LEUNG KIN FOOK and Others v. EASTERN WORLDWIDE CO. LTD. and Another

IN THE COURT OF APPEAL

1996, No. 165

(Civil)

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H E A D N O T E

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Section 35(3) Limitation Ordinance - Order 20 r5(5) Rules of the Supreme Court - Power to over-ride time limit - Whether proposed amendments of statement of claim raising new causes of action "arise out of substantially the same facts as the cause of action in respect of which relief has been claimed" - High Court Judge had refused application by the plaintiffs to amend.

Held (Court of Appeal): Order 20 r5(5) should not be narrowly construed - The fact that there was no complete over-lap of facts, and additional facts had to be pleaded to establish new causes of action, did not take the case out of Order 20 r5(5). Appeal allowed. Leave given to amend.

IN THE COURT OF APPEAL

1996, No. 165

(Civil)

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J U D G M E N T

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Litton V-P:

Introduction

1. This is an interlocutory appeal.

2. The appellants, plaintiffs in High Court Action No. CL-7/1988, are the owners of a dumb barge Shui Nam No. 1". The respondent (the 1st defendant) was the hirer of the barge. This appeal concerns an application to amend the plaintiffs' statement of claim made on 10 June 1996, over 8 years after the writ was issued.

3. The judge, Cheung J, refused leave. He concluded that the application to amend was barred by s35(3) of the Limitation Ordinance, Cap 347 which, as relevant, reads:

"(3) Except as provided by section 30 or by rules of court, the court shall not allow a new claim ... to be made in the course of any action after the expiry of any time limit under this Ordinance which would affect a new action to enforce that claim."

4. The rules of court relevant for this purpose are Order 20 r5(2) and (5) which state:

"(2) Where an application to the Court for leave to make the amendment mentioned in paragraph ... (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.

(3) ....

(4) ....

(5) An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment."

5. The judge held that: (1) the proposed amendments pleaded new causes of action and (2) they did not substantially arise out of the same facts as the cause of action in respect of which relief was claimed in the action. He accordingly refused the application to amend. Hence the appeal to this court.

The pleaded claim for relief

6. The indorsement in the writ as pleaded against the 1st defendant states:

"INDORSEMENT OF CLAIM

The Plaintiffs claim against the 1st defendant, as charterers and/or hirer of the barge SHUI NAM NO. 1' (the Barge'), for damages for breach of contract entered into between the Plaintiffs and the 1st Defendant on or about the 27th November 1987 relating to the use and/or hire of the Barge and/or breach of duty of care relating to the use and/or hire of the Barge ...."

7. As can be seen, this makes claims against the 1st Defendant based broadly on breaches of contractual duty and on the basis of tortious liability.

8. The statement of claim filed on 8 June 1988 pleaded an oral agreement made on about 27 November 1987 whereby it was agreed that the 1st Defendant would charter the barge for a voyage from Hong Kong to Macau, the barge to be redelivered to the plaintiffs in Hong Kong.

9. The particulars subsequently delivered allege that the barge was incapable of self-propulsion and that the 1st Defendant, under the arrangement between the parties, provided a tug to tow the barge: the barge was accordingly under the control of the 1st Defendant at all material times.

10. The plaintiffs averred that, from these facts, the legal incidence of bailment arose; that the 1st Defendant failed to redeliver the barge to the plaintiffs; the plaintiffs accordingly claimed the sum of $1.2m against the 1st Defendant, being the value of the barge.

11. This was the sole cause of action as averred in the statement of claim.

The proposed amendments

12. By the amendments proposed in their summons of 10 June 1996 the plaintiffs sought, in effect, to revive the causes of action previously pleaded in the indorsement of claim in the writ: (1) breach of the 1st Defendant's contractual duties relating to the use and operation of the barge on its voyage from Hong Kong to Macau and (2) breach of the 1st Defendant's duty of care in tort, based upon similar facts.

13. As far as the contractual duties are concerned these arise, on the proposed amendments, from the same contractual arrangements which have already been pleaded, either expressly or by implication. What is new, in effect, is the averment of breach of those duties. By pleading bailment in the original pleadings, the plaintiffs avoided the need to aver how the loss of the barge occurred; now they say that the loss of the barge arose through the 1st Defendant's breaches of duty in contract, alternatively in tort. In essence, the additional averments allege (i) failure to provide a suitable tug; (ii) failure to heed the meteorological conditions before embarking on the voyage and (iii) failure to react adequately when the emergency arose.

The judge's approach

14. The judge held, in my view correctly, that these are new claims or new causes of action. The question then arises: Do they arise substantially out of the same facts as the original cause of action?

15. The judge said this:

"The facts upon which the Plaintiffs plead their existing relief are simple, namely, the agreement between the parties for the hiring of the barge and its return and the failure of the Defendants to return the barge. The facts now relied upon by the Plaintiffs in support of its new pleadings are different. The Plaintiffs were simply not concerned with the condition or the construction of the barge and the tug, the weather conditions when the vessels were put to sea and the safety arrangements of the barge. All these related to the cause of the loss of the barge. The new causes of action do not arise from the facts of the original cause of action."

16. The judge is, in my view, correct to say that the facts pointing to the cause of loss of the barge are new: But is that conclusive of the issue before him?

Proper construction of Order 20 r5(5)

17. The words in Order 20 r5(5) are not to be narrowly construed: they should be given a broad and liberal interpretation in order to attain the objective of the rules. By focusing attention on the additional averments which the plaintiffs need to make to establish the new causes of action, the judge has, in my judgment, applied the provisions of Order 20 r5(5) too narrowly.

18. If one looks at the issue broadly, what does one see? The contractual duties which are now pleaded arise from the original contract; the duty of care likewise arises from the relationship of owner and charterer of the barge as originally pleaded. There is no complete overlap of facts because, in the new causes of action, additional facts have to be pleaded. This does not, however, take the case out of Order 20 r5(5).

Discretion

19. The judge having adopted an erroneous approach by construing the effect of Order 20 r5(5) too narrowly, the matter now falls upon us to exercise the discretion afresh.

20. Here the circumstances are overwhelmingly in favour of the plaintiffs. The same issues between the parties have already been raised in the Third Party proceedings in a parallel action, High Court Action No. 7987/1990, which was on 3 July 1992 ordered by consent to be tried immediately after High Court CL-7/88 by the same judge, the parties to be bound by the judgment on common issues.

21. These averments now to be added by amendment in the pleadings in CL-7/88 were in fact first raised in the Third Party proceedings back in February 1991 in the other action.

22. It has not been submitted on behalf of the 1st Defendant that any prejudice would in fact inure if the amendments were allowed. The arguments which have been put to us with great cogency and skill by Mr Sussex focus on the proper application of Order 20 r5(5).

23. In my judgment the appeal should be allowed and the judge's order of 28 June 1996 should be discharged. We should make an order allowing the amendment in terms of the plaintiffs' summons of the 10 June 1996.

Godfrey JA:

24. I agree; but, since we are differing from the judge, I propose to add a few words of my own.

25. In my opinion, the claim based on negligence and breach of contract which the plaintiffs now seek to revive, although a claim of a different character from that originally pleaded in the statement of claim (i.e., a claim founded on an allegation of bailment) is a claim which arises out of substantially the same facts; indeed the identical facts, save that it is now sought to supplement those facts with some additional facts necessary to support the allegations of negligence and breach of contract. In these circumstances, although the judge thought otherwise, the requirements of the rule to which my Lord Litton, V.P. has referred, Order 20 rule 5(5), are satisfied, and I agree that we should exercise our discretion in the manner he proposes.

Liu JA:

26. What should have been brought forward, once and for all, for final adjudication comprises, so it is submitted, quite a different cause of action which is not based on the same or substantially the same facts.

27. Assuming, in the circumstances of this case, a claim in bailment be materially different from the proposed claim based on what allegedly caused the barge to founder, the pleadings and the conduct of proceedings in this case have been such that this court should strive for bringing together all the issues for doing full justice.

28. I have also taken into account the once widely pleaded case in the general indorsement on writ and what is being regarded as the same claim when the third party proceedings in the personal injury action are turned into a fully-fledged demand by, but a small amendment to include the value of the lost barge. It would seem that no real prejudice would be caused to the 1st defendant if this new claim were admitted. The plaintiffs as applicants would evidently suffer prejudice without a joinder. Moreover, the 2nd defendant relies on an Act of God for the loss of the barge, and events which caused or contributed to the sinking of the barge are expected to be investigated at the trial. Mr Sussex concedes that if the Act of God defence of the 2nd defendant should succeed, the plaintiffs' claim against the 1st defendant would also be defeated. Therefore, in any event how the barge came to be lost at sea will be an issue in the action, and causation of loss of the barge will be as crucial to the 2nd defendant as it will be to the 1st defendant. What caused the barge to founder cannot be realistically detached from the nature of the plaintiffs' case against the 1st defendant, which arose also from the loss of the barge, albeit in bailment. For this reason alone, I think I would be right in concluding, though not without diffidence, that there is a "significant overlap" of factual matrix between the existing claim and the cause of action proposed to be added, both based on the loss of the barge. After all, overlapping is "substantially a matter of impression". See Welsh Development Agency v. Redpath Norman Long Ltd. [1994] 1 WLR 1409 at p. 1418D.

29. In this case, loss of the barge led to the breach complained of by the plaintiffs, and when one looks beyond the pleaded duty of the 1st defendant in default to "the nature and extent of the breach" relied upon by the plaintiffs and "the nature and extent of the damage" complained of, it is reasonably clear that the proposed claim to be added cannot be said, as a matter of degree, to be a new cause of action. See Steamship Mutual Underwriting v. Trollope & Colls (1986) 33 BLR 77 at pp. 98 - 99. Each case must of course be judged on its own facts. Supra, p. 98, per May, L.J.

30. I, too, would allow this appeal.