48. The “K H Enterprise” (The “Pioneer Container”) [1994] 1 Lloyd’s Rep 593

Bailment – owners entitled to rely on exclusive jurisdiction clause in bill of lading

The facts

A container ship, fully laden, was lost in a collision off the coast of Taiwan. Containers on board belonged to multiple cargo owners and were bound for multiple destinations.

The bills of lading in question reserved exclusive jurisdiction to Taiwan.

Cargo owners instituted action in Hong Kong against shipowners by arresting a sistership of the lost vessel.

The cargo owners were not party to the bills of lading.

Owners applied for a stay of proceedings in Hong Kong arguing that, as sub-bailees, they were entitled to rely on the bills of lading which were contracts between the bailors and the bailees. In the alternative, they argued forum non conveniens.

Findings

Sears J held that the cargo owners were bound by the exclusive jurisdiction clause but he refused a stay, influenced mainly by the fact that the claims would be time barred if instituted in Taiwan.

The Hong Kong Court of Appeal (Cons VP, Power AJ and Godfrey J) agreed that the jurisdiction clause was operative but that the discretion to refuse a stay had been wrongly exercised.

The Privy Council (Lords Goff, Lowry, Slynn, Lloyd and Sir Thomas Eichelbaum) upheld the Hong Kong Court of Appeal.

The Board referring to the leading text books on bailment and a judgment of Lord Denning in Morris v Martin, found that the bailors had impliedly given consent to the bailees to contract on terms which included the exclusive jurisdiction clause.

The Board rejected arguments that on the principles of incorporation, clauses not germane to the carriage of the goods, such the exclusive jurisdiction clause, should not be incorporated.

The Board also rejected an argument that because there was already a Himalaya clause which was designed to cater for third parties or persons outside the contract, that it was impermissible to have recourse to the principles of bailment.

With regard to forum non conveniens, the Board considered that the cargo owners had deliberately allowed the time limit in Taiwan to expire before instituting action in Hong Kong. The Board stated that the mere fact the time limit may have expired in Taiwan was not a reason in itself for refusing a stay. In a situation with multiple claimants it was desirable for all the claims to be heard in one jurisdiction.

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