P & O Nedlloyd BV v Arab Metals Co & Ors

This is an application by the Claimant shipowners to amend their Particulars of Claim. The underlying facts are very unusual and remarkably old. The Second and Third Defendants oppose the application on the grounds that the proposed claims are time-barred and that they do not arise out of the same facts or substantially the same facts as the existing claims within CPR 17.4(2) and they argue further and alternatively that, even if this court does have jurisdiction, it should not exercise its discretion in favour of allowing the amendment in the circumstances of this case.

The existing claim may be summarised as follows.

It is said that the claimants were the carriers under a bill of lading contract in respect of two containers of scrap for carriage from Alexandria to Felixstowe on board the Claimant’s vessel, UB Tiger, followed by on-carriage to a final destination in the UK to be nominated. Both Defendants dispute the allegation that the contract provided for carriage beyond Felixstowe. The First Defendants were the shippers, the Second Defendants were named consignees and the Third Defendants were indorsees of the bill of lading from the Second Defendants. Shipment from Alexandria took place on 7 May 1998 and the bills of lading were endorsed on 18 May 1998. On 27 May 1998 the Claimants were asked by fax from W M Martin & Co (Marine) Ltd, agents acting, it is alleged, on behalf of one or some of the Defendants, to deliver the containers to the Third Defendants at Hamilton in Scotland.

On about 1 June 1998 the Claimants tendered delivery of one of the containers to the Third Defendants at Hamilton, but delivery was rejected on the grounds that the contents were radio-active. The Claimants then carried the containers to the premises of their agents at Coatbridge where they were tested and radio activity was confirmed, to the effect that the contents were considered to be radioactive waste under the Radioactive Substances Act 1993. On 18 June 1998 the Claimants requested both the Second and Third Defendants to take delivery of the containers under clause 20 of the bill of lading contract. That provided:

The Claimants also requested that delivery should be taken under Section 12 of the Torts (Interference with Goods) Act 1977 which gives a statutory right to sell uncollected goods.

The Defendants failed to take delivery in accordance with these requests and it is pleaded that they were thereby in breach of contract and statutory duty.

There is also a claim based on the allegation that the Defendants tendered to the Claimants dangerous goods for carriage and/or goods which were not properly described in the bill of lading and not properly packed or marked or labelled.

It is then pleaded that by reason of those matters the claimants have suffered loss and damage. This is explained in the following particulars:

The loss and damage is quantified as including container demurrage for over five and a half years, storage charges at Coatbridge for a similar period, survey and inspection fees and accounts from the Scottish Environment Protection Agency, the total amounting to about £148,000. The relief claimed is set out in the prayer as follows:

The very considerable periods of time by reference to which the claims for container demurrage and storage charges have been calculated is due to the continuing immobilisation of the containers at Coatbridge where they still remain. The Scottish Environmental Protection Agency (SEPA) has repeatedly made it known to the Claimants that it will not allow the containers to be moved unless they are returned to Egypt under special safety arrangements with the Egyptian Government. No such arrangements have been made, although the Claimants have made considerable efforts to obtain governmental consent. They are not to blame for the lack of progress. Not even the Foreign and Commonwealth Office has been able to persuade the Egyptian Government to co-operate in the disposal of the consignment.

The claim form was not issued until 8 March 2004, five years and ten months after shipment and was served on the Second Defendant on 29 April 2004 and on the Third Defendant on 15 April 2004, the First Defendants being served in Egypt with leave of this court The Claimants had given no previous indication to either defendant that they were about to commence proceedings. Indeed, there had been no communication from them to the Third Defendants since June 1998 or to the Second Defendants since 13 March 2000. Both defendants assumed that the matter was closed in so far as they were concerned.

Following service of the particulars of claim, the Second and Third Defendants served defences on 22 July 2004. They relied on substantially the same points, their main contention being that the Claimants’ bill of lading contract did not provide for carriage beyond Felixstowe. The Second Defendants pleaded that they had divested themselves of any further obligations in respect of the goods by their endorsement of the bills of lading to the Third Defendants. They further denied that in sending the request to the Claimants by fax on 27 May 1998 to deliver the containers to the Third Defendants at Hamilton, W M Martin & Co (Marine) Ltd had been acting as agents for the Second Defendants. The Third Defendants’ defence alleged that the only claim that could lie against them was in respect of the on-carriage from Felixstowe, but no such contract had been pleaded.

Following service by the Claimants of Requests for further information from both the Second and Third Defendants in August 2004 and Responses from both which were served in September 2004, on 18 and 19 October 2004 the Claimants’ solicitors wrote to all three defendants requesting consent to the amendments of the Particulars of Claim the subject of this application. The Second and Third Defendants both objected on the grounds that new causes of action were being relied upon which were time-barred. No response was received from the First Defendants. The Claimants then issued this application on 8 December 2004, six and a half years after they had tendered the goods for delivery to the Third Defendants. Unfortunately, the hearing could not take place until 19 April 2005, nearly seven years after the Claimants had tendered delivery.

The amendments introduce the following new matters.

There is a minor change to the name of the Second Defendants to which no objection is taken.

There was in the alternative to the terms of the bill of lading as originally pleaded, a variation of the bill of lading contract by the fax of 27 May 1998 to the effect that the delivery place was to be the Third Defendants’ premises at Hamilton.

Alternatively, there was a new, additional contract of carriage under which the Claimants were to carry the containers to Hamilton. That additional contract (“the Alternative Contract”) was on the same terms as the bill of lading contract.

It was pleaded in the alternative that the defendants were in breach of the Alternative Contract in failing to take delivery of the containers, tendering dangerous and/or radioactive goods without written consent and goods which were not properly marked.

An indemnity was claimed in the alternative under the Alternative contract in respect of the breaches relied upon.

Specific performance was claimed of the Alternative Contract that the defendants should take delivery of the containers in accordance with governmental requirements.

Damages were claimed in addition to specific performance.

The Defendants’ submissions may be summarised as follows:

The claims for damages and an indemnity founded on breaches of the bill of lading contract as varied or on the Alternative Contract were time-barred under section 5 of the Limitation Act 1980 because the cause of action arose more than six years before the amendment was sought.

The three claims for declarations set out in the prayer were also time-barred because they were based upon allegations as to the Claimants’ rights under a simple contract and the remedy sought was a Common Law remedy in relation to those rights.

As to the claim for specific performance of the bill of lading contract as varied or of the Alternative Contract, whereas it is accepted that the section 5 six year time limit does not apply to a claim for specific performance except by analogy under section 36(1) of the 1980 Act, in this case a court of equity would have applied that time limit by analogy because the relevant principle was that if the court was exercising a concurrent jurisdiction giving same relief as was available in a court of law or, as here, where the equitable remedy was wider than at law, if there were correspondence between the remedies at law and in equity, the court would adopt the limitation period applicable to a claim for the remedy at law. Here the Claimants sought a remedy at law, namely declarations as to their rights and a corresponding remedy inequity, namely specific performance, in order to give effect to their rights at law.

The new causes of action do not arise out of the same or substantially the same facts as the causes of action originally pleaded. That is because, whereas the original causes of action were based on the allegation that the Second and Third Defendants were bound by the bill of lading contract because they were holders of the bill of lading, the additional claims are founded on the effect of the request for delivery contained in the 27 May 1998 fax from M W Martin to the Claimant against the background of oral discussions and the allegation that such request had the effect of varying the bill of lading contract or of creating the Alternative Contract on the same terms as the bill of lading contract.

Accordingly, the amendments are not such as to fall within CPR 17.4(2) and this court has no jurisdiction to allow any of the relevant amendments.

Alternatively, if there is jurisdiction, the amendment in respect of the claim for an equitable remedy should not be permitted because, if allowed, the claim raised by it has no real prospect of success by reason of the principles of laches, the Claimants having taken no steps to assert their claim against the Third Defendants since June 1998 and against the Second Defendants since March 2000.

If the Court had jurisdiction, its discretion should be exercised against permitting the amendment because the Claimant’s delay in bringing the claims amounted to “sleeping on their rights” since first giving notice in June 1998. They had made no demand that the Second or Third Defendants should take delivery until February 2004 and they now sought to charge the defendants for container and storage charges during that period. The Claimants’ excuse for having failed to prosecute their claim, that they had been negotiating with governmental authorities for permission to move the containers and return them to Egypt, was irrelevant for it could have been determined at any time during the period of delay which of the parties was obliged to bear the costs associated with immobilisation of the containers. Further, the delay had given rise to prejudice in as much as the Second Defendants’ claim over against the First Defendants, the shippers of the containers, was no time-barred under Egyptian law and could be brought directly in the Egyptian courts. Secondly, both defendants had retained limited information in relation to the claim and it was now difficult to gather relevant evidence. In testing the question of prejudice one should not confine the investigation to a comparison between the position of the defendants when they were appraised of the proposed amendment and their position when the original particulars of claim were served: there was a general discretion to look at the overall delay with regard to the claimants’ failure to raise the point within the limitation period.

The starting point for ascertaining whether this court has jurisdiction to allow the proposed amendments is CPR 17.4. This provides in so far as relevant:

Section 36(1) of the Limitation Act 1980 provides:

Thus, it is first necessary to investigate whether:

any of the new claims were time-barred on 8 December 2004 by application of the six year time limit under section 5 of the Limitation Act because they were founded on a simple contract;

any of the new claims were time-barred on 8 December 2004 because they were claims for equitable relief within section 36(1)(b) of the Limitation Act and prior to 1 July 1940 a court would have applied to any such claim the six year time limit by way of analogy.

The new claims for damages and an indemnity founded on breaches of the bill of lading contract as varied or the Alternative Contract were clearly founded on a simple contract and were time-barred.

The new claims for declaratory relief were also time-barred. These claims are unquestionably new claims whereby new causes of action were substituted. Those causes of action were composed of the factual basis of those claims together with the relief alleged to be consequent upon those facts. The claim for a declaration that rights had accrued by reason of that factual basis is, in my judgment, no less a cause of action than a claim for substantive relief, such as damages, on the basis of the same facts. In National Bank of Commerce v. National Westminster Bank [1990] 2 Lloyds Rep 514 Webster J. held that claims for declarations that a bank was not entitled to debit its customer’s account and that it was indebted to the customer in the amount debited were not in themselves causes of action and that the simple contract time limit in Section 5 of the Limitation Act 1980 did not apply. He added at page 518L that he could not think of a situation in which a court would make a declaratory judgment of a right which could not be enforced because a claim to enforce it would be statute barred. This view has been criticised in McGee, Limitation Periods, 4^th edn, para 3004 on the grounds that the vital question for limitation period is the basis of the action. I would put it like this. The function of the Limitation Act is to identify those periods of time within which a claimant is permitted to invoke the jurisdiction of the court to grant relief. Those periods of time vary according to the nature of the grounds for relief. Those grounds comprise both the factual foundation and the assertion of a legal or equitable right consequential upon those grounds. A claim for a declaration that a contractual right has accrued or that a breach of contract has occurred is thus a claim, or, in the words of section 5, an action, for relief founded on grounds an essential part of which is a simple contract.

Moreover, a declaration, although a discretionary remedy, is not an equitable remedy but is a creation of the Judicature Acts 1873-5: see Chapman v. Michaelson [1909] 1 Ch 238. Accordingly, the claims for declaratory relief in this case do not engage section 36(1)(b) of the Limitation Act 1936.

In so far as the claims for declaratory relief raised by the proposed amendment are founded on grounds which differ from those for the original claims for declaratory relief they are therefore time-barred.

As to the claim for specific performance of the Alternative Contract, the question arises whether it is of such a kind as falls within section 36(1)(b) of the Limitation Act 1980. The substance of the new claim is that the defendants are under a continuing duty under the Alternative Contract to take delivery of the containers. That claim necessarily involves that the duty arose when delivery was tendered to the defendants in 1998. The alternative claims for declarations and an indemnity and for damages are all based on the defendants’ same refusal to take delivery and all those claims are time-barred because all of them are founded on the same breach of contract which took place more than six years before the application to amend. Against this background, the submission by the Claimants that before 1 July 1940 a court of equity would not have applied by analogy the six years limitation period needs examining with great care because, if it were correct, it would give rise to an extremely anomalous remedial regime which could have no intelligent justification in the context of a modern system of commercial law. The remedial dislocation involved could be justified neither in terms of logic nor public policy. Accordingly, unless there were compelling juridical support for this submission, it ought to be rejected.

In Spry on Equitable Remedies, 5^th Edn, it is stated at p419:

This passage was expressly approved by the Court of Appeal in Companhia de Seguros Imperio v. Heath (REBX) Ltd [2000] 2 All ER (Comm) 787. However, that formulation leaves open the question how close must be the necessary similarity between the exclusive equitable right and the legal rights and by reference to what characteristic of the respective equitable and legal rights one measures that similarity.

In Ridgway Motors (Isleworth) Ltd v. Michael (Unrep) 13.6.96, HHJ Baker QC, sitting as an additional judge of the Chancery Division, held, in respect of a claim for specific performance of a contract constituted by the exercise of an option to purchase the freehold reversion contained in a lease of industrial premises, that there was no legal right corresponding to specific performance and that whereas section 36(1) would apply to other forms of equitable relief such as the taking of accounts, the right to an order for specific performance might be lost by the lapse of time under the doctrine of laches.

This approach to the identification of analogy would thus appear to confine it to similarity between the equitable and legal remedy. However, this decision does not appear to be based on any particular decision of any court of equity before July 1940. Moreover, it is not based on any consideration of similarity between the underlying facts which engage the equitable remedy and those which engage the legal remedy. Further, it deploys the principle of laches as a justification for treating specific performance as non-analogous, whereas there is no necessary inconsistency between the applicability of the statutory time bar and, within the limitation period, the applicability of the principle of laches.

In Companhia de Seguros Imperio v. Heath, supra, a claim was brought by a member of a reinsurance pool against the pool underwriting agent claiming damages for breach of an underwriting agreement, damages for negligence in tort and damages for an intentional breach of fiduciary duty. All those remedies were derived from the same underlying facts. It was held by the Court of Appeal that the claim for damages for breach of fiduciary duty was a claim in relation to which a court of equity would have applied the statutory limitation period prior to 1 July 1940. At page 796 Waller LJ observed:

This reasoning therefore takes into account both the similarity between the underlying facts necessary for the remedy at law and in equity as well as the intrinsic similarity between the remedy at law in damages and the remedy in equity of equitable compensation.

At pages 798-799 of this judgment Waller LJ. held, substantially by reference to the decision of the Court of Appeal in Paragon Finance v. Thakerer & Co [1999] 1 All ER 400, that the fact that the remedy in equity was attributable to an exclusive equitable jurisdiction did not prevent a claim for such a remedy from being treated by way of analogy with a claim at law. The court did not have to be exercising its concurrent jurisdiction for the analogy to be applicable. On that basis, the fact that specific performance of a contract is a remedy exclusive to equity cannot per se disqualify such a claim from being treated by way of analogy with a claim for damages for breach or for a declaration as to breach for the purposes of section 36.

Having considered the authorities referred to both in Dr Spry’s book and in Companhia de Seguros Imperio v. Heath, I have reached the conclusion that a claim alleging breach of contract and claiming specific performance and/or damages and/or an indemnity should be treated as entirely time-barred it brought more than six years after the breach relied upon occurred or commenced. Whereas there is an intrinsic dissimilarity in the remedy in equity from that at law, the underlying facts are identical and there is no question of any equitable right to property or anything in the nature of a trust being involved. The essence of the matter is that a continuing breach of contract is alleged for which damages are claimed and in relation to which the granting of the equitable remedy will simply put an end to the continuing accumulation of loss. In such a case the function of that remedy is to diminish the loss which would otherwise sound in damages. To conclude that the availability of this remedy went on existing (laches apart) beyond the time when the claim for damages or an indemnity or a declaration of right ceased to be available would be to contemplate such an implausible remedial facility as to suggest most strongly that no court of equity would have so proceeded before July 1940.

I therefore conclude that all the new claims are time-barred.

It is clear from the recent decision of the Court of Appeal in Goode v. Martin [2002] 1 WLR 1828 that CPR 17.4(2) imposes a higher threshold for jurisdiction than is required by section 35(5) of the Limitation Act 1980. That sub-section, which has the function of identifying the conditions for permitting a new claim, set-off or counterclaim to be introduced in the course of an action provides:

Reference to the judgment in Goode v. Martin at p1840 shows that, in so far as the rule confines the test under CPR 17.4(2) to new claims arising out of the same facts or substantially the same facts as those arising out of the original claim by the party applying to amend as distinct from facts the same or substantially the same as the facts already in issue, it has no legitimate aim in a case where the amendment seeks to introduce a new claim based on facts relied on by way of defence to the original claim. As I made quite clear at first instance this rule ought to be brought into line with section 35(5) of the 1980 Act, the purpose of which is to prevent the injustice which an amendment out of time might cause if it raised significant issues of fact not already raised by the claim and defences advanced in the proceedings when the application was made. In that event, the opposite party would be driven to investigate for the first time evidence as to facts which had occurred outside the limitation period. Since CPR 1.2(b) requires this court to give effect to the overriding objective in interpreting any rule and the overriding objective includes dealing with each case justly and since there can be no public policy consideration involved in distinguishing for the purposes of section 35(5) facts which arise out of an original claim from facts raised by a defence to it, I shall proceed to consider CPR 17.4(2) so that it has a co-extensive threshold with that sub-section.

The Claimants submit that there is a complete overlap of the facts on which the new claims are based and the facts which underlie the original claims. The proposed introduction of a claim based on the variation of the bill of lading contract (paragraph 8A) or the alternative claim based on the Alternative Contract (paragraph 8B) are both founded on the facts originally pleaded in paragraph 8 which founded the case originally pleaded that the effect of the 27 May 1998 fax from W M Martin was to nominate the place of delivery under the bill of lading. The three paragraphs referred to are as follows:

It is submitted by Mr Simon Rainey QC, who was instructed after the defences were served, that all that is new is the legal analysis of those facts already pleaded.

Mr Michael Davey, on behalf of the second and third defendants challenges that analysis by reference to the Claimants’ evidence in the third witness statement of Mr William Howard from which it is clear that the fax of 27 May had been sent in confirmation of prior telephone conversations between Mr Borland of W M Martin, said to be the agent of one or other of the defendants, and the Claimants’ booking clerk and that the Claimants rely on the content of those telephone conversations as the basis or background to the Alternative Contract or agreement to vary the bill of lading said to have been evidenced or effectuated by the fax. It is submitted that although the claimants have pleaded their new case solely by reference to the fax, they are bound to have to go behind it to make good the facts giving rise to the variation or the contract.

Investigation of the contents of the fax shows that not only had there been previous discussion between the claimants and W M Martin but also between the Claimants and Ireland Alloys involving Mr Chris Lane and in the course of which prices had been quoted. The prices in question – for “terminals, haulage and tipper hire” are apparently accepted by W M Martin for their account on behalf of Ireland Alloys. Noteworthy also is the statement in the fax that the original bill of lading had already been “surrendered to P&O”, which strongly suggests that the contract of affreightment had been completely performed by that time.

It is necessary to ascertain from these sparse details whether the new claims arise out of the same or substantially the same facts as the original claim which relied only on the fax as an instrument of nomination of the place of delivery under the bill of lading contract.

In order to make good that original claim it is necessary for the Claimant to establish:

that the terms of the bill of lading included an obligation on the carrier to take the containers by road to a final destination to be nominated in the United Kingdom;

that the fax of 27 May 1998 was sent by W M Martin as agent for the first, second or third defendants, who were parties to the bill of lading contract at the time when the fax was sent;

that the fax was an effective instrument of nomination for the purposes of the bill of lading contract.

In order to establish that the bill of lading contract was varied as alleged in paragraph 8A it would be necessary to establish:

that W M Martin were the agents of the first or second or third defendants authorised to vary the bill of lading contract so as to extend it to cover land carriage from Felixstowe or Hamilton on the original bill of lading terms;

that the fax of 27 May 1998 either contained such a new contract or evidenced it, an exercise which would necessarily involve reference to the prior telephone discussions referred to above.

Are the facts outlined in the proceeding paragraph substantially the same as those outlined in paragraph 39 above? The concept involved in “substantially the same” in CPR 17.4(2) must, in my judgment, involve something going no further than minor differences likely to be the subject of enquiry but not involving any major investigation and/or differences merely collateral to the main substance of the new claim, proof of which would not necessarily be essential to its success.

I have no doubt that on the present application, the facts which underlie the new claims fall well outside the concept of “substantially the same facts” in CPR 17.4. In reality, the Claimants will be driven to rely on matters going well beyond what appears on the face of the 27 May 1998 fax in order to make good either their case on variation or their case on the Alternative Contract, since it will be vital for them to establish by evidence that that the terms of the bill of lading continued to apply notwithstanding that the fax contains no words expressly suggesting this and indeed states that the bill of lading had been surrendered to the carriers. Thus whereas, on the original case, the Claimants need deploy only the fax as an instrument of nomination of the ultimate on-carriage destination, in the new case, they have to go substantially further than that and rely on evidence underlying the fax to make good its alleged contractual effect.

For these reasons, I conclude that this court has no jurisdiction to give permission to amend the particulars of claim and the Claimants’ application will therefore be dismissed.

In view of this conclusion it is unnecessary to consider how I would have exercised any discretion had there been jurisdiction to give permission to amend. Nevertheless, there is a very clear answer to this further issue.

There is no reason why the Claimants should not have pleaded the new claims at any time within the Limitation Period. Having delayed commencement of proceedings until nearly six years after the termination of the carriage it was essential that they should deploy the whole factual basis on which their claims were to be based before the end of the Limitation Period. They have put forward no explanation for their failure to do so. The argument raised in the defence that the contract of carriage came to an end upon discharge of the vessel at Felixstowe and surrender of the bills of lading presents itself to me as so glaringly obvious that the Claimants ought to have anticipated it at the outset and advanced their alternative cases on variation and the Alternative Contract at the time when they served their original particulars of claim. Although it is argued that it is not shown that it would be any more difficult for the defendants to conduct their defence if these new claims were now introduced than it would have been if they had been raised in the original pleading or at latest by the end of the Limitation Period, I am firmly of the view that the overriding objective required that in the interests of justice it would not be appropriate to expose the defendants even to the relatively small risk that, in view of the additional delay in advancing these new claims, after such a long initial delay in starting the proceedings, it would be more difficult for them to be defended. That risk is clearly to be inferred from the effect of the passage of yet further time on the quality of the evidence of the necessary witnesses.

For those reasons I should in any event have refused the application.

As to the submission that the claim for specific performance of the varied contract or the Alternative Contract should be disallowed because it is bound ultimately to fail on the grounds of laches, it would be undesirable for me to express any concluded view at this stage because to do so might well have the effect of pre-determining a substantive defence available to the defendants in respect of their original claim for specific performance. That will be for them to pursue at the main trial of these proceedings. This application having been determined on other grounds, that defence should be left unexplored prior to the trial.

I shall give case management directions for the future prosecution of these proceedings at the time when this judgment is handed down.