Zhousan Xinhong v. Sino Trans & Another

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(1) Zhoushan Xinhong Aquatic Co. Ltd. (2) Kyoritsu Shoji Co. Ltd. v. (1) Sino Trans Limited (2) China Shipping Container Lines (Hong Kong) Co. Ltd
Hong Kong District Court: Civil Action No. 540 of 2006: Judge H.C.Wong: 4 August 2006
Mr. Kerry of Messrs Crump & Co., for the Plaintiffs
Mr. Colin Wright, instructed by Messrs. Richards Butler, for the first Defendant

The first Defendant in this case applied to stay the Hong Kong proceedings relying on a foreign jurisdiction clause allegedly contained in the Bill of Lading. The court, applying the principles stated in "EL Amria" to the circumstances of this case, exercised its discretion to refuse the stay. The application was accordingly dismissed.

DMC Category Rating: Confirmed

This case note is contributed by Crump & Co, the International Contributors to the website for Hong Kong

The Plaintiffs brought a claim in the Hong Kong District Court against both defendants for damage to a cargo of frozen seafood. The cargo was shipped from Ningbo, China by the first Plaintiff, to Nagoya, Japan, for delivery to the second Plaintiff. The cargo was found to be damaged. The first Defendant was the contractual carrier, the second defendant the actual carrier, China Shipping Container Lines (Hong Kong).

The first Defendant applied for a stay of the action on the ground that the bill of lading contained on its reverse a jurisdiction clause in favour of the Ningbo Maritime Court of the People’s Republic of China. However, the first Defendant failed to produce the original bill of lading or a copy of the reverse side of the relevant bill, to prove the existence of this provision. The second Defendant accepted the jurisdiction of the Hong Kong court.

It was accepted that there was no close connection between the Defendants and Hong Kong, apart from their having a business address in Hong Kong and that, if the case continued in Hong Kong, witnesses would have to be called from China and Japan. Further relevant considerations were that, under Clause 4 of the contract of carriage, the applicable law was that of the People’s Republic of China, and that, under Clause 24 of the Bill of Lading, all suits had to be brought within nine months after the delivery of the goods. The goods were delivered on 6 September 2005. The nine months limitation period had thus expired in June 2006.

The Judge took the view that for the court to exercise its discretion to refuse a stay, the Plaintiffs had to show strong cause. She held that the Court's discretion in refusing a stay is subject to the principles established by a line of authorities referred to by Brandon L.J. in the case of The "El Amria" [1981] 2 Lloyd's Rep. 119, at pp.123-124.  The Court has to consider all of the circumstances of the case, taking into account the following factors summarised by Dicey and Morris on the Conflict of Laws, 13th edition, volume 1, page 443 paragraph 12-117:

" In exercising its discretion whether or not to grant a stay, the court considers al the circumstances of the case, and the following formulation of the particular factors to be taken into account has been much relied upon: (1) in which country the evidence is available, and the effect of that on relative convenience and expense of a trial in England or aboard; (2) whether the contract is governed by the law of the foreign country in question, and if so, whether it differs from English law in any material respect (3) with what country either party is connected, and how closely; (4) whether the Defendants genuinely desire trial in a foreign county, or are only seeking procedural advantages (5) whether the Plaintiffs would be deprived of security for their claim, or be unable to enforce the judgment in their favour, or be faced wit a time-bar not applicable in England, or for political , racial, religious or other reasons be unlikely to get a fair trial. The fact that a stay will result in concurrent proceedings with different parties, but similar issues, may militate against a stay."

After weighing all the circumstances of the case, the judge concluded that the Plaintiffs’ position would be prejudiced if the proceedings were stayed.

At paragraphs 41 and 44 of her judgment, she said:
"Should the present proceedings be stayed for the Plaintiffs to pursue their claims in the Maritime Court of Ningbo and should the Defendants raise the issue of limitation of action under the contract in the PRC Court relying on Clause 24 of the alleged terms and conditions on the back of the said Bill of Lading, it is likely that the Plaintiffs would not be able to recover against the Defendants in the PRC.  As a result, the Plaintiffs would have to turn to the Hong Kong Courts and apply for the lifting of the stay of proceedings in Hong Kong after a long delay and having incurred further expenses in the Ningbo Maritime Court proceedings.  It seems to me to be quite wrong to stay proceedings in Hong Kong and expose the Plaintiffs to the risks of wasting huge expenses and time if there is a strong possibility that the matter may be time-barred in China under the alleged Clause 24 of the said Bill of Lading…Further, they may have to continue their claims against the second Defendant in any event, even if they should succeed in the Maritime Court in Ningpo, in order to enforce the judgment."

The Judge accordingly refused to exercise her discretion to stay the proceedings.

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