo was in the charge of Unisco, Calx's appointed agent there (or so the 1^st Defendant alleged) so that from 21^st to 23^rd January 1995 Calx would have thought that it had complete control over the cargo, so that there was no need to have the authority of owners to issue the "switch" bill.

22. At the end of the day, the stark (and hard) fact was that by the time Bill of Lading No. 1B was issued by Vigour in April 1995, presumably acting as agents for Calx, Calx were no longer the charterers of the "MANA" and had not been so for the past three months, in that the vessel had come off charter in a matter of days after discharge in Shanghai; ergo it was inherently plausible that Calx and its agents had no authority to do what they in fact did. I agree with Mr. Sussex. I am quite unable to ascribe to this isolated fax of 6^th December 1994 the effect suggested so persuasively by Mr. Smith.

23. I turn now to the Letter of Indemnity, ironically itself a document which had not been placed before the learned Judge at the ex-parte stage, and one upon which the 1^st Defendant also maintained a material non-disclosure argument. The response was, perhaps, predictable in so far as Mr. Smith had pinned his argument upon the addressee thereof. The uncontroverted evidence on behalf of the 1^st Defendant was that this document had never been sighted before its production in these proceedings, and in any event the word "Owner" is plainly generic; as Mr. Sussex pointed out, Chilsan as Calx's agents had been in the habit of effecting this description themselves in their own fax communications. The point is short. The Letter of Indemnity was a late exhibit. Despite Mr. Smith's advocacy, I am not prepared, on the face of this document alone, and in particular in the context in which it arose, to use this as a basis to infer evidence of agreement on the part of Owners, via agents, to issue the "switch" bill in question. Indeed, had the case originally been put on this singular inferential basis, I suspect it would have been given short shrift by the learned Judge hearing the ex-parte application. Nor am I prepared to ascribe to this document evidence of ratification of the situation on the part of Owners, a speculative line of argument which Mr. Smith appeared to derive from the judgment of Mr. Justice Longmore in The Atlas, op. cit. Like Mr. Justice Longmore in that case, I do not consider that there was any evidence of sufficient knowledge or indeed any knowledge at all for the doctrine of ratification to apply.

24. I would add this. It is a comment upon the Plaintiff's general approach. Mr. Smith suggests that the isolated strands of the Letter of Indemnity and the fax of 6^th December 1994 are sufficient to raise the issue of knowledge of owners and (although it is far from clear why) thereby to constitute the express authority of Vigour to issue the "switch" Bill of Lading No. 1B. My note of his submission records that whilst he "cannot say at this stage one way or the other" whether owners did "know what was going on", nevertheless this was sufficient for his purposes in order to get a foot in the door, so to speak; discovery would follow thereafter (which of course the 1^st Defendant had not yet given) and then the true situation would be revealed. I bear in mind that Mr. Smith inherited this case in its present form having come into it for the purposes of this application. But if I have understood his submission correctly, this is not an approach which I consider appropriate. Order 11 is an 'exorbitant jurisdiction', to repeat an oft-quoted phrase; jurisdiction has not been established as of right. Over the past 20 years it has spawned an active and authoritative jurisprudence. Both the letter and the spirit of the rules are to be observed before a foreigner is impleaded before our Courts and is subjected to our process. In short, Order 11 represents an exercise of jurisdictional power which is to be respected and treated with care, so that before leave is granted, a cogent analytical case must be made for so doing. Which in my judgment is not what has occurred in these proceedings. A "good arguable case" means what it says, although plainly in some instances this may be easier to recognise than to describe; indeed, it may often be easier to say what it is not. But I have no hesitation whatever in saying that narrowly based speculative inference does not a good arguable case make.

25. In my view, therefore, the Plaintiff clearly has not crossed the required "threshold of persuasion", and has not shown a good arguable case that it falls within sub-rules 1(1)(d)(i) and/or (ii); accordingly, I discharge the ex-parte Order upon this basis alone.

(b) Merits: Serious Issue To Be Tried

26. Having dealt with the crucial and primary question of jurisdiction, I turn now to the merits. I can, perhaps, take these arguments relatively shortly, bearing in mind the lesser burden the Plaintiff faces under this head.

27. In his submission Mr. Sussex makes, I think, three further significant points. In summary, they are these: -

(i) The present Plaintiff no longer has locus to sue on this contract; such rights as it is alleged it enjoyed under Bill of Lading No. 1B (which are denied) have, on the Plaintiff's own case, been statutorily extinguished pursuant to the provisions of the Bills of Lading and Analogous Shipping Documents Ordinance, Cap. 440;

(ii) The Plaintiff is also time-barred by virtue of the operation of Article III rule 6 of the Hague Visby Rules;

(iii) The Plaintiff's claim in any event fails for circuity of action by reason of the issuance of the Letter of Indemnity dated 20^th April 1995.

28. Mr. Sussex in fact also utilised these arguments in the context of a submission as to material non-disclosure, none of these matters having been drawn to the attention of Mr. Justice Yeung at the ex-parte hearing. However, as I made clear to Counsel during argument, I am disinclined to decide this case on a material non-disclosure basis, and instead I shall consider these arguments as matters of substance within the Order 11 framework.

(i) Locus: The Operation of Cap. 440

29. The point is put thus: the present suit is brought pursuant to a bill of lading contract. Yet it is clear on the pleadings that the Plaintiff sues as shipper under the bill, and not as holder. Indeed, it is common ground that the bill of lading was endorsed by the Plaintiff to Minmetals, and presented under the letter of credit which Minmetals had opened in favour of the Plaintiff. On the evidence, therefore, Minmetals became the holder of Bill of Lading No. 1B. Ergo, says Mr. Sussex, the Plaintiff has lost its rights under the bill of lading by virtue of section 4(5)(a) of the Bills of Lading and Analogous Shipping Documents Ordinance, Cap. 440.

30. This legislation, perhaps, has yet to receive extensive attention in this jurisdiction, albeit it appears to substantially re-enact the English Carriage of Goods by Sea Act 1992, a useful commentary on which appears in Scrutton on Charterparties and Bills of Lading, 20^th Edition, at p. 35 et. seq.

31. Under section 2(2)(b) of the Ordinance, the holder of a bill is defined to be "a person with possession of the bill as the result of ... any endorsement of the bill..." and for the purposes of the Ordinance a person shall be regarded "as having become the lawful holder of a bill of lading wherever he has become the holder of the bill in good faith."

32. Section 4(1)(a) then states that a person who "becomes the lawful holder of a bill of lading" shall, by virtue of becoming such holder "have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract", whilst section 4(5)(a) correlatively provides that where rights are so transferred by operation of sub-section 4(1) in relation to any document, such transfer "shall extinguish any entitlement to those rights which derives (a) where that document is a bill of lading, from a person having been an original party to the contract of carriage..."

33. It follows, submitted Mr. Sussex, that the shipper under the bill of lading ceased to have contractual rights once (as was clearly the situation with the Plaintiff in this case) someone else, namely Minmetals, became lawful holder of the bill of lading. This seems to me to be a powerful argument, and one which Mr. Sussex marshalled in the alternative, submitting that this was a point going to jurisdiction, but that if he be wrong and it sounded to the merits only, it nevertheless forms such a "knockout blow" on the face of the pleadings and the documents that this alone forms a sufficient basis for the discharge of the ex-parte Order.

34. I can see the argument that this properly falls under the jurisdiction head. Although in the context of this case it is not necessary finally to decide what is an interesting point, my present inclination is that the subsequent nature of the alleged statutory loss of contractual rights probably makes this a merits rather than a jurisdictional issue. Whatever it may be, however, it is certainly a point which, on the evidence at least, does not appear to have been considered by the Plaintiff.

35. In response thereto, Mr. Smith submitted that in the circumstances of the case, and particularly bearing in mind the sequence of events whereby Minmetals obtained the endorsed bill of lading but thereafter moved to enjoin payment of the entire sum due under the Letter of Credit, that Minmetals could not be considered to be a "lawful" holder of the bill (within the terms of section 4(1)(a) of the Ordinance) since it had not become "the holder of the bill in good faith" (section 2(2) of the Ordinance). Mr. Sussex's rejoinder was this: it would be surprising, he submitted, if the attitude Minmetals had adopted subsequently in September 1995 in terms of its application to the Chinese Court for injunctive relief could render Minmetals a non-lawful holder as at April 1995. Bill of Lading No. 1B was properly endorsed by the Plaintiff and properly presented pursuant to the letter of credit, whereupon the Plaintiff had the Bank of China's engagement to pay in 60 days; pursuant thereto instructions were given to release the cargo to Minmetals. The detailed sequence of events appears on the papers, to which I was taken in some detail, and I am satisfied, on the present state of the evidence and as Mr. Sussex contends, that Minmetals became the lawful holder of the bill of lading and nothing that can be characterised as mala fides occurred in the period 25^th April to 4^th May 1995. Minmetals obtained the duly endorsed bill and thereafter retrieved the joint bank guarantee from Unisco (although, of course, it did not receive full delivery, an issue itself the subject of the Chinese proceedings, wherein the Plaintiff counterclaims for the price). The point, Mr. Sussex concluded, was unarguable.

36. Whilst I specifically bear in mind the lower burden imposed on a Plaintiff in terms of a serious issue to be tried, after some reflection I have come to the conclusion that the Plaintiff does not surmount this lesser threshold in terms of the case placed before the Court. Accordingly, over and above my primary finding on jurisdiction, which is sufficient in itself to dispose of this matter, I would in any event have declined to exercise my discretion upon this basis also.

(ii) & (iii) Time Bar and Letter of Indemnity

37. To the contrary, upon these two issues I find that the question of the one-year time bar (involving as it does the question of whether the goods "ought to have been delivered"), and the question of the construction of the Letter of Indemnity involving a circuity of action argument (not, I think, Mr. Sussex's strongest point) may safely be regarded as serious issues to be tried, and in this regard there is little further that needs to be said at this stage.

(c) Forum Conveniens

38. Since in my judgment the case has not been shown to fall within the primary jurisdictional requirement, and since I have also come to the conclusion that there would not be a serious issue to be tried in terms of the statutory transfer of rights under the Bills of Lading and Analogous Shipping Documents Ordinance, Cap. 440, my views under the heading of forum conveniens are, perhaps, of lesser immediate importance.

39. As to forum conveniens, Mr. Sussex contended that apart from the issue of Bill of Lading No. 1B in Hong Kong, this action has no substantial connection with Hong Kong; everything of which the Plaintiff complains took place in Shanghai, as to which there are already proceedings in Ningbo between the Plaintiff and Minmetals. Accordingly, Mr. Sussex submitted that the Plaintiff had not shown that Hong Kong is clearly or distinctly more appropriate for the trial of this action than the Courts of Shanghai or Ningbo, and that this was therefore not a proper case for service out within the meaning of Order 11 rule 4(2).

40. Mr. Smith approached the point differently. He reverses the proposition. He says that the question is whether there is some other forum which is clearly or distinctly a more appropriate forum than Hong Kong. He notes that none of the parties to the present action is based in the P.R.C. nor are any of the charterers or sub-charterers. The 4^th Defendant (whom has not to-date been served) is based in Hong Kong, and that the issues which arise for determination in this case are pre-eminently questions of shipping or commercial law not dependent upon, as he puts it, the determination of "raw" facts to be deposed to by witnesses from China, but rather upon discerning recognised legal concepts from the given facts, which themselves will emerge chiefly from the documents. Moreover, the fact that the Plaintiff has a claim against Minmetals is not a sufficient reason for saying that China is the natural forum; the 1^st Defendant is Liberian with no known Chinese connection, and an action commenced in China would now be time-barred on any view; accordingly, the Court should not deprive the Plaintiff of the practical benefit of having complied (arguably) with the time limit in Hong Kong.

41. I am disinclined to accept Mr. Smith's proposition that for the purposes of Order 11 consideration the appropriateness of the forum is to be decided, as it were, by a process of negative evaluation depending on whether some other forum is clearly or distinctly more appropriate. This, it seems to me, is an approach which fits more easily into applications for a discretionary stay of proceedings wherein jurisdiction has been established as of right. In my view, the correct approach is for a plaintiff seeking Order 11 relief to show that Hong Kong is clearly the appropriate forum: see here the observations of Bingham L.J. (as he then was) inDu Pont v. Agnew [1987] 2 Lloyd's L.R. 585 at 589 (wherein the learned Judge quoted from the speech of Lord Goff in Spiliada):

"Where the exercise of jurisdiction by the English Court is resisted not by a party duly served within the jurisdiction but by a party served pursuant to O.11, r.1 of the Rules of the Supreme Court, the Court's task is essentially the same: to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice. But in this case the burden is on the plaintiff to persuade the Court to exercise its discretionary power to permit service on the defendants outside the jurisdiction. The plaintiff must show that England is clearly the appropriate forum. In considering whether this is clearly shown, the significance of the different O.11 grounds will vary greatly from case to case :

... For example, the fact that English law is that putative proper law of the contract may be of very great importance (as in B.P. Exploration Co. (Libya) Ltd. v. Hunt [1976] 1 Lloyd's Rep.471; [1976] 1 W.L.R.788, where, in my opinion, Mr. Justice Kerr rightly granted leave to serve proceedings on the defendant out of the jurisdiction); or it may be of little importance as seen in the context of the whole case. In these circumstances, it is, in my judgment, necessary to include both the residence or place of business of the defendant and the relevant ground invoked by the plaintiff as factors to be considered by the Court when deciding whether to exercise its discretion to grant leave; but, in so doing, the Court should give to such factors the weight which, in all the circumstances of the case, it considers to be appropriate." (emphasis added)

42. So far as I am aware, in this area there has been no alteration to the fundamental principles outlined in Spiliada, albeit as Bingham L.J. in Du Pont was concerned to emphasise, it is essential to differentiate between considerations arising in a situation in which a party has been duly served within the jurisdiction and is seeking to invoke the inherent (and undoubted) jurisdiction of the Court in order to stay proceedings, and considerations which are relevant upon an application for the exercise of the Court's discretion under Order 11 rule 1(1) and rule 4(2), wherein the existence of such jurisdiction itself is under attack.

43. Accordingly, whilst no longer necessary, in light of my earlier findings, to fully explore this element of the case, in the exercise of my discretion I would, I think, decline to hold, on the evidence before me, that Hong Kong was the forum conveniens, although I am very much aware that this view is taken and expressed against a background of adverse holdings under the first two heads of Lord Goff's tripartite structure in Seaconsar, op. cit., namely, jurisdiction and merits.

ORDER

44. The result of the foregoing is that in my judgment the ex-parte Order of Mr. Justice Yeung must be discharged, and I accede to the 1^st Defendant's application in terms of paragraph 1 of its Summons dated 1^st April 1997.

45. As to costs, there can in the circumstances be no question but that the Plaintiff do pay to the 1^st Defendant its costs of this action, including the costs of and occasioned by this application.

(Submissions by the parties upon the scale of costs)

46. Both parties wished to be further heard upon the scale of costs, an aspect which had been canvassed earlier at the conclusion of the argument, Mr. Sussex then having asked for an order upon a higher scale than the usual party-and-party basis.

47. Mr. Rees Smith, who appears for the 1^st Defendant today, has asked for indemnity costs against the Plaintiff. He submitted that this is an action which should never have been brought, in this or any other jurisdiction. In essence, he says, this is a dispute between the seller and the purchaser of the cargo of steel, that no claim should have been brought against the ocean carrier, and that it was not until the argument at the inter-partes stage that the case had been placed upon the basis on which it was actually put; indeed to-date all manner of other arguments had been deployed. Moreover, the effect under Cap. 440 of the endorsement to Minmetals of Bill of Lading No. 1B had not been considered, and when coupled with the fact that proceedings had earlier this year been commenced by the Plaintiff in South Africa, wherein the 1st Defendant's vessel had been arrested and security obtained for the claim, this amounted to an action which should not have seen the light of day in Hong Kong.

48. Mr. Smith naturally accepted, as the losing party to this application, that his client should have to pay the costs, but nevertheless maintained that this should be on the standard party-and-party basis. There had been no question in this case of any affront to the Court, he said, and the fact that the case had been considered to be a bad one did not justify the making of other than a standard Order. In this connection he drew my attention to several authorities, in particular the case of Overseas Trust Bank Ltd. v. Coopers & Lybrand (a firm) and Others v. Peat, Marwick, Mitchell & Co. (a firm) and Another [1991] 1 HKLR 177, a decision of Mr. Justice Godfrey (as he then was) in which the learned Judge considered the basis of orders for indemnity costs, and further a decision of the Hong Kong Court of Appeal in Kung Kwok Wai David v. Citibank NA [1989] 2 HKC 48, wherein the Court of Appeal stated that in order to award costs on a more generous basis than was usually the case, there should be some special or unusual circumstances in order to justify the Court in exercising its discretion in that way. Simply put, losing a poor case was insufficient, submitted Mr. Smith; this was ordinary hostile litigation, and it was not suggested that the case had been brought for improper reasons.

49. As was made clear during argument, I do not think this is a case for indemnity costs, and accordingly I decline to accede to Mr. Rees Smith's submission in these terms. Notwithstanding Mr. Smith's able remarks, however, in my judgment the particular circumstances of this case do merit an order that costs should be to the 1^st Defendant to be taxed and paid, if not agreed, upon a common fund basis, which was the view I had initially expressed before the parties made clear that they wished to revisit this issue.

50. This is a case about contested jurisdiction. The contention as to the basis of jurisdiction put forward by the Plaintiff ultimately depended upon an assertion of actual authority on the part of an alleged agent based upon two isolated documents located in the entrails of the affidavits, against a factual background in which the issue of the authority (or the lack of it) on the part of Vigour, the 4^th Defendant, was plainly at the forefront of the Plaintiff's mind, given the alternative breach of warranty of authority plea, where the Plaintiff clearly knew far more about the issuance of the bill of lading by Vigour than the 1^st Defendant, and where no attempt had apparently been made by the Plaintiff to contact Owners in order to establish if Vigour had been authorised to issue a "switch" bill of lading in respect of cargo which had been landed for three months at the time of the issue of such bill. And this against the background in which any authority Vigour ordinarily may reasonably have been thought to have had would have long since been spent, and where the issue as to the statutory cessation of rights argument appeared either to have been overlooked or ignored. Leaving to one side the issue of the South African arrest, which has been referred to by both Counsel but with regard to which I have received no affidavit evidence, I am more than satisfied in the particular circumstances that the broad justice of the case warrants the exercise of my discretion to make a costs order on a common fund basis. In the course of his submission Mr. Smith reminded me that any appeal against a costs order requires leave to appeal. He is of course correct. I will entertain any such application as and when it is made. The case is certified as fit for Counsel.