HOI KONG CONTAINER SERVICES CO. LTD. v. CHINA NATIONAL ARTS & CRAFT IMPORT & EXPORT CORPORATION ZHEJIANG BRANCH and Another

IN THE COURT OF APPEAL

1996, No. 182
(Civil)

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J U D G M E N T

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Bokhary, J.A.:

1. This is an interlocutory appeal. It is by the 2nd defendant. And it is against an Order made by Findlay J on January 9 last year granting the 1st and 2nd plaintiffs leave to amend their Points of Claim in a manner to which I will come in a moment. This morning, we extended time for appealing, since the extension was unopposed.

2. The action is in respect of wet damage to a consignment of 584 cartons of poplin gloves.

3. Those goods were shipped from the People's Republic of China via Hong Kong to the United States of America under a bill of lading issued by the 1st defendant to the 1st plaintiff.

4. Both plaintiffs sue as owners of the goods and holders of the bill of lading. Further, the 2nd plaintiff sues as indorsee of the bill of lading.

5. When the goods arrived in Hong Kong, they were delivered into the custody of the 2nd defendant who stuffed them into containers. The goods were then shipped to the United States in those containers.

6. On the unstuffing of the containers, the plaintiffs plead, the gloves were found to have sustained wet damage.

7. As against the 1st defendant, the plaintiffs plead breach of contract in failing to deliver the goods in the same good order and condition as when received.

8. And as against the 2nd defendant, the plaintiffs plead breach of duty as a bailee.

9. The amendments which Findlay J allowed the plaintiffs to make were to the paragraph in which that plea of breach of a bailee's duty was made, being paragraph 8, and the particulars thereto.

10. In its original form, paragraph 8 read:

"In breach of their duties as bailees of the goods during transhipment at Hong Kong, the 2nd Defendants failed properly safely and carefully to handle the said goods.

PARTICULARS

The 584 cartons shipped under the Bill of lading were commingled at Hong Kong with another 918 cartons shipped from Shanghai to Hong Kong on the vessel Long Jiang. The said 918 cartons shipped on the vessel Long Jiang were on the voyage from Shanghai to Hong Kong stowed on deck. The said vessel encountered typhoon Gordon when the said 918 cartons became wet damaged. Proper segregation by the 2nd Defendant of the two consignments would have prevented damage to the goods shipped under Bill of lading CT319."

11. That, Mr Kerr for the 2nd defendant says, alleges salt water damage only.

12. The amendments involved the following things.

13. First of all, the body of paragraph 8 was amended to specify "between 16th and 22nd July 1989" as the period of the matters complained of therein.

14. Secondly, the existing particulars were numbered "(1)" and the following particulars were then added:

"(2) Further, or in the alternative, the 2nd Defendant caused or permitted the consignments to be open to the elements and/or stored or left not under cover during the transhipment process at a time when there was heavy rainfall in Hong Kong, so that the consignments became wet-damaged from the rain. The recorded daily rainfall on 17th and 18th July 1989 was 24.5 mm and 112.7 mm respectively.

Proper handling and temporary storage so as to shield or protect the consignment from the heavy rain would have prevented wet damage to the goods."

So fresh water damage came in further or alternatively.

15. Before the judge, the 2nd defendant took two points in opposing those amendments. Both were rejected by the judge. The first point was that a new cause of action was being introduced. That point is not re-newed before us. The second point, however, is re-newed before us.

16. Its nature may be gathered from the grounds of appeal filed by the 2nd defendant. Those read:

"1. The Learned Judge erred in the exercise of his discretion in granting leave to amend.

2. The Learned Judge failed to take sufficient or any regard to the Plaintiffs' delay in applying to amend the Points of Claim.

3. The Learned Judge failed to take sufficient or any notice of the prejudice the 2nd Defendant has suffered as a result of the delay in applying to amend.

4. The Learned Judge failed to take sufficient or any regard to the fact the 2nd Defendant would not be able to investigate the new allegations raised by the 2nd Plaintiffs.

5. The Learned Judge erred in ruling that the proposed amendment would not cause injustice to the 2nd Defendant and that the 2nd Defendant had failed to establish prejudice."

17. The primary facts put forward by the 2nd defendant in support of the allegation of prejudice are those contained in the Affirmation dated December 28, 1995, of Ms Sue Foung Kong, an assistant solicitor with the 2nd defendant's solicitors. She made her affirmation from the contents of her firm's file and from what she was told by the 2nd defendant's claims manager, Mr H T Hung.

18. Turning to that affirmation, one finds this in the last three paragraphs thereof:

"4. I am informed by Mr Hung that at the relevant time, the 2nd Defendant's Sea Operation Department arranged and carried out containerisation of break bulk cargo received from China and that it is most likely that this Department was responsible for vanning the goods in question. This Department closed in 1990 whereupon all employees of that Department resigned. There are no existing records of that Department and accordingly the 2nd Defendant is unable to ascertain the identity of those employees who could give evidence on the Plaintiffs' new allegation.

5. This new allegation is in addition to the Plaintiff's existing allegation that the 2nd Defendant commingled the goods with another consignment shipped from Shanghai to Hong Kong on the vessel "LONG JIANG". The 2nd Defendant made pertinent enquiries into the issue of commingling as early on as February 1991. There is now produced and shown to me marled "SFK-1" true copies of correspondence received from the 2nd Defendant setting out the results of their enquiries. Furthermore, the 2nd Defendant served a Request for Further and Better Particulars on the Plaintiffs on the 22nd May 1991 specifically requesting further and better particulars on the issue of commingling.

6. I believe that the 2nd Defendant is prejudiced by the proposed amendments in that it is now impossible for the 2nd Defendant to contact the relevant witnesses to give evidence on the Plaintiffs' new allegation. Furthermore, even if the 2nd Defendant could contact the relevant witnesses I believe that it would virtually be impossible for the relevant witnesses to recall details of the vanning process of the goods given that over six years have elapsed since the date the incident occurred. I believe that if the Plaintiffs had originally pleaded the new allegation, my firm would have made and would have requested the 2nd Defendant to make enquiries into the vanning process of the goods at the same time enquiries were made on the commingling of the goods which was in early 1991."

19. In rejecting the 2nd defendant's argument as to the prejudice, the judge first said this:

" The reality of this matter is that it is unlikely that, even if the fresh allegation had been contained in the points of claim filed on 8 October 1990, some 14 months after the event in July 1989, let alone in 1991, the second defendant would have been able to identify individuals who had handled the cargo, and even more unlikely that those individuals would have been able to relate just what they did with the cargo to show that the second defendant had taken the proper precautions to avoid it being damaged by rain. Certainly, the second defendant has not established this, which it is bound to do to succeed in its opposition. The second defendant does not say, for example, that it kept accurate records to show which individuals in its employ, or which individuals employed by a sub-contractor, handled this particular cargo, and that, by reason of their system, record-keeping, procedures or whatever, those individuals would have been able to say, not from memory - because that would not have been reasonably possible after the lapse of any significant time; certainly not after 14 months - but from records that they kept at the time, whether or not it rained when they were handling the cargo, and, if it did, what measures they took to avoid the cargo being damaged, and that this evidence, because of the delay, is no longer available. In other words, the second defendant has not, in my view, established that it is any worse of now than it would have been if the allegation as to damage by rain had been raised originally in the points of claim. We all knew, from experience in dealing with claims of this nature, that it is rare for there to be any direct evidence of how goods in the custody of a bailee were handled. Whether or not a bailee failed in its duty is decided by inference and the tools of the law. Even if the bailee is able to call the employees who handled particular goods, it is unusual for those witnesses, if they are being honest, to say that they remember what they did or did not do in connection with particular goods some substantial time earlier; more usually, the witnesses say what they would have done, or what was their invariable custom."

20. Then the judge continued:

" I am also happy with what is said by Ms Kong to establish that the second defendant is not able to investigate the new allegation and trace witnesses. Only the second defendant is able to give evidence about this, but this important aspect, which is the whole crux of the matter before me, is dealt with in the sketchiest of manners. Regarding the records of the Sea Operation Department of the second defendant, without which, I am told, the second defendant cannot identify witnesses, it is said only that the department closed "in 1990", without any specific date, and that "there are no existing records of that Department". Why are there no records? It is not usual, surely, for records of a department within a company to disappear when the department closes. I am given no explanation for this. What happened to those records? Were they destroyed? If so, how and why? Apparently, the records were in existence in May 1991, after the department had closed. Mr Hung says then that he checked them. Why did they disappear after that? I am not told. I should have been told. In particular, I should have been told why records were not kept when there was pending litigation. Surely, the records were not audited to retain those that might relate to whether or not the goods were kept next to wet cartons, but to remove and destroy those that might relate to how the goods were otherwise handled. I am left being suspicious about this. Mr Hung must know the facts. He was there in 1991 and is there now. I do not understand why this strange situation was not explained more fully. I am not satisfied that the second defendant has told me all that there is to be told about this.

In the result, I am not satisfied that the delay in making the new allegation has prejudiced the second defendant, and I give leave to the plaintiff to amend its points of claim as it wishes to do."

21. It should made very clear that the judge was not in any way expressing any doubt as to the honesty of Ms Kong. What he was criticising was the way that the 2nd defendant chose to deal with the matter: supplying Ms Kong with limited information to put before the court.

22. It seems to me that the judge was entitled to decide as he did. He made no error of principle; and he approached the case with commendable common sense. I am satisfied that he paid proper regard to all the factors which had to be taken into consideration. For example, it was suggested that he was not aware that the longer the time that passes, the greater the danger of prejudice. Of course he was fully aware of that. In fact, he made a specific reference to fading memory. Ultimately, the opposition to the amendments failed because of the inadequacy of the evidence put forward in asserting specific prejudice. The judge, in my opinion, came to a conclusion with which this Court cannot properly interfere.

23. Accordingly, I would dismiss this appeal.

Liu, J.A.:

24. I agree. I merely wish to highlight two features: first, the exercise of a judge's discretion is to be guided by his assessment of where justice lies. "Many and diverse factors would bear upon the exercise of this discretion". Ketteman v. Hansel Properties Ltd. [1987] 1AC 189 at p. 212 D/E, per Lord Griffiths. It is against that setting that the judge's exercise of his discretion in this case is to be examined on the usual principle. And as to the alleged prejudice, a party resisting a proposed amendment must be able to satisfy the court that but for the delay, a helpful document or helpful witness would have been available to him. In other words, to begin with, there must exists at one time a helpful document or a helpful witness. I, too, would dismiss this appeal.

Nazareth, V.-P.:

25. I also agree.

26. The issue that confronted the judge is not the same as that we have to address here. He was concerned with whether leave to amend should be granted; we are concerned with whether his decision, i.e. the exercise of his discretion, was plainly wrong or deficient in some way that would warrant intervention by this Court.

27. That I may have decided the application below in a different way is nothing to the point. It does not avail the appellant. I have not found the appeal the easiest of matters to decide, but at the end of the day I am not persuaded that the judge was plainly wrong, beyond the generous ambit of reasonable judicial disagreement, proceeded upon some erroneous assumption of law or fact, or was wrong in some other way that would justify intervention. I say that after having careful regard to Mr Kerr's very full written submission and to his eloquent submission before us.

28. For those reasons, I do not think that this Court is in a position to intervene. The appeal is accordingly dismissed.