XCHRX ABB TRAFO-BB GmbH & OTHERS v. COMBI OCEAN LINE & ANOTHER

HCCL NO. 43/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 43 OF 1997

____________

____________

_______________

D E C I S I O N

_______________

The background:

1. This is an application by the Defendants to strike out the Plaintiffs' claim for want of prosecution. The Defendants were shippers of two units of ABB distribution transformers from Hamburg to Manila. The cargo duly arrived Manila and was discharged into the custody of the Manila International Container Port on 19 June 1994. It was then delivered by Unitrans to the 2nd Plaintiff on 28 June 1994, whereupon the porcelain insulators of the transformers were found to have been damaged. Under the Hague Visby Rules which are applicable to this carriage, the time limit for bringing proceedings was one year. This limitation period was extended by consent of the Defendants and the Plaintiffs issued a writ of summons on 13 March 1997.

2. The proceedings took their usual course until May 1999. The Defendants deny that the damage occurred during the carriage by sea and sought to rely on a duplicate copy of a gatepass issued by the International Container Terminal Services Inc in which a Mr de Guzman of Unitrans, the transportation company employed by the Plaintiffs, certified that the cargo was received by him in good condition, but the copy was not very legible. They requested the Plaintiffs to produce the original copy for inspection. The Plaintiffs could not locate the original copy and suggested to proceed with exchanging witness statements. The Defendants' solicitors refused saying that discovery was not complete until the Plaintiffs produced the original gatepass. The Plaintiffs then issued a time summons for exchange of witness statements by the parties while the Defendants issued a summons for production of the original gatepass.

3. The parties then appeared before the Hon Mr Justice Stone on 1 June 1999 when the parties' solicitors aired their differences. Mrs Thomson who represented the Defendants indicated that the reason for the discovery was that the Defendants wished to ascertain if they need to call Mr de Guzman. Whereupon Mr Kimber of the Plaintiffs' solicitors confirmed that the Plaintiffs were not disputing authenticity of the gatepass. The Hon Mr Justice Stone then ordered the Plaintiffs to make and file an affidavit stating whether they have or have at any time had in their possession the gatepass. On 28 June 1999, the Plaintiffs served proof of evidence of their witnesses.

4. Thereafter the matter went dormant for 22 months until 6 April 2001 when the Plaintiffs' solicitors requested the Defendants' solicitors to provide viva voce evidence concerning the statement of Mr de Guzman. On 7 April 2001, the solicitors now acting for the Defendants filed a Notice of Change of Solicitors. On 10 May 2001, the Plaintiffs filed a Notice of Intention to Proceed and on 14 June 2001 issued a summons to set the matter down for trial. The Defendants then applied to strike out the Plaintiffs' claim for want of prosecution.

The legal principles:

5. The legal principles involved in such an application are well settled by the House of Lords in Birkett v James [1978] AC 297. In order to succeed in striking out a plaintiff's claim, a defendant has to establish:

(1) inordinate and inexcusable delay; and

(2) (i) such delay gives rise to a substantial risk that it is not possible to have a fair trial of the issues in the action; or

(ii) the delay is such as is likely to have caused prejudice to the Defendants.

 

Inordinate and inexcusable delay:

6. There was total inaction for 22 months from 28 June 1999 until 6 April 2001. This must be a substantial delay. Mr Laracy, on behalf of the Plaintiffs, submits that the delay was not inordinate and lack of progress is not unusual for this kind of action. He argues that the delay is also excusable as the Plaintiffs are based in Germany and there are problems in taking instructions and in translation.

7. This is a case involving carriage of goods by sea to which the Hague Visby Rules which provide for a one year limitation period are applicable. While no issue arises by reason of limitation because the time for instituting proceedings have been extended by consent, the Hague Visby Rules suggest that this is precisely the type of case in which the parties contemplated that they will or ought to proceed with all diligence and despatch. There are many foreign elements involved in an international carriage. Difficulties in locating witnesses overseas must inevitably arise. Such difficulties may increase with time and may even become impossibilities. The shipper may also be bound by terms of its sub-contract with its agents which may have its own limitation provisions. Delay may adversely affect a shipper in defending its case and in recovering an indemnity from third parties. Thus where the contract is subject to a much shorter limitation period than the usual period of six years, a delay longer than the limitation period must on the face be inordinate and the burden rests on the party responsible for the delay to prove it is neither inordinate in the circumstances nor is otherwise excusable. The longer is the delay, the more onerous the burden becomes. In The Finnrose [1994] Lloyd's Law Rep 559, which also involved carriage by sea, the parties were but for their agreement subject to a limitation period of one year. A delay of 19 months to two years was held to be inordinate and inexcusable.

8. With the advance in telecommunication technology in these days and age, I am unable to accept Mr Laracy's explanation for the delay as credible. In my view, the Plaintiffs have been sleeping on their rights during these two years. I find the delay inordinate and inexcusable.

Whether there was a change in the Plaintiffs' position:

9. The Defendants' application is founded on the Plaintiffs' inordinate and inexcusable delay coupled with their change of position from June 1999 as a result of which the Defendants have been prejudiced. The prejudice goes to the root of the case, namely whether the cargo was damaged during the ocean carriage. They seek to rely on a statement contained in the gatepass made by Mr de Guzman acknowledging that the cargo was received by him in good order and condition. According to Mrs Thomson, the Defendants made it clear that the purpose for bringing the application for discovery was to ascertain whether the Defendants would have to call Mr de Guzman and that upon the concession given by Mr Kimber for the Plaintiffs that the Plaintiffs were not going to dispute the authenticity of the gatepass, the Defendants stepped down their effort in locating Mr de Guzman. Then to their dismay on 6 April 2001, the Plaintiffs demanded Mr de Guzman be called as a witness. The Defendants recommenced their attempts to trace Mr de Guzman through their solicitors in the Philippines. On 11 June 2001, they were informed by their Philippines solicitors that despite their inquiries with the consignee, broker, hauler and various other freight forwarders in the past three months, they were unable to locate Mr de Guzman.

10. Mr Kerr submits that having extracted the concession from the Plaintiffs that they were not going to dispute the authenticity of the gatepass, it appeared to the Defendants that the Plaintiffs' case was no longer effectively tenable, because on their own documents, the cargo had been received in Manila in good order and condition and thus the damage could not have occurred during the carriage by sea for which only the Defendants were responsible. As the gatepass was going to be admitted as evidence, the Defendants took the view that there was no need to locate Mr de Guzman. They thought the plaintiffs were not attempting to pursue their action either as a result of the concession or otherwise. Hence, they adopted the position not to progress the matter further and let sleeping dogs lie. Mr Kerr submits that had the Plaintiffs not adopted their position in June 1999 and had not been inactive for the last two years, the Defendants would have made attempts to locate Mr de Guzman for the purpose of giving viva voce evidence on the condition of the cargo when he received them. With the passage of time, the Defendants had lost the opportunity of locating Mr de Guzman. He therefore submits that it is inherently unjust for the court to permit the Plaintiffs to benefit from their inordinate and inexcusable delay and abrupt change of position.

11. On the other hand, Mr Laracy argues that Mr Kimber's concession was only in respect of authenticity of the gatepass and not as to the accuracy of the statement contained therein. I think that must be right. Both parties are aware of the potential significance of the gatepass. If what is stated in the gatepass regarding the condition of the cargo is true, the damage did not occur during the sea carriage and the Defendants are not liable. There is a fundamental and significant distinction between authenticity of a document and the truth of its content, which solicitors in the conduct of litigation must be very much alive to. While it was clear that the purpose of the hearing on 1 June 1999 was to ascertain whether it was necessary to call Mr de Guzman, the nature of that hearing could not be ignored. It was an application for discovery of document. By conceding authenticity, Mr Kimber's concession must mean that the gatepass may be produced without formal proof. It would be absurd to assume that by admitting the authenticity of the gatepass, Mr Kimber was admitting the truth of its content as well, as that would mean a complete collapse of the Plaintiffs' case. If Mrs Thomson thought Mr Kimber was admitting the truth of the content of the gatepass, it was only her happy assumption and the Plaintiffs could not be blamed for making the concession nor can they be accused of having changed their position. Had the Plaintiffs proceeded with exchanging witness statements and applied to have the case set down for trial soon after the 1 June 1999 hearing, I do not think the Defendants could complain of any change of position or of prejudice.

Prejudice:

12. Having made the above finding, the Defendants' application could only proceed on the basis of inordinate and inexcusable delay. The issue is would the Defendants' position be any different now that two years have lapsed and Mr de Guzman has become untraceable?

13. Mr Kerr referred to The Beian CL 72 of 1990 where at paragraph 24 the Hon Mr Justice Waung set out the approach to be adopted in considering prejudice. To that very distinguished judgment, I can only echo my respectful concurrence. Indeed the court should approach the question of prejudice on a broad basis and with good commercial sense and ascertain from all the circumstances if the prejudice is genuine and not fanciful. Such delay also reflects to some degree a lack of conviction on the part of the plaintiff in its own case. Where the considerations are nicely balanced on both sides, the court should discourage unjustified delay and make it easier for the defendant to strike out for want of prosecution rather than to allow stale cases to go forward to trial where the defendant is in reality disadvantaged and where the court has to struggle with evidence of doubtful value and cogency. But of course, prejudice by its nature takes many forms and it is often difficult to pin down the exact dimension of a specific prejudice. However, each case must be adjudged on its facts. In the present case, the issue is fairly straight forward: what disadvantages have the Defendants suffered? That resolves around what the Defendants have done in locating Mr de Guzman; what they intended to do in going about to locate him; where was Mr de Guzman and had there been no delay, is there a real as against a fanciful possibility that he would be located.

14. Prejudice could always be inferred from inordinate delay and inordinate delay must have rendered the chance of locating Mr de Guzman all the more remote. However, on the fact, back in early 1999, the Plaintiffs had tried to locate Mr de Guzman, but their effort met with no success. They were informed that Mr de Guzman had left the employment of Unitrans two years ago and that he had moved out of his former residence without leaving any forwarding address. Thus Mr Laracy submits that the Plaintiffs' delay had not caused any prejudice because in any event Mr de Guzman could at no time have been located, not even as early as 1997.

15. On the other hand, what have the Defendants done? They were alerted of the claim in 1994. While it is not reasonable to expect a full scale of inquiry had to be launched at that stage as to who are likely witnesses, it is reasonable that some steps should be taken at least to have these potential witnesses identified and contacted at an early stage. In 1998, they were able to obtain a copy of the gatepass from the container terminal through their solicitors in the Philippines. In 1999, they were pressing on with the question of discovery just to satisfy themselves whether Mr de Guzman would have to be called for the purpose of producing the gatepass. But there is no indication what attempts they have made in locating Mr de Guzman between 1994 and 1999 while the matter was under active litigation, or between June 1999 and May 2001 during which period the delay occurred.

16. On the fact, certainly the Plaintiffs had obtained no benefit by their delay. The position as at 1 June 1999 was that Mr de Guzman had left the employment of Unitrans and moved out of his residence leaving no forwarding address. That was five years after the incident and two years after the issue of the Plaintiffs' writ of summons. The Plaintiffs had made some inquiries in locating Mr de Guzman as the Plaintiffs' case is that he was also the maker of a conflicting statement that the transformers were damaged when received. On the other hand, the Defendants had done nothing towards locating Mr de Guzman. Putting aside the question whether the Defendants had suffered any prejudice, on the fact, the Plaintiffs have not obtained any benefit. This is not a case where a witness has been located but becomes unavailable through lapse of time. Mr de Guzman simply could not be located at the time and the Defendants have done nothing to locate him. The position between 1 June 1999 and 6 April 2001 was the same. In my view, it was wrong to assume Mr Kimber's concession as to the authenticity of the gatepass was an admission as to truth of its content and an indication that the Plaintiffs did not intend to proceed with the claim. Hence, the Defendants were also to blame for not attempting to locate Mr de Guzman. As the Plaintiffs derived no benefit from their own delay, as Mr de Guzman could not be located even in an attempt a year earlier and as the Defendants had never taken steps at any stage whether before or after 1 June 1999 to locate Mr de Guzman, I am driven to conclude that the chance to locate Mr de Guzman which they claim they have lost is virtually non-existent and the prejudice they allegedly suffer is unreal. While inordinate and inexcusable delay should be discouraged and proper administration of justice and public policy would suggest that claims involving such delay should be struck out, interest of justice would also require every wrong to be put right and all damage be compensated. In this respect, the law is not to punish but to dispense justice as is appropriate in the circumstances. While the Plaintiffs' delay is inordinate and inexcusable, I am not satisfied that it has caused or is likely to have caused prejudice to the Defendants.

Whether a fair trial is possible:

17. The issue in this case is whether or not the goods were damaged during the ocean carriage or after. The Plaintiffs' case is based on a witness having sight of a missing or lost document to the effect that the damage happened during the ocean transit while the Defendants' case is based on the statement contained in the gatepass that the cargo was received by Mr de Guzman in good order and condition. In both cases, the persons making the statements relied upon by the parties, probably the one and the same Mr de Guzman, could not be called. Hence, Mr Kerr submits that this is not the sort of evidence which would allow the Court to do justice and it is not possible for this matter to be fairly tried. He submits that it is not the Court's function to try matters on conjecture when the need for conjecture has arisen as a result of delay on the part of the Plaintiffs.

18. Having found that the Defendants' position had not changed for the worse, I am unable to find how the delay has given rise to a substantial risk that it is not possible to have a fair trial of the issues in the action. The Court has always to resolve difficult and complicated questions of fact and on the basis of conflicting evidence. In the present case, whether there had been delay or not, the Court would be presented with the same evidence. The lack of viva voce evidence might render the Court's fact finding process more difficult than otherwise, but this is no reason for the Court to shy away from making a finding. In the absence of Mr de Guzman, the Defendants' solicitors would have to issue a hearsay notice in respect of the gatepass and the Plaintiffs' solicitors would probably issue a counter-notice. The admissibility of the statement would have to be resolved in accordance with the provisions of the Evidence Ordinance and the rules of evidence, while the matter itself would have to be resolved by the Court on the merits of the case and on the basis of the available documentary evidence and the evidence of witnesses who are available to give evidence on behalf of the parties and ultimately, if it has to, on the burden of proof. This is not a case where the Court would be faced with insurmountable difficulties. In my judgment, this is not a case where the Plaintiffs' delay has given rise to a substantial risk that a fair trial of the issue is impossible.

Conclusion:

19. It is wrong for the Defendants' solicitors to assume that by conceding authenticity the Plaintiffs were admitting the truth of Mr de Guzman's statement contained in the gatepass. Hence, there has been no change in the Plaintiffs' position. The Plaintiffs' delay of 22 months was both inordinate and inexcusable. However, on the fact of this case, such delay does not give rise to any substantial risk that it is not possible to have a fair trial of the issues in this action or is such as is likely to have caused prejudice to the Defendants. Accordingly, the Defendants' application for striking out the Plaintiff's claim for want of prosecution must be dismissed with costs to the Plaintiffs.