The Owners of Cargo Lately Laden on Board the Ship "Bayville" v. Mercury Shipping Co Ltd

HCAJ000014/1983

Jurisdiction of Court to set aside a judgment entered by plaintiff after failure of defendant to comply with an unless order.

Interpretation to be given to decision of Full Court of Hong Kong in Edward Sum v. Li Pui Chuen and Others (1962) H. K. L .R. 209. Court is at liberty to and should follow present English practice referred to in Samuels v. Linzi (1981) 1 Q.B. 115. Consideration of conduct of defendant which will be deserving of such sympathy as to warrant setting aside.

What constitutes a difficult point of law such as will warrant setting aside. Meaning of word "errors" in the Charter Party.

BETWEEN

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Coram: Hon. Power, J.

Dates of Hearing: 5 January 1984 & 6 January 1984

Date of Delivery of Judgment: 16 February 1984

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JUDGMENT

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1. In this application Mercury Shipping Company Limited, the Defendants, seek an order that the judgment entered in this action in default of compliance by the Defendants with an order of the Master requiring them to file a list of documents be set aside.

2. In the action the owners of cargo lately laden on board ship "Bayville", the Plaintiffs, seek damages for breach of contract and/or duty by the Defendants as demise charterers of the said vessel in that they delivered a cargo of bags of sugar which was short, slack and partially wetted. The plaintiffs claim that -

3. The cargo was loaded at Recife in Brazil for carriage to Jakarta in Indonesia. The vessel had arrived Recife on the 14th November 1981 and loading commenced on that date and continued until the 24th November. The ship's crew told the Master that they noted that there was short shipping as to 370 bags on the 14th and 15th November and on the 16th the Master wrote pointing this out to a local shipping agent, Williams & Co. (Williams). Williams were the agent of Messrs. Tate & Lyle International Ltd., the voyage charterers, and were also, it appears, agents of the Defendants. Indeed, it was they who eventually signed the Bill of Lading on behalf of the Master. Williams replied to the Master on the 20th November indicating that the quay side counting, which had been called into question by the Master, was, in their opinion, reliable and that, if the Master wished to make any check upon the quantity, it should be done jointly with IAA men (the Government handling agents) ex lorry on the quay. Williams also suggested that Super-inspect, a cargo inspection agency, who had, by then, been employed by the Defendants to conduct a shipboard tally, were without experience and were unreliable. The master, nevertheless, continued to employ Superinspect who, in the outcome, presented a report which indicated short shipment of 2,290 bargs.

4. The vessel sailed on the 24th November but it appears that before leaving the Master instructed a Mr. Guimaraes to appear before a Notary Public to have an Instrument of Protest, made by the Master, notarised. In this Instrument the Master said that there had been short shipping as to 1,183 bags (this does not tally with Superinspect's number) and "that charter's agents Williams & Co., Recife, informed me that unless I give unclaused Mate's Receipts and issued clean Bill of Lading, I will not be permitted to sail the vessel". He went on to say "I say that I am making this protest also because I am not permitted to clause my Mate's Receipts and to sign Bill of Lading without qualifying remarks in any way whatsoever". In this protest the Captain explained why he had commenced his own tally. He said that he noticed "that shippers/shore tallymen were reading books, listening to radios, relaxing in cars and other points on the wharf and seem not to pay full attention to their job of tallying cargo". The Captain went on to say that "a number of bags were observed to fall in the water during loading after tally from trucks at wharf "and "that a number of boys were found torn and bleeding with less contents and were rejected and returned after tally by shore tallymen had been done from trucks to wharf".

5. As to Clause ( i ) the Defendants contend that it can be met by proof that the 889 bags were never loaded at all. As matters presently stand, there is no explanation as to how it comes about that only 889 bags are said to have been short-landed when the Master's tally shows that a number very much in excess of that figure was shortloaded.

6. Claims (ii) and (iii), which constitute a small part of the Plaintiffs' financial claim, relate to alleged loss during handling by stevedores after arrival of the vessel at Jakarta. The Plaintiffs allegation in this regard is that the Defendants are responsible for the negligence of the stevedores.

7. The Bill of Lading, which was exhibited as "P W B-2" to the affidavit of Mr. Bugden, states that "240,000 (Two Hundred and Forty Thousand) bags of refined white crystal sugar minimum polarization 99.7 degree, moisture 0.1 percent both at time of shipment packed in about 50 kilo nett uniform single new jute bags with poly liner.

being marked and numbered as in the margin and are to be delivered in the like good and condition at the aforesaid Port of Jakarta.''

8. The foot of the Bill of Lading, under the words "Shipped on board, Recife, November 24th, 1981", appears to be signed: "Williams (Service Martimos) Ltd. - as agents - by Master's authority". I say that it appears to be signed because on the photostat exhibited there is no signature or chop but only the typewritten words set out above. However no issue was made of this. It seems to be common ground that Williams, who were the Defendants, as well as the voyage charter's agents, signed a clean Bill of Lading despite the Master's allegation that the quantity was not correctly stated.

9. The vessel was voyage chartered under a Sugar Charter Party ("P W B-5" ) dated the 5th November 1981 and entered into between the Defendants, the demise charterers of the vessel, and Tate and Lyle International L t d., the voyage charterers. There was no issue that the Defendants being demise charterers employed the Master and were a party to the Bill of Lading. The Bill of Lading contained the provision "Subject to all clauses, conditions, exceptions and stipulations of the Charter Party dated". The material clauses of the Charter. Party are clause 14 and 15 which read as follows:-

10. The writ of summons was issued on the 26th January 1983 and an acknowledgment of service was filed on the 9th February 1983. On the 11th February 1983 there was a summons taken out by the Plaintiff asking for summary judgment pursuant to O.14 r.l. In support of this application Mr. Bugden filed an affidavit, to which reference has been made, annexing, inter alia, a copy of the Bill of Lading and a copy of the Charter Party.

11. On the 25th February 1983 Mr. Jonathan Johnson filed an affidavit opposing the granting of judgment under O.14 and submitting that the Defendants had a good and complete defence to the claim. The Defence was filed on the 17th March 1983. The Plaintiffs did not proceed with the O.14 summons.

12. On the 24th May the Plaintiffs amended their Statement of Claim and on the 20th July the Plaintiffs filed their list of documents. On the 2nd August 1983 the Plaintiffs filed a summons asking that the Defendants do within 14 days file a list of documents and requesting that, upon failure to comply with such an order, the defence be struck out and the Plaintiffs be at liberty to sign judgment.

13. The Defendants did not appear upon this summons and on the 4th October 1983, Master Wilson made an order in terms thereon. This order was filed on the 10th October 1983 and, there having been no compliance with it, judgment was signed by the Plaintiffs on the 19th October 1983. On the 25th October, the Defendants took out the present summons.

14. The two issues for my decision in this application are:-

(1) Does the Court have jurisdiction? Prior to the case of Samuels v. Linzi (1981) 1 Q.B. 115, the view taken by the English Courts was that, when a defendant had failed to comply with an order of the Court, which failure had allowed the plaintiff to enter judgment against him, the action was dead and the Courts had no jurisdiction to make an order extending time to allow the defendant to comply with the Court's order. It was held in that case that the Court did have power to extend time where an "unless" order had been made but had not been complied with "since the modern practice was not to treat the action as dead". (Headnote).

15. The Court went on to say that the power should be exercised cautiously and with due regard to the principle that orders were made to be complied with and not to be ignored. There is, then, no doubt that the present practice in England would allow a Court to make the order sought. However, in Hong Kong, in the case of Edward Sum v. Li Pui Chuen and Others (1962) H. K. L. R. 209, the Full Court following the practice in England, as it then existed, held that, while the Court may vary any order before it is passed and entered, it could not do so afterwards as the Court was then functus officio.

16. Mr. Sussex, who appeared for the Plaintiffs, submitted that this Court was bound by the decision of the Full Court and that, no matter what it considered that Court would do if the matter was now taken before it on appeal, this Court could not arrogate to itself the power to overrule the clear decision in Edward Sum's case. Mr. Smith, who appeared for the Defendants, submitted that, in the peculiar and particular circumstances of this case, it would be proper for this Court to consider itself not bound by the decision of the Full Court. He submitted that it was clear that the Full Court would follow the decision in Samuels v. Linzi Dresses Ltd. and that this Court, given that this was so, should avoid unnecessary costs and delay by overleaping the decision in Edward Sum's case. He prayed in aid the unreported decision of Hunter J. in International Buyers Service v. Pakistan International Airlines Corporation and Others which was delivered on the 22nd July 1983.

17. In Edward Sum's case, the Court, having reviewed the English cases, held at p.212 that:-

"The practice is summed up in the editorial note to Re V. G. F. Holdings Ltd. (1941) 3 A. E. R. 417 in these words:-

'.......It is well-settled that the court can vary any order before it is passed and entered. After it has been passed and entered the court is functus officio, and can make no variation itself. Any variation which may be made must be made by a court of appellate jurisdiction .........' "

18. Hunter J. stated the problem which he faced in the following way:-

"That, therefore, gives rise to this question. The full bench in Hong Kong have followed the practice laid down in the 1878 English cases. The English Court of Appeal have now said that that practice is wrong. Those cases have been over-ruled. In effect what they have said is that the Divisional Courts in England in those days put a false or too narrow construction upon the English rule. The problem is where does that leave me as a matter of authority. Am I bound still to follow the Hong Kong full bench decision because it is there or am I entitled to look at the reasoning of the decision and  then say that that reasoning has been undermined if not destroyed by the Court of Appeal in England because the Court of Appeal has held that the construction which the Divisional Court put upon the relevant rule was wrong. I find this an embarrassing position. No authority has been cited to me one way or the other in this somewhat grey area in which trial judges find themselves in this particular jurisdiction."

19. He considered that he was not bound to follow the Hong Kong full bench decision for 3 reasons.

20. His first and principal reason he set out as follows:-

"I accept that I am bound by one court and only persuasively bound by the other. But the difference between these two concepts in this particular matter, where the Court which binds me has itself drawn its inspiration and support from the earlier Court, it so narrow, that I feel that  the High Court here ought to have that choice. That is my first reason for exercising my discretion in this case. "

21. His second reason was because he found "the alternative route (by way of a time consuming and costly appeal from a decision which he was satisfied must be upset) totally unattractive."

22. I do not intend to canvass his third reason which was, as he frankly said,"simply a device" which took the "narrowest view of authority".

23. With respect to my learned brother, I am satisfied that it was not necessary, when finding as he did, to hold that the Court was not bound by the decision in Edward Sum's case.

24. Before a Court holds itself bound by the precedent of any superior decision, it must first determine the extent of the precedent established by that decision.

25. I am satisfied that a clear indication in this regard is given in Edward Sum's case by the use of the words "the practice" in the passage from the decision cited above.

26. The Full Court examined the cases and satisfied itself as to "the practice" followed in England. Having established that practice it was satisfied that it should be followed. I consider that the correct view of the decision in Edward Sum' s case is, that it held that the established English practice, as to the power to extend time where an ''unless" order, has been made and not complied with, should be followed. To hold, as I am asked to do, does not I am satisfied involve any indication that the Court considers itself to be not bound by that decision of the Full Court. This Court is, as the Full Court indicated it should, following the established English practice.

27. I am satisfied, therefore, that the Court following the English practice does have power to extend time.

(2) ( i ) Is this a proper case for the Court to exercise its discretion in favour of the Defendants.

28. Mr. Sussex submitted that there must be some redeeming feature in the conduct of the Defendants which showed that they were deserving of the Court's sympathy. He referred to the words of Lord Justice Roskill in Samuels v. Linze Ltd. at 126 where he said:-

"To say that there is jurisdiction to extend the time where an "unless" order has been made and not complied with is not to suggest  let this be absolutely plain - that relief should be automatically granted to parties who have failed to comply with the orders of the court or otherwise than upon stringent terms either as to payment of costs or as to bringing money into court or the like. Orders as to time, and in particular as to the time for delivery of pleadings and particular are made not to be ignored but to be complied with. In the present case, long before the problem caused by the Christmas holidays last year arose, there had been serious delay in complying with various orders, and the defendants were at mercy when they came before Judge Hawser. They had not done that which they ought to have done. They were not, save perhaps at the very last moment, deserving of any sympathy. But at the last moment they had made a real effort to comply with the order and they were perhaps unlucky that their efforts did not meet with success.

29. He submitted that in the present case there had been no "real effort to comply with the order" and there was no redeeming feature in the conduct of the Defendants which was deserving of any sympathy.

30. Mr. Smith on the other hand said that the facts spoke for themselves. He submitted that a series of unfortunate mischances had occurred none of which, in itself, was of any real seriousness but which, when combined, had the result that the Court's order, because it did not come to the Defendant's knowledge, was not complied with. He submitted that this was clearly not a case of knowing disobedience to an order of the Court. He pointed particularly to the order itself, submitting that the making of an "unless" order in circumstances such as obtained in the present case was most unusual. I am satisfied that he is correct in this submission and am unable to find any circumstance which would have indicated that such an order was appropriate. It seems that the order was made simply because it was asked for and was not opposed. Given the nature of the documents being sought, I am satisfied that the time limit allowed, i.e. 14 days, was wholly unrealistic. I am quite satisfied that, had the Defendants appeared before the Master, they would have been able to satisfy him both that considerably longer time should be given and that the order should not be granted upon such stringent terms.

31. I turn now to look at the actions of the Defendants' solicitors. Mr. Biggs, who was handling the matter,was on holiday on the 2nd August when the summons for discovery was filed. There then occurred a series of what can only be described as careless mischances. The first occurred when no note of the hearing date of the summons was made by the solicitor who was dealing with the matter in Mr. Biggs' absence in the diary of Mr. Biggs. There was either carelessness on the part of the solicitor concerned or a failure by Mr. Biggs to institute a proper system of dealing with his matters during his holiday.

32. The second mischance occurred when the summons was misfiled in the correspondence file. This was clearly a matter of carelessness on the part of the solicitor who received the summons or one of  the clerks.

33. The third mischance occurred when the solicitor who received the summons failed to mention to Mr. Biggs, upon his return, that it had been received. This was particularly significant given that no note of the hearing date had been placed in Mr. Biggs' diary.

34. The fourth mischance occurred when on the 7th October Mr. Biggs having received a telex stating that an order had been made did not locate the summons and ascertain the exact nature of the order. He says that he spoke to his colleague who then informed him that the summons had been issued and that the reason he did not locate the summons was because it had been misfiled.

35. On the 10th October the fifth mischance occurred when Mr. Biggs, having received a copy of the order, did not read it through. I fully appreciate that  Mr. Biggs considered that there was no likelihood that an "unless" order had been made. However, exercising ordinary care, he should have read the order from start to finish.

36. As can be seen from the above, there was one careless mischance following upon another. Are there any matters that might be said to be deserving of sympathy? Mr. Biggs did,after receiving the telex of the 7th October, speak to his clients asking them for copy of their file so that he could prepare the list of documents. He received the file on the 20th October and then intended to telephone the solicitors for the Plaintiffs and ask for an extension of time. It was, however, too late as judgment in default had been signed on the 19th October. Had Mr. Biggs been alerted to the true position a little earlier I have no doubt that he would have had no difficulty, upon application to the Master, in obtaining an extension of time. While I do not in anyway countenance Mr. Biggs' failure to read the order when he did get it in his hands, I must say that I do not consider it was unreasonable for him to think that an "unless" order would not have been made.

37. I bear in mind (a) the nature of the order which was made by the Master, particularly the very short length of time that was given to comply therewith, and that an unless order was made in circumstances where there was no particular circumstance to warrant the making thereof (b) that each act of careless mischance was relatively minor (c) that there was no deliberate flouting of the Court's order. In all of the circumstances I consider that the Defendants are deserving of sufficient sympathy to warrant the exercise of the Court's discretion in their favour.

(2) (ii)Have the Defendants an arguable defence? As to the minor part of the Plaintiff's claim relating to loss said to be caused during handling in Jakarta the Defendants do not, I am satisfied, given the wording of clause 15 of the Charter Party, have any defence.

38. Whether the Defendants have an arguable defense as to the major part of the claim hinges upon the meaning to be given to the word "errors" in clause 15 of the Charter Party. The relevant sentence therein reads as follows:-

''Quantity stated on Bills of Lading to be conclusive evidence against the ship as to the number of bags of sugar shipped, errors and obvious fraud excepted."

39. Mr. Smith contends that "errors" are established if the ship owner can prove that the quantity stated on the Bill of Lading  is erroneous, i.e. if the ship owner establishes that the quantity in the Bill of Lading is wrong, then he has established an error and displaced the evidence that would otherwise be conclusive against him.

40. Mr. Sussex contends that the word has a much narrower meaning. He contends that there would only be "errors" if it is shown that the figures in the Bill of Lading were placed therein in error and not deliberately. He contends. that if the figure was placed deliberately in the Bill of Lading, not being the result of some sort of error, then it is binding upon the parties. Mr. Sussex submits that the object of a clause such as this is to prevent the kind of dispute that has arisen in the present case. He submits that the clause is inserted to ensure that the Bill of Lading can be negotiated with confidence that it correctly sets out the quantity of goods shipped. He submits that it is clearly desirable this should be so as Bills of Lading have to be negotiated in ports far from the port of loading by parties who have no opportunity to know anything of the circumstances of the loading or the quantities actually loaded.

41. Both counsel referred to Sugar Supply Commission v. Hartlepools Seatonia S. S. Company (1927) 2 K. B. 419. Mr. Smith referred particularly to the judgment of Mr. Justice MacKinnon where he said "I agree with the learned arbitrator in thinking that what is intended by the clause is actual proof of error, as for example, by comparison between the Mate's receipts and the Bill of Lading, or some other document so that the source of the discrepancy between the two can be pointed out.

42. Mr. Smith referred to Grant v. Norway 10 C. B. 665 which held that the Master, signing a Bill of Lading for goods which have never been shipped, is not to be considered as the agent of  the owner in that behalf so as to make the latter responsible to one who has made advances upon the faith of a Bill of Lading so signed. He submitted that the reason that conclusive evidence clauses were inserted in Bills of Lading was to ensure that the onus would be upon the owner to prove that the Bill of Lading was not correct and that such clauses were never intended to do more than that i.e. to shift the onus.

43. Mr. Sussex adopted the argument of Sir Thomas Inskip in the Sugar Supply Commission Case, at p. 427, where he said, "Equally 'error' must mean some error on the face of the documents which would become apparent on the production of the documents e.g. a discrepancy between the mate's receipts and the statement of quantity in the Bill of Lading. The arbitrator has found that there was no evidence to show how the discrepancy between the Bill of Lading number and the  out-turn number arose. The clause requires proof of the error. In the absence of proof one is left to conjecture whether the discrepancy is due to error or fraud. It is not enough for the shipowners to say that all the bags of sugar put on board were discharged, the error must be proved. If the contention for the respondents is correct and 'error' includes all discrepancies, then there is no reason for including 'fraud' in the clause."

44. Mr. Sussex said "errors" should be given its ordinary meaning and referred to the case of Taylor v. Bullen 5 EX 779. In that case, the Court, when dealing with the sale of a ship said that the word "error" meant any "Unintentional misdescription". He submitted that this was the meaning of the word "error" in the present circumstances. Mr. Smith contended that that was a case of sale of goods and that the Court should be very cautious before adopting the meaning ascribed thereto to the word "error". Mr. Sussex submitted, however, that even if the definition in that case was not relied upon, the, meaning that he wished to ascribe to "error" was its ordinary English meaning.

45. The Shorter Oxford English Dictionary states that "error" means "something incorrectly done  through ignorance or inadvertence; a  mistake."  He submitted that there was no question here of anything being done through ignorance or inadvertence as what was done by the agents of the ship owners was done deliberately & knowingly.

46. Mr. Smith submitted that there was clearly an arguable case. He submitted that at worst for him the Court must hold that there was a real difficulty as to a matter of law and that it was, therefore, an appropriate case in which to set aside the judgment and allow the Defendant to defend. He referred to the decision in The Sugar Supply Commission case where the learned judge had referred to the matter as "an extremely difficult question". While the question may be one of some difficulty it does seem to me to be of such difficulty "that it cannot be properly dealt with in these proceedings. Having considered all of the argument, I am quite satisfied that "errors" must be given the meaning contended for by Mr. Sussex.

47. In argument Mr. Smith touched upon, but did not really develop, the possibility that the present case is affected by the fact that the agents were acting for both the parties to this action? It was not argued that any estoppel would arise nor did the Defendant seek to rely on "obvious fraud". While it may well be that the owners have a cause of action against their agents for failing in their duty towards them, I am satisfied that the fact that Williams were agents for both the Defendants and the charterers cannot be said, as the matter has been argued before me, to affect this action. In the circumstances I hold the Defendants have not established an arguable defence and that their application must fail. Defendants are ordered to pay Plaintiffs' costs of this application to be taxed.

Representation:

Mr. C. Smith instructed by Richards Butler for Applicants/Defendants.

Mr. C. Sussex instructed by Clyde & Co. for Respondents/Plaintiffs