XCHRX ARTBRAND LTD. AND ANOTHER v. INTEROCEAN LINES LTD. AND ANOTHER

HCAJ315/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY PROCEEDINGS NO. 315 OF 1997

----------------------

-----------------------

-------------------------

J U D G M E N T

-------------------------

Application to set aside judgment

1. This is an application by the 1st Defendant to set aside the judgment entered in default of defence. The writ was issued on 13th October 1997. The Statement of Claim was served on the 1st Defendant on 12th June 1998. The 1st Defendant had leave to serve and file the defence on or before 29th July 1998. No defence was filed.

2. The 1st Defendant further applied by summons issued on 1st September 1998 for extension of time to file the defence. Judgment was entered against the 1st Defendant on 4th September 1998. The application to set aside was lodged on 12th September 1998.

Reason for delay

3. Although the Plaintiffs, in its affirmation in opposition to the 1st Defendant's application, stated that the 1st Defendant had not given an explanation for the delay, this point was not pursued by Mr Tam, Counsel for the Plaintiffs, in his submission. On the evidence, I am satisfied that the 1st Defendant had given an explanation for the delay, namely, on the question of retaining the present solicitors as their legal advisors.

4. I have to repeat my call on previous occasions that judgment should not be entered when a summons for extension of time to file defence has been issued. However, as the matter now stands, solicitors must ensure that they applied for an interim stay of the proceedings when they issued the time summons so as to prevent judgment being entered against their clients.

Defence

5. Mr Yau, Counsel for the 1st Defendant, accepted that the judgment was regularly obtained. The parties have addressed me on whether there was a meritorious defence.

6. As to the defence, the 1st Defendant relied on agency, namely it issued the Bill of Lading as an agent for the charterer or owner of the vessel and that the loss of the goods was caused by perils of the sea.

Agency

7. On the question of agency, the 1st Defendant's case is that it had entered into an agreement ("the agreement") with two shipping companies in which they would co-operate to run ships between Hong Kong and ports in Taiwan. Each company would provide a vessel to join the line and each company would be allowed a certain cargo space. The 1st Defendant was not the owner or charterer of Orient Commerce on which the loss occurred. This type of agreement was discussed in the case of The Nedlloyd Colombo [1995] 2 HKLR 53. Litton V.-P. stated that "In essence, the parties undertook to provide slots in each other's vessel". The agreement in that case provided each of the parties would individually be responsible for claims in respect of damage to the cargo carried under their bills of lading. Here in this case, there is no agreement relating to the question of responsibility for loss of cargo. Mr Tam referred to Clause 5(3) of the Agreement which provides that :

"3） 金源、金貴輪載方之承運保險單(CHARTERER'S P & I)內須確保配載方有合法索償之身份，赤道明珠輪則由配載方自行承保。"

The parties agreed that the clause means that the owner of Orient Commerce must effect an insurance policy which enables the 1st Defendant, the carrier, to make claims on the insurance policy. Mr Tam submitted that this shows that the 1st Defendant was a principal. I am unable to say that this is the only conclusion one can reach. The mere fact that a carrier can make such a claim under the insurance policy does not mean that it is a principal.

8. The Nedlloyd Colombo case does not touch on the interpretation of Clause 15 of the Bill of Lading issued by the 1st Defendant in this case. Clause 15 provides that :

"If the vessel is not owned by or chartered by demise to the Company or Line by whom this Bill of Lading is issued (as may be the case notwithstanding anything that appears to the contrary) this Bill of Lading shall take effect only as a contract with the Owner or Demise Charterer as the case may be as Principal made through the agency of the said Company or Line who act as Agents only and shall be under no personal liability whatsoever in respect thereof."

9. Mr Tam argued that Clause 15 only applies to a situation where the 1st Defendant was the carrier of a vessel not belonging to the participants of the agreement. In my view, this is a matter that could only be dealt with when full arguments are heard at the trial. As the matter now stands, it appears that the 1st Defendant has a meritorious defence under Clause 15.

Perils of the sea

10. As to the defence of the perils of the sea, Mr Tam argued that the 1st Defendant has not showed that it had fulfilled the obligations under Article III(1)(C) of the Hague-Visby Rules, namely,

"... carrier shall be bound before and at the beginning of the voyage to exercise due diligence to make the holds, ... and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation."

11. It is clear in the Note of Protest by the Master that all due precautions were taken with respect to securing of cargo and safe navigation of the vessel. Whether the obligations had been fulfilled or not is a matter of evidence at the trial. The 1st Defendant has at this stage shown, by reference to the Note of Protest, the loss of containers in severe weather conditions which brings the case within the perils of the sea requirement. I am satisfied that on this point the 1st Defendant has also shown a meritorious defence.

Conclusion

12. Accordingly, I will set aside the judgment and give the 1st Defendant leave to serve and file the defence within two days.