Jian Sheng Co. v. Great Tempo S.A., docket T-2219-96

     T-2219-96

BETWEEN:

     JIAN SHENG CO. LTD.

     Plaintiff,

     - AND -

     GREAT TEMPO S.A.,

     SINOTRANS CANADA INC.,

     and the owners and others interested in

     the ship "TRANS ASPIRATION"

     Defendants.

     REASONS FOR DECISION

TREMBLAY-LAMER J.

INTRODUCTION

     This is a motion on behalf of the Defendant, Great Tempo S.A., pursuant to Rules 317 and 336(5) of the Federal Court Rules¹ for an Order over-ruling the Order of Prothonotary J. Hargrave dated April 7, 1997 denying a stay of proceedings.

FACTS AND BACKGROUND

     In February 1996, Gloria McNeil, a transportation broker with the firm of Canadian Transport Company Ltd., booked a space on the vessel M.V. "TRANS ASPIRATION", voyage 34, for carriage of 2300 to 2500 MFBM of lumber from Nanaimo, in the Province of British Columbia, Canada, to the Plaintiff, Jian Sheng Co. Ltd. ("Jian Sheng"), in Taichung, Taiwan. The carriage was booked with the Defendant, Sinotrans Canada Inc. ("Sinotrans"), and confirmed by a booking note. Under the terms of the booking note, Sinotrans was identified as the carrier, the M.V. "TRANS ASPIRATION" as the vessel, and MacMillan Bloedel Limited as the shipper. The booking note contained the following clause:

The parties further agree that the following conditions form part of the contract of carriage. If any of them are inconsistent with the Carrier's conditions of carriage, the Carrier in accepting this space booking agrees that the conditions herein prevail.

Any dispute arising out of or in connection with this booking shall be referred to arbitration at Vancouver for final determination in accordance with the rules of the Vancouver Maritime Arbitrators Association ("VMAA").

     The Bill of Lading, in standard form, was issued March 13, 1996, by Sinotrans, in favour of the Tapei Business Bank with Jian Sheng, as the party to be notified. MacMillan Bloedel Limited was identified as the shipper. Sinotrans, however, signed "AS AGENTS ONLY FOR CARRIER: TRANS ASPIRATION". This being so, Sinotrans denies being the carrier or having chartered the M.V. "TRANS ASPIRATION". The M.V. "TRANS ASPIRATION" is owned by Great Tempo S.A. of Panama. However, Mr. Samson Lok of Wah Tung Shipping Agency Co. ("Wah Tung Co.") deposed that Wah Tung Co. is the manager of and conducts all of the business of Great Tempo S.A. from Hong Kong.

     The Bill of Lading contained, on its reverse, two clauses which are pertinent:

3.      Jurisdiction

Any dispute arising under this Bill of Lading shall be decided in the country where the carrier has his principal place of business, and the law of such country shall apply except as provided elsewhere herein.

17.      Identity of Carrier

The Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the vessel named herein (or substitute) and it is therefore agreed that said Ship Owner only shall be liable for any damage or loss due to any breach of non-performance of any obligation arising out of the Contract of Carriage, whether or not relating to the vessel's seaworthiness. If, despite the foregoing, it is adjudged that any other is the Carrier and/or bailee of the goods shipped hereunder, all limitations of, and exonerations from, liability provided for by law or by this Bill of Lading shall be available to such other.

It is further understood and agreed that as the Line, Company or Agent who has executed this Bill of Lading for and on behalf of the Master is not a principal in the transaction, said Line, Company or Agent shall not be under any liability arising out of the Contract of Carriage nor as Carrier nor bailee of the goods.

     About one quarter of the whole cargo of packaged lumber, constituting a substantial portion of that which was carried on the deck, was lost overboard during the voyage. By statement of claim filed with this Court on October 8, 1996, the Plaintiff, Jian Sheng, claims for loss of and damages to the lumber, the sum of $395,865.92U.S. On February 6, 1997, the Defendant, Great Tempo S.A., filed a motion for an order staying the proceedings.

     The Defendant challenged this Court's jurisdiction on the basis of the jurisdiction clause in the Bill of Lading. On April 4, 1997, Hargrave P. denied the Defendant's application for a stay of proceedings on the ground that the jurisdiction clause was void for uncertainty. The pertinent passages read:

In the present instance there is no real indication on the Bill of Lading, or in any of the evidence tendered, as to who Sinotrans Canada Inc. thought they were signing the Bill of Lading for. They merely signed "as agents for the owner: Trans Aspiration". Logically, if the "Trans Aspiration" were on charter, to Sinotrans (Bermuda) Ltd., as contended by counsel for Great Tempo S.A., it would be a charterer's bill of lading and notwithstanding the identity of carrier clause on the reverse, Sinotrans (Bermuda) Ltd. might be either the carrier or a carrier. There is nothing in the Bill of Lading to identify the carrier: nowhere in the evidence tendered on behalf of the Defendant Great Tempo S.A. does anyone come right out and say that Great Tempo S.A. is in fact the carrier. However it does appear that Great Tempo S.A. is the owner of the "Trans Aspiration" and thus might be the carrier or a carrier.

Mr. Lok, of Wah Tung Shipping Agency Co. Ltd. of Hong Kong, deposes that his firm conducts one hundred per cent of the business of Great Tempo S.A., "although Great Tempo S.A. is registered as a Panamanian company." He does not say from where the Board of Directors of Great Tempo S.A. gives overall direction to Wah Tung, including the Board's direction that Wah Tung manage the "Trans Aspiration".

A jurisdiction clause in a bill of lading has as a main purpose the clear and precise designation of the jurisdiction in which a cargo owner ought to sue when the carriage of its cargo has gone wrong. In the present instance and considering the Court of Appeal's views in the "Rewia", Jian Sheng Co. Ltd., the Plaintiff, might equally conclude it ought to sue: (1) Sinotrans (Canada) Ltd., who says it is an agent, but who does not disclose its principal and whom the shipper understood to be the carrier, in Vancouver; or (2) Sinotrans (Bermuda) Ltd., in Bermuda; or (3) Great Tempo S.A., in its place of incorporation, Panama; or (4) Great Tempo S.A., where its Board sits, in some unknown jurisdiction. On the basis of the "Rewia", the Plaintiff could conclude it probably ought not to sue Great Tempo S.A. in Hong Kong, merely on the basis that Wah Tung Shipping Agency Co. Ltd., who have only just now surfaced, is the manager of the "Trans Aspiration".

The jurisdiction clause in this instance offers no guide, let alone certainty, as to where an action on the Bill of Lading ought to be commenced. The jurisdiction clause is thus void for uncertainty.

ANALYSIS

a)      The Standard of Review

     The applicable standard of review in an appeal from a Prothonotary's decision is that which was established by the Federal Court of Appeal in Canada v. Aqua-Gem Investments Ltd.² A discretionary order by a prothonotary is reviewable only if:

(1)      they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or

(2)      in making them, the prothonotary improperly exercised his discretion on a question vital to the final issue of the case.3

This standard has since been applied on numerous occasions.⁴

     In the instant case, in view of the Defendant's submissions, it must be determined whether Prothonotary Hargrave's decision was based upon wrong principles. For efficiency, I shall deal first with the nature and purpose of the February, 1996 booking note.

b)      The Booking Note

     The first issue which needs to be addressed is the significance of the paramountcy clause in the booking note with regard to the Plaintiff, Jian Sheng. I am of the view that the learned Prothonotary correctly decided that the booking note could not produce any effect vis-à-vis the Plaintiff who was not a party thereto. I would therefore adopt the Prothonotary's reasons on that point.

     It is a well-established principle that, unless otherwise expressly provided in either the booking note itself or the contract contained in or evidenced in the Bill of Lading, the booking note does not form part of the contract of carriage; rather, the booking note is a contract for carriage. As suggested by the Defendant's counsel, support for that proposition can be found in The Rewia,⁵ where the English Court of Appeal expressed the following views:

It is nothing to the point to say that further investigation might yield different results, because the determination of the question whether the bills of lading were the owners' bills depends on the true construction of the bills. As Mr. Gaisman forcefully points out, the original plaintiffs in this action were consignees of the goods who could only have had title as assignees of the bills of lading, and not by way of an assignment of an oral booking contract. What are sued on are the contracts contained in or evidenced by the bills of lading. Those contracts were made for either the first or the third defendants and the Court would therefore derive no assistance from a factual inquiry into the circumstances in which the booking contract was made.6

c)      The Bill of Lading

     Having reached the foregoing conclusion with respect to the booking note, the Prothonotary turned to the Bill of Lading. In particular, he examined the validity of the jurisdiction clause therein. Upon reviewing both the facts and the terms of clause 17 of the Bill of Lading, he found that they did not disclose the identity of the carrier and that therefore the jurisdiction clause was void for uncertainty. With respect and for the reasons that follow, I am of the view that the learned Prothonotary's decision on that latter issue was incorrect.

     First, I agree with counsel for the Defendant that the Bill of Lading is a standard liner Bill of Lading with the ship M.V. "TRANS ASPIRATION" properly designated on the face of the document and which states that the master of the vessel has signed the original Bills of Lading. The Bill of Lading sets out the master's name and the agent Sinotrans signed as agents only for the carrier: the M.V. "TRANS ASPIRATION".

     The Identity of Carrier clause, clause 17 in the Bill of Lading, provides that "the Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the vessel named herein." The Bill of Lading named the vessel M.V. "TRANS ASPIRATION". As indicated, the owner of the vessel M.V. "TRANS ASPIRATION" is the Defendant, Great Tempo S.A., a Panamanian company. It follows that, under clause 17, the Defendant, Great Tempo S.A., is the carrier.

     In his reasons, the learned Prothonotary found that Sinotrans (Bermuda) Ltd., as a charterer of the vessel, might be either the carrier or a carrier. In support of this finding, he referred to the comments of Professor Tetley in Marine Cargo Claims,⁷ which states that notwithstanding any identity of carrier clauses, the ship owner and the charterer, if any, are jointly and severally responsible as carriers. In view of the authorities discussed below, I agree with counsel for the Defendant that this general statement must be rejected.

     The legal principles applicable to this issue were established long ago by the Supreme Court of Canada in Paterson Steamships Ltd. v. Aluminum Company of Canada Ltd.⁸ In that case, the issue, as here, was whether the shipowners and/or the charterer were parties to the contract of carriage. Rand J., concurred by Rinfret C.J.C. and Fauteux J., stated that:

Under such a charter, and in the absence of an undertaking on the part of the charterer, the owner remains the carrier for the shipper, and in issuing bills of lading the captain acts as his agent. In this case, the bill of lading was signed for the captain by the agents appointed by the charterers certainly for themselves and probably for the vessel also and that fact raises the first of the only two points deserving consideration.

It is, I think, too late in the day to call in question the relation of the time charterer or his or the ship's agent towards cargo. The charterer has purchased the benefit of the carrying space of the ship; he is the only person interested in furnishing cargo; and the captain is bound to sign the bills of lading as presented, assuming them not to be in conflict with the terms of the charter party. The practical necessities involved in that situation were long ago appreciated by the courts and the authority of the charterer to sign for the captain confirmed.9 [emphasis added]

     In Aris Steamship v. Associated Metals and Minerals Corporation,¹⁰ the Supreme Court of Canada reaffirmed that position. More recently, in Union Carbide Corporation et al. v. Fednav Ltd.,¹¹ Nadon J. reviewed all of the authorities on the subject. At issue before him was a clause in the Bill of Lading identical to the one in question in these proceedings.

     Upon reviewing the wording of the clause, Nadon J. first stated:

Briefly put, the clause is to the effect that the contract evidenced by the bill of lading is one between the owner of the cargo and the owner of the vessel on which the goods are to be carried. The clause further provides that the owner of the ship shall be the only party liable for loss or damage to cargo or for any breach or non-performance of the obligations arising out of the contract of carriage. The clause finally provides that the company or agent who has issued the bill of lading on behalf of the master of the vessel is not a principal and that such company or agent "shall not be under any liability arising out of the contract of carriage nor as carrier nor bailee of the goods".12

     He then reached the following conclusion:

In Paterson Steamships and in Aris Steamship, the Supreme Court of Canada concluded that bills of lading signed on behalf of the master of a ship were binding upon the owners of that ship and not upon the time-charterers. With or without a demise clause, a bill of lading issued in the circumstances of this case constitutes a contract binding upon the owners of the ship and not upon the time-charterers, unless, as stated by Rand J. in Paterson Steamships, there is an undertaking on the part of the charterer that he will carry the cargo.13

     Nadon J. expressly rejected the views expressed by Professor Tetley. Likewise, he refused to follow the reasons of Reed J. in Canastrand Industries Ltd. v. Lara S (The).¹⁴ In this regard, Nadon J. stated:

Madam Justice Reed seems to have accepted Professor Tetley's theory that where goods are loaded on a time-chartered ship the owners of that ship and the time-charterers are engaged in a joint venture insofar as the carriage of the goods is concerned. I cannot accept the soundness of this view. Firstly, such a conclusion defies the decisions of the Supreme Court in Paterson Steamships and Aris Steamship. Secondly, there cannot be a joint venture between owners and charterers unless there has been a meeting of the minds between the parties to the joint venture. Can it be said that, in entering into a time charter-party in the New York Produce Exchange form, as is the case here, the owners and the charterers have agreed to jointly carry the goods loaded on the ship? In my view, it cannot be so said. Thirdly, in order to agree with Professor Tetley, one must forget that the Federal Court of Appeal has clearly held that the question as to who the carrier is one which depends upon the documents and the circumstances of the case.15 [references omitted]

     I agree with Nadon J. Indeed, it clearly flows from the foregoing authorities that there can be no joint venture between the owner of a vessel and its charterer unless there is an express undertaking on the charterer's part to this effect. Such is not the case here. Sinotrans (Bermuda) Ltd., as a charterer, could not be considered a carrier. Consequently, only Great Tempo S.A., as the owner of the vessel, remains the carrier for the shipper. Thus, the jurisdiction clause in the Bill of Lading is not void for uncertainty.

     The jurisdiction clause stipulates that "any dispute arising under this Bill of Lading shall be decided in the country where the carrier has his principal place of business, and the law of such country shall apply except as provided elsewhere herein."

     It is now incumbent upon this Court to decide whether the Defendant has established the location of its principal place of business.

     In his reasons, the learned Prothonotary suggested that the ship owner's Hong Kong manager, Wah Tung Co., "have only just now surfaced". He then relied heavily on the English Court of Appeal decision in The Rewia and stated:

The Court of Appeal pointed out that, "the principal place of business is not necessarily the place where most of the business is carried out." The Court then found principal place of business of the carrier to be in Hamburg, for notwithstanding that the Hong Kong agent, Turbata Co. Ltd., had a free hand in the day-to-day management of the vessel from Hong Kong, all it did was, in the final analysis, subject to the control of the directors in Hamburg.

He added:

Mr. Lok, of Wah Tung Shipping Agency Co. Ltd. of Hong Kong, deposes that his firm conducts one hundred per cent of the business of Great Tempo S.A., "although Great Tempo S.A. is registered as a Panamanian company." He does not say from where the Board of Directors of Great Tempo S.A. gives overall direction to Wah Tung, including the Board's direction that Wah Tung manage the "TRANS ASPIRATION".

     The Defendant, Great Tempo S.A., wishes to litigate in a convenient and familiar forum. That forum, it contends, is Hong Kong. The Defendant invites this Court to distinguish the decision of the English Court of Appeal in The Rewia. Unlike in The Rewia, where the ship owner desperately tried to show that Germany was the principal place of business and demonstrated that the directors were German, German companies owned shares in the vessel, policy decisions were made in Germany, and directors' meetings were held in Germany, the evidence in this instant case is that all of the business of the Great Tempo S.A. is conducted from Hong Kong.

     The Plaintiff, on the other hand, stresses that the Defendant has led no evidence regarding the principal place of business of Great Tempo S.A. There is no evidence as to the identity and address of the directors and/or officers of Great Tempo S.A. Nor is there any evidence concerning the location of the bank accounts or other assets of Great Tempo S.A.

     Despite very able argument of counsel for the Plaintiff on that point, I am of the view that there is evidence upon which this Court can determine where Great Tempo S.A. has its principal place of business. I first refer to the affidavit of Mr. Samson Lok, wherein he deposed that, at paragraphs 3 and 14:

3.      100% of the business of Great Tempo S.A. is conducted from Hongkong, although Great Tempo S.A. is registered as a Panamanian company.

14.      Under the Contract of Carriage evidenced by the Bill of Lading, the carrier is the ship owner and Hongkong is the carrier's principal place of business.

     Need I add that this was no surprise to the Plaintiff. Indeed, in the second paragraph of its statement of claim, the Plaintiff expressly recognized that Great Tempo S.A. has its principal place of business in Hong Kong. The relevant paragraph reads:

2.      The Defendant, Great Tempo S.A. is a corporation carrying on business as a common carrier of goods by sea. Its principal office is located at c/o Wah Tung Shipping Agency Co. Ltd., Rooms 2101-2105, 21st Floor, China Resources Building, 26 Harbour Road, Wan Chai, Hong Kong. At all times material to this action it was the owner of the defendant vessel "Trans Aspiration".

     To hold otherwise would result in allowing the Plaintiff to impugn the substance of the allegations of its statement of claim which I am not prepared to do. I find further support for my finding in the fact that Mr. Samson Lok's evidence on this question stands uncontradicted.

     In deciding whether the issuance of a stay would be appropriate the factors to be weighed by this Court are those which were enunciated in The Eleftheria:¹⁶

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.

     In the instant case, the defendants have established a prima facie case that there ought to be a stay of the present proceedings pursuant to the jurisdiction clause in the Bill of Lading. The Plaintiff now bears the onus and has to demonstrate that, notwithstanding the existence of a jurisdiction clause, there are special circumstances which militate in favour of the Court exercising its discretion by not granting the stay.

     In my opinion, the Plaintiff has failed to meet that burden. It did not present a strong cause for not granting the stay. In particular, the Plaintiff did not explain or demonstrate why Hong Kong would not be an appropriate forum. The Plaintiff's principal place of business is in Taiwan, a country which obviously is closer to Hong Kong than to Vancouver. The officers of the vessel and the remaining crew are nationals from either Hong Kong or China. Other witnesses including the surveyors and the Plaintiff's corporate witnesses are also in Taiwan. Further, Hong Kong courts can surely deal with matters such as conflicts of law and the application of foreign law. There is no evidence to the effect that the Defendant is seeking some juridical advantage or that the Plaintiff would somehow be prejudiced should a stay be granted.

     For these reasons, the Defendant's appeal is allowed and the application for a stay of proceedings in favour of Hong Kong is granted with costs.

OTTAWA, (ONTARIO)

This 4th day of June 1997

    

                                 JUDGE

__________________

¹ R.S.C. 1978, c. 663, as amended.

² [1993] 2 F.C. 425 (C.A.).

³ Ibid. at 454.

⁴ Concepts, Inc. v. Immuno AG, (1996), 71 C.P.R. (3d) 525 (F.C.T.D.); Cornerstone Securities Canada Inc. v. North American Trust Co.(1994), 86 F.T.R. 53 (F.C.T.D.); Samsonite Canada Inc. v. Costco Wholesale Corp.(1994), 53 C.P.R. (3d) 210 (F.C.T.D.); Keramchemie GmbH v. Keramchemie (Canada) Ltd.(1994), 56 C.P.R. (3d) 454 (F.C.T.D.); Source Services Corp. v. Source Personnel Inc., (December 11, 1995), T-1841-95; and, Singh v. Canada (Minister of Citizenship and Immigration), (May 1, 1996), IMM-3512-95 (F.C.T.D.).

⁵ [1991] 2 Lloyd's Rep. 325 (C.A.).

⁶ Ibid. at 333.

⁷ W. Tetley, Marine Cargo Claims , 3d ed. (Cowansville: Les Éditions Yvon Blais Inc., International Shipping Publications, 1988), at p. 234.

⁸ [1951] S.C.R. 852">[1951] S.C.R. 852.

⁹ Ibid. at 854.

¹⁰ [1980] 2 S.C.R. 322">[1980] 2 S.C.R. 322.

¹¹ (May 20, 1997) T-2403-81 (F.C.T.D.).

¹² Ibid. at 32.

¹³ Ibid. at pp. 32-33.

¹⁴ [1993] 2 F.C. 553 (T.D.).

¹⁵ Supra note 11 at 35.

¹⁶ [1969] 1 Lloyd's Rep. 237 at 242.