THE OWNERS OF AND/OR OTHER PERSONS ENTITLED TO SUE IN RESPECT OF THE CARGO LATELY LADEN ON BOARD THE SHIP OR VESSEL "JI HUA" v. THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL "JI HUA"

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JUDGMENT

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1. The Vessel Ji Hua carried 963 tons of Toluene and 495 tons of IPA from Korea to Hong Kong. When the vessel arrived in Hong Kong, samples were taken of the Tulene Cargo and the IPA Cargo and each cargo was found to be in accordance with specification, namely that nothing untoward had occurred during the voyage and that each was of the same quality as when shipped. Discharging of the two cargoes then commenced by pumping the respective cargo into different shore tanks, one dedicated for Toluene and one dedicated for IPA. After discharge, the contents of the respective shore tanks were supposed to contain the respective cargo of Toluene and IPA. The test, however, showed that the two cargoes had co-mingled which according to the surveyors could only occur during discharge and in particular, by the wrongful opening of the cross over valves by the ship's crew thereby causing the two cargoes to be co-mingled. There were two cross over valves involved in this case.

2. The Plaintiffs issued summary judgment application and at the hearing before me, initially, four defences were raised by the Defendants. These defences are:-

Is there any substance in any of the four defences?

LATENT DEFECT

3. Mr. Kerr has acted wisely and did not advance any argument in the course of the hearing on this point. Although it is in the pleadings and in the Amended Defence and in the affidavit, I would simply just say, to put the Defendants out of its misery, that they had no chance of success. It is well known that for a defence of latent defect to succeed, it is necessary for the Defendants first to identify clearly the particular defect and then to say with considerable detail in what respect that defect was latent and could not have been discovered earlier if the Defendants had exercised due care and diligence. This was not done, neither in the Amended Defence nor in the affidavit, and I think this allegation deserves to be buried and the making of it only served to reduce the credibility of the Defendants in the eyes of the Court.

VALVE BLINDED OFF

4. This is the second line of defence. This allegation came rather late in the day. Mr. Kerr again seeing where the wind was blowing did not advance any argument on this point. And in the circumstances, as it has not been the subject of submissions by Mr. Kerr, I would do no more than to say that it also has no chance of being accepted. The allegation is that there had been special measures taken to blind off the valve. The consequence of that if true, would be that co-mingling would not have been possible. But we know clearly that co-mingling took place.

NO IMMEDIATE SAMPLING TEST

5. The main time spent at the hearing was on the meaning of the instructions given by China Resources Petrochems (Group) Co. Ltd. obviously an affiliate of the Plaintiffs to the Defendants. This can be found at pages 71-74 of the bundle. Page 71 is particularly important, it reads:

          "TANKER DISCHARGE INSTRUCTIONS

          1. Sample and Temperature Recording

and then it goes on. The document is dated 25th July 1998.

6. The case of Mr. Kerr is that the Plaintiffs had a responsibility to take, immediately after the commencement of pumping, 1 litre sample on the shore side and then have the co-extensive responsibility, immediately submitting it for analysis by the lab, and if this had been done, because it took something like 5 hours for discharge to take place, either no damage would have been done or much less damage would have been done in terms of the amount of co-mingling. This is an allegation which was not properly the subject of ample affidavit evidence.

7. But the first question is whether it can be shown that the Plaintiffs owed a contractual duty to the Defendants as alleged by Mr. Kerr? I agree with Miss Norden that there can be no question of that being the case. The bill of lading was dated, I think, 15th July. The bill of lading which is a negotiable instrument therefore would have been in circulation from the 15^th July. This instruction letter in question is 25th July. I do not see how this letter could enlarge the obligations of the parties under bill of lading especially when the bill of lading could well be in the hands of some third party. So I do not believe that there is a viable case for Mr. Kerr to say that under the bill of lading contract, there is the alleged contractual obligation. If there is no contractual obligation, then where does it take, Mr. Kerr? I agree with Miss Norden that if one reads the document at page 71 from paragraph 1 onwards, all it does is to show that the Plaintiffs are careful about the safety. They wished the Defendants to take particular care and these are the safety measures that they would like Defendants to undertake and paragraphs 2 to 8 on page 71 are clearly all examples of the measures that the Defendants as owners would have to take. I see paragraph 1 as being no different. These are steps the Defendants should take as to add to the safety measures.

8. The different wording of 1 (a) and (b) furthermore makes it quite clear that under 1 (b), it is not an obligation of the Plaintiffs to take samples immediately after discharge had started, or to submit for lab analysis immediately after that sample has been taken. I therefore do not begin to see a case of the Defendants' possibly succeeding at trial on the omission of the Plaintiffs to take measures which enabled the Defendants to rely on the defence under Hague Rules 4(2)(i). I must confess that this is the first time in my limited exposure to this type of litigation that a litigant has tried to make use of that particular provision in this way.

9. Be that as it may, the view I have taken is that there is no breach or no act of the Plaintiffs, which has caused this loss or which might give rise to a partial defence to the Defendants. The loss was simply caused by the breach of duty on the part of the Defendants in allowing the co-mingling to take place.

DAMAGES

10. I now turn to the final question of damages. There are altogether 9 items of damages pleaded in paragraph 7 of the Amended Statement of Claim. The first two items, that is to say, the figures of $98,297.60 and $128,806.86 in respect of the loss of the two cargoes arising out of the co-mingling by the Plaintiffs having to re-sell them back to the Korean wholesalers. These were the subject of much criticism by Mr. Kerr. The criticism really took this form. That the co-mingled product could have been distilled and if that process had been taken, then there would only be a 10% loss of the value of the cargo and therefore the loss suffered by the Plaintiffs would be far less. First, if I may say so, with no due respect to the Defendants' legal team, the evidence of the Defendants adduced on this 10% distillation loss is simply not adequate or what one will expect in the circumstances. The source of information given was from the Defendants, the shipowner, and Defendants' expert who was not sufficiently identified or whose experience known or the basis of the advice being given that distillation would give 10% loss.

11. However, what is much more compelling for the court is the evidence from the Plaintiffs. The Plaintiffs had shown a statement dated 7th May 1999 at page 118 of the bundle, a statement from An Zejun of the Plaintiffs to say that serious consideration had been given to the courses open to the Plaintiffs upon the co-mingling and eventually this decision was to sell to the Koreans for these reduced prices because it was found that refining/reconditioning not really possible, difficult and dangerous because the high Toluene content. The cargo had to be disposed of quickly, the tanks would have been required. The people with expertise to deal with the refining to reprocess the product were the Koreans, not the Plaintiffs. The costs, in any event, for reprocessing of I think Toluene would have been very high of $90.00 per metric ton, not the 10% figure as suggested by the Defendants and that the Plaintiffs considered themselves lucky to have been able to dispose of the cargo to the Koreans, probably because of the good commercial relationship between the parties.

12. The test on a case of failure to mitigate is not a high test for the victim, that is the Plaintiffs in this case. They had done what on any basis would be considered to be reasonable, and this is my conclusion that they had done what is perfectly reasonable. They had resold the goods mitigating loss quickly as they could see the market might be moving down. The Court is not going, with the view of hindsight, to say that they could have done this, or they could have done that, or higher price could have been fetched. So, in my view, there is nothing in Mr. Kerr's objection to Items (1) and (2) of the claim.

13. Items (3) and (4) have been the subject of amendment today and Mr. Kerr wishes to have time at least to be able to come back and deal with them after instructions. I will propose to adjourn that to a new date which I will indicate later on.

14. Item (5) is no longer the subject of dispute or serious dispute by Mr. Kerr.

15. In relation to Items (6) and (7), I think Mr. Kerr has something about these two claims including fees which would in any event had been incurred. I would therefore allow the figure of $5,078.00 and $5,740.00 under those items plus a figure of $1,600.00 which are for two extra tests that were carried out as a result of the incident.

16. I also allow and uphold the figures in Items (8) and (9) of the particulars.

17. There should be interest on the damages awarded from the date of the writ until judgment at 2% above prime. I would also award costs which I would assess by way of gross sum assessment under Order 62 r.9(4)(b) at a date which I will now discuss with the parties.