CHINA OCEAN SHIPPING COMPANY, THE OWNERS OF THE SHIP OR VESSEL "XINGCHENG" v. THE OWNERS OFTHE SHIP OR VESSEL "ANDROS"

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Headnote

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                PRACTICE AND PROCEDURE - DISMISSAL FOR WANT OF PROSECUTION - SHIPS AND SHIPPING - LIMITATION OF ACTIONS - LACHES - CONSTRUCTION OF HAGUE-VISBY RULES.

                The plaintiffs were carriers of goods from Shanghai to Melbourne under through bills of lading which were not expressed to incorporate the Hague-Visby Rules. The goods were transhipped in Hong Kong and then carried on M/V Andros to Melbourne, by the defendants, under onward bills of lading which expressly incorporated the Rules. It was alleged by the shippers that the goods, which were unloaded in Melbourne on 31st October 1981, had been damaged in transit by alkaline contamination.

                On 8th September 1982 shippers commenced an action in personam claiming damages both from the plaintiffs and from the defendants. On 31st March 1983 the plaintiffs commenced an action in rem against the defendants, as owners of the M/V Andros, claiming damages amounting to an indemnity against such sum as the plaintiffs might be adjudged liable to pay to shippers in the earlier action. They failed to serve a Statement of Claim. On 2nd October 1985 the defendants issued a summons seeking an order that the action be dismissed for want of prosecution. The Registrar made an order as asked and his decision was upheld on appeal to the Judge.

                On appeal to the Court of Appeal

Held (dismissing the appeal): -

The Court also held, obiter, that had rule 6 bis applied to the plaintiffs' claim they would have had six years from 31st October 1981 in which to bring an action against the defendants since, albeit the Limitation Ordinance does not apply to an Admiralty action in rem, the period to be applied according to the doctrine of lathes would follow the law by analogy.

IN THE COURT OF APPEAL

BETWEEN

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JUDGMENT

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Kempster, J.A.:

1. This is the judgment of the Court on an appeal from an order of Mayo J., made on 16th January 1986, upholding an earlier order of the Registrar that the instant action be dismissed for want of prosecution. Typically in such a context two factors have dominated the argument namely whether or not the plaintiffs' cause or causes of action is or are time-barred and whether or not their delay has given rise to serious prejudice to the defendants, If not time-barred or if the defendants have shown no serious prejudice we would not normally expect the power to dismiss for want of prosecution to have been exercised. The judge's finding that the delay was inordinate and inexcusable has not been challenged.

2. On 30th August 1981 the plaintiffs who, we were told, are a company incorporated according to the law of the Peoples' Republic of China, issued five through bills of lading for the carriage of 1380 cartons of mens' clothing from Shanghai to Melbourne with transhipment in Hong Kong. These bills provided that "In all circumstances the carrier and the ship shall be discharged from all liabilities in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered" and that "The responsibility of the carrier shall be limited to the part of the transport performed by him on the vessel under his management." were the Hague-Visby Rules to be applicable the question could arise as to whether the latter provision was repugnant to Article III rule 8.

3. The goods were loaded breakbulk on the M/V Xingcheng which arrived in Hong Kong on 9th September 1981 following which they were stuffed into containers and shipped to Melbourne on the M/V Andros arriving on 31st October. On inspection they are alleged to have been found damaged by alkaline contamination.

4. The bills of lading covering the voyage from Hong Kong to Melbourne were issued on behalf of Hoi Loong Navigation Ltd, the vessel's owners, in the standard form of "Jumbo Line", being the trade name of Charlick Operations Pty Ltd, the charterers, and named the shippers as China Merchants Steam Navigation Co. Ltd. O/B China National Textiles I & E Corp Shanghai Silk Branch. China Merchants were the plaintiffs' Hong Kong agents and China National Textiles the shippers named on the through bills. However, the parties to this appeal have for present purposes treated the plaintiffs as the shippers; acting in discharge of their continuing obligation to carry the goods from Shanghai to Melbourne. Both through and onward bills were clean though one of the Mate's Receipts issued in Hong Kong bore the remark "(5) five cartons stained by contents. Such onward bills expressly incorporated the Hague-Visby Rules and the material parts of Article III read:

" 6 - Subject to paragraph 6 bis the carrier and the ship shall in any event be discharged from all  liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered. This period may, however, be extended if the parties so agree after the cause of action has arisen. -

 

        6 bis. An action for indemnity against a third person may be brought even after the expiration of the year provided for in the preceding paragraph if brought within the time allowed by the law of the Court seized of the case. However, the time allowed shall be not less than three months, commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself."

5. The shippers named in both sets of bills issued a writ in the Supreme Court of Hong Kong on 8th September 1982 claiming against the plaintiffs, in personam, damages for breach of duty arising from the terms of the through bills and, after amendment, like relief against Hoi Loong Navigation Ltd arising from the terms of the onward bills. The plaintiffs submitted to the jurisdiction. If the goods were indeed damaged on arrival in Melbourne issues arise as to whether such damage was due to inherent vice and if not whether it was sustained while the goods were being carried by the M/V Xingcheng or alternatively by the M/V Andros or, possibly, by both. Be that as may it is common ground that this writ was issued within the time provided both by the terms of the through bills and by Article III rule 6.

6. On 31st March 1983 the plaintiffs commenced the instant action, in rem, against Hoi Loong Navigation Ltd who were sued as ''The owners of the Ship or Vessel 'Andros'". To prevent its seizure the defendants, having accepted service, procured the issue on 10th May by "the Swedish Club", their insurers, of a letter of guarantee. The plaintiffs thus secured for themselves an advantage which would not have resulted from the issue of a third party notice in the 1982 action.

7. On 1st April 1985 the defendants' solicitors requested the plaintiffs' solicitors to serve a Statement of Claim, by then long overdue having regard to the terms of RSC O 18 r 1, and intimated that an application to dismiss would probably follow a failure to comply. On the 24th of that month shippers discontinued as against Hoi Loong Navigation Ltd in the 1982 action.

8. All that resulted from the defendants' solicitors request of 1st April 1985 was a Notice of Intention to proceed in the 1983 action the tardy pace of which, not surprisingly, has reflected that of the other. On 2nd October the defendants issued a summons to dismiss the 1983 action on the grounds of inexcusable and inordinate delay; also invoking RSC 0 19 r 1. On 29th November Mr. Registrar Barnett acceded to the application; the plaintiffs' subsequent appeal being dismissed as already mentioned.

9. We turn to the first factor being the question of limitation. If, being a claim by a shipper against "the carrier and the ship", the plaintiffs' claim is governed by Article III rule 6 of the Hague-Visby Rules it was clearly out of time when their writ was issued. It therefore falls to determine whether it is governed rather by rule 6 bis or if the plaintiffs' general endorsement on the writ is apt to comprise an alternative claim arising otherwise than by reason of the terms of the relevant bills. It may here be observed that the defendants have only been provided with a draft Statement of Claim as a basis for argument, that no application for leave to serve such pleading out of time has been made and that the issues arising between the parties to this litigation are even now far from clear.

10. A contract of indemnity involves an undertaking by one party to make good a loss which may be sustained by another but rule 6 bis  applies not to "an action on a contract of indemnity" but to an action for indemnity" which we construe to mean "an action by A claiming from B full compensation for monies payable to C." The terms of the plaintiffs' writ and the evidence filed certainly indicate an action of that nature and, being neither owners nor consignees of the cargo nor indorsees of the bills, they have not demonstrated or formulated to our satisfaction any claim, whether grounded in tort or otherwise, which precludes reliance on the bills. In any event Article IV bis, reads "1. The defences and limits of liability provided for in these Rules shall apply in any action against the carrier in respect of loss or damage to goods covered by a Contract of carriage whether the action be grounded in contract or in tort."

11. If, therefore, rule 6 bis applies the plaintiffs had and if the action stands dismissed, would have at least "the time allowed by the law of the Court seized of the case" in which to commence an action against the defendants. For an admiralty action in rem the six year period running from "the date on which the cause of action accrued" normally applicable to "actions founded on simple contract - " does not and would not apply: Limitation Ordinance (Cap. 347) s 4(6). Further, no period of limitation is prescribed by or under any other Ordinance or any imperial enactment , such as the Carriage of Goods by Sea Act 1971, (applicable to Hong Kong by virtue of the Carriage of Goods by Sea (Hong Kong) Order 1980) within the meaning of s 40. The time allowed by the law of Hong Kong is at large subject to the doctrine of lathes in accordance with the general rule as to limitation of Admiralty actions. The exception for Admiralty actions in rem, it may be noted, was abrogated in England by section 5 of the Limitation Act 1980.

12. Since lathes constitute, an, equitable bar we heed the comment made long ago in an Irish case by Lord Redesdale that "when the legislature by statute limited the proceedings at law in certain cases and provided no express limitations for proceedings in equity, it must be taken to have contemplated that equity followed the law and therefore it must be taken to have virtually enacted in the same cases a limitation for courts of equity also: Hovenden v. Lord Annesley ⁽¹⁾.  Rather more recently Neill J. (as he then was) expressed the opinion "- if the doctrine of lathes has any application I would be disposed to hold that a period of limitation of  six years should be applied by analogy:" Gulf Shipping Lines Ltd v. Jadranska Slobodna Plovidba ⁽²⁾. Applying the same analogy, we would if necessary hold that the plaintiffs had six years from the date on which their cause of action accrued to bring an admiralty action in rem against the defendants. Beyond question they could bring an action in personam within that period.

13. The plaintiffs are claiming damages for the defendants' breach of duty in and about the carriage of goods from Hong Kong to Melbourne. Their cause or causes of action therefore arose when, and on the hypothesis that, the defendants delivered damaged goods to the consignees on 31st October 1981. Subject to other considerations, therefore, the plaintiffs had until October 1987 to commence proceedings and would be able to issue a fresh writ in rem were this action to stand dismissed.

14. We turn now to "other considerations" which are critical. The through bills are not expressed to incorporate the Hague-Visby Rules and there is no evidence before us as to the general application of such Rules in China. Nonetheless the applicability of Hong Kong law to the through bills has not been the subject of argument. Hong Kong law only gives these Rules the force of law in relation to contracts for the carriage of goods by sea which, by Article 1(b), must be covered by bills of lading or their equivalent and where the port of shipment is Hong Kong or where the bill "expressly provides that the rules shall govern the contract." Carriage of Goods by Sea Act 1971 s 1(3) and (6). Rule 6 bis, to the material part of which rule 6 is subject, is therefore so be construed as to include "the carrier and the ship" within the meaning of the words "a third person" and "the person bringing such action for indemnity." "Indemnity" will then mean "an action by A claiming from B full compensation for monies payable to C under a bill of lading subject to the Hague-Visby Rules." We cannot so construe rule 6 bis as to give it a life of its own independent of rule 6. That being the case and the plaintiffs having failed to satisfy us that the through bills were subject to the Hague-Visby Rules we find the plaintiffs bound by rule 6 rather than by rule 6 bis in relation to the onward bills and, a fortiori, that they could not now commence a fresh action based on them whether in rem or in personam.

15. As to the other factor, Mayo J. based his conclusions in relation to prejudice on a relatively fresh allegation that the containers were contaminated prior to loading. It is true that this may be an academic point having regard to the relatively light burden of proof resting on shippers but they would not be precluded from specifically pleading such contention either by amendment to the Statement of Claim or in their Reply. In this and other regards the defendants would need oral evidence to supplement and explain the reasonably comprehensive documentation already available to them. We are satisfied, therefore, that there was evidence before Mayo J., as there is before us, warranting both his finding that the defendants have seriously been prejudiced as a result of the plaintiffs' delay in the prosecution of this action and his consequential exercise of the discretion to dismiss. In the circumstances we are not entitled to interfere on the grounds that, influenced by Mr. Smith's persuasive argument on behalf of the plaintiffs, we might have exercised our discretion differently: Hadmor Productions Ltd v. Hamilton ⁽³⁾.

16. In conclusion we would like to express our appreciation for the patience and care with which Counsel dealt with our numerous interventions and to say that we would still further have been assisted had skeleton arguments and a chronology been forthcoming.

17. The appeal fails and must be dismissed.

(1)    (1806) 2 Sch & Lef 607 at pp. 630-631

(2)    [1981] 1 Lloyds Rep. 31 at p. 38

(3)   [1983] 1 AC 191