Date: 19990817
Docket: T-1102-98
ACTION IN REM AGAINST THE SHIP "FU NING HAI"
AND IN PERSONAM
BETWEEN:
ITOCHU CANADA LTD.,
Plaintiff,
- and -
THE OWNERS AND ALL OTHERS
INTERESTED IN THE SHIP "FU NING HAI",
QINGDAO OCEAN SHIPPING COMPANY,
HYUNDAI MERCHANT MARINE CO. LTD. and
FRASER SURREY DOCKS LIMITED,
Defendants.
REASONS FOR ORDER
MR. JOHN A. HARGRAVE,
PROTHONOTARY
[1] This action involves corrosion damage to steel pipe and to square steel tubing, both intended to be chrome-plated and used in the manufacture of furniture. The pipe and tubing was carried from Pohang, Korea and delivered to Fraser Surrey Docks Limited at New Westminster on 20 July 1997.
[2] The stay now sought by Hyundai Merchant Marine Co. Ltd. ("Hyundai"), in favour of litigation in Seoul, Korea, is in this instance discretionary. There are some factors which do lean toward a stay, however as both counsel for the plaintiff and counsel for the defendant ship owner, Qingdao Ocean Shipping Company ("QOSCO") point out, there are also strong factors which indicate a stay would not be appropriate. The application for a stay is in this instance denied. I will now consider this in more detail, beginning with some relevant facts.
FACTS
[3] Carriage of the plaintiff"s cargo from Korea to Canada is governed by two clean bills of lading. Counsel for Hyundai submits that Korean law will govern this action. However the bills of lading contain contradictory choice of law clauses. Clause 25, headed "Governing Law and Jurisdiction" provides that:
| The claims arising from or in connection with or relating to this Bill of Lading shall be exclusively governed by the law of Korea except when other (sic) provided in this Bill of Lading. Any and all action concerning custody or carriage under this Bill of Lading whether based on breach of contract to (sic) otherwise shall be brought before the Seoul Civil District Court in Korea. |
I take it from the first sentence of this provision that Korean law is to apply except to the extent that the contrary is provided for in the bill of lading which brings me to clause (C) of the Clause Paramount:
| All terms, provisions and conditions of the Canadian Water Carriage of Goods Act 1936, and of the rules comprising the schedule thereto are, so far as applicable, to govern the contract contained in this Bill of Lading and ship owners are to be entitled to the benefit of all privileges, rights and immunities contained in such Act and in the schedule thereto as if the same were herein specifically set out. If anything herein contained be inconsistent with the said provision, it shall to the extent of such inconsistency and no further, be null and void. The carrier shall be under no responsibility whatsoever for loss of or damage to Goods howsoever and wheresoever occurring when such loss or damage arises prior to the loading on and/or subsequent to the discharge from the company"s ship. |
There is an inconsistency here, between the application of Korean law and the application of the Canadian Water Carriage of Goods Act.
[4] Korea has not adopted the Hague Rules or any similar convention, but rather has parallel legislation said by Hyundai"s expert on Korean law to include the major principles of the Hague and of the Hague-Visby Rules. While Korean law is to apply, by virtue of clause 25 of the bill of lading, Hyundai, by way of its own bill of lading, also seeks to rely on the Canadian Water Carriage of Goods Act exceptions. This is an easily resolved conflict, for as the current editor of Carver on Carriage by Sea (13th ed., 1982, Stevens and Sons of London) points out, at paragraph 575, the Hague Rules ought to apply in this situation. Indeed, by incorporating the Canadian Water Carriage of Goods Act into the Bill of Lading Hyundai has made void anything in domestic Korean law which is contrary or repugnant to the Act: see for example Golodetz v. Kersten Hunik & Co. (1926), 24 Lloyd"s 374, a decision of Lord Justices Bankes and Warrington sitting as additional judges of the Queen"s Bench. As a result the applicable law will be, at least in part and perhaps completely, the Canadian Water Carriage of Goods Act . The expert on Korean law avoids dealing in his opinion this quandary by ignoring both the proviso in clause 25 and the Clause Paramount and thus does not touch upon the importation of the Canadian Water Carriage of Goods Act.
[5] The mate"s receipt, given on the loading of the pipe contains a generic clause:
| The quantity and quality unknown only by tally the ship"s not responsibility for condition. |
Bill of Lading 7051700, for the 73 bundles of pipe contains the following specific clause:
| 73 bundles were wet by rain and rust in part " prior to load " on visible area. |
The mate"s receipt for the square tubing, Bill of Lading 7051800, contains no such specific exemption, but only the generic clause.
[6] The Bills of Lading contain a printed Retla clause on their faces, to the effect that a clean bill of lading does not mean an absence of visible rust.
[7] Carriage was performed by Hyundai as charterer of the Fu Ning Hai, owned by QOSCO.
[8] On arrival of the cargo at New Westminster there was considerable rust damage. Chloride contamination was found to be negligible, perhaps equally consistent either with stowage on a dock in damp conditions or with heavy condensation during transit in a salt-laden atmosphere.
[9] Hyundai says that rust pre-existed loading, referring to Hyundai"s discharge surveyor"s report:
| The rusting of steel products noted at this time appear consistent with the exceptions noted on the Mate"s Receipts at time of loading. We understand all unprotected Pipe, etc were stored in the open at the loading ports in Korea. |
Of course the plaintiff"s pipe and square tubing was not unprotected, but was wrapped in plastic.
[10] The statement of claim, seeking $87,440.18 in damages, was filed 29 May 1998. Hyundai, who challenges the jurisdiction by means of the present motion, was served through its Vancouver agent, Hyundai Merchant Marine (America) Ltd., on 2 June 1998. New York counsel for Hyundai, whom plaintiff"s counsel had advised at an early stage as to time for filing a defence, retained Vancouver counsel. On 10 July 1998, a week after the defence became due, Hyundai"s Vancouver counsel sought and obtained consent to the late filing of Hyundai"s defence, presumably the consent extension would be that allowed by rule 7. Subsequently counsel for Hyundai, who is with a large maritime department of Vancouver law firm, wrote to say, in part:
| Since we received the documents very recently and the writer will be out of the office from July 25 to August 16, 1998, we intend to make application to the court on August 31, 1998 to extend the time for filing our client"s Statement of Defence. |
| We request that you take no steps to default judgment in the interim without first advising us. |
[11] On 10 September 1998, even though Hyundai had not brought the promised motion for an extension of time within which to file its defence, the plaintiff produced its documents to all of the defendants. That same day counsel for Hyundai advised that he had instructions to apply for a stay on the basis of want of jurisdiction: counsel for the plaintiff asked him to bring the motion as soon as possible.
[12] On 30 September counsel for Hyundai advised he was working on the stay: counsel for the plaintiff, during the same telephone conversation, advised him that the plaintiff would be arguing delay as a bar to a stay. Procedural matters progressed, vis-à-vis the other defendants: Fraser Surrey Docks Ltd. ("Fraser Surrey") provided its documents on 29 October 1998. On 2 November 1998, plaintiffs" counsel wrote to counsel for Hyundai noting that it had been five months since Hyundai had been served, setting out the history of delay on the part of Hyundai, threatening default judgment and again stating that any motion for a stay would be opposed on the basis of excessive delay. Procedural steps progressed, with QOSCO providing its documents on 4 November 1998.
[13] On 16 November 1998, counsel for Hyundai served its motion for a stay, 6 " months after service of the statement of claim, certainly an excessive delay in any terms and all the more so in that neither Hyundai, nor its New York lawyers, nor its Vancouver lawyers are in the least bit naive when it comes to Marine cargo actions and court rule imposed time frames.
CONSIDERATION
The Eleftheria
[14] While, as a general rule, jurisdiction clauses must be honoured as contractual undertakings, this rule is not, as pointed out by both the Federal Court of Appeal in The Seapearl v. Seven Seas Dry Cargo Shipping Corporation [1983], 2 F.C. 161 at 176-177 and by Mr. Justice Brandon, as he then was, in The Eleftheria, [1969] 1 Lloyd"s 237 at 242, an absolute for a court has a discretion whether or not to stay such a proceeding. Indeed, in any current discussion of a stay in a maritime case involving a jurisdiction clause it is obligatory to begin with the much quoted passage from The Eleftheria , p. 242:
| The principles established by the authorities can, I think, be summarized as follows: (1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign Court, and the defendants apply for a stay, the English Court, assuming the claim to be otherwise within the jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs. (4) In exercising its discretion the Court should take into account all the circumstances of the particular case. (5) In particular, but without prejudice to (4), the following matters, where they arise, may be properly regarded: (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign Courts. (b) Whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects. (c) With what country either party is connected, and how closely. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign Court because they would (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial. |
[15] In Methanex New Zealand Ltd. v. The Kinugawa [1998], 2 F.C. 583, I summed up the effect of the open-ended list of considerations in The Eleftheria and the Seapearl:
| ... it is not a matter of adding up points for and against a stay, but rather it involves the consideration of the existence of some other forum which is more appropriate and more convenient for the pursuit of the action and for securing proper justice; that a court ought to exercise its jurisdiction by granting a stay unless there are strong reasons to the contrary; and that while the onus is initially on the defendant to establish the jurisdiction clause and to show that there is a more appropriate or proper forum elsewhere, once that is accomplished the burden then shifts to the plaintiff to show that there are special circumstances and strong reasons, by virtue of which justice requires, that the trial should take place where the action has been commenced. [p. 603] |
[16] In the present instance the form selection clause is applicable, yet I am not convinced, applying the test as set out in The Eleftheria, as commented upon in The Sea Pearl and as summarized in The Kinugawa, that Korea is the appropriate forum.
Split Proceedings and Inconsistent Decisions
[17] To begin, there is the difficulty in the present instance of multiple defendants, only one of whom has any real link to Korea. Indeed, one result of upholding the jurisdiction clause would be a split proceeding and perhaps inconsistent decisions, with the present action against Fraser Surrey and QOSCO being very much alive and with the likelihood of a second action in Korea. With this concept in mind, as a general principle a stay ought only to be granted where it may be fully effective or where it applies to all of the parties. These concepts are noted by Mr. Justice Rothstein, as he then was, in Figgie International Inc. v. Citywide Machine Wholesale Inc. (1993), 50 C.P.R. (3d) 89 at 92. The problem of inconsistent decisions where litigation is split by jurisdiction is touched upon in Citi-March Ltd. v. Neptune Orient Lines Ltd., [1997] 1 Lloyd"s 72 (Q.B.) at p. 78:
| ... it is also appropriate that considerable weight should be given to the risk of inconsistent decisions if proceedings were to be split between Singapore and London. I would also attach equal weight to the injustice of requiring a plaintiff in a case on facts such as these to sue in separate jurisdictions different defendants in respect of the same loss thereby causing him to lose the benefit of a composite trial. In that connection I would add that the practice which has developed in relation to the exercise of the Court"s discretion in the analogous case of applications to stay under s. 4(1) of the Arbitration Act, 1950 is that if an action has been properly commenced against more than one defendant in respect of the same loss, a stay will not generally be granted upon the application of one defendant in reliance on his arbitration clause: see The Eschersheim , [1974] 1 Lloyd"s Rep. 188. |
While Neptune Orient Lines involved an application for a stay in favour of arbitration the same principles apply where the stay is to facilitate litigation in another forum. The possibility of conflicting decisions from two different courts is, in this instance, a substantial reason for denying a stay.
Position of QOSCO
[18] Interestingly, only Hyundai is in favour of litigation in Korea. Fraser Surrey took no part in the debate. The brief of QOSCO, opposing the Korean jurisdiction, is concise and to the point. It begins with the proposition that to ensure orderly administration of justice and efficient disposition of the issues as among all four parties, who are present in this proceeding, this Court should maintain its jurisdiction. Counsel then goes on to set out that:
| 4. While jurisdiction in Korea might suit the Korean defendant, it does not suit the Canadian Plaintiff, who purchased the goods for delivery in Canada, nor does it suit the Chinese shipowner, who carried the goods into Canada, nor is it likely to suit the Canadian wharf operator, who is resident here and who received and handles the goods within the territorial jurisdiction of this Court. |
| 5. Many of the necessary documents and witnesses are in the jurisdiction, suggesting that the issues between the parties should be resolved here in a convenient forum and in a single forum. |
| 6. If a stay was granted, .... there is no evidence before the Court that the Plaintiff would not face prejudice in attempting to litigate in Korea. Indeed, an inference may be drawn from Hyundai"s material that the Plaintiff would suffer prejudice, Hyundai"s evidence noting that Korean law generally embraces the concepts of the Hague-Visby Rules. Otherwise, it is on the record that delivery of the goods was achieved in July of 1997, and therefore, it is submitted, the Plaintiff might, prima facie , be out of time for an action in Korea. |
Counsel concludes that it is not in the interest of justice that the matter be stayed, that being the test under s. 50(1)(b) of the Federal Court Act. These submissions merit further consideration.
[19] As I have already indicated the considerations in The Seapearl and in The Eleftheria are open-ended. Convenience is certainly an element, not only from the point of view of the danger of a split decision, but also from the point of view of the other defendants being concerned about presenting their case in a strange and different off-shore forum, even if only to guard against the possibility of an off-shore judgment being enforced against them. Convenience, coupled with the possibility of inconsistent outcomes if there are proceedings in two jurisdictions, are a strong, but not the only reason, against a stay in this instance.
Availability of Documents and Witnesses
[20] As to the availability of documents and witnesses, certainly there are both in Korea, just as there are both in Canada. As to seagoing witnesses, I do not think that one jurisdiction ought to be favoured over another, for the evidence of the master or chief officer of the Fu Ning Hai will, in all probability, either have to be taken on commission or that witness or witnesses be brought from elsewhere to attend the proceeding, whether it be in Canada or Korea. This is a neutral point.
Time Bar in Korea and Procedural Advantage
[21] I turn now to the concept of prejudice, particularly the point raised by counsel for QOSCO of a time-bar and a choice of forum to gain procedural advantage.
[22] The plaintiff"s cargo was delivered 20 July 1997. Assuming the Canadian Water Carriage of Goods Act applies, or even, as Hyundai"s expert disposes, that Korean law embraces legislation similar to the Hague and to the Hague-Visby Rules, there will be a one year time-bar. That time has now run: it would be a good defence to an action in Korea. Hyundai has refused a time extension. Such a time-bar triggers Eleftheria considerations.
[23] In this instance there is the issue of whether Hyundai truly wishes to litigate in Korea, as opposed to merely seeking a procedural advantage. There is also the parallel issue of whether the plaintiff, in view of the time bar, would be prejudiced by now being forced to sue in Korea. On this latter point I leave aside, for the time being, the issue of deprivation of security, an issue raised by Hyundai"s expert on Korean law, but rather focus on prejudice and the Korean time-bar. Such limitation is not a factor in the present timely Federal Court litigation.
[24] Most usually, perhaps even universally, a defendant seeking a stay on the grounds of a jurisdiction clause will go out of its way to show that it seeks no procedural advantage by specifically waiving any time-bar. This is an excellent way of showing good faith. However, in the present instance, Hyundai says and here I quote from counsel"s brief:
| if the Plaintiff is faced with a time-bar in Korea then the Plaintiff"s prejudice is self-induced and the omission to protect time in the contractual forum should not prevent a stay of this action. |
Pertinent here is Citi-March Ltd. v. Neptune Orient Lines Ltd. (supra). There Mr. Justice Colman pointed out that a stay will not be ordered, even where the plaintiff has decided not to preserve time in a foreign jurisdiction, so long as there is a strong case for the jurisdiction where the action has in fact been commenced. Indeed, even where there is not a strong case to maintain jurisdiction, except for the time bar, a stay will not be granted if a plaintiff can show it acted reasonable. Whether failure to start a protective action in a foreign jurisdiction is unreasonable depends upon the circumstances: see Neptune Orient at pages 76 and 77. In the present instance, in addition to the time bar argument, the plaintiff has a strong case by which to oppose a stay. Moreover, it acted reasonably in not commencing a backup action in Korea for it is not unfair to say that the plaintiff was lulled into believing Hyundai would or had attorned to the Federal Court jurisdiction. Hyundai"s argument, set out above, that the plaintiff had brought its time bar problem upon itself is an argument that will not wash. The time bar and resulting prejudice is a very strong and here a sufficient ground for refusing a stay. Yet there are other factors which either go toward refusing a stay or are a strong ground for denying a stay.
Differences in the Law
[25] In applying The Eleftheria I should look at the mechanics of enforcing a claim in the courts in Korea. Korean procedure is based on civil law. Hyundai"s expert says there will be 7 to 10 court hearings to submit evidence over the one or two year course of the action. Apparently there is no formal discovery of documents. Rather there is an ad hoc production of documents if a party can convince the Korean court, in each instance, as to the relevance of a document. Nor is there a means to compel oral testimony unless, in the same way, a party can convince the Korean court that a witness ought to be compelled to testify. This sort of thing is particularly relevant in a cargo claim, which depends generally upon documentation and particularly upon the evidence of and documents produced by loading surveyors, tally clerks, the officer in charge of loading, the master during carriage, ship"s officers during discharge and discharge surveyors. The differences in Korean law, as compared with Canadian law, are a substantial point against allowing a stay.
In Rem Proceedings
[26] The present action is in rem and in personam. Hyundai"s Korean law expert says that there is no in rem procedure in the Korean courts, but then goes on to set out that vessels may be arrested. It is clear from the expert"s material that such an arrest is to force a sale to satisfy a mortgage or a maritime lien, neither of which applies in the present instance. Alternately, there is a prejudgment attachment procedure analogous to a Mareva injunction, to preserve assets, with the party requiring preservation to put up a bond, which is forfeited if the claimant is not successful. Such prejudgments attachments are subject to prior security and to challenges by the shipowner for a preliminary injunction cancelling such an arrest. This arrest procedure is also interesting in that not only must the ship be within the Korean jurisdiction, when the order is sought from the court, but also such an arrest order takes a minimum of one or two days and will not be effective if a ship has completed preparation for a voyage. In the present instance there is no in rem security which might be carried over. It is thus a factor, although in the present instance certainly not a strong factor, that in rem security in Korea, based on an arrest or the threat of an arrest, might seem to be something of an illusion, particularly when paired with the reasonable availability of arrest in Canada. All of this might prejudice a plaintiff and could conceivably prejudice the plaintiff, however I give it very little weight in this instance.
Intransigence and Attournment
[27] There is further strong reason to deny a stay and that is the intransigence on the part of Hyundai in seeking the stay. Coupled with this factor are the initial actions of Hyundai, which are tantamount to attournment or estoppel. A similar estoppel arose in Methanex (supra), considered at page 598 and following. There the estoppel was in the form of a letter of undertaking. Here the estoppel is no less binding because it was the result of telephone calls and correspondence by which Hyundai sought time extensions within which to file its defence and then, after much delay, changed its position to the detriment of the plaintiff which had conducted its case in a normal manner in the Federal Court because it had been lead to believe that jurisdiction would not be an issue.
[28] These factors, intransigence and attournment or estoppel, are bound together in the present instance. They also go toward prejudice to the plaintiff. To begin, Hyundai indicated it wished a time extension so it might file a defence. This request was made on 10 July 1997, well before the time-bar had run. Had Hyundai, at that time, indicated it would challenge jurisdiction on the basis of some exceedingly fine print on the reverse of the Bill of Lading, the plaintiff could easily have preserved time by commencing proceedings in Korea. Counsel for the Plaintiff makes a fair and proper statement: he says he is not prepared to undertake that he would have commenced an action in Korea had he learned, at the last minute but within time, of Hyundai"s intention to challenge jurisdiction. Yet, what counsel, the plaintiff, or the plaintiff"s underwriters might have done is pure hypothetical conjecture for, on the basis of dealings with Hyundai, counsel felt there was no need to bring an action in Korea as the claim, for some $87,000, was properly secured by an action in Canada, Hyundai wished to file a defence and jurisdiction was not an issue. This sort of situation arose in The Biskra [1983] 2 Lloyd"s 59 (Q.B.). However, on the facts in that instance, the plaintiff had not been mislead or lulled by the conduct of the defendant"s advisors. That is not the fact pattern in the present instance. In itself Hyundai"s request for and grant of a time extension within which to file a defence constitutes an estoppel. The plaintiff was further lulled by the 24 July 1998 letter from Hyundai"s counsel, quoted in part earlier, setting out an intent to apply, some five weeks in the future, on behalf of Hyundai, for an extension of time within which to file a defence. This estoppel is, in itself, a strong cause by which to deny a stay.
Delay in Seeking a Stay
[29] There is also the matter of delay. "An application for a stay on the grounds that the parties agree to submit the dispute to a foreign Court should be brought without delay after service of the writ.": The Biskra (supra) at page 62. In The Biskra the statement of claim was filed 30 March 1982, with the defendant advising, 7 April, that it would apply for a stay. This is the sort of prompt unequivocal action that is required and this is particularly so in the Federal Court.
[30] The rules of this Court have always been time sensitive. This is particularly the case since the institution of the new rules in April of 1998. A plaintiff has always had the onus of moving an action along in a timely manner. To some degree plaintiff"s counsel could always grant and can presently grant time dispensations to defendant"s counsel, particularly if strict compliance to a given rule or schedule would be a temporary embarrassment or a real inconvenience. Yet, under the new rules, plaintiff"s counsel and a plaintiff who does not move an action along at the required rate may suffer more than embarrassment to counsel and convenience to plaintiff. If either pleadings are not closed within 180 days from the issuance of a statement of claim, or all procedural steps completed and a pre-trial conference not requested within 360 days of issuance of a statement of claim, the Court may and indeed the Court, by reason of delay, has struck out a proceeding by way of status review under rules 380 and 381. This is prejudice which cannot be compensated for in costs.
[31] In the present instance the actions of the plaintiff and of plaintiff"s counsel have clearly shown not only reasonable accommodation to Hyundai and various of Hyundai"s counsel, but also a proper desire and indeed steps taken, to get on with the action. Here I have in mind ongoing production of documents, yet accommodation to allow Hyundai time to file a defence, a proper balance which would permit the action to proceed in a timely way. In contrast, Hyundai has not lived up to the obligation to bring on its objections to jurisdiction quickly and at an early stage. This is also a strong reason by which to deny the present stay.
CONCLUSION
[32] As I indicated in Methanex (supra) at p. 603, a stay is decided not by adding up points, pro and con, but by considering factors involving the appropriateness and convenience of a given forum and factors going to secure proper justice. Only if there are strong reasons ought a court to exercise its jurisdiction and deny a forum established in a proper jurisdiction clause.
[33] In the present instance there are strong and sufficient reasons why I should exercise my discretion and determine that the trial should take place in this Court where the action has been commenced.
(Sgd.) "John A. Hargrave"
Prothonotary
August 17, 1999
Vancouver, British Columbia
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS ON THE RECORD
COURT FILE NO.: T-1102-98
STYLE OF CAUSE: ITOCHU CANADA LTD.
v.
THE OWNERS AND ALL OTHERS INTERESTED
IN THE SHIP "FU NING HAI", QINGDAO OCEAN
SHIPPING COMPANY, HYUNDAI MERCHANT
MARINE CO., AND FRASER SURREY DOCKS LTD.
PLACE OF HEARING: VANCOUVER, BC
DATE OF HEARING: November 30, 1998
| REASONS FOR ORDER OF MR. JOHN A. HARGRAVE, PROTHONOTARY |
DATED: August 17, 1999
APPEARANCES:
| Mr. Chris Giaschi for Plaintiff |
| Mr. Peter Swanson for Defendant Hyundai Merchant Marine Co. |
| Mr. Doug Morrison for Defendant Qingdao Ocean Shipping Company |
SOLICITORS OF RECORD:
Giaschi, Margolis
| Vancouver, BC for Plaintiff |
Campney & Murphy
| Vancouver, BC for Defendant Hyundai Merchant Marine Co. |
Bull, Housser & Tupper
| Vancouver, BC for Defendant Qingdao Ocean Shipping Company |