THE OWNERS OF THE SHIP OR VESSEL "KAFUR MAMEDOV" v. THE OWNERS AND/OR DEMISE CHARTERS OF THE SHIP OR VESSEL "GOLDPATH"

Headnote

Admiralty law --- "action" in s. 8 of the Maritime Conventions Act 1911 includes counterclaims, which therefore have to be brought within the two-year period provided for subject to the court's power to extend time, per Nazareth V-P and Godfrey JA following The Fairplay XIV [1939] P 57, The Gniezno [1968] P 418 and The Malandrinon, 27th May 1993, unreported; Seagroatt J dissenting.

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JUDGMENT

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Seagroatt J:

1. On 23rd August 1993, the Ship "Kafur Mamedov" and the Ship "Goldpath" collided in Hong Kong waters. Subsequently, correspondence and negotiations between solicitors acting for the owners of the two ships took place, the last contact between the two respective firms being in February 1995.

2. On 22nd August 1995, the owners of the "Kafur Mamedov" commenced proceedings against the owners of the "Goldpath". That was on the last day before the expiration of the two-year limitation period under the Maritime Conventions Act 1911. On 28th November 1995, the "Goldpath", the Defendant ship, was arrested in Hong Kong waters. On 5th December, "Goldpath" issued a writ against "Kafur Mamedov" and 68 sister ships and also entered appearance to the Plaintiff's writ. On 12th December, the Defendants, "Goldpath" filed notice of a counterclaim to the Plaintiff's action although by that time no Statement of Claim had been served "Goldpath" or rather the solicitors on their behalf issued two applications by motion for extensions of time under section 8 of the 1911 Maritime Conventions Act for leave to commence the proceedings and also for leave to file the counterclaim out of time. Both actions, of course, arise out of the same incident.

3. Section 8 of the Maritime Conventions Act 1911 provides as follows:

"No action shall be maintainable to enforce any claim ... against a vessel or her owners ... unless proceedings therein are commenced within 2 years from the date when the damage or loss ... was caused,... provided that any court having jurisdiction to deal with an action ... may, in accordance with the rules of court, extend such period to such an extent and on such conditions as it thinks fit, and shall, if satisfied that there has not during such period been any reasonable opportunity of arresting the Defendant vessel within the jurisdiction of the court, or within the territorial waters of the country to which the Plaintiff's ship belongs or in which the Plaintiff resides or has his principal place of business, extend any such period to an extent sufficient to give such reasonable opportunity."

4. It is important to have regard to the policy of Limitation Acts generally. Courts have expressed at least three differing reasons for supporting the existence of statutes of limitation, namely that:

5. There is nothing inconsistent in these three reasons. The third arises essentially from an equitable maxim "Vigilantibus Et Non Dormientibus Lex Succurrit". The theme that emerges is that a Defendant or potential Defendant should not be put at a disadvantage by a dilatory Plaintiff. The effect is to give the Defendant an accrued statutory right after the expiration of the limitation period.

6. The approach of the courts to the policy which affords the Defendants in an action the opportunity of pleading the limitation bar has been clearly considered in a number of cases which themselves were considered by Waung J. in this hearing.

7. Hill J. in The Llandovery Castle [1920] pp. 119 at p. 125 said;

"The section fixes a period of two years and the discretion can only be used in favour of a Plaintiff if there are special circumstances which create a real reason why the statutory limitation should not take effect"

8. Willmer L.J. in The Alnwick [1965] pp. 357 (citing Hill J. in the "Kashmir")

"The Maritime Convention Act by Section 8 had extended the time from 12 months to 2 years. That extended time is not rigidly fixed, as it is qualified by the proviso in relation to the discretion which is given to the court. Prima facie, however. it is a limit of which the Defendants are entitled to have the benefit. It is a statutory limitation which is given to them that they are not to be sued in respect of these ... claims after a period of two years. Therefore one starts with that, and it seems to me that it is upon the Plaintiff, who comes to have the time extended, to show that there are substantial reasons why the Defendants should be deprived of the right to limitation which the law gives them."

9. He went on to consider the extent to which the court had adopted a more generous attitude in the exercise of its discretion over the intervening years since the decision in the "Kashmir", and concluded that the provisions of section 8 of the Act of 1911 should be applied with some strictness:

"One thing is abundantly clear, and that is, that the burden is fairly and squarely on the Plaintiff to show some substantial reason why... time should be extended so as to deprived the Defendants of their statutory defence. Exhypothesi, the Plaintiff on any such application is already in default: he or she comes to the court asking for a concession and to that extent is in mercy..."

10. Both from a consideration of the section of the statute and the approach of the courts, it is clear that the section was designed to afford some benefit or protection to a Defendant against a dilatory or defaulting Plaintiff. In this case it appears to have been conceded before Waung J. that the section applied to a counterclaim by a Defendant. At p. 3 of his judgment at letter I - K he said:

"It was assumed by the parties that the counterclaim which the Defendants wish to bring against the Plaintiffs is subject to section 8 of the Act and that therefore if time was not extended by the Court under section 8 of the act the counterclaim ... and the claim in the writ ... would be struck out or stayed on the basis that the claims therein are not properly maintainable."

11. It was, therefore, upon that basis the learned judge proceeded but Mr. Michael Thomas Q.C., on behalf of the Appellants has argued that there was no such concession or assumption certainly by the Appellants in the hearing and indeed he has argued that section 8 of the Act does not apply in particular to counterclaims. I am bound to say that I was surprised that such an assumption or concession would indeed be made and I have myself proceeded on the basis that there was no such concession or assumption.

12. An immediate consideration of the terminology of section 8 of the Act gives rise to my initial conclusion that it does not extend nor was it intended to extend to counterclaims by Defendants arising out of the same incident or set of circumstances where a Plaintiff has commenced an action for damages for negligence and or breach of duty. When one links the words "no action shall be maintainable ... unless proceedings therein are commenced within two years from the day when the damage or loss was caused" with the expressions in the proviso which refer to the "reasonable opportunity of arresting the Defendant vessel" and "within the territorial waters of the country to which the Plaintiff's ship belongs or in which the Plaintiff resides", it is clear that such section refers to the commencement of an action by a Plaintiff in order to claim loss or damage. If it was intended to cover a counterclaim by a Defendant then in my view the section would have said so, particularly since by the 1873 Judicature counterclaims had a life of their own.

13. I derive further support for my view from the approach of Sheen J. in The Albany and Marie Josaine [1983] 2 L..L.R. p. 195:

"It seems to me the relevant circumstances to take into account are these. First the degree of blame worthiness. I must ask the question: is the delay before the issue of the writ excusable? ... second. the length of the delay ... next it is relevant to consider whether the circumstances which caused the delay were beyond the control of the party who has been dilatory, and whether there are very special circumstances."

14. The Learned Judge (Waung J.) in this case went on to consider the decision of Merriman J. in The Fairplay XIV [1939] P. p.57 and the unreported decision of the English Court of Appeal in the Malandrinon.

15. In the Fairplay XIV the position was significantly different from that in the case which we have to consider. The Plaintiff had issued the writ and arrested the Defendant ship some 11 days before the expiration of the limitation period. The Defendant, even though unable to counterclaim at that stage, could have issued a cross-writ within the period. The Defendant had, however, taken no action other than entering an appearance to the writ some 5 days before the expiration of the two-year limitation period. It was and may still be the practice for parties in a collision at sea to issue a writ and cross-writ.

16. I have to bear in mind that I must make the same concession as was made by Russell L.J. in The Malandrinon, when he referred to "my own inadequacies in this field" and by Hoffmann L.J. (as he then was) who referred to "a knowledge of Admiralty practice to which I do not pretend."

17. But the practice in such a situation, where the two actions arise out of the same set of circumstances, a collision involving the respective Plaintiff's ships, is that the actions are consolidated with the Plaintiff in the first action in time being the Plaintiff in the consolidated action.

18. I need to consider the judgment in the Fairplay XIV carefully, because I have concluded that in respect of the Learned President's conclusions as to the ambit and construction of section 8, I must respectfully disagree. The section, as I have already stated, nowhere refers to a counterclaim. Counterclaim were introduced by section 24(3) of the 1873 Judicature Act and re-enacted by section 39 of the main 1925 Judicature Act and then by section 49 of the 1981 Supreme Court Act. It was a sensible and practical measure reducing cost duplication and proliferation of proceedings and ensuring that the issue or issues arising out of an event or events involving the parties could be resolved on one occasion in one set of proceedings.

19. It is clear from the judgment that Mr. Gordon Willmer (as he then was) argued that section 8 did not apply to counterclaims. The full nature of his argument is not, however, apparent and Mr Owen Bateson (as he then was) was not called upon to deal with the section 8 argument in relation to counterclaims. Of course, the Defendant could not at that stage advance a counterclaim because there was no Statement of Claim to which he could plead. The counterclaim is pleaded as part of the Defence in any event.

20. It may be that the Learned President was more concerned with the application of the section to a cross-action. The section refers to an action not being "maintainable" unless proceedings are commenced within two years from the date when the damage or loss was caused. In the second part of the section references are made to the reasonable opportunity of arresting the Defendant's vessel and the Plaintiff's ship residence and place of business. All these matters indicate what I have earlier referred to as the policy of protecting the Defendant's position by limitation periods. There may be several reasons why a potential Defendant to an action does not wish to issue proceedings himself in respect of any loss suffered by him. One of those reasons may well be that he does not wish to be the Plaintiff in an action, and another reason may simply be that he does not want to issue proceedings in a particular jurisdiction. There is also the additional potential reason that he does not wish to incur costs. He may prefer simply to wait and see if the other party commences proceedings and then with his defence plead a counterclaim.

21. It is important to note that he cannot plead a counterclaim without pleading a defence to the action. It seems to me to be contrary to all reasonable policy to say that a Defendant should be barred from counterclaiming in an action which has been commenced against him, simply because whereas the action against him was commenced within the time period, proceedings were not served on him till after that period had expired, thereby preventing him from pleading his defence and counterclaim within the two year period.

22. It is important also to consider the position of counterclaims established by the Limitation Act 1939. That Act, of course, does not apply to Admiralty actions enforceable in rem save with certain exceptions which need not concern me.

23. By section 28 of the Limitation Act 1939, any claim by way of set off or counterclaim is deemed to be a separate action and to have been commenced on the same date as the action in which the set off or counterclaim is pleaded, i.e. if the Plaintiff's action is commenced within the limitation period then the set off or counterclaim is deemed to have been commenced within that period.

24. Section 28 of the Act defines "action" as being wide enough to cover a set off or counterclaim and section 35 of the Limitation Act 1980 repeats this. That definition, of course, is essential to the provision under the Limitation Act in 1939 whereby the set off or counterclaim is deemed to have been commenced on the same date as the Plaintiff's claim.

25. Even allowing for the vagaries of Admiralty practice and the purpose and international comity behind the Maritime Convention Act, 1911 it cannot be right that the position of a counterclaiming Defendant under that Act should be wholly different from his position under another. Such inconsistency makes a nonsense of legislation.

26. It is of interest to consider the definitions in the standard legal dictionaries.

27. In the 1987 edition of Jowitts "Dictionary of English Law" the following appears under "Action":

28. The term "action" is now applied "to all proceedings in the Supreme Court which would have been commenced by writ in the superior courts of common law ... and all suits formerly commenced ... by a cause in the Court of Admiralty."

29. The 1986 edition of Strouds "Judicial Dictionary" has much to say about the term "action". Lord Simon in Berry (Herbert) Associates v. I.R.C. [1977] 1 W.L.R. p. 1437 is cited saying:

"The primary sense of action as a term of legal art is the invocation of the jurisdiction of a court by writ."

30. The 1873 Judicature Act defined "action" as "a civil proceeding commenced by writ or in such other manner as may be prescribed by Rules of Court."

31. A counterclaim is not an "action", not even when, the original action being at an end, it happens to be the sole matter in issue. It has been held not to be an "action" within the meaning of s. 67(1) of The Queen's Bench Act 1960. (Sask) Prudential Trust Co. v. Lacv [1965] 54 W.W.R. 245.

32. The Maritime Conventions Act, 1911 is printed in volume 2 of the Supreme Court Practice 1995. There are a number of commentaries on section 8, the limitation section, but no reference to the decision in The Fairplay XIV. The two relevant commentaries are in respect of "maintainable", confirming that the cause of action is not extinguished, only the right to maintain the action is barred; and "unless proceedings are commenced". The Espanoleto [1920] p.223 was cited - The court should consider an application to renew (a writ) on its merits and inquire whether the circumstances were such that the court would have given leave to issue the writ notwithstanding that the time had expired, on the ground that the Plaintiff had exercised due diligence in prosecuting his claim. Nowhere is the position of a Defendant counterclaiming considered.

33. The decision of the Court of Appeal in Attorney-General v. Jones (Donaldson, M.R. presiding) is on the face of it an authority to suggest that a counterclaim is to be treated as an action. But the Defendant in that case was a vexatious litigant against whom a civil proceedings order had been made prohibiting him from instituting or continuing civil proceedings or making applications in such proceedings without leave. The Court of Appeal dismissed the appeal against the Divisional Court's order.

34. The submission on behalf of the vexatious litigant was that by counterclaiming in proceedings he was not instituting "vexatious" proceedings. The Master of the Rolls relied upon order 15 r.2(2) and order 15 r.1 (which related to joinder of causes of action) as applying in relation "to a counterclaim as if it were a separate action and as if the person making the counterclaim were the plaintiff". He went on to say that "a counterclaiming defendant therefore institutes the proceedings in relation to the counterclaim in exactly the same way as a plaintiff institutes proceedings in relation to the claim." It is however important to note that this was a counterclaim by a vexatious litigant with the vexatious litigant appearing in person. Ignoring for the moment the latter point, the effect of the order was that he could not maintain any vexatious cause of action. The facts are entirely unclear but by implication it must be that he was seeking to maintain by counterclaim a "vexatious" claim which he was prohibited from maintaining. That is clearly not the situation in this case. As a litigant in person, it is unlikely that he argued the position in counterclaims through. The position of a statutory bar did not arise. By inference he was seeking to raise a claim from which he was debarred for the stated reason. It is of course open to any plaintiff to seek to debar a counterclaiming defendant from his counterclaim for a variety of reasons - this is one. The carefully chosen words of order 15 r.2(2) are "as if". They do not bear the positive meaning so as to conflict with the definitions of an action which have been considered.

35. In considering the position regarding counterclaims generally, I have borne in mind the decision of Brandon J. as he then was in The Gniezno [1968] P. p.418. In that case he held that the Defendant was entitled to enter an appearance to a writ even though it had expired without being served on him, but that a Defendant could only effectively raise a counterclaim by a proceeding recognised or directed by the Rules of Court and that a notice of counterclaim was not such a proceeding and accordingly would be set aside.

36. This again was a case of a collision at sea between two ships. The owners of one of the ships issued but did not serve a writ in rem against the Defendants, the owners of the other ship. But later, the Defendants themselves issued a writ in rem against the Plaintiffs for damages caused by the collision. There were then two writs in existence. Both issued within the limitation period yet the matter for the judge to consider was whether the Defendant's notice of counterclaim could stand. It was argued that the claim to which the notice of counterclaim related was not maintainable by reason of section 8 of the Maritime Conventions Act 1911.

37. That notice of counterclaim, of course, was served outside the limitation period. The decision was concerned with the initiation of a counterclaim. To quote Brandon J.:

"It is a curious circumstance that in other kinds of proceedings there is first a document which begins the proceedings and later another document in a nature of a pleading setting out in detail the matters relied on. For instance, in an action the Plaintiff issues a writ and then delivers a Statement of Claim. In the case of a counterclaim, however, there is no provision for two documents in that way. The whole matter seems to be combined in general at any rate in one proceeding, namely service of the defence and counterclaim. Whether it is desirable that this should be so or not is a matter that may perhaps deserve consideration."

38. In fact, in my view, the learned judge was unnecessarily concerned with that particular technicality and the form of the procedure which generally follows, namely the issue of the writ and statement of claim followed by the defence and counterclaim, out weighs any disadvantages and certainly any of those in his mind at the particular time. He went on, however, to state as has been set out in other cases, that the Defendant cannot made a counterclaim until a Statement of Claim had been served upon him, because it is not until then that he can deliver a defence.

39. In his detailed consideration of the highly technical matters which he reviewed, he had cause to consider the decision of the president Sir John Bigham in The Salyvia [1910] P. p.25. In that case the action by the Plaintiff had been discontinued before the Defendant had done anything to raise a counterclaim. But after discontinuance, a counterclaim was intimated by letter. The Court held that no counterclaim had been set up or could be proceeded with. As Brandon J. stated, the decision is not surprising because the action had been discontinued before anything was done with regard to the counterclaim. But the president, Sir John Bigham in reviewing the reasonable decision made this particular comment:

40. "A counterclaim can only be born of a living action". That is really a matter of common sense because not until a Plaintiff has served his Statement of Claim, can a Defendant plead his defence and set up a counterclaim. It follows therefore, at no stage can a counterclaim be set up in anticipation of a Statement of Claim being served.

41. It further means in the ordinary course of events, that if a Plaintiff chooses to issue his writ and perhaps serve its Statement of Claim one day before the expiration of the limitation period of two years, it is virtually inevitable that a Defendant cannot plead his defence and counterclaim until after that two-year period has elapsed. In those circumstances, in my view, it is nonsense for a section of a statute to be interpreted as giving rise to a statutory bar against the Defendant raising his counterclaim, thus giving the Plaintiff the particular advantage of an accrued statutory right. No Limitation Act, in my view, is ever designed to create that possibility and if such a possibility was, in fact, the intention of the law-makers, it would clearly have been expressed to be so.

42. At a later stage of his judgment, Brandon J. went on to consider the decision of Merriman J. in The Fairplay XIV. Again, that decision indicated that it was not possible for Defendants to set up a counterclaim because the proceedings begun by the Plaintiff had not reached the stage which would enable it to do so. The judge in that decision clearly took the view that the only way a counterclaim could be raised was by the delivery of a defence and counterclaim at the appropriate stage in the action.

43. Brandon J. in the course of his judgment indicated that he had made a number of inquiries as to Admiralty practice over a period of time and had ascertained that on occasions Notices of Counterclaim had been filed in collision actions and that a practice had grown up. However, despite that practice he took the view, as indeed other judges had done, that the Notice of Counterclaim was of no effect in raising a counterclaim.

44. Brandon J. came back to the decision in The Fairplay XIV when considering the question of the time bar under section 8 of the Maritime Conventions Act 1911. In the case before him, it had been conceded that the expression "action" in section 8 included a proceeding by counterclaim and that if it had not been conceded. he would nevertheless so hold in the light of the decision in The Fairplay XIV. He then considered section 28 of the Limitation Act 1939 which does not, of course, apply to such Admiralty actions, whereby for the purposes of limitation the date of a counterclaim is taken as the date of the writ.

45. It was in that statute that counterclaim and set off, were regarded or "deemed" to be actions for the purposes of the statute. But in relation to section 8 and the Maritime Conventions Act 1911 generally, there is no such specific provision. The considerations which Brandon J. devoted to that particular case were largely academic, because the Defendant's writ was issued within the period of two years and extended by agreement of the Plaintiff's solicitor, and therefore if that action was proceeded with, the claim in it would not be out of time whatever might be the decision with regard to the desire to raise a counterclaim.

46. And it was this that largely led him to the decision that no order should be made on the Plaintiff's application or on the Defendant's application for an extension of time. The "Gniezno's" (Defendant's) action was still in being, and steps were being considered to proceed with that action. The learned judge almost in his last words concluded:

"In view of the fact that the Defendants have open to them the possibility at least of proceeding with an action which is in time, I do not think there is any need to give them leave even if the merits otherwise warranted it, to proceed with a counterclaim in this action."

47. In the unreported Court of Appeal decision in The Malandrinon v. The Ignan Bank, writs had been issued by both parties within the limitation period and those writs were served close to the end of any extended limitation period. The problem was not the failure to issue proceedings in time but the issue of a writ in a form which the solicitors for one party were not bound to accept.

48. The decision by an extremely strong Court of Appeal consisting of Lord Justices Russell, Evans and Hoffmann was largely concerned with the exercise of the discretion in section 8 of the Act and the circumstances giving rise to that. The decision of the President in The Fairplay XIV was considered.

49. Leave to appeal in The Malandrinon case had been given by Staughton L. J. in which he said:

"The present situation in that action is that damages are claimed against the Defendants for allowing their ship to be run into while at anchor but the Defendants cannot counterclaim against the Plaintiffs for running into their ship. That may be thought to be unsatisfactory".

50. Evans L.J. reached his decision in judgment in The Malandrinon, in which the facts were far more complicated than in this appeal, without referring in detail to the judgment in The Fairplay XIV but stated that the principle relied upon by Merriman J. in the exercise of his discretion, reinforced his own conclusion that it "would be unjust and unfair" to deprive the Defendants of the right to counterclaim in proceedings already begun by the Plaintiff The phrases such as "unjust and unfair" "manifest injustice" "ridiculous that the Plaintiff should be able to stand on a statutory right" "the interests of justice" which appear in The Fairplay XIV and The Malandrinon in the consideration of the exercise of the discretion, really should be taken to highlight the anomaly in the acceptance of the notion that section 8 applies to counterclaims. Nearly sixty years have elapsed since Merriman J's decision, and a far less technical approach has been adopted towards procedural matters. It has certainly not been argued through in any decision over that period as far as our collective researches can reveal.

51. It has been suggested that the provision exists to cover the Plaintiff against what would be statute barred counterclaims where such arise out of incidents or subject matter wholly different from that which is the basis of the Plaintiff's action. But if the Defendant were to counterclaim in respect of some other cause of action, unrelated to the Plaintiff's claim, which was itself barred by the two-year period, it would be open to the Plaintiff to take interlocutory proceedings to strike out such counterclaim on the basis that it was statute-barred, did not arise out of the same set of circumstances and was only pleaded as the subject of a counterclaim because the Defendant well knew that he could not mount an independent action by reason of the bar in section 8. This would be a situation wholly different from real counterclaim - the Defendant would be seeking to use the counterclaim as a device to get round an accrued right to the Plaintiff (in his position as a potential Defendant) were he to commence proceedings in respect of his claim which was statute-barred.

52. The decision of the House of Lords in the 1882 case known as The Khedive concerned a counterclaim brought by the "Khedive" in an action in rem in the Admiralty Division by the owners of the other ship. The decision was after the Judicature Act, 1873 but before the Maritime Conventions Act, 1911. The result was that both vessels were held to blame.

53. Lord Selborne spoke of the "new method of procedure under the Judicature Acts, by claim and counterclaim" which, in his consideration of the true effect of procedure, and the forms of decrees of the Admiralty Court in this class of cases, could not make any difference; in a judgment redolent of a common sense, logical approach he went on to say:

"... It was argued with great ingenuity that the cross claims of the two ships which had come into collision were as distinct as any two actions in different courts, and that the undenied practice merely arose from the Admiralty interfering to prevent the abuse of its process. Even if this were made out, I should be unwilling to give effect to what I cannot but think very technical and artificial reasoning. But I do not think it is made out. The two claims arise out of one and the same accident. They are determined in one and the same Court, and they depend on one and the same question, viz. were both, or only one, of the parties to blame? and that question is determined once for all between the same parties ... Even if the course of pleading had always been, as it appears latterly to have been, to condemn each separately, and order the damages to be assessed separately, I should still say that they were, in substance at least, not distinct and separate actions."

54. I am now conscious of the fact that in holding section 8 does not extend to counterclaims I am disagreeing with the Vice-President, Mr. Justice Nazareth, and with Justice of Appeal, Mr. Justice Godfrey, and I do so with great respect and diffidence. I think it necessary to consider the question of the court's discretion as if section 8 did so apply which is the decision of the majority of this court.

55. All that I have set out in support of my decision that it is illogical unjust and straining principles of construction beyond the rational to interpret section 8 in the way contended for by the Respondent, indicates that a court should, in my view on these facts, without hesitation, exercise its discretion so as to extend time for a counterclaim to be pleaded. It is not necessary to repeat the terms and expressions used by Merriman J., Evans L.J. and Staughton L.J.

56. The Appellants have to show "good reason". Such good reason is itself apparent from the facts of this case; respondent's writ issued on the day before expiration of the limitation period, served several months later, followed by a prompt response from the Appellants.

57. The argument that the Appellants should have issued their own writ as a protective measure, does not hold water. There may be many good reasons why a shipowner does not want to issue a writ. He may not want to assume the onus of proof and have to make the running; he may not feel it is economically sensible to sue for a smaller sum than would be claimed automatically in a counterclaim to his action; he may through a variety of circumstances have lost valuable, even essential evidence to advance an action at his initiative. Esoteric though Admiralty practice may be, the considerations will probably be no different from those involved in a running down case, or a building dispute.

58. There can be no prejudice to a Plaintiff faced with a counterclaim in an action which he has initiated. Of course if a Plaintiff leaves the commencement of his action until the last minute, and serves his writ after the last minute, then the counterclaim may weaken his position if his tactic was deliberately to try and take advantage of section 8. But such a lottery is not what the courts will countenance or what any statute was intended to permit. Furthermore the prejudice of which the Plaintiff might in such a context complain was certainly not what the Limitation Acts had in mind.

59. The playing field for an action must be a level one. If a Defendant were to be deprived of his counterclaim, the 'goal posts' would have been moved to his significant disadvantage.

60. An action by the Respondents in which the Defendant can counterclaim for his damage arising out of the same incident viz. the collision, entitles a court to have the chance of doing justice to both parties. It would be unconscionable to sanction a situation whereby it would be prevented from doing just that.

61. I do not need to review the matters taken into account in The Fairplay XIV and The Malandrinon or the two-stage test following a number of decisions by the House of Lords - 1) is there a good reason for extending the period? 2) is the balance of hardship in the favour of the party seeking the extension? They are clearly set out in the Learned Judge's judgment.

62. But I respectfully disagree with the Learned Judge in his assessment of the factors governing the exercise of his discretion and in his exercise of his discretion. Such an interference ought not to be made lightly but I fear the fact that he was allowed to assume that section 8 applied to counterclaims has misled or may have misled him into adopting a much more severe test, and in seeking to distinguish and in effect to disagree with the decision by Merriman J. in The Fairplay XIV.

63. Having decided that section 8 of the Act of 1911 does not apply to counterclaims; and that even if it were to be the case this is so clearly a case for the discretion to be exercised to enable the Defendants to pursue a counterclaim, it is not necessary for me to deal with the argument in respect of set-off, legal or equitable. It will follow that a set-off may be pleaded to accompany a counterclaim, whatever the circumstance under which a counterclaim proceeds.

64. I would accordingly allow the appeal. The Appellant is entitled to his costs of this appeal. As far as the costs of the hearing before Waung J. are concerned I am of the view that the Appellants should have some of the costs of that as well. The applications were opposed. I have been a little troubled about the fact that for some reason not entirely clear, the Learned Judge considered that he did not have to decide whether section 8 applied to counterclaims. Because of that fact, which could have been corrected, I consider that the Appellant should have only 50% of its costs of that hearing.

Godfrey, J.A.:

Introduction

65. As appears from the judgment of Seagroatt, J. (which I have had the advantage of reading in draft) there are three issues which we have to consider on this appeal. First, ought s. 8 of the Maritime Conventions Act 1911, which provides that "no action shall be maintainable to enforce any claim .... unless proceedings therein are commenced within 2 years .....", be construed as proscribing, not only an action which is out of time, but also a counterclaim? I will call this "the construction point". Secondly, if so, ought thediscretion conferred on the court by the proviso to s. 8 to extend the 2 year period "to such extent and on such conditions as it thinks fit" be exercised in this case in favour of "The Goldpath" (the counter-claimant)? I shall call this "the discretion point". Thirdly, if not, ought "The Goldpath" be allowed to maintain, in the action against it by the "Kafur Mamedov", a set-off in respect of the damage done to"The Goldpath" in the collision which gave rise to the action? I shall call this "the set-off point".

The construction point

66. There is no doubt that a cross-action by "The Goldpath" would be caught by section 8. Why should a counterclaim be any different? The judge below appears to have thought (rightly or wrongly) that the parties had "assumed" that a counterclaim would be caught by s.8. Before the reforms in civil procedure effected by the Judicature Act 1873, there was no such thing as a "counterclaim". Why should a procedural reform give greater substantive protection to a "counterclaim" than to a cross-action? In "The Fairplay XIV" [1939] P.57 it was argued for the counterclaiming defendants that they were not caught by s.8 and did not need to involve the discretion of the court; but that argument was founded exclusively on section 34 of the Admiralty Court Act 1861 (a procedural section for dealing with cross-claims arising out the same collision). The President (Sir Boyd Merriman) rejected the argument. He said (at p.61) that he had "no doubt whatever that s.8 of the Maritime Conventions Act, 1911, applies to this case" and (at pp.61-62) that "it was as plain as can be that the defendants had to come to this Court under the proviso to s.8 and ask for an extension of time.....". In "The Gniezno" [1968] P.148, Brandon J. (at p.447) recorded that "It is conceded that the expression 'action' in s.8 includes a proceeding by counterclaim". He added "If it were not conceded, I should so hold, for it seems to me to follow from the decision in The Fairplay XIV.....". He drew attention to a difference between the Maritime Conventions Act, 1911 and the Limitation Act 1939, pointing out that the provision of the latter Act, whereby for limitation purposes the date of a counterclaim is taken as the date of the writ, was not matched by any comparable provision in the former Act. In "The Malandrinon", 27 May 1993, unreported, a decision of the Court of Appeal in England, Evans LJ (with whom Russell and Hoffman LJJ agreed), in giving the leading judgment, clearly proceeded on the basis that a counterclaiming defendant would be caught by s.8 and, if out of time, would therefore need to obtain an extension (although the point did not require to be decided). No authority was cited to us to suggest that the construction placed on s.8 by Sir Boyd Merriman, Brandon J, and Evans LJ was wrong. If the point had arisen for decision for the first time, I might have been inclined to accept the argument that, on its true construction, s.8 did not catch a counterclaim. But the point does not so arise; and in my opinion this court would not be justified now in construing this section in a sense contrary to that considered to be correct by the three judges (all of whom had had extensive experience in this specialised field) whose views I have cited. I must therefore dissent from the different opinion expressed by Seagroatt J. I accept that this means that in litigation to which the general provision of the Limitation Ordinance applies, the position of a counterclaiming defendant will not be the same as the position of a counterclaiming defendant to whom s.8 of the Maritime Conventions Act, 1911, applies. But this does not cause me much surprise, or even concern. I accept, too, that for many other purposes a counterclaim may not fall to be treated as an action, though for some purposes it is so treated: see, e.g. Attorney General v. Jones [1990] 1 WLR 861, where a counterclaim by a vexations litigant was so treated). But for present purposes it is my opinion that we, in this court, should treat the point as settled and follow the earlier authorities, even though, as I accept, we are not bound to do so.

The discretion point

67. In my judgment, "The Fairplay XIV" (above) provides a useful guide to the proper exercise of the discretion conferred on the court by s.8: the court must ask itself whether "the interests of justice demand" that the counterclaim should go forward: (see per Sir Boyd Merriman at p. 63). I accept that "The Goldpath" has to show "good reason" for not claiming relief against "The Kafur Mamedov" before the expiration of the 2 year period prescribed by s.8. Seagroatt.J is of the opinion that such "good reason" is itself apparent from the facts of this case. I agree with him, for the reasons he gives. I conclude, in the words of Evans LJ in "The Malandrinon", mat "it would be unjust and unfair to [the owners of 'The Goldpath'] if they were deprived of the right to counterclaim in the proceedings which [the owners of 'The Kafur Mamedov'] have already begun". The judge below having reached the contrary conclusion, a conclusion which seems to me manifestly "unjust and unfair" (although the judge thought otherwise), we are entitled to set aside his exercise of discretion and substitute our own. I would, for the reasons given by Seagroatt, J, extend time so as to enable "The Goldpath" to maintain its counterclaim in the action now brought by "The Kafur Mamedov" against it and so avoid the "unjust and unfair" consequences which would otherwise follow.

The set-off point

68. The conclusion I have reached on the discretion point renders it unnecessary for me to express any view on the set-off point.

69. The notion of an equitable set-off (it must be an equitable set-off) of a claim by one ship against a claim by another arising out of a collision between them is novel, so far as I am aware, although it may be none the worse for that; and since the point does not in the circumstances arise for decision, I consider it preferable to say nothing about it, except that, while such a set-off might be unexceptionable in principle, there is some authority which would tell against it: see McCreagh v. Judd [1923] WN 174.

Costs

70. I agree with the order as to costs proposed by Seagroatt, J.

Nazareth V-P:

71. I agree with Godfrey JA. Had the construction point arisen for the first time, I think the considerations admirably marshalled in Seagroatt J's judgment would warrant the construction of s.8 of the Maritime Conventions Act that he favours. However, the usual practice in collision cases, i.e. to issue cross-actions and subsequently consolidate seems now to have been well established for a considerable period (see e.g. Halsbury's Laws of England 4th Ed p. 414 footnote 3 and p. 433) and to reflect the views taken in The Fairplay XIV, The Gniezno and The Malandrinon to which Godfrey JA and Seagroatt J have referred in their judgments.

72. Moreover, in enacting the Limitation Ordinance (Cap. 347) as recently as 1965 with its express saving provision in s.40 of periods of limitation prescribed by "any imperial enactment", the legislature against the foregoing background must be taken to have intended to preserve s.8 of the Maritime Conventions Act with its then known judicial interpretation and established procedures. I, therefore, am reluctant to treat the matter as other than settled.

73. As to the discretion point, I concur generally in the views and entirely in the conclusions of my Lords, and would accordingly allow the appeal, extend time to enable "The Goldpath" to maintain its counterclaim, and deal with costs in the manner proposed by Seagroatt J for the reasons he gives.

74. Likewise, as to the set-off point, it is both unnecessary and I think preferable not to express any view.

75. Accordingly the appeal is allowed and the order of Waung J set aside. Instead, there will be an order nisi extending the time within which the appellant may file its counterclaim to expire one month after the date of the handing down of this judgment. The appellant is to have its costs of the appeal and half of its costs of the proceedings below.