Trafigura Beheer BV v Kookmin Bank Co

Synopsis

This dispute arises out of the provision of a letter of credit (“L/C”) by the defendant (“Kookmin”), a Korean bank, as the issuing bank, in favour of the claimant, a Dutch company, (“Trafigura”), which sold a cargo of decant oil to a Korean company, Huron Co Ltd (“Huron”). When the cargo arrived at the discharge port in South Korea it was discharged without production of the bills of lading and the cargo was later released to Huron. Trafigura received payment under the letter of credit through an advising bank in London, ANZ Bank.

The buyers, Huron, became insolvent and Kookmin has not been reimbursed by Huron for the purchase price of the cargo that was financed by the L/C. Kookmin has brought proceedings in Korea against Trafigura; the shippers of the cargo (Pertamina PT); the owners of the ship that carried the cargo from Indonesia to Korea and the managers of the vessel, in an attempt to recover its loss. In those proceedings Kookmin alleges (broadly speaking) that Trafigura, as beneficiary under the L/C, has acted in breach of various obligations it is said to owe to Kookmin, as the issuing bank of the L/C. Kookmin also asserts that Trafigura has acted fraudulently towards Kookmin. Kookmin alleges that Trafigura is therefore liable to Kookmin under Article 750 of the Korean Civil Code to pay damages to Kookmin which are equal to the amount of payment under the L/C, which was US$5,920,000.

Trafigura has countered these Korean proceedings by starting the present action, in which it claims against Kookmin a declaration of non – liability. Trafigura also claims an anti – suit injunction to prevent Kookmin carrying on the Korean proceedings.

Kookmin challenged the jurisdiction of the court and Trafigura attempted to obtain an interim anti – suit injunction. There was a hearing before Cooke J on 4 August 2005. In his judgment handed down on 5 August 2005, he held that the English court was clearly the appropriate forum to decide all the matters raised in both Trafigura’s English proceedings and Kookmin’s claim in Korea. But he held that Trafigura’s application for an anti – suit injunction, which was put forward on the basis that Kookmin’s Korean claim was doomed to failure and so unconscionable, “just falls short of the standard required for the grant of such an injunction”: see paragraph 51 of the judgment.

At a subsequent Case Management Conference, Mrs Justice Gloster ordered that there should be a Preliminary Issue to decide what law or laws governed the issues concerning Kookmin’s claims against Trafigura. That is the issue I now have to decide. For the purposes of the hearing before me there was no dispute about the principles of Korean law on which Kookmin relies. After hearing submissions from Mr Stephen Males QC for Trafigura and Mr Andrew Onslow QC for Kookmin, for which I am most grateful, I reserved judgment.

The Contractual Arrangements

The C&F Sale Contract between Trafigura and Huron.

Under clause 8 of the Sale Contract, it was agreed that payment would be secured by an irrevocable documentary Letter of Credit in US dollars. Clause 8 also provided that payment would be made against presentation of four sets of documents. These documents were identified as: (i) the Seller’s commercial invoice; (ii) an independent inspector’s quality report at the load port; (iii) an independent inspector’s quantity report at the load report; and (iv) “full set 3/3 original Bills of Lading issued to or endorsed to the Order of buyer or 2/3 original Bills of Lading issued to or endorsed to the Order of buyer plus original master’s/agents/vessel owners’ receipt for missing 1/3 original Bill of Lading”.

Clause 8 of the Sale Contract further provided as follows:

“If any of the above documents are not available at payment due date, then Seller shall present:

A.

Seller’s Commercial invoice ……..

B.

Seller’s Letter of Indemnity ……. in the following format:

Dear Sirs

We refer to a cargo of [quantity] of [product] loaded on board vessel [ ] pursuant to Bills of Lading dated [ ].

Although we have agreed to sell the said cargo to yourselves, we have been unable to provide you with the full set of original 3/3 clean on board Bills of Lading (or 2/3 original Bills of Lading and master’s receipt for 1/3 original Bill of Lading) and other original shipping documents covering the said sale.

In consideration of your paying the full purchase price of USD [ ] with value [ ], we hereby expressly warrant that we have marketable title to the goods, and that we have the full right and authority to transfer such title to you and to effect delivery of the said cargo.

We further agree to make all reasonable efforts to locate and surrender to you, as soon as possible, the full set of original Bills of Lading (or 2/3 Bills of Lading and master’s receipt for 1.3 original Bill of Lading) and to protect, indemnify and hold you harmless from any and all damages, costs and expenses (including reasonable Attorney fees) which you may suffer by reason of the Bills of Lading and other shipping documents remaining outstanding, including but not limited to, any claims and demands which may be made by a holder or transferee of the original Bills of Lading and other original shipping documents or by any third party claiming an interest in the cargo or the proceeds thereof.

This Letter of Indemnity shall be governed by and construed in accordance with the laws of England and each party expressly submits to the exclusive jurisdiction of the English Courts in London.

This Letter of Indemnity shall expire 14 months after shipment or upon our tender of the shipping documents to you, whichever occurs first. We agree that we will make all reasonable efforts to obtain and surrender the shipping documents as soon as possible.”

Clause 16 of the Sale Contract provided that property in the oil to be delivered under the contract would pass from the sellers (Trafigura) to the buyers (Huron) “when it passes the flange connection of the vessel’s intake hose at the loadport”.

Clause 18 of the Sale Contract stated that it was governed by English law. The parties also agreed to submit all disputes under it to the exclusive jurisdiction of the English Courts.

The Letter of Credit issued by Kookmin.

Field 46A of the L/C sets out what documents must be presented for payment under the L/C. First it stipulates that there must be “full set 3/3 original Bills of Lading”. But in contrast to stipulations as to the terms of the bills of lading that are set out in clause 8 of the Sale Contract, Field 46A of the L/C provided that the bills be “issued to or endorsed to the Order of Kookmin Bank Seoul, Korea” . (Cf. the Sale Contract which provided that the bills be “issued to or indorsed to order of buyer”). Field 46A of the L/C also stipulates that the bills be marked “freight payable as per charterparty”. Field 46A indicated what further documents must be produced for payment under the L/C. These included the Seller’s invoice and an independent inspector’s quality and quantity report at the load port.

Field 47A of the L/C sets out Additional Conditions. Section (M) of that Field states that if the documents required for payment were not available at the time of negotiation, “payment shall be made” against the Seller’s commercial invoice and the Seller’s Letter of Indemnity (“LOI”), in a format that was then set out in the L/C. The terms of the LOI which are quoted in the L/C are the same as those set out in the Sale Contract. As in the Sale Contract, the LOI was to be addressed to Huron, as buyers, not to Kookmin. As in the form of wording set out in the Sale Contract, the terms of the LOI set out in the L/C provided that it was to be governed by and construed in accordance with the laws of England and that each party expressly submitted to the exclusive jurisdiction of the English Court in London.

The L/C also incorporated the ICC Uniform Customs and Practice for Documentary Credits (“the UCP”): Field 72. Cooke J held that the L/C is governed by English law: see paragraphs 23 and 24 of his judgment. That finding was not challenged by Kookmin at the hearing before me.

The Charterparty

Pursuant to the Charterparty, the vessel proceeded to Balongan, West Java. Loading of the cargo started on 15^th November 2003 and was completed on 18 November 2003. Upon the completion of loading bills of lading were issued. In the bills the port of shipment was specified as “Balongan, West Java”, rather than “Balongan, Indonesia”. The discharge port was referred to as “the port of Korea”. This contrasts with the terms of the L/C which refers to the delivery place as being “one safe port/berth in South Korea”. The Bills also provided for freight to be deemed earned on commencement of loading, rather than “freight payable as per charterparty” as required by Field 46A of the L/C.

The Bills of Lading were issued to Pertamina, as the shippers of the cargo. The originals of these Bills of Lading remained in the hands of Pertamina. They are expressly governed by Indonesian law.

The vessel then proceeded to the discharge port of Pyongtaek, South Korea. In the course of the voyage from West Java to South Korea, on 24 November 2003, the charterers sent a fax message to the shipowners. This stated:

“We hereby invoke the LOI as per clause 36 in the charterparty.

We hereby request you to discharge all cargo onboard to receiver Huron Co Ltd at discharge port Pyongtaek, Korea without production of original bills of lading.

Please kindly confirm LOI is in order for discharge”.

Shanghai arrived at Pyongtaek on 29^th November 2003. Discharge of the cargo began on 30^th November 2003. It appears that discharge was made into a bonded warehouse. Discharge was completed by 2 December 2003 and the vessel then sailed away.

On 12 December 2003 Trafigura presented the documents for payment under the L/C to the ANZ Bank in London, the advising bank. Before presentation of the documents however, Mr Phil Goh, who worked in Trafigura’s Singapore office, had noticed three of the discrepancies in the bill of lading which I have noted above. He was concerned, first, about the reference to “Balongan, West Java” instead of “Balongan, Indonesia”; and, secondly, by the reference to the “port of Korea” as the discharge port instead of “one safe port/berth in South Korea”. He apparently noted but was not concerned with the reference in the bill of lading to “freight to be deemed earned on commencement of loading”, as opposed to the L/C term of “freight payable as per charterparty”.

There was, however, a further discrepancy which he did not notice. The bills of lading that were issued provided for the cargo to be discharged “unto made out or endorsed to the order of ANZ Bank London”, (sic) i.e. the advising bank. This was in contrast to the stipulation in the L/C, which was that the bills of lading should be “issued to or endorsed to the order of Kookmin Bank Seoul, Korea”. Nor was the bill of lading wording as provided for in clause 8 of the Sale Contract, which provided that the bills be “issued to or endorsed to the order of buyer”.

Trafigura decided to deal with the problem of what it regarded as discrepant bills of lading by following the alternative course for which the L/C provided, namely, to supply its commercial invoice and the LOI, in the prescribed format, to ANZ Bank in London. This is what Trafigura did on presentation of the documents on 12^th December 2003. An LOI in the prescribed form was given to ANZ Bank, signed by an authorised signatory of Trafigura. It is clear from the wording of the LOI that it is, in fact, addressed to Huron, not either ANZ or Kookmin. Hence the wording of the LOI, which states: “although we have agreed to sell the said cargo to yourselves, we have been unable to provide you with a full set of original 3/3 clean on board bills of lading…”. This wording is in accordance with the L/C terms.

On 15^th December 2003 ANZ bank wrote to Kookmin, claiming reimbursement under the terms of the L/C. With this letter it enclosed documents, which consisted of a draft and invoices. The letter states “we certify all terms and conditions are complied with”. It would appear, therefore, that ANZ bank had paid Trafigura the price of the cargo at some time between 12^th and 15^th December 2003. It also appears that the cargo, which had been in store in the bonded warehouse, was released to Huron upon payment of the purchase price to Trafigura. The release of the cargo to Huron appears to have taken place on about 31^st December 2003.

On 12^th January 2004, Kookmin sent a message to the ANZ Bank in London. This message stated:

“We received LOI I/O (instead of) original documents. Please send original documents which is mentioned by LOI ASAP. Your prompt attention to this matter would be highly appreciated.”

That message was passed on to Trafigura’s Trade Finance Department in London. The message was then passed on to Mr Goh in Trafigura’s Singapore office. He was asked by Trafigura’s Trade Finance Department in London to contact Pertamina, (the shippers of the cargo), in order to ascertain the whereabouts of the original bill of lading. Mr Goh contacted Mr Ngm in Trafigura’s Jakarta office. Mr Ngm stated in an email to Mr Goh dated 16^th January 2004 that the original three bills of lading would be sent to Mr Goh that day. Mr Goh received the first set of original Bills of Lading on 19^th January 2004.

Mr Goh took the three original bills of lading to the office of Tanker Pacific Management, the managers of the vessel. This office was in Singapore. Mr Goh intended to exchange the three original bills of lading, which he believed were discrepant for the purposes of the L/C, in exchange for new “original” bills of lading which he intended would conform with the L/C terms. Mr Goh dealt with Captain Sanjiv Pandyala of Tanker Pacific Management. Captain Pandyala was prepared to make this exchange, upon the condition that the new bills were claused in order to indicate that the voyage had been completed. Therefore Captain Pandyala wrote the words “voyage accomplished null and void” in manuscript on the back of each of the three new bills of lading. Mr Goh countersigned that endorsement. Tanker Pacific Management retained one of the set of the three new bills, saying that they were doing so on behalf of the Master. Captain Pandyala also gave Mr Goh a receipt for one of the originals, on behalf of the Master. Mr Goh obtained the other two originals of the new bills. He did so in Singapore.

I should note here that I agree with the observations of Cooke J, at paragraph 9 of his judgment on the jurisdiction and anti – suit injunction issues, that it is common practice in the oil trade for shipping documents to be unavailable at the discharging port and also for cargoes to be delivered against some form of Letter of Indemnity. The latter procedure has its dangers, as is also well - known and appreciated. Also, it is (and has been for centuries) common practice for one bill of lading out of the usual set of three bills to be retained on board ship by the master of the vessel, when he releases the other two original bills of the set of three to the shipper after they have been signed upon completion of loading.

On 20^th January 2004, Mr Goh sent the two original bills of lading, together with the master’s receipt for the third bill on to Mr Ngm, Trafigura’s representative in Indonesia, so that those documents could be passed to Pertamina, in Indonesia. The intention was, apparently, that Pertamina should transmit these documents up the banking chain.

This is what happened. The two new bills of lading subsequently arrived at Kookmin, via ANZ in London. On 4^th February 2004, Kookmin sent a message to ANZ Bank, London. This stated:

“Please be advised that we have received B/L which we requested. However, only 2/3 set presented I/O full set (3/3). We believe that you have received 3/3 set of B/L for endorsement because of instruction on B/L made out to or endorsed to the order of ANZ Bank, London. So, please reply us whereabouts 1/3 set of B/L is or if you hold, please deliver it to us asap.”

On 5^th February 2004, ANZ Bank in London responded to Kookmin and said that it had only received two of the three original bills of lading. There is no evidence of any further attempts by Kookmin to obtain the third original that had been retained by the vessel’s managers on behalf of the master.

Meanwhile, in January 2004, Huron went into liquidation. Kookmin has not been reimbursed by Huron for the payment made to Trafigura under the L/C.

Kookmin’s Proceedings in Korea and Trafigura’s Proceedings in England

In November 2004 Kookmin issued proceedings in the Seoul Central District Court against the owners of Shanghai (Marelia Overseas Inc), the managers of the vessel, Tanker Pacific Management, the shippers, Pertamina, and Trafigura. The Claim Form sought judgment against each of those defendants for US$ 5,826,032.71 plus interest. This Claim Form was received by Trafigura on 18^th March 2005.

The Claim Form asserts first, a claim against the ship owners, Managers and Shippers. It is alleged that all three of those parties had an obligation to deliver the cargo to Huron only “upon the verification of the bill of lading”. It is alleged that those defendants’ failed to fulfil such an obligation, because they handed over the cargo to Huron and thereby violated the rights of the claimant, Kookmin, as the owners of the shipment.

The claim against Trafigura is expressed in the following terms:

“[Trafigura] sold the shipment to Huron. [Trafigura] even though it has received the payment in its entirety through the Letter of Credit following the sales transaction, failed to restitute all original copies of the Bill of Lading to [Kookmin] and one of the three original copies remains in its custody to date. If any of the Defendants is found in possession of this copy of the Bill of Lading, this would constitute fraud, whereby [Trafigura] received the payment for the shipment with no intention to forward the remaining original Bill of Lading. If such proves to be the case, [Trafigura] is responsible for the damages caused to [Kookmin] by its fraudulent action and the amount of the compensation would equal the full amount of payment issued through the Letter of Credit.”

On 2^nd June 2005, Trafigura issued a Claim Form in the Commercial Court. This sought a declaration that: (a) on the true construction of the Letter of Indemnity and/or the Letter of Credit, Trafigura did not undertake or represent that it would [or intended to] provide all the Bills of Lading to Kookmin. Alternatively, it sought a declaration that Trafigura was under no liability to Kookmin arising out of any failure to provide all the Bills of Lading to Kookmin or arising out of any lack of intention to do so. Trafigura also sought a declaration that Kookmin was obliged to pursue any claim asserting any such liability by Trafigura before the English High Court and not otherwise. Further, Trafigura claimed an injunction restraining Kookmin from pursuing its claim in the Seoul Central District Court of South Korea.

Kookmin challenged the jurisdiction of the English Court to hear and determine Trafigura’s claim for a declaration of non-liability and Trafigura’s claim for an “anti-suit injunction”. Kookmin’s application for a declaration that the Court had no jurisdiction over Kookmin in the action and Trafigura’s cross - application for an interim anti-suit injunction were heard by Cooke J, who gave Judgment on both claims on 5^th August 2005. His judgment was not appealed by either side.

The judgment of Cooke J.

Cooke J held: (i) “it is plain” that the L/C is governed by English law: (paragraph 15 of the judgment). (ii) The C&F Sale Contract between Trafigura and Huron is subject to English law and the English Court has exclusive jurisdiction as between those parties: (paragraph 15). (iii) The LOI is expressly governed by English law and the English court has exclusive jurisdiction in respect of disputes arising under it. (iv) On the proper construction of the L/C, any claim by Kookmin based on fraudulent misrepresentation would be “doomed to fail” (paragraph 28). (v) Equally, any purported claim for restitution on the basis that payment made under the L/C was under the mistaken belief that no Bills of Lading had been issued and that the cargo remained under the control of the carrier was “equally hopeless”: (paragraph 29). (vi) Further, any allegation of breach of the L/C based on the presentation of an LOI when Bills of Lading were in fact available, albeit in discrepant form, “has no prospect of success”: (paragraph 30).

Cooke J also considered Kookmin’s claims under Korean law which were then - and still are - stated to be based on Article 750 of the Korean Civil Code. That provides that any person who causes loss to or inflicts injuries on another person by an unlawful act, wilfully or negligently, shall be bound to make compensation for damages arising therefrom. There is no point in summarising Cooke J’s analysis in any detail, however, because the way that Kookmin puts its case has been refined since then. It is only relevant to point out that, on the material before him, the judge concluded that (i) any claim by Kookmin against Trafigura as a matter of English law would be unsustainable; but (ii) he could not say that “there is no prospect of success in any tort claim against Trafigura”: (paragraph 36). It was agreed in the hearing before me that this last remark by the judge referred to any tort claim by Kookmin under the laws of Korea.

However, the judge concluded (at paragraph 40) that, taking into account all the contractual arrangements and the factual circumstances of the case, it was plain that:

“England is clearly the appropriate forum for determination of the matters raised in Trafigura’s claim form….as well as being the appropriate forum for Kookmin’s existing claim and its proposed amended claims”.

The present form of Kookmin’s claims against Trafigura in the Korean proceedings and the pleadings in the English action.

The current form of Kookmin’s claim in the Korean court is set out in a Brief that was submitted to the Korean court in November 2005. In the hearing before me it was referred to as “the November Brief”. The principles of Korean Law on which Kookmin relies have been summarised in a document called Statement of Principles of Korean Law, which Gloster J ordered should be prepared for the purposes of this Preliminary Issue.

Kookmin makes two types of claim against Trafigura. The first is that the presentation of the LOI under the L/C in circumstances where Trafigura had available to it the first set of bills of lading was: (a) unlawful and fraudulent in Korean law; and/or (b) a breach of the L/C. This claim is set out at Section 3.B(1) – (6) and Section 4 of the November Brief. At the hearing before me it was referred to as “the Presentation Claim”.

The second type of claim revolves around the discharge of the cargo to Huron; the return of the original bills of lading to the shipowner/managers in Singapore and the clausing on the reverse of the second set of bills of lading with the words “voyage accomplished. Null and void”. The allegation is that these acts together were unlawful and tortious under Korean law because they deprived Kookmin of any security interest in the cargo or any claim against the carrier. This claim is set out in Section 3.B(7)-(11) of the November Brief. It was referred to as “the security claim”.

The reasoning behind the security claim is that Kookmin had an expectation (but not a contractual right, per Cooke J’s conclusions) of receiving valid bills of lading issued or endorsed to its order. If Kookmin had received such bills then it would have acquired an enforceable security interest in the cargo. Under Korean law Trafigura owed a duty, “in tort”, not to act to the detriment of that security interest in the cargo.

Both types of claim and Trafigura’s liability to Kookmin are said to arise under Article 750 of the Korean Civil Code. That provides:

“Any person who causes loss or inflicts injuries on another person by an unlawful act, wilfully or negligently, shall be bound to make compensation for damages arising therefrom”.

The Particulars of Claim in the English action were served after the November Brief had been produced. Paragraph 16 of the Particulars of Claim summarises the allegations made by Kookmin against Trafigura, dividing them into the “presentation claim” and “security claim”, as I have done above. Paragraphs 18 and 19 of the Particulars of Claim set out Trafigura’s case on Kookmin’s claims under Korean law.

Paragraph 18 deals first with the “presentation claim”. However, before me, Mr Andrew Onslow QC stated that Kookmin no longer sought to rely on the “presentation claim” for the purposes of the English proceedings. Therefore I need not set out details of Trafigura’s case on that issue. (Footnote: ¹)

As for the security claim, Trafigura’s case is set out at paragraph 20 of the Particulars of Claim. In essence, it is that: (i) the contractual scheme of the L/C and the LOI did not provide Kookmin with any security interest in the cargo; (ii) Trafigura complied with the requirements of the L/C and the LOI as to delivery of the cargo without bills of lading and did so at a time when Kookmin could have had no security interest in the cargo; (iii) the only obligations that Trafigura had in relation to bills of lading after the delivery of the cargo are those set out in the LOI, which do not include any obligations towards Kookmin. So Trafigura cannot be liable to Kookmin for its loss, which resulted from Huron’s default and insolvency.

Kookmin’s Defence deals with Trafigura’s case on Kookmin’s security claim in the following way: (i) Kookmin’s obligation to pay under the L/C was only against conforming documents presented in accordance with the L/C. But in any case, Kookmin’s claim that Trafigura acted tortiously in Korean law “are not inconsistent with [Kookmin’s] obligations under the L/C”: (paragraph 15). (ii) The obligations of Trafigura to Kookmin that are summarised in the Particulars of Claim and elaborated in the Korean proceedings arise under the Korean law of tort. “They are separate from, and not excluded by, the rights and obligations under the letter of credit”. Trafigura’s conduct on which Kookmin relies is “wrongful in Korean law”: (paragraphs 17 (b) and (c)).

When making the order for the Preliminary Issue on 6 March 2006, Gloster J also directed that Kookmin should set out in one document the principles of Korean law on which it relied. This has been done in a document entitled “Statement of Principles of Korean law including the constituent elements of the torts on which the Claimant relies”. (The reference to “Claimant” must mean the Claimant in the Korean proceedings). Mr Males, for Trafigura, did not challenge the statements of principle set out in this document, although he did submit that paragraphs 3,4 and 5 of the Statement of Principles were irrelevant to the present issue because they did not set out principles of Korean law but attempted to apply the principles to the facts, in a tendentious way.

Paragraphs 1 and 2 of this Statement provides as follows:

“1.

Article 750 of the Korean Civil Code sets out the basis of tortious conduct under Korean law and provides that:

“Any person who causes loss to or inflicts injuries on another person by an unlawful act, wilfully or negligently, shall be bound to make compensation for damages arising therefrom.”

2.

The constituent elements of a tort under article 750 (as interpreted) and on which the Claimant [in the Korean proceedings] relies are set out below.

2.1

There should be a wilful or negligent act or acts by the tortfeasor.

2.1.1

“Acts” in this context include “omissions” or failures to act;

2.1.2

Wilful acts are those which the tortfeasor committed with a recognition of the possibility of certain results.

2.1.3

Negligent acts are those acts carried out while failing to appreciate the ordinary considerations regulating human affairs, and by such failure, acting to cause a result that the person knew or should have known would cause harm.

2.1.4

The liability on the part of the tortfeasor for wilful acts or negligent acts is not different and so the plaintiff is not required to distinguish or prove the existence of intent, only that an unlawful act occurred to cause harm.

2.2

The wilful or negligent act or acts complained of should be unlawful.

2.2.1

“unlawful” means “ illegitimate” or “not having legally justifiable cause”.

2.2.2

Unlawful conduct is divided into 5 categories:

2.2.2.1

Violation of criminal codes; eg the Korean Criminal Act’s Article 323 (Obstructing Another from Exercising His Rights), which prohibits the interference by one party with another’s document or property so as to prevent that other party from exercising its rights; Article 355 (Embezzlement and Breach of Trust) which prohibits a party having the custody of another’s property from gaining pecuniary advantage or causing a third person to do so by embezzlement or refusal to return it; and Article 347 (Fraud) which prohibits one party from defrauding another by taking another’s property or obtaining a pecuniary advantage.

2.2.2.2

Violation of other prohibitory Statutes;

2.2.2.3

Violation of social order;

2.2.2.4

Certain types of failure to act; and

2.2.2.5

Breach of a duty of good faith. Under Korean law all relationships between private entities whether arising out of a contractual relationship or not, must be governed by the Korean Civil Act’s Article 2 (Trust & Good Faith) which provides that (1) the exercise of rights and performance of duties shall be in accordance with the principles of trust and good faith; and (2) no abuse of rights shall be permitted.

2.3

The party alleging the tort suffered a loss.

2.4

There is a recognisable causal relationship between the unlawful act and the loss suffered.”

Paragraphs 3, 4 and 5 of the Statement of Principles then purport to apply these principles of Korean law to the facts of the case.

Paragraph 6 of the Statement of Principles summarises the position in Korean law as to causation. That paragraph states:

“Korean law does not require a party suffering a loss to prove proximate causation in a tort action. The concept of causation is broadly considered in that all causes, regardless of proximity would be considered if the loss is reasonably attributable to such cause and it was not an anomaly or unusual circumstance.”

Although Mr Males objected to paragraphs 3, 4, 5, 7 and 8 of the Principles document being before the court, in the context of this Preliminary Issue I think that it is a useful summary of what Kookmin now alleges were unlawful acts by Trafigura that give rise to the “security claim” under Korean law.

Kookmin’s allegations of Trafigura’s wrongful acts are, in summary, as follows:

The Preliminary Issue and the statutory provisions.

The preliminary issue ordered by Gloster J on 6 March 2006 is in the following terms:

“What is (or are) the law (or laws) applicable to the question whether the Claimant is liable to the Defendant on the claims advanced by the Defendant against the Claimant in the Korean proceedings referred to in the Particulars of Claim?”

The parties are also agreed on the consequences of a conclusion by the English court that Korean law applies to the issues relating to the claims advanced by Kookmin against Trafigura in the Korean proceedings. The English Court would then have to determine, as a matter of Korean law, whether Trafigura has committed wilful or negligent acts which are unlawful under Article 750 of the Korean Civil Code. On the assumption that Korean law applied, only when the English court had determined that issue would it then be able to decide whether or not Trafigura would be entitled to its declaration of non-liability.

The parties also agreed that Trafigura’s application for an anti – suit injunction must await the determination of the applicable law issue. If my conclusion is that Korean law applies, then that must also depend on whether Trafigura had committed unlawful acts under Korean law.

There is a threshold argument between Mr Males and Mr Onslow about which particular English conflict of laws rules apply in the circumstances of this case. But it is common ground that they are either the conflict of laws rules concerning the applicable law of tort, or the conflict rules concerning the applicable law of contract. The argument at the hearing focused on the former, because Mr Onslow accepted that if the relevant conflict rules were those concerning the applicable law of contract, then the court would be bound to conclude (following the decision of Cooke J) that English law applied and so Kookmin would have no arguable claim against Trafigura.

The English conflict of laws rules concerning tort are now set out in the Private International Law (Miscellaneous Provisions) Act 1995, Part III: (“PILA”). The relevant sections are as follows:

9

Purpose of Part III

(1)

The rules in this Part apply for choosing the law (in this Part referred to as “the applicable law”) to be used for determining issues relating to tort or (for the purposes of the law of Scotland) delict.

(2)

The characterisation for the purposes of private international law of issues arising in a claim as issues relating to tort or delict is a matter for the courts of the forum.

(3)

The rules in this Part do not apply in relation to issues arising in any claim excluded from the operation of this Part by section 13 below.

(4)

The applicable law shall be used for determining the issues arising in a claim, including in particular the question whether an actionable tort or delict has occurred.

(5)

The applicable law to be used for determining the issues arising in a claim shall exclude any choice of law rules forming part of the law of the country or countries concerned.

10

Abolition of certain common law rules

The rules of the common law, in so far as they –

(a)

require actionability under both the law of the forum and the law of another country for the purpose of determining whether a tort or delict is actionable; or

(b)

allow (as an exception from the rules falling within paragraph (a) above) for the law of a single country to be applied for the purpose of determining the issues, or any of the issues, arising in the case in question, are hereby abolished so far as they apply to any claim in tort or delict which is not excluded from the operation of this Part by section 13 below.

.........

11

Choice of applicable law: the general rule

(1)

The general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur.

(2)

Where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being –

(a)

for a cause of action in respect of personal injury caused to an individual or death resulting from personal injury, the law of the country where the individual was when he sustained the injury;

(b)

for a cause of action in respect of damage to property, the law of the country where the property was when it was damaged; and

(c)

in any other case, the law of the country in which the most significant element or elements of those events occurred.

(3)

In this section “personal injury” includes disease or any impairment of physical or mental condition.

………..

12

Choice of applicable law: displacement of general rule

(1)

If it appears, in all the circumstances, from a comparison of -

(a)

the significance of the factors which connect a tort or delict with the country whose law would be the applicable law under the general rule; and

(b)

the significance of any factors connecting the tort or delict with another country.

that it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of the other country, the general rule is displaced and the applicable law for determining those issues or that issue (as the case may be) is the law of that other country.

(2)

The factors that may be taken into account as connecting a tort or delict with a country for the purposes of this section include, in particular, factors relating to the parties, to any of the events which constitute the tort or delict in question or to any of the circumstances or consequences of those events.

………….

14

Transitional provision and savings

(1)

Nothing in this Part applies to acts or omissions giving rise to a claim which occur before the commencement of this Part.

(2)

Nothing in this Part affects any rules of law (including rules of private international law) except those abolished by section 10 above.”

The submissions of Mr Males were, in summary, as follows:

The submissions of Mr Onslow were, in summary:

In my view the issues for decision are:

Issue One: are the issues raised by the “security claim” to be regarded as “issues relating to tort” within s.9(1) of PILA, so as to make Part III of PILA applicable?

Where an English court has to decide a conflict of laws issue, it must obviously do so according to the English law rules concerning conflict of laws. Part III of PILA abrogates the former English common law rule that claims in tort based on facts occurring outside the jurisdiction could only be pursued in the English courts if the facts constituted a “wrong” that was actionable under English law. (Footnote: ²) Instead, Part III of the Act sets out rules for deciding which system of law will apply, when one or more different systems of law might be applied to determine issues “arising in a claim” (section 9(4)). (Footnote: ³) But the rules for choosing the applicable law that are set out in Part III of PILA only apply where the issues “relate to tort” (section 9(1)). (Footnote: ⁴)

PILA does not define what is meant by “tort” or “issues relating to tort”. As those are words are used in a statute dealing with English law, logically those words should be interpreted according to English law principles of statutory construction. (Footnote: ⁵) This would be in contrast to the position when dealing with contractual conflict of laws issues, under the Rome Convention, which is given the force of law in England and Wales by the Contract (Applicable Law) Act 1990, s 2(1). (Footnote: ⁶)

But some assistance is given by section 9(2) on how “tort” and “issues relating to tort” are to be interpreted for the purposes of deciding whether Part III of PILA is relevant at all. That sub – section provides that: “…the characterisation for the purposes of private international law of issues arising in a claim as issues relating to tort or delict is a matter for the court of the forum”. “Characterisation” here means the process of identifying the nature of issues that arise between parties when there is a claim (and defences to it), then classifying them within a framework of juridical concepts. Traditionally, the process is carried out to determine (under English conflict of laws rules), which country’s law applies to a particular issue as defined in terms of juridical concepts. (Footnote: ⁷)

As Dicey & Morris (Footnote: ⁸) points out, section 9(2) states an obvious truism, because the court of the forum is the only court that can decide whether, for the purposes of private international law, an issue arising in a claim is to be “characterised” as an issue relating to tort. Which conflict of laws rules the court uses for the purpose of performing the exercise of “characterisation” is a separate and distinct question.

But I also agree with the editors of Dicey & Morris (Footnote: ⁹) that, on its proper construction, sub-section 9(2) is doing more than stating an obvious truism. I think its proper interpretation must be approached by asking: what is the purpose of section 9(2) in the context of Part III of PILA? It must be to define the process by which the court decides which (if any) issues between the parties “relate to tort”, so as to enable the courts of the forum to decide whether Part III of PILA will apply for the purposes of deciding which law applies to determine those issues.

Sub-section 9(2) tells the court of the forum that it must characterise the issues arising in a claim (to see if it relates to tort) “for the purposes of private international law”. Sub – section 9(2) does not say that the process of deciding whether an issue is to be characterised as one “relating to tort” must be done according to English conflicts of laws rules of characterisation, or by using only juridical concepts as defined by English law. (Footnote: ¹⁰) The method of characterising an issue is left open. I agree with the view of Professor CGJ Morse, (Footnote: ¹¹) referred to in Dicey & Morris, (Footnote: ¹²) that the words “for the purposes of private international law” in section 9(2) indicate that Parliament intended that the court should examine relevant issues to decide whether they will be characterised as “relating to tort” not only by reference to English legal concepts and classifications, but by taking a broad “internationalist” view of legal concepts. Thus even if an analysis using English legal concepts and classification would not characterise an issue as “relating to tort”, (Footnote: ¹³) the English court must take account of legal concepts and classifications in any other relevant system of law. How this is to be done in each case must depend on the relevant facts and issues. Ultimately, this statutory approach to characterisation may not be very different from that adopted by the English common law, if one compares, for example, the principles set out in Macmillan Ltd v Bishopsgate Investment Trust Plc (No 3), although that was not a case of a claim in tort, but one for a restitutionary remedy. (Footnote: ¹⁴)

Mr Males submitted that characterisation of issues is a matter for English law as the law of the forum. In one sense he is correct, because by section 9(2) the characterisation has to be done by rules that are applicable in the English court. But to the extent that Mr Males submits that the English court should take account only of English legal concepts and English law classifications to see whether issues relate to tort or not, I must disagree, for the reasons I have set out above.

I think that it must follow from this that the word “tort” in section 9(1) and (2) is to be construed broadly, so as to embrace non – contractual civil wrongs that give rise to a remedy. The phrase “issues relating to tort” must mean all those relevant factual issues which relate to the civil wrong in dispute between the parties.

In this case, the “security claim” of Kookmin appears to comprise four elements. The first is the release of the cargo by Trafigura to Huron, by Trafigura giving instructions to the shipowners. The second is the return of the first set of the bills of lading to the shipowners, through their managers. The third is permitting the substitute bills of lading to be claused “voyage accomplished, null and void”. The fourth is putting two of the three bills of lading of the second set so claused into the banking chain.

Each of those four elements can be broken down into component “issues”, such as: what was the relationship between Trafigura and Kookmin; why did Trafigura do what it did in each case; what was the consequence of Trafigura’s actions and so forth. But I do not see the point in analysing these different component issues in any detail. In my view they all “relate to tort”, in the sense that they all relate to Kookmin’s claim for a pecuniary remedy, which is not based on a contract, but an allegation that Trafigura has committed a civil wrong against Kookmin.

Mr Males ripostes that if a proper analysis is conducted, the basis for the “security claim” must be the relationship between Kookmin, as the issuing bank, and Trafigura as beneficiary, under the L/C. Mr Males correctly points out that, as a matter of English law classification, this is a contractual relationship and these matters relate to contract. He also points out that Cooke J has already held that under English law there is no basis, in either contract or tort, on which Kookmin could mount a claim such as the “security claim”.

But I have concluded that all those arguments are beside the point. Kookmin does not base its claims on English law. It does not base its claims on breaches of the obligations of Trafigura under the L/C. It relies on actions and omissions of Trafigura which, it says, are outside the L/C and the UCP altogether, but which constitute a non – contractual civil wrong under Korean law. For the purposes of deciding whether the issues between the parties are “issues relating to tort” within section 9(1) of PILA, I have concluded that I cannot ignore the way Kookmin puts its claim in Korean law and simply look at the matter through the eyes of English law. Nor is it possible, given the nature of the exercise of “characterisation”, to obliterate all thoughts about other systems of law at this stage of the enquiry. I realise that the consequence of this approach is that I have referred to a particular system of law at the very first stage of the enquiry as to which is the applicable law. But it seems to me that this is inevitable, given the instructions set out in section 9(2) of PILA.

Therefore I have concluded that the issues between the parties do relate to tort. So the decision on which applicable law or laws is to determine these issues must be settled according to the principles set out in sections 11 and 12 of PILA.

Issue Two: In which country did the most significant element or elements of the events constituting the tort in question, ie. the “security claim” occur for the purposes of section 11(2)(c) of PILA?

It was agreed by Mr Males and Mr Onslow that relevant “elements of [the] events…” constituting the tort in question, ie. Kookmin’s “security claim”, occurred in different countries. For the purposes of determining the applicable law according to “the general rule” under section 11(2)(c) of PILA, I have to consider “the most significant element or elements…” of the events “…constituting the tort in question”, ie. the most significant elements of the events constituting the alleged non – contractual civil wrong.

In Morin v Bonhams & Brooks, (Footnote: ¹⁵) the Court of Appeal gave guidance on the proper approach to be followed by a court when considering elements of the events constituting the tort in question when they occur in different countries. Mance LJ said at paragraph 16:

“Section 11 of the 1995 Act adopts a geographical test. Where elements of the events constituting a tort occur in different countries, then [other than in cases of personal injury or death]…it selects the law of the country “in which the most significant element or elements of those events [ie. those constituting the tort] occurred”. What is required is an analysis of all the elements constituting the tort as a matter of law and a value judgment regarding their “significance”, in order to identify the country in which there is either one element or several elements, which taken alone or together, outweighs or outweigh in significance any element or elements to be found in any other country. The governing law under s.11(2) will be the law of that country”. [Mance LJ’s emphasis in bold].

In Dornoch Limited v Mauritius Union Assurance Company Ltd and others (Footnote: ¹⁶), I added the following comment to this statement of principle by Mance LJ:

“I would respectfully add that “significant element or elements” cannot simply mean those elements which involve the most elaborate factual investigation. It is the significance of the particular element or elements in making up the tort alleged that counts”.

So, first, I have to identify all the elements constituting the tort that are relied on by both Kookmin and Trafigura. Having identified those elements, I must then make a value judgment regarding the significance of the different elements in making up the tort alleged.

As I have said, Mr Males objected to paragraphs 3, 4 and 5 of the Principles of Korean Law because he said they delved into the facts rather than set out principles of law. But they do usefully set out the alleged “Unlawful Acts” of Trafigura, which are the events which Kookmin says “constitute the tort in question”, to use the words of section 11(1) of PILA.

The first fact referred to in paragraph 3 is the surrender of the bills of lading to the carrier. That took place when Mr Goh gave Captain Pandyala the originals at the office of the Managers of the vessel in Singapore on about 20 January 2004. So that element occurred in Singapore.

The second fact, referred to in paragraph 3.2 of the Principles document, (although the first in time) is Trafigura’s instruction for the discharge of the cargo without production of the bills of lading “(when such bills did exist)”. That instruction had been given by Trafigura’s associate company which was the charterer of the vessel, in a fax message sent on 24 November 2003 from the charterer’s office in Singapore to the vessel whilst in transit from Indonesia to Korea. So that event occurred in Singapore.

The third and fourth facts referred to in the Principles document is that Trafigura obtained a second set of bills of lading “at the Bank’s (ie. Kookmin’s) request”: see paragraph 4. The request must have come from Kookmin in Korea. The bills of lading were then obtained by Trafigura at the offices of the vessel’s Managers in Singapore. The fifth fact, that Trafigura transferred one bill of the new set to the carrier, is a reference to the fact that the Managers kept one of the three bills of lading that Captain Pandyala prepared in the presence of Mr Goh on about 20 January 2004. That also happened in the Managers’ office in Singapore.

The sixth fact referred to in the Principles document is the addition of the statement “Voyage accomplished, null and void” on the reverse of all of the second set of the bills of lading. That clausing was actually done by the Managers of the vessel, although it was counter –signed by Mr Goh. That action was also taken in the Managers’ Singapore offices.

The seventh fact, which is somewhat obliquely referred to in the Principles document, is that Trafigura put the two claused bills of lading into the banking system and did not pass three clean bills of lading to the Bank as it had requested. (Footnote: ¹⁷) That element occurred in either Singapore or Indonesia.

The last fact is that Kookmin has suffered loss as a result of the actions of Trafigura or its agents: see paragraph 8 of the Principles document. It is said that this loss has occurred because the Bank was deprived of its ability to “enforce its rights under the bills of lading against the carrier of the cargo”. It seems implicit in the way the matter is put that the loss was suffered by Kookmin in Korea.

Mr Onslow relied particularly on that element of the events constituting the alleged tort by Trafigura. He submitted that the place where the loss occurred was the most significant of all the elements. He relied by analogy with decisions of the European Court of Justice, when it has considered whether jurisdiction can be founded by a claimant under Article 5(3) of what was the Brussels Convention and is now Article 5(3) of Regulation 44 of 2001. (Footnote: ¹⁸) In my view those cases are not helpful. Under section 11(2)(c) and the guidance in the Morin case, I have to make a “value judgment” on the different elements in the instant case. In my view, cases concerning wording in another statutory provision, which has been given an autonomous meaning by the European Court of Justice will not help this exercise.

Mr Males submitted that the significant elements to events constituting the tort alleged occurred in London. He submits that the essence of Kookmin’s complaint is that Trafigura did not present correct documentation under the L/C, either when the first presentation was made or when the second set of two bills of lading was put into the banking system and eventually found its way to ANZ in London. He points out that Trafigura was entitled to present documents under the L/C at any bank “for negotiation” and Trafigura did so at ANZ in London. Therefore, if there was any failure with regard to the presentation of documents, this was in London.

Mr Onslow counters this by arguing that this failure is only relevant to the “presentation claim”, which Kookmin is not pursuing in the present action. I think that there is much force in this submission.

Mr Males also submits that if there is particular significance in the loss of Kookmin, then on proper analysis, the loss occurred when Kookmin reimbursed ANZ. That reimbursement was done in London. He points to the statement of Mr Kang, at paragraph 25, who accepts that Kookmin’s loss occurred when it paid funds to ANZ in London. (Footnote: ¹⁹) As an alternative, he submits that the loss to Kookmin occurred in Japan, because the reimbursement to ANZ was made by Kookmin’s Tokyo office. (Footnote: ²⁰)

Having set out all these possible elements of the events constituting the tort alleged by Kookmin in respect of the “security claim”, I must now make a value judgment on which is the most significant element or elements of the events constituting the tort alleged. The first in time is the order to discharge the cargo without bills of lading. Although the order and the discharge were the start of the problem, it is clear from the way paragraph 3 of the Principles of Law is phrased that those actions are not the most significant element of the events constituting the tort of the “security claim”.

Kookmin’s primary complaint is that once Trafigura had given orders to discharge the cargo without the bills of lading and that had happened, Kookmin was deprived of its security interest in the cargo because Trafigura did not send the original bills of lading to Kookmin, contrary to Kookmin’s instructions (via ANZ) on 12 January 2004. Instead, Trafigura surrendered those bills to the carrier and then took the second set of claused bills, which were useless as security for the cargo. So it is those acts that are the foundation of Kookmin’s claim against Trafigura.

Trafigura surrendered the original bills and took the second, claused set, in Singapore. Trafigura left one of the bills from the second set with the vessel’s Managers in Singapore. Trafigura also put the other bills from the second set into the banking chain in Singapore. In my view, judged by the way Kookmin puts its “security claim”, those were the most significant elements of the events constituting the alleged tort.

The place of the “loss” is also significant. On the way the “security claim” is put in the Principles of Law, I do not accept that Kookmin’s loss took place when it reimbursed ANZ, because Kookmin hoped at that stage to recover the sums from Huron. The loss came when Trafigura surrendered the first set of bills and so forth, as I have just set out. In my view that loss occurred in Korea.

The wording of section 11(2)(c) forces me to decide in which country the most significant element or elements occurred. Having attempted to value the significance of all the elements, I conclude that the most significant were those that took place in Singapore. That is because the acts on which Kookmin principally relies occurred there. Although the loss is also significant, it is not the most significant element in this case. In a sense, Kookmin was out of pocket from the moment it reimbursed ANZ in Tokyo. What really made the difference, on its case, was the actions of Trafigura in Singapore.

Therefore the “general rule” must be that the law of Singapore should determine the issues relating to the “security claim”.

Section 12 of PILA invites a court to make a comparison between the significance of the factors which connect a tort with the country whose law would be the applicable law “under the general rule” (ie. under section 11) and the significance of any factors connecting the tort with another country. Section 12 does not lay down any precondition before this further comparison can be undertaken. Moreover, it is clear from the terms of section 12(2) that the factors that a court can take into account as connecting a tort with a country under section 12 are broadly stated. Section 12(2) identifies a number of particular factors, but they are not said to be exclusive. Mance LJ noted in the Morin case (Footnote: ²¹) that the factors are potentially much wider than those to be considered under section 11(2)(c). In some cases there may be only limited scope for the application of section 12, (Footnote: ²²) but in others there is much greater scope; it depends on the facts of individual cases.

On the facts of this case it seems to me that it is important to consider whether the concept of “factors which connect a tort” with a country within section 12 embraces the parties’ express or implied choice of the law of a particular country to govern their contractual relations. This question was raised in the Morin case and Mance LJ made some comments on it, although they were obiter and he stated that he preferred to leave the question open.

In the Morin case the claimant was a French antique dealer who carried on business in London and who had a penchant for antique or “historic” cars. He received in London a catalogue for a car auction in Monaco. The details of an “historic car”, a Ferrari, caught his eye. So, armed with the catalogue, he travelled to Monte Carlo and successfully bid for the Ferrari as advertised. But the car suffered from mechanical faults. M. Morin attempted to sue in England the Monagasque auctioneer and its English parent company for damages for negligent misstatement. The catalogue contained a number of conditions applicable to all transactions. One of the conditions, clause 9.1, was that transactions to which the catalogue conditions applied would be governed by Monegasque law and the parties submitted to the non – exclusive jurisdiction of the Monegasque courts.

The two defendants sought to set aside permission to serve proceedings of the English court out of jurisdiction. The principal issue before the Court of Appeal was whether Monegasque or English law applied to the misrepresentation claim against the Monegasque auctioneer. Mance LJ, in agreement with the Deputy Judge, held that the most significant elements of the events constituting the alleged tort had occurred in Monaco. Therefore, following the “general rule”in section 11(1) and section 11(2)(c), the applicable law was Monegasque law.

Mance LJ considered what the position would have been had it been necessary to consider section 12. (Footnote: ²³) It is in this context that Mance LJ considered the question of whether the concept of “factors which connect a tort” with a country embraces the parties’ choice of the law of a particular country. He said, at paragraph 23:

“In general terms, it would seem odd, if an express choice of law were not at least relevant to the governing law of a tort. But Adrian Briggs, in an article “On drafting agreements on choice of law” in [2003] LMCLQ 389, points out the difficulty of the language of s.12 – adding however that “it may not be impossible” to overcome its “anti – commercial cast”. The law of a country is after all a feature of the country. Further, one should not forget that cl.9.1 not only deals with governing law, but provides for submission to the non – exclusive jurisdiction of the Monegasque courts. It may be open to argument that that itself constitutes a “factor connecting the tort” to Monaco. The judge did not decide any points relating to s.12 and, since we do not have to do so either, I prefer to leave them all open”. (Footnote: ²⁴)

I have read the article by Professor Briggs. It is principally concerned with how far parties can extend the scope of express choice of law clauses that might be agreed by parties to a contract so as to embrace non – contractual claims. Professor Briggs’ comments on section 12 of PILA arise in the context of a discussion on how far PILA would take account of any express choice of law clause for the purposes of determining the applicable law in relation to issues between the parties relating to tort. He states that it is “notorious” that section 12 allows an issue in a tort claim to be governed by a law of a country other than that determined by the application of the “general rule” under section 11, “…when the connections with another country make it more appropriate to apply the law of that country.” (Footnote: ²⁵) He continues:

“It is not therefore the appropriateness of the other law, but the territorial connections with another state, which determine whether another law – [in the case he is dealing with the contractually and chosen law] – will apply…..Overcoming the anti – commercial cast of s.12 of the 1995 Act may not be easy, but it may not be impossible; and such difficulties do not justify the failure to draft a choice of law clause in the manner which best suits the interests of the parties, for it is hard to believe that any other country will find s.12 to be worth emulating…”

With respect to Professor Briggs, in my view he adopts too narrow a construction of section 12(1) and (2). In section 12(1) the court is invited to make a comparison of the significance of the factors which connect a tort with the country whose law would be the applicable law under the “general rule” and “the significance of any factors connecting the tort...with another country”. I would emphasise the use of the words “any factors” in section 12(1). In my view Professor Briggs’ comments also do not give adequate scope to the breadth of section 12(2). As I have already commented, it is inclusive, not exclusive in its terms. But it does state that the court can take into account “…in particular, factors relating to the parties” as factors that might connect the tort with “another country” for the purposes of section 12. It seems to me that the phrase “factor relating to the parties” is broad. The factor only has to “relate” to the parties. I would hold that the phrase can include the fact of a pre – existing relationship between the parties, whether contractual or otherwise. (Footnote: ²⁶) Another factor “relating to the parties” must be, in my view, the law that the parties have expressly or impliedly chosen to govern their pre – existing contractual relationship. If that pre – existing relationship is said to give rise to events constituting the alleged tort in question, then it seems to me that the factual and contractual context in which the events took place and the law governing any related contracts must be within the phrase in section 12(2): “…relating to…any of the events which constitute the tort…in question or to any of the circumstances or consequences of those events”.

For my part I see no difficulty in the idea that if the governing law of a contract, or a chosen jurisdiction provision in a contract is that of country A, that may be a factor that connects the alleged tort under consideration with country A. An analogous exercise is carried out every time the court considers the impact of the applicable law of a contract when deciding whether England is the appropriate jurisdiction in a “forum non conveniens” case. (Footnote: ²⁷) So in my view the contractual “matrix” in which it is said the alleged tort constituting the “security claim” occurred is a potential “factor” for consideration under section 12.

Mr Males submits that in this case there are six factors which connect the alleged tort with another country other than that identified by using the “general rule” under section 11(2)(c). He submits that they all point to England.

To my mind the first connecting factor which he identifies, that is, the L/C contract between Trafigura as beneficiary and Kookmin as issuing bank, is by far the most important out of the six. The existence of the L/C contract is the reason for any kind of connection between Trafigura and Kookmin at all. The L/C was the pre – existing relationship which, at least in contract, governs the rights and obligations of Trafigura and Kookmin as, respectively, beneficiary and issuing bank under the L/C. Cooke J held that the L/C contract, as between Trafigura and Kookmin, is governed by English law: see paragraphs 15 and 23 of his judgment. That conclusion has not been challenged before me by Kookmin. Nor has Kookmin challenged the conclusions of Cooke J that Kookmin would have no claim against Trafigura under the L/C as a matter of contract and that the English law contracts leave no room for a claim in tort where the contracts are fulfilled: see para 36 of his judgment.

The L/C also gives rise to a contractual relationship between the issuing bank and the advising/negotiating/paying bank. That relationship must also be governed by English law.

Under the L/C, ANZ London was the advising bank. Trafigura was entitled (although not obliged) to tender relevant documents for negotiation at a bank in London and it did so at ANZ in London. Trafigura’s decision (using Section (M) of Field 47A of the L/C terms) to tender the LOI with other documents to ANZ in London, so as to obtain payment under the L/C, was one of the triggers that has led to the present claim by Kookmin against Trafigura.

The second point to note concerns all the other relevant contracts. First there is the Sale Contract between Trafigura as seller and Huron as buyer. The L/C only came into existence by virtue of the terms of the Sale Contract. The Sale Contract states expressly that it is governed by English law and that all disputes under it are to be submitted to the exclusive jurisdiction of the English Courts: see clause 18.

Trafigura gave orders to the vessel to discharge the cargo without production of the bills of lading. It was entitled to do so by clause 36 of the Charterparty. That contract is also governed by English law. I have already pointed out that the first set of bills of lading, which were made out to Pertamina as shippers, were expressly governed by Indonesian law.

Pursuant to the terms of the L/C, and the Sale Contract, Trafigura provided an LOI in the terms as set out in the L/C and in the Sale Contract. That LOI is expressly governed by English law and has an English jurisdiction clause.

Therefore it seems to me that the second important factor for the purposes of section 12 is that all but one (Footnote: ²⁸) of the relevant contractual relationships between the parties – that between the sellers (Trafigura) and buyers of the cargo; that between the sellers and the carriers; that between the issuing bank and the beneficiary under the L/C; and that between the sellers and the buyers in the LOI contract – are all governed by English law. All those parties’ contractual rights and obligations are therefore connected with England, because, as Mance LJ said in paragraph 23 of the Morin case, “…the law of a country is a feature of the country”.

I would not go as far as Mr Males’ submission, (in identifying his second factor) that to make Korean law the applicable law to any tort claim against Trafigura “would subvert the system of financing international trade by means of letters of credit governed by UCP 500”. But I have concluded that when the law governing all the contractual relationships between relevant parties concerned with the Sale Contract and its financing is English law, it would seem bizarre to hold that the applicable law to determine issues arising in relation to Kookmin’s tort claim against Trafigura should be the law of another country, viz. Singapore.

Of Mr Males’ six factors, the only other one I need mention is his submission that Trafigura had no presence in Korea and its actions were not committed in Korea. I do not entirely accept that point. I accept that Trafigura did not have a place of business in Korea and that it dealt with Huron in Singapore. But it agreed to sell and deliver cargo to Korea. Trafigura also ordered that the cargo be discharged, without production of bills of lading, in Korea. But, for reasons I set out below, I do not regard those connections with Korea as particularly important compared with other connecting factors I have identified.

Mr Onslow submitted that Kookmin’s “security claim”, as opposed to its “presentation claim”, is centred on Korea, thus making Korean law substantially more appropriate to be the applicable law for determining the issues arising in Kookmin’s claim. I must disagree. As I have already concluded when analysing the significant elements of relevant events for the purposes of section 11 of PILA, the key events took place in Singapore, not Korea. For the reasons I have given, the place of Kookmin’s loss, Korea, does not displace the primary significance of the elements of events that occurred in Singapore.

In the terminology of section 12 of PILA, the most significant factor that relates to the two parties is the pre – existing relationship of the L/C. Without that pre – existing contractual relationship, Kookmin cannot create the necessary connection between itself, as issuing bank, and Trafigura, as beneficiary under the L/C, so as to give rise to the duties that Kookmin says are owed to it by Trafigura under Korean law. That factor connects the alleged tort to England because English law is the governing law of the pre – existing contractual relationship between the parties.

Section 12 requires that I compare the significance of the conclusion with the significance of the country identified under the “general rule” set out in section 11. In a way, the fact that the key events took place in Singapore was adventitious. Trafigura is a Dutch company, but also has offices in London and Singapore. The key events took place in Singapore because the ship’s Managers had an office there. As with many cases involving international trade, key events could have happened in many different places.

Ultimately I have concluded that it is substantially more appropriate that the applicable law governing the contractual relationship between Trafigura and Kookmin for issues relating to tort should be the same as that governing their contractual relationship: viz. the law of England. That conclusion is supported by the fact, as I have stated, that all but one of the other contractual relationships between all relevant parties are governed by English law. I repeat: it would seem bizarre for all those parties’ contractual relations to be governed by one applicable law, yet hold that the law of another country is to determine non – contractual rights and obligations.

The decision, under section 12(1), of whether or not it is “substantially more appropriate” for the applicable law for determining the issues in tort to be the law of a country other than that identified using the “general principle” under section 11(2)(c), must, ultimately, involve a value – judgment as to the significance of factors that point to an applicable law other than that identified under the “general rule”. I accept that it is for the party seeking to rely on section 12(1) to demonstrate that the factors relied on under section 12(2) clearly lead to the result that it is substantially more appropriate for the applicable law of the other country to determine the issues arising in relation to the tort alleged, ie. the “security claim”. But I have no hesitation in arriving at the value judgment, based on the facts of this case, that it is substantially more appropriate for English law to be the applicable law to determine any non – contractual claims that Kookmin may wish to bring against Trafigura in relation to the matters set out in the Principles of Korean law.

Conclusions

My conclusions on the three issues concerning the applicable law are, therefore:

The issues raised by Kookmin concerning the “security claim” are to be regarded as “issues relating to tort” for the purposes of section 9(1) of PILA. Therefore the rules set out in Part III of PILA must be applied to decide on which applicable law is to be used to determine the issues arising on the “security claim”.

Applying those rules, the most significant elements of the events constituting the tort said to constitute the “security claim” occurred in Singapore, for the purposes of section 11(2)(c) of PILA.

Considering section 12(1) and (2) of PILA, there are factors which connect the tort constituting the “security claim” with a country other than Singapore. Overall the factors connect the tort with England. The significance of those factors, looking at them overall is such as to make it substantially more appropriate that the law of England should be the applicable law to determine the issues relating to the “security claim”.

Therefore I answer the question in the Preliminary Issue: English law.

I understand Mr Onslow to concede that if I concluded that the applicable law in relation to Kookmin’s tort claims was English law, then Trafigura is, in principle, entitled to a Declaration of Non – Liability in the English action. However, he wished to reserve his position on the question of whether Trafigura would in principle be entitled to an anti – suit injunction. There may have to be further argument on that point after the parties have considered this judgment.