WONG HING FAAT v. THE HONG KONG AND YAUMATI FERRY CO. LTD.

H E A D N O T E

Practice and Procedure - limitation defence sought to be introduced 11 years after accident and 7 years after defence - prejudice - discretion.

Merchant Shipping - s.503 Merchant Shipping Act 1894 - 'actual fault or privity' - pleading of material facts.

1984 No. A2936

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. I have before me an appeal from a decision of Master Woolley given on 60th March 1996 whereby he gave the Defendants leave to re-amend their defence.

2. The amendment which the Master allowed permitted the Defendants to raise, 11 years after an accident on their ferry "Man Wing", a limitation of liability defence based on section 503 of the Merchant Shipping Act 1894 as applied to Hong Kong. The effect of this defence, if successful, is to limit the Defendant's liability to something in a region of.$600,000. I was told that on a. full liability basis the Plaintiff's claim for damages for personal injuries, pain suffering has been valued by his legal advisers at something in the region of $2m.

The accident

3. At about 7 a.m. on 22nd May 1981, the Plaintiff was a passenger on board of the "Man Wing" ferry owned and operated by the Defendant which was operating between Kwun Tong and Shaukiwan. The ferry was licensed to carry 750 persons comprising 18 crew, 375 passengers on the main deck or lower deck and 357 passengers on the upper deck. At the relevant time the ferry was crowded with standing passengers. As the ferry was coming alongside the dock, the Plaintiff left his seat and walked along the passenger walkway towards the gangway with a view to disembarking. As the ferry berthed, the Plaintiff stumbled, a mooring rope became taut and the Plaintiff was caught by the bights of rope lying on the passenger walkway. In the course of the berthing, the Plaintiff was dragged and his left leg was pressed against the bulwark of the ferry, and the Plaintiff fell onto the deck of the ferry. The Plaintiff suffered severe injuries and on the 67th May 1981, he had to have a through the knee amputation, and on the 13th June 1981 he had to have an above the knee amputation. He was provided with an artificial-leg in December 1981. He was kept in hospital for some 7 months.

Chronology

3rd May 1984	Writ issued
30th May 1984	Defence filed
15th June 1984	Plaintiff files list of documents
10th July 1984	Plaintiff requests further and
	Better particulars of the defence
24th August 1984	Defendant files further and better
	Particulars of the defence.
11th September 1985	Plaintiff files notice of intenction
	to proceed
28th February 1986	Depfendant files list of documents
29th July 1986	Plaintiff applies for case to be set
	down for trial in fixture list
14th January 1987	Consent direction for filing of
	amended defence
28th January 1987	Amended defence
28th March 1988	Plaintiff files notice of intention
	to proceed

11th October 1990	Plaintiff files notice of intention
	to proceed
2nd May 1991	Defendnat takes out summons to
	re-amend the defence
10th July 1991	Plaintiff takes out summons to amend
	the Statement of claim
16th September 1991	Master Jones orders
	(1) leave to the Plaintiff to amend
	the Statement of Claim
	(2) leave to the Defendant to
	re-amend the Defendant's defence
	(3) Defendant's summons be adjourned
	sine die with liberty to restore
16th March 1992	Application by Defendant to amend
	the amended defence
20th March 1992	Master Woolley orders that
	(1) the Defendant do have leave to
	re-amend the amended defence as per
	the document annexed to the Summons
	filed on 16th March 1992 and the
	service be dispensed with
	(2) the Plaintiff be at liberty to
	file and serve a Reply within 14
	days from the date of the order

It can be seen that there has been some delay by the Plaintiff but no application has been made to the Court to dismiss these proceedings for want of prosecutions.

Section 503 of the Merchant Shipping Act 1894

4. Section 503 suffice so far as material as follows:-

"(1)  The owners of a ship, British or foreign, shall not, where all or any of the following occurrences take place without their actual fault or privity; (that is to say)

(a) Whereany less of life or nersonal injury is caused to any person being carried in the ship

(b) ...

(c) ...

(d) ...

be liable to damages beyond the following amounte; (that is to say)

(i) in respect of loss of life or personal injury, either alone or together .... an aggregate amount not exceeding fifteen pounds for each ton of their ship's tonnage;...."

5. Paragraph 26 of the re-amended defence refers t the Merchant Shipping (Limitation of shipowner's liability) (Hong Kong Dollars Equivalents) Order dated 12th January 1979 which prescribed HK$1,263 as the equivalent of 3,100 gold francs as was originally prescribed in s.503 of the Merchant Shipping Act 1894. The figure of 3,100 gold francs were substituted by the sum of £15 by the Merchant Shipping (Liability of Shipowner and Others) Act 1958. 1 was told by counsel that the minimum tonnage relevant to these sections is 300. If the 1979 order applies then the maximum liability of the Defendants is HK$378,942.00. However, Mr. William Waung who appeared together with Mr. Ruy Barretto for the Plaintiff submitted that the relevant order was one made in 1989 which substituted the Hong Kong Dollar sum of 2125 for the sum of 1263. If that contention is correct then the Defendant's maximum liability under the section will be in the region of$600, 000.

6. It is clear on the authorities that the onus is upon the Defendants to prove that they, as owners of the ship, are not be liable because the accident complained of took place without their actual fault or privity. In Lennard's Carry ng Co. Ltd. v. Asiatic Petroleum Co. Ltd. (The Edward Dawson) (1915] A.C. 705 Viscount Haldane L.C., said this at p.713:-

"My Lords, a corporation is an abstraction. -It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation. That person may be under the direction of the shareholders in general meeting; that person may be the board of directors itself, or it may be, and in some companies it is so, that that person has an authority co-ordinate with the board of directors given to him under the articles of association, and is appointed by the general meeting of the company, and can only be removed by the general meeting of the company. .... It must be upon the true construction of that section in such a case as the present one that the fault or privity is the fault or privity of somebody who is not merely a servant or agent for whom the company is liable upon the footing respondeat superior, but somebody for whom the company is liable because his action is the very action of the company itself. It is not enough that the fault should be the fault of a servant in order to exonerate the owner, the fault must also be one which is not the fault of the owner, or a fault to which the owner is privy; and I take the view that when anybody sets up that section to excuse himself from the normal consequences of the maxim respondeat superior the burden lies upon him to do so."

7. It is clear from this passage that section 503 is an exception to the general rule relating to the vicarious liability of employers for the acts of their servants or agents. If the Defendants had been the owners of a motor vehicle which had negligently injured the Plaintiff, they would have been liable without more ado for the negligence of their servants or agents. Although Parliament, in its wisdom, has limited this rule in favour of the owners of ships it was fair to say that during the last 30 years or more, the Court had imposed high standard and requirements on shipowners seeking to rely upon this limitation of liability provision.

8. In The Lady Gwendolen (1965) P 294 at 342, Willmer L.J. said this at p.342/343:-

"On the contrary, I think that it is necessary to examine in detail the facts of each particular case in order to see what in fact the shipowners did, or omitted to do, which could fairly be said to constitute actual fault on their part. Where, as here, the shipowners are a limited company, it is almost inevitable that difficult questions will arise. It is necessary to look closely at the organisation of the company in order to see of what individual it can fairly be said that his act or omission is that of the company itself."

    'The Learned Lord Justice then went on to deal with the passage above quoted from Viscount Haldane's in The Edward Dawson and then he continued:-

"But neither in the Court of Appeal nor in the House of Lords was it said that a person whose actual fault would be the company's actual fault must necessarily be a director. Where, as in the present case, a company has a separate traffic department, which assumes responsibility for running the company's ships, I see no good reason why the head of that department, even though not himself a director, should not be regarded as someone whose action is the very action of.the company itself, so far as concerns anything to do with the company's ships."

    In The Garden City [1982] 2 Lloyd's Rep. 382 at 386, Staughton J. said this:-

"Thus far, although there was fault for. which Polsteam were vicariously liable, there is nothing to indicate actual fault or privity on their part. That expression connotes, for present purposes, fault on the part of the shipowner himself. If the ship is owned by a corporation, it refers to fault on the part of the directing mind, the alter ego, or some other metaphor, such as the brain and nerve centre of the corporation."

    In The Marion [1984] 1 A.C. 563 at 573, Lord Brandon referred to a statement of Sir Gordon Willmer in The England (1973] 1 Lloyd's Rep. 373, where he said:-

"It seems to me that any company which embarks on the business of shipowning must accept the obligation to ensure efficient management of its ships if it is to enjoy the very considerable benefits conferred by the statutory right limitation."

    Lord Brandon then went on to say this at p.573:

"My Lords, I am of the opinion that what Sir Gordon Willmer there described as "this relatively new approach", begun by your Lordships' House in The Norman [1960] 1 Lloyd's Rep. 1 and continued by the two subsequent decisions of the Court of Appeal in The Lady Gwendolen [1965] P.294 and The England [19731 1 Lloyd's Rep. 373 should now be regarded as the correct approach in law to the problem of actual fault of shipowners or ship managers in contested limitation actions. It follows that I regard it as right to apply that approach to the facts of the present case."

9. Mr. Waung submitted that there was no previous case to his knowledge where section 503 had been invoked by the owners of a passenger-carrying ferry in Hong Kong which never left Hong Kong waters. Normally, the cases involving section 503 are navigational collision cases. What normally happens is that the owners of the vessel who were at fault apply to the Court for an order that their liability be limited in accordance with section 503. If the Court, sometimes after a long contested action, supports the limitation defence then the amount of the limitation can be paid into Court and all parties claiming in respect of the fund can apply to the Court to prove their entitlement. He referred me to p.156 et seq of Meeson on The Practice and Procedure of the Admiralty Court. He pointed out that in the precedent affidavit in support of a summons for a decree under 0.75 r.38(2), the Marine Director of the Plaintiffs set out the grounds upon which limitation of liability was claimed. In the precedent used the deponent alleges that the accident was caused due to the negligent navigation of those on board the vessel at the material time and not caused or contributed to by the negligence of any other person, and therefore the section applied.

10. Mr. Waung relied upon four separate grounds in his appeal against the Master's order.

Pleading not properly formulated

11. Limitation disputes are primarily not navigation but issues of business management. Mr. Waung submits, in my view correctly, that for the section to apply 2 essential elements have to be established:-

(1) That there was an alter ego of the company;

(2) Injury was not due to or contributed to by the fault or privity of such alter ego;

(3) The burden of proving both (1) and (2) is upon the shipowners.

12. The importance of the alter ego derives from the passage above cited from Viscount Haldane's speech in The Edward Dawson. Viscount Haldane's approach has been followed in a number of cases which are usefully referred to in paragraph 7 of Mr. Waung's skeleton argument and these include The Lady Gwendolen, The England, and The Marion.

13. These cases show that the onus is clearly up on the shipowners to establish that there was no fault or privity by the alter ego. The consequence of this, submits Mr. Waung, is that material facts must be pleaded in respect of (a) the identity of the alter ego and (b) that the accident complained of was not due to any failure by the alter ego to ensure that there was in place an efficient system of ship management and that there was proper supervision and control.

14. In my judgment, Mr. Waung is correct in his submission as to what one is entitled to expect to find in a defence relying upon s.503.

15. I now turn to the proposed re-amended defence to see whether these material facts are pleaded sufficiently or at all. Paragraph 66 states that the accident occurred without the actual fault or privity of the Defendant. 5 paragraphs of particulars are then given. There is no mention of the alter ego of the company. There is not a word concerning system, supervision control or instruction on passenger safety in relation to mooring ropes. The particulars merely states that the ship had been constructed in 1956, had been duly authorised to carry passengers, had been examined by ship surveyors of the Marine Department and had never been unfit to ply for passengers. It is further alleged that there were on board 8 crew members who were all competent and that no accident of a similar nature had ever occurred previously.

16. In my judgment, the proposed re-amendment gets nowhere near to pleading sufficient material facts so as to bring the Defendants within the ambit of s.503 as explained in the cases. The pleading does not deal with the alter ego point and does not even attempt to set out the system and supervision relied upon. The pleading is.embarrassing to the Plaintiff and, in my judgment, it would not be right to permit this limitation defence to be pleaded in this manner. It is no defence to argue that particulars can always be ordered. The Defendants are seeking an indulgence from the Court and it is incumbent upon them to ensure that their re-amended pleading complies with the rules of Court. In my judgment, it does not and on that basis alone I would have allowed the appeal.

Doomed to fail

17. Mr. Waung submitted that I should allow this appeal also on the basis that this defence was doomed to failure and that it would be futile to permit it to be raised. He submits that the failure to plead material facts give additional force to the Plaintiff's submission that the Defendant does not have the material to raise a viable case of limitation and the privity defence has no solid basis in fact.

18. I do not think it necessary for me to go into this submission in any detail. I have found that the defence has not been properly pleaded. To decide whether, if properly pleaded, it would stand any chance of success is to descend into the rule of speculation which I do not think it appropriate for me to do. I cannot say that the defence, if properly pleaded, is doomed to fail because I do not know, and nor does the Plaintiff, what evidence the Defendant has to rely upon. All I can say is that by the proposed re-amended pleading, the Defendant has given nothing away.

No affidavit

19. I consider it most surprising that the Defendant did not place before the Court an affidavit explaining why this defence is sought to be raised so late in the day and more importantly why no outline of the factual basis relied upon has been given. The Court is being asked to exercise its discretion by granting an indulgence to the Defendant, and I think it incumbent upon them to explain the delay and substance of this defence to the Court. This has not been done.

Lateness of application and prejudice to Plaintiff

20. By any stretch of the imagination this is a very late amendment. I accept that amendments can be allowed even during closing submissions, and sometimes on appeal provided that to do so would not prejudice the other party. Mr. Waung relied heavily on certain observations of Lord Griffiths in Ketteman v. Hansel Properties [1988] ]. AER 61. In that case, the Defendants had applied to amend by pleading limitation during' the course of their closing. submissions. The application was granted by the judge, but on appeal the Court of Appeal held that leave to amend should not have been granted. The House of Lords upheld the Court of Appeal by holding that:-

"where a Defendant decided not to plead a procedural bar, such as a limitation defence, before trial and fought the case on its merits it was not open to him to amend his defence during the final stages of the trial in order to plead the procedural defence when it had become apparent that it was likely to lose on the merits. Furthermore, there was a clear difference between amendments which ought to clarify the existing issues in dispute and amendments sought to raise a new defence for the first time, and there was no rule of practice of invariably allowing a new defence to be raised by amendment at the end of the trial subject to the grant of an adjournment and the Defendant paying costs thrown away".

21. At p.61, Lord Griffiths had this to say:-

"Equally, in my view, if a defence of limitation is not pleaded because the Defendants' lawyers have overlooked the defence the Defendants should ordinarily expect to bear the consequences of that carelessness and looked to his lawyer's for compensation if he has so minded."

22. At pp.66/63 Lord Griffiths, when dealing with the question of leave to amend, said this:-

"Counsel for the architects submitted that the authorities obliged a judge to allow an amendment no matter how late it was made nor for what reason provided the other party could be properly compensated by an award of costs. He relied on the authorities set out in The Supreme Court Practice and in particular the decision of Brett MR in Clarapede & Co. v. Commercial Union Association (1883) 36 WR 666 at 663:-

"The rule of conduct of the court in such a case is that, however negligent or careless may have been the first omission, and, however late the proposed amendment, the amendment should be allowed if it can be made without injustice to the other side. There is no injustice if the other side can be compensated by costs ....."

This was not a case in which an application had been made to amend during the final speeches and the court was not considering the special nature of a limitation defence. Furthermore, whatever may have been the rule of conduct a hundred years ago, today it is not the practice invariably to allow a defence which is wholly different from that pleaded to be raised by amendment at the end of the trial even on terms that an adjournment is granted and that the defendant pays all the costs thrown away. There is a clear difference between allowing amendments to clarify the issues in dispute and those that permit a distinct defence to be raised for the first time.

Whether an amendment should be granted is a matter for the discretion of the trial judge and he should be guided in the exercise of the discretion, by his assessment of where justice lies. Many and diverse factors will bear on the exercise of this discretion. I do not think it possible to enumerate them all or wise to attempt to do so. But justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes, and the legitimate expectation that the trial will determine the issues one way or the other. Furthermore, to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence.

Another factor.that a judge must weigh in the balance is the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently. We can no longer afford to show the same indulgence towards the negligent conduct of litigation as was perhaps possible in a more leisured age. There will be cases in which justice will be better served by allowing the consequences of the negligence of the lawyers to fall on their own heads rather than by allowing an amendment at a very late stage of the proceedings."

23. I accept that this amendment is not sought to be added during trial, but I am entitled to take into account that it comes very.late in the day and will inevitably, if allowed, have the effect of delaying further this already long delayed case. In considering delay I do not lose sight of the Plaintiff's own delay, but having escaped without a summons to strike out, he is surely now entitled to have his case.determined as soon as possible.

24. I am entitled to take into account the strain upon the Plaintiff which will inevitably result from a further delay in the determination of his case. I take Lord Griffiths' point about the courts being over indulgent towards the negligent conduct of litigation. No explanation has been given to me as to why this defence was not pleaded much earlier and I can only think that the reason why is that it was not spotted by counsel or solicitors when drafting the defence or during the 7 years after it was served. I have not been told whether the Defendants, shipowners, were aware or unaware of the existence of this provision which is much to the benefit of all shipowners.

25. In addition to all of the above is the fact that it is clear that documents relevant to this defence are no longer in existence. This is all detailed in Mr. Turnbull's affidavit and exhibits and I do not propose to set it all out again. I accept that if documents are missing, it can be said, as it was by Miss Eu for the Defendant, that this would enure to the Defendant's disadvantage. But the matter is not so simple as that. Discovery works both ways. It may be that the lost documents would have assisted the Defendant's case and they will have to live with that disadvantage - a considerable one given that the onus is upon them to establish the central elements of the defence. However, some or all of the lost documents might have assisted the Plaintiff in destroying the Defendant's limitation plea. Why should the Plaintiff be forced to go into litigation - a risky enough business at the best of times - without the chance of utilising ammunition which he might have gained from the Defendant's own documentation.

26. It is not without significance that the loss of documents was raised at the hearing before the Master, and that Counsel then appearing for the Defendants made it clear that the documents sought by the Director of Legal Aid on 3rd June 1991 were in fact available for inspection. Mr. Turnbull deposes that, "This statement carried great weight with the Master and I believe contributed significantly to his decision to grant leave to re-amend the defence". This statement on oath has not been challenged by any affidavit from the Defendant or by counsel then appearing for them. Miss Eu's report to me of a telephone conversation with her predecessor is just not good enough to deal with Mr. Turnbull's powerful point set out in para. 11 of his affidavit. Most of these documents are not now available and I am satisfied that there is a real risk of prejudice to the Plaintiff if he would to have to deal with this defence without them.

27. I am also satisfied that the Plaintiff may suffer prejudice by the absence of witnesses as well as the difficulty of existing witnesses attempting to recall events of 11 years or more ago in circumstances where they could only recently have been asked to turn their mind to these events.

28. I am also satisfied that there would be general hardship on the Plaintiff in not having his case heard for some time.. If this defence was to be allowed a considerable amount of time and money would have to be expended in investigating the matters relevant to it. It would involve a review of the Defendant's corporate and management structure and matters of that nature.

29. I remind myself that I have a discretion whether or not to allow this new defence to be added so late in the day. I accept that usually a court will allow an amendment where the other party can be properly compensated by costs. But in this case, there would be substantial prejudice to the Plaintiff which could not be compensated by an order for costs. I have taken into account all the matters raised by Miss Eu in her valiant attempt to persuade me that this was a proper case to permit the amendment to be made, but at the end of the argument, I was wholly satisfied that, in the exercise of my discretion, it would not be right to permit this amendment to be made.

30. I think I ought to make it clear that even if I had been satisfied that the pleading had been properly formulated, I would still have exercised my discretion to refuse the amendment on the basis of the reasons set out above.