THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL "CSAV TOKYO" v. THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL "KMTC HONG KONG"

HCAJ164/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO.164 OF 2004

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Admiralty action in rem against the ship
"KMTC HONG KONG" of the Port of Panama

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J U D G M E N T

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1. As a result of a collision on 22 March 2002 between the plaintiffs' ship "CSAV TOKYO" and the defendants' ship "KMTC HONG KONG", serious damage was done to the plaintiffs' ship.  The defendants admitted liability for such collision damage on 15 April 2002.  Security for the claim of the plaintiffs was given on 10 May 2002 and on 30 May 2002, the plaintiffs and the defendants agreed that the claim of the plaintiffs for such collision damage shall be subject to Hong Kong law and Hong Kong jurisdiction.  On or about 30 August 2002, there was joint survey on board the plaintiffs' ship.

2. The plaintiffs' team handling the claim against the defendants took considerable time to prepare the claim but there was no communication between the plaintiffs and the defendants in relation to the claim after the joint survey in August 2002 and its follow-up joint survey.

3. The claim of the plaintiffs against the defendants became time-barred under the two-year time limit provided by section 7 of the Merchant Shipping (Collision Damage, Liability and Salvage) Ordinance ("Ordinance") on 21 March 2004.  Some 6 months after the expiry of the limitation time, the plaintiffs became aware that the claim of the plaintiffs against the defendants was time-barred.

4. A writ in rem was issued by the plaintiffs in this action on 21 September 2004.  By summons dated 18 October 2004, the plaintiffs sought from this court an order that time for commencement of this action be extended.  The application was made pursuant to section 7(3) of the Ordinance.

5. Section 7 of the Ordinance provides :

"(1) Subject to subsection (3), no action shall be maintainable to enforce any claim or lien against a ship or its owners in respect of any damage or loss to another vessel… caused by the fault of the former vessel, whether such vessel is wholly or partly in fault… unless proceedings in the action are commenced within 2 years from the date when the damage… was caused…

(3) Any court having jurisdiction to deal with an action to which this section relates may, in accordance with the rules of the court, extend period within which proceedings in the action must be commenced, to such extent and on such conditions as it thinks fit…"

6. The two-year time limit for collision claim is derived from the English Maritime Conventions Act of 1911 which in turn was the result of an international convention.  The much shorter time limit for collision claim (compared to for example ordinary tort claims) is well known in the shipping community.  From time to time the Admiralty Court of England and of Hong Kong are asked to extend time for the commencement of the collision action and whether the court would do so depends entirely on the particular circumstances of the case.

7. At the hearing it was not disputed that the court could only extend time upon "good reason" being shown by the plaintiffs.  The dispute is whether on the facts of the case, "good reason" has been shown.

8. "Good reason" is an expression which was used by Lord Brandon in the leading authority of The Myrto (No. 3) [1987] 1 AC 597.  The Myrto was a case where the plaintiff bank as mortgagee of the ship sued very large number of cargo owners for the costs of discharging the cargo from the ship arrested and sold by the Admiralty Court.  In order to minimise the costs to be incurred against a large number of foreign defendants/cargo owners, the bank obtained an order of renewal of the validity of the omnibus writ.  The renewal order was challenged by a few cargo owners/defendants and the House of Lords held that good reason was shown in the exceptional circumstances of that case.

9. In the course of his classic speech, Lord Brandon first distinguished between 3 categories of cases where the application for extension could arise :

(1) Category (1) where at the time of the application for extension, the writ was still valid and the claim was not yet time-barred;

(2) Category (2) where at the time of the application for extension, the writ was still valid but the claim was time-barred; and

(3) Category (3) where at the time of the application, the writ was not valid and the claim was time-barred.

10. After reviewing the authorities on the circumstances which allow the court to extend time for the validity of the writ, Lord Brandon said at page 622R this :

"I think on the whole that it has been unhelpful to put the condition for extension as high as ‘exceptional circumstances', an expression which conveys to my mind at any rate a large degree of stringency.  The old rule in force until 1962 referred to ‘any other good reason', and I think that the new rule should be interpreted as requiring ‘good reason' and no more.

The question then arises as to what kind of matters can properly be regarded as amounting to ‘good reason'.  The answer is, I think, that it is not possible to define or circumscribe the scope of that expression.  Whether there is or is not good reason in any particular case must depend on all the circumstances of that case, and must therefore be left to the judgment of the judge who deals either with an ex parte application by a plaintiff for the grant of an extension, or with an inter partes application by a defendant to set aside an extension previously granted ex parte.

Good reason is necessary for an extension in both category (2) cases and category (3) cases.  But in category (3) cases, the applicant for an extension has an extra difficulty to overcome, in that he must also give a satisfactory explanation for his failure to apply for extension before the validity of the writ expired."

11. Although The Myrto is a case concerned with the scope of the power under the rules of the court to renew the writ and thereby extend time for the validity of the writ, the parties agreed before me that the same principle applies to the extension of time under section 7 of the Ordinance.  Care however must be exercised in not blindly applying The Myrto.  Lord Brandon in The Myrto referred to 3 categories, these 3 categories are all cases where the writ originally issued was validly issued in time and was not time-barred.  The third category of The Myrto is where the writ was issued in time (not time-barred) but somehow the validity of the writ was allowed to expire and in the meantime limitation period has also accrued.  Therefore in that third category, when renewal was sought, the writ was both invalid as well as being time-barred.  The case under our present consideration here is really a fourth category where the writ when issued was already time-barred and therefore there was an accrued limitation defence even at the time of the writ.  It is in the light of this difference between the third category and what I call the fourth category, that the present application must be considered in applying the agreed principle of "good reason".  The dispute at the hearing of the summons is largely over the application of the agreed principle.

Good reason shown or not

12. From the time of the accident on 22 March 2002 to the time when the writ was issued on 21 September 2004, there was a period of two and half years.  The admission of liability took place on 15 April 2002 and the by end of May 2002, guarantee for the claim and agreement of the parties that Hong Kong law and jurisdiction was to govern the claim had been agreed.  What then could be the reason or excuse for not issuing the writ in time.

13. The joint survey took place on board the ship at the repair yard in Hong Kong on or about 30 August 2002.  There was a follow-up joint attendance, the date of which is not known but which could not be very long time afterwards.  At the joint survey, there might have been and probably was agreement on what particular damage was caused to what particular part of the ship and that such particular damage was attributable to the collision.  There was however no agreement on the quantum of any individual item of damage.

14. The lack of any agreement on the quantum of any individual item of damage is important because there is more than the possibility that the disagreement over quantum would have to be resolved by the court.  There is in fact the necessity for the plaintiffs (like all cases) to bring the claim in time when there is no agreement on liability and quantum.  Admission of liability in nautical cases does not render the case any different from say road accident personal injury cases where liability was admitted from the beginning.  There can be no basis for the plaintiffs or those acting for the plaintiffs to believe that any quantum of any particular item of damage claimed by the plaintiffs would be agreed by the defendants.

15. In the two affidavits of Mr Steemers, he described in great detail what work he had undertaken to prepare for the claim.  The work was of course done in the context of, liability admitted but no quantum being admitted.  Such work done by Mr Steemers did not relieve the duty of the plaintiffs to issue the writ in time.

16. The plaintiffs have correctly admitted that Mr Steeemers did not appreciate that a time limit would apply to the claim but that ignorance whether of Mr Steemers or of the plaintiffs would not excuse the non issue of the writ or could provide a good reason for extension.  Nor indeed could any oversight or carelessness (if any) on the part of any one acting for the plaintiffs in the matter.

17. Of course the court in considering all the circumstances, would take into account the fact that there was an admission of liability.  In the case The Zirje [1989] 1 Lloyd's Rep 493, Sheen J said at page 497 that admission of liability "goes some way towards eliminating the justification for a period of limitation as stringent as two years…".  I do not understand Sheen J to be saying there that the two-year limit does not apply to collision claim in a case where only quantum is in dispute nor do I understand him to be saying in The Zirje that where there is admission of liability that by itself is good reason to extend time.  If that is what he was saying then I must respectfully disagree.  In my view, admission of liability does not in any way relieve the duty of the claimants (in collision cases) to issue the writ in time as admission of liability does not impose a longer time limit or provides a "good reason for extension".  Indeed the case of The Zirje was said by Hirst LJ in The Al Tabith [1995] 336 at 342 :

"…to be on the edge of the borderline and it should be, in future, be treated as a one-off decision on its own special facts and not cited as authoritative."

18. For me The Al Tabith provides a more reliable guide on how the time extension cases should be approached.  The Al Tabith is a case where the judge refused to grant extension (after a 6 months extension already given by the party) and the Court of Appeal agreed that no extension should be given.  The reason for the Court of Appeal in rejecting any time extension application is summarised in the following words at page 343 of Russell LJ :

"The sole operative cause of the delay in issuing the writ was, in my judgment, the human error of Mr Dawson.  He was not induced to make the mistake by any active or passive conduct on the part of the defendants."

19. In my judgment, the sole cause of the failure on the part of the plaintiffs to issue the writ in time is, to put the case of the plaintiffs at their highest, the ignorance of Mr Steemers that a two-year time limit applied and that ignorance was not induced in any way by conduct on the part of the defendants.

20. There was no "crossing of the line" in the words of Hirst LJ (at page 341 of The Al Tabith) in the conduct of the defendants which led or caused the plaintiffs not to issue the writ in time.

21. As Rose LJ said at page 343 of The Al Tabith the defendants are prima facie entitled to the limitation defence which has accrued to them and ought not, to be deprived of it merely because of the ignorance of those representing or acting for the plaintiffs.

22. In all the circumstances of the case, which I have considered very carefully, there was no good reason shown by the plaintiffs for an extension of time.  It follows therefore that there was no room for the exercise of any discretion to grant the time extension sought.  The summons of the plaintiffs and the action of the plaintiffs herein must be dismissed with costs.