Court of First Instance of Hong Kong

HCCL000025/1999

HCCL25/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.25 OF 1999

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Coram : The Hon Mr Justice Stone in Chambers

Date of Hearing : 22 April 1999

Date of Delivery of Judgment : 22 April 1999

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J U D G M E N T

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There is before the Court a summons filed on 15th December 1998 by the Plaintiff herein seeking leave, inter alia, to join a 3rd Defendant to this action, one Wai Hai Lines Limited, together with seeking a number of other consequential procedural orders. There is also before the Court, with the consent of Counsel, an application for leave to serve the aforesaid Wai Hai Lines Limited out of the jurisdiction, the putative 3rd Defendant being, I understand, a Taiwanese company.

The matter arises in this way. On or about 18th November 1997, the Plaintiff agreed to purchase two consignments of cartons of frozen peeled shrimp from a wholesaler in Indonesia. The shipment was arranged by the wholesaler with the agent of the Intended 3rd Defendant in Indonesia to ship the goods to Hong Kong by the vessel Wan Hai 203 No.98, and two Bills of Lading No. BJHKR002 23 and No.BJHKR003 23 of the said goods were issued by the Indonesian agent for and on behalf of the Intended 3rd Defendant whom, as I have said, is situated in the Republic of China.

To cut a long story short, the goods were due to arrive in Hong Kong on or about 27th November 1997. Shortly after the arrival of the goods, the Notify Party was informed of the arrival by the 1st Defendant who, the Plaintiff says on affidavit, acted as agent of the Intended 3rd Defendant in Hong Kong to prepare all necessary shipping documents in exchange for the release of the goods from the container terminal of the 2nd Defendant. However, on or about 1st December 1997 when contractors had been arranged to collect the goods which had arrived at the container terminal, it was discovered these same goods had been wrongfully released to some unknown person by, it is said, the presentation of forged release orders.

It is against this background that the present application is made, no doubt because it appears to have been recognised by those advising both the 1st and the putative 3rd Defendant that they may have got the wrong end of the stick in terms of the appropriate Defendants to this action. If, as now appears to be accepted, the 1st Defendant was simply the agent of the Intended 3rd Defendant, it is difficult to see what cause of action the Plaintiff has against him for what has transpired. Accordingly, the Plaintiff perceived that it was necessary to do something to remedy the situation. But here matters become a little more complicated. Because as in many carriage of goods cases of this nature, there was a one year time-bar, which arises in the way that I shall shortly describe.

In any event, those instructing Mr Sammy Hui, who appears on behalf of the Plaintiff in this application, wrote to Messrs Holman, Fenwick & Willan, on whose instructions Mr Sussex appears today on behalf of the 1st Defendant (which is, I understand, a subsidiary of the Intended 3rd Defendant) by letter dated 16th September 1998. It is a sensible letter, indicating to Messrs Holman, Fenwick & Willan that there is an intention to amend the writ to include Wan Hai Lines Limited, the carrier, as a Defendant. It then states that "Wan Hai Lines Limited and the 1st Defendant are closely related and as a matter of courtesy, we would like to ask you for confirmation whether you have instructions to accept legal process for and on behalf of Wan Hai Lines Limited." I pause at this stage to observe that had this eminently sensible course been put into effect, there was no difficulty lying in the way of the Plaintiff's intended course of action, save and except the necessity to get leave to serve the Intended 3rd Defendant out of the jurisdiction.

The Plaintiff's letter of 16th September 1998 was then met with a reply from Messrs Holman, Fenwick & Willan of 24th September 1998. It is, if I may say so, in relatively predictable terms; there is nothing exceptional about it, thanking the solicitors on the other side for their letter and asking simply whether it is accepted that no claim lies against the existing 1st Defendant, Wan Hai Lines (HK) Limited. Doubtless at this stage those acting for Wan Hai Lines Limited had in mind that Wan Hai Lines (HK) Limited was no more the agent of the carrier who was, of course, the Intended 3rd Defendant. The letter goes on as follows :-

"... You would require leave to add an additional defendant by way of an amendment to the writ. Could you please advise on the basis on which you could propose to make such an application. We anticipate that you are also aware that Wan Hai Lines Limited is a company incorporated and based in Taiwan. You would therefore require leave to serve them out of the jurisdiction in Taiwan. Could you please explain the basis upon which you would apply for leave and the grounds on which you would invite the court to disregard the Taiwanese jurisdiction clause in the bills of lading.

We have no authority to accept service on behalf of Wan Hai Lines Limited."

There seems to have been no response to this letter by those acting for the Plaintiff. What apparently happened next - and I am grateful to Mr Hui for clarifying the timetable - is that on 4th December 1998, the Plaintiff launched an ex parte application, backed by an affidavit, for leave to serve the Intended 3rd Defendant out of the jurisdiction. This application went before the Master because at that stage, prior to February 1999, this action had not yet been transferred into the Commercial List; had it been so, such application would have come of course direct to the Commercial List Judge. In any event, the Master made a salient comment. He looked at the papers, and by a Memo to those instructing Mr Hui dated 10th December 1998, he observed that it would be more appropriate for the Plaintiff first to make the application for amendment to add the Intended 3rd Defendant to the action. I dare say the Master was right in considering that these matters were interrelated. Normally in instances where a party sought to be joined to the action is out of the jurisdiction, the affidavit leading the application condescends both to a request for joinder and a request for leave to serve out. That Memo from the Court in turn led to the filing of the present summons for joinder on 15th December 1998. And, as I have indicated, it is this summons that has been the vehicle for the hearing today.

Which brings me to the substantive argument which has revolved around the one year time-bar to which I have earlier made reference. That time-bar under the contract of carriage contained in the relevant bill of lading on any basis expired (and I think Mr Hui accepts this) on 27th or 28th November 1998, so that by the time that the application for leave to serve out was launched on 4th December, and certainly by the time that this application for joinder was constituted on 15th December, the Plaintiff clearly was out of time in terms of an accrued time-bar defence vis-à-vis the Intended 3rd Defendant. Here lies the rub.

Mr Sammy Hui, who appears for the Plaintiff, has presented a complex argument which appears to depend upon a proposition that the Hague Rules do not apply in this case, but that even if they do (and thus the one year time-bar, or an analogous period, is applicable), nevertheless I should exercise my discretion to allow joinder. This argument, which involved an ingenious interreading between the Clause Paramount at Clause 2 of the Bill of Lading and the Governing Law and Jurisdiction clause at Clause 3, at the very least underplays the significance of the specific contractual term upon which Mr Sussex, for the 1st Defendant, in turn has based his argument. This is Clause 25 on the reverse of the Bill of Lading, which reads as follows :-

"25. (Notice of claim and Time for Suit) (1) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the Carrier at the port of discharge or place of delivery before or at the time of delivery of the Goods or, if the loss of damage be not apparent, within 3 days after delivery, the Goods shall be deemed to have been delivered as described on this Bill of Lading. (2) In any event the Carrier shall be discharged from all liability in respect of non-delivery, misdelivery, delay, loss or damage unless suit is brought within one year after delivery of the Goods or the date when the Goods should have been delivered." (emphasis added)

Mr Sussex runs, I think it fair to say, a three pronged argument. First, he says that any claim the Plaintiff has against the Intended 3rd Defendant is clearly extinguished by virtue of the contractual time-bar, and that the Court has no power to resurrect this claim; and second, that further or alternatively this is not a case where if (which is denied) the Court indeed has such power, the Court nevertheless should exercise its discretion to join the proposed Defendant despite the time-bar.

This latter point seems to me effectively to break up into two sub-propositions. The first is that the amendment to join a Defendant takes effect not by way of relation back to the date of the original writ, but on the date on which such Defendant is effectively joined as a party; otherwise, an intended defendant could be deprived of an accrued limitation defence. In this regard, he relies on the House of Lords case of Ketteman v. Hansel Properties Ltd [1987] 1 A.C. 189 (HL) approving the dictum of Brandon LJ in Liff v. Peasley and Another [1980] 1 W.L.R. 781 (CA). There could therefore, he says, be no useful purpose in allowing any amendment because the Court would simply be letting in the 3rd Defendant in order to permit him to plea a 'live' time-bar defence. Alternatively, if he be wrong on the contention that the Court has no jurisdiction in this matter to allow the joinder, given the extinction of the claim, and further if he is wrong on the relation back point, Mr Sussex says that in any event there is nothing before the Court upon which the Court could seek to exercise its discretion to permit this joinder out of time, in which context a salient element to be borne in mind in any exercise of such discretion is that, absent application of the principle in Ketteman, op.cit., the doctrine of relation back would preclude reliance upon an accrued time-bar defence. He stresses that no material has been put forward by the Plaintiff upon which such discretion as to joinder can 'bite' (which is correct as a matter of fact), and that surprisingly, nothing has come forth from the Plaintiff to explain why, after its letter to Messrs Holman, Fenwick & Willan in September, there was complete inaction until 4th December 1998.

Mr Sussex's third and final proposition is that the application is brought in breach of an exclusive jurisdiction clause in the contract between the Plaintiff and the 1st Defendant, and accordingly is liable to be stayed. That exclusive jurisdiction clause is the Governing Law and Jurisdiction clause at Clause 3 of the Bill of Lading, which reads :-

"The contract evidenced by or contained in this Bill of Lading shall be governed by Taiwan Law except as may be otherwise provided for herein, and any action thereunder shall be brought before the Taipei District Court in Taiwan Republic of China."

He adds that nothing has been placed before the Court which would serve to detract from the strength of that clause, and that on the principles developed in The "El Amria" [1981] 2 Lloyd's Rep.119 and related cases, the Plaintiff has the very considerable burden of showing good cause why the parties should not be kept to their contractual obligations. I pause here to note that the existence of this Governing Law and Jurisdiction clause for some reason was not deposed to in the ex parte affidavit leading the application for leave to serve out, which was filed on 4th December 1998.

I am inclined to find for Mr Sussex upon all three bases advanced. I have been tempted simply to decide this case solely on the relation back issue, that is, on the application of the principle in Ketteman, op.cit., to which it seems to me there is no good answer. But in my judgment, at least in the short amount of time I have had for reflection, such an approach would not accord full recognition to the force of Mr Sussex's jurisdiction argument. In support of his proposition that as a matter of law the claim simply ceases to exist if suit be not brought within one year, and that the Rules of the High Court do not give the Court power to resurrect such a claim which has ceased so to exist -- that is, the Rules cannot create a substantive legal cause of action which does not exist, and that the reference in the Rules to extending a time-bar must apply to procedural time limits only -- Mr Sussex relies, I think it fair to say, upon three principal decisions. These are the Aries Tanker Corporation v. Total Transport Ltd (The "Aries") [1977] 1 W.L.R. 185, which is a decision of the House of Lords, and two more recent decisions, that of Hobhouse J. (as he then was) in Zainalabdin Payabi and Baker Rasti Lari v. Armstel Shipping Corporation and Panthai Shipping Ltd (The "Jay Bola") [1992] 1 QB 907, and the decision of His Honour Judge Diamond in Transworld Oil (USA) Inc. v. Minos Compania Naviera S.A. (The "LENI") [1992] 2 Lloyd's Rep.48.

The starting point for this argument is the speech of Lord Wilberforce in The "Aries", op.cit., at p.188C-G which reads :-

" My Lords, if this case is to be decided on the terms of the contract it would appear to me to be a comparatively simple one. There is an obligation to pay freight, calculated upon the amount of cargo intaken, which obligation arises upon discharge. There is no dispute as to the amount : it is a liquidated claim. The contract contemplates the possibility of a cross-claim by the charterers in respect of loss or damage to the cargo and it expressly provides by incorporation of article III, r.6 of the Hague Rules that the carrier and the ship shall be discharged unless suit is brought within one year after the date of delivery or the date when delivery should have been made. This amounts to a time bar created by contract. But, and I do not think that sufficient recognition to this has been given in the courts below, it is a time bar of a special kind, viz., one which extinguishes the claim (cf. article 29 of the Warsaw Convention 1929) not one which, as most English statutes of limitation (e.g. the Limitation Act 1939, the Maritime Conventions Act 1911), and some international conventions (e.g. the Brussels Convention on Collisions 1910, article 7) do, bars the remedy while leaving the claim itself in existence. Therefore, arguments to which much attention and refined discussion has been given, as to whether the charterer's claim is a defence, or in the nature of a cross-action, or a set-off of one kind or another, however relevant to cases to which the Limitation Act 1939 or similar Acts apply, appear to me, with all respect, to be misplaced. The charterers' claim, after May 1974 and before the date of the writ, had not merely become unenforceable by action, it had simply ceased to exist, and I fail to understand how a claim which has ceased to exist can be introduced for any purpose into legal proceedings, whether by defence or (if this is different) as a means of reducing the respondents' claim, or as a set-off, or in any way whatsoever. It is a claim which, after May 1974, had no existence in law, and could have no relevance in proceedings commenced, as these were, in October 1974. I would add, though this is unnecessary since the provision is clear in its terms, that to provide for the discharge of these claims after 12 months meets an obvious commercial need, namely, to allow shipowners, after that period, to clear their books." (emphasis added)

The concept of the time-bar created by contract which is a time-bar of a special kind, i.e. one which extinguishes the claim and does not simply render it unenforceable by action, was adopted by Hobhouse J. in The "Jay Bola", wherein the learned Judge said, op. cit., at p.932G-p.933A, said :-

" In any event Ord.20, r.5 cannot deprive a party of a substantive defence. Neither the statutory provisions under which the rule was made nor any general power to regulate the procedure of the courts can deprive a person of an accrued substantive legal right or, more precisely in the present context, create a substantive legal cause of action which did not previously exist. If Ord.20, r.5 and the inclusion in it of the words 'any applicable limitation period' is to be construed as referring to substantive provisions which extinguish causes of action, it would, in my judgment, be ultra vires; but the correct approach is that the words must be read as referring only to limitation periods properly so called which impose a procedural restriction only. Where the Hague Rules time limit is involved, the rule will not assist a party whose cause of action has already been extinguished." (emphasis added)

Finally, Judge Diamond in The "LENI" observed as follows, op.cit., at pp.58 to 60 :-

" I can deal with this question rather more shortly than the first because I have had the advantage of reading a recent decision of Mr Justice Hobhouse in Zainalabdin Payabi and Another v. Amstel Shipping Corporation and Another (The Jay Bola), [1992] 2 Lloyd's Rep.62, a judgment given on Jan.31, 1992 with which I find myself in general agreement. Since that decision considers the relevant authorities in detail it will not be necessary for me to do so.

The starting point for any consideration of this question is Aries Tanker Corporation v. Total Transport (The Aries), [1977] 1 Lloyd's Rep.334; [1977] 1 W.L.R. 185 where Lord Wilberforce (with whom the other members of the House of Lords agreed) considered the nature of the time bar provided by art. III, r.6 and said at p.336, col.1; p.188 :-

... it is a time bar of a special kind, viz, one which extinguishes the claim ... and not one which, as most English Statutes of Limitation (e.g., The Limitation Act 1939 ...) ... do, bars the remedy while leaving the claim itself in existence ... The charterer's claim, after May 1974 and before the date of the writ, had not merely become unenforceable by action, it had simply ceased to exist ...

In the present case the claim of Transworld Oil America Inc., against the owners ceased to exist, if I am right on the first question, on Oct.9, 1987. It would be surprising if it could be resurrected in 1992 by means of an amendment to the writ and points of claim. The function of the Court is to give effect to substantive defences; it is not that of seeking to override them.

The defence, moreover, is one which arises by virtue of an international convention. The amended Convention applies internationally not only (i) where a bill of lading is issued in a contracting State and (ii) where the carriage is from a port in a contracting State but also (iii) where parties to a contract of carriage voluntarily incorporate in a bill of lading either the Hague-Visby Rules or legislation giving effect to those rules; see art.X(C). If the Court is to have a discretion to override a defence arising under an international Convention one would expect that such discretion would be similarly conferred by international legislation.

There are in my judgment three different reasons why in principle leave should not be granted to amend the writ if, as I have held, the claim of Transworld Oil America Inc., is barred by art. III, r.6 and I shall shortly mention each of them.

First, it seems to me that the Rules of the Supreme Court do not and cannot confer power on the Court to override substantive time bars; see s.84 of the Supreme Court Act, 1981 and Halsbury's Laws, 4th ed. (1982) vol.37, pp.18-19. In the present case the plaintiffs mainly relied on R.S.C., O.20, r.5. This rule cannot in my judgment be construed so as to permit the resurrection of a claim which has ceased to exist. If the rule purports to have such effect it must, in my judgment, be held to be ultra vires. I agree in this respect with what was said by Mr Justice Hobhouse in The Jay Bola ...

... Mr Smith relied on The Puerto Acavedo, [1978] 1 Lloyd's Rep.38. That decision is no longer authoritative since it was made under a version of R.S.C., O.15, r.6 which is no longer current. That rule was altered in 1982 and the current rule is expressly limited to time limits applying under the Limitation Act, 1980 and the Foreign Limitation Periods Act, 1984. In addition the order was made on an unopposed ex parte application and cannot be reconciled with Ketteman v. Hansel Properties Ltd., [1987] A.C. 189. Mr Smith also relied on the decision of Mr Justice Hirst in The Joanna Borchard, [1988] 2 Lloyd's Rep.274. For the reasons give by Mr Justice Hobhouse in The Jay Bola, I am unable to agree with the conclusions of Mr Justice Hirst.

Secondly, it seems to me that, even if there were power to grant leave to amend the writ, that leave should not be granted as the amendment would not relate back to the date of issue of the writ but would take effect only from the date of the amendment. There would therefore be no useful purpose in allowing the amendment as the claim of Transworld Oil America Inc., would still be a claim which had been extinguished by virtue of art. III, r.6; see Liff v. Peasley, [1980] 1 W.L.R. 781 and Ketteman v. Hansel Properties Ltd., (sup.). There are certain cases where by virtue of s.35 of the Limitation Act, 1980 an amendment involving the addition or substitution of a new party is deemed to relate back to the date on which the proceedings were originally commenced. But s.39 of the 1980 Act makes it clear that s.35 does not apply :

... to any action for which a period of limitation is prescribed by or under any other enactment ...

such as the Carriage of Goods by Sea Act, 1971. It may be said that in the present case the amendment would not involve the addition of a new cause of action but only the substitution of a new party to enforce an existing cause of action. Even so in Liff v. Peasley (sup.) at p.803, Lord Justice Brandon, as he then was, held, in a passage subsequently approved by the House of Lords in Ketteman, that where the amendment involves the addition of a new party the amendment does not relate back to the original date of the document amended. ..." (emphasis added)

I am acutely aware that in holding in this manner, and in accepting Mr Sussex's argument as to jurisdiction, that I have declined to follow a decision of Hunter J. (as he then was) in Kenvee (Nigeria) Ltd. v. Prompt Shipping Corp. Ltd. & Anor. [1983] 2 HKC 613. I do so with considerable hesitation since, if I may respectfully say so, the late Mr Justice Hunter is regarded as one of Hong Kong's most eminent judges of recent times. But in so doing, I note that Hunter J. based his decision in Prompt Shipping in part upon the decision in the Marubeni Corporation and Marubeni Amercian Corporation v. Pearlstone Shipping corporation (The "Puerto Acevedo") [1978] 1 Lloyd's Rep.38, which as His Honour Judge Diamond in The "Leni" observed, is regarded as being no longer authoritive since it was made under a version of Order 15 rule 6 which is no longer current. Moreover, this decision of Hunter J. was also, of course, decided prior to the decision in Ketteman v. Hansel Properties Ltd [1987] 1 A.C. 189.

My decision to accept Mr Sussex's first point in itself is sufficient to decide this case. However, if I be wrong in holding that the contractual time-bar has in fact extinguished the claim, then equally I can see no answer to the absence of the relation back as a result of the principle in Ketteman's case so that, in the absence of such a relation back, it remains open to any defendant so joined to come in and plead an existing time-bar defence.

This then leaves the third broad head of argument, which is the matter of the general discretion of the Court. I am perhaps more undecided on this area than with the first two issues of principle. It is fair to say that in September 1998 those acting for the Plaintiff well knew about the problem of suing the wrong party, but they chose to do nothing about it until early December 1998, by which date the time-bar had expired. Of course, I can see why they would wish to add the 3rd Defendant to the existing proceedings, given the presence in the jurisdiction of the 2nd Defendant in whose yard the containers were stored, although by the same token I do not think that an arguably misplaced action against the 1st Defendant can constitute a powerful reason for adding the 3rd Defendant, if and in so far as Mr Hui prays this fact in aid. On balance, however, and looking at the matter in the round, I am against Mr Hui under this head also, not least because of the total absence of any material which has been placed before the Court upon which the Court could be invited to exercise its discretion, even if it were otherwise minded so to do. Absent the first two points of principle, namely the legal extinction of the claim and the non-applicability of the doctrine of relation back, an application in isolation for a stay of proceedings would have been an interesting exercise. But at the end of the day I am inclined, as I have said, to decide in favour of Mr Sussex's arguments under this last head as well.

It follows from the foregoing that the summons dated 15th December 1998 is dismissed. I will hear Counsel on the question of costs. I will also hear Mr Gobindpuri, who has been patiently sitting in Court on behalf of the 2nd Defendant. He says that he had wanted to see what was happening at this application, and indeed since he was served with the relevant summons he may have a point. For the record, however, he has adopted the time-honoured posture of neither consenting nor objecting.

Finally there is outstanding, in effect as a matter of housekeeping, the Plaintiff's application for leave to serve out, which was not formally before me today but which, by the consent of Counsel (and in particular with the good sense of Mr Hui in agreeing to bring it on) it has been agreed that it should be dealt with at this hearing. As to this, it seems to me to follow, absent joinder which has now failed, that the application for leave to serve out on the Intended 3rd Defendant in Taiwan itself must also fail. That would appear to be a trite proposition. In this connection Mr Sussex has observed that the application on behalf of the Plaintiff was lodged under the sub-heads of Order 11 rule 1(1)(c),(e) and (f), and he says that the application is undeserving either under the rubric of good arguable case or in terms of a serious issue to be tried, and certainly as a matter of the forum conveniens head, given the existence in the contract of carriage of Clause 3, the Governing Law and Jurisdiction clause. I will not here become involved in the thorny issue of whether, with regard to the 'necessary or proper party' rubric (the subject of an earlier judgment of this Court : see Inchcape JDH Ltd. v. Baltrans Exhibition & Removal Ltd. & anr. v. Air China Corporation, [1997] HKLRD 1278) of whether the merits in a 'necessary or proper party' application falls under the head of good arguable case or a serious issue to be tried, since Mr Sussex is correct, I think, given the existence of the 'live' time-bar in Clause 25 of the Bill of Lading, that whatever else may or may not be said there could be no serious question to be tried in light of the undoubted existence of this contractual term.

To sum up, therefore, it seems to me that Mr Hui has had a difficult day today, in that he has failed either to achieve the relief he sought in the summons nor indeed, in what has now turned into an inter partes application, has he been successful in obtaining leave to serve out of the jurisdiction. He has my sympathy. Sometimes cases are good, sometimes they are bad. I have held that this one is bad.

I will now hear Counsel on the question of costs.

[Submissions from Counsel]

I have now had the advantage of hearing from Counsel on the issue of costs. For the avoidance of doubt, the only orders for costs I make are in relation to this summons, and there is to be no order as to costs in relation to the relatively minimal amount of argument relating to the application for leave to serve out. In the circumstances the 1st Defendant must have its costs of and occasioned by the Plaintiff's summons dated 15th December, which costs will naturally include the costs of the hearing today, such costs to be taxed, if not agreed. That deals with the position of the 1st Defendant.

Mr Gobindpuri asks for his costs. He represents the 2nd Defendant who will shortly, I anticipate, be served with the Statement of Claim, although I am told that that has not yet occurred. He has been served with the summons, he says, and he is here to protect his position. He points out that in the summons there are procedural directions consequential upon any such joinder as may have been ordered. In short, he has had his day in Court and he wants to be paid for it. To the contrary, Mr Hui says that in this circumstance no order as to costs is appropriate. I think that the answer is neither. The 2nd Defendant is to have its costs on the following basis : the costs of and occasioned by the Plaintiff's summons dated 15th December 1998 are to be the 2nd Defendant's costs in the cause, such costs to be taxed, if not agreed.

That being all for this afternoon, I thank all parties for their assistance.

Representation:

Mr Sammy Hui, inst'd by M/s Liu, Szeto & Partners, for the Plaintiff

Mr Charles Sussex, inst'd by M/s Holman, Fenwick & Willan, for the 1st Defendant

Mr Gobindpuri of M/s Dibb Lupton Alsop, for the 2nd Defendant