JUDGMENT
Lord Justice LEGGATT:
The third defendants, R. Shipping Co., appeal from the order of Mr. Justice
Sheen of July 25, 1990. By that order he dismissed the third defendants'
applications under O. 12, r. 8 for orders that the order of the Admiralty
Registrar, giving leave to the plaintiffs to issue and serve a concurrent
writ on the third defendants out of the jurisdiction, be set aside and that
the issue of the writ and service of it on the third defendants be set aside
(see [1991] 1 Lloyd's Rep. 69). As their title indicates, the plaintiffs are
the owners of the cargo lately laden on the ship R.. The grounds of the
application were:
(a) There is no real issue to be tried between the plaintiffs and the first
defendants;
(b) The third defendants are not necessary or proper parties to these
proceedings;
(c) This is not a proper case for service out of the jurisdiction: (i) by
reason of an exclusive jurisdiction agreement between the plaintiffs and
the third defendants, and (ii) because the plaintiffs have not shown that
England is the more appropriate forum than that provided for in the
exclusive jurisdiction agreement between the parties;
(d) The third defendants are domiciled in Germany, and must be sued
there pursuant to art. 2 of Schedule 1, to the Civil Jurisdiction and
Judgments Act, 1982;
(e) The first plaintiffs and the second defendants are domiciled in a
Contracting State and the third defendants are, and the first plaintiffs
claim to be party to an agreement that a court of a Contracting State,
the Federal Republic of Germany, is to have jurisdiction to settle disputes
arising in connection therewith under art. 17 of Schedule 1 of the Civil
Jurisdiction and Judgments Act, 1982.
The plaintiffs claim as cargo interests for loss and damage to a cargo
of nutmegs and mace shipped in July, 1988 aboard the vessel R. at
Granada for carriage to Felixstowe, Rotterdam and Hamburg. The
third defendants then were the owners, the fourth defendants were
intermediate charterers, and the first defendants were sub-charterers of
the vessel. The claim is made against the "first and/or third defendants"
under contracts of carriage contained in or evidenced by bills of lading.
The claim is also made against those defendants for breach of their
duties as bailees or carriers for reward in failing to deliver the cargo and
to deliver it in the like good order and condition as when shipped. The
third defendants claim that they were, but the first defendants were
not, parties to the bills of lading contracts, and that they therefore were
carriers under the bills of lading, on which they are entitled to rely. Clause
3 of the bills of lading provides:
3. Jurisdiction
Any dispute arising under this Bill of Lading shall be decided in the
country where the carrier has its principal place of business, and the law
of such country shall apply except as provided elsewhere herein.
According to the third defendants, their principal place of business is
Hamburg. On that footing they contend that the Court is obliged by
art. 17 of the Brussels Convention, 1968 ("the Convention") to decline
jurisdiction.
The plaintiffs contend that the Judge was right to find that, even though
the third defendants' domicile was in West Germany, their principal
place of business was in Hong Kong. They argue that it was in those
circumstances within the Judge's discretion to refuse to set aside the
proceedings, and that there are now no grounds for interfering with that
exercise of discretion.
Section 42 of the Civil Jurisdiction and Judgments Act, 1982 ("the Act ")
provides (so far as material) as follows.
(1) For the purposes of this Act the seat of a corporation... shall be
treated as its domicile.
(2) The following provisions of this section determine where a corporation
or association has its seat – (a) For the purpose of Article 53 (which for
the purposes of the 1968 Convention equates the domicile of such a body
with its seat)...
(6) Subject to subsection (7), a corporation or association has its seat
in a state other than the United Kingdom if and only if – (a) it was
incorporated or formed under the law of that State and has its registered
office or some other official address there; or (b) its central management
and control is exercised in that state.
It was disputed before the Judge, but is now common ground, that
the seat, and therefore the domicile, of the third defendants is in West
Germany, because its central management and control is exercised in that
State. The Judge came to that conclusion on account of the fact which he
recapitulated at p. 74 col. 1 of the report of his judgment in this way:
First, all the directors were German and resident in West Germany.
Second, the shares in R. are all beneficially owned or controlled by
German companies. Third, major policy decisions are made in Hamburg.
Fourth, such meetings of directors as were held were in Hamburg. In the
agreement with Turbata drawn up on June 15, 1987 certain major policy
decisions were reserved by the directors of R., and that agreement is
specifically stated to be governed by German law and the parties thereto
agreed to submit to the jurisdiction of the Hamburg courts. The reference
to Turbata is to Turbata Co. Ltd. of Hong Kong who were employed by the
third defendants as managers of the vessel.
Article 17 of the Convention (as amended) provides that where parties,
one or more of whom is domiciled in a Contracting State, have agreed
that the Courts of a Contracting State are to have jurisdiction to settle
particular disputes, those Courts shall have exclusive jurisdiction, and that
such an agreement must be in writing or in accordance with international
trade practices.
The four principal issues in this appeal are these:
(1) Whether the third defendants were parties to the bills of lading; (2)
whether the third defendant's principal place of business was in West
Germany; (3) to what standard the third defendants are required to
prove that cl. 3 constitutes a jurisdiction agreement between the third
defendants and the plaintiffs to which art. 17 applies; and (4) whether cl.
3 satisfies the formal requirements of art. 17.
The Judge held that the third defendants are domiciled in West Germany.
From that there is no appeal. Article 2 of the Convention provides:
Subject to the provisions of this Convention, persons domiciled in a
Contracting State shall, whatever their nationality, be sued in the courts
of that State.
Persons who are not nationals of the State in which they are domiciled
shall be governed by the rules of jurisdiction applicable to nationals of
that State. It follows that, unless the plaintiffs can show that another
article applies, the third defendants cannot be sued in this country, but
must be sued in West Germany.
Article 6 provides (so far as material):
A person domiciled in a Contracting State may also be sued: (1) where
he is one of a number of defendants, in the courts... or the place where
any one of them is domiciled This is a provision analogous with R.S.C., O.
11, r. 1(1)(c), which permits a person to be served out of the jurisdiction
who is a "necessary or proper party". To rely on art. 6 the plaintiffs would
have to show that there is a real issue that the plaintiffs may reasonably
ask the Court to try as to whether the first defendants assumed the
obligations of the carriers under the bills of lading. They seek to do
that notwithstanding that they have alleged in the alternative, the first
defendants have averred, and the third defendants have admitted, that
the third defendants were the carriers, because the bills were owners'
bills. The Judge remarked that the bills of lading are all on the first
defendants' standard form with no indication that they were not the
carriers; that according to the plaintiffs the contracts of carriage were
made orally by the second plaintiffs with the first defendants' local agents
in Grenada at a time when the second plaintiffs were unaware that R.
was on charter; that in October, 1989 the third defendants' solicitors
contended by telex to the plaintiffs' solicitors that the bills of lading were
charterers' bills; and that under German law it would be held that the
third defendants are not parties to the contract of affreightment and are
not liable in contract to the cargo interests under the bills of lading. The
Judge concluded that:
It is... clearly arguable that the shippers entered into a contract with the
first defendants and that the first defendants assumed the responsibilities
of "the carrier" under the bills of lading.
The time charter was made in Hamburg Jan. 8, 1988, in NYPE form. By cl.
8
it was provided that the captain is -
... to sign Bills of Lading for cargo as presented in conformity with Mates'
or Tally Clerks' receipts. By cl. 53:
It is understood that the Master will authorize Charterers, or their Agents,
to sign Bills of Lading on his behalf provided the Bills are made up in
accordance with Mate's and Tally Clerk's receipts.
The bills of lading were liner bills with the name of the first defendants
and also of the second defendants as managers printed at the head. The
shipper was expressed to be Grenada Co-Op Nutmeg Association, and the
notify address was of the first plaintiffs in Rotterdam. Under "Particulars
furnished by the merchant" appeared a statement in common form that:
In accepting this Bill of Lading the Merchant expressly accepts and agrees
to all its stipulations on both pages, whether written, printed, stamped
or otherwise incorporated, as fully as if they were all signed by the
Merchant...
In Witness whereof the Master of the said Vessel has signed the number
of original Bills of Lading stated below, all of this tenor and date, one of
which being accomplished, the others to stand void. In each bill under the
printed words "For the Master" appeared the stamp of St. John Agencies
surmounted by an indecipherable signature.
The third defendants contend that it is clear that they, and not the first
defendants, were parties to the bills of lading. The bills were signed
"for the Master" by the local agents of the first or fourth defendants
in Granada on the first defendants' form. The connection between the
agents and the owners is plain from the fact that by cl. 53 of the time
charter the agents had authority to sign for the master, who was the
servant of the owners. By contrast, there is no evidence, actual, implied
or ostensible, that the agents had any authority to bind either the first or
the fourth defendants to the bills.
The plaintiffs adopt the Judge's approach, contending that it is strongly
arguable that the bills of lading were charterers' bills. They argue that the
bills were issued by or in the name of a container line of which the first
defendants were operators. There was nothing in the bills, which were
their documents, to limit or qualify an assumption of personal liability of
the first defendants. The bills contained no clause identifying any person
other than the first defendants as "carriers". The absence of any provision
identifying the "carriers" should lead to the inference, the plaintiffs argue,
that the first defendants were liable as the persons in whose name the
bills were issued.
The plaintiffs say that they are trying to investigate the circumstances in
which the bills of lading were issued, and what authority was given to St.
John Agencies to issue them, whether by the owners, or by the master, or
by the charterers. The plaintiffs argue that the oral booking contract may
throw light on what the parties understood. They contend that the bills
of lading provide "very likely" evidence of the terms of the contract; but
to see whose bills they are it is appropriate to look at the circumstances
of their issue. Bills of lading signed "by or for the master" are capable of
giving rise to charterers' bills. If issued in liner forms, and if shippers do
not know that the vessel is chartered or that anyone is signing for the
line, then the plaintiffs contend that in the absence of clear words to the
contrary the bills are char- terers' bills. It is an oddity that although the
plaintiffs are not arguing for the purpose of giving the Court jurisdiction
that the bills were charterers' bills, they would at trial be contending that,
as they have pleaded and the defendants have admitted, the bills are
owners' bills.
The inspiration of the plaintiffs' argument on this issue appears to be
Scrutton on Charterparties, 19th ed. p. 68-9, where in art. 38 it is stated
first that:
When a bill of lading is issued for goods on a chartered ship, the
question whether the bill of lading, in the hands of a shipper other than
the charterer or of a bona fide holder for value is a contract with the
shipowner or the charterer is one of some difficulty and it is difficult to lay
down general rules. For this proposition is cited:
Per Walton J. in Samuel v. West Hartlepool Co. (1906) 11 Com. Cas. 115
at page 125. What the Judge in fact said at that page was this:
Upon this point many cases were cited, and to some extent the
authorities appear conflicting. But since the question is really a question
of fact depending upon the documents and circumstances in each case,
it may be that the apparent conflict arises mainly from the fact that the
documents and circumstances are different in different cases. At p. 126
Mr. Justice Walton added, after referring to an example of an owners' bill:
But even in cases of this kind it is scarcely safe, in my opinion, to lay
down a hard and fast rule. The circumstances and terms of the documents
may differ in different cases belonging to this class. and between the
two types of classes which I have described there is a great variety of
intermediate cases, of which the present case is an example. If there was
any decision upon documents and facts substantially or in all material
respects similar to those in the present case, I should, of course, follow it.
After referring to a demise charter, the editors of Scrutton continue at p.
69:
If the charter is not a demise a bill of lading signed by the master or by
the charterer as authorised agent of the master is usually a contract with
the shipowner. For that among many other authorities is cited the dictum
of Mr. Justice Channell in Wehner v. Dene Steamship Co., [1905] 2 K.B.
92 at p. 98:
In ordinary cases, where the charterparty does not amount to a demise
of the ship, and where possession of the ship is not given up to the
charterer, the rule is that the contract contained in the bill of lading is
made, not with the charterer, but with the owner... There then follows in
Scrutton the sentence that has given rise to controversy:
However, although the master is the owner's servant, his signature may
in some cases bind the charterer and not the owner. When the original
editor wrote that sentence he may be supposed to have cited as authority
only Harrison v. Huddersfield Steamship Co., (1903) 19 T.L.R. 386. An
agreement had been made between shipowner and charterer that the
captain was to be the agent of the charterer and to have no authority to
make contracts by bills of lading on behalf of the shipowner. The words
"as Master " which were printed on the bills of lading had been struck out
and the words "as agent for time charterers" substituted in writing. The
captain gave evidence that he received express instructions not to sign
bills of lading for owners but only as agent for time charterers. Mr. Justice
Walton held that:
... if the Master had signed as master he would have been making a
contract for the shipowners. But he did not do so. Under the whole
circumstances of the case, the contract by the bills of lading was not
made for the shipowners, nor did the master propose to act for the
shipowers, nor had he apparent authority. It followed that the shipowners
were not liable.
For reasons that are not clear, to footnote 79 in which Harrison v.
Huddersfield (sup.) is cited the following passage has since been added:
... see too Wehner v. Dene SS. Co.... Wilston SS. Co. v. Andrew
Weir & Co. (1925) 31 Com. Cas. 111; Paterson Zochonis v. Elder
Dempster(1922) 12 Ll.L.R. 69, 71; Zwilchenbart v. Henderson(1854) 9
Ex. 722; The Venezuela [1980] 1 Lloyd's Rep. 393. Taking those cases in
chronological order, Zwilchenbart v. Henderson (sup.) depended on the
fact that there was no evidence of a contract between the master and the
consignee, and was not relied on in the present case by either Counsel.
To Wehner v. Dene SS. Co. (sup.) I have already referred; the bills were
owners' bills. Paterson Zochonis & Co. v. Elder Dempster & Co., (1922)
12 Ll.L.Rep. 69, concerned a claim for cargo damage which occurred on
a vessel chartered for use in the Elder Demptster Line. The bills of lading
were issued in the name of the first three defendants, of whom African
Shipping Co. were the time charterers. The question of liability on the bills
was dealt with
only in passing, Mr. Justice Rowlatt observing:
... it seems to me that there is a contract with the African Shipping Co
on this bill of lading. This is a case where a well-known line of ships
found it necessary to supplement its fleet by getting in another upon
a time charter; and people in the commercial world who use the line
know nothing at all about that. They think they are shipping by this line;
and unless it is clear to the contrary the contract should be regarded as
being made with the line. In this case the mate's receipt – as the bill of
lading itself which goes just as far – it is the more material document –
proclaims to the people who took the bill of lading that those who are
going to carry the goods are the African Steamship Co; and there is the
signature at the bottom which may be the signature of the master without
qualification. Therefore, I think, in these circumstances it is a bill of lading
with the African Steamship Co.
Mr. Saloman relied on the case as an example of a vessel chartered by a
line. The reports of the case in the Court of Appeal ((1923) 13 Ll.L.Rep.
513 at p. 514; [1923] 1 K.B. 420 at p. 422) show that, as the Judge held,
the contract on the bill of lading was with the charterers. But no impetus
is to be derived from that case for present purposes, because although
the bills were liner bills all the tonnage used by the first defendants
appears to have been chartered in.
It is necessary to consider Wilston Steamship Co. v. Andrew Weir & Co.,
(1925) 22 Ll.L.Rep. 521; (1925) 31 Com. Cas. 111 in a little more detail,
because it is in my judgment an example of what in Samuel v. West
Hartlepool Co. (sup.) Mr. Justice Walton referred to as a -
... decision upon documents and facts... in all material respects similar to
those in the present case. When the defendants chartered the vessel from
the plaintiffs they agreed to indemnify the owners from all consequences
or liabilities that might arise from the captain signing the bills of lading by
the orders of charterers or their agents. The arbitrator, Mr. R. A. Wright
K.C. held that the bill of lading was an owners' bill. The charter was a
time charter, not amounting to a demise. It contained a clause which
contemplated that bills of lading might be signed by the master on the
orders of the charterers. When signed and made, they would be contracts
of the shipowners. The bills of lading were upon the charterers' printed
form. The Judge remarked that -
... The allusions in the stipulations and conditions of the bill of lading are
somewhat ambiguous... but he held that "the really decisive language"
was to be found at the end of the document. After reference in common
form to the signing of the bills of lading, there appeared the words "for
the Master" in print, and then in writing -
... for Captain A. Souter, master s.s. Wilston, for Turner, Morrison and
Co Ltd... followed by initials which were not those of Captain Souter. In
those circumstances the Judge agreed with the decision of the arbitrator
that this bill of lading was a bill of lading contract of the shipowners. He
regarded the case as governed by Wehner v. Dene Steamship Co. (sup.)
and Tillmans v. Knutsford Steamship Co., [1908] 1 K.B. 185. Mr. Saloman
could only submit that Wilston's case is distinguishable because the bills
of lading referred expressly to the owners. In my view that is immaterial.
The remaining case of The Venezuela, [1980] 1 Lloyd's Rep. 393 can be
dealt with shortly. The bill of lading contemplated that the carrier would
be the sub-charterers of the vessel or an associated company with which
it ran a regular liner service. Mr. Justice Sheen construed the bill of lading
to mean that the sub-charterers were operating the vessel in the sense of
having produced it to carry the goods. At p. 397 he held that if the sub-
charterers did not wish to contract as "the carrier", then the bill of lading
issued by them should at least have made it clear with which company
the shipper was entering into the contract of carriage. Until the shipper
or holder of the bill of lading was told that the vessel was on time charter
for the voyage in question there was nothing on either side of the bill of
lading which indicated that anyone other than the sub-charterers were
contracting as carrier. In the circumstances of that case he therefore held
that the bills were charterers' bills.
Mr. Saloman was content to dismiss most of these cases as decided
on their own facts. As an example of a case in which charterers may
be bound even though the bills are signed "by or for the Master", he
relied most strongly on The Okehampton, [1913] P. 173. The contract
of carriage was between the plaintiffs and the shippers of the cargo, the
plaintiffs taking delivery of the goods from the shippers, putting them
on board, signing the bills of lading in their own name, and on their
own behalf, as principals. The question raised by the case was whether
the plaintiffs, who were sub-charterers, and had lost their freight after
the vessel had collided with the defendants' vessel, had a possessory
interest which entitled them to sue. The sample bill of lading in Spanish
bore the words "el capitan" to indicate where the master of the vessel
was to sign. The bills were signed in this space by a representative of
the sub-charterers. Mr. Roche, K.C., who appeared as Counsel, later
remarked as Mr. Justice Roche in Wilston's case (sup.) at p. 117 that in
The Okehampton, as he understood the facts, -
The bill of lading made no reference to the Master, or, at all events, it did
not purport to be signed for and on behalf of the Master or for and on
behalf of the ship or the shipowners. Lord Justice Vaughan Williams held
at p. 178 that the sub-charterers' representative signed the bill of lading
on his own behalf with the full knowledge of the master. He concluded
that because the bill of lading was signed by the charterer -
... not on account of the ship but on his own account, it follows
necessarily that he had sufficient interest – really sufficient possession
– to enable him to bring this action. Lord Justice Hamilton remarked
that the important point was that the owners were not parties to the
contract of carriage constituted by the bills of lading. They had to be
construed in the light of the fact that they were signed by the charterers.
The essential feature was that the charterers did not purport to sign the
bills for the master or the shipowners. The signature by the charterers
was unqualified and the bills were therefore charterers' bills.
The Okehampton (sup.) was an unusual case in that, in order to sue, the
charterers had to show that they had a possessory title. They did so by
proving that they were bailees of the goods at the time when the bills
were issued in their name. The charterers themselves signed the bills of
lading, and it could be inferred as a matter of fact that the goods were
in their possession. The case merely shows that even if the signatory
had authority to bind the shipowner, he did not in fact purport to do so,
and the charterers alone were made parties to the contract. The bill of
lading was signed by the charterers not on account of the ship but on
their own account. They were signing for themselves as principals, and
the shipowners were not parties to the contract of carriage. It is important
to note that although the sample bills bore the words "el capitan", the
charterers did not purport to sign for him. The difference is crucial. That
was why Lord Justice Hamilton referred to the contract of carriage as
having been made with the charterers "in form". He remarked at p. 181
that authority -
... carries one no further unless it is established that they did sign on
behalf of the Master. But the charterers did not purport to do so and, as
Lord Justice Hamilton said:
... all the circumstances seem to me to show that in fact they did not do
so. In short, in that case, as in this, the question is one of construction.
Mr. Saloman submits that where a charterer operates a line and all bills
are signed by the charterer, apparent difficulties, such as that the bills
may be master's bills, carry no weight because the intent of the document
is paramount. For that reason the fact that in this case the signature
of St. John Agencies appears under the words "For the Master" is not
conclusive. He argues that it is insufficient that there was authority for
agents to sign on the owners' behalf. It carries one no further unless it
is established how the bills were actually signed. That takes Mr. Saloman
to his central proposition: where bills are issued in regular liner form and
the shippers do not know either that the vessel was chartered or that the
master was not the servant or agent of the line, unless there are clear
terms in the bill of lading to the contrary, the bill is a charterers' bill; and
there is nothing in the authorities (Mr. Saloman adds defiantly) to the
contrary.
Mr. Gaisman relies on Tillmans v. Knutsford (sup.) in which the time
charterers had agreed to indemnify the owners from all consequences of
the captain signing bills of lading by order of charterers or their agents,
and they signed one of the four bills of lading "for the Captain and
owners". Mr. Atkin, K.C. argued for the owners that only the captain could
bind them by signing the bills of lading. But Mr. Hamilton, K.C. replied for
the charterers that the signing of the bill by the charterers was "either
authorised by the owners at the time or ratified afterwards." At p. 191 Mr.
Justice Channell said:
... the time charterers, instead of directing, as they were entitled to do,
the captain to sign, signed it themselves. I am of opinion that the effect
of their so signing is exactly the same as if they had directed the captain
to put his name to the bill of lading and he had accordingly signed it. If
they had struck out the words "for the Captain and owners", and then
signed it, I think they would, on the face of it, have been purporting to
make it their own contract; but they did not purport to make it their
own contract. They purported to sign it for the captain and owners; and,
therefore, to make it the contract of the captain and owners, and they
had absolute power to do that by the terms of the charterparty. Similarly,
in the present case the master was required to sign bills of lading as
presented, and the understanding was that with his authority the
charterers or their agents would sign them on his behalf. In any event,
even had there been no prior authorisation, since with knowledge of the
bills of lading the master proceeded to carry the goods, there was the
plainest possible case of ratification.
In essence the plaintiffs' argument depends on the use of liner forms of
bills of lading, coupled with their ignorance of the fact that the vessel
was chartered. But on the present state of the evidence there is nothing
to detract from the bills of lading which on their true construction were
signed for the master by agents to whom he was empowered to give
authority and must be taken to have done so, since he was required
to sign them as presented. The master was in fact the servant of the
shipowners. 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 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
contacts 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.
It is common ground that the charter in the present case is a time charter,
not amounting to a demise. It appears to me that the law was correctly
stated by Mr. Justice Channell in the passage from Wehner v. Dene SS.
Co. which I have cited earlier. That formulation has never been doubted.
The facts of the present case are indistinguishable from those in Wilston
v. Andrew Weir(sup.), and that decision has never been doubted. The
text in Scrutton on Charterparties to which note 79 is appended is now
misleading, and in context only the first of the cases there referred to
is helpfully cited. If Mr. Justice Walton had had the benefit in 1905 of
the cases subsequently decided, he would have been unlikely to regard
them as "to some extent... conflicting ". They are all of a pattern. In my
judgment they support the conclusion that a bill of lading signed for the
master cannot be a charterers' bill unless the contract was made with the
charterers alone, and the person signing has authority to sign, and does
sign, on behalf of the charterers and not the owners. Accordingly, the
bills of lading in this case were owners' bills. The plaintiffs have no claim
against the first defendants. Article 6 therefore cannot be complied with
in relation to the third defendants. Since I do not regard the contrary as
capable of serious argument, the plaintiffs' case against them must fail. It
is therefore not necessary to consider any of the third defendants' further
arguments. But since the question of where the principal place of business
was of the third defendants has been argued before us, I will briefly say
why I take a view about it different from the Judge.
As a result of foreclosure two mortgagee banks each owned a 50 per
cent. share in the third defendants who were a company set up to run the
vessel.
She was registered in Liberia. Each bank appointed a director; and the
third director was a representative of the brokers, C. F. A. G.m.b.H. &
Co. of Hamburg. The banks were companies registered in West Germany
with German directors. The minutes are available of only three board
meetings: on July 17, 1987 to constitute the company and to arrange
for the management of the vessel by Turbata; and on Nov. 14, 1988 to
ratify the sale of the vessel. They were held in Hamburg. The managers
were evidently chosen for their experience of crewing vessels. The
management agreement dated July 15, 1987 appointed them to provide
all the day-to-day management services, but made charter-parties
exceeding three months subject to the third defendants' prior consent.
Insurance, entry with a P. and I. Club, and the bringing of proceedings
were to be in accordance with the third defendants' instructions. Use of a
bank other than a particular one of the mortgagee banks was subject to
consent. The managers had to furnish to the owners a budget, statement
of earnings, balance sheet, detailed expenses account, and all the vessel's
earnings after deduction of operational costs. The master and others
employed in or in connection with the vessel were deemed to be servants
of the owners. The agreement itself was governed by German law and
subject to the Hamburg
Courts. The relevant charter-party was negotiated by C. F. A. subject to
board approval, which was given. The Judge referred to most of these
facts in greater detail between pp. 73 and 74 of his judgment.
When determining the domicile of the third defendants by virtue of s.
42(6)(b) of the Act, the Judge concluded that the "central management
and control" of the company was exercised in West Germany. He
nevertheless felt able to hold that -
... [i]t is unrealistic to regard the business of R. as having been carried on
in Hamburg... and that because the ship was managed in Hong Kong, the
third defendants' principal place of business was in Hong Kong. In support
of this conclusion the plaintiffs argue that "principal" means "main". I
disagree: in my view it means, in this context as well as generally, "chief"
or "most important". The principal place of business is not necessarily
the place where most of the business is carried out. They argue that it
is wrong to construe a maritime contract by reference to The Polzeath,
[1916] P. 241, which was concerned with the forfeiture in wartime of a
vessel that purported to be English rather than German. The plaintiffs
maintain that the third defendants' business was really carried out in
Hong Kong, and that the Judge was therefore right to conclude that that
was where their principal place of business was. Rightly, in my judgment,
the third defendants underscore the fact that the shareholders, directors
and mortgagee banks were German; that the meetings of directors took
place in Hamburg; that charters, including the relevant time charter
of Jan. 8, 1988, had to be authorised specifically from Germany; that
everything about the relevant charter was German except the fact that
it was into the Hong Kong branch of a German bank that hire was to
be paid; that by German law profits had to be repatriated to Germany;
and that, as appears from the entries in the Lloyd's registers, the third
defendants' brokers, C. F. A. of Hamburg, played an important role in
their affairs. True it is that the day-to-day management of the vessel
was conducted by Turbata under the management agreement, but the
third defendants points out that the managers were always answerable,
and subject, to the control and direction of the German officers of the
company.
In Palmer v. Caledonian Railway Co., [1892] 1 Q.B. 823 Lord Esher said:
I should have thought without any authority that the principal office of
the company must be the place at which the business of the company is
controlled and managed... in the sense that it is independently controlled
or managed... A similar approach was adopted by Lord Loreburn, L.C.
in De Beers Consolidated Mines Ltd. v. Howe, [1906] A.C. 455 when at
p. 458 he accepted the principle that a company resides for purposes of
income tax where its real business is carried on, adding:
I regard that as the true rule, and the real business is carried on where
the central management and control actually abides. So also in Daimler
Co. v. Continental Tyre and Rubber Co. (Great Britain), [1916] 2 A.C. 307
Lord Atkinson at p. 319 indicated that a test of residence was the -
... place where the real business centre from which the governing and
directing minds of the company operated, regulating and controlling its
important affairs. In The Polzeath (sup.) this Court had to determine
whether in wartime a ship owned by a British company, but in some
respects directed from Germany, was forfeit to the Crown. Under s. 1
of the Merchant Shipping Act, 1894 the question whether she was a
British ship depended on whether the company had its "principal place of
business" in this country. In the leading judgment Lord Justice Swinfen
Eady considered the shareholding and directors of the company, the
company's financial control and banking, and the chartering and insurance
of the vessel, as well as the day-to-day management which obviously had
to be conducted in England. Lord Justice Swinfen Eady concluded, and the
other Lords Justices agreed with him -
... that both before and after the war, and at all the material dates, the
control and management of this company were in Hamburg. The test
which he applied appears at p. 245 when he said:
... in considering what is the principal place of business of the company,
one has to consider the centre from which instructions are given,
and from which control is exercised on behalf of the company over the
employees of and the business of the company, and where control is
exercised, and the centre from which the company is managed without
any further control except such control as every company or the directors
of a company are liable to by the larger body which they represent, the
shareholders of the company in general meeting [emphasis added]. The
Court held that although the manager at King's Lynn had always -
... practically had a free hand as to chartering steamers, surveys, repairs,
freights, arranging officers and crew, etc.... he had acted under the
direction of the chairman at Hamburg, and that under those circum-
stances it was clear that both before and after the outbreak of war the
principal place of business of the company had been Hamburg.
In my judgment there is nothing uncommercial or inapposite about
the conclusion that the principal place of business is in Hamburg of a
company
registered in Liberia owning a ship, the earnings of which would ultimately
be remitted to Germany, and about which most important decisions would
be taken in Germany. That is the conclusion to which the reasoning in The
Polzeath inexorably leads, and it is applicable here. Although the Judge
purported to apply the reasoning in that case, he never asked himself
from which city the business of the third defendants was "independently
controlled or managed ". Still less did he attempt to identify the centre
from which the company was managed "without any further control".
Had he done so, he must have recognised that, although in practice
Turbata had a free hand in the day-to-day management of the vessel from
Hong Kong, all that they did was subject to the control of the directors
in Hamburg. That was the centre from which instructions were given
when necessary, and ultimate control exercised. I do not consider that
the reference to the "principal place" of the third defendants' business
requires the identification of a particular building. For purposes of cl. 3
of the bills of lading it is sufficient that the principal business of the third
defendants should have been conducted from West Germany. Had it been
necessary to determine the matter at this stage, I would therefore have
held that the third defendants' principal place of business is in Hamburg
where its central management and control is exercised.
I am content to assume that, if they were relevant, the Court would at
this stage have to decide the issues arising under art. 17 rather than
merely determine whether they give rise to a good arguable case, but I
reserve my opinion about whether in the circumstances of this case the
jurisdiction agreement satisfies the requirements of that article.
The course which shipping disputes may take when they have to be
resolved by lawyers is not always predictable. So in a case in which
containers of spices were admittedly lost overboard, we find the third
defendants arguing that the action should take place in Hamburg now
that it would be time barred there, while the plaintiffs resist that course
by arguing that bills are charterers' bills which they would seek at trial to
prove are owners' bills. I would allow the appeal, and make an order in
terms of the third defendants' summons.
Lord Justice NICHOLLS:
I agree that this appeal should be allowed for the reasons given by Lord
Justice Dillon and Lord Justice Leggatt. At one stage I was exercised that
the owners' arguments involved the unacceptable conclusion that the
cargo-owners would be unable to sue the carriers under the bills of lading
contracts either in England or in Germany. On one hand, under English
law the owners were the carriers, but they could not be sued in England
because they are domiciled in Germany and, in the absence of a good
arguable claim against the English sub-charterers, the owners could
not be brought before the English Court under art. 6 of the Brussels
Convention 1968. On the other hand, although the owners could be
sued in Germany, that would not avail the cargo-owners because under
German law the carriers under the bill of lading contracts were the sub-
charterers and not the owners.
Fortunately this conundrum does not arise. Although the owners are not
and
were not amenable to the jurisdiction of the English Court in this action,
under German law they as owners were under a potential liability in delict
on bills of lading terms. Further, the sub-charterers could have been sued
in Germany as carriers under the bills of lading contracts by virtue of art.
6; they could have been joined as additional defendants to an action in
Germany brought against the German-domiciled owners. (In this regard I
add that I am not persuaded that art. 17 would have assisted the English
subcharterers in resisting the jurisdiction of the German Court. In addition
to and quite apart from any other considerations, I do not believe the
sub-charterers could have insisted on being sued in England in reliance
on art. 17 of the Convention and cl. 3 of the bills of lading contracts if
the effect of so doing would have been that the claim then fell to be
determined by a law under which they, as the sub-charterers, were not a
party to the contract containing the very clause, cl. 3, on which they were
relying.)
Thus the result of this appeal is a decision that the English Court has no
jurisdiction to try this action. But that is not to say that the plaintiffs were
without remedy for the cargo loss of which they complain. They had a
remedy in Germany. It is the plaintiffs' misfortune that they instituted
their proceedings in the wrong country.
Lord Justice DILLON:
I agree that this appeal should be allowed for the reasons given by Lord
Justice Leggatt
The crucial question to my mind is whether the third defendants ("the
owners " can be brought before the English Courts under art. 6 of the
Brussels Convention. If not, the owners, who, as is now accepted, have
a domicil in Germany although incorporated in Liberia, must be sued in
Germany under art. 2 of the Convention.
But the owners can only be brought in under art. 6 if the owners have a
valid claim against the first defendants ("the sub-charterers"). If there
is no proper claim against the sub-charterers here, there is no basis for
suing the owners here. Moreover, under the scheme of the Convention,
the question whether there is a valid claim against the sub-charterers
should, if practicable, be decided at the present preliminary stage; the
considerations laid down in The Brabo, (1949) 82 Ll.L.Rep. 251; [1949]
A.C. 326 in relation to O. 11 apply equally, in my judgment, to art. 6.
The only claim suggested by the plaintiffs against the sub-charterers is a
claim in contract on the footing that the sub-charterers were parties to
the bills of lading contract; i.e. that the bills were charterers' bills and not
owners' bills and the sub-charterers were the carriers under the bills. The
plaintiffs accept that if they have no such claim in contract against the
sub-charterers on the bills, they can have no claim in tort against the sub-
charterers.
Whether the sub-charterers, an English company, were parties to the bills
and are consequently liable in contract under them must, at any rate in an
English Court, be decided by English law. It is irrelevant to that question
that, by German law with which the sub-charterers have no connection,
the bills would be regarded as charterers' bills and not owners' bills.
The question whether the sub-charterers were parties to the bills is a
question of the true construction of the bills in the light of the surrounding
circumstances. It is not a question on which further relevant and
admissible evidence may become available if the action is allowed to go
to trial, and it should therefore be decided now on the material presently
before the Court.
Lord Justice Leggatt has summarized the relevant English authorities
in his judgment. The key words in the bills are the words "for master"
against which the stamp and signature of St. John Agencies have been
placed. Unless the words "for master" can be rejected as surplusage
or repugnant to the references to the subcharterers in the heading of
the bills, these bills must, on the English authorities analysed by Lord
Justice Leggatt be held to be owners' bills signed for the master so as
to bind his employers, the owners. But I can, for my part, see no basis
of construction which would entitle the Court to reject the words "for
master" and the preceding words "In Witness whereof the Master... has
signed the... Bills" in this way.
Therefore, in my judgment, the bills are, by English law, owners' bills, the
plaintiffs have no claim in the English Courts against the sub-charterers,
and the owners cannot be brought before the English Court under art. 6
of the Convention.
This makes is unnecessary to express any view on the owner's claim
that art. 17 applies, and we did not hear Mr. Gaisman on many aspects
in relation to that claim. I would merely comment that, as at present
advised, I have considerable difficulty in seeing how the "consensus"
concept of European law exemplified by such decisions of the European
Court as Salotti v. RUWA, [1976] E.C.R. 1831 and Partenreederei MS
Tilley Russ v. Haven & Vervoebedrjf Nova N.V., [1985] Q.B. 931 can
conceivably be satisfied in the circumstances of this case so as to fix
the shippers with notice that the German Courts are to have exclusive
jurisdiction under cl. 3 of the bills. The fact that the shipper's stamp was
endorsed on the back of each bill and initialled, so as to pass title to the
goods to the consignee, is a formality of no relevance to the "consensus "
approach of the European Court.
Finally, I agree with Lord Justice Leggatt for the reasons he gives, and
with all respect to the Judge who took a different view, that the owners'
principal place of business was in Germany – Hamburg – and not in Hong
Kong. Hong Kong was the principal place of business of Turbata, the
managing agents, who are in fact and not merely legal fiction a separate
entity; it is not the principal place of business of the owners.
[Order: Appeal allowed with costs here and below, to be taxed and paid
forthwith; application for leave to appeal to the House of Lords refused.]