CHINA NATIONAL ARTS AND CRAFTS IMPORT & EXPORT CORPORATION ZHEJIANG BRANCH AND ANOTHER v. SEALAND SERVICE INC. AND OTHERS

HCCL000090C/1990

HCCL90/1990

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.90 OF 1990

---------------

BETWEEN
	CHINA NATIONAL ARTS AND CRAFTS IMPORT & EXPORT CORPORATION ZHEJIANG BRANCH	1st Plaintiff
	JACOB ASH CO. INC.	2nd Plaintiff
	AND
	SEALAND SERVICE INC.	1st Defendant
	HOI KONG CONTAINER SERVICES CO. LTD	2nd Defendant
	FREIGHT-TRANS INTERNATIONAL CO. LTD	3rd Defendant
	and
	FREIGHT-TRANS INTERNATIONAL CO. LTD	1st Third Party
	HOI KONG CONTAINER SERVICES CO. LTD	2nd Third Party

---------------

Coram : Hon Stone J in Chambers

Date of Hearing : 6 April 2000

Date of Judgment : 6 April 2000

 

______________________

J U D G M E N T

______________________

 

THE APPLICATION

1. This is the plaintiffs' application, pursuant to a summons dated 10 May 1999, for summary judgment in the amount claimed in the Points of Claim, that is, US$51,624.85, together with interest and costs.

THE FACTUAL BACKGROUND

2. It must be some sort of record in the common law world for a commercial court to be dealing with an application for summary judgment well over a decade after the events giving rise to the claim in question, which so far as the 1st defendant is concerned relates to a contract of carriage between the 1st plaintiff and the 1st defendant, as evidenced by Bill of Lading CT319 issued at Shanghai on 30 June 1989, wherein the 1st defendant agreed to carry from Shanghai to Pittsburgh, via Hong Kong, a consignment of 584 cartons of poplin ski gloves. The 1st plaintiff is named as shipper on the bill of lading and as the result of endorsement thereon the 2nd plaintiff became entitled to the rights of the 1st plaintiff under the contract of carriage.

3. The material facts can be shortly stated. The goods in question were shipped to Shanghai on the vessel "Dong An" on 13 June 1989, the "Dong An" thereafter apparently arriving in Hong Kong on or about 16 July 1989. The goods were delivered into the custody of the 2nd defendant, stuffed into two sealed Sealand containers, and on or around 22 July 1989 were shipped to Takoma, USA and thereafter transported by rail to Pittsburgh. However, and there appears to be no dispute about this, when the containers were opened and unstuffed in Pittsburgh, the goods were found to be damaged with water stains on the cartons and mildew on the gloves. As a consequence, the plaintiffs began this action for loss and damage, the claim being valued, pursuant to the particulars given in the Amended Points of Claim, in the sum of US$51,624.85. Broadly speaking the elements of the claim fall into two categories : first, the cost of reconditioning and repacking the goods by a company known as Unsmoke Services Inc. of Pennsylvania amounting to the sum of US$45,773.61, with the balance of slightly less than US$6,000 representing consequential expenses.

4. In terms of the head action, these proceedings have remained 'live' solely against the 1st defendant, that is Sealand Service Inc., the 3rd defendant not having been served, and the action having been discontinued against the 2nd defendant on 31 March 1999. I understand that the third party proceedings by the 1st defendant against the 2nd defendant remain in being.

5. This case last came before this court in October 1999 upon a disputed amendment application. The proposed amendment to the Defence to which specific objection was taken by the plaintiffs involved the withdrawal of an admission made in paragraph 1 of the original Defence wherein the 1st defendant, Sealand, had formally admitted that it was the contracting carrier under Bill of Lading CT319. In the event, the court refused this amendment application pursuant to its judgment dated 20 October 1999, and Mr Coleman, who appeared then as today for the plaintiffs, has suggested that the genesis of that amendment application was solely to ward off the present application for summary judgment.

THE ISSUE OF LIABILITY

6. Mr Coleman's case on liability is straightforward. He says that the plaintiffs sued the 1st defendant on a contract contained in or evidenced by a bill of lading. Pursuant to that bill, Sealand acknowledged that the goods were received in apparent good order and condition. It was, in commercial parlance, "a clean bill". The details of the shipment and transshipment are admitted by Sealand. There is no dispute, says Mr Coleman, that the goods on arrival were found to be damaged, and it is trite law that merely putting a plaintiff to proof does not entitle the defendant to leave to defend. In any event, there can be no doubt that the goods arrived damaged, not least because the 1st defendant's own surveyor said so.

7. Now comes Mr Coleman's bull point, at least for the purposes of this application : whenever and however precisely the damage occurred in the period between shipment and delivery does not matter so far as his client is concerned, given that the bill of lading was a clean on board through bill. Whilst the 1st defendant may have rights of recourse against third parties, such as, for example, against the entity responsible for stuffing what had been break bulk cargo into containers during transshipment in Hong Kong, that is the 2nd defendant, Hoi Kong Container Services Company Limited ("Hoi Kong"), such rights did not and do not constitute a defence to this claim.

8. He further submitted that the 1st defendant had confirmed in solicitors' correspondence that it would not be calling any witness of fact so that, for the purposes of this application, the court had but to refer to the documents presently before it, an evidential situation that would not change and, in so far as his client was concerned, would not improve.

9. It is common ground between counsel that the effect of the clean through bill - specifically admitted at paragraph 1 of the Defence - has the effect of shifting the burden onto the 1st defendant to rebut what is otherwise regarded as prima facie evidence of the position as at the date of shipment. And in this regard, Mr Coleman submitted, so far as the 1st defendant is concerned, the cupboard was bare. In short, he said, there was "not a shred" of evidence filed on behalf of the defendant to discharge the burden created by virtue of the issuance of the clean bill to demonstrate that the damage had occurred prior to shipment in Shanghai. Indeed, although it was not any of his client's concern (and any descent into this particular arena had been solely in the context of the plaintiffs' proposed case against the 2nd defendant), Mr Coleman suggested that the overwhelming probability was that the well-documented heavy rainfall in Hong Kong on 18 July 1989, which took place at the time when the break bulk cargo was in the course of being restuffed into the two Sealand containers by the 2nd defendant, was the obvious candidate for the origin of the wet damage which had clearly been suffered.

10. On behalf of the 1st defendant, Mr Smith mounted a spirited rearguard defence. His case was that the goods had not been wet damaged at any stage in the course of the carriage. To the contrary. Damage, he said, had occurred prior to shipment.

11. Mr Smith based his argument upon an extrapolation from a document entitled an 'Exception List' which had been prepared by the 2nd defendant herein, Hoi Kong, on 21 July 1989 at the time of the transshipment, which List on its face indicates that 20 cartons of gloves had been noted in this record as "Cover Torn and Repasted. Cont's in Full". If what had happened was that these cartons had been rain damaged on the wharf, as the plaintiffs had suggested, it was remarkable, Mr Smith submitted, that only 20 cartons had been singled out for attention by Hoi Kong, so that, given the apparent good condition of the containers in which these goods had been carried to Pittsburgh, it was a reasonable hypothesis that the damage had occurred prior to initial loading at Shanghai on the "Dong An", and not subsequently.

12. I do not find this argument persuasive, eloquently though it was advanced. I have no idea of the circumstances of the preparation of the Exception List in question (and I very much doubt that anyone else has either) and I agree with Mr Coleman that there is not one piece of hard evidence proffered by the defendants that the wet damage in fact occurred prior to shipment at Shanghai on 30 June. The hypothesis which Mr Smith offers is simply not enough to warrant sending this case to trial. Indeed, given that his case is that the wet damage not only occurred prior to 21 July (the date of the Exception List), but prior to 30 June (the date of shipment), it is in any event not easy to understand how the absence of any reference in that Exception List to wet damage in fact assists his argument, nor for that matter how it can serve to qualify the receipt of the goods in apparent good order and condition at the time of the issuance of the clean bill of lading in Shanghai. It seems to me that extrapolated reliance (which is all that it can be) upon the Exception List is itself arguably based upon an internally false hypothesis.

13. I further note in passing that the proposition involving preshipment damage in Shanghai is not reflected in the case put forward by the 1st defendant against Hoi Kong in the Third Party proceedings, paragraph 6 of the Third Party Points of Claim against Hoi Kong making reference, inter alia, to Hoi Kong, via the offices of their subcontractors, causing or permitting :-

"... the goods to be commingled with other goods that they become heavily wetted thereby causing the goods themselves to become wet damaged."

14. For present purposes, I refrain from saying what in my view is the overwhelming probability as to the cause of the wet damage in question. I do not have to go that far for the purposes of this application, and I bear in mind the extant third party proceedings. Suffice to say, if it be thought appropriate, the 1st defendant can be left to its remedies, if any, against the 2nd third party, Hoi Kong.

15. After considering all the evidence, and after having taken into account the arguments of counsel, I have concluded, in the words of Order 14, rule 3, that the plaintiffs have not satisfied the court that "there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial" of this claim.

THE ISSUE OF QUANTUM

16. As to quantum, Mr Coleman submits that this aspect is equally clear-cut. The costs of restoration of the ski gloves, by Unsmoke, are well documented, and there is ample evidence as to what was done in terms of restoration not only to the 584 cartons the subject of this claim, but also to the further 918 cartons, also destined for the same buyer, which were separately shipped on board the vessel "Long Jiang" in three APL containers. The authenticity of the documents is not disputed, said Mr Coleman, nor is the fact that upon devanning the goods were found to be wet damaged.

17. Mr Smith's submission in terms of quantum was essentially that in this claim the defendants were being "lumbered with" and asked to pay for loss and damage which should probably be borne by another carrier, that is, by owners of the "Long Jiang". On the plaintiffs' own expert report prepared by Toplis & Harding, the possibility of sea water damage was canvassed (as opposed to freshwater damage only which appeared to be suggested by the Luard Report prepared on behalf of the defence) and Mr Smith objected to the method of "straight line" apportionment to the claim, so that the total repair cost of US$117,670 was divided by the total of 1,502 cartons (584 + 918), to obtain the per carton cost of restoration, that figure then being multiplied by the number of APL cartons and the 584 cartons carried in the Sealand containers to produce the respectively claimed figures of US$71,908.14 (for APL) and US$45,761.86 (for Sealand).

18. The man-hour element in the total Unsmoke bill amounted to US$78,855 out of a total of US$117,669.96 and, commented Mr Smith, it was "a matter of commonsense" that seawater damage cost more to rectify than freshwater damage. Accordingly, if the court was against him on liability, this was a proper case for judgment on liability with an order that damages be assessed. At that assessment, the relevant experts could be asked this particular question as to the freshwater/seawater damage dichotomy, and the court could then decide that issue. In this connection, Mr Smith came close to suggesting - if I have understood him correctly - that there was a different benchmark at play in terms of liability and quantum in Order 14 applications. In terms of quantum, he said, the plaintiffs had the burden of establishing that "straight line" assessment was clearly appropriate not only for the goods carried in respect of this particular claim, but also in terms of those which were not carried. In other words, it was for the plaintiffs to show that an assessment was not required, and in this case, absent any such assessment, there could well be a danger of unfairness to his client.

19. For his part, Mr Coleman - rightly in my view - strongly disputed that in terms of liability and quantum there was any difference in the applicable test - and submitted that in Order 14 applications the burden was on the defendant, in applications for judgment for a specific sum, to show by evidence a triable issue or issues. The plaintiffs had put their case up on quantum, and it was not open to Mr Smith to hypothesize, from the Bar, about what was or was not "commonsense" or that it "stood to reason" that greater effort/expenditure would be required for seawater as opposed to freshwater damage. The people who had done the work all those years ago had spoken as to the cost of the work, and had apportioned it between the bigger and smaller batches of cartons, and Mr Smith had not succeeded, said Mr Coleman, in invalidating that approach.

20. After some reflection, I agree. In my view, this case has been characterised under both liability and quantum heads by nothing more than the inventive surmise of counsel, absent any evidential basis laid therefor. In the quantum context, it would have been the simplest of tasks to file expert evidence along the lines of the freshwater/seawater distinction that Mr Smith has argued, and yet this has been chosen not to be done, quite possibly for good reason.

21. The court can only act upon the evidence before it. Leave to defend is not granted, as Mr Coleman submitted (quoting Megarry J), by means of "surmise and Micawberism". In the circumstances of this case, I think that that is not an inappropriate description. The protracted history of the case does not make happy reading, nor is it a testament to the efficiency of the court system. How such a small claim (in modern terms at least) can have been permitted to be the subject of a decade of attention by solicitors on each side, and can have justified two hotly opposed applications attended by counsel on each occasion is (or should be) a matter of concern. In my view, this case should now be brought to a halt absent any further expenditure.

ORDER

22. The plaintiffs are to have judgment against the 1st defendant in the head action in the sum claimed, namely, US$51,624.85.

23. I will hear the parties as to interest and costs.

[Submissions from counsel]

24. I have now had the benefit of submissions from counsel upon both interest and costs.

25. As to interest, I confess I have had some qualms about the justification of ordering interest to run from the date of the writ, which in this case is 10 August 1990. There are, of course, two relevant arguments. From the plaintiffs' point of view, as Mr Coleman says, the court should not encourage what are ultimately held to be unmeritorious defendants from hanging onto the monies claimed absent the award of interest; equally, says Mr Smith, the other side of that particular coin is that the court should not encourage dilatory proceedings. After some hesitation, I have decided that there is really insufficient information put before me on this point to warrant departure from the usual rule, unusual though this case is.

26. My Order on interest, therefore, is that the plaintiffs are to have interest on the judgment sum at the rate of 8% p.a. from the date of the issuance of the writ, namely, 10 August 1990, to the date of judgment herein, namely, 6 April 2000, and thereafter, interest on the principal sum at the judgment rate from time to time prevailing until payment.

27. Turning now to costs, Mr Coleman not only asks for the costs of this action against the 1st defendant, he also asks for what he characterises as a 'Sanderson Order' which, in his lexicon at least, potentially involves payment by the 1st defendant of the costs of the plaintiffs' pursuit of the 2nd defendant (which latter action, it will be recalled, was discontinued on 31 March 1999).

28. Mr Smith, in response, says that this is not a Sanderson Order properly so-called anyway, but that if this aspect of costs is going to be seriously pursued, it cannot be pursued today, given the amount of background work which would necessarily have to be done by both parties. At the same time he puts a marker down on the basis that any application for this type of order is not patent on the face of the summons with which he is presently dealing, and it should not be thought, if this application were to persist with on a date to be fixed, that he would do otherwise, if successfully opposing such application, but ask for the costs of that application. That seems to me to be a perfectly justifiable approach, and indeed I do not think Mr Coleman has any quarrel with it.

29. Accordingly, for present purposes, in my view the fairest course to adopt is this. The plaintiffs have asked for and have obtained judgment. That application has been opposed. This head action is now at an end, subject, of course, to any appeal. Clearly, a costs order in normal course should follow, namely that the costs of this action are to be paid by the 1st defendant to the plaintiffs (such order to include the costs of this application), such costs to be taxed if not agreed. In the event that Mr Coleman wishes, on instructions, to pursue what for shorthand purposes I will persist in calling a Sanderson Order, there will be liberty to apply to make that application at a date and time to be fixed in consultation with counsels' diaries.

30. The foregoing appears to be all that can usefully be achieved today. I thank both counsel for their assistance.

 

 

 

Representation:

Mr R. Coleman, instructed by Messrs Crump & Co., for the Plaintiffs

Mr Smith, instructed by Messrs Healy & Baillie, for the 1st Defendant

HCCL000090B/1990

HCCL90/90

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.90 OF 1990

---------------

BETWEEN
	CHINA NATIONAL ARTS AND CRAFTS IMPORT & EXPORT CORPORATION ZHEJIANG BRANCH	1st Plaintiff
	JACOB ASH CO. INC.	2nd Plaintiff
	AND
	SEALAND SERVICE INC.	1st Defendant
	HOI KONG CONTAINER SERVICES CO. LTD.	2nd Defendant
	FREIGHT-TRANS INTERNATIONAL CO. LTD.	3rd Defendant
	and
	FREIGHT-TRANS INTERNATIONAL CO. LTD.	1st Third Party
	HOI KONG CONTAINER SERVICES CO. LTD.	2nd Third Party

---------------

Coram : Hon Mr Justice Stone in Chambers

Dates of Hearing : 30 September and 15 October 1999

Date of Delivery of Judgment : 20 October 1999

_______________________

J U D G M E N T

_______________________

The Application

1. This is an application by the 1st Defendant herein, by summons dated 21st June 1999, for leave to amend its Points of Defence in terms of the draft annexed to the summons.

2. Unusually, given the general attitude of the Commercial Court towards pleading amendments, the application is strenuously opposed, albeit in limited scope in that such opposition is confined to the withdrawal of an admission which, it is said, is of fundamental import in the present proceedings. At this stage, therefore, it may be useful to sketch in a little of the background to this case.

The Factual Background

3. As is evident from the title of the action, this case is of some age, the Writ herein having been issued on 10th August 1990, which in terms of the normal pace of commercial litigation almost qualifies as ancient history. Be that as it may. The Plaintiffs' claim stems from a contract of carriage between the 1st Plaintiff and the 1st Defendant, as evidenced by a Bill of Lading, No.CT319 issued at Shanghai on 30th June 1989. Pursuant thereto, the 1st Defendant agreed to carry from Shanghai via Hong Kong to Pittsburgh, U.S.A., a consignment of 584 cartons of ski gloves. The 1st Plaintiff is named as the shipper on the Bill of Lading and, as the result of the endorsement thereon, the 2nd Plaintiff allegedly became entitled to the rights of the 1st Plaintiff under the contract of carriage.

4. The goods in question were shipped at Shanghai on the vessel "Dong An" on 13th June 1989, the "Dong An" thereafter apparently arriving in Hong Kong on or about 18th July 1989. The goods were delivered into the custody of the 2nd Defendant and stuffed into two sealed containers, and on or around 22nd July 1989 were shipped to Takuma, U.S.A., and thereafter transported by rail to Pittsburgh.

5. However, when the containers were opened and unstuffed in Pittsburgh the goods were found to be damaged, with water stains on the cartons and mildew on the gloves. As a consequence, the Plaintiffs began this action for loss and damage, the claim therefor being valued at US$51,624.85, the breakdown of which sum is duly itemized in the Points of Claim dated 5th October 1990.

6. Points of Defence to this claim were served by the 2nd Defendant on 24th October 1990 and by the 1st Defendant on 10th December 1990. Discovery and Further and Better Particulars followed, which in broad terms brings the chronology of the action up until May 1994.

7. Thereafter, on 19th January 1996, the Plaintiffs filed and served Amended Points of Claim pursuant to the Order of Findlay J dated 9th January 1996 and, on 18th May 1997, an appeal by the 2nd Defendant against that Order was dismissed.

8. On 18th November 1998, Amended Points of Defence were filed and served by the 2nd Defendant, the solicitor for the 1st Defendant having earlier confirmed by letter dated 5th September 1997 that the 1st Defendant would not be amending its Defence.

9. On 10th December 1998 Findlay J ordered that Interrogatories served by the 2nd Defendant as long before as 14th March 1995 be set aside, in addition to making directions for the further conduct of the action, and on 31st March 1999, the Plaintiffs' action against the 2nd Defendant was discontinued by consent. In terms of the head action, therefore, proceedings remain 'live' solely against the 1st Defendant, the Writ, I am told, not having been served on the 3rd Defendant.

The Disputed Amendment

10. The proposed amendment to which specific objection is taken involves the withdrawal of an admission made in paragraph 1 of the original Defence whereby the 1st Defendant, Sealand Service Inc. ("Sealand"), formally admitted that it was the contracting carrier under Bill of Lading CT319, as pleaded in paragraph 1 of the Points of Claim.

11. I set out below the manner in which the proposed draft is now framed :-

"1. Save that Bill of Lading CT319 is dated 30th June 1989 Paragraph 1 of the Points of Claim is admitted. Paragraph 1 is denied. The 1st Defendant denies that the issue of bill of lading no.CT319 was authorised by the 1st Defendant and Qian Tang Company, who signed the bill of lading no.CT319, had any authority whatsoever to issue bill of lading for and on behalf of the 1st Defendant.

2. The issue of the bill of lading no.SEAU755005992 dated 27th July 1989 by the 1st Defendant, with reference to the bill of lading no.CT319, was based on shipping instructions received from the 3rd Defendant, the shipper. It is denied that the 1st Defendant had any knowledge of the content of the bill of lading no.CT319 at the time of issue of the bill of lading no.SEAU755005992."

12. It is these amendments that have provided the fulcrum of the present debate. As is evident, in the absence of the admission, the 1st Defendant now wishes to set up a positive case denying that the signatory and issuer of the Bill of Lading had authority to act for and on behalf of the 1st Defendant.

Applicable Legal Principle

13. The broad principles in relation to applications to amend pleadings are well known : as a general rule, amendments ought to be permitted for determining the real question in controversy between the parties to any proceedings, or of correcting defects or errors in the proceedings. So that amendments will be allowed if such can be achieved without injustice or without doing some injury which could not be compensated in costs.

14. In 99% of cases, of course, disadvantage caused by amendment is indeed so compensatable in costs. The remaining 1% inevitably focuses upon the issue of prejudice, and it is this element that goes to the heart of this case.

15. There is, I think, no substantive difference between Counsel as to the broad principles to be applied, albeit there may possibly be a difference of emphasis.

16. The leading recent English authority upon the withdrawal of admissions is that of the English Court of Appeal in Gale v. Superdrug Stores [1996] 1 WLR 1089, which Mr Smith, Counsel for the Plaintiffs, submitted was authority for the following propositions :-

(1) The discretion is a general one to be exercised after striking a balance between the prejudice to either side if the admission is withdrawn (or made to stand);

(2) The court should ordinarily allow an admission to be withdrawn if it can be done without injustice to the other party and if no question of bad faith or overreaching is involved;

(3) The party resisting the withdrawal of an admission must produce clear and cogent evidence of prejudice before the court will be persuaded to restrain a litigant from exercising his privilege to change his mind.

17. In general terms these principles are unlikely to arouse controversy, the balancing of each side's interest being the touchstone. Gale appears to have been followed, in part at least, by the Hong Kong Court of Appeal in Re Chung Wong Kit (A Bankrupt) [1999] 1 HKC 684, wherein Rogers JA observed (at 688) :-

" ... Mr Fitzpatrick relying upon the authority of Tse Yuk Tin, administrator of the estate of Tse Yat Hung, deceased v Chee Cheung Hing & Co Ltd & Anor [1984] HKLR 391 argued that the respondents should not have been allowed to rely upon this affirmation as it constituted a withdrawal of an admission which was being made without proper explanation. This however is not a rule of law in itself but just an example of the proposition that a party should not be permitted to resile from an admission unless it was just to allow it to do so having regard to the interests of both sides.

There are two answers to the objection, it seems to me. The first is that as is shown in another case to which Mr Fitzpatrick drew our attention (Gale v Superdrug Stores plc [1996] 1 WLR 1089) in determining whether it is fair to allow a party to resile from an admission, it is not sufficient for the court to presume prejudice to the opposing party, but it is necessary to balance the prejudice suffered by the admitting party if deprived of his right to resile against any prejudice which the relying party has specifically established he will suffer if the admission is withdrawn.

..." (emphasis added)

18. It follows from the foregoing, I think, that the general approach is tolerably clear, albeit Mr Smith sought to extract from Gale a further element, namely, the relative lack of importance of the excuse or reason proffered for the withdrawal of the admission sought.

19. If by this Mr Smith is verging on suggesting that it really does not matter a great deal why an admission is withdrawn, and that the Court should concentrate predominantly upon the issue of prejudice, I do not agree. It seems to me that this element in the equation is all part and parcel of the discretionary 'mix' which is to be evaluated by the tribunal hearing the application in light of the evidence before it. As Waite LJ succinctly put it in Gale (op.cit. at 1097) :

"... Excuse (or lack of it) is not entitled, in my judgment, to any particular emphasis, it is just part of the overall picture and will carry no more weight than the particular circumstances require..." (emphasis added)

20. Whilst in this jurisdiction Hunter J (as he then was) expressed the matter thus in Tse Yuk-tin, administrator of the estate of Tse Yat-hung, deceased v. Chee Cheung Hing & Co. Ltd. & Another [1984] HKLR 391 at 395 :-

"... At the other extreme Mr Fleming for the Crown suggests that if the decision is conscious it should be decisive, and that the court should not allow any withdrawal from a conscious decision so made. I believe that the true principle lies somewhere between those two extremes. I hope I am not showing disrespect to the very eminent 19th century judges whom I have just quoted, if I suggest that their remarks have to be put in their context. In most cases the context was that of an inadvertent mistake. Because for my part I find it difficult to accept that those very eminent gentlemen would have treated as irrelevant the sort of conscious choice which is manifest in the facts before me, a choice to accept as true a false premise: an acceptance of the fact of direct employment as true, which was in fact known to be false (on the view that it is now being put forward) and in the face of a clear warning by the insurer's solicitors. There is a language problem here which I have already adverted to. I am far from sure that Bramwell, L.J., for example, would regard that as a bona fide mistake, within his own term of reference. I am not quite sure how Bowen, L.J. would react and whether he would regard this as an example of overreaching or not, because I have doubts as to the precise ambit of that word.

Conversely it seems to me equally wrong to say that the court never allows a party second thoughts: never allows a fundamental change of direction even after a conscious decision. My understanding of the practice is and always has been, that the court allows a party to withdraw an admission deliberately made or to resile from a conscious choice for good reason, and if good reason is shown. In particular it expects the party to put before it a convincing credible explanation of the circumstances in which the admission was in fact made, which is sought to be said to have been made under a mistake. A typical sort of case is where a party is able to say 'yes, when I said this, or when I admitted this, I believed that to be the case, I have now got some totally fresh evidence in my possession which if true suggests that it was not the case, and I want to advance that proposition'.

In those circumstances the court, I think, can readily give leave to withdraw the admission and does so. Conversely if no credible or convincing explanation is given, that is a powerful factor in favour of the exercise of discretion against the application. I am bound to say here I am not happy with the explanation which has been put before me." (emphasis added)

21. With these principles in mind, I turn now to consider the argument on this application.

The Argument

(i) Need for the present application

22. Mr Smith put the matter shortly. He said simply that the 1st Defendant's explanation for the need to make the amendment at this stage has been dealt with in Mr Binnersley's 3rd Affidavit (at paragraphs 6-9). This, inter alia, attempts to link a connecting carrier agreement between Zhejiang Fuchuen Co. Ltd. and the 1st Defendant which 'may have been applicable' to Bill of Lading No.CT319 (as originally drawn the affidavit asserted 'was applicable') and accordingly, as Mr Binnersley expressed the point :

"The carrier of the Goods from Shanghai to Hong Kong was Zhejiang Fuchuen Co. Ltd., the publishing carrier, instead of the 1st Defendant. This further information was given to me by Mr Law ... following the Plaintiffs' belated decision to apply for summary judgment after the action against the 1st Defendant had been dormant for some years..."

23. Mr Smith made no bones about the position. The Plaintiffs' summons for summary judgment of 10th May 1999 ('some 81/2 years later') had prompted the 1st Defendant to consider whether its pleadings required amending.

24. For his part Mr Coleman took this aspect of the case robustly. He says that the claim is and always has been based upon an alleged contract of carriage with the 1st Defendant contained in or evidenced by Bill of Lading No. CT319. Until this response to the application for summary judgment, the 1st Defendant's consistent case had been to admit the existence of that contract, indeed to assert it, and to rely upon specific terms of that contract. There could be no suggestion, continued Mr Coleman, that the admission was in any way inadvertent in this case. Indeed, what is clear is that the case of the 1st Defendant was pleaded after time had been taken for investigation and for consideration of the results of that investigation, and after taking advice from both solicitors and counsel. The 1st Defendant had at all times been represented and gave instructions via its Claims Manager, Mr Law, who had been in post since before the events giving rise to the claim, and remained so to date. Mr Law apparently had 'now' changed his instructions as to what, it is said, was "not unusual" in the PRC in 1989, so that an agreement which postdated the Bill of Lading is now said to be an agreement which 'was applicable'. Even ignoring the factual non-sequitur, submitted Mr Coleman, the only explanation for the change in instructions could have been that the Plaintiffs in this case now had actually asked for judgment.

25. On this aspect I agree with the tenor and content of Mr Coleman's submissions. Indeed, I am bound to say that, on the evidence before this Court, it is not easy immediately to accept Mr Law's apparently belated recognition of the significance of the connecting carrier agreement. Notwithstanding the information said to be received from Mr Law in late 1990 to the effect that "the 1st Defendant had no knowledge of the existence and the content of the Bill of Lading No.CT319 until the receipt of the said writ of summons", nonetheless, after consulting with Counsel, it was then decided that "the 1st Defendant had no alternative but to make the admission" in paragraph 1 of the 1st Defendant's Points of Defence of 10th December 1990, and it was only consequent upon the Plaintiffs' application for summary judgment that this further recent advice from Mr Law was forthcoming.

26. In this regard, it seems to me that Mr Smith has made a virtue out of necessity. This change of stance, some 8 1/2 years on, is specifically aimed at the imminent Order 14 application. In my view this is redolent of a purely tactical manoeuvre, which, as Mr Coleman observed, might as easily have come on the first day of trial absent any application for summary judgment. So that when regarded in this light, I find it difficult to credit the supposedly new advice rendered from client to instructing solicitor, and this quite apart from the lack of internal logic in the particular paragraph employed in the affidavit purporting to explain this new advice. Indeed, given that Mr Law has been the relevant person within the 1st Defendant's organisation throughout the entire 10 year period, it is notable that no substantial explanation has been given with regard to his change of instructions other than the imminence of the application for summary judgment.

27. Accordingly, in what is perhaps an echo of Hunter J in Tse Yuk-tin, I also am "not happy" with the explanation offered, and I take a dim view of this element of this case. This however is not conclusive, and must be considered together with the important issue of prejudice.

(ii) Prejudice

28. On this particular aspect it behoves Mr Coleman to make the running, and to provide evidence that if the amendments were in fact to be granted that the Plaintiffs would suffer prejudice not compensatable in costs. Mr Coleman submitted that he is well able to discharge this burden. In short, he said that the evidence of Mr Kerry in his 4th Affidavit clearly established that, in the circumstances of the original admission as to the basis of this claim, no enquiries were made by the Plaintiffs in relation to any issue of validity or of proper authorisation of the issue of the Bill of Lading. Indeed, although in October 1990, the 1st Defendant had indicated in correspondence that it would argue that the bill was unauthorised and ultra vires, the point ultimately was not pleaded, nor was any subsequent indication given. Mr Kerry made it clear in his evidence that after the intention to alter the Defence was recently notified, the Plaintiffs' solicitors immediately made enquiries in order to determine if proper investigation was still possible. However, for various reasons, including the obvious passage of the years, the nature of any relationship between the 1st Defendant and the party which issued the bill could not be ascertained. So that the result is that the Plaintiffs are now, in substance, precluded from adducing any evidence, documentary or otherwise, as to the circumstances surrounding the issue of the relevant bill. That, said Mr Coleman, is a statement that is simply not controverted on the evidence before the Court.

29. Accordingly, Mr Coleman submitted, if the Plaintiffs are now to be put in the position of being unable to adduce evidence contrary to the proposed amended case of the 1st Defendant, that is plainly prejudice which cannot be compensated for in costs or otherwise, and, he added, the mere assertion by the 1st Defendant's Solicitor that he does not believe that prejudice would result from the application to amend is not only contrary to the evidence, but is an affront to common sense.

30. In the course of his submission, Mr Coleman also noted that a copy of Bill of Lading CT 319 was in fact the first document disclosed in the 1st Defendant's List of Documents dated 12th June 1991, albeit curiously it is now said that an investigation of the circumstances surrounding the issue of the Bill of Lading had not revealed how the 1st Defendant obtained or procured a copy of that bill. Moreover, said Mr Coleman, the relevance of the connecting carrier agreement itself was far from clear since the latter dealt with shipments to Canada whereas the instant case clearly involved shipment of goods to America.

31. From his vantage point, Mr Smith attacked the Plaintiffs' evidence on this part of the case. In essence, he submitted that what the Plaintiff has produced amounted to no more than bare assertions of prejudice. On the Plaintiffs' own evidence, he said, enquiries by the Plaintiffs in recent months have allegedly ascertained that Qian Tang would not have issued the Bill of Lading unless authorised to do so. Indeed, Mr Qian of Qian Tang apparently has been able to provide some information about an alleged agency agreement, albeit it seems that he has been instructed not to make an affirmation. Moreover, continued Mr Smith, the specific point on which Mr Qian has allegedly been instructed not to depose is the relationship between Qian Tang and Sealand. Yet it is clear from the document headed 'Brief Introduction' that Qian Tang was established as the Shanghai office of an entity which has been known by various names, including Zhejiang Economic and Trade Transportation Corporation, and that this was entirely consistent with the 1st Defendant's contention that Qian Tang was acting for Zhejiang Fuchuen when it issued Bill of Lading CT319. The general assertion, said Mr Smith, that non-specific documents which may never have existed cannot now be found does not amount to clear and cogent evidence of prejudice. And as to the allegation of an agency agreement with Sealand made in 1987 (if such indeed was made or evidenced in writing), then the 1st Defendant would come under an obligation to give discovery in relation to it if and only if the amendment is allowed. In any event, whether or not it was made in writing, no prejudice exists since Mr Qian would plainly be able to give evidence about it, unless, of course, he continued to be subject to his present instructions not to do so.

32. In the course of argument Mr Smith made much of the fax letter dated 10th August 1999 received from the Plaintiffs' correspondent solicitors, but at bottom I do not think that it greatly assists. The letter makes it eminently plain that Mr Qian has again been re-interviewed, and he has said that he, i.e. Mr Qian, believes that Qian Tang or Sinotrans entered into an agency agreement with Sealand during 1987 requiring Qian Tang to issue bills of lading on Sealand's behalf. However, and in my view this is the important aspect, the letter also states :

"...As a result of staff changes and restructuring of [Qian Tang's] operation, Mr Qian has been unable to obtain any further details of this agreement and has been unable to locate a copy of it. Mr Qian believes that the agreement has probably been destroyed because it ceased to have any relevance to [Qian Tang's] business many years ago. Mr Qian insists that [Qian Tang] would not have issued a Sealand bill of lading without Sealand's authority and can see no reason why it would wish to do so...."

Decision

33. After reviewing the available evidence, I am in no doubt but that the proposed withdrawal of this admission by the 1st Defendant - an admission disavowing the contract of carriage constituting the very basis of this claim - would enure severely to the prejudice of the Plaintiffs. It is clear that the Plaintiffs must produce good evidence of prejudice, but this element naturally varies in terms of the factual substratum within each particular case. "Cogent evidence of prejudice" is not to be used as some sort of forensic mantra when, in circumstances such as the present, due to the considerable passage of time the Plaintiffs obviously are unable precisely to place themselves in the position of some nine years previously, whether this be in terms of access to such documents and witnesses as may then have existed, or now to be in a position to accord such matters due consideration as if the admission in question initially had not been made.

34. Notwithstanding Mr Smith's vigorous criticism of the evidential position, in my view it is sufficient to have done exactly what Mr Kerry did when notified of the proposed amendment and to demonstrate, in my judgment 'cogently', both by a review of his firm's file (now doubtless voluminous) and by immediate enquiries via agents in Shanghai, that the position is now virtually hopeless in terms of any realistic response to those newly-pleaded matters. I attach relatively little weight to the 'Mr Qian factor' if I may so term it (in which context I note that Mr Smith says that he has 'no instructions' as to whether his client had in its possession an agreement of the type but vaguely recalled by Mr Qian, given that this is a matter not yet in issue), and when Mr Kerry states in terms as understandable as they are plain that "the Plaintiffs are not now in a position to adduce any documentary or other evidence as to the circumstances surrounding the issue of Bill of Lading No.CT319", in the circumstances I am perfectly prepared to accept that sentence at face value. In fact, given the passage of time, I should have been surprised had the situation turned out to have been otherwise.

35. In my judgment, the 1st Defendant is not now to be permitted to move the goalposts by the withdrawal of the admission made in its original Points of Defence of 10th December 1990.

36. As is clear from this judgment, I have found considerable difficulty with the adequacy and internal logic of the explanation as to the original course whereby the bill of lading contract was admitted, or in grasping why Mr Law "now" has given the advice that apparently he has, although in so saying I wish to make it clear that I am making no criticism of the deponent, Mr Binnersley.

37. I further hold that the Plaintiffs would be severely prejudiced by the inability to produce documentary or other evidence relevant to the proposed amendment, and that such loss of opportunity cannot be remedied in costs.

38. Accordingly, after reviewing the arguments of Counsel and the totality of the evidence, I have no hesitation, in the exercise of my discretion and after balancing the interests of the Plaintiffs in resisting this amendment against the interests of the Defendant in securing it, in declining to permit the amendments sought in so far as such amendments involve pleas relating to the withdrawal of the admission as to the existence of the contract of carriage evidenced by Bill of Lading CT319.

Order

39. My Order therefore is that the application of the 1st Defendant in its present form, i.e. by summons dated 21st June 1999, must be dismissed. Should the 1st Defendant wish to reformulate its proposed amendments in light of this judgment, no doubt such amendments otherwise can be made by consent.

40. Subject to anything the parties may wish to put forward, I further order that the costs of and occasioned by the application be to the Plaintiffs in any event, to be taxed if not agreed.

41. I thank Counsel for their assistance.

	(William Stone)
	Judge of the Court of First Instance

Representation:

30th September and 15th October 1999

Mr Russell Coleman, inst'd by M/s Crump & Co., for the Plaintiffs

Mr Clifford Smith, inst'd by Healy & Baillie, for the 1st Defendant

20th October 1999

Mr Kerry of M/s Crump & Co., for the Plaintiffs

Mr Nigel Binnersley of M/s Healy & Baillie, for the 1st Defendant

HCCL000090A/1990

1990, No. CL90

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BETWEEN
	CHINA NATIONAL ARTS AND CRAFTS IMPORT & EXPORT CORPORATION ZHEJIANG BRANCH	First Plaintiff
	JACOB ASH CO. INC	Second Plaintiff
	AND
	SEALAND SERVICE INC.	First Defendant
	HOI KONG CONTAINER SERVICES CO. LTD.	Second Defendant
	FREIGHT-TRANS INTERNATIONAL CO LTD.	Third Defendant
	and
	FREIGHT-TRANS INTERNATIONAL CO LTD.	First Third Party
	HOI KONG CONTAINER SERVICES CO. LTD.	Second Third Party

Coram: The Hon Mr Justice Findlay, in Chambers

Date of hearing: 10 December 1998

Date of handing down of judgment: 16 December 1998

______________

JUDGMENT

______________

1. On 14 March 1995, the second defendant administered interrogatories to the plaintiffs. On 16 March 1995, the plaintiffs issued a summons seeking an order that the interrogatories be withdrawn or varied. This summons is now before me.

2. The allegations in the amended points of claim that are relevant to the interrogatories are -

"The first and second plaintiffs were all material times owners of the goods and/or holders of the Bill of Lading. Further, on endorsement of the Bill of Lading the second plaintiff became entitled to the rights of the first plaintiff under the contract of carriage.

In breach of their duties as bailees of the goods during transhipment at Hong Kong between 16 and 22 July 1989, the second defendant failed properly safely and carefully to handle the said goods."

3. As to the allegation that the plaintiffs were the owners of the goods, the first defendant asked for further and better particulars. The plaintiffs replied that -

"The first plaintiff had title in the goods prior to the transfer of the Bill of Lading to which the goods were subject, as shipper of the goods and holder of the Bill of Lading.

The second plaintiff acquired title in the goods after it obtained the relevant Bill of Lading which was acquired on or before 29 August 1989 on a date the plaintiffs cannot better particularise."

4. In its amended points of defence, the second defendant says that the first plaintiff "is put to strict proof as to when and how it acquired ownership of the goods, if at all and how ownership of the goods passed to the second plaintiff from the first plaintiff if at all.". The second defendant also pleads that the first plaintiff is "familiar with the custom and practice of the port of Hong Kong and terms and conditions upon which transhipment is undertaken in Hong Kong.".

5. The interrogatories administered to the first plaintiffs may be distilled into the following broad categories -

1. asking the first plaintiff if it acted as agent of the manufacturer or owner of the goods in processing the sale to the second plaintiff, and, if so, the first plaintiff's remuneration and the identity of the manufacturer;

2. asking the first plaintiff whether it manufactured the good, and, if so, details of when, where and whether the first plaintiff retained title until sold to the second plaintiff, or, if not, details of the contract under which the first plaintiff bought the goods;

3. if it is the first plaintiff's case that title to the goods passed to the second plaintiff, asking the first plaintiff when this happened, the consideration and any compensation paid by the first plaintiff to the second plaintiff in respect of the damage; and

4. asking the first plaintiff about its means of knowledge of the customs of the port of Hong Kong.

6. The interrogatories administered to the second plaintiff follow these lines -

1. asking the second plaintiff if it aware of the identity of the manufacturer of the goods, and, if so, the identity of the manufacturer and if the first plaintiff acted as agent of that manufacturer, and whether the second plaintiff was provided with documents showing the manufacturer;

2. if it is the second plaintiff's case that title to the goods passed to the second plaintiff, asking the second plaintiff when this happened, the consideration and any compensation paid by the first plaintiff to the second plaintiff in respect of the damage; and

3. if it is the second plaintiff's case that title passed to it prior to the departure of the goods from Hong Kong, asking the second plaintiff about it means of knowledge of the customs of the port of Hong Kong.

7. Mr Kerr withdrew the last interrogatory as far as it concerns the second plaintiff.

8. I will deal with the interrogatory concerning the customs of the port of Hong Kong separately. Mr Kerr submitted that the other interrogatories are legitimate to enable the second defendant to know the plaintiffs' case regarding the ownership of the goods. The pleadings, Mr Kerr says, show that it is the plaintiffs' case that the ownership passed from the first plaintiff to the second plaintiff. There is no suggestion that they were both owners at any given time. Accordingly, Mr Kerr argues, only one of the plaintiffs can have a good cause of action against the second defendant, and the second defendant is trying to find out which one that is. If this is so, the matter in issue is when ownership passed, and the only relevant interrogatory is that asking when title passed from the first plaintiff to the second plaintiff. All the other interrogatories in this area are aimed at trying to find out what proof the plaintiffs will offer to prove their case, or are irrelevant to any issue. The only relevant interrogatory is not necessary because the plaintiffs have already stated their case, as far as they are able to, on this point in their further and better particulars. Answering this interrogatory will add nothing to this. The plaintiffs' case is that the title passed on or before 29 August 1989, but they cannot say when exactly. If this is a bad case, the second defendant has its remedy, but that is not by interrogating further on this point.

9. The remaining interrogatory directed to the first plaintiff is blatantly aimed at finding out what evidence will emerge from the first plaintiff in relation to whether or not it has knowledge of the customs of the port of Hong Kong. Even if this interrogatory were otherwise legitimate, I do not see how answering it would help to dispose of the matter fairly or save costs.

10. Accordingly, in my judgment, none of the interrogatories need to be answered by the plaintiffs.

11. The question of costs has not been argued but there seems no obvious reason why costs should not follow the event. I make an order nisi that the second defendant pay the plaintiffs' costs of this application.

12. There is another summons before me asking that I give fresh directions to advance the trial of this matter. It seems to me that the only directions necessary are -

13. That statements of witnesses of fact be exchanged within 60 days, and they stand, subject to any contrary direction by the trial judge, as evidence in chief.

14. That each party may call one expert, and their reports be exchanged within 28 days of the exchange of the statements of witnesses of fact.

15. That the matter be set down, in consultation with counsel's diaries, for a trial of 5 days not earlier than May 1999.

16. The costs of application will be in the cause.

	JK FINDLAY
	Judge of the High Court Court of First Instance

Representation:

Mr Russell Coleman, instructed by Messrs Crump & Co, for the plaintiffs.

Mr Nigel Binnersley, of Messrs Healy & Baillie, for first defendant

Mr John Kerr, instructed by Messrs Dibb Lupton Alsop, for the second defendant.

HCCL000090/1990

1990, No. CL90

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

	CHINA NATIONAL ARTS & CRAFTS IMPORT EXPORT ZHEJIANG BRANCH	First Plaintiff
	JACOB ASH COMPANY INCORPORATED	Second Plaintiff
	AND
	HOI KONG CONTAINER SERVICES COMPANY LIMITED	Second Defendant

Coram: Hon Mr Justice Findlay, in Chambers

Date of hearing: 5 January 1996.

Date of handing down judgment: 9 January 1996

____________

JUDGMENT

____________

1. In their action against the second defendant, the plaintiffs seek leave to amend their points of claim. The substance of the amendment they seek is in respect of paragraph 8. I set out below the paragraph as it stands in standard print, with the amendments being sought in italicised characters.

"8. In breach of their duties as bailees of the goods during transhipment at Hong Kong between 16th and 22nd July 1989, the 2nd Defendants failed properly safely and carefully to handle the said goods.

PARTICULARS

(1) 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.

(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 24.5mm and 112.7mm 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."

2. The writ of summons was issued on 10 August 1990. This says only that the plaintiffs' claim is in respect of the second defendant's breach of contract and/or duty in and about the carriage, care and custody of the damaged goods. The more particular allegation was made in the points of claim filed on 8 October 1990.

3. The points of defence do not deal specifically with the particular alleged under paragraph 8 of the points of claim. The defence, amongst other things, denies generally that the damage occurred while the goods were in the actual custody or actual control of the second defendant as a result of their wilful neglect or default or otherwise.

4. Further particulars as to paragraph 8 supplied by the plaintiffs state that "wet cartons should not have been placed in a degree of proximity to dry cartons so as to allow the passing of moisture from one to the other". The second defendant requested further particulars of this allegation, and the plaintiffs said that the wet and dry cartons were in proximity both before and after they were stuffed.

5. The situation is, then, that the original allegation was that the second defendant allowed the goods to become wet by placing them next to wet cartons, and the new allegation is that the second defendant allowed the goods to become wet by exposing them to rain.

6. The second defendant opposes the application for leave to amend. In support of that opposition, the second defendant has filed an affirmation by Ms Sue-foung Kong, an assistant solicitor. Ms Kong says that the plaintiff is seeking to introduce a new cause of action. This is not so. She says that she is informed by Mr HT Hung, the claims manager of the second defendant, that, at the relevant time, the second defendant's Sea Operation Department arranged and carried out the containerisation of break bulk cargo received from China, and that it most likely that this department was responsible for vanning the goods in question. She says that this department closed in 1990 - no specific date is given - whereupon all the employees of the department resigned. Ms Kong says that there are no existing records of the department, so the second defendant cannot ascertain the identity of the employees who could give evidence regarding the new allegation. The second defendant, it is said, made pertinent inquiries about commingling "as early as February 1991". Ms Kong produces a letter dated 20 February 1991 from the second defendant, written by Mr HT Hung, to some insurance brokers in which it is said - "Based on the information as provided by claimants we are unable to trace any record showing that the cargo ex "Long Jiang" in Jul 89 was handled by this company. Our principal M/S F.T.I. verbally confirmed that they had not handled this vessel at date said above.". Another letter, again by Mr HT Hung, dated 14 May 1991, is produced. This says - "We confirm that we have checked again our record and unable trace that Hoi Kong on (sic) our agent and subcontractor had handled any cargo ex. "Long Jiang" at period May - June 1989 which please advise Alsop Wilkinson accordingly.". Mr Kerr also handed in from the bar a translation of a fax dated 3 May 1990 from Golden Fortune Shipping Co, Ltd. to Zhe Jiang Artcraft Sun & Moon Artcraft Dept.. This says - "As regards the damage to the 918 cartons of gloves shipped by "Long Jiang" V.8907 B/L No.4, please note that the cargo was discharged from "Long Jiang" at berth which was immediately transferred to Branes (sic) off dock CFS for stuffing into containers for transhipment.", and a letter dated 28 February 1991 from the insurance brokers to Throughtrans Services (Asia) Ltd., which says - "We further understand from Hoi Kong they have no record that Long Jiang's wet cargo were co-mingled with Dong An's cargo into the barge 'Hoi Kong No. 7.".

7. Ms Kong goes on to say that it is now impossible for the second defendant to contact relevant witnesses to give evidence on the new allegation, and, even if this could be done, it would be virtually impossible for witnesses to recall details of the vanning process after over six years. She says that, if the new allegation had been pleaded originally, inquiries could have been made into the vanning process at the same time as inquiries were made into the commingling.

8. The new allegation arises from a report by marine surveyors dated 27 November 1989, made at the request of the first defendant, in which they expressed their opinion that the cartons containing the damaged goods were "touched by freshwater at some time prior to our examination and most likely prior to loading into subject containers." This report was disclosed on discovery to both the plaintiffs and the second defendant in 1991.

9. The plaintiffs should have leave to amend unless this would cause injustice to the second defendant. The only basis on which it could be said, and the only basis on which it is said by Mr Kerr, to be unjust to the second defendant is that the amendment, if allowed, would cause prejudice. Mr Kerr accepts that no new cause of action is sought to be pleaded, but the plaintiffs wish to plead new particulars of the second defendant's alleged breach of duty as bailee. The particular kind of prejudice alleged by the second defendant is that it is unable to investigate the matter and produce evidence to contest the fresh allegation.

10. The burden of persuasion is on the plaintiffs. If, at the end of the day, I cannot decide whether or not it is just to allow the amendments, the plaintiffs must fail. But where, as here, a party relies on prejudice, on the basis that documents and witnesses are no longer available, as the only factor in the scales of what is just, that party must establish that prejudice. The second defendant, therefore, has to show that, because of the plaintiffs' delay in raising the new allegation, it is now unable to investigate the allegation and gather evidence to combat it. That is to say, the second defendant must show that, if the allegation had been raised timeously, the second defendant would not have suffered this prejudice. As I understand him, Mr Kerr suggests that the plaintiffs should have raised the allegation when they had the evidence to support it; that is, when the surveyor's report giving the opinion that the damage was caused by freshwater was available to them in 1991.

11. 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 know, 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.

12. I am also unhappy 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.

13. 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.

14. I see no reason, at this stage, why the usual order as to costs should not be made. Accordingly, I make an order nisi that the plaintiff pay the costs of the application, and that the second defendant pay the costs of its opposition to the application. I grant a certificate for counsel.

Representation:

Mr Russell Coleman, instructed by Messrs Crump & Co, for the plaintiffs.

Mr John Kerr, instructed by Messrs Alsop Wilkinson for the second defendant.

	JK FINDLAY
	Judge of the High Court