XCHRX CHINA NATIONAL ARTS & CRAFTS IMPORT EXPORT ZHEJIANG BRANCH and Another v. HOI KONG CONTAINER SERVICES COMPANY LTD. (D2)

1990, No. CL90

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. In their action against the second defendant, the plaintiffs seek leave to amend their points of claim. The substance of the amendment they seek is in respect of paragraph 8. I set out below the paragraph as it stands in standard print, with the amendments being sought in italicised characters.

"8. In breach of their duties as bailees of the goods during transhipment at Hong Kong between 16th and 22nd July 1989, the 2nd Defendants failed properly safely and carefully to handle the said goods.

PARTICULARS

(1) The 584 cartons shipped under the Bill of Lading were commingled at Hong Kong with another 918 cartons shipped from Shanghai to Hong Kong on the vessel Long Jiang. The said 918 cartons shipped on the vessel Long Jiang were on the voyage from Shanghai to Hong Kong stowed on deck. The said vessel encountered typhoon Gordon when the said 918 cartons became wet damaged.

Proper segregation by the 2nd Defendant of the two consignments would have prevented damage to the goods shipped under Bill of Lading CT319.

(2) Further, or in the alternative, the 2nd Defendant caused or permitted the consignments to be open to the elements and/or stored or left not under cover during the transhipment process at a time when there was heavy rainfall in Hong Kong, so that the consignments became wet-damaged from the rain. The recorded daily rainfall on 17th and 18th July 1989 was 24.5mm and 112.7mm respectively.

Proper handling and temporary storage so as to shield or protect the consignment from the heavy rain would have prevented wet damage to the goods."

2. The writ of summons was issued on 10 August 1990. This says only that the plaintiffs' claim is in respect of the second defendant's breach of contract and/or duty in and about the carriage, care and custody of the damaged goods. The more particular allegation was made in the points of claim filed on 8 October 1990.

3. The points of defence do not deal specifically with the particular alleged under paragraph 8 of the points of claim. The defence, amongst other things, denies generally that the damage occurred while the goods were in the actual custody or actual control of the second defendant as a result of their wilful neglect or default or otherwise.

4. Further particulars as to paragraph 8 supplied by the plaintiffs state that "wet cartons should not have been placed in a degree of proximity to dry cartons so as to allow the passing of moisture from one to the other". The second defendant requested further particulars of this allegation, and the plaintiffs said that the wet and dry cartons were in proximity both before and after they were stuffed.

5. The situation is, then, that the original allegation was that the second defendant allowed the goods to become wet by placing them next to wet cartons, and the new allegation is that the second defendant allowed the goods to become wet by exposing them to rain.

6. The second defendant opposes the application for leave to amend. In support of that opposition, the second defendant has filed an affirmation by Ms Sue-foung Kong, an assistant solicitor. Ms Kong says that the plaintiff is seeking to introduce a new cause of action. This is not so. She says that she is informed by Mr HT Hung, the claims manager of the second defendant, that, at the relevant time, the second defendant's Sea Operation Department arranged and carried out the containerisation of break bulk cargo received from China, and that it most likely that this department was responsible for vanning the goods in question. She says that this department closed in 1990 - no specific date is given - whereupon all the employees of the department resigned. Ms Kong says that there are no existing records of the department, so the second defendant cannot ascertain the identity of the employees who could give evidence regarding the new allegation. The second defendant, it is said, made pertinent inquiries about commingling "as early as February 1991". Ms Kong produces a letter dated 20 February 1991 from the second defendant, written by Mr HT Hung, to some insurance brokers in which it is said - "Based on the information as provided by claimants we are unable to trace any record showing that the cargo ex "Long Jiang" in Jul 89 was handled by this company. Our principal M/S F.T.I. verbally confirmed that they had not handled this vessel at date said above.". Another letter, again by Mr HT Hung, dated 14 May 1991, is produced. This says - "We confirm that we have checked again our record and unable trace that Hoi Kong on (sic) our agent and subcontractor had handled any cargo ex. "Long Jiang" at period May - June 1989 which please advise Alsop Wilkinson accordingly.". Mr Kerr also handed in from the bar a translation of a fax dated 3 May 1990 from Golden Fortune Shipping Co, Ltd. to Zhe Jiang Artcraft Sun & Moon Artcraft Dept.. This says - "As regards the damage to the 918 cartons of gloves shipped by "Long Jiang" V.8907 B/L No.4, please note that the cargo was discharged from "Long Jiang" at berth which was immediately transferred to Branes (sic) off dock CFS for stuffing into containers for transhipment.", and a letter dated 28 February 1991 from the insurance brokers to Throughtrans Services (Asia) Ltd., which says - "We further understand from Hoi Kong they have no record that Long Jiang's wet cargo were co-mingled with Dong An's cargo into the barge 'Hoi Kong No. 7.".

7. Ms Kong goes on to say that it is now impossible for the second defendant to contact relevant witnesses to give evidence on the new allegation, and, even if this could be done, it would be virtually impossible for witnesses to recall details of the vanning process after over six years. She says that, if the new allegation had been pleaded originally, inquiries could have been made into the vanning process at the same time as inquiries were made into the commingling.

8. The new allegation arises from a report by marine surveyors dated 27 November 1989, made at the request of the first defendant, in which they expressed their opinion that the cartons containing the damaged goods were "touched by freshwater at some time prior to our examination and most likely prior to loading into subject containers." This report was disclosed on discovery to both the plaintiffs and the second defendant in 1991.

9. The plaintiffs should have leave to amend unless this would cause injustice to the second defendant. The only basis on which it could be said, and the only basis on which it is said by Mr Kerr, to be unjust to the second defendant is that the amendment, if allowed, would cause prejudice. Mr Kerr accepts that no new cause of action is sought to be pleaded, but the plaintiffs wish to plead new particulars of the second defendant's alleged breach of duty as bailee. The particular kind of prejudice alleged by the second defendant is that it is unable to investigate the matter and produce evidence to contest the fresh allegation.

10. The burden of persuasion is on the plaintiffs. If, at the end of the day, I cannot decide whether or not it is just to allow the amendments, the plaintiffs must fail. But where, as here, a party relies on prejudice, on the basis that documents and witnesses are no longer available, as the only factor in the scales of what is just, that party must establish that prejudice. The second defendant, therefore, has to show that, because of the plaintiffs' delay in raising the new allegation, it is now unable to investigate the allegation and gather evidence to combat it. That is to say, the second defendant must show that, if the allegation had been raised timeously, the second defendant would not have suffered this prejudice. As I understand him, Mr Kerr suggests that the plaintiffs should have raised the allegation when they had the evidence to support it; that is, when the surveyor's report giving the opinion that the damage was caused by freshwater was available to them in 1991.

11. The reality of this matter is that it is unlikely that, even if the fresh allegation had been contained in the points of claim filed on 8 October 1990, some 14 months after the event in July 1989, let alone in 1991, the second defendant would have been able to identify individuals who had handled the cargo, and even more unlikely that those individuals would have been able to relate just what they did with the cargo to show that the second defendant had taken the proper precautions to avoid it being damaged by rain. Certainly, the second defendant has not established this, which it is bound to do to succeed in its opposition. The second defendant does not say, for example, that it kept accurate records to show which individuals in its employ, or which individuals employed by a sub-contractor, handled this particular cargo, and that, by reason of their system, record-keeping, procedures or whatever, those individuals would have been able to say, not from memory - because that would not have been reasonably possible after the lapse of any significant time; certainly not after 14 months - but from records that they kept at the time, whether or not it rained when they were handling the cargo, and, if it did, what measures they took to avoid the cargo being damaged, and that this evidence, because of the delay, is no longer available. In other words, the second defendant has not, in my view, established that it is any worse of now than it would have been if the allegation as to damage by rain had been raised originally in the points of claim. We all know, from experience in dealing with claims of this nature, that it is rare for there to be any direct evidence of how goods in the custody of a bailee were handled. Whether or not a bailee failed in its duty is decided by inference and the tools of the law. Even if the bailee is able to call the employees who handled particular goods, it is unusual for those witnesses, if they are being honest, to say that they remember what they did or did not do in connection with particular goods some substantial time earlier; more usually, the witnesses say what they would have done, or what was their invariable custom.

12. I am also unhappy with what is said by Ms Kong to establish that the second defendant is not able to investigate the new allegation and trace witnesses. Only the second defendant is able to give evidence about this, but this important aspect, which is the whole crux of the matter before me, is dealt with in the sketchiest of manners. Regarding the records of the Sea Operation Department of the second defendant, without which, I am told, the second defendant cannot identify witnesses, it is said only that the department closed "in 1990", without any specific date, and that "there are no existing records of that Department". Why are there no records? It is not usual, surely, for records of a department within a company to disappear when the department closes. I am given no explanation for this. What happened to those records? Were they destroyed? If so, how and why? Apparently, the records were in existence in May 1991, after the department had closed. Mr Hung says then that he checked them. Why did they disappear after that? I am not told. I should have been told. In particular, I should have been told why records were not kept when there was pending litigation. Surely, the records were not audited to retain those that might relate to whether or not the goods were kept next to wet cartons, but to remove and destroy those that might relate to how the goods were otherwise handled. I am left being suspicious about this. Mr Hung must know the facts. He was there in 1991 and is there now. I do not understand why this strange situation was not explained more fully. I am not satisfied that the second defendant has told me all that there is to be told about this.

13. In the result, I am not satisfied that the delay in making the new allegation has prejudiced the second defendant, and I give leave to the plaintiff to amend its points of claim as it wishes to do.

14. I see no reason, at this stage, why the usual order as to costs should not be made. Accordingly, I make an order nisi that the plaintiff pay the costs of the application, and that the second defendant pay the costs of its opposition to the application. I grant a certificate for counsel.