KOMALA DECCOF AND CO. S.A. AND OTHERS v. PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA (PERTAMINA)

1980, No. 960

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an application by the 2nd plaintiff, Collin Navigation Co. S. A. to re-re-amend the statement of claim.

2. The history of the case dates back to the lst July 1971 when an agreement was entered into between the 2nd plaintiff and the defendant for the construction and sale of two ocean going tugboats for a total price of US$1,994,500. Another agreement to build two other tugboats was also made on the same date and this agreement was completed although delivery was late. It is common ground that there have been considerable commercial dealings between the parties from about 1969 until about 1976. Substantial sales took place during this period including such items as steel bars, machinery, cement and the charter of ships. For the purposes of this application it is necessary for me to refer to three of the clauses in the agreement. Clause 3 provides for the tugboats to be delivered on a mutually agreed date, not earlier than 6 months and not later than 9 months, but it was also provided that the period could be extended by reason of delay for certain causes. Indeed, an extension was granted for the delivery in this case. By clause 4 the purchase price was to be paid in cash not later than 6 months after `delivery. Finally, clause 7 of the agreement has featured prominently for it contains the provision for the purchasers obligation to pay additional expenses, so I shall set it out in full: -

"                                                         Clause 7

 

This Irrevocable Contract is effective as from the day of signing of this Contract until the completion of payment. The Purchasers will continue to undertake full responsibility under any circumstances, and to fulfill this Irrevocable Contract, and to guarantee full payment not later than six months, and take delivery of the two (2) Tug-boats in Djakarta immediately after receipt of Supplier's notice of readiness. Meanwhile, the Purchasers will also undertake full responsibility for any additional expenses incurred due to Purchasers delay in taking delivery of the two (2) Tug-boats after the notice of readiness has been served. "

The agreement was later varied for the tugboats to be constructed in Taiwan together with the provision of extra equipment.

3. A notice of readiness was sent by the 2nd plaintiff to the defendant on the 28th September 1972 which included a request for payment and delivery instructions. On the 14th January 1973, the 2nd plaintiff requested instructions for the names to be given to the tugboats and again for delivery instructions. Subsequently three reminders were sent by the 2nd plaintiff, but no reply was received. Eventually, on the 13th June 1975, the defendant asked the 2nd plaintiff to name the tugboats, "Nuti" and "Nita". The 2nd plaintiff acknowledged these instructions and made another request for payment. However, there was no response from the defendant nor to seven reminders sent between September 1975 and December 1979.

4. On the 30th May 1978, the 2nd plaintiff informed the defendant that their running account amounted to US$4,366,102.08 which sum included the purchase price of the two tugboats "Nuti" and "Nita". The defendant did not reply to this letter nor to reminders that were sent later.

5. After the writ was issued on the 26th February 1980, there were some without prejudice communications between the parties, but they achieved no positive result. The tugboats were sold by the 2nd plaintiff on the 29th December 1981 for the sum of US$2.45 million which was more than the contract price. By so doing the 2nd plaintiff finally accepted the defendant's repudiation of the contract.

6. In the endorsement on the writ, there are separate claims by each of the three plaintiffs against the defendant for the price of goods sold and delivered and in respect of other claims. Under paragraph 2, the 2nd plaintiff claims sums incurred by way of demurrage expenses, charter hire and damages for failure to take delivery of two tugboats. Particulars of the claim for the tugboats were set out in paragraph 2C which recites details of the contract and claims payment of the purchase price on the grounds that the property had passed to the defendant. In the event that the property had not passed the 2nd plaintiff claimed in the alternative, damages for breach of contract. On an application by the defendant on the 4th July 1982, Bewley J. struck out paragraph 2C from the endorsement. The 2nd plaintiff did not resist nor consent to this application. The particulars were struck out on the grounds that the claim was time barred under the Limitation Ordinance Cap. 347. In the judgment of the Court of Appeal given on the 7th February 1986⁽¹⁾, to which I shall refer later, Kempster J.A. described the order as midway between a default and a consent order.

7. The statement of claim which was served on the 2nd July 1982 contains no reference to the tugboats.

8. On the 18th November 1982, summary judgment under 0.14 was entered in favour of the plaintiffs for part of the claim in the sum of US$1,164,225 with interest. This judgment given by Mayo J. was subsequently subject to an appeal by the plaintiffs on the matter of interest.

9. On the 17th February 1984, the 2nd plaintiff obtained leave from Master Clay under 0.11 of the Rules of the Supreme Court to issue a writ in a fresh action to be served out of the jurisdiction in which a claim was made for damages and expenses incurred as a result of the delay caused by the defendant in failing to take delivery of the tugboats. The order for leave was set aside on appeal by the defendant on the 29th April 1985 by Mayo J. on the grounds that the claim was res judicata. The 2nd plaintiff's appeal against this decision was dismissed on the 7th February 1986 when the Court of Appeal held that the action was vexatious. Although the 2nd plaintiff obtained leave to make further submissions, the Court affirmed its decision on the 30th July 1986.

10. In considering the particulars of the endorsement set out in paragraph 2C, Kempster J.A. had this to say in his judgment at page 4⁽¹⁾ :-

"Particulars C 'primarily" constituted a claim for the price pursuant to sections 51(1) and 20, Rule 5(1), of the Sale of Goods Ordinance (Cap. 26), though damages for non-acceptance pursuant to section 52 were claimed in the alternative, while the substantive words were reasonably apt to embrace claims for damages for neglecting to take delivery within the parameters of clause 7 on the basis of repudiation and also under section 39 of the Ordinance without so alleging. "

Later in the judgment, Kempster J.A. made reference to the fact that although the particulars in 2C had been struck out, the endorsement still included a claim for damages for failure to take delivery and for damages for breach of contract with the result that the 2nd plaintiff should be permitted to include the claim in the re-amended statement of claim in the present action. Mr. Newman, counsel. for the 2nd plaintiff submitted that the Court of Appeal was suggesting that this was the correct procedure to adopt for the inclusion of this claim. The Court of Appeal declined to rule whether the cause of action that had been pleaded in the second action was doomed to failure either because it had been abandoned in the first or that it was barred by the Limitation Ordinance, or whether in keeping the contract alive the 2nd plaintiff was in breach of duty to mitigate any continuing loss.

11. It is conceded by the 2nd plaintiff that if the claim would be time barred in a new action, the Court has no jurisdiction to grant the amendments.

12. However, the thrust of the 2nd plaintiff's application is based upon Clause 7 of the contract and section 39 of the Sale of Goods Ordinance which concerns the liability of a buyer for neglecting or refusing to take delivery of goods. Whilst it is accepted that the 2nd plaintiff are precluded from claiming damages for non-acceptance, there is no bar for the additional expenses incurred by reason of the defendant's delay in taking delivery of the tugboats. Accordingly, the 2nd plaintiff maintains that the effect of the proposed amendment is to add the particulars of the claim which arise out of the same facts or substantially the same facts that have already been pleaded in the endorsement. It is therefore contended that the claim made for these additional expenses amounts to a debt and gives rise to a cause of action from the dates when the expenses were incurred.

13. Mr. Newman said that in order to determine whether the particulars arise out of the same facts or substantially the same facts, the court is entitled to look at the re-amended statement of claim with the proposed re-re-amended statement of claim and to the endorsement on the writ. On the other hand, Mr. Phillips, counsel for the defendant submitted that the court is not permitted to consider the endorsement on the writ, but only to compare the re-amended statement of claim with the amendments that are now sought to be made. He cited in support of his argument Steamship Mutual Underwriting Association Ltd. & Another v. Trollope & Colls (City) Limited⁽²⁾, a decision of the Court of Appeal in England as authority for his proposition that the statement of claim is to be regarded as paramount.

14. Mr. Phillips also placed reliance upon a passage in volume 1 of the Supreme Court Practice 1985 18/15/1 which reads : "A claim in the writ not repeated in the statement of claim is treated as abandoned". Reference is then made to two cases Cargill v. Bower⁽³⁾ and Lewis v, Durnford⁽⁴⁾. Mr. Phillips conceded that Cargill v. Bower⁽³⁾ is not an authority, for this proposition as it was concerned with an election between two inconsistent remedies which resulted in an abandonment of the one which was not elected. However, he asserted that the second case supported his argument for Swinfen Eady J. held that a claim endorsed on a writ was superseded by the statement of claim. Accordingly, where a plaintiff in his statement of claim omitted part of the claim, he is deemed to have abandoned that part. I was also referred to Harries v. Ashford ⁽⁵⁾ where the Court of Appeal applied Cargill v. Bower⁽³⁾ and Lewis v. Durnford⁽⁴⁾. However, in Clemence v. Daniel⁽⁶⁾, Danckwerts, J. gave leave to amend, by including an alternative claim for specific performance of a contract that had been included in the writ but not in the statement of claim. He held that the dicta of Asquith L.J. in Harries v. Ashford⁽⁵⁾ to the effect that the court had no power to grant leave to amend a statement of claim by including a claim made in the writ were obiter and not supported by the authorities referred to in that case.

15. May L.J. in the Steamship Mutual⁽²⁾ case expressed doubt as to whether there is any legal basis for deciding that there had been abandonment in the circumstances referred to by Swinfen Eady J. in Lewis v. Durnford⁽⁴⁾. In the course of his judgment as to whether a statement of claim should be amended, he had this to say at page 27 :-

"When a plaintiff seeks leave to serve a re-amended statement of claim, and one has to consider and contrast it with the earlier amended statement of claim for the purposes, for instance, of section 35 of the Limitation Act 1980, one realistically looks at the two statements of claim. One does not look truly to the endorsement on the writ - in which the plaintiff by Ord.6, r.2(1)(a) need not “plead" any cause of action at all (if "plead" is the correct word). In passing, it is difficult to reconcile that particular sub-rule with the provisions of Ord.18, r.15(2). But nevertheless, when one looks at the two statements of claim - the amended and re-amended statement of claim in this litigation - adopting what I trust is a reasonably and sensible approach, remembering the definition of the cause of action in, for instance, Letang's case, it seems to me as clear as it was to the learned judge that, in the action constituted by the writ and re-amended statement of claim, the plaintiff was seeking to enforce a new claim, that is to say one which involved the addition of a new cause of action, that is to say the one which related to the brickwork. "

Later in his judgment, May L.J. said that after service of the writ, but before service of the statement of claim, the endorsement on the writ identified the cause or causes of action.

16. In Letang v. Cooper⁽⁷⁾, Diplock L.J. as he then was, defined a cause of action thus :-

"A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person. "

17. In an earlier case, Batting v. London Passenger Transport Board⁽⁸⁾ the Court of Appeal did consider the endorsement on the writ when deciding whether or not to grant an order to amend the statement of claim.

18. In my judgment it is unrealistic to ignore the endorsement on the writ and to have regard only to the statement of claim as being paramount. Although no explanation has been given for the failure to include the claim in the statement of claim it may-well have been attributable to a mistake or to an error of judgment. It does seem with the words retained in the endorsement that the full implication of the striking out was not properly appreciated at the time. The authorities cited by Mr. Phillips and the passage quoted from the Supreme Court Practice do not therefore in my opinion support his argument. I consider that neither the statement of claim nor the endorsement should be treated as paramount, but should be looked at together. Accordingly I am satisfied that the amendments sought to be made relate to the particulars arising from the same facts that are contained in the endorsement.

19. Accordingly it is now necessary for me to consider whether I should exercise my discretion by allowing the amendments. Mr. Phillips submitted that the defendant has been lulled into believing that the 2nd plaintiff by its conduct has abandoned the claim by its failure to contest the application to strike out and by the omission to include any reference to the tugboats in the statement of claim.

20. There has been no express abandonment of the claim which arose in Woomera Company Limited and Another v. Provident Centre Development Limited⁽⁹⁾, where counsel specifically abandoned a claim for common law damages. But despite that abandonment the Court in its discretion allowed the defendant to restore the claim by an amendment.

21. My attention was drawn to Excomm Ltd. v. guan Guan Shipping (Pte) Ltd. (The Golden Bear)⁽¹⁰⁾ where it was held that an agreement to abandon or rescind an arbitration agreement could be inferred from silence and inaction by the parties. Another note in the Supreme Court Practice Volume 1 at 18/15/3 which refers to the oases of Cargill v. Bower⁽³⁾ and Lewis v. Durnford⁽⁴⁾ that a claim in a writ not repeated in the statement of claim was treated as abandoned was cited in that case. Having regard to what I have said earlier this passage would appear to be misleading.

22. The particulars in paragraph 2C were struck out in July 1982 so that the delay in respect of which the defendant complains only applies from that time until leave was granted to commence the second action in February 1984. In my view the delay from July 1982 until February 1984 was not inordinate whilst I do not consider the evidence indicates that the 2nd plaintiff by its silence or otherwise can be said to be deemed to have been abandoned. In fact the evidence is to the contrary.

23. Criticism will no doubt be levelled at the 2nd plaintiff for the considerable period of time in which they purported to keep the contract alive which has resulted in the very substantial claim that has been made for the additional expenses. Nevertheless there is an admitted breach of contract by the defendant which gives rise to a claim for damages. Again there is a dispute as to when the cause of action arose and whether any of the claims are time barred. These matters are all in dispute. A Court will not decide upon an interlocutory application disputed questions of fart although it will decide a question of law, albeit of complexity, if it is satisfied that the 2nd plaintiff is bound to fail. However, I am far from satisfied that the 2nd plaintiff is bound to fail.

24. Mr. Phillips submitted that a number of the items that have been claimed do not consititute additional expenses for delay, but relate to damages for non-acceptance. Mr. Newman conceded that some items did not arise from delay, and with this concession, I shall disallow those amendments. However, there were certain other items to which Mr. Phillips took exception, but Mr. Newman contended that he should be permitted to argue these matters at the trial. I agree and shall allow those amendments to be made.

25. Mr. Phillips further raised the issue that the merits of the claim should be scrutinised very carefully as this was a case for service of the proceedings out of the jurisdiction under 0. 11. However, as leave had already been granted in 1980 on those particular facts, I am satisfied that the 2nd plaintiff has shown that there is a good cause of action.

26. I have come to the conclusion that no prejudice, hardship or detriment will be caused to the defendant by making the amendments which cannot be adequately compensated by an award of costs.

27. In all the circumstances and in the exercise of my discretion, I am satisfied that the 2nd plaintiff is entitled to an order to amend the re-amended statement of claim with the exception of those items of particular damage to which reference was made by Mr. Newman in his submission.

(1) Civil Appeal No. 80 of 1985

(1) Civil Appeal No. 80 of 1985

(2) Unreported 13th March 1986

(2) Unreported 13th March 1986

(3) [1878] 10 Ch.D.502

(4) [1907] 24 TLR 64

(5) [1950] 1 All E.R. 427

(6) [1956] CLY 6925

(7) [1965] 1 QB 232

(8) [1941] 1 All E.R. 228

(3) [1878] 10 Ch. D.502

(4) [1907] 24 TLR 64

(9) [1985] HKLR 263

(10) The Times 18th November 1986