England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE Case No: QBADI 97/0857/3

COURT OF APPEAL (CIVIL DIVISION )

(MR JUSTICE CLARKE )

B e f o r e

THE OWNERS OF THE SHIP ‘HERCEG NOVI ’ Respondent

v.

THE OWNERS OF THE SHIP ‘MING GALAXY ’ Appellants

(Handed down transcript of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD Tel:0171 421 4040

Official Shorthand Writers to the Court)

MR JEREMY RUSSELL QC and MR CHARLES HADDON-CAVE (instructed by Messrs Ince & Co, London EC3R 5EN) appeared on behalf of the Appellants (Defendants).

MR NIGEL TEARE QC and MR LUKE PARSONS (instructed by Messrs Holman Fenwick-Willan, London EC3N 3AL) appeared on behalf of the Respondents (Plaintiffs).

J U D G M E N T

(As approved by the court)

©Crown Copyright

SIR CHRISTOPHER STAUGHTON: This is the judgment of the court.

On 18th August 1996 there was a collision between the HERCEG NOVI and the MING GALAXY within a traffic separation scheme in the Straits of Singapore. When this case was before Clarke J. it was originally common ground that the collision took place in Singapore waters. Then at a late stage it was submitted for HERCEG NOVI that the collision was in Indonesian waters. The judge found it unnecessary to resolve that dispute.

The HERCEG NOVI sank as a result of the collision. There were criminal proceedings in Singapore. The master of the MING GALAXY pleaded guilty and was fined S.$4000; the master of the HERCEG NOVI also pleaded guilty, and was fined S.$8000.

The owners of the HERCEG NOVI are South Cross Shipping Ltd. of Malta; the owners of the MING GALAXY are Yangming Marine Transport Corporation of Taiwan. The owners of each vessel criticise the navigation of the other. Approximate figures for their claims are, in US dollars:

The HERCEG NOVI $10,350,000

Her cargo 4,000,000

The MING GALAXY 3,187,000

If those figures are substantiated, limitation of the owners’ liability under the international conventions will or may arise. The limit of liability of the MING GALAXY is about $5,800,000 in this country; but it is only $2,900,000 in Singapore, where a different convention applies. So far as we know the claim of the MING GALAXY will not exceed the limit of the HERCEG NOVI under either convention. There is no suggestion that the limit will be broken under the terms of either convention on the facts of this case.

Naturally enough, there is a dispute as to the appropriate forum to determine those claims.

On 20th August 1996, which was two days after the collision, the MING owners began Admiralty actions in rem and in personam against the HERCEG owners and their vessel in the High Court of Singapore. (To avoid confusion, we do not refer to either party as plaintiffs or defendants.) On the following day a third writ was issued in the same court by the MING owners, against the master and the third mate of the HERCEG NOVI. In a fourth action, also in the High Court of Singapore on 21st August, the MING owners sought to limit their liability against the HERCEG owners and all persons claiming to have sustained loss or damage by reason of the collision. The claim was founded on section 136 of the Merchant Shipping Act Cap. 179 of Singapore.

The writ in the action in rem brought by the MING owners was served, with commendable enterprise, by fixing it to the mast of the HERCEG NOVI where she had sunk, inside Singapore waters.

On 28th August, again with commendable dispatch, the HERCEG owners issued a writ in an Admiralty action in rem in the Queen’s Bench Division against the MING GALAXY. This writ was served on a sister ship, the MING SOUTH, on 30th August at Felixstowe. On 7th November 1996 the MING owners gave notice of motion to stay the English action on the grounds that (1) England was not the appropriate forum, and (2) there were proceedings pending elsewhere, that is to say in Singapore. That application came before Clarke J. By his order made on 20th June 1997 he stayed the action pending the determination of two issues in the High Court of Singapore, as to

(1) the responsibility for the collision, and

(2) the amount of the claim of the MING owners for damages.

More significantly, the judge refused to grant a stay of the English action as a whole. In particular, the effect of his order was that if the MING owners wish to limit their liability in England, they will have to rely on the English statute and the higher limit which it affords. The judge gave the MING owners leave to appeal on that issue.

Clarke J. decided on the evidence that England was not the natural or appropriate forum for the trial of the action, and that Singapore was clearly and distinctly shown to be more appropriate than England. From that conclusion there has been no appeal. It followed that there ought to be a stay of the English action, unless that course would deprive the HERCEG owners of some legitimate juridical advantage so as to justify the refusal of a stay. The advantage which they rely on is, of course, the higher limit of liability prevailing here as opposed to the limit in Singapore.

We were referred by Mr Russell QC for the MING owners to a number of passages in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] AC 460 and De Dampierre v. De Dampierre [1988] AC 92. Mr Teare for the HERCEG owners told us that there was no dispute as to the appropriate principles, but only as to how they should be applied. We can, therefore, be brief in stating what we understand those principles to be. Lord Goff of Chieveley said in the Spiliada case (at p. 482):

“The key to the solution of this problem lies, in my judgment, in the underlying fundamental principle. We have to consider where the case may be tried “suitably for the interests of all the parties and for the ends of justice”.”

The quotation comes from the speech of Lord Shaw of Dunfermline in Société du Gaz v. Société Anonyme de Navigation Les Armateurs Français [1926] SC 13 at p. 19, where in turn it was derived from Sim v. Robinow 19 R.665, 668.

Turning to the application of that fundamental principle, Lord Goff observed that:

“an advantage to the plaintiff will ordinarily give rise to a comparable disadvantage to the defendant; and simply to give the plaintiff his advantage at the expense of the defendant is not consistent with the objective approach inherent in Lord Kinnear’s statement of principle in Sim v. Robinow ,”

Lord Goff then mentioned typical examples of such an advantage:

“Damages awarded on a higher scale; a more complete procedure of discovery; a power to award interest; a more generous limitation period.”

He continued:

“Now, as a general rule, I do not think that the court should be deterred from granting a stay of proceedings ... simply because the plaintiff will be deprived of such an advantage, provided that the court is satisfied that substantial justice will be done in the available appropriate forum.”

That we take to be the sub-heading of principle for cases where there is said to be a legitimate personal or juridical advantage. It was echoed in the De Dampierre case, where Lord Goff said (at p. 110):

“the court should not as a general rule, be deterred from granting a stay of proceedings simply because the plaintiff in this country will be deprived of such an advantage, provided that the court is satisfied that substantial justice will be done in the appropriate forum overseas.”

Lord Templeman (at p. 101) said:

“The court must consider whether in all the circumstances it is just that the plaintiff should be allowed to exploit and enforce his English advantage and should only refuse a stay if it would be unjust to confine the plaintiff to his remedies elsewhere.”

In a later passage (p. 102) Lord Templeman agreed with the approach of Lord Goff; in our opinion he was not in any way, departing from the requirement of an objective approach or the view that a stay should be refused if substantial justice will be done in the foreign court.

The same theme is to be found in the speech of Lord Goff in Connelly v. RTZ Corporation plc [1997] 3 WLR 373 at p. 384.

Section 503 of the Merchant Shipping Act 1894 provided that the owners of a ship should not be liable for (i) loss of life or personal injury, or (ii) loss or damage to goods, occurring on board their ship without their actual fault or privity, beyond the sum of £15 per ton of the ship’s tonnage in case (i), and £8 per ton in case (ii).

By the Merchant Shipping (Liability of Shipowners and Others) Act 1958 those amounts were altered: £15 became an amount equivalent to three thousand one hundred gold francs; £8 became one thousand gold francs. Other amendments were made, including an extension of the events for which limitation was available, and also of the persons who could rely on it.

That Act gave effect to the ratification by the United Kingdom of the Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships of 1957. The Convention was ratified or acceded to by 46 states ( Griggs, Limitation of Liability for Maritime Claims (1997) LM & CLQ 645), but others abstained; and in particular the United States stayed with their previous law which allowed limitation by abandoning the ship and freight to the claimants. The regime of the 1957 Convention became (and remains) part of the law of Singapore.

Now there is the Convention on Limitation for Maritime Claims 1976, which is set out in Part 1 of Schedule 7 to the Merchant Shipping Act 1995. By section 185(1) of the Act it is to have the force of law in the United Kingdom. This Convention made two important changes. First, it substantially increased the figures to which liability was limited. These are expressed in Units of Account rather than gold francs; but the effect is clear enough from the figures we have given of the limits applicable to the MING GALAXY under the two Conventions.

Secondly, the 1976 Convention substituted a new test for the circumstances in which limitation would not apply. Under the 1957 Convention the shipowner had to show that the loss occurred without his actual fault or privity. It was thought by some that shipowners were too readily found not to have discharged that burden. Article 4 of the 1976 Convention provides:

“A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.”

That wording is similar to, but more restrictive than, a provision in the Hague Protocol of 1955 to the Warsaw Convention on carriage by air.

The 1976 Convention was thus a package deal, whereby the limits were raised considerably but in return the shipowner received the benefit of a limit which was thought to be virtually unbreakable. It was largely the work of the Comité Maritime Internationale, a non-governmental body representing the interests of all those involved in sea transport. The draft was finalized by the CMI at its 1974 Conference in Hamburg ( Selvig, Limitation of Shipowners’ Liability p. 9) - which one of us attended. As commonly happens, the work was then taken over by governments, in the shape of the IMCO (now the International Maritime Organisation and an organ of the United Nations). We mention these details because it is an important part of the case for the HERCEG owners that the 1976 Convention is commended by IMO.

By section 17(1) of the Merchant Shipping Act 1979 the 1976 Convention became part of the laws of the United Kingdom. That provision was re-enacted, as we have said, in the 1995 Act. The Convention has never been ratified by Singapore, where the 1957 regime still prevails.

We have a variety of figures as to the extent to which one or other Convention is still applied internationally. It was only in 1986 that the 1976 Convention came into force, having achieved 12 ratifications. Mr Russell for the MING owners told us that, of the countries with the world’s ten largest fleets, those with 153 million tons apply the 1976 Convention, and those with 159 million tons do not. Only four out of the top ten adhere to 1976, and the largest (Panama) does not. That can be contrasted with the statistics mentioned by Clarke J, that 43 per cent of the word’s tonnage is registered with the 1976 states, and only 7.6 per cent with the 1957 states. All those figures are in our view subject to the comment that they are only concerned with ships and shipowners. They tell us nothing about countries which provide the world’s cargoes, or which have coastlines or bridges or harbours which are exposed to damage by ships. Mr Russell told us that of the 184 states which are members of the United Nations, only 30 currently adhere to the 1976 Convention. That is about equal to the number still adhering to the 1957 Convention, which is 30 or thereabouts. The United States still have neither Convention. Luxembourg, we were told, has recently joined the 1957 Convention.

Some of those who have ratified or acceded to the 1976 Convention have done so with reservation(s), which might be said to detract from the generality of its acceptance. However, it is said that the matters on which reservations are allowed are of minor importance. And in any event, it is impossible to say that there is much international consensus on this topic. Mr Griggs has written (p. 376):

“Reviewing the various limitation Conventions and looking at the States which have ratified them reveals that it is only a relatively small proportion of the maritime nations of the world which has sought to achieve uniformity in this area. Of those who dipped their toe in the water of uniformity, by subscribing to the 1924 Limitation Convention, some have not had the courage of their convictions and adopted the 1957 Convention. Even fewer have made the leap to the 1976 Convention and it remains to be seen how many will adopt the changes introduced by the 1996 Protocol. To add to the confusion some countries have adopted a later limitation Convention without bothering to denounce the previous one. Still others (of which perhaps the United States is the most important example) have their own law of limitation, which may be based on one or more of the existing Limitation Conventions but may, on the other hand, be very individualistic. One is forced to the conclusion that in this area there is, despite outward appearances, relatively little uniformity despite years of worthy endeavour.”

We do not find that surprising. Some may be tempted by the higher limit of 1976; others by the greater prospect of breaking the limit under 1957; others still prefer their own system of limitation - or none at all.

The Vishva Abha [1990] 2 Lloyd's Rep. 312 was, so far as we know, the first of the series. There Sheen J. refused to stay an English action because, amongst other reasons, he considered that it would be a grave injustice to the plaintiffs:

“to deprive them of their right to litigate in this country and send them to South Africa where their chances of recovering damages would be limited to so much less than the sum they may recover in this country.”

The point was considered in more detail by Clarke J. in Caltex Singapore Pte. Ltd. v. BP Shipping Ltd. [1996] 1 Lloyd's Rep. 286, where the essential facts were similar to this case. He held that limitation under the 1976 Convention was a legitimate juridical advantage which would justify the refusal of a stay in favour of the natural forum. His reasons were as follows (at p. 298):

“In my judgment (subject to the actual figures) the ends of justice will best be served if the plaintiffs are permitted to proceed in England. It is true that many countries have not ratified the 1976 Convention. It is however the policy of IMO that they should. It has been recognized by countries which have 43 per cent of the world’s tonnage. It is desirable that as many countries as possible should apply the same standards, partly because that is desirable in itself and partly because it avoids problems such as have arisen in this case. It seems to me to be proper to regard the 1976 Convention as representing a widely accepted development from the regime which existed under the 1957 Convention.

The United Kingdom is a party to the 1976 Convention and has enacted it as part of English law. It seems to me that it can fairly be regarded as part of English public policy which the Courts should take into account and that for that reason it is objectively desirable that the provisions of the 1976 Convention should apply where possible.”

Next there was the decision of Waung J. in The Kapitan Shvetsov [1998] 1 Lloyd's Rep. 199, by which he stayed an action proceeding in Hong Kong in favour of the courts of Singapore in response to the persuasive arguments of Mr Haddon-Cave. The judge declined to follow the decision in the Caltex case. He said (at p. 211):

“The fact that the 1976 Convention is a development from the 1957 Convention does not make the 1976 more widely acceptable objectively or more desirable objectively. There are pros and cons in respect to the two Conventions and a country’s preference for one Convention over another is a very complicated matter, very often dictated by factors such as whether it is a country of shipowners or cargo-owners/traders, its level of economic activity and development and the overall impact of the two Conventions on the country’s economic welfare.

Where I find I cannot accept the reasoning of Caltex is the part of the decision expressed to be based on English public policy. It may be the law of Hong Kong that the 1976 Convention is given the force of law in Hong Kong but that is not the same thing as saying that the 1976 Convention reflects Hong Kong public policy or that it is Hong Kong public policy to give full coercive force to the 1976 Convention or to apply the 1976 limit against parties whose countries have not subscribed to the 1976 Convention (e.g. Singapore and Russia). It seems to me that this approach goes directly against the very high authority of Spiliada and the very case which came to be decided immediately after Spiliada, namely de Dampierre v. de Dampierre. ”

That decision was reversed, by a majority, in the Court of Appeal of Hong Kong. Liu J.A., in a dissenting judgment, said that Waung J. “was right in refusing to allow himself to be unduly persuaded by the rationale of Mr Justice Clarke”.

Two more cases followed in quick succession. In Caspian Basin Specialised Emergency Salvage Administration v. Bouygues Offshore SA [1997] 2 Lloyd's Rep. 507 the contest was the opposite way round from the present case: the shipowners wished to limit their liability in England, presumably because the difficulty in breaking the limit under the 1976 Convention was greater although the limit itself was higher. Rix J. declined a stay in favour of the South African courts. After considering the Caltex case and the Kapitan Shvetsov (both before Waung J. and in the Court of Appeal), he said that it was clearly a point on which two views could be strongly argued, and continued (at p. 530):

“What Mr Justice Clarke referred to as English public policy was, as he made plain, ultimately a reflection of the modern international view of the justice of the matter. That is not to say, of course, that the earlier Convention, to which the United Kingdom itself adhered until quite recently, is an unjust regime or that jurisdictions which still apply it are less civilised for doing so. But it does, it seems to me, entitle a Court to say that the 1976 Convention represents not merely English law but an internationally sanctioned and objective view of where substantial justice is now viewed as lying, and that in such circumstances the advantages of the 1976 Convention (whichever way they fall on the facts of any case) are a relevant and legitimate consideration in the overall question of where a case may be tried for the interests of all the parties and the ends of justice.”

However, Rix J. went on to say that the point was not one which he had to decide. He based his decision on other authorities, which said that a shipowner had at least a prima facie right to choose the forum in which he would bring limitation proceedings. (That, incidentally, is an argument which would favour the MING owners in the present case; but Mr Russell told us that they do not rely on it.) The decision of Rix J. is presently under consideration in the Court of Appeal.

The last of the other cases is Bouygues Offshore SA v. Caspian Shipping Co. [1997] 2 Lloyd's Rep. 533. It is, we hope, enough to say that Timothy Walker J. followed the reasoning of Clarke J. in the Caltex case and Rix J. in the decision just mentioned, saying that:

“the 1976 Convention represents a widely held view of objective justice.”

This was delivered on 13th May 1997, after Rix J. but before Timothy Walker J. After an exhaustive review most of the authorities Clarke J. said (at p. 176):

“I have reconsidered this question with care in the light of the submissions clearly advanced on both sides. As already stated, I accept the point that it is wrong to refer to English public policy, at least as that expression is used in Dicey & Morris. I also accept the submission that in general one must not compare the quality of justice in different jurisdictions. In particular, different jurisdictions will naturally have different approaches to matters such as evidence, discovery and costs. The question remains an objective one, namely whether in the interests of all parties and the ends of justice it is just to grant a stay. ....

After hearing the argument and considering the question afresh, but before learning of the decision of Mr Justice Rix to which I refer below, I reached the conclusion that the views expressed in Caltex are to be preferred to those expressed by Mr Justice Waung in The Kapitan Shvetsov, namely that, given the provisions of the 1976 Convention and the development of international maritime law which it represents (as evidenced by the support of IMO), it is in principle appropriate to hold in an appropriate case that, viewed objectively, the interests of all parties and the ends of justice may best be served by refusing a stay in an appropriate case and allowing the plaintiffs to proceed.”

Clarke J. went on to say that the views of Rix J. were entirely consistent with the conclusions he had reached.

We have to say that we agree with Waung J. and with Liu J.A., rather than with the majority of the Court of Appeal in Hong Kong and the English judges at first instance. We reach that decision for three reasons:

(1) The 1976 Convention has not received universal acceptance, or anything like it. It is not “an internationally sanctioned and objective view of where substantial justice is now viewed as lying”. It is simply the view of some 30 states.

(2) The International Maritime Organisation is not a legislature. It may commend the 1976 Convention to the international community. But if by doing so it were found to have enacted an international consensus, that would be to deprive sovereign states to a large extent of their right to stay with some other regime. We say that because jurisdiction could often be obtained by arresting a ship in a 1976 country, and if that action were allowed to proceed despite there being a more appropriate forum where 1957 prevailed, the 1957 country would be left with no effective use for its own law.

(3) In our view it is quite impossible to say that substantial justice is not available in Singapore, seeing that there is a significant body of agreement among civilized nations with the law as it is there administered. The preference for the 1976 Convention has no greater justification than for the 1957 regime. Loss in the cases we are considering will often be borne by the insurers of one side or the other. The 1976 Convention provides a greater degree of certainty, which they will perhaps welcome. But in terms of abstract justice, neither Convention is objectively more just than the other. Our task is not to decide whether our law is better than the law of Singapore. It is to decide whether substantial justice will be done in Singapore. In our view it will be. This appeal should be allowed, and an unconditional stay of the English action granted.

Order: Appeal allowed with costs; application for

leave to appeal to the House of Lords refused.