On 30 August 1981 the plaintiffs issued five through bills of lading for carriage of 1,380 cartons of men’s clothing from Shanghai, People’s Republic of China, to Melbourne, Australia, with transhipment in Hong Kong. The goods were loaded breakbulk on the ship Xingcheng in Shanghai to Hong Kong, where they were stuffed into containers and shipped to Melbourne on the ship Andros. Upon arrival in Melbourne, the clothing was alleged to have been damaged by alkaline contamination.

The bills of lading covering the voyage from Hong Kong to Melbourne were issued on behalf of Hoi Loong Navigation Ltd and named the shippers as China Merchants Steam Navigation Co Ltd, O/B China National Textiles, I&E Corp Shanghai Silk Branch. China National Textiles were named as the shippers on the through bills of lading. Both through and onward bills were clean, although the mate's receipts issued in Hong Kong bore the remark '(5) five cartons stained by contents'. The onward bills of lading incorporated the Hague-Visby Rules.

On 8 September 1982 the shippers named in both sets of bills issued a writ in the Supreme Court of Hong Kong claiming against the plaintiffs and Hoi Loong Navigation Ltd in personam. The plaintiffs submitted to the jurisdiction and commenced an action in rem against Hoi Loong Navigation Ltd as the owners of the Andros.

On 1 April 1985 the defendants' solicitors requested the plaintiffs' solicitors to serve a statement of claim, by then long overdue (RSC O 18 r 1), and intimated that an application to dismiss would probably follow a failure to comply. On 2 October 1985, the defendants issued a summons to dismiss the 1983 action on the grounds of inexcusable and inordinate delay. On 29 November 1985 Registrar Barnett acceded to the application. This decision was upheld on appeal to the High Court. The plaintiffs appealed to the Court of Appeal.

Held: Appeal dismissed.

The plaintiffs' claim is governed by art 3.6 of the Hague-Visby Rules which provides:

Subject to paragraph 6 bis the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered. This period, may however, be extended if the parties so agree after the cause of action has arisen. ...

6 bis. An action for indemnity against a third person may be brought even after the expiration of the year provided for in the preceding paragraph if brought within the time allowed by the law of the Court seized of the case. However, the time allowed shall be not less than three months, commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself.

The plaintiff's claim was clearly out of time when the writ was issued. It therefore falls to determine whether it is governed by art 3.6 bis. The plaintiffs' claim is an action for indemnity by the defendants. Article 4 bis.1 reads: 'The defences and limits of liability provided for in these Rules shall apply in any action against the carrier in respect of loss or damage to goods covered by a contract of carriage whether the action be grounded in contract or tort.'

Therefore, if art 3.6 bis applies, the plaintiffs would have to have at least 'the time allowed by the law of the Court seized of the case' in which to commence an action against the defendants. For an admiralty action in rem the normal six-year period for commencing an action running from the date the action arose does not apply (Limitation Ordinance (Cap 347 s 4(6)). No other period of limitation is prescribed. The time allowed in Hong Kong is subject to the doctrine of laches in accordance with the general rule as to limitation of admiralty actions. Since laches constitute an equitable bar, a period of limitation of six years should be applied by analogy. The plaintiffs had six years from the date on which their cause of action accrued.

The through bills are not expressed to incorporate the Hague-Visby Rules and there was no evidence as to the general application of the Rules in China. Nonetheless, Hong Kong law gives the Hague-Visby Rules the force of law in relation to contracts for the carriage of goods by sea, which, by art 1.b, must be covered by bills of lading, and where the port of shipment is Hong Kong or where the bill expressly provides that the Rules are to govern the contract.

Article 3.6 bis should be construed to include the 'carrier and ship' within the meaning of the words 'a third person' and the 'person bringing such action for indemnity'. 'Indemnity' will then mean 'an action by A claiming from B full compensation for monies payable to C under a bill of lading subject to the Hague-Visby Rules'. Article 3.6 bis cannot be construed to give it a life of its own independent of art 3.6. The plaintiffs have not proved that the through bills were subject to the Hague-Visby Rules and so the plaintiffs are bound by art 3.6 rather than art 3.6 bis in relation to the onwards bills and cannot commence a fresh action based on them, whether in rem or in personam.