Hong Kong Islands Shipping Co Ltd and Another v. Castle Insurance Co Ltd and Others

HCA003727/1978

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 3727 OF 1978

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Coram: Mr. Commissioner Mayo

Date of Judgment: 15th October 1980

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JUDGMENT

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1. This is an application by 31 of the defendants in this action to strike out an order made by the Registrar ex parte for the joinder of the 2nd plaintiff.

2. The main argument advanced in support of the application is that the 2nd plaintiff should not have been added as a party as its claim is statute barred.

3. In its points of claim the 1st plaintiff made a claim against the 12th to 85th defendants under Average Agreements which were entered into in consideration of the 1st plaintiff delivering to them cargo without payment of cash deposits. The claims against the 1st to 11th defendants are based upon their being guarantors of the various payments of the proportions of general average attaching to the consignees of cargo i.e. the 12th to 85th defendants.

4. The claim for General Average arises out of a voyage of the "Potoi Chau" from various ports in the Far East to Jeddah, Hodiedah, Aden and Bombay in October 1972 when the said vessel encountered cyclonic weather conditions necessitating sacifices of ship and cargo and the incurring of various items of expenditure.

5. The Agreements and guarantees I have referred to were entered into in late 1972 and early 1973, the last guarantee being concluded in May 1973.

6. In view of the large number of cargo owners it took a considerable amount of time for the Adjusters Messrs Stevens & Elmslie & Co. to prepare an Average Adjustment and they did not deliver this until the 31st August 1977. The writ in these proceedings was issued on the 25th October 1978 and the order joining the 2nd plaintiff as a party was made by the Registrar on the 23rd July 1979.

7. Mr. Waung, who represented the defendants argued that his clients would be severelly prejudiced by the addition of the 2nd plaintiff as they would be thereby deprived of defences it would have both as to the plaintiffs lack of title and the time bar.

8. The most important matter which has to be determined in this application is when does time run from on a claim based on General Average.

9. Mr. Waung submitted that as the relevant Bills of Lading provided that General Average should be adjusted according to the York Antwerp Rules 1950 and the publication of an adjustment had not been made a condition precedent to the existence of a course of action, liability to contribute arose when sacrifices were made or expenditure incurred. The authority for this proposition was contained in the leading case on this subject Chandris v. Argo Insurance Co. Ltd and others⁽¹⁾. Mr. Waung also cited the case of the Nimrod⁽²⁾ as having followed the principles laid down by Megaw J. (as he then was) in the Chandris case. Mr. Waung went on to argue that if it was clear that the 2nd plaintiff was statute barred I should make an order to strike out the 2nd plaintiff from the proceedings. He referred to the case of Lucy v. Henleys Telegraph Works⁽³⁾ where a similar situation had prevailed. In particular he referred to a passage in the judgment of Megaw L.J. on p. 412 of the report which reads as follows:

"The addition of a new and different party is not correcting the name of a party: it is not a matter of mistake. The inference is inevitable that an amendment to add a completely new and different defendant is not permissible where a relevant of limitation affecting the proposed defendant has expired."

10. The plaintiffs were represented by Mr. Mumford. He emphasised the practical problems which would be encountered if time ran from the date of the sacrifices or expenditure. In particular he referred to the difficulty or impossibility of cargo owners formulating claims prior to the finalisation of the Average Adjustment. He suggested that some cargo owners might not even know immediately whether or not they had a claim, on account of the numerous imponderables and the paucity of information which may be available.

11. He pointed out that the Salvage award in the instant case had not been determined until 1976 and Clyde & Co., the solicitors who had also acted for some of the defendants had not rendered their bill of costs to the Adjusters until April 1976.

12. However Mr. Mumford's main argument was that a course of action had not arisen until the amount being claimed had been determined. He said that a cargo owner would find himself in an impossible position if he had to commence litigation prior to an adjustment being made as it would be open to the defendants to resist the claim on the grounds that there were insufficient particulars of the claim for it to be maintained.

13. In support of this Mr. Mumford also argued that it was clear from the documentation that it was the intention of the parties that no moneys should be payable until after the Adjustment had been concluded. He referred to the case of "Evje"⁽⁴⁾ where it had been held that time ran from the date of the supporting documentation being concluded. With respect I do not think that this case is of much assistance to the plaintiff as the facts of the "Evje" were rather different to those in the present case. In the "Evje" case the usual form of Bond was not entered into and reliance was placed upon an exchange of correspondence which the Indian High Commissioner in London had entered into. In the final letter, when instructions were given to release the cargo, the solicitors for the ship owners wrote in the following terms "We thank you for your letter of the 23rd February and note that we may apply to you for settlement when our adjustment of General Average is completed." This indicated a different situation to the wording of bonds and contracts which are used in normal cases. Certainly there is nothing in the documentation exhibited to the affidavits before me which revealed that a separate contract had been entered into providing that the cause of action was postponed until the settlement of the Average Adjustment.

14. Mr. Mumford also contended that although a ship owner may have a lien on cargo where average claims remained outstanding this did not mean that there had to be a right of action vested in the ship owner. With respect I disagree with Mr. Mumford and consider that this is further indication that a right of action existed from the date of the sacrifice or expenditure.

15. In addition to the contention that the 2nd plaintiff was not statute barred Mr. Mumford argued that this was an appropriate case for the Court to exercise its discretion in his clients favour and permit the 2nd plaintiff to remain a party to the proceedings. He said that a similar situation had arisen in an unreported case recently before the Court of Appeal in Hong Kong Kapimantan Timbers Co. v. Mighty Dragon Shipping Co. S.A.⁽⁵⁾. In that case the Court of Appeal had permitted the amendment of a writ to allow the addition of a 2nd plaintiff notwithstanding that it was statute barred. It is clear that the circumstances of that case were unusual. One of the reasons why the 2nd plaintiff had become statute barred was that although leave to add the party had been sought within time the application had been adjourned as a result of the parties legal advisors having given an inaccurate estimate of time for the hearing of the application. This resulted in an adjournment which meant that the hearing was outside the time limit.

16. However the main thrust of Mr. Mumford's argument was the practical difficulties which would arise if time did run from 1972. It would seem to me that this argument can work both ways. Equally formidable problems are likely to arise if time runs from the date of the delivery of the adjustment. If this was so it would be in the hands of a ship owner to postpone an adjustment indefinately. Perhaps even more important than this it may be necessary for the Courts to have to entertain claims where the subject matter of the dispute had occurred many years ago and insuperable difficulties may arise in establishing in any detail what transpired.

17. In the present case I understand that it is the intention of the defendants to argue that the question of General Average does not arise due to the unseaworthiness of the "Potoi Chau". It will become progressively more difficult for evidence to be adduced either to establish this or rebut it and it would seem to me that it would be unsatisfactory for the limitation period to run from the date of the delivery of the Adjustment. In any event it would appear to be clearly established from the authorities that time does not run from this time.

18. I am satisfied that a course of action did arise at the time of the adventure and accordingly the 2nd plaintiff's claim is now statute barred. I am also satisfied that I should not exercise any discretion in favour of the plaintiffs as submitted by Mr. Mumford. This application therefore succeeds and the Registrar's Order will be set aside.

19. Costs shall be to the defendants.

Representation:

Mr. Mumford instructed by (Johnson, Stokes & Master) for Plaintiffs

Mr. William Waung instructed by (Deacons) for Defendants

(1) Lloyds 1963 Vol. 2 p.65

(2) Lloyds 1973 Vol. 2 p.91

(3) 1971 1 Q.B. 393

(4) 1974 2 Lloyds Law Reports 57

(5) Civil Case No. 57 of 1979