The Pioneer Container KH Enterprise v. Pioneer Container
The Pioneer Container KH Enterprise v. Pioneer Container
 2 AC 324
The plaintiffs (owners) contracted with the freight carriers (first bailee) for the carriage of their goods by container from Taiwan to Hong Kong. The carriers issued the plaintiffs with bills of lading which provided that the carrier was entitled to sub-contract ‘on any terms’ the whole or any part of the handling, storage or carriage of the goods. The carriers sub-contracted the carriage to the defendant shipowners (sub-bailees) who issued former the feeder bills of lading incorporating an exclusive jurisdiction clause (cl 26) which provided that the bills of lading were governed by Chinese law and that any claim or other dispute arising under the ‘bill of lading contract‘ was to be determined in Taiwan unless the carrier otherwise agreed. The vessel on which the plaintiffs’ containers were being shipped from Taiwan to Hong Kong sank with the loss of all cargo following a collision with another vessel during the voyage. The plaintiffs commenced proceedings in Hong Kong by the issue of a writ, claiming damages from defendant against the losses sustained out of negligent mismanagement of plaintiff’s goods—i.e. breach of duty to take reasonable care characteristic of bailee. The shipowners applied to have the proceedings stayed on the grounds that the plaintiffs had, by cl. 26 of the bills of lading, agreed that any claim or other dispute thereunder should be determined in Taiwan.
- What was the nature of relationship between bailor and sub-bailees?
- Whether the plaintiffs were bound by the exclusive jurisdiction clause, albeit they were not privy to the contract between sub-bailees and first bailee? (Whether the principle enunciated in Morris v. Martin was applicable?)
- Whether Court of Appeal was right in staying the proceedings to refer the dispute to Taiwanese tribunal, albeit plaintiff’s cause of action in Taiwan had already become time barred?
1st Contention: The clause in question refers to any claim or other dispute arising under ‘This Bill of Lading contract‘; and plaintiffs submitted that this wording compelled the conclusion that the clause applied only to contractual claims. However, shipowners sought to build upon that dictum in order to advance an argument that cl. 26 should be read broadly, to embrace not only claims which are contractual in nature, but also claims in bailment or in tort where the liability of the shipowners was governed by the contractual terms set out in a bill of lading in the shipowners’ form.
2nd Contention: Plaintiffs submitted that the exclusive jurisdiction clause should be excluded from such incorporation because it was not a clause directly germane to the subject matter of the bill of lading, viz the shipment, carriage and delivery of the relevant goods
3rd Contention: Plaintiff’s contended that the bailees were never in the possession of the goods, in which circumstance, the defendants were quasi-bailees; since the principle of sub-bailment does not extend to quasi bailees, hence, plaintiff’s will not be bound by the terms of such sub-bailment, even of authorized]
To produce a uniformity of jurisdiction and convenience in commercial terms, plaintiffs should be held to be bound. This is because if there would not be exclusive jurisdiction clause applicable to plaintiffs, the claims would arise under various jurisdictions which would be both inequitable and grossly inconvenient for the defendants.
1) MORRIS v. MARTIN: “the defendants, by voluntarily receiving into their possession, goods which were the property of another, became responsible to the plaintiff as bailees of the goods.” Therefore, in a case such as this, the obligation is created by the delivery and assumption of possession under a sub-bailment. Further, the obligation owed by the sub-bailee to the owner must likewise be that of a bailee for reward vis-à-vis the owner, notwithstanding that the reward is payable not by the owner but by the bailee. (this proves that the sub-bailee’s liability is co-extensive as that of bailee) The PC however added that the sub-bailees must be aware of bailor’s interest in the goods, so as to become obliged to take due care of the goods bailed.
2) MORRIS case: the owner is bound by the conditions if he has expressly or impliedly consented to/ authorised the bailee making a sub-bailment containing those conditions, but not otherwise.
(Note: Estoppel may also arise as against the plaintiffs who will be estopped from denying the ostensible authority of the bailees, as according to 1st contract, to act as agents of them)
1st Contention: Bills of lading are documents which operate as receipts for the goods, and which contain or evidence the terms of the contract of carriage. Therefore, it must be the intention of both sub bailees and the bailers who consented for the inclusion of the same that these terms must be held to be binding notwithstanding the liability to arise as under tort or contract. It will be commercially unapt if the contention of the plaintiffs is withheld.
2nd Contention: Where the consent is very wide in its terms, only terms which are so unusual or so unreasonable that they could not reasonably be understood to fall within such consent are likely to be held to be excluded. However, the exclusive jurisdiction clause was neither unreasonable and nor unusal for it was commonly being included in such bills of lading.
3rd Contention: As it was, the form of bill of lading issued by 3rd type of plaintiffs in respect of these goods represented that Scandutch had received the goods for transportation from the place of receipt; and no evidence was adduced to contradict this. Therefore, they weren’t quasi bailees rather sub-bailees.
3) Applying the principle that the court should exercise its discretion by granting a stay of proceedings brought in breach of an agreement to refer disputes to a foreign court unless strong cause for not doing so was shown, the expiry of the time limit in Taiwan was not sufficient reason for refusing a stay since the plaintiffs had advisedly but unreasonably gambled on being permitted to litigate in their preferred forum of Hong Kong rather than Taiwan, which was where they were bound to litigate, and had let time run out in Taiwan without taking the trouble even to issue a protective writ there. In so doing, the plaintiffs had acted unreasonably. The appeal would therefore be dismissed.
Author: Vishrut Kansal (NUJS, Kolkata)
Such an insightful and balanced post. Bailment is change of possession of goods, not transfer of ownership of goods as in sale. Some of the essential elements of bailment are as follows: i) Contract. ii) Delivery of movable goods. iii) Non-transfer of ownership. iv) Purpose..
Essential Elements of Bailment