In June 2013, the MOL Comfort (the vessel) fractured and sank together with all of the cargo laden on board. The cargo interests of a portion of the lost cargo, Li Lian International Ltd (the plaintiffs), sued the non-vessel operating carriers, Herport Hong Kong Ltd (the defendants), who issued bills of lading in favour of the plaintiffs (the defendants’ BLs). The defendants in turn commenced a third party claim for indemnity against Nippon Yusen Kaisha (the third party) to whom the defendants had sub-contracted the carriage of cargo and who had issued a bill of lading (the third party’s BL) in favour of the defendants.

The defendants’ BLs provided for Hong Kong law to be the governing law and for the Hong Kong Courts to have exclusive jurisdiction. The third party’s BL provided for Japanese law to be the governing law and for the Tokyo District Court to have exclusive jurisdiction.

An action to limit liability was commenced in Tokyo, Japan, to benefit the third party as a slot charterer of the vessel. At first instance, the defendants obtained an order to issue a third party notice and to serve the notice against the third party out of jurisdiction in Tokyo, Japan. This third party notice was duly served. In response to this notice, the third party filed an application to: (i) discharge the order; (ii) set aside the service of the third party notice; (iii) obtain a declaration that the Hong Kong court had no jurisdiction over the third party; (iv) stay the third party proceedings.

Held: Application granted.

The defendants argued that Hong Kong law, as opposed to Japanese law and jurisdiction, should apply because of an ambiguity that was created in the third party’s BL. To establish this ambiguity, the defendants contended that by reason of art 10 of the Hague-Visby Rules (s 3(2) of the Hong Kong Carriage of Goods by Sea Ordinance), the Hague-Visby Rules applied compulsorily to the current matter because it involved a shipment of cargo from Hong Kong. Articles 3.6 and 3.6 bis of the Hague-Visby Rules provide for different limitation periods for claims for loss and damage (limitation period of 1 year) and claims for indemnity (greater than 1 year subject to local legislation).

The third party’s BL stated that 'any and all actions against the Carrier ... shall be brought before the Tokyo District Court ... whilst any such actions against the Merchant may be brought before the said Court or any other competent court at the Carrier’s option'. The defendants argued that the word 'brought' suggested the commencement, initiation or origination of legal proceedings and not legal proceedings involving a claim in indemnity. As the action by the defendants against the third party was a claim in indemnity, it was therefore not caught under the exclusive jurisdiction clause. In any event, the defendant argued that an ambiguity was created and the contra proferentem rule would interpret the contract against the third party and in favour of the defendants.

The court rejected the defendants’ arguments and granted the third party’s application on three main grounds. First, there was an exclusive jurisdiction clause in the third party BL calling for Japanese law and the exclusive jurisdiction of the Tokyo District Court. In this regard, even though the Hague-Visby Rules were incorporated into the third party’s BL, there was absolutely no ambiguity in the contract as there was no distinction between a standard claim and a claim in indemnity for the purposes of bringing a claim. Secondly, a lis alibi pendens situation existed on account of the limitation proceedings in Japan and the defendants had failed to show strong reasons why they should be allowed to pursue their claim against the third party in Hong Kong instead of in the agreed forum in Japan. Thirdly, there was material non-disclosure on the part of the defendants when they applied for the order to issue and serve a third party notice out of jurisdiction.