CHAN JAK TUNG T/A FORWARD & CO v. BALTRANS LTD AND OTHERS

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REASONS FOR JUDGMENT

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1. By this Summons the Defendant applied for an order that between the Plaintiff and the Defendant, preliminary issues be tried or that the question of limitation defences be tried first. I dismissed the application at the conclusion of the hearing and I now hand down my Reasons.

2. The Plaintiff as owner of goods in 16 containers (collectively referred to as "the Goods") shipped on board the vessel Leverkusen Express for carriage in mid 1993 from Hong Kong to Hamburg under 11 Bills of Lading issued by the Defendant, claimed in this Action against the Defendant for the non delivery of the Goods. It is common ground that the Vessel arrived in Hamburg sometime in 1993 but the Defendant released the 16 Containers on various dates in or around June and July 1993 to persons without the production of the original bills of lading or namely to persons not entitled to receive the same. This is therefore a classic case where the defendant should be liable and as said by the Privy Council in Sze Hai Tong Bank v Rambler Cycle Co. [1959] A.C. 576 at page 586 "a shipowner who delivers without production of the bill of lading does so at his peril." The Defendant seeks in a number of ways to escape its liability and in the Amended Defence, a number of defences were raised consisting I was told at the hearing of title to sue, package limitation and quantum. But the two substantial defences sought to be relied on by the Defendant are the 9 months contractual limitation defence and the one year Hague-Visby Rules limitation defence.

3. What happened apparently was that the Plaintiff sold the goods to the buyer Tegro (the 1st Third Party) by way of letters of credit but the documents were rejected and there were attempts to obtain payments but eventually the Plaintiff had to rely on the Bills of Lading and when these were presented to the Defendant for the delivery of the Goods in May 1994, the Plaintiff was told that the Goods were gone and on the 20th June 1994 the Writ of Summons was issued. After a very long time, the Defendant eventually in 1995 sought and was given leave to issue Third Party Proceedings against four separate parties:-

I am informed that the 1st Third Party had defaulted in acknowledging service of the Third Party Notice and is now out of the picture but that the 2nd, 3rd and 4th Parties are disputing jurisdiction and by agreement of the Defendant and those three Third Parties, the stay applications of those three Third Parties were agreed (without knowledge of the Plaintiff) to be adjourned.

4. The Defendant desired the separate trial of the two limitation defences primarily in the hope that if the Defendant should succeed in the 9 months limitation defence then that would be the end of the Plaintiff's case and of the Third Party proceedings but that if it could succeed with the 12 months Hague Visby Rules defence, then the Defendant might be able to "knock out" the claim in respect of some of the 16 containers, although it was recognised by the Defendant that the Defendant would still have to meet at the main trial the claim in relation to at least 7 containers which would not be barred by the 12 months limitation defence. The application for preliminary or separate trial under Order 33 rules 3 and 4 are vigorously opposed by the Plaintiff.

5. At the hearing it was recognised by Mr. Kerr for the Defendant that although it was framed in the Summons as a pure question of law, what is sought by the Defendant was less in the nature of the determination of a preliminary point of law and was more in the form of asking the Court to order separate trial of the two limitation defences, namely separate trial of separate issues under Order 33 rule 4. In the White Book at page 592 the following is said about separate trial of separate issues:-

"An order for the separate trial of separate issues is a departure from the beneficial object of the law that all disputes should be tried together, and therefore, generally speaking, such an order should only be made in exceptional circumstances or on special grounds...."

In Telford Development Ltd. v Shui On Construction [1990] 2 HKC 110, the Court of Appeal said at page 117:-

"The general rule is that all the issues in a case are to be tried at one and the same time. There is power to order that different issues in a case be tried at different times. But that departure from the general rule is ordered only if it is just and convenient. And it is, of course, for the party who seeks such a departure to demonstrate that it is indeed just and convenient."

6. I am not convinced as a matter of case management and as an exercise of discretion that the Defendant has demonstrated that it is just and convenient to make the requested order of separate trials.

7. First in relation to costs, Mr. Kerr started by saying that there would be a great deal of savings of costs, because the limitation defences are pure questions of law and would involve no or practically no oral evidence but as the arguments developed, it is clear that oral evidence will undoubtedly have to be given and there is even considerably doubt as to what will be the exact scope of the oral evidence and what directions the court should give on for example witness statements if separate trial is ordered. One example of the difficulty surrounding this will suffice. Under both the 9 month limitation defence of Clause 23 and under the 12 month limitation defence under Article III rule 6 of the Hague Visby Rules, the question of the time when each container should have been delivered is vital for the calculation of whether the claim in relation to that container might be time barred. The precise meaning of the time when the goods should have been delivered is uncertain as there is apparently no convincing judicial authority on these provisions. In the circumstances, the oral evidence which would be given might cover a scope which it is difficult to ascertain with precision at present (having regard to the present state of pleadings). This is therefore not a situation where the Court can say how much time the separate trial will take and I suspect that if I were to order separate trial, there would have to be quite a few hearings of directions, before the actual trial can take place. I was informed by Mr. Smith that even on the most conservative estimate, having regard to the uncertain state of the law, a hearing just referrable to law will take at least two days. If oral evidence is included, then the parties will be looking at a separate trial which will take anything from 4 to 5 days to much longer period and this is on the assumption (by no means certain) that all three Third Parties will waive their right to participate in the separate trial. This is therefore not a case where on a short separate trial on a pure question of law, of sufficient clarity and certainty of underlying facts, a finding by the Court on the narrow distinct legal question of law will bring about much savings of costs. In the circumstances the Defendant had failed to demonstrate to the Court that there would be a substantial savings of costs.

8. The considerations on costs however are further weighed against the Defendant because of the uncertainty of the law. I have been shown the decisions of the New South Wales Court of Appeal, the English Court of Appeal and the somewhat divergent views in two decisions of the Hong Kong Court of Appeal. Mr. Smith also informed me that there is much learned literature on the matter of contractual shorter time limit being in conflict with the Hague-Visby Rules. In the absence of any binding authoritative statement from the highest court, it is likely that the first instance judgment after the separate trial on the limitation defences would have to be resolved first by the Court of Appeal and then by the Court of Final Appeal. Instead of costs being saved, the parties may well find that as result of the separate trial that much more costs will have to be incurred. This involves not just additional costs but also additional time and delay.

9. Time is of concern to me and at the hearing, I indicated that in the event the Defendant failed on the two limitation defences after the matter had been contested all the way to the Court of Final Appeal, the Plaintiff would suffer greatly by the delay caused by a separate trial ordered by the Court. It is quite probable should I see fit to order separate trial, that the separate trial will not take place much before summer of 1997 having regard to the necessity for oral evidence, and that the Court of Final Appeal would not make its final determination on this matter until say mid or late 1998, at which time the Plaintiff will then have to wait for the Defendant to restore the stay applications of the Third Parties and for the disposals of the same and for the Third Party proceedings to catch up with the Main Action. The Plaintiff would be looking at a trial sometime probably in 2000 if not later. Such a prospect might be convenient to the Defendant and the Third Parties but it must be totally unacceptable to the Plaintiff and to the Court. In the White Book at page 592, it is said that:-

"... where there has been delay and there is a likelihood of additional costs and where also there are facts to be determined, the Court will be disinclined to order the trial of a preliminary issue......"

I agree. I have no doubt that unless the question of 9 months contractual defence is decided in favour of the Defendant, there will be much additional delay for the Plaintiff because even on the best case of the Defendant, something like 7 containers or 5 Bills of Lading would not be caught by the Hague Visby Rules 12 month limitation defence. (A few days difference will mean the collapse of the 12 months defence relating to most if not all the containers.) There is no certainty or even very strong likelihood that the Defendant will succeed on this 9 months contractual defence. The Court is therefore being asked to take a risk on this application. In my judgment the Court should decline to take that risk. I am therefore not convinced that it is just or convenient to order separate trial on the basis of savings of time. In fact on the question of time, because of the likely duplication and overlap and the necessity for considerable oral evidence to be received at the separate trial, if the Court of Final Appeal should be against the Defendant, then it is quite likely that there would be duplication of evidence with all the difficulties inherent in the same witness having to give evidence again either before the same or different Judge, at two trials separated by two, three or four years. This is a recipe for injustice and inconvenience.

10. Finally I was referred to the supposed beneficial effect of the separate trial on the Third Parties Proceedings. I acknowledge of course that this is possible should the Defendant finally win on the 9 months limitation point. But this is only a possibility and measured against it is the certainty (in the event of Defendant failing on the 9 months point) that the Third Parties proceedings will be delayed much further and additional costs will be incurred and the Third Parties will be deprived of the opportunity of taking part in the separate trial. However what is to be borne in mind is that this is an application by the Defendant for a separate trial of the Main Action between the Plaintiff and the Defendant on the basis that it is just and convenient for the Main Action that there should be a separate trial of that Main Action. Great weight should therefore be given to considerations of the Plaintiff and the Defendant in the Main Action. In so far as the effect of a separate trial is concerned, of course I should also take into account matters of Third Party proceedings and the possible commercial consequences, and the various matters said for the Defendant in the 4th Affidavit of Mr. Davidson. But taking all these into account, I am nevertheless convinced that justice and convenience call for this Action to proceed to a full trial as quickly as possible and that the Court should not allow the Defendant to indulge in the requested separate trial.

11. I am of course conscious that there is the new culture of case management and of expedition under the influence of authority such as Ashmore v Lloyds [1992] 1 W.L.R. 446 and the Woolf Report, and in the new spirit it is open and very often incumbent on the Commercial Court to take drastic or sensible step of severing the important issues and push them forward for an earlier resolution. But every case turns on its own special circumstances. In this context it is worth while recalling the wisdom of long years of experience expressed in two judgments of the House of Lords. In Tilling v Whiteman [1980] A.C. 1, Lord Wilberforce said at page 17G:-

"... I, with others of your Lordships, have often protested against the practice of allowing preliminary points to be taken, since this course frequently adds to the difficulties of courts of appeal and tends to increase the cost and time of legal proceedings. If this practice cannot be confined to cases where the facts are complicated and the legal issue short and easily decided, cases outside this guiding principle should at least be exceptional."

Lord Fraser said at page 25C:-

"... Preliminary points of law are too often treacherous short cuts. Their price can be, as here, delay, anxiety, and expense."

In Allen v Gulf Oil [1981] A.C. 1001, Lord Wilberforce said at page 1010H:-

"... My Lords, I and other of your Lordships have often protested against the procedure of bringing, except in clear and simple cases, points of law for preliminary decision. The procedure indeed exists and is sometimes useful. In other cases, and this is frequently so where they reach this House, they do not serve the cause of justice. The present is such an example. The question as originally framed was clearly inept. It was recast by Kerr J. into an improved form. But both judges in the Court of Appeal found it either unintelligible or unanswerable: so I believe do some at least of your Lordships. The fact is that the result of the case must depend upon the impact of detailed and complex findings of fact upon principles of law which are themselves flexible. There are too many variables to admit of a clear-cut solution in advance."

Lord Roskill said at page 1022A:-

To take counsel in these wise words of caution seem to me in the circumstances to be not only sensible but essential. I of course accept that the application is no longer based on a pure point of law but is for a seperate trial of seperate issues but the basis of the application is on the same principle of economy of time and expense. Attractively advanced submissions had been made to me founded upon pleas of supposed economy but I am not seduced or persuaded. I am not satisfied that a good or sufficient case had been made out for an order of separate trial. The Summons of the Defendant is accordingly dismissed with costs: