Up in the Air

February 2015

The year of 2014 is a turbulent year in Malaysia’s (perhaps the world’s) aviation history.

Amidst the three consecutive major aviation incidents happened in 2014, much has been said on the rights of the passengers to damages under the Convention for the Unification of Certain Rules for International Carriage by Air- Montreal, 28 May 1999 (“Montreal Convention”) against the carrier and other relevant parties.

Subsequent to the MH370 incident, the American law firm, Ribbeck Law Chartered, filed a petition for discovery in Illinois Court against both Malaysian Airline System Berhad (“MAS”) and Boeing. The Cook County Circuit Court threw out the petition and threatened to punish the lawyers if they attempted to use such a tactic again to force the firms to turn over data about the missing MAS flight.

However, on or about 7 January 2015, the Illinois Appeals Court found that the Cook County Circuit Court had erred in his judgment and ordered the lower court to hear the petitions against the airline and aircraft manufacturer Boeing Co.[1]

At this juncture, MAS and Boeing Co. other than submitting to the jurisdiction of the United States Court, may apply for an injunction in the Malaysian Court to restrain the plaintiff from taking any legal proceedings in any jurisdiction other than Malaysia. The case on point is Société Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 871 (“Lee Kui Jak”).

Before we discuss the case of Lee Kui Jak, it is pertinent to firstly answer whether the Malaysian Court has jurisdiction to hear the dispute arising from MH370 incident.

 

Whether the High Court of Malaya has jurisdiction to adjudicate over the dispute arising from MH370 incident?

The jurisdictional question must be determined by examining the content of the plaintiff’s claim and to test it against the provision of Section 23 (1) of the Courts of Judicature Act 1964, which reads-

“23. Civil Jurisdiction- general

(1) Subject to the limitations contained in Article 128 of the Constitution the High Court shall have jurisdiction to try all civil proceedings where –

(a) the cause of action arose;

(b) the defendant or one of several defendants resides or has his place of business;

(c) the facts on which the proceedings are based exist or are alleged to have occurred; or

(d) any land the ownership of which is disputed is situated,

within the local jurisdiction of the Court and notwithstanding anything contained in this section in any case where all parties consent in writing within the local jurisdiction of the other High Court.”

To-date, we do not know the cause of action and the facts which triggered the incident. However, it may still be arguable that the High Court of Malaya has jurisdiction to hear the claim arising from MH370 incident. This is because one of the possible defendants in this incident, Malaysia Airline System Berhad, maintains its place of business in Malaysia.

Be that as it may, Article 33 of the Montreal Convention may lend support to the argument that the High Court of Malaya has jurisdiction to adjudicate over the dispute arising from MH370. In gist, Article 33 of the Montreal Convention provides that an action for damages can be taken in Malaysia (where the airline is based), in China (its destination) or in the country where the ticket was bought.

It should be noted that even if a private commercial agreement contains an express ouster clause with regard to Malaysia Court’s jurisdiction to try a dispute arising from the same agreement, the Malaysian Court thus far is quite reluctant to give effect to the ouster clause if the plaintiff’s claim fall within Section 23(1) of the Courts of Judicature Act 1964.[2]

 

Case study of Lee Kui Jak

The case of Société Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 871 is relevant when it comes to the law relating to injunctions restraining a party from commencing or pursuing legal proceedings in a foreign jurisdiction.

The case of Lee Kui Jak shares a few identical features with the MH370 incident- amongst others- the former arising out of a helicopter crash in Brunei. The said helicopter was manufactured by a French company (“SNIAS”), owned by an English company, operated and serviced by a Malaysian company, and crashed in Brunei. The deceased, who was a passenger, was killed. He and his family were residents of Brunei and he was a successful businessman providing in particular, catering services to oil rigs operating off Brunei.

The plaintiffs, the deceased’s widow and administrators of his estate, instituted three set of proceedings in Brunei, France and Texas- in Brunei against the Malaysian company and SNIAS, in France against SNIAS, and in Texas against SNIAS and its associated companies and the Malaysian company and its associates. The Texas court had jurisdiction over SNIAS because SNIAS carried on business there. The French proceedings against SNIAS were discontinued, and the plaintiffs’ claim against the Malaysian company was settled.

SNIAS and its associated companies applied to the Texas court for dismissal of the plaintiffs’ action there on the ground of forum non conveniens and the judge dismissed the application without giving reasons. The plaintiffs’ Texas attorneys commenced pretrial discovery and trial was eventually fixed for 1 July 1987 in Texas.

Meanwhile SNIAS applied to the High Court of Negara Brunei Darussalam for an order restraining the plaintiffs from continuing with the Texas proceedings. The application was dismissed and SNIAS appealed. The plaintiffs gave undertakings that they would agree to trial by judge alone in Texas, and they accepted that on trial in Texas the law of Brunei was applicable as to liability and quantum so that no claim lay against SNIAS on the basis of strict liability or for punitive damages. SNIAS gave undertakings to protect the position of the plaintiffs and their Texas attorneys in Brunei, and to facilitate trial of the action there in autumn 1987. A contribution notice was served by SNIAS on the Malaysian company, which intimated that it would submit to Brunei but not Texas jurisdiction, and that it would accept service of a third party notice issued by SNIAS in Brunei.

The Court of Appeal of Brunei Darussalam dismissed SNIAS’ appeal against the refusal to grant an injunction holding that having regard to the work done by the plaintiffs’ Texas attorneys Texas had become the appropriate and natural forum.

The Privy Council allowed SNIAS’ appeal and granted an injunction restraining the plaintiffs from further proceeding with their action against SNIAS in the Texas Court and such an injunction granted upon an undertaking given by SNIAS.

The Privy Council laid down the basic principles of the law relating to injunctions restraining a party from commencing or pursuing legal proceedings in a foreign jurisdiction:-

First, the jurisdiction is to be exercised when the “ends of justice” require it;

Second, where the court decides to grant an injunction restraining proceedings in a foreign court, its order is directed not against the foreign court but against the parties so proceeding or threatening to proceed;

Third, it follows that an injunction will only be issued restraining a party who is amenable to the jurisdiction of the court, against whom an injunction will be an effective remedy;

Fourth, it has been emphasised on many occasions that, since such an order indirectly affects the foreign court, the jurisdiction is one which must be exercised with caution.

Fifthly, the mere fact that the courts of Brunei provide the natural forum for the action is, for reasons already given, not enough of itself to justify the grant of an injunction. An injunction will only be granted to prevent injustice, and, in the context of a case such as the present, that means that the Texas proceedings must be shown in the circumstances to be vexatious or oppressive.

The injunction was granted by the Privy Council ‘on terms’, i.e. undertaking given by SNIAS. RH Hicking and Wu Min Aun[3] noted that this is a useful legal device, giving the court a flexibility of discretion to ensure the ‘balance of justice’ considered desirable in taking account of potential injustice to the defendant and the plaintiff. It is worth mentioning that it would be open to the plaintiffs’ Texas attorneys to be admitted ad hoc to the Brunei Bar for the purposes of this case, and SNIAS have given an undertaking to cooperate in such admission.

The Privy Council also made the findings as follows:-

  1. The fact that the works already undertaken by the lawyers in the Texas proceedings was not sufficient to make Texas Court the natural forum for the determination of the dispute.
  2. The courts of Brunei remains the natural forum for several reasons, amongst others, (i) the fatal accident happened in Brunei; (ii) the applicable law governing the claim was the law of Brunei; (iii) the deceased was resident in Brunei and carried on his principal business in Brunei; and the plaintiffs, his widow and her co-administrator, are likewise resident in Brunei; (iii) having regard to the very substantial income of the deceased, and the volatile nature of the oil industry upon which his business depended, it is plain that witnesses of fact, experienced in the conditions of that industry in Brunei, are likely to be called on the issue of quantum. (iv) as against these factors, there was absolutely nothing to connect the action with Texas at all.”
  3. If the plaintiffs are not restrained from continuing their proceedings in Texas, SNIAS may be unable to claim over against Bristow Malaysia in those proceedings; and that, if held liable to the plaintiffs in the Texas court, they may have to bring a separate action in Brunei against Bristow Malaysia in which they may have to establish their own liability to the plaintiffs before they can be entitled to claim contribution from Bristow Malaysia, with all the attendant difficulties which this would involve, including the possibility of inconsistent conclusions on the issue of liability.
  4. For the plaintiffs to be permitted to proceed in a forum, Texas, other than the natural forum, Brunei, with that consequence, could indeed lead to serious injustice to SNIAS, and that the plaintiffs’ conduct in continuing with their proceedings in Texas in these circumstances should properly be described as oppressive. Furthermore, no objection to the grant of an injunction to restrain the plaintiffs from continuing with these proceedings can be made by them on the basis of injustice to them, having regard to the undertakings given by SNIAS.

 

No Express Choice of Law

In Lee Kui Jak, the Privy Council held that one of the strong connecting factors in suggesting Brunei being a forum for the dispute is that- both parties in Lee Kui Jak agreed that the applicable law governing the claim was the laws of Brunei.

Where the Montreal Convention is clear on the jurisdiction issue, there is no express choice of law set out in the same Convention. Article 33 (4) of the Montreal Convention merely provides that ‘Question of procedure shall be governed by the law of the court seized of the case’. Article 33 (4) of the Montreal Convention is, arguably, not a choice of law clause.

If a plaintiff decides to file its action in Malaysia Court, it does not necessarily follow that the Court must apply Malaysia law to determine the case. In the circumstances where there is no express choice of law, the plaintiff may apply to the Court to determine the proper law governing the Montreal Convention.

There is no hard and fast rule to ascertain the governing law of the Montreal Convention in the MH370 incident. The House of Lords in Amin Rasheed Shipping Corporation v. Kuwait Insurance Co. [1984] 1 AC 50 propounded a 3 stages test as follows:

(a) If the parties have made an express choice of law in the contract itself, then subject to certain exceptional limitations, that law they have chosen will prevail.

(b) If there is no express choice of law, the court must examine all the facts surrounding the contract to determine whether there was an inferred or implied choice of law by the parties. Other factors include:

(i) the currency in which the payment is to be made;

(ii) the location of the subject matter of the contract;

(iii) nationality of the parties;

(c) In the absence of any choice of law express or implied the court proceeds to determine and apply the system of law with which the transaction has the closest and most real connection.

The decisions of Amin Rasheed (supra ) and Bonython (supra) have been approved and applied in the Federal Court case of James Capel (Far East) Limited v. Y K Fung Securities Sdn. Bhd. & Anor. [1996] 2 CLJ 55.

Applying the principles propounded in the cases of Amin Rasheed and Bonython in the MH370 incident, the relevant considerations to determine the implied choice of law of the contract entered between the passenger and the aircraft company is as follows:-

  1. The currency in which the payment made by the passenger;
  2. The location of the subject matter of the contract; and
  3. The nationality of the parties.

Alternatively, even if assuming the implied choice is not to be found, the Court would apply the system of law with which the transaction has the closest and most real connection.

In the present matter, the determination of choice of law is not a straightforward one because the passengers of MH370 consist of various nationalities. It is submitted that the Court may adopt the laws of Malaysia if it could be established that the contract entered between the passenger and the aircraft company has the closest connection to Malaysia.

Even if the Court finds that the choice of law is not the laws of Malaysia, it is settled that a choice of foreign law does not prevent Malaysian courts from having jurisdiction and ability to adjudicate such dispute.[4] The Court may still apply section 45 of the Evidence Act 1950 if the Court need to form an opinion upon a point of foreign law.[5]

 

Conclusion

It is not difficult to understand the intention of the plaintiffs in filing an action in the court of Illinois even though there is no nexus between Illinois and the MH370 incident. In the case of Lee Kui Jak, it was disclosed by the plaintiffs that the reasons for commencing proceedings in Texas was for a higher level of damages (such contention was nevertheless abandoned in the Court of Appeal where the plaintiffs accepted that Bruneian law being the governing law of the dispute).

In the context of the MH370 incident, it is arguable that the courts of Malaysia, other than the courts of Republic of China, remains the natural forum for the action for the reasons as follows:-

  1. The courts of Malaysia has jurisdiction over the MH370 incident,
  2. The choice of law governing the claim is the laws of Malaysia;
  3. Most of the deceased are the residents in Malaysia and carried on their principal business in Malaysia; and the plaintiffs, their co-administrator, are likewise resident in Malaysia;
  4. As to the issue of quantum on the loss of income, having regard to the nationality of the deceased, it is most likely that the witnesses of fact are the residents in Malaysia.

 

In order for MAS and Boeing Co. to obtain an injunction to restrain the plaintiffs from commencing or pursuing legal proceedings in the court of Illinois, the mere fact that the courts of Malaysia provide the natural forum for the action is not enough of itself to justify the grant of an injunction. An injunction will only be granted to prevent injustice and the Illinois proceedings must be shown in the circumstances to be vexatious or oppressive.

 

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[1] Malay Mail Online, 7.1.2015; Daily Express, 8.1.2015

[2] See Petrodar Operating Co. Ltd v Nam Fatt Corporation Bhd [2014] 1 CLJ 18 (FC); American Express Bank Ltd v Mohamad Toufic Al-Ozeir [1995] 1 CLJ 273 (SC); Globus Shipping & Trading Co (Pte) Ltd v Taiping Textiles Berhad [1976] 2 MLJ 154 (FC)

[3] Conflict of Laws in Malaysia, page 88

[4] Playboy Enterprises International Inc v Zillion Choice Sdn Bhd [2011] 2 CLJ 329;

[5] American Express International Banking Corporation v. Tan Loon Swan [1992] 1 CLJ 9; [1992] 1 CLJ (Rep) 1

Esther Chow Ruen Xin (1)

Esther Chow Ruen Xin

Telephone (Secretary): +603 2164 0200 – ext no. 125
Email: esther.chow@azmandavidson.com.my